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08-21-2010, 10:06 AM
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#1
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Full time employment: Posting here.
Join Date: Dec 2006
Location: chicago burbs
Posts: 806
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swr
I realize this is probably been discussed many times. My wife is 52 and I am 55. I have worked with the FIRECALC numerous times.
I'd like to early retirees' opinion on what a swr would be assuming no other income (i.e. social security, pension or wages) coming in. Also, assume the mix is 50% equities, 30% bonds and 20% cash.
Interesting to see what the swr ranges would be from forum members.
Thanks,
Golfnut
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08-21-2010, 10:10 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Something slightly less than what FIRECalc says will give you a 95% success rate.
__________________
Numbers is hard
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08-21-2010, 10:20 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Posts: 2,612
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Quote:
Originally Posted by golfnut
I'd like to early retirees' opinion on what a swr would be assuming no other income (i.e. social security, pension or wages) coming in. Also, assume the mix is 50% equities, 30% bonds and 20% cash.
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You haven't said how much you hold in retirement funds (a minor issue).
You also haven't said how much you need to live on (another minor issue).
Assuming you are retiring in your mid-50's and expect to live at least 30 years, pick a number between 3% and 6%. Hopefully, it will be enough to meet your basic needs.
-- Rita
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Only got A dimple, would have preferred 2!
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08-21-2010, 10:43 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 6,258
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Ten million dollars should give you a swf of around $350,000/$400,000 a year... if you don't outlive it.
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
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08-21-2010, 11:41 AM
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#5
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Full time employment: Posting here.
Join Date: Dec 2006
Location: chicago burbs
Posts: 806
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Quote:
Originally Posted by Gotadimple
You haven't said how much you hold in retirement funds (a minor issue).
You also haven't said how much you need to live on (another minor issue).
Assuming you are retiring in your mid-50's and expect to live at least 30 years, pick a number between 3% and 6%. Hopefully, it will be enough to meet your basic needs.
-- Rita
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Rita, I am just attempting to get peoples's opinions on a swr based on the parameters I set out. I thought some forum members (who are actually ER) could provide some real life thoughts vs. FIRECALC.
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08-21-2010, 11:53 AM
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#6
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Full time employment: Posting here.
Join Date: Jun 2009
Location: SoCal
Posts: 569
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Without knowing the specifics of the portfolio size, given your ages, I would guess 3-3.5%. In your mid-50's you have a very long way to go on your portfolio and I'd personally go lower than the standard 4% guideline.
But as others have said, it depends your expenses and portfolio size. Also, I'm w*rking and not in ER yet, so this is just my opinion.
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08-21-2010, 12:00 PM
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#7
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,128
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Given our ages (both 55) it's not realistic to really think we'll get nothing out of SS so it is difficult for me to think of a swr without that expectation of SS lurking in the background.
However, in those circumstances I would not RE unless I had a 3% SWR or less to cover both my essential and discretionary budgeted expenses.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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08-21-2010, 12:24 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Location: Denver
Posts: 3,519
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What is the point of your question? All our circumstances are different.
But anyways, here's mine if it helps you. Portfolio is 60/40, age 50 DW is 46, no kids, I use Bob Clyatt's 4%/95% methodology. I'm sure I'll get Social Security, but am not counting on it. The 4% of current portfolio allows us a satisfactory lifestyle.
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08-21-2010, 12:41 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,296
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We are 52 and 56 years of age. If I don't count SS and the pension we receive, our SWR would have to be 3.8% to live a modest life with constant spending power.
However we do have a pension and I figure half of our SS benefits when I run FIRECalc. The SWR I use at this time is 3%.
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There's no need to complicate, our time is short..
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08-21-2010, 12:57 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Posts: 1,901
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At your age, without other resources I would begin with 3%. If after 5 yrs you have more than you started with I would then take 4% of the original amount.
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“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
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08-21-2010, 12:58 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,186
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Quote:
Originally Posted by Alan
Given our ages (both 55) it's not realistic to really think we'll get nothing out of SS so it is difficult for me to think of a swr without that expectation of SS lurking in the background.
However, in those circumstances I would not RE unless I had a 3% SWR or less to cover both my essential and discretionary budgeted expenses.
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Agreed, and I'd add that one's definition and implementation of "discretionary budget" also has a lot to do with what constitutes a Safe Withdrawal Rate for any individual. If your discretionary budget includes everything you ever dreamed about doing in retirement plus a generous allowance to cover things you haven't even thought of yet, then 3% sounds very conservative. If your discretionary budget includes only enough to cover a few small indulgences beyond your basic needs, it's not conservative at all.
So much of what constitutes a Safe Withdrawal Rate for any individual is determined by that individuals flexibility in spending I'm frequently amazed we can compare situations amongst ourselves at all..........
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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08-21-2010, 01:05 PM
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#12
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Full time employment: Posting here.
Join Date: Dec 2006
Location: chicago burbs
Posts: 806
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Thanks to all who replied here.
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08-21-2010, 01:06 PM
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#13
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,128
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Quote:
Originally Posted by youbet
Agreed, and I'd add that one's definition and implementation of "discretionary budget" also has a lot to do with what constitutes a Safe Withdrawal Rate for any individual. If your discretionary budget includes everything you ever dreamed about doing in retirement plus a generous allowance to cover things you haven't even thought of yet, then 3% sounds very conservative. If your discretionary budget includes only enough to cover a few small indulgences beyond your basic needs, it's not conservative at all.
So much of what constitutes a Safe Withdrawal Rate for any individual is determined by that individuals flexibility in spending I'm frequently amazed we can compare situations amongst ourselves at all..........
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Good points. My discretionary spending is 40% of the total expenditure so I have a lot of fat built in. When times get bad I can cut back significantly.
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Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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08-21-2010, 01:47 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Sep 2007
Posts: 1,214
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I don't quite understand the thinking here.
AFAIK, the standard SWR calculations use something like 95% confidence that the portfolio will not be exhausted in 30 (or 40) years. Even if you retire at age 40, 30 years takes you to 70, and 40 years to 80.
IMHO, either of these durations is pretty close to "forever", so it hardly matters what age you start drawing.
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08-21-2010, 02:21 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
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I will FIRE at 55.
I use 4% as a max reference point to understand our highest spending threshold.
year 1 of FIRE: 1.9% of our portfolio + my ER pension (no COLA) would provide our current spending level. But this is amount does not include large extraordinary expenses such as car replacement, large house maint items, etc.
I am using 3% as our planning level reference to smooth out extraordinary expenses and some additional travel and entertainment. This does not include SS.
But in any given year, I will have no problem spending more if we choose to do so.
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08-21-2010, 03:48 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Posts: 1,901
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Quote:
Originally Posted by rayvt
I don't quite understand the thinking here.
AFAIK, the standard SWR calculations use something like 95% confidence that the portfolio will not be exhausted in 30 (or 40) years. Even if you retire at age 40, 30 years takes you to 70, and 40 years to 80.
IMHO, either of these durations is pretty close to "forever", so it hardly matters what age you start drawing.
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What you say is true. However in some of the 95% SWR periods your portfolio is down by 50% 10 yrs or so into retirement, only to come back in later years. How you would sleep during that dip is important to consider.
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“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
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08-21-2010, 05:32 PM
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#17
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Thinks s/he gets paid by the post
Join Date: Sep 2007
Posts: 1,214
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Right. That's why I'm using the Guyton-Klinger rules for our withdrawals.
FWIW, both the MWR and the CPR rules kicked in in 2009, for the 2010 draw.
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08-21-2010, 07:31 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,688
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I am in the postion of having no pension or equivalent of SS to fall back on. My (simplified) assumptions are:
1. between 40-60% of assets in real estate, 40-50% in equities and a small balance in bonds, cash or similar
2. a retirement budget which has been put together and frequently revised as we have tracked spending over the last few years
3. 20% arbitrarily added to the budget as a buffer
4. I have concluded that a WR about equal to the net yield on the real estate and equities will work
Expected ages at retirement should be about 47 and 41. We also have two young children.
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Budgeting is a skill practised by people who are bad at politics.
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08-21-2010, 08:14 PM
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#19
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Full time employment: Posting here.
Join Date: Dec 2006
Location: chicago burbs
Posts: 806
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There has been some great and interesting responses!
Thanks,
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08-21-2010, 09:34 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Assuming that you will never get SS, pension, or wages, and will have to live solely off your portfolio for the rest of your life, I would withdraw 3% of your portfolio annually assuming an AA of 45:55 equities:bonds (similar to mine).
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Happily retired since 2009, at age 61. Best years of my life by far!
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