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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 04:25 AM   #201
 
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Re: SWR of 6.21% for 26 years

Well Canada has some good fishing. Plus, they gave
us Gordon LIghtfoot and Joanie Mitchell. Otherwise
though....................

John Galt
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 05:00 AM   #202
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Re: SWR of 6.21% for 26 years

typical american responses

ciao
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 07:13 AM   #203
 
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Re: SWR of 6.21% for 26 years

Hey gummy, I was just jerkin' your chain man. We love
Canada, especially those cool Mountie uniforms.
They still wear those, right?

John Galt
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 08:53 AM   #204
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Re: SWR of 6.21% for 26 years

Quote:
typical american responses

ciao
Sorry, gummy, it's how we're raised and schooled. I really like Canada, though. It blows my mind how fast the culture shifts when driving over the border. That doesn't happen when driving from state to state. The cleanliness and scenery immediately improves when driving into Canada via Detroit.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 09:25 AM   #205
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Re: SWR of 6.21% for 26 years

The same could be said of detroit and several sectors of hell

But seriously folks, some of my best friends are from canada. And two of my grandparents. But then again, as soon as the snow went down enough for the dogs to get some traction, they left.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 12:26 PM   #206
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Re: SWR of 6.21% for 26 years

Quote:
Quote:
on 02.04.04 at 14:41:28, Hyperborea wrote:
In the words of Errol Flynn: Any man who has $10,000 left when he dies is a failure.
In the words of TH, anyone who lives 20 years longer than they thought they would and runs out of money wishes he was a failure
Well, $10,000 was worth a lot more when Errol Flynn said it. *

Seriously though, it is a balancing act. *I have no wish to fund a hospital wing after I die and I also don't wish to spend the last few years of my life in poverty. *How do we withdraw enough but just enough? *If you are retiring young (30's or 40's) then the compounding effect is even more.

There is the issue of utility. *Above a certain amount of money (which varies by person) each extra dollar is less valuable than the one before it. *Restricting your income in the earlier years of your retirement to amass a large amount for later retirement will result in lower overall utility. *Couple that with the reasonable expectation that needs as you age will decrease - less need for travel, less need for fast cars, less need for expensive toys, etc.

We do need to plan for the uncommon but still possible worst case - 4% withdrawals, diversified portfolios, fallback options, budget flexibility, and for the early retiree (40's and earlier) then some easy income job skills. *However, looking at the historical data we can see that this is not the common scenario. *In most cases we will instead be looking at how to deal with lots of money and big portfolios. *Do you want to reap it all as a lump sum when you're 90? *Leave it to your cat? *Turn your kids into spoiled trust fund babies? *Or sip at it gently over a 40-60 year retirement?

Quote:
Living in another culture full time would be interesting. *Just not sure I'd want to work another 10 years to accommodate it.
This could actually shorten the amount of time required to retire depending on where it is you wish to live. *If you want to live in Paris or Tokyo that will increase the time but in most other cases it will be less. *Health insurance for those buying their own in retirement (all Americans under 65) will be much cheaper if you are not living in the US.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 12:45 PM   #207
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Re: SWR of 6.21% for 26 years

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We withdraw just what we need to pay the bills (and live comfortably). Our minimum withdrawal rate is then determined by things like the the price of electricity (rather than historical returns, Monte Carlo or mathematical gesticulation).
<snip>
Of course, whatever one does (rationally), one can argue:
"you're just calculating a SWR" *:P
IIRC your base living amount comes from an annuity (and possibly a university pension?) so there is no need for using a SWR on the remainder of the portfolio. This is what my parents who retired "early" (i.e. before 65 - just) do. They live off government pensions and my dad's company pension. The portfolio is only for "fun" money and spoiling grandkids and upgrading the toys. If it runs dry then they won't starve and they won't have to return to work and they'll still be able to make trips (just less frequently and less lavishly).

If one plans to retire long before being eligible for a government pension and with no corporate pension (almost nobody of my generation has one) then how does one size their withdrawals from a portfolio? The "standard" SWR numbers give at least an upper bound of reasonableness based on historical data. How much extra can I take if the portfolio does well? Perhaps, I can take a fraction of the gains (your sensible withdrawals) or perhaps I can take a fraction of the current portfolio value (galeno's method)? This has the benefit of allowing me to "front load" somewhat the withdrawals as your calculations show.

In my first n years of retirement my wife and I will be vagabonds with no permanent residence - perpetual travellers like the Terhorsts. Where we travel to will be based on input from our desires but also portfolio returns. Can we spend 4 months in Paris this year or only 4 weeks? It will depend on the amount we withdraw from the portfolio and that withdrawal will depend on what is "safe" to do so.

If we look at the historical record those 4% (approximately) withdrawals were only required for safety in a small number of sequences. Most of the sequences would have allowed greater withdrawals but how do we know which they are in advance? We can't (or at least those of us who are rational don't claim to know) so all we can do is react to increasing (or decreasing) portfolio values. This will require a new withdrawal calculation on a regular basis.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 12:52 PM   #208
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Re: SWR of 6.21% for 26 years

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I'm hoping that, one day, I run across somebuddy who actually does some mathematical (or other) analysis to determine a SWR and actually follows what the mathematics regurgitates.
As I understand it the ex-MF poster Galeno uses an SWR calculation for his withdrawals. *He apparently divides his portfolio into two portions - a fixed income buffer (FIB) and the "equities" portion (though I think he has high yield bonds, REITs, and some other stuff in there - perhaps "investment" portion would be better). *Yearly he withdraws 5% of the current value from the "equities" portion and places it in the FIB. *After that he reallocates the FIB into 3 pieces: 1/3 money market; 1/3 1-year CDs (and/or 2-year CDS with 1-year left to maturity); 1/3 2-year CD. *Half of that money market is spent over the course of the coming year. *Now, I've never met Galeno but this is what I have gathered after reading his posts and exchanging some conversation with him.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 01:13 PM   #209
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Re: SWR of 6.21% for 26 years

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Seriously though, it is a balancing act. I have no wish to fund a hospital wing after I die and I also don't wish to spend the last few years of my life in poverty. How do we withdraw enough but just enough? If you are retiring young (30's or 40's) then the compounding effect is even more.
[...]
Do you want to reap it all as a lump sum when you're 90? Leave it to your cat? Turn your kids into spoiled trust fund babies? Or sip at it gently over a 40-60 year retirement?
I'm going to wait until i'm 85 or so, then marry Anna Nicole Smith's granddaughter.

Actually I sincerely hope to god I have this problem to ponder nearly every day for the rest of my life... "What to DO with all this money!".
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 02:16 PM   #210
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Re: SWR of 6.21% for 26 years

Quote:
Quote:
Hyperborea wrote:
Do you want to reap it all as a lump sum when you're 90? *Leave it to your cat? *Turn your kids into spoiled trust fund babies? *Or sip at it gently over a 40-60 year retirement?
I'm going to wait until i'm 85 or so, then marry Anna Nicole Smith's granddaughter.

Actually I sincerely hope to god I have this problem to ponder nearly every day for the rest of my life... "What to DO with all this money!".
I have no guarantees that I'm going to make it to 85 - a reasonable probability (long lived grandparents and personal good health) but no guarantees. Also are lots of dollars at 85 going to be as valuable as an extra couple of thousand or so every year (or most years) between now and then?
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 02:34 PM   #211
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Re: SWR of 6.21% for 26 years

I'm way too ornery to die before then, plus everyone in my family going back 5 generations made it to at least 90 My dad is 70 and is still going strong.

With regards to a few extra thousand between now and then, I spend what I want within reason, and dont feel like I'm missing out on anything at all. If I felt I was, I'd spend it!

If I happen to come up with a few extra bucks in the portfolio when I'm old as a result, maybe I'll buy something silly, give it to some charity that I like, or heck, leave it in an estate to my dogs. Better than getting anxiety over paying the bills and making eating dog food no longer an optional activity.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 02:47 PM   #212
 
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Re: SWR of 6.21% for 26 years

hyper,

I'm with you on spending it, before you are to old to enjoy it. I have some older friends that are closing in on 80 and it ain't pretty!

So, I will spend more in the first 20 years of retirement than I will spend in the last 20 years.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 04:03 PM   #213
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Re: SWR of 6.21% for 26 years

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Better than getting anxiety over paying the bills and making eating dog food no longer an optional activity.
People wouldn't say things like this if they were aware of the cost of dogfood.

Have fun.

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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 04:53 PM   #214
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Re: SWR of 6.21% for 26 years

I just got back from the feed store and can file a full report if necessary.

About $10 a bag for cheap stuff, $28-35 for the "good stuff", and $48 a bag for stuff that I'd open a bottle of wine to have with.
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 07:06 PM   #215
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Re: SWR of 6.21% for 26 years

EEUUWWW!

DRY Dog Food?

Lighten up on the cost savings campaign a little bit, canned is much better!
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 07:12 PM   #216
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Re: SWR of 6.21% for 26 years

Pfft...the dogs are sampling three kinds...duck and sweet potato, white fish and sweet potato, and lamb and duck. Quinoa and Amaranth, rye and brown rice. Cranberries, blueberries, carrots, apples, peas, garlic, yucca, green tea, kelp. All human grade ingredients.

Better than the stuff I eat...whats that paste in the cans again?!?
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 11:21 PM   #217
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Re: SWR of 6.21% for 26 years

Just in case anyone is worried about my diet or excessive cost savings...

Our dinner tonight was boiled tiny white potato's, halved and topped with sour cream and caviar, followed by sandwiches of smoked oysters, minced celery hearts and mustard greens tossed with a dressing of olive oil, fresh squeezed lemon juice, garlic and lousiana hot sauce.

Of course, I made it myself in about ten minutes and the ingredients ran me about $8, most of which was the big dollop of caviar.

Since I used fat free sour cream and only enough olive oil to generate an emulsion, the total fat in the meal was under 6 grams, plus about half a days worth of complex carbs and proteins.

The dogs settled on the lamb and duck with quinoa, amaranth, cranberries, sweet potato, yucca and whatever the hell else was in that mixture.

Gosh darn it, but dont we all just hate this lousy sub 4% SWR... 8)
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Re: SWR of 6.21% for 26 years
Old 04-05-2004, 11:56 PM   #218
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Re: SWR of 6.21% for 26 years

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Gosh darn it, but dont we all just hate this lousy sub 4% SWR... 8)
That's a little disingenuous. *Everybody can live just fine on a 4% SWR. *H3ll, you could eat at the French Laundry every night of the week (if you could get a table), drive a new Porsche 911 Turbo every year, and spend the summer in Cannes on a 4% SWR too. *Of course I've left out the important fact of what the portfolio amount is and how many years you'll need to work to build it up.

What I was saying was not that 4% of my planned portfolio isn't enough - 3% would be fine and in tighter situations we could get by on perhaps 2%. *What I was saying was that I want to collect the likely but not guaranteed excess returns in a slow sip every year rather than save them up for a big gulp when I'm at an age where others will have to do the gulping for me - if I make it there.
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Re: SWR of 6.21% for 26 years
Old 04-06-2004, 12:55 AM   #219
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Re: SWR of 6.21% for 26 years

I'm sorry, I wasnt directing any of that post in your direction at all. It was a playful (but truthful) post for those who might be concerned that I was taste testing dog food a little too often, or for those who think living on a 4% SWR means eating cheap tuna out of a can. I love my doggies more than some people love their children...I wanna know what they're eating!!!

SWR means what it means to you. Key operative word being "SAFE", the rest being mechanical. If you're sleeping good and living a good life, the rest is academic. Arguably, interestingly academic, but thats it.

If you feel safe with your withdrawal, be it 1%, 4%, or 72%, then thats what matters. If you can live a pleasing lifestyle on a 4% SWR, and ER sounds good to you, do it. If 4% sounds like a big crimp in what makes you happy, and you've carefully looked at why money stuff makes you happy and found it with sound foundation, then save some more. Money stuff never made me happy, I just thought it did. If you need on average (note ON AVERAGE) a lot more than 4%, rethink...I dont think you have a sustainable situation with an 8%+ before taxes/inflation/expenses/etc rate of return.

Your point on portfolio size is very relevant...but I suspect I dont have a whole lot more or less than most people here who have revealed. I wouldnt recommend ER on a lot less than $750k (without a mortgage or other significant debt), and would think one would be fairly set on $2M+. Add your debt load to these numbers, interest included, to get a fair floor. Thats for folks who cook their own fine meals and live well on simple entertainment.

Sounds like you're grouchy with me. Hope nothing I said made you upset, that certainly wasnt my intention. But I probably made light of some serious concerns you had. My apologies.

That aside, the french laundry is good, and I have eaten there a couple of times. I might be able to produce a better plate of food, but only because I have merely two people to think of, rather than a couple of hundred per day.

And I'm one heck of a lot cheaper.

p.s. My fiancee says I'm also a lot cuter than Tom Keller I think that means she's not leaving me a tip...

By the way, did you ever make it to the Yankee Pier and did you like it?
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Re: SWR of 6.21% for 26 years
Old 04-06-2004, 06:42 AM   #220
 
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Re: SWR of 6.21% for 26 years

Hello TH! Noticed that you said that you would not recommend ER
on less thna 750K. I recall that in Paul Terhorst's book he opined you could do a "bare bones" on a net worth
of $100,000 but you might need to work part time.
That was a long time ago. However, I still believe
in the $50.00 per day rule for truly "bare bones"
retirement. This is with no pension, no SS, no debt,
no pets (maybe one cat or a fish), driving a beater
car (or no car), cheap rent in a low cost area, no or little health insurance, not much traveling, not much eating out and budgeting like crazy. You should be able to get 6%
on $300,000, if you put it all to work and of course
your personal property would be worth little or nothing.
Now, we don't live this way, and my net worth
(even before my divorce was never anywhere close
to $750,000. I think you might be giving an excessively
gloomy picture to "wannabees". I have run the numbers
and like Paul Terhorst, I used to be an accountant.
All you need is the motivation and a little luck.
How about a real life example? My son is 39 and never
made $18,000 a year in his life. Yet, he lives well by his standards and has no financial difficulties. In fact he is finishing up his bachelor's degree and planning his next
adventure as I write. Eventually, his might be a story
of a kind of perpetual retirement, never having had a real "career".

John Galt
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