SWR of 6.21% for 26 years

[hocus]

I'm not saying you are wrong to want to augment the existing historical simulations, simply that you have not done the work yet.

The work is not complete, that's for sure. The way I see it is, we are in the third or fourth inning.

 

[raddr]

***** wrote:

There is hardly anyone who ever talks to him when he posts over at the SWR Research Group board because the leaders of the community there have imposed a boycott of that board.

Just to clarify: I was boycotting the board when you were running it before you were banned from NFB.  I'm not boycotting it now but I don't post there because I don't think that his switching studies are particularly useful for determining a "safe" SWR.  I also prefer to post SWR subject material on the FIRE board which is appropriate for such subjects.  I can't speak for the other "leaders" of the board but I suspect that they have similar feelings.

 

[gummy]

I find this SWR analysis a fascinating exercise, but I have a question (which, hopefully, somebuddy can answer):

How would one actually use the SWR number, once it's been calculated?

Do you imagine calculating each January and using the number to determine your withdrawals for the coming year?

I've spent an inordinate amount of time playing with SWR myself but still don't understand its use.

For example, in one tutorial

http://home.golden.net/~pjponzo/min-to-max.htm#SWR

my "sidekick" asks the above question ... and I'm unable to answer :-/

 

[BigMoneyJim]

How would one actually use the SWR number, once it's been calculated?

Here are a couple of reason's I'm interested at age 34:

• It helps me get an idea of how big my portfolio may need to be before retiring
• Given the above, it helps me determine whether I may need to work 10 more years or 30 more years
• If I retire early enough, I may be taking the 72(t) exemption from my IRA, and a SWR would increase my confidence in the survivability of the IRA geven a fixed Substantially Equal Periodic Payment. (I've heard that recent tax changes greatly reduce the penalty for drying up the IRA, but it's been a while since I looked.)

Projecting forward, I assume it will be very comforting to have a ballpark figure of how much I could withdraw from my portfolio every year and not run out during market fluctuations (even if I plan to adjust my withrdrawls based on performance).

That's what SWR means to me.

 

[hocus]

How would one actually use the SWR number, once it's been calculated?

I've used it primarily for making allocation decisions. When I put my plan together in the mid-90s, my first step was to determine a take-out number because that told me how much I needed in the way of assets to hand in the resignation. I developed a conservative plan that called for a 3 percent withdrawal, a somewhat risky plan that called for a 5 percent withdrawal, and a medium plan that called for a 4 percent withdrawal. (I ended up pulling the trigger when I had enough in the way of assets to support the medium plan.)

After determining my three possible take-out numbers, I wanted to figure out what my asset allocation strategies should be to support plans with any of those numbers. Before I did my SWR work, I had most of my assets (which were not much at the time) in stocks. I determined that having so much in stocks was going to delay my retirement by a good bit, and I was anxious to get on with the next stage of my life, so I elected to move my money out of stocks to get my overall lifetime SWR number up (not because of any dislike for stocks, which I like just fine).

I revisit my plan once a year, and make adjustments. For example, I have long believed that I will be able to get a SWR of higher than 4 percent from stocks when stock prices return to lower valuation levels. I had a rough idea in my mind that 5 percent would probably be possible, but I had never done any formal statistical analysis to determine an exact number. I still don't think we know how high the SWR for stocks may someday go, but I feel confident after seeing the work that JWR1945 has done that 5 percent is certainly attainable and that 6 percent is likely attainable. Knowing that influences my other allocation decisions. I'm less worrried now if I have to go for a few years with an SWR of less than 4 percent on some sections of my portfolio because I feel confident that in the not-too-distant future I'll be able to tap into an SWR of greater than 4 percent for stocks.

I've never viewed my plan as a finished plan. I continue to study investing issues in retirement and I like to be able to take advantage of new stuff I learn. I would not like it if I felt that I were locked into decisions I made at age 43 because that was the plan I thought made sense then and I followed a rule that it just couldn't be changed. If I find that I can get a higher SWR than I thought was possible at an earlier time, I let my wife know that it seems OK for us to spend a little more on furniture or something like that.

For safety's sake, I follow a rule that our level of financial independence should either remain the same or increase a bit each year. I have been able to do that for the first four years of the plan because I am not invested in stocks and the asset classes I am in are more predictable. I don't think I could follow that rule religiously if I had a significant allocation in stocks. But in times when I am invested in stocks, I intend to do a "mark up" in the value of my stock investments at times when prices bring the nominal value of the stock portion of my portfolio well below the real value indicated by SWR analysis.

 

[gummy]

Many thanks for your replies.

I can understand that you may use SWR to estimate eventual portfolio requirements and/or make adjustments to your portfolio contributions (before retirement) and/or adjust asset allocation (while you're making investments).

BUT, when you eventually DO retire (and start withdrawing) you will continue to calculate a SWR to determine withdrawals?

 

[hocus]

Re: SWR of 6.21% for 26 yearswhen you eventually D

When you eventually DO retire (and start withdrawing) you will continue to calculate a SWR to determine withdrawals?

Mine is a new-fangled sort of "retirement," Gummy.

My goal was to make a shift from a corporate writing job to a career writing non-fiction books on a freelance basis. My wife is a stay-at-home mom and we have two pre-school age kids. Freelance writing is not a career where you can count on a lot of money coming in (I assume a minimum of $10,000 per year on average). So I needed to know for sure that my assets would allow me a take-out number of x number of dollars per year before I could responsibly turn in a resignation notice. I did not retire from the world of work altogether. I retired from dependence on a corporate paycheck.

With this sort of retirement, my financial circumstances will be highly variable for a good number of years to come. It is possible that I will not find a publisher for my first book. If that happens, I am going to need to make adjustments, either cut back on spending or find an alternate means of bringing in at least $10,000 per year. It is also possible that I will make a whole bunch more than $10,000 per year from my writing efforts. If that happens, I can put everything above $10,000 into savings and get myself in a situation where I can spend more or spend the same and take a lower withdrawal rate.

My circumstances are such that I need to check how my plan is holding up on at least a yearly basis. I don't necessarily do a full-blown SWR analysis every year (truth be told, I don't have Excel on my computer and couldn't put together a spreadsheet if you put a gun to my head). If I learn that the SWR for X asset class has gone up a bit, I factor that in; and if I learn that the SWR for Y asset class has gone down a bit, I factor that in.

The key for me is that each time I revisit the plan, it look solid on a going-forward basis. I don't look for 100 percent certainty or anything like that. But I don't want to expose my family to significant financial risk just so that I can go off and chase dreams. I don't take the SWR stuff so seriously that I would take it out to three decimal points or anything like that.

But if you aren't going to use SWR analysis to assess investment risk, what are you going to use? It seems to me that, if you are making life plans that have ramifications many years into the future (whether you feel that these plans constitute a true "retirement" or not), you need some means of knowing whether you can count on your portfolio to provide the financial support needed on a long-term basis. SWR analysis is the best tool that I know of for developing a reasonably informed assessment.

 

[Nords]

Re:  Gummy, maybe this is...

... what you have in mind.

http://www.analyzenow.com/dynamic_financial_planning_pro.htm

 

[arrete]

gummy inquires:

I can understand that you may use SWR to estimate eventual portfolio requirements and/or make adjustments to your portfolio contributions (before retirement) and/or adjust asset allocation (while you're making investments).

BUT, when you eventually DO retire (and start withdrawing) you will continue to calculate a SWR to determine withdrawals?

I am retired early (6 years ago at 50). I've used the Sensible WR as ballpark figure to aim at all along. My husband was comfortable with my using 5% (which is outside the range of the SWR studies), but I just figured about 4% was something worth aiming at. Not the only criterion for retiring, however. I was mainly fed up with working and could think of a whole slew of things to do instead.

I retired with a lot of "slosh" in my budget. Sort of like gummy's budgets which depend on how things are doing that year. For instance, last year I had 2 unexpected costs and one expected new cost. I was starting up a new "hobby" - bird rehabbing which required a lot of fixed costs up front. Then I had serious dental problems. Then one of the kids decided to buy a house and I pitched in. So I got really close to spending a little too much. But I have plenty of places I can cut costs out of my budget, hence the slosh.

I figure these things kind of even out over time. Some years I spend a lot less than I planned. I'm hoping this is one of those years : I still look at what percentage of my assets I'm spending, but it is just one of several checks I use. I also keep an eye on various parts of my budget over time, such as food, medical , vacation , and so on. It helps me catch unnecessary spending, but it also indicates area that I have to plan for increases in the future - such as vet bill for elderly cats - they are increasing over time.

I also try to think ahead about other costs that may crop up but I don't have now. Like increased trips to the parents as their health requires (if they'd just get off that dang island in Maine!). Also an increasing number of grandchildren increases the budget a bit - I think gummy can relate to that.

Anyhoo - yeah, I looked at SWR before I retired as a ballpark figure to aim at (but not to depend on) and I sort of watch the percentage of assets spent now that I'm retired. But I'm not fanatical about it. And I realize that the risks can't be quantified, so why the heck try?

Too much babble.

arrete

 

[gummy]

*****:
Thanks for the explanation. I can see how an annual SWR calculation may be useful (for you).

Nords:
Hey! That URL describes a scheme much like my "sensible withdrawals" spreadsheet - which I call Dynamic Monte Carlo
Neato!

arrete:
"I also keep an eye on various parts of my budget over time, such as food, medical, vacation, and so on.
I have plenty of places I can cut costs"

Aah, great minds think alike, eh what?
I find this useful, from time to time:
http://home.golden.net/~pjponzo/retirement-expenses.htm

The missus tells me the numbers and I fill in the spreadsheet.
(As you might imagine, she looks after the budget and won't let me near our bank account.)

 

[cute fuzzy bunny]

I did a pretty full budget, from regular predictable monthly items through a detailed miscellaneous section, and then figured out a schedule of major replacement items like cars, tires, major appliances, heating and air conditioning, house painting and so forth. Always added a little to everything and for the miscellaneous made sure I added a 30% uptick. Also made sure to add sales tax to everything.

I drew down the long term stuff to rough annual numbers.

I wasnt anal about this. I did it in about an hour or two using some stuff I borrowed from quickens budgeter and some postings here (someone had a big fat 'miscellaneous' budget post a while back that gave me lots of ideas). The point was to get a rough handle on outflow. It gave me several ideas on where I could make some cuts to things that didnt mean a lot to me and some opportunities to cut back if things get tight.

I certainly dont "track" this or sit at the computer every day with a stack of receipts. I'd rather shoot myself.

With that in hand, I "know" what I need to spend and according to all the "planning tools", my investments will more than suffice.

= sleeping better

With that known, I now just spend what I need, prudently if possible, and if we hit a run of really bad investing years I can reduce back a little by referring to my budget sheet.

What I budget for (generically) in case its helpful for someone else making this up:

Regular monthly stuff:

Home Ins
Home Tax
Nat Gas
Water
Elec
Trash
Cable/Internet
Phone
Car Tax
Car Ins
Gas
Food
Med Ins
Misc
Entertainment

Stuff that funnels into "Misc"

BATHROOM STUFF
Shampoo
Conditioner
Soap
Lotion
Toothpaste
TP
Kleenex
Shaving Cream
Razors
Bandaids
Rubbing alcohol
Hydrogen peroxide
Deodorant
Wash cloths
Towels

PETS
Dog and Cat food
Dog biscuits and treats
dog/cat meds/vet

HOME
Car maintenance
Bug killers
Fertilizer
Mower gas + oil
Drinking water
Warehouse club dues
Wood

KITCHEN STUFF & OTC MEDS / Vitamins

Paper towels
Foil
Plastic wrap
Baggies
Dish soap
Dishwasher detergent
Garbage bags
Laundry Det/spotter/bleach
Meds
Vits

OFFICE SUPPLIES

Stamps
Envelopes
Paper
Batteries

EXTRA UNFORESEEN EXPENSES (All Above Expenses x 30%)+Sales Tax

And the longer term stuff

Car
water heater
furnace
AC compressor
Housepaint
refrigerator
Dishwasher
range
Microwave
washer and dryer
Car tires
computer
Printer
Television

living room set
bedroom set
gas grill
clothes
Workout equipment
Bicycles
Vacuum Cleaner
Steam Cleaner
Tools

Just for nice round numbers if you'd like to plug them in and not do the work, my total very conservative "Misc" for a couple is $4637 per year, and my draw down annualized amount for long term capital replacements is roughly $3000 per year. The latter is obviously highly deferrable.

 

[Hyperborea]

BUT, when you eventually DO retire (and start withdrawing) you will continue to calculate a SWR to determine withdrawals?

Yes, I'm using the 4% number in my planning as most are.  In retirement (about 7 years away) I plan to use a yearly withdrawal amount for my "income".  Why?  It's easy to work with and it keeps our (my wife's and my) spending in line.  Now, I'm not planning on withdrawing a straight 4% but a fixed base of perhaps 3% with a variable topup (Sensible Withdrawals or galeno style or something else). I also plan to average out the variable withdrawal with a 3 to 6 year fixed income buffer.

That 3% isn't the absolute minimum that we could live on but it's the point at which it becomes more difficult to still do what we want.  If the economy, my portfolio choices, or whatever means that we have to cut back further then we will be able to - perhaps all 3rd world travel (plan to go Terhorst style for a while).  The fixed + variable systems have the benefit of "enforcing" frugality when dictated by the portfolio returns.  It seems that it's that small nudge early in the "loser" return sequences that makes all the difference in survivability.

What seems to be the main theme here is not the actual true future SWR percentage nor market timing but adaptability that is really required for (very) early retirement.  This is also been the conclusion on the MF REHP board despite attempts by some to go down the rabbit hole of figuring out the future return sequence so that the future true SWR can be calculated.

As a counter question, what would you use to size your yearly withdrawals if not some "SWR" number?  Would you withdraw some amount calculated based just on need without any reference to the portfolio?  How would you decide when to take extra withdrawls if your portfolio has done well?  How much extra?

 

[JWR1945]

Hyperborea

As a counter question, what would you use to size your yearly withdrawals if not some "SWR" number? Would you withdraw some amount calculated based just on need without any reference to the portfolio? How would you decide when to take extra with drawls if your portfolio has done well? How much extra?

The traditional answer is to live off your dividends, never selling any shares of stock.

That is what therealchips has done. It has worked very well for him.

OTOH, his portfolio has grown a lot and he is now down to withdrawing 2% of his current balance. The fact that it is 2% is not necessarily related to the current dividend yield of the S&P500 index.

Have fun.

John R.

 

[Hyperborea]

The traditional answer is to live off your dividends, never selling any shares of stock.

That is what therealchips has done. It has worked very well for him.

OTOH, his portfolio has grown a lot and he is now down to withdrawing 2% of his current balance.

I would question whether it has "worked very well for him" or not. Sure he's got a bigger portfolio now but are there things he would have liked to have done that he didn't? The money is only the means to an end and not the end in itself.

This is in my mind a problem and why I dislike this solution. I have no desire to leave a large inheritance and I wish to enjoy my money in my lifetime. Sure, I can do a lot of things for little money but if I had the extra I would certainly like to do some things that money lets you do: race cars in a local (or even national) amateur league; own a vintage guitar; take guitar lessons from some of the real masters; buy one of those really old bottles of scotch; rent a villa and invite my extended family to stay with us for the month; etc. This poor income and huge portfolio effect is only magnified if you retire very early in your 30's or 40's.

 

[arrete]

The traditional answer is to live off your dividends, never selling any shares of stock.

That is what therealchips has done. It has worked very well for him.

The brain's a little fuzzy, but I vaguely remember him having a pension - something you don't see a lot of any more. Guaranteed income is always nice. I could be all wet though.

arrete

 

[sgeeeee]

. . . How would one actually use the SWR number, once it's been calculated?

Take the SWR. Multiply it by 25. Divide the result by SQRT(treasury interest rate)*sin (PE). Write this number down and swing it over your head while you scream like a chicken.

This, of course, will not help you in your retirement but it will entertain your family for a few moments.

More seriously, I've only been retired for a year now and my wife has been retired for only several months. So I am still wondering how accurate my plans were and whether there are implications to those plans that I've overlooked. I would hope that I "test" my plans against my actual retirement less and less as FIRE continues. But I expect to use the tools available to me for several years just to buy some comfort with this new lifestyle.

 

[cute fuzzy bunny]

As another "dividend" liver-offer, here's my thoughts on that.

I dont exactly deprive myself but I'm not dumb about it.

We eat really good food but I make it myself and I shop at a really good but cheap and unfancy market. Heck we eat maine lobster 4-6 times a year and that aint cheap here on the left coast.

We have a nice bottle of wine or champagne every now and then, but I dont spend $25 on a bottle of wine to swill with a plate of spicy pasta.

I spend a lot of time doing things that bring me a lot of pleasure and cost little or nothing. Spending the day at the lake with the dogs throwing a ball for them is just as rewarding to me as spending a weekend at some expensive ski resort or owning a boat.

But I have a plasma tv and a home theater projector with dolby digital sound setup. I spent time researching and comparison shopping to get everything at rock bottom prices and cut some corners that I dont think matter much.

I buy 3-4 year old "beaters", like a BMW convertible and an Infiniti Q45. I'm really killing myself here.

I buy cheap crappy furniture, sometimes used, that looks decent and will hold together for 10-12 years. Because I have 3 cats sharpening their claws on it, chasing each other over it, and two dogs that have no idea what "get down!" means, unless its dog speak for "get up on that couch and drool on it!"

When I want to travel, I pack up the wife and the parents and the dogs in the SUV and we take a day trip to one of the cool places within a few hours drive. Once in a great while we'll get a motel room somewhere a days drive away and make a 2 day trip out of it. But then again I've flown a couple of million miles and been almost everywhere, and dont really have the urge to "be somewhere else". Here is good.

Since I dont have a mortgage, and I pay cash for everything and deep bargain shop, I can get by with the dividend method.

But heres the thing...some day when my portfolio is substantially enlarged, I might buy that boat. Or that house with a big spread of land. Or a new high def projector when those get cheap enough. Or maybe none of the above because stuff doesnt really make me any happier or more fulfilled. Even if I wait eight or ten years before making any large spends or increasing my withdrawal rate...hell I'll still be in my late 40's or early 50's and I DEFINITELY didnt deprive myself of much in my 20's and 30's.

That having been said, it you want to do a lot of "wealthy stuff", you wont make it on this method, and you might need to keep working to build up a big enough portfolio to keep doing that. Or just keep working period.

And theres nothing wrong with that. As long as you're happy with the tradeoff, and you've also thought about why doing those things feels good and you're doing them for the right reasons.

*****'s "new luxuries" suit me just fine.

 

[Hyperborea]

As another "dividend" liver-offer, here's my thoughts on that.

I dont exactly deprive myself but I'm not dumb about it.

That's fine but setting up a portfolio to live off only the dividends has one of two results.  You work longer to build the portfolio to the size where that is possible or you live on less yearly from the portfolio.  In fact, if you could live off the lower amount then you could have pulled the plug sooner with other withdrawal schemes so there really is only the result of working longer.

That having been said, it you want to do a lot of "wealthy stuff", you wont make it on this method, and you might need to keep working to build up a big enough portfolio to keep doing that.  Or just keep working period.

I have no burning desire for a lot of "wealthy stuff" but I have no desire to leave a large inheritance.   In the words of Errol Flynn: Any man who has $10,000 left when he dies is a failure.

I already autocross now and will likely resume that in retirement after we stop our "perpetual traveller" phase.  Having more money to spend now rather than leave it all to a cat or the local university would let me run nationally.

I haven't logged a million miles (though still quite a few) and there is a big difference between travelling back and forth between Boston and San Francisco twice a month for business meetings and really exploring and living in another culture. Even going to India for business meetings is a big step away from riding the trains around and exploring the country.

The renting of a villa to spend time with the extended family would be great to possibly get everyone together.  The old scotch would be great to try. Oldest I've tried is the 25 year olds and even then I haven't bought one myself.

However, I'm not about to give up FIRE for those though some of those like living in other countries may actually make it more viable and others like my guitar playing can be a fallback for income if things get bad.  It comes back again to the fact money is not an end in itself but the means to an end.  Building my portfolio balance up just for the sake of building it up to impress the old codgers at the retirement home is not my goal.

 

[cute fuzzy bunny]

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

I haven't logged a million miles (though still quite a few) and there is a big difference between travelling back and forth between Boston and San Francisco twice a month for business meetings and really exploring and living in another culture. Even going to India for business meetings is a big step away from riding the trains around and exploring the country.

True. I've been on just about every island in the carribean, most central american countries, and just about every country in europe. I always "padded" the business trips to make vacations and plenty of them were purely for pleasure. Living in another culture full time would be interesting. Just not sure I'd want to work another 10 years to accommodate it.

The renting of a villa to spend time with the extended family would be great to possibly get everyone together. The old scotch would be great to try. Oldest I've tried is the 25 year olds and even then I haven't bought one myself.

The extended family can fit in the house i'm in now, but somehow that doesnt sound like a lot of fun...guess it depends on the family I like a good scotch too, and plenty of room in the budget for a special bottle now and then...the infrequency is what makes it special.

However, I'm not about to give up FIRE for those though some of those like living in other countries may actually make it more viable and others like my guitar playing can be a fallback for income if things get bad. It comes back again to the fact money is not an end in itself but the means to an end. Building my portfolio balance up just for the sake of building it up to impress the old codgers at the retirement home is not my goal.

Amen!

I've found that a lot of people who want to travel, buy stuff, hold special events, yada yada yada are often doing it to make themselves feel better about themselves, or in the spirit of making someone else feel better about them. I feel pretty good, and as far as how others feel about me...well...@#%$@# 'em.

 

[gummy]

Hyperborea asks:
As a counter question, what would you use to size your yearly withdrawals if not some "SWR" number? Would you withdraw some amount calculated based just on need without any reference to the portfolio? How would you decide when to take extra withdrawls if your portfolio has done well? How much extra?

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).

Anything above the minimum withdrawal rate is determined by recent portolio returns ... and what luxuries we want to engage in - which is entirely unpredictable

This is much like what I've described here:

http://home.golden.net/~pjponzo/sensible_withdrawals.htm

except that, in a spreadsheet, it's difficult to incorporate:
"Our portfolio did quite well. How about China this year?"
"Naw ... I'd prefer to buy that 50" TV"

Of course, whatever one does (rationally), one can argue:
"you're just calculating a SWR"

P.S.
If I ever suggested to my wife that I have a wonderful formula for determining what we can withdraw this year, she'd burst out laughing and tell me:
"swing it over your head and scream like a chicken"

... as salaryguru suggests.

 

[John Galt]

I've been chewing over what gummy has to say and
one thought bubbles to the surface.

As most of you know, I think SWR conversation is fun
and interesting, I just don't really use it myself except
in a very general way. My wife and I have separate
finances and share household expenses. This was
worked out very unscientifically. As long as my net
worth keeps increasing I don't worry much. I do have
back up plans to my back up plans to my back up plans
for the day when this stops. Under the best case
scenario it never will, but even under the worst case
I can't see being forced back to work.

John Galt

 

[hocus]

If I ever suggested to my wife that I have a wonderful formula for determining what we can withdraw this year, she'd burst out laughing

My wife possesses the most important qualification for the job, the patience of a saint. Still, we have managed to figure out a way to meld our very different individual perspectives into a combined mutual perspective that so far at least I think has produced pretty darn good results.

She gets anxious from time to time about our financial circumstances, which I think it is fair to describe as unusual. My stock response is to suggest that she look over the numbers showing that we are in better shape that most of our friends. She acknowledges this, but then adds the observation that "some of our friends have two paychecks and no kids, and we instead have two kids and no paychecks." I note that she knew when she married me that I wasn't the sort of guy to get too hung up by petty details like that.

The other side of the story is that, when she sees the power of a theory reveal itself in practical results, she is better than me at taking care of the detail work needed to make the theories work; she is the one who records the numbers in the budget and lets me know when I have been renting too many videos or whatever, for example.

There's one story illustrating this phenomenon that left a big impression on me. Before I pushed too hard on the Retire Early thing, I suggested that we make a plan to save enough to pay off our mortage in about two year's time. She humored me: "That would be a nice thing to do, honey; we should give that one a try." She is the one who sends in the checks to cover the various bills each month. Less than two years later, she no longer needed to send in that big one for the mortgage. That sent the message about the power of effective saving in a way that discussions of my theories about how to achieve financial independence early in life never had. Once the ideas connected with her in a way that made sense to a person with her personality type, she was the spouse who became the real saving vulture.

I am a person who can come up with six theories on how to save effectively before breakfast. That's just a skill that God happened to give to me. Execution, on the other hand, tends not to be my strong point. My wife is responsible for execution of much of our personal plan. When it comes to my SWR theories, JWR1945 has been kind enough to take on the task of providing the data-based proof that many need to see before the ideas are worthwhile in their eyes.

What I love about discussion boards is that it allows people to join efforts and thereby generate lots of workable, tested, scrutinized ideas that are more valuable than the ones that any of the various segments of the community could have come up with on their own. We all have different skill sets. The way it works is that you give when you can give, and you take when there is something you need to take.

I have given a whole bunch over the past five years. I have taken a whole bunch too. I am not an altruist. My book is ten times better than what it would have been had I not spent thousands of hours putting together the 2500 posts I have put forward at this point. Putting those posts together forced me to think harder. The feedback I received helped me discard stupid stuff and enrich the insights. And of course there were lots of insights that I picked up from posts put forward by others that I never would have dreamed up on my own had I spent my whole life thinking about this stuff.

JWR1945 has read my book. He can tell you that one of the themes that runs through it is the benefit that comes from joining internet discussions boards to learn about how to retire early. I don't want people just to read the book. I want them to read the book, and then come join our movement. I want them to learn from us and us to learn from them. An important purpose of the book is to build the community.

Intercst will be thanked on the Acknowledgments page for the efforts he has put forth in building the community. He played an important role, as you all know. Dory36 will be thanked too, of course. And Wanderer and raddr and BenSolar and lots of your other favorites. Lots of people will be thanked by name and each community member who contributed a single post will be thanked in a general sense for adding the brick he or she added to the great big wonderful building we have constructed over the years. I will get any royalties generated from the book. But the reality is that the development of the ideas that drive the book was a group project. I think of this book as our book.

It is not the last book we are going to write together. It is only the first. But the first time you do something is often the most exciting time. I expect it is going to be an exciting adventure for us all watching it take off together.

 

[gummy]

John Galt:
"... SWR conversation is fun and interesting, I just don't really use it myself ..."
My sentiments exactly.
However, it occurs so often on discussion forums that I've been writing about it for years - and having all that fun doing so!

The curious thing is that, in all those years, I've only found one person who uses it after they retire and start withdrawing - that's *****, who may not really be retired - and withdrawing

When I've asked (on other forums) who uses SWR (to determine current, not future withdrawals), I usually get a lecture on how to calculate it, how important it is, a jillion links to essays on the subject etc. etc.

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.

*****:
"... when she sees the power of a theory reveal itself in practical results ..."
Do you really calculate a SWR and use it to determine your withdrawals from a portfolio
... or are you simply reorganizing your finances (which my wife would clearly appreciate).

About your book:
I hope you have better luck than I.
After years of writing (fiction) and running through several agents I gave up.

http://home.golden.net/~pjponzo/novels.htm

Perhaps writing about financial independence is more attractive to publishers.

 

[Michael]

How would one actually use the SWR number, once it's been calculated?

As a reality check to make sure your plans are reasonably realistic. As long as actual spending does not exceed the SWR, you are probably ok. If you are comfortable living on less than 1%, this is fine. You do not have to withdraw any more just to reach any magic number. If you need to withdraw 10% to survive, the SWR tells you to go back to the drawing board and make a new plan.

 

[BigMoneyJim]

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.

What, just for the novelty? Or do you hope to gain insight from such a person?

If you're looking for people who place their future faith purely in mathematics, look at those who claim market movents are predictable via technical analysis; some seem to deeply believe if you can find the right numbers to plug into the equation that you can predict the future. Perhaps everyone who made it to retirment learned this doesn't work reliably?


We want to aviod running out of money when we're 95 and arthritic, and we don't want to work until 78 if we don't need to. So somehow we need to learn what point in that range we feel comfortable. I think SWR tools were created to help set up boundaries: now we can make a decent case for something between living off real dividends and 4% of the initial balance as being safer than 6-8% previously recommended by "experts" and enabling earlier retirement than dividends only.

But this isn't anything new, this is what you, gummy, and all the other retirees here are already doing. I'll just watch for discussions on which brands of dog food taste better to determine which SWR's were really safe.