The Number

[mathjak107]

WORK IS JUST SOMETHING I DO TO FILL THE TIME BETWEEN WEEKENDS!

 

[RockMiner]

In my occupation we have a joke which goes that when one of us is asked a technical question we will ponder, calculate, re-calculate, scratch our heads, and ask "what do you want it to be?"

SWR's are much the same IMO.

 

[SteveR]

Finding your number is step one in knowing when you have enough to ER.

Step two through whatever are what it takes to get enough $$$ to match your number.

The later steps are to generate an income stream that ebs and flows with the economy, your lifestyle and the market.

The last step is to wave your last dollar at the undertaker.

$1-2 million? Should be enough for most folks as long as their house is paid off and medical is taken care of. You won't be truly rich.....just comfortable and able to do most of what may be imporatant to most folks but not rich enough for an extravagant lifestyle. $80k before taxes is not a huge sum of money in today's economy. It gets down to expenses vs nest egg size to determine how happy you would be with a given amount of income. Even a large nest egg would not provide sufficient disposible income for fun and games if it is required to fund too much expense that does not create fun.

FunFactor=Nestegg-NonFun Expenses

The larger the FunFactor the more potential fun stuff you can fund.

 

[veritasophia]

With a well diversified portfolio that includes small/value/foreign/commodities this study concludes that a SWR of 5-6% worked historically (for the period the study covers) and that is BEFORE even considering adjusting w/r for bad years in the market where other studies have shown one can add 1-2% in SWR. (easy read; scroll to the bottom for SWR results).
http://raddr-pages.com/research/CommodityFutures.htm

Does Vanguard have a commodity fund? I couldn't find one besides going through PIMCO for PCRIX (1.24 expense ratio ) Any cheaper alternatives?

 

[Shredder]

WORK IS JUST SOMETHING I DO TO FILL THE TIME BETWEEN WEEKENDS!

What's a weekend? Every day is a weekend when you retired.....Shredder

 

[youbet]

I wonder if it might not be wise to recognize that 4% means zero Social Security in your 60's.

I like the Firecalc tool a lot, but it does add some confusion to our discussions because it combines determing your desired withdrawal rate from your portfolio in absolute dollars with historically testing that rate as a percentage.  Firecalc adds the dimension of helping you determine what you need to withdraw from your financial portfolio given the amount you choose to budget and other income streams such as SS or pension, etc.  This seems to often confuse us into thinking that SWR is related to those other income steams and it isn't.

SWR refers to the inflation corrected percentage of your beginning portfolio you can withdraw annually for some number of years without depleting your portfolio as tested by applying historical market performance and inflation rates.  Whether or not you get SS or a pension does not matter in determining an SWR.  Those other income steams only impact the amount you need to withdraw, not what's possible.

It's a fine line, but I think significant.  That's why I prefer to use the SWR Excel spreatsheet downloadable from the RE Homepage site.  If you haven't used that, try it.

 

[REWahoo]

SWR refers to the inflation corrected percentage of your beginning portfolio you can withdraw annually for some number of years without depleting your portfolio as tested by applying historical market performance and inflation rates. Whether or not you get SS or a pension does not matter in determining an SWR. Those other income steams only impact the amount you need to withdraw, not what's possible.

It's a fine line, but I think significant. That's why I prefer to use the SWR Excel spreatsheet downloadable from the RE Homepage site. If you haven't used that, try it.

Why not just run FIRECalc without the SS, pension or other income streams if you want a "pure" SWR number?

 

[preben]

PCRIX is the institutional shares at the e/r is a very resonable 0.74%. While it demands $5M to buy in I presume most of us here have that . - joking aside many brokers, Incl. Vanguard have made a special deal so one can buy in at much smaller minimums.
Cheers!

Does Vanguard have a commodity fund?  I couldn't find one besides going through PIMCO for PCRIX (1.24 expense ratio  )  Any cheaper alternatives?

 

[youbet]

  Why not just run FIRECalc without the SS, pension or other income streams if you want a "pure" SWR number?

Yep, that works too.

 

[jdw_fire]

I like the Firecalc tool a lot, but it does add some confusion to our discussions because it combines determing your desired withdrawal rate from your portfolio in absolute dollars with historically testing that rate as a percentage.  Firecalc adds the dimension of helping you determine what you need to withdraw from your financial portfolio given the amount you choose to budget and other income streams such as SS or pension, etc.  This seems to often confuse us into thinking that SWR is related to those other income steams and it isn't.

SWR refers to the inflation corrected percentage of your beginning portfolio you can withdraw annually for some number of years without depleting your portfolio as tested by applying historical market performance and inflation rates.  Whether or not you get SS or a pension does not matter in determining an SWR.  Those other income steams only impact the amount you need to withdraw, not what's possible.

It's a fine line, but I think significant.  That's why I prefer to use the SWR Excel spreatsheet downloadable from the RE Homepage site.  If you haven't used that, try it.

youbet, I think you are overlooking the real value of FIREcalc which is not determining a Safe W/D ratio (e.g. 4%) but determining a safe W/D amount in dollars that will grow with inflation.  The beauty of it including future income streams is it allows the user to determine a maximum standard of living that is maintained through out the time frame chosen (i.e. an inflation adjusted dollar W/D) that may at the start of their retirement be a larger percentage of their portfolio than the pat answer of 4%.  As time goes on and the other income streams kick in a smaller W/D is required of their portfolio thus protecting said portfolio and making the whole plan for said maximum standard of living possible.  Percentages are nice rules of thumb but maping out all the income streams is really valuable for detailed planning.

 

[youbet]

  Percentages are nice rules of thumb but maping out all the income streams is really valuable for detailed planning.

As I stated, I'm a fan of Firecalc. But people do get confused when income streams are available other than the SWR and make statements like "gee, with SS starting I can increase my SWR."