Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Timing retirement
Old 08-05-2016, 09:15 AM   #1
Recycles dryer sheets
ducky911's Avatar
 
Join Date: May 2010
Posts: 381
Timing retirement

Firecalc has that example of three different people retiring '71,'72'73. Always gave me a scare with one guy running out of money.

I retired July '11 with the S&P around 1200. Lucky me!

Bob
__________________

__________________
You've got to ask yourself one question: Do I feel lucky? Well, do ya, punk?
I hate (despise) loads and fees
Retired July '11 investments 60/40 in very low cost index and mutual funds, balance once a year at best.
ducky911 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-05-2016, 03:22 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jun 2014
Posts: 1,212
I think it is less of a worry if you have pensions and SS. If not it would be a big worry.
__________________

__________________
Teacher Terry is online now   Reply With Quote
Old 08-05-2016, 05:27 PM   #3
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,048
Anyone retiring in 2015 or 2016 and "just" making it in terms of savings, when the market was at the high point is in danger of that happening if things go south very soon for a few years. Especially if they don't have a pension and are too young for SS.

That is why it's valuable to have a cushion built into your savings or your spending plans.

Yes lucky you, as the S&P has risen about 82% (~ 16.5% per yr) since you retired, but someone retiring 1 year ago has seen it rise only 4%
__________________
Sunset is offline   Reply With Quote
Old 08-05-2016, 06:02 PM   #4
Recycles dryer sheets
Taxman59's Avatar
 
Join Date: Sep 2014
Posts: 473
Quote:
Originally Posted by Sunset View Post
Yes lucky you, as the S&P has risen about 82% (~ 16.5% per yr) since you retired, but someone retiring 1 year ago has seen it rise only 4%
The S&P may only be up 4%, but I am up about 10% after withdrawals!



Have the day you deserve, and let Karma sort it out.

Sent from my iPad using Early Retirement Forum
__________________
Taxman59 is offline   Reply With Quote
Old 08-05-2016, 06:28 PM   #5
Full time employment: Posting here.
Aerides's Avatar
 
Join Date: Nov 2015
Posts: 576
Our plan always involved having ~3 years expenses in addition to whatever we plugged into firecalc. I plan to keep that approach rebalancing to maintain 3 years "safe" to allow us to weather out reasonable future storms, at least for the near future. But yes, I'm glad we OMY'd and didn't RE in summer 2015 or that would have been too much worry to start with.
__________________
Aerides is offline   Reply With Quote
Old 08-05-2016, 09:01 PM   #6
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 280
Quote:
Originally Posted by ducky911 View Post
Firecalc has that example of three different people retiring '71,'72'73. Always gave me a scare with one guy running out of money.
Sitting at the fancy sidewalk café, I overheard three young gentlemen, perhaps each around 40 years old. They were toasting to their success, having worked their IPO to a point where they were tired of working for the man.

Person A: “I checked my brokerage account this morning, and it turns out that I have right at 2.2 million. I figure that I need $100,000 each year to maintain my lifestyle.” (Does the math on his smartphone, 4.7% withdrawal rate) “That’s it! I am going to retire!”

Person B: Checks his brokerage account- 2.7 million. Does the math- 3.7%. “I agree! $100K is about what I figured I need also, I am also going to retire!”

Person C: Checks his brokerage account- 3.7 million. Does the math- 2.7%. “I agree! $100K is about what I figured I need also, I am also going to retire!”

What might their balances look like in 25 years? (Hint: look at the results chart on the FireCalc page)

The way the problem is presented on the FireCalc homepage suggests that the only variable is which year the people retired. The market dropped 19% from 1973 to 1974, and another 25% from 1974 to 1975. In my case study above, Person B would have 2.2 million one year later, and Person C would have 2.2 million 3 years later. The majority of the reason that Person A fails, is because they were right on the edge of being financially viable, and sequence of returns got them. Person B had just enough, and made it successfully. Person C had conservative numbers, and thrived. These numbers are roughly the numbers presented on the FireCalc home page, adjusted by CPI, then divided by 2.1. I added one year of expenses to Person B's portfolio, and 2 years to person C. This way they could all retire at the same time.

This would be the risk of having a 'magic number' that you hit just before a huge drop in the market, especially if all of your living expenses come from that account.
__________________
Clone is online now   Reply With Quote
Old 08-05-2016, 10:07 PM   #7
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,188
All of this argues for having a back-up plan. With the example of $100K withdrawal, it's not too difficult to imagine turning in the Beemer and picking up a used Toyota - maybe also trading the luxury apartment for a modest one, etc. With strategic cutting, such folks can weather the storm. The folks you might feel more pity for are the ones who have little room to cut. My opinion: Anyone depending totally upon withdrawal from a portfolio should have several back up plans already laid out. YMMV
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 08-05-2016, 10:22 PM   #8
Recycles dryer sheets
 
Join Date: Apr 2014
Posts: 226
I think Wade Pfau has a couple articles where he says a person should be heavy in bonds at the beginning of retirement then add more equities as they age. This combats sequence of returns. Reverse of what everyone does.

I don't do it. Just mentioning it. Decide for yourself. lol
__________________
retirementguy1 is offline   Reply With Quote
Old 08-05-2016, 10:30 PM   #9
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,048
Quote:
Originally Posted by Aerides View Post
Our plan always involved having ~3 years expenses in addition to whatever we plugged into firecalc. I plan to keep that approach rebalancing to maintain 3 years "safe" to allow us to weather out reasonable future storms, at least for the near future. But yes, I'm glad we OMY'd and didn't RE in summer 2015 or that would have been too much worry to start with.
We worked a little more than needed, because I didn't realize we could retire, so we built up a cushion accidentally, so we are past our "just made it" number.
__________________
Sunset is offline   Reply With Quote
Old 08-06-2016, 07:41 AM   #10
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,702
Quote:
Originally Posted by retirementguy1 View Post
I think Wade Pfau has a couple articles where he says a person should be heavy in bonds at the beginning of retirement then add more equities as they age. This combats sequence of returns. Reverse of what everyone does.

I don't do it. Just mentioning it. Decide for yourself. lol
I think this is very sound advice. I'm at 60/40 now, but when I fully retire and stop generating any income, I plan to drop to 45/55, and then gradually increase a percentage or so a year until I get back to 60/40. That eases any worries about bad sequence of returns in the early years of my retirement.
__________________
Ready is offline   Reply With Quote
Old 08-06-2016, 07:46 AM   #11
Full time employment: Posting here.
 
Join Date: May 2014
Posts: 938
If it is tight and you are worried would a part time job help?


Sent from my iPad using Early Retirement Forumh
__________________
rayinpenn is offline   Reply With Quote
Old 08-06-2016, 07:56 AM   #12
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,702
A good way to see if your portfolio can survive a bad sequence of returns is to use the investigate tab in Firecalc, and see what WR would have a 100% success rate. This shows you the WR and the spending level that would have survived the worst years for sequence of returns, including the years that fall into the 5% failure rate for a 4% SWR.
__________________
Ready is offline   Reply With Quote
Old 08-06-2016, 08:27 AM   #13
Recycles dryer sheets
Willers's Avatar
 
Join Date: May 2013
Posts: 480
Quote:
Originally Posted by Ready View Post
A good way to see if your portfolio can survive a bad sequence of returns is to use the investigate tab in Firecalc, and see what WR would have a 100% success rate. This shows you the WR and the spending level that would have survived the worst years for sequence of returns, including the years that fall into the 5% failure rate for a 4% SWR.
+1 This is what I used as a check on our readiness. We also have about 35% discretionary spending sp that helps too.

Sent from my SM-T810 using Early Retirement Forum mobile app
__________________

__________________
“If you don't do it this year, you will be one year older when you do.” - Warren Miller
Willers is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Market Timing Schmarket Timing bob boag FIRE and Money 160 10-20-2014 08:10 PM
Retirement timing...big enough difference? Fermion FIRE and Money 13 09-17-2013 11:00 AM
Financial timing of retirement Katsmeow FIRE and Money 11 11-16-2009 01:52 PM
Timing Your Retirement retire@40 FIRE and Money 52 11-13-2008 08:31 AM

 

 
All times are GMT -6. The time now is 02:01 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.