Vanguard looks at the 4% rule, 20 years later

[daylatedollarshort]

We're planning on 0% real for a few years then 1% real long term. Anything over that will be party time. I am not much of a a risk taker but I'm also not a big spender so it works out.

[Gunny]

FIRECalc gives me a 98% success rate on a WR of 6% over 30 years with a 60/40 portfolio and figuring SS at for me at 70 and DW at 62. As I also have a COLA'ed pension and other investments I do not plan to tap into, I am very comfortable with that. Any reason I shouldn't be? I FIRE in June.


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[David1961]

Quote:

Originally Posted by gunnychapman FIRECalc gives me a 98% success rate on a WR of 6% over 30 years with a 60/40 portfolio and figuring SS at for me at 70 and DW at 62. As I also have a COLA'ed pension and other investments I do not plan to tap into, I am very comfortable with that. Any reason I shouldn't be? I FIRE in June. Sent from my iPad using Early Retirement Forum

If you are comfortable, that's what matters. If it were me, I'd ask the following:

What are chances you will live longer than 30 years?
How much more money would you need to turn that 98% into 100%

[David1961]

Quote:

Originally Posted by jkern I don't use the 4% rule as a rule at all. I calculate my SWR and compare it to all the literature to determine if I feel comfortable or not. After all income sources come online (SS for me). SWR : 4% Not comfortable at all SWR : 3.5% Concerned SWR : 3% Ok SWR : 2.5% Comfortable SWR : 2% Very comfortable SWR : 1.5% Look into increasing spending

That's about the way I would look at the various WR's too. But I might change 2.5% to "very comfortable" and 2% to "all set". Even if your investments just keep up with inflation, a 2% WR would last 50 yrs. Either way, it's judgement call.

[audreyh1]

Doesn't anyone withdrawing less than 3% worry that you'll leave a huge chunk to your heirs while limiting your enjoyment in your golden years? Is that your intention?

[Major Tom]

Quote:

Originally Posted by audreyh1 Doesn't anyone withdrawing less than 3% worry that you'll leave a huge chunk to your heirs while limiting your enjoyment in your golden years? Is that your intention?

I'm withdrawing less than 3% specifically because I began ESR/ER with a smaller portfolio that I ideally would have liked. I want to give it a chance to grow a little so that (hopefully) I will have the option to spend more in the future. I'm 51 years old, so a little sacrifice now should lead to more fun later on.

If there is money left over after I'm gone, that's fine. I can always think of a person or charity I like, to leave it to.

[Major Tom]

Quote:

Originally Posted by jkern I don't use the 4% rule as a rule at all. I calculate my SWR and compare it to all the literature to determine if I feel comfortable or not. After all income sources come online (SS for me). SWR : 4% Not comfortable at all SWR : 3.5% Concerned SWR : 3% Ok SWR : 2.5% Comfortable SWR : 2% Very comfortable SWR : 1.5% Look into increasing spending

That's roughly how I look at it also. I'm at 2%, and I like feeling very comfortable.

[Hermit]

Quote:

Originally Posted by audreyh1 Doesn't anyone withdrawing less than 3% worry that you'll leave a huge chunk to your heirs while limiting your enjoyment in your golden years? Is that your intention?

My tendency seems to be to give any extra money to my kids (heirs) anyway.

[audreyh1]

Quote:

Originally Posted by Major Tom I'm withdrawing less than 3% specifically because I began ESR/ER with a smaller portfolio that I ideally would have liked. I want to give it a chance to grow a little so that (hopefully) I will have the option to spend more in the future. I'm 51 years old, so a little sacrifice now should lead to more fun later on. If there is money left over after I'm gone, that's fine. I can always think of a person or charity I like, to leave it to.

Fair enough. I can see a strategy of underdrawing at first, to be adjusted later.

I also retired very early and let my portfolio grow for over a decade with 0 withdrawals. And somehow we made it through two nasty bear markets, and thankfully it still managed to grow in real terms. I had other (riskier) investments to draw on before I started drawing on the retirement portfolio.

[RetireBy90]

While I am planning on a 4% or less in 2 years, I can understand backing off to 3 or 3.5. I am also planning a modest 6% return on retirement funds. With a conservative 2 to 3% difference, I'm not planning on taking any of the principal. Am I missing something?

[audreyh1]

Quote:

Originally Posted by Hermit My tendency seems to be to give any extra money to my kids (heirs) anyway.

We gift quite a bit too - to siblings and their families, and to charity. But we prefer to do this by drawing more when we are living, rather than letting it accumulate until after we are gone. Since we are gifting to siblings (no children of our own), now seems way more important than later.

[Major Tom]

Quote:

Originally Posted by audreyh1 Fair enough. I can see a strategy of underdrawing at first, to be adjusted later. I also retired very early and let my portfolio grow for over a decade with 0 withdrawals. And somehow we made it through two nasty bear markets, and thankfully it still managed to grow in real terms. I had other (riskier) investments to draw on before I started drawing on the retirement portfolio.

I am a little concerned that I'll find it difficult to adjust my draw upwards later. I do tend to suffer from an effect that has been much discussed here, and that is that the same frugality that propelled me to be able to ER, also threatens to make it a little difficult to loosen the purse strings in ER. Have you had any issues with this, audreyh1?

[ERD50]

Quote:

Originally Posted by audreyh1 Doesn't anyone withdrawing less than 3% worry that you'll leave a huge chunk to your heirs while limiting your enjoyment in your golden years? Is that your intention?

No, that's not a 'worry' at all.

A worry would be running out of money after quitting work before full retirement age, and then what? My kids would probably help out, but I hope to never hit that stage. Keeping my WR conservative is how I do that.

I do what I want, drink good beer/wine, eat good food, go to concerts, buy what I want. I'm not limiting myself to any great degree. Otherwise, I would have managed to work longer. Everything is a balance, mine feels good to me.

-ERD50

[W2R]

Quote:

Originally Posted by audreyh1 Doesn't anyone withdrawing less than 3% worry that you'll leave a huge chunk to your heirs while limiting your enjoyment in your golden years? Is that your intention?

I've been withdrawing around 2%, but this year due to starting SS it will be down to 1.x%. I want to leave some to my daughter, but not a huge chunk; her husband has a great job and they are better off than I have ever been, so there isn't much point in that.

I don't *worry* about it exactly, but I agree that the logical move now is to ramp up my lifestyle a bit if that will enhance my life in some way. I have been doing pretty well in that effort, or so I thought, spending lots more on things I truly enjoy, but the more I spend the more the market booms and the more my portfolio grows. Consequently my withdrawal as a percentage of my 12/31 balance each year has been dropping. This is so ironic.

I am looking for a nicer house. That's something I would value and it should put a dent in my portfolio, for sure, plus increased operating costs would increase my yearly WR. But the house has to be one I would like more than my present house. Still looking....

[Major Tom]

Quote:

Originally Posted by W2R I don't *worry* about it exactly, but I agree that the logical move now is to ramp up my lifestyle a bit if that will enhance my life in some way. I have been doing pretty well in that effort, or so I thought, spending lots more on things I truly enjoy, but the more I spend the more the market booms and the more my portfolio grows. Consequently my withdrawal as a percentage of my 12/31 balance each year has been dropping. This is so ironic.

We should all be so lucky. I'm officially envious!

[W2R]

Quote:

Originally Posted by Major Tom We should all be so lucky. I'm officially envious!

Don't be! It's all temporary. I have spent most of my life right around the corner from broke. We all have good luck and bad luck at various times in our lives and nothing is ever constant. Karma is on my side for a change right now, but who knows what tomorrow will bring.

[audreyh1]

Quote:

Originally Posted by Major Tom I am a little concerned that I'll find it difficult to adjust my draw upwards later. I do tend to suffer from an effect that has been much discussed here, and that is that the same frugality that propelled me to be able to ER, also threatens to make it a little difficult to loosen the purse strings in ER. Have you had any issues with this, audreyh1?

One can always gift more. That's easy.

I fine myself more inclined to "upgrade" as funds become available.

I have always lived below my means, but I am not necessarily frugal, just prudent.

I'm not buying first class airfare anywhere yet. But I'll buy first class train tickets in Europe.

[cooch96]

No one seems to mention getting part time work to make ends meet if your portfolio doesn't last. I figure 80% success is good gambling odds. If I ever start to slip into that 20%, why not tighten your belt AND pick up something seasonal to tide you over until your portfolio is healthy again? I reckon if I'm too old to do anything productive, then I'll also be too old to give a care what happens.

[Major Tom]

Quote:

Originally Posted by cooch96 I reckon if I'm too old to do anything productive, then I'll also be too old to give a care what happens.

My fear about a situation like this would be that I would be too old to do anything productive, yet still sentient enough to be miserable if my means had dwindled. Although I hope it doesn't happen to me, I can envisage being physically incapacitated, yet still being perfectly aware that my life sucked. It's a position I don't wish to be in.

[cooch96]

Quote:

Originally Posted by Major Tom My fear about a situation like this would be that I would be too old to do anything productive, yet still sentient enough to be miserable if my means had dwindled. Although I hope it doesn't happen to me, I can envisage being physically incapacitated, yet still being perfectly aware that my life sucked. It's a position I don't wish to be in.

I guess I just have a real hard time imagining a life where I'm unable to do anything, but still thrilled because I have a team of nurses and a pile of money in the bank. Spend it while you can enjoy it. That's what I say.