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10-19-2018, 08:18 AM
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#201
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,206
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Quote:
Originally Posted by audreyh1
Many of us have no SS (yet) and no pensions. Many of us here are completely dependent on our investments to fund our retirement.
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Last time I checked mostly SIREs outnumber mostly FIREs here - may be time for another poll. That's why answers here are often a little confusing as one POV is somewhat/quite a bit different than the other. The more "passive" income one has, the more aggressive he/she can be with their investment AA. And potentially spending as well.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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Why take a much smaller SWR than you can??
10-19-2018, 08:57 AM
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#202
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Full time employment: Posting here.
Join Date: Jun 2017
Posts: 504
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Why take a much smaller SWR than you can??
Quote:
Originally Posted by USGrant1962
No, a WR is the amount you choose to withdraw (for whatever reason). SWR is defined in the ER literature as a maximum withdrawal that survives historical back testing. SWR has nothing to do with remaining balance - it only requires that you don't go broke. Your WR may be higher or lower than an SWR, that's up to you.
There is nothing wrong with deciding to withdraw only 2.0% or 2.5%, but don't confuse that with the portfolio survival that SWR is intended to address.
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What literature? Maybe I didn’t pay for the subscription to that and didn’t see it? Bogleheads define it as ‘a consistent but inflation adjusted % withdraw of your investments for a set time period that doesn’t lead to failure’ it goes on to define failure’ (I would view the definition of failure as a separate definition).
If your time period is 45 years and your ‘failure criterium’ is to have (on average) an inflation adjusted amount equal to your starting balance that puts a SWR around 3%
You can say your failure criterium is 95% chance of not running out of money but using that you would still have to adjust your SWR for the number of years.
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10-19-2018, 09:10 AM
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#203
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,206
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Quote:
Originally Posted by pj.mask
What literature? Maybe I didn’t pay for the subscription to that and didn’t see it? Bogleheads define it as ‘a consistent but inflation adjusted % withdraw of your investments for a set time period that doesn’t lead to failure’ it goes on to define failure’ (I would view the definition of failure as a separate definition).
If your time period is 45 years and your ‘failure criterium’ is to have (on average) an inflation adjusted amount equal to your starting balance that puts a SWR around 3%
You can say your failure criterium is 95% chance of not running out of money but using that you would still have to adjust your SWR for the number of years.
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Not sure what you're getting at but here's a clearer(?) quote from the Bogleheads wiki. The % withdrawal rate in SWR methodology is based on the initial portfolio $. Thereafter it's the exact same % as year one, just inflation adjusted. But it's an academic study, it was never intended to be a Ronco "set it and forget it" withdrawal scheme.
Quote:
A safe withdrawal rate is defined as the quantity of money, expressed as a percentage of the initial investment, which can be withdrawn per year for a given quantity of time, including adjustments for inflation, and not lead to portfolio failure; failure being defined as a 95% probability of depletion to zero at any time within the specified period.
Usage: Typically, SWR is utilized as an approximation of the probability that a given portfolio can support a given annual spending component for a required period, with a reasonable confidence. To do this, variables such as the allocation of assets within a model portfolio, the beginning balance, and/or the number of years expected in retirement are varied, a model is applied, and results of these alterations in the variables are observed and compared, in order to optimize for the maximum.
Controversy: Unfortunately, the term "Safe Withdrawal Rate" is necessarily an ambiguous term. This is because initial methods utilized historical data to statically determine what would have been safe given the actual results that past portfolios would have generated with the variables given. The next logical step, of course, was to use that information to predict future SWRs. Either use is technically correct, but one should always be sure to be clear whether the use is in reference to past or projected SWRs, so that unnecessary argument can be prevented.
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Many people here misrepresent SWR all the time, and use the term SWR when they mean simply WR all the time...
https://www.bogleheads.org/wiki/Safe_withdrawal_rates
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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10-19-2018, 11:05 AM
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#204
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Thinks s/he gets paid by the post
Join Date: Oct 2010
Posts: 1,217
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Quote:
Originally Posted by Midpack
Not sure what you're getting at but here's a clearer(?) quote from the Bogleheads wiki. The % withdrawal rate in SWR methodology is based on the initial portfolio $. Thereafter it's the exact same % as year one, just inflation adjusted. But it's an academic study, it was never intended to be a Ronco "set it and forget it" withdrawal scheme.
Many people here misrepresent SWR all the time, and use the term SWR when they mean simply WR all the time...
https://www.bogleheads.org/wiki/Safe_withdrawal_rates
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Yep, and SWR isn't the only financial term used with flexible definitions on this forum.
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10-19-2018, 11:15 AM
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#205
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Thinks s/he gets paid by the post
Join Date: Mar 2014
Location: Southern Cal
Posts: 4,032
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Maybe some of us don’t know better. In fact, I have no knowledge of FIRECALC, SWR, etc.. Some of us don’t plan our retirement down to the detail either, I wonder how other people do it.
I stumbled on this site by accident, I was googling for Bill and Aikasha’s website, I used to enjoy following them.
That said, there are many ways to get to El Dorado, I did plan for my retirement the old fashion way, being conservative with my estimate at the on set. Retirement account has grown more than I had planned, still have not touched it yet. Meanwhile some fixed income have grown to exceed my expense by 30%. Healthcare expense is reasonable stable, but we still spend about $10k per year. Not free.
__________________
Just another day in paradise
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10-19-2018, 11:50 AM
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#206
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Recycles dryer sheets
Join Date: May 2014
Posts: 412
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Quote:
Originally Posted by pj.mask
What literature? Maybe I didn’t pay for the subscription to that and didn’t see it?
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The literature in question is Bengen's original article:
http://www.retailinvestor.org/pdf/Bengen1.pdf
The Trinity Study: (not on the web)
AAII Journal 10, 3: 16–21
Other updates to Trinity:
https://web.stanford.edu/~wfsharpe/retecon/4percent.pdf
Safe Withdrawal Rate is a shortening of Bengen's "maximum safe rate of withdrawal".
SWR is not ambiguous but it is theoretical in the sense that (a) it is 20+ year old study, (b) it is a somewhat idealized situation, and (c) Bengen only intended it to be a guideline and not an actual retirement plan.
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10-19-2018, 12:16 PM
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#207
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Thinks s/he gets paid by the post
Join Date: Apr 2011
Location: Madison
Posts: 1,337
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Wow! None of my other posts even came close to the longevity of this one. Stirred up a pretty good debate. I do agree that a SWR can vary widely depending on age and SS/pensions. Thanks for all the responses.
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
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10-19-2018, 01:06 PM
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#208
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Location: DC area
Posts: 2,479
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Quote:
Originally Posted by TwoByFour
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Trinity study is online here: https://www.aaii.com/files/pdf/6794_...ustainable.pdf
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged
"All models are wrong, some are useful." - George Box
“There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
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10-19-2018, 01:32 PM
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#209
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,012
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Quote:
Originally Posted by dtbach
Wow! None of my other posts even came close to the longevity of this one. Stirred up a pretty good debate. I do agree that a SWR can vary widely depending on age and SS/pensions. Thanks for all the responses.
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Well - a safe withdrawal rate is completely dependent on the portfolio, and independent of SS or pensions.
It's simply the max amount that you can withdraw from the portfolio annually, and meet whatever survival criteria or lowest portfolio value, AA and time period you select.
The fact that you have additional income from non-portfolio sources doesn't change that.
__________________
Retired since summer 1999.
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10-19-2018, 01:38 PM
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#210
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Thinks s/he gets paid by the post
Join Date: Jan 2007
Location: Minneapolis
Posts: 1,172
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Quote:
Originally Posted by Midpack
Many people here misrepresent SWR all the time, and use the term SWR when they mean simply WR all the time...
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As, well as WR (Withdrawal Rate) and Spending Amount... Two completely different things. With that said; they could be the same amount for some people.
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