Why take a much smaller SWR than you can??

[JDARNELL]

We have not started drawing from our portfolio as of yet. Blessed to have more than enough rental come, COLA'd pension, etc to more than cover all our spending needs and most wants. I have been thinking though why did I overshoot so much? I ERd at 45 and 5 yrs later I have no plan to spend any of it. So I have been working on trying to figure out how to spend some of the funds in a way that adds value to our life.

In my research I ran across this youtube video and downloaded the article he is talking about. This might be beneficial to some. Most of us plan for the worse case and for me this kind of helps put things in perspective. He does a good job trying to poke holes in his thinking. He talks about the 4% rule but I can't even get to 1% mentally. :face palm:

JDARNELL

https://medium.com/@justusjp/misunderstanding-sequence-of-returns-risk-9f49d601a018

 

[OldShooter]

This thread is pretty worthless without actually mentioning the amount of your nest egg. Obviously 2% or 3% of $10m is a whole different thing then 3% of $1m. Seems many on this forum have $5-$10m saved and I can see where it would be somewhat difficult to spend 4% of that for a lot of people.

True to a point, but I know many people who have "enough" at an income point that is much lower that what is probably the average around here. Above a certain survival point I think that "enough" is more about having comfortably reconciled one's perceived needs and wants with one's financial circumstances.

If you remember Maslow's needs hierarchy, financial needs are low in the triangle and, once satisified, do not contribute further to happiness. That is another answer to the OP's question.

 

[W2R]

This thread is pretty worthless without actually mentioning the amount of your nest egg. Obviously 2% or 3% of $10m is a whole different thing then 3% of $1m. Seems many on this forum have $5-$10m saved and I can see where it would be somewhat difficult to spend 4% of that for a lot of people.

In my case, the low withdrawal rate is not due to having a huge nest egg like $5-$10 million... it's due to two things:

(1) The first is that I haven't had any big unexpected expenses this year. No dental implants, for example. This is very unusual IME. Just wait until a year when I need a new roof, three dental implants, have to pay hurricane evacuation expenses, and my car craters, and I'll be singing a different song.

(2) The second is SS. I am not a kid like some of us; I have reached age 70 at last, this year. I waited until age 70 for my (higher!) SS which I am getting now, in addition to a mini-pension that is about 40% as much as my SS. My SS + pension will be covering most of my spending. If I spend the same amount next year as this year, and if the SS COLA is 2.8% as expected, my SS+pension will cover 90% of my spending.

I like it this way which is why I waited for SS until I turned 70 last June. For me there is value in moving into non-volatile, non-varying income sources like SS and pension as I grow older. YMMV and that is fine, but my financial planning reflects my own values and this is one.

Anyway, it's not that I'm withdrawing a big chunk of money and that represents a low percentage of my vast wealth. It's that I just do not need to withdraw much this year and so my withdrawal amount would be a small percentage of even a small portfolio (and mine is more middle-of-the-road).

 

[Mdlerth]

Would all the celebrities here please raise their hands?

Who here is spending money on stuff they don’t really want?

Probably not many normal people. But if you want to learn how to blow dough on a world-class level, look no further than many, many celebrities. I heard a story about a famous musician who declared bankruptcy some years back. I'll call him Mister X.

At the time he had earned over $200 million in his career, but had managed to urinate it all away. Here's how he (allegedly) did it:

Imagine you are at a typical A-list party in Hollywood. Nothing but the best here: champagne, caviar, cocaine, Cheetos (I happen to like Cheetos! ). At 3:00 AM, Mister X decides he needs a new outfit, so he tells his executive assistant to arrange it. In 20 minutes, a half dozen limos pull up in front of the mansion to take Mr. X and whoever is still awake to a fashionable shop on Rodeo Drive.

The shop owner had been awakened by the Exec Asst, and told that Mr. X was coming with twenty of his closest friends and wanted to get some new togs for the whole party. So he rushes to open the store, because he knows price will be no object for Mr X.

Two hours later, the party returns to the Hollywood mansion with glittering new kits, and the shop owner pockets a cool quarter million.

The story went on to say this behavior wasn't at all out of the ordinary for folks in that industry. Perhaps the lesson here is just because you can spend it doesn't mean that you should.

 

[W2R]

Probably not many normal people. But if you want to learn how to blow dough on a world-class level, look no further than many, many celebrities. I heard a story about a famous musician who declared bankruptcy some years back. I'll call him Mister X.

At the time he had earned over $200 million in his career, but had managed to urinate it all away. Here's how he (allegedly) did it:

Imagine you are at a typical A-list party in Hollywood. Nothing but the best here: champagne, caviar, cocaine, Cheetos (I happen to like Cheetos! ). At 3:00 AM, Mister X decides he needs a new outfit, so he tells his executive assistant to arrange it. In 20 minutes, a half dozen limos pull up in front of the mansion to take Mr. X and whoever is still awake to a fashionable shop on Rodeo Drive.

The shop owner had been awakened by the Exec Asst, and told that Mr. X was coming with twenty of his closest friends and wanted to get some new togs for the whole party. So he rushes to open the store, because he knows price will be no object for Mr X.

Two hours later, the party returns to the Hollywood mansion with glittering new kits, and the shop owner pockets a cool quarter million.

The story went on to say this behavior wasn't at all out of the ordinary for folks in that industry. Perhaps the lesson here is just because you can spend it doesn't mean that you should.

You're right; there is definitely a huge gap between Mister X's high end lifestyle and my own. Your story is a great illustration of the big financial advantages we have in not being world famous rock stars.

One big difference for me, is that at 3:00 AM on any given night, I do not want to get all dressed up in ANYTHING no matter how gorgeous... What a hassle! And what would I get out of going through all that? At that hour I'm just wearing something soft, old, and comfortable, and will be going to bed soon.

 

[braumeister]

Well, the Cheetos sound good.

 

[audreyh1]

I hadn’t thought too much about the

It’s too much work to spend more

scenario. I think that is also coming through on this thread.

I can certainly think of way more things I’d like to do that would cost money but it seems I can’t fit them all in a given year!

We chronically underspend our ~3% withdrawal rate which I still think is a bit too conservative given our ages. A good market plunge could take care of that problem for a while too.

But I’m not giving up yet! I am determined to spend more on things that we care about and really enjoy.

 

[NW-Bound]

... We chronically underspend our ~3% withdrawal rate which I still think is a bit too conservative given our ages. A good market plunge could take care of that problem for a while too...

When the market heads south, it is possible to convert that Lambo back into cash, but the reverse conversion rate is nowhere like the original rate from cash to Lambo.

 

[HFWR]

“You spend your whole life just piling it up there
You’ve got stacks and stacks and stacks
‘Til Gabriel comes and taps you on the shoulder
But you don’t see no hearses with luggage racks...”

Don Henley

 

[audreyh1]

When the market heads south, it is possible to convert that Lambo back into cash, but the reverse conversion rate is nowhere like the original rate from cash to Lambo.

Considering that we spend on experiences and consumables rather than collecting stuff, I’m afraid we haven’t accumulated toys like Lamborghinis that we could sell if needed.

 

[45th Birthday]

Based on Fidelity RIP, using Significantly Below Average market returns, we could increase our current spending until ages 85/88 (after which one might assume we couldn't possibly continue to spend like that) by 40% before the plan fails.

We could definitely think of ways to blow that dough, but live a pretty comfortable life already. Why don't we? Fear of another crash and a long planning horizon (current ages 57 and 60), plus we would like to leave our kids and charities something.

We have ramped up spending over the years and will probably continue to do so, but not in huge steps.

 

[Dtail]

This thread is pretty worthless without actually mentioning the amount of your nest egg. Obviously 2% or 3% of $10m is a whole different thing then 3% of $1m. Seems many on this forum have $5-$10m saved and I can see where it would be somewhat difficult to spend 4% of that for a lot of people.

Here you go.
For 2019 expected 3% of 1.7mm

BTW - The average for the forum is probably around the 3mm range based on past posts and polls.

 

[sengsational]

I'm in the "it's work to spend" category, and also, the things I buy can take a lot of time.


First, I find it hard to buy something without a lot of research and comparative shopping. So that takes time and effort. Then, after I get an item, it might take a while to integrate it into my life. And of course if I'm doing that, I'm not figuring out what I want to buy next.


I like the idea of a personal assistant. The expense of paying the assistant plus all the time made available would allow more spending. I think there was discussion of those in "The 4 Hour Work Week". Foggy, but I think you could hire someone from India or something for pretty cheap, and set them working on whatever you came up with. That might enable someone like me to spend more since I'd be outsourcing the time consuming due diligence. The problem is that if one derives meaning from tackling those things, outsourcing would be a net loss to well-being.

 

[Housewife]

We use SWR as a reference point, but we do not manage our expenses based on it. We have young children. There will be years in the future when significant kid-related expenses (college tuitions, weddings, etc.) will be incurred. We ourselves are also many years away from Medicare eligibility. Given the cost of healthcare and uncertainty of the insurance system, we have to be very cautious in not only preserving but hopefully growing our nest egg, even though we are in retirement. So we remain frugal, and spend the least amount that makes us reasonably happy.

 

[travelover]

“You spend your whole life just piling it up there
You’ve got stacks and stacks and stacks
‘Til Gabriel comes and taps you on the shoulder
But you don’t see no hearses with luggage racks...”

Don Henley

.

 

[Offgrid Organic Farmer]

If someone has a pension that covers nearly everything, say all but $1000, and they have $100K investment worth, that have a 1% WR. I suspect some of the low WR people may be cases like this, though I don't know. It's certainly possible. ...

I have a pension, that does cover everything.
I have been retired for 17 years. I am not eligible for SS yet. I am still investing in my portfolio.

 

[NW-Bound]

Considering that we spend on experiences and consumables rather than collecting stuff, I’m afraid we haven’t accumulated toys like Lamborghinis that we could sell if needed.

I know you don't have nor want a Lambo. I was just joking about what some people might have to do when the market turns south. The media talked about this in the past recessions.

 

[RobbieB]

I don't remember anything said in the media.

 

[NW-Bound]

Lambo was just a metaphor, although I am sure some did have to sell theirs.

You don't remember the destitute during the Great Recession, when people were out of work, and have to liquidate their home and possessions?

 

[travelover]

You don't remember the destitute during the Great Recession, when people were out of work, and have to liquidate their home and possessions?

Reminds me of JFK saying he learned about the Great Depression when he went off to Harvard and read about it. Tisk, little people........

 

[RobbieB]

I remember the recession and foreclosures on my street. Right next door. Vacant for a year and a half. But I saw that coming with all the price increases and the flipping.

I don't worry about that stuff. Wasn't worried then and not worried now.

 

[audreyh1]

Lambo was just a metaphor, although I am sure some did have to sell theirs.

You don't remember the destitute during the Great Recession, when people were out of work, and have to liquidate their home and possessions?

It’s tough when you have little to no savings, lose your job, and also have a mortgage and your house value dropped big time putting you underwater.

Fortunately (knock on wood) I am not in that situation nor was in 2009.

 

[NW-Bound]

I never said nor implied that you were.

No, few of us are or were in that situation. And keeping a lower SWR is an insurance policy that we stay that way.

But not 1% WR though. That takes a bigger stash than mine, to live the life we do now. I would not mind being that rich though.

 

[garyt]

Here you go.
For 2019 expected 3% of 1.7mm

BTW - The average for the forum is probably around the 3mm range based on past posts and polls.

That helps. Of course , then there's pensions and SS to consider.

 

[HFWR]

.