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Old 10-30-2009, 03:19 AM   #41
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I misnamed the SWR as the safe withdrawal rate. He calls it the sustainable withdrawal rate, or the maximum amount one can periodically withdraw from a distribution portfolio with no possibility of failure during your lifetime. He gives examples, and I think comes down on 3.7%.
however in his book (page 180) he says that "In practice, I use 90% probability of portfolio survival"
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Old 10-30-2009, 09:54 AM   #42
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Originally Posted by cashflo2u2 View Post
So you take the answer, e.g., 35 and multiply that times your retirement portfolio and that is the amount of annuity (SPIA) to purchase.
Am I reading this correctly that I should purchase a SPIA that is 35 times the size of my retirement portfolio? If I could do that I would not need too! I must be reading it wrong so any clarification would help.

Thank you,
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Old 10-30-2009, 10:15 AM   #43
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I was reading something by Otar where he states that one may need an annuity to offset the "luck" factor in retirement. He calculates the minimum value of the annuity as

MA= 100X (RWR -SWR) /(AR-SWR)

where RWR=required withdrawal rate; SWR = safe withdrawal rate; AR = payout rate on immediate annuity

If the answer is less than zero you don't need one. If MA is between 0 and 100 you should have enough to retire (mathmatically) but not enought to offet the luck factor. So you take the answer, e.g., 35 and multiply that times your retirement portfolio and that is the amount of annuity (SPIA) to purchase. If the MA is larger than 100, keep on working for da' man.

Note- this is for portolios in the distribution mode only.
i think you need to replace the bolded words with "that percentage of your portfolio"
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