Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 09-29-2018, 12:38 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 19,466
Firecalc does not pick a withdrawal rate for anybody. It lets you model a withdrawal rate against historical data for given withdrawal/spending methods and given portfolio and several additional caveats.

When you give Firecalc a spending and portfolio value, you are picking the withdrawal rate. It just reports what that calculated withdrawal rate is, and give you several statistics about portfolio survival for a give time period and asset allocation.

You actually have to run it several times to chose a withdrawal rate that you think you can live with after reviewing the various results.
__________________

__________________
Retired since summer 1999.
audreyh1 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 09-29-2018, 12:43 PM   #22
Recycles dryer sheets
 
Join Date: May 2014
Posts: 171
Quote:
Originally Posted by audreyh1 View Post
Joeea is absolutely correct in that what you did in the past makes no difference at all if you look at where your assets are now and choose what is safe enough going forward.
I have wondered about that model in the past, in which you don't use a single WR that was calculated at year-0 of your retirement, but instead run a new SWR model every year based on your current state (age, assets, AA). It is an interesting idea and might work if your remaining sequence of years are statistically independent of the previous year, but they aren't. There is a positive correlation between any two years' returns. Investors know this as "momentum" - a rising market tends to continue to rise.

That same effect exists for any RIP run and this has been discussed on Bogleheads. People tend to retire during an up market, since that is when they have reached their magic number. But when a RIP model is run, it is started randomly without any bias about how the sequence starts - equal weight is given to starting on an up year or a down year. But that assumption is actually incorrect - people tend to start their retirement on an up market.

I don't know how big of an effect the above is, but it is there. It is probably not a reason to not run a WR calculation every year, just take the results with a grain of salt.
__________________

TwoByFour is online now   Reply With Quote
Old 09-29-2018, 12:44 PM   #23
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 4,752
Quote:
Originally Posted by audreyh1 View Post
The idea with % remaining portfolio method, is that you stick to the same % withdrawal every year. The Clyatt method modified this just slightly. You might want to turn that off at first.

Running the % remaining portfolio method in Firecalc does not "pick" a withdrawal rate for you. It tells you how a given withdrawal rate would have performed historically. Big difference. You are selecting the withdrawal rate yourself by inputting your portfolio and withdrawal amount.

Because portfolio values can vary widely every year, so will income based on % of the portfolio each year.
[Edit]
Thanks Audreyh1 and others!

We got a bit off track on withdrawal methodologies -- and I learned something new--but I think my question about 'banking' unspent percentages is now clear to me.

I do think I'll move to a % of portfolio method; as you point out that's what I've been doing unconsciously anyway.

I'm really not that dense...I just act that way sometimes!
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is online now   Reply With Quote
Old 09-29-2018, 01:16 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 21,736
Quote:
Originally Posted by RunningBum View Post
As long as they are actually exception expenses, and not all lifestyle creep...
For a few years, I pondered the costs of having two homes, and questioned my ability to carry both. If these "one-time" expenses kept repeating, then they would not be truly non-recurring. Would not want to fool myself.

These repairs and upgrades subsided the last 2 years, and my WR is now around 2.6% for the trailing 12 months. Would have been 2.3%, if it were not for an expense that would go away in next year.

PS. If the expenses kept growing, I would have to seriously think about early SS.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 09-29-2018, 03:26 PM   #25
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 1,817
Quote:
Originally Posted by marko View Post
Thanks.
[Edit] Got it. Crap! After 10+ years coming here every day I just figured something new out! What else is out there that I think I know but don't?

Running the "% remaining port" I got a 4.7% rate. I assume I'd be 'forced' to stick to 4.7% for the next 35 years, yes? I used "100%" but didn't see any difference regardless of what I put in.

Following the "95% Rule," from Work Less, Live More, each subsequent annual withdrawal will be the greater of 100% of your previous year's withdrawal, or 4.7% of your current portfolio, with no adjustment for inflation (unlike the normal FIRECalc behavior, which uses your starting portfolio, and makes adjustments for inflation).


Regardless, it does sound like if I under spent for a few years in the future, that unspent % would be available as extra income; same as having set it aside.
It should be noted that "4.7%" just represents your spending divided by your portfolio balance. It is not your true spending WR% each year, once you include other items such as SS/Pensions/one time expenses, etc.
__________________
TGIM
Dtail is online now   Reply With Quote
Old 09-29-2018, 03:45 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 19,336
Quote:
Originally Posted by MichaelB View Post
You may be overthinking this. ...
+1 Late to the party, but what happened in the past is irrelevant... interesting perhaps, but irrelevant. All that really matters is your current best estimate of annual withdrawals in relation to the current value of your portfolio and that ratio is not excessive.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 09-29-2018, 04:49 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 6,379
So if the OP had withdrawn 3%, and tucked the unspent money in a side account to use for the cars, tuition, and kitchen renovation, it'd be fine. But since he kept it invested, his plan was broken by going over budget the last 2 years? I don't buy it.

Or are we only talking about the future? Let's turn the clock back two years. OP has been well under budget for 8 years, but knows these big expenses are coming. Are you saying he can't do them because they'd put him at 6% for the next two years?
RunningBum is offline   Reply With Quote
Old 09-29-2018, 05:17 PM   #28
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 4,752
Quote:
Originally Posted by RunningBum View Post

Or are we only talking about the future? Let's turn the clock back two years. OP has been well under budget for 8 years, but knows these big expenses are coming. Are you saying he can't do them because they'd put him at 6% for the next two years?
OP here. That's essentially how it plays out. I didn't really know these costs were on the horizon; that doesn't matter. But that's the essence of my question.

To be fair to everyone, this is not something that keeps me awake at night. Historically, my normal burn rate is below a generic safe 4% and as RunningBum noted earlier, I have still a lot of unspent 'reserve'...and separate upside potential in the wings.

My original question was just wondering how to view the unspent percentages and if one could use a longer term average to cover unexpected blips.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is online now   Reply With Quote
Old 09-29-2018, 05:47 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 19,466
Quote:
Originally Posted by marko View Post
Regardless, it does sound like if I under spent for a few years in the future, that unspent % would be available as extra income; same as having set it aside.
It’s perhaps just a little different depending on how you choose to withdraw funds using a % of remaining portfolio method.

Say you withdrew your 4%, then found that you didn’t spend $10K of it, so the next year you decide to withdraw $10k less. Now your withdrawal rate is slightly lower. No prob.

What about that extra $10K you left in your portfolio? Well it increased your remaining portfolio a bit, so if you stuck to your 4% of remaining portfolio, your future income increased $400 a year assuming little volatility.

Or you could choose not to be that strict and just perhaps keep track of some unspent funds that were left invested but could be withdrawn as extra later if needed. This would generally be fine unless you went through a period where the portfolio took a bad hit in which case your annual income will go down plus that extra you planned to perhaps take in the future would also be hit. Temporarily.

Those are just the trade offs between keeping unspent funds in potentially volatile long-term investments.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 09-29-2018, 06:14 PM   #30
Full time employment: Posting here.
 
Join Date: Dec 2014
Location: St. Charles
Posts: 796
Quote:
Originally Posted by NW-Bound View Post
PS. If the expenses kept growing, I would have to seriously think about early SS.
A very reasonable comment. I can't imagine anyone taking issue with that!
__________________
If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
CardsFan is online now   Reply With Quote
Old 09-29-2018, 06:49 PM   #31
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 4,752
Quote:
Originally Posted by audreyh1 View Post
Itís perhaps just a little different depending on how you choose to withdraw funds using a % of remaining portfolio method.

Say you withdrew your 4%, then found that you didnít spend $10K of it, so the next year you decide to withdraw $10k less. Now your withdrawal rate is slightly lower. No prob.

What about that extra $10K you left in your portfolio? Well it increased your remaining portfolio a bit, so if you stuck to your 4% of remaining portfolio, your future income increased $400 a year assuming little volatility.

Or you could choose not to be that strict and just perhaps keep track of some unspent funds that were left invested but could be withdrawn as extra later if needed. This would generally be fine unless you went through a period where the portfolio took a bad hit in which case your annual income will go down plus that extra you planned to perhaps take in the future would also be hit. Temporarily.

Those are just the trade offs between keeping unspent funds in potentially volatile long-term investments.
Very interesting. But if I withdrew that $10k and put it in a safe deposit box? I'd have my 4% plus the $10k, as your first example shows.

However say 8 years of under withdrawing left me with $500k of "extra" in the portfolio....
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is online now   Reply With Quote
Old 09-29-2018, 06:54 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 19,466
Quote:
Originally Posted by marko View Post
Very interesting. But if I withdrew that $10k and put it in a safe deposit box? I'd have my 4% plus the $10k, as your first example shows.
Correct. Although my unspent funds go to high yield savings accounts and maybe CDs/treasuries/short-term high quality bond funds.

Just some ways to think about it.

If you can anticipate some spikes in your spending - new car, home remodeling, extra medical bills, major repair - you can build the “savings” to fund those over several years rather than having an occasional big spike higher withdrawal. If you have records of past spending it can help get an idea of what kind of costs might be involved.

But that’s just another option for dealing with year-to-year variances in spending.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 09-29-2018, 06:57 PM   #33
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 4,752
Quote:
Originally Posted by audreyh1 View Post
Correct. Although my unspent funds go to high yield savings accounts and maybe CDs/treasuries/short-term high quality bond funds.

Just some ways to think about it.
Thanks for all of this!
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is online now   Reply With Quote
Old 09-29-2018, 07:06 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 19,466
Quote:
Originally Posted by marko View Post
Thanks for all of this!
Youíre very welcome!
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 09-29-2018, 07:10 PM   #35
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,847
I would think about this in two ways:

1. The lifestyle creep issue...are these two years really one-offs or is it the start of a trend?

2. Forgetting the past, take 4% (or whatever SWR you use) of my current portfolio today. Do I feel comfortable with that as a budget going forward? If so, I would feel fine.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 09-30-2018, 09:56 AM   #36
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 1,537
1. Your portfolio is probably in better shape by spending 1.7% first 8 years th an 6% next 2 years than visa-versa.
2. You have 10 less years to fund.
3. As others said, where you are and what you do in the future is more important than what has happened. Regroup. Review.
I had the opposite this year, dodging some non recurring for another year or so. They'll be raiding my stash soon though.
__________________
ďNo, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Old 09-30-2018, 10:03 AM   #37
Full time employment: Posting here.
dtbach's Avatar
 
Join Date: Apr 2011
Location: Madison
Posts: 896
Quote:
Originally Posted by pb4uski View Post
+1 Late to the party, but what happened in the past is irrelevant... interesting perhaps, but irrelevant. All that really matters is your current best estimate of annual withdrawals in relation to the current value of your portfolio and that ratio is not excessive.

Beat me to it but this is really the bottom line. I think you are in fine shape.
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
dtbach is offline   Reply With Quote
Old 10-09-2018, 05:12 PM   #38
Full time employment: Posting here.
 
Join Date: Dec 2017
Location: Honolulu
Posts: 536
Quote:
Originally Posted by joeea View Post
Whatever you have done in the past makes absolutely no difference going forward.

Examine your assets. Determine what rate of withdrawal you would like. Analyze to see if your assets can support that withdrawal rate going forward. If not, adjust accordingly. Repeat the process periodically.
Exactly! The only reason what withdrawal rates you took in the past MIGHT matter in the future is whether any of the higher spending years (due to ____) might reoccur. Just plug in the current balance and your planned withdrawal rates!
HNL Bill is offline   Reply With Quote
Using delta
Old 10-09-2018, 07:22 PM   #39
Confused about dryer sheets
 
Join Date: Feb 2014
Location: Springfield
Posts: 1
Using delta

A bedrock of movement of money is the calculation of percent change. (Real analysts call it percent delta Ö just so you know.) We use these to show month-over-month (MoM) and year-over-year (YoY) changes in data, and they should be in every reporting dashboard you build. Without exception.

Using delta as the percentage change shows the movement of money, including living on money, living off money and living for money. Each category moves. So tracking movement of these dollars helps illustrate patterns including spending.

Adapting from the accumulation phase into the spending phase is aided using percent delta.

AD037564-46E4-43FA-971B-475DE01F207D.jpeg
__________________

highlan875 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
Lump Sum or Dollar Cost Averaging your Roth/IRA mickeyd FIRE and Money 3 11-23-2006 03:38 PM
$ Value Averaging Strategy DFW_M5 FIRE and Money 2 10-08-2005 10:53 AM
tax averaging kirkj55 FIRE and Money 7 08-31-2005 08:47 PM
Value Averaging into stocks at ER Charles Abbott Hi, I am... 13 01-31-2004 11:18 AM

» Quick Links

 
All times are GMT -6. The time now is 01:05 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.