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Old 01-07-2014, 10:09 AM   #21
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I can understand those who retire young and choose a withdrawal rate <4%.

In the grand scheme of things, when is it prudent to pursue a withdrawal rate >4% and even much higher?

I wonder if on cruise ships very old people take the cruise because it's something they really want to do, or that they have so much money left, might as well spend it on something.

IOW, could we be delaying gratification too long, for a supposedly secure (100% safe) retirement?

Does anyone know someone who saved a lot, delayed gratification, only to pass it onto heirs who spend it frivolously?
My parents are above 4% because RMDs are higher than expenses, and my mother has a Pension which generates substantial income.
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Old 01-07-2014, 10:12 AM   #22
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My parents are above 4% because RMDs are higher than expenses,..
If they don't spend all their withdrawal, they may not actually be above 4%. All they've done is move a portion of their retirement savings to a taxable account.
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Old 01-07-2014, 11:05 AM   #23
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If they don't spend all their withdrawal, they may not actually be above 4%. All they've done is move a portion of their retirement savings to a taxable account.
They spoil their grandkids with it. They are not banking it.
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Old 01-07-2014, 11:08 AM   #24
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They spoil their grandkids with it. They are not banking it.
Gotcha.

Then the reason they are above 4% WR isn't because of their RMD, it's your fault for having kids.
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Old 01-07-2014, 12:05 PM   #25
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My process
1. Estimate annual expenses in retirement, including taxes
2. Enter expenses into firecalc
3. On "other income" tab enter 70% of projected SSI starting in appropriate year
4. Fiddle with total portfolio until it says 95% success for 50 years
5. Drink a beer

Recently I've been considering working long enough to build up an oversized vacation fund, say 100k or so that I'd chuck into something relatively conservative and be able to pull 5k or so a year from. My thought is since one often hears early underperformance is the precursor to failed portfolios it could also serve as a panic fund to turtle with for a couple of years if needed, since early on in retirement most of it would still be there. So it would be outside firecalc calculations for portfolio size, but could be brought in and I'd just skip going to France of whatever.

Not sure if that is stupid or not, haven't thought about it too deeply.

I wouldn't use FIRECalc for a 50 year span - there aren't enough scenarios. I use 30 years and then try and figure out if my WR (when I'm 81 yo) will be less than 5% with the remaining minimal portfolio (assuming I also get 70% of SSI)..

I don't think your idea of a "vacation fund" is stupid - because that's exactly what I have ! Mine is 78k and covers 4 "bucket list" vacations which I plan to take 4 years apart from each other (ie: it will cover 16 years).
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Old 01-09-2014, 05:57 AM   #26
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For what it's worth, I turn 49 in 2014 and plan for 2.5-3% SWR. Time horizon until age 95.

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Midpack thanks for the tables, it was real enlightening. The biggest problem I have, and the main reason I joined this site, is that there is little information out there for extended retirement. I am currently only 40 years old. What would those tables look like out to 40 or 50 years of withdrawls? I have told myself that I want to shoot for a 3% SWR, but perhaps that is much too conservative. The difference between 3% and 4% would make a huge difference on when we could retire. But to be honest I would probably sleep better at night with 3%. I am not sure the stock market will be so robust as in the past.
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Old 01-09-2014, 10:20 AM   #27
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For what it's worth, I turn 49 in 2014 and plan for 2.5-3% SWR. Time horizon until age 95.
But your AA has only 10% or so Equities, correct ?
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Old 01-09-2014, 02:27 PM   #28
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my 70/30 allocation shows a 143% chance of success at 2.5%
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Old 01-09-2014, 03:12 PM   #29
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I suppose the question is then why would we even bother looking at WR in the context of a year-by-year projection expressed in dollars?
I pay no attention to the man behind the SWR curtain because it provides no concrete information in my case Retiring at 60, receiving substantial one-time income at 65 (or earlier), and delaying SS until 70 all make SWR irrelevant. I have run 5 or 6 (lost count) calculators all showing I will have a 6 or 7 figure PF balance at end of life, so I'm unconcerned with SWR as long as spending remains within plan (plan is also for very last check to undertaker to bounce).
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Old 01-09-2014, 03:49 PM   #30
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I have run 5 or 6 (lost count) calculators all showing I will have a 6 or 7 figure PF balance at end of life, so I'm unconcerned with SWR as long as spending remains within plan (plan is also for very last check to undertaker to bounce).
I'm curious how you'll be able to achieve that plan without
a) annuitizing 100% at some point and/or
b) being willing to vary spending drastically during your retirement (as much as 7X).
I'd like to 'die broke' but there's no practical way aside from a) & b) above to do so that I know of.
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Old 01-09-2014, 03:55 PM   #31
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Originally Posted by tuixiu View Post
My process
1. Estimate annual expenses in retirement, including taxes
2. Enter expenses into firecalc
3. On "other income" tab enter 70% of projected SSI starting in appropriate year
4. Fiddle with total portfolio until it says 95% success for 50 years
5. Drink a beer
> 70% of projected SSI?
> 50 years?

Are you over or underestimating your expense?
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Old 01-09-2014, 04:05 PM   #32
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In the grand scheme of things, when is it prudent to pursue a withdrawal rate >4% and even much higher?
When you can put the money in good use while you are still healthy enough to enjoy life. I don't mind running out of my money and live modestly on SS + others when I am 82 (if I get there).

I think it's silly to LBYM & save all of your life, RE and maintain LBYM, accumulate even more wealth, and die richer than your favorite charities (or DS/DD) deserve.
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Old 01-09-2014, 04:10 PM   #33
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Recently I've been considering working long enough to build up an oversized vacation fund, say 100k or so that I'd chuck into something relatively conservative and be able to pull 5k or so a year from.

Not sure if that is stupid or not, haven't thought about it too deeply.
We did something similar. We have a separate account in short term bonds that is outside of our retirement planning. We use it as our no-guilt fun money.
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Old 01-09-2014, 04:54 PM   #34
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But your AA has only 10% or so Equities, correct ?
He recently stated that his fixed income allocation is 98%, leaving just 2% for equities.
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Old 01-09-2014, 05:57 PM   #35
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(plan is also for very last check to undertaker to bounce).
That'd be my & DW's ideal ending scenario. When the last of us croaks, we want to be in debt . But it's like timing stock market (too much risk with very little chance of getting it right). Instead, I run FIRECALC until I have 100% success rate. I am also ready to live modestly in later years, i.e. front load early retirement years with higher WR.
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Old 01-09-2014, 08:52 PM   #36
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I'm curious how you'll be able to achieve that plan without
a) annuitizing 100% at some point and/or
b) being willing to vary spending drastically during your retirement (as much as 7X).
I'd like to 'die broke' but there's no practical way aside from a) & b) above to do so that I know of.
Ah, there's the rub. Should have said I'd like to die bouncing the undertaker's check, but nope, there is no practical way (dammit ).

lnflation-adjusted planned spending levels account for basics including everything from taxes, fees, travel, medical, etc., etc., and even large emergencies (based on adult lifetime spending history). No annuities planned and WD rate ranges from a high of around 6% in early years to around 2.5% post SS at 70. Also have the flexibility to forego inflation adjustments (which my history demonstrates I already do) and even greatly reduce discretionary spending in the event of another scary 2008 type year.

Should have said the 6 to 7 figure ending balance provides the comfort level needed to not worry about SWR rate or "this time it's different" scenarios (other than an asteroid strike).
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Old 01-10-2014, 06:27 AM   #37
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I pay no attention to the man behind the SWR curtain because it provides no concrete information in my case Retiring at 60, receiving substantial one-time income at 65 (or earlier), and delaying SS until 70 all make SWR irrelevant. I have run 5 or 6 (lost count) calculators all showing I will have a 6 or 7 figure PF balance at end of life, so I'm unconcerned with SWR as long as spending remains within plan (plan is also for very last check to undertaker to bounce).
Thanks. It makes me feel better to see others ignoring SWR entirely. I've worked hard for a year and a half to get to the point where I have reliably accurate predictions (yes, I know: oxymoron) of each year's income and out-go, projected out to a reasonable estimate of longevity. I know some people are tweaked by the idea of riding the edge (i.e., using mid-line assumptions and 90% confidence levels instead of conservative assumptions and 95% confidence levels) but, as I mentioned in a thread on assumptions recently, taking the more conservative tack would effectively undercut our dreams of a comfortable retirement. Quite frankly, I'd rather have reality do that than do it to ourselves, i.e., I would rather adjust to unforeseen excessive misfortune rather than live life prepared to withstand any such misfortune unaffected.

To be fair, though, we secretly have a conservative tack built into footings under the foundation of our retirement plan. We live in a relatively high-cost area, the Boston metro area. Our retirement plan is based on expenses in that context. In another thread folks are discussing moving for retirement, generally for tax savings that some states offer, but also in the interest of reducing living expenses. For various reasons, I know that there his hidden strength in our retirement plan, not evident from the more risky assumptions and approaches we've used to get to a green light, in that we can move and thereby reduce our living expenses by 35% easy.
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Old 01-10-2014, 07:43 AM   #38
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I think SWR has a lot to do with income level.

We plan on a 3% to 3.5% SWR retiring at age 46 but we will be living on $50,000 or less. Because of our lower income we will qualify for lower taxes on gains/SS income.

Someone with a need for $100,000 a year might want a SWR closer to 2.5% to 3% if they are planning a 40 year retirement.
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Old 01-10-2014, 08:31 AM   #39
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I think SWR has a lot to do with income level.

We plan on a 3% to 3.5% SWR retiring at age 46 but we will be living on $50,000 or less. Because of our lower income we will qualify for lower taxes on gains/SS income.
No, you are confusing two different numbers. For calculating an SWR, your expenses include taxes. So a higher income/spending/taxes does not mean a lower SWR%, it means higher income/spending/taxes.

Plug 4% WR into FIRECalc with a $4,000 spend and a $100,000 portfolio. Now plug 4% WR into FIRECalc with a $400,000 spend and a $10,000,000 portfolio. Same result.

If you don't plug spending with estimated taxes into FIRECalc, you are doing it wrong.


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Old 01-10-2014, 08:48 AM   #40
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No, you are confusing two different numbers. For calculating an SWR, your expenses include taxes. So a higher income/spending/taxes does not mean a lower SWR%, it means higher income/spending/taxes.

Plug 4% WR into FIRECalc with a $4,000 spend and a $100,000 portfolio. Now plug 4% WR into FIRECalc with a $400,000 spend and a $10,000,000 portfolio. Same result.

If you don't plug spending with estimated taxes into FIRECalc, you are doing it wrong.


-ERD50
I wasn't confused, I was considering things like future increases in taxes and means testing on SS. Lower income will not have to factor these into their portfolio as much as a higher income so they can start off with a higher SWR and have the same chance of success.

I don't know exactly how to calculate it, but a guess of about .5% difference between someone living off $30,000 to $50,000 a year and someone living on $100,000 to $150,000 a year.

It does sound like I am confused. What I really mean is the lower income person likely will have higher after tax returns across their accounts, so they can have a higher SWR. Plus when SS kicks in, they will gain a larger percentage of it tax free.
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