W/O SS still 4.27% SWR

[runnerr]

Hello, I was running firecals and discovered that the withdrawal rate does not change with or without SS. For example; Principal 750,000, withdrawal 33,000 with a 66.3 percent success rate. At a 4.27 percent withdrawal rate.

Principal 750,000, withdrawl 33,000, SS 11,000. This is 100 percent success rate. With a 4.27 withdrawal rate.

Can some one explain?

Thanks runnerr

 

[REWahoo]

Need more information on the version of FIRECalc you are using (Advanced?) and all the inputs/settings for both the with and without SS runs.

 

[runnerr]

I forgot to add that I was under the assumption that a 4% withdrawal rate was considered a safe rate. 750,000 x .04 = 30,000. That along with 11,000 should = 41,000. What is up with that? I realize it is just an assumption.

runnerr

 

[runnerr]

The advanced version and the only two input boxes I changed was expenses, 32,00 which I kept the same through both examples. The other box was SS. One example I added 11,000 starting in 2011 the other I entered 0. Success rate went from 100% with to 66.3% without SS. But the percentage of the with drawl rate remained the same at 4.27% How can it remain the same with SS if I am reducing the withdrawal rate by 11,000 to equal the original expenses of 32,000.

If the withdraw rate was to remain the same and I was still taking 32,000 before SS then when I started collecting SS my monies for expenses should rise to 41,000. Which I forgot to post in the original posting.

Thanks Bob

 

[REWahoo]

In both cases FIRECalc results say:

"Your plan is to spend $32,000 a year, or 4.27% of your starting portfolio."

This is correct in that you start with a $750,000 portfolio in both runs. In the SS version you don't start withdrawing until four years after your "starting portfolio", which has no impact on the initial withdrawal percentage. It does decrease your withdrawal rate at the four year point and the result is an improved success rate.

I show a 100% success rate for the run with SS and a 91.5% success rate for the run without SS. In terms of the 4.27% SWR rule of thumb, I'd say those numbers aren't outside what you would expect them to be.


The devil is in the details...

EDIT: Of course the information Dory posted 6 seconds after I hit the enter key might be more accurate than my infomation. He did write the program after all.

But I stand by my "devil is in the details" comment. 8)

 

[dory36]

The adjustments affect the success rate, not the reported percentage of the portfolio it takes for you to live.

The percentage is the "base" percentage, showing how much you need to live on as a percentage of your portfolio. Without adjustments, all will come from your portfolio. Adjustments from SS and others will change the amount you need to withdraw from your portfolio, but the assumption is that you are still needing that 4% to live on.