Hello all. I've been lurking and reading and learning. This seems to be a great forum with intelligent, sometimes humorous, and always respectful dialog. Thank you for having me.
My Basics: I'm 51, DW is 45. We both have jobs in megacorps and are getting tired of it all. We currently have $1M+ mixed in pre-tax and post-tax accounts. We also currently have a large house from which we will downsize and add some incremental funds into the allocation mix. Our retirement home will still be in the $700-800K range - e.g. potential for a further downsize later. We each have non-COLA'd pensions which we're planning to start drawing on at 55. Likewise, current plans are to start SS at 62, but we'll make that decision later. Since the value of the pensions will decay with inflation, I typically think about SS as "covering" the inflation loss of the pensions and not adding any real incremental income. The pensions (with SS inflation support) will cover about 40% of needed retirement income. The remainder to come from drawing against our portfolio - which is a typical Boglehead, 65/35 kind of mix.
We've played with FIREcalc, Fido RIP, etc. and I've been building my own spreadsheets for years.
I have a question regarding SWR. I understand 4% is "traditionally" accepted as a valid number to use - certainly many prefer 3% or less.
If I punch a $1M portfolio and $40K/annual spending for 30 years into FIREcalc, I get a 95% success rate. Increasing to 40 years drops success rate to 86%. This then seems to be "justification" for the 4% SWR number.
When I change the annual spending to $50K (or 5%), the success rates drop to 71% (30 years) and 57% (40 years).
(Note - the above FIREcalc numbers assume "spending power is preserved". When I use Bernicke's spending models, the success rates are, of course, significantly higher.)
My current thinking is to proceed with a 5% SWR. Under the following understanding:
- it is likely to be successful (57-71% range),
- "only" 60% of needed income comes from the portfolio,
- if needed we can downsize our home in the future,
- if needed we can opt for the Bernicke spending model (my assumed spending plan has a a few "luxury" items included which could be reduced/eliminated)
Is the 5% SWR approach just too aggressive? am I overlooking something/anything?
All feedback is much appreciated.
PS - I just finished "The Joy of NOT Working" and highly recommend it. (I found it from other posts on this forum - thanks again!)
My Basics: I'm 51, DW is 45. We both have jobs in megacorps and are getting tired of it all. We currently have $1M+ mixed in pre-tax and post-tax accounts. We also currently have a large house from which we will downsize and add some incremental funds into the allocation mix. Our retirement home will still be in the $700-800K range - e.g. potential for a further downsize later. We each have non-COLA'd pensions which we're planning to start drawing on at 55. Likewise, current plans are to start SS at 62, but we'll make that decision later. Since the value of the pensions will decay with inflation, I typically think about SS as "covering" the inflation loss of the pensions and not adding any real incremental income. The pensions (with SS inflation support) will cover about 40% of needed retirement income. The remainder to come from drawing against our portfolio - which is a typical Boglehead, 65/35 kind of mix.
We've played with FIREcalc, Fido RIP, etc. and I've been building my own spreadsheets for years.
I have a question regarding SWR. I understand 4% is "traditionally" accepted as a valid number to use - certainly many prefer 3% or less.
If I punch a $1M portfolio and $40K/annual spending for 30 years into FIREcalc, I get a 95% success rate. Increasing to 40 years drops success rate to 86%. This then seems to be "justification" for the 4% SWR number.
When I change the annual spending to $50K (or 5%), the success rates drop to 71% (30 years) and 57% (40 years).
(Note - the above FIREcalc numbers assume "spending power is preserved". When I use Bernicke's spending models, the success rates are, of course, significantly higher.)
My current thinking is to proceed with a 5% SWR. Under the following understanding:
- it is likely to be successful (57-71% range),
- "only" 60% of needed income comes from the portfolio,
- if needed we can downsize our home in the future,
- if needed we can opt for the Bernicke spending model (my assumed spending plan has a a few "luxury" items included which could be reduced/eliminated)
Is the 5% SWR approach just too aggressive? am I overlooking something/anything?
All feedback is much appreciated.
PS - I just finished "The Joy of NOT Working" and highly recommend it. (I found it from other posts on this forum - thanks again!)