A Decision Analysis approach to SWR choices

[Rich_by_the_Bay]

..You are saying that instead of spending so much time analyzing the data that goes in, spend some time analyzing the data that comes out for your particular situation -- give it some thought and customize it.

Well put.

I guess the take-home message for me is to keep things in proportion: likelihood of certain things happening on the one hand, and the impact they would create if they did happen. Human nature is to distort these for a lot of reasons, with subsequent decisions that are actually not in your self-interest. It helps me to explicitly consider both factors independently to reduce the risk of these "wrong decision" traps.

Just my $.02.

 

[Wu Wei]

Rich...thanks for the "tool". For me, it illuminates the simple fact that quantity (SWR) does not necessarily lead to higher quality (FIRE).

 

[SteveR]

...Yes, a lot of it does depend on your backup plan, too.  I liked Larry Swedroe's recent post on the Vanguard Diehards morningstar board about a plan advocating a 5% SWR:
Kramer

I agree with the M* post and all the others ones that approach SWR percentages more like a taylored suit than one off the rack. Each individual has their own number that will work best for them instead of one number for the masses. Like HA said in his post above

" I think this approach might work very well in the case of a government worker who wants to choose between retiring at time t, with cola'd income of say $50,000; vs. retiring at time t+x with a larger cola's income. Then he can confidently make the assignments of utilities that you suggest."

A couple (or individual) with only SS and a company pension will have a very different retirement funding picture from a couple that has only a 401k or IRA and SS to use to pay the bills and fund self entertainment costs. The more "stuff" you can use to create income the better you can live (more you can spend). Some folks have lesser "needs" than others and that is fine. The problem is when your needs exceed your income.

My income needs and sources will differ from others in retirement. Mine are unique to my situation and my ability to create my nest egg and have company support while in retirement. My SWR will be more like 6% in the first few years and then will decrease to 4-5% and eventually go below 3% as various events and funding needs change during the next 30+ years. Mine will not be a static withdrawl rate but a very flexible one for many reasons. I think folks need to understand that the whole retirement funding process for most folks, is a dynamic process that needs to be tweeked as things change year to year.