Assets Depleting after Retired

[athena53]

I'm up 6% 3 years after retirement; it would have been more but we had an expensive downsizing 2 years ago. (More $$ than expected to fix things in the old house and make the changes we wanted to the new house.)

It should work that way if you want to keep pace with inflation and withdraw larger annual amounts as the purchasing power of your money decreases; my goal has always been to keep the withdrawal % less than the average investment return each year.

 

[pb4uski]

Actually, now that I think of it, it is probably more likely than not that one's retirement assets will grow because SWR's are based on pessimistic cases so one doesn't run out of money if returns are adverse.... if returns are even normal, then it is likely that you assets will grow. The historical return for a 60/40 portfolio is about 8%... so even if future returns are lower and only 6%... with a 4% WR the investments will be growing 2% annually.... and returns over the last 5 years have been good.

 

[Dawg52]

I'm ahead too. Not as much as some here as I have a very conservative AA. Just started collecting SS so that should help even more. No pension. Got some things I want to do with my condo and new furniture to buy for my home so plan to spend a little more over the next couple of years.

 

[Pilot2013]

I'm ahead too. Not as much as some here as I have a very conservative AA. Just started collecting SS so that should help even more. No pension. Got some things I want to do with my condo and new furniture to buy for my home so plan to spend a little more over the next couple of years.

If you don't mind stating it, what do you consider a conservative AA?

 

[audreyh1]

Actually, now that I think of it, it is probably more likely than not that one's retirement assets will grow because SWR's are based on pessimistic cases so one doesn't run out of money if returns are adverse.... if returns are even normal, then it is likely that you assets will grow. The historical return for a 60/40 portfolio is about 8%... so even if future returns are lower and only 6%... with a 4% WR the investments will be growing 2% annually.... and returns over the last 5 years have been good.

Of course. The average terminal values for 4% withdrawal rate for 30 years is quite high.

 

[street]

Only being a ER for one year I can see this being very common. My portfolio is up 11% in one year and that is minus all of our expenses etc.

Everyone has a different approach and how they handle their money but if you plan for it I do believe it is very common to have more in the end then what you started with.

 

[Danmar]

Entirely possible and even likely given the strong markets since 2009. Depending on your asset mix and as long as you have a reasonable WR you will almost certainly have more now than in 2009. I retired in 2006 ( a particularly bad time) but even then have a lot more now than when I started. Have started to "up the spending a bit" to prevent being the "the richest guy in the graveyard". Even then I suspect we will never deplete the portfolio much below its current level.

 

[Bamaman]

After 8 1/2 years ER, I'm up just over 30% in my 401K--despite making normal withdrawals in 6 of those years.

 

[Corporateburnout]

+1. I have a modest pension and only need 2% WR or less after that. If my annual return is over 2% then my assets grow. I am thinking about more expensive travel.

Your annual return needs to grow in real terms by 2% plus the rate of inflation which as of last month was 2.2%.

 

[pj.mask]

Something to consider. If you plan your SWR on 100% success and retire with 100x then 10 years later because of bull market now have 150x - you should be able to use the same SWR% on the appreciated assets because your worst case scenario is you withdrawing at the peak before an extended downturn. You can essentially always use the highest number to support you SWR and increase it by the greater of inflation or appreciation.

If you have less than 100% SWR then you should recalculate your failure rate at the new SWR (same $ withdrawal but higher balance) looking at current portfolio balance.

The date you retired has no impact when looking at your portfolio and future SWR.

 

[ERD50]

... I saw a friend whom retired 3-4 years ago. To my surprise, he told me that his assets actually INCREASED since he retired.

why? how? I don't believe it. ...
Wow... is it really possible?

...if you are retired, please share your thoughts.

enuff

My thoughts are: It's hard for me to believe you've been on this forum since 2005, and would ask this.

Of course it is possible to have assets increase in retirement. As other's have pointed out - it is more than 'possible,' it is likely.

Many people here mis-characterize the 4% WR as 'spending down all your money'. But that happens in only ~ 5 % of the cases, many cases end up with more, often far more, at the end.

-ERD50

 

[bradaz2488]

Only been retired for 4 years. My nest egg has increased 13% and our WR has average around 2.5%. My biggest ticket item has been a new (used) car. My current ER plan shows us dying with ~50% initial net egg (today $). I use this as a buffer since we have a 44 year plan. Do not start seeing significant decreases in net egg until I hit 72 and start paying higher taxes on RMD and ever increasing heathcare costs. Our other buffer is assuming no SS. I will probably increase spending at 62 once I know what our SS benefits will "actually" be.

 

[Cobra9777]

I retired 4 years ago in 2013. We both have modest pensions and a small amount of rental income. Withdrawal rate after that is 1.9%, which is easily covered by dividends, so we haven't actually sold any shares yet. This is all pre-SS. Portfolio is up 30% since I retired, excluding rentals and main home. I guess one way to look at this: I could withstand a 30% drop in the market and still have the same portfolio value I started with. I'll need to remind myself of that at the time.

 

[CaliKid]

I would say if you retired in the last 5, or so, years your assets should be up. I would be concerned if they weren't. Most sectors have performed very well.

 

[bradaz2488]

I would say if you retired in the last 5, or so, years your assets should be up. I would be concerned if they weren't. Most sectors have performed very well.

Yep.. as a newbie at ER I will not spend more just because our nest egg is higher than plan. All is takes is a bear market to bring things back.

 

[Bigdawg]

My annual true up amount continues to drop. I'll be close to zero at true up.

More waygu beef my friend.

 

[wmc1000]

For most all on this forum a long term scenario should see assets grow even with a downturn happening in the first few years of retirement. Once SS kicks in a few years from now I can project years where no draw is needed from assets.

 

[GalaxyBoy]

Anyone who's used FIRECALC much would have seen this phenomenon. Just look at the family of curves it produces.

 

[pj.mask]

Yep.. as a newbie at ER I will not spend more just because our nest egg is higher than plan. All is takes is a bear market to bring things back.

But according to fire calc if you look at the current appreciated snap shot with 100% success - that is exactly what you should do. If you have few failure cases then in a sense good years increase the probability of bad years (if we say over the long term market will always generate average returns).

How does your retirement date matter if using firecalc has inputs for current balance and forward SWR? Your balance is what it is weather you are working or retired and as time passes your remaining life (potentially) decreases.

Some people may want to pass on money or play it safe, and I agree past is not a absolute predictor of the future, but you should be aware how the calculations are run and the basis for their prediction.

 

[NYEXPAT]

Wow... is it really possible? too many people keep telling me that I will out live your money.
enuff

Enuff,
Rest assured, in my case at least, that will never happen!

 

[45th Birthday]

I think there is a barbell distribution of outcomes. Those (most on here) who retire with a nice nest egg and then LBYM. Over a long period, with average market returns, these people will die with more money than they retired with.

On the other side (some in my family) will retire with little to no net worth and die in debt. Their net worths will teeter back and forth around the zero line.

In my case, net worth up 32% after 11 years. Of course the Great Recession started shortly after I FIRE'd, so at one point net worth was 47% below where it is now.

 

[misshathaway]

I've been retired 18 months and my net worth is up 11%. Part of that is due to the stock market upswing, and part is due to my not being able to relax about money.

 

[bradaz2488]

But according to fire calc if you look at the current appreciated snap shot with 100% success - that is exactly what you should do. If you have few failure cases then in a sense good years increase the probability of bad years (if we say over the long term market will always generate average returns).

How does your retirement date matter if using firecalc has inputs for current balance and forward SWR? Your balance is what it is weather you are working or retired and as time passes your remaining life (potentially) decreases.

Some people may want to pass on money or play it safe, and I agree past is not a absolute predictor of the future, but you should be aware how the calculations are run and the basis for their prediction.

40+ ER plans are at higher risk and IMHO you need to remain very discipline with spending level early in the plan. This is even more important when retiring in a bull market. I think FireCalc is one of the better tools out there and I use it all the time as a sanity check with other tools I use. At the end of the day each person locks in their plan with the risk level that allows them to sleep at night.

 

[Souschef]

Are you retired? I saw a friend whom retired 3-4 years ago. To my surprise, he told me that his assets actually INCREASED since he retired.

why? how? I don't believe it. Those was my initial thoughts. It turns out that he didn't touch his 401k and the market did well the last 3 years. He lived on pension and withdraw small amount from his saving...

Wow... is it really possible? too many people keep telling me that I will out live your money. if you are retired, please share your thoughts.

enuff

Yes it is possible. With 2 SS and 2 pensions, almost all of our expenses are covered.
I retired in 2009, rolled over my 401K, and it has triples in the intervening years.
I have had to take RMDs from my IRAs, and after the withdrawal the IRAvalue has actually gone up.
I just turned79, and I figure with a 40K/year withdrawal, it is good for another 25 years!

 

[W2R]

Are you retired? I saw a friend whom retired 3-4 years ago. To my surprise, he told me that his assets actually INCREASED since he retired.

why? how? I don't believe it. Those was my initial thoughts. It turns out that he didn't touch his 401k and the market did well the last 3 years. He lived on pension and withdraw small amount from his saving...

Wow... is it really possible? too many people keep telling me that I will out live your money. if you are retired, please share your thoughts.

enuff

This is why we have endless threads discussing withdrawal rates, and FIRECalc results, I suppose. Like many ER Forum members, I withdraw less than the studies say I could. When you do this in a rising market, your nestegg will increase.

Personally my annual withdrawals have averaged less than 2%, and way less than FIRECalc says I could be spending. The rest goes back into my portfolio and continues to grow. Right now my portfolio balance is 128% of what it was when I retired. Of the 28% increase, 9% is due to inflation and 19% is real. This increase is despite buying my (more expensive) dream home in cash that came from that portfolio, a couple of years ago. The increase was greater before I spent all that money on my house.

When, not if, the market crashes again many of us will have smaller portfolio balances than we do now.