youbet
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
But I never planned to take 4%. If my memory is correct, 4% is only good for 25-30 years and then you run out of $$$, right?
You're joking of course?
But I never planned to take 4%. If my memory is correct, 4% is only good for 25-30 years and then you run out of $$$, right?
Although we can debate the pros and cons of various withdrawl rates ad nauseum, nothing substitutes for a robust starting balance. I believe that many who wind up experiencing sleepless nights are those who didn't have an adequate cushion to begin with. Start out with a robust nestegg and you can adjust your WD to suit economic circumstance . . . start out with an anemic nestegg and you will likely have to push your luck.
I'm a percent-of-total fan -- maybe 4.5% per annum, with Clyatt's 95% rule as a backstop. I don't see the economic fluctuations as a reason to back away from that. But it might test your ability to tighten the belt here and there, or maybe stash away a reserve in the good times (maybe a ceiling of 5% in any given year).
I like never running out of money even it it means a little pinching here and there. Heck, we've done that most of our lives.
However, I didn't fully comprehend the implications of a 27% decline in my portfolio in the very first year!
There isn't a SWR strategy in existence that would have protected you from the unfortunate timing you ran into, and it sounds like you handled the worst-case-scenario like a champ.We decided to use the 4/95 rule to ER in May 08 since it was the only one I knew would support a 40+ year ER with purchasing power intact at the end. However, I didn't fully comprehend the implications of a 27% decline in my portfolio in the very first year!
I just tried it with a withdrawal rate of 0.0% (no withdrawals). It still takes 7 years to get back to where you started, in nominal dollars again!
We sure took a hit, didn't we.
I think that probably we can take comfort in the fact that usually the market rebounds sharply after a big fall such as we have had, so instead of 7.5% we might be getting several times that return for a few years. Of course, there are no guarantees.
I'm 51....my plan goes to 92 years old. Egads...I can't imagine living another 41 years....I'm 47, planning to be able to live to 100, although I don't expect to. R
Hey, you might end up looking like my aunt - she turned 92 last week:I'm 51....my plan goes to 92 years old. Egads...I can't imagine living another 41 years....
Ahhhh....such a lovely lady...Hey, you might end up looking like my aunt - she turned 92 last week:
The trouble with supposing that is that it would right away put most equity valuations back into meaningfully over valued. In the past when equities have fallen this much they have been very undervalued at the bottom. (Other than 2003)
Ha
You are of course referring to the US stock market. There are other markets in the world where this is not necessarily so.
Related to the quote, "never a borrower or lender be (apropos an ongoing thread), there is a reason you won't see me in the Stockpicking Forum.I'm all ears. What are your favorites?
Ha
Related to the quote, "never a borrower or lender be (apropos an ongoing thread), there is a reason you won't see me in the Stockpicking Forum.
You are of course referring to the US stock market. There are other markets in the world where this is not necessarily so.
Without a willingness to even mention markets where you assert that valuations are better than in the US (as you did above), your comment is difficult to evaluate.
Ha
You must have quite good hearinglI'm all ears. What are your favorites?
Ha
I was trying to be serious. As for bed.........I wish I could be funny in the a.m..... I'm going back to bed....
While I understand the theory behind the 4%, in actual retirement years it is not that simple a rule to enforce.
I retired at age 59. My wife was to retire the same age, but has yet felt comfortable enough to do so (even if financially, she's OK).
Currently, my withdrawal rate against our combined retirement portfolio is 2.7% (in the third year of retirement). Since my income was higher during working years, and continue to be during retirement it make sense (rather than a 2% & 2% = 4% rate). BTW, all calculations for our portfolio's are "merged" - that is our AA is based upon all holdings in our combined portfolios (I'm more agressive; my DW not so), along with witdrawl forecasts.
However, my wife is expected to retire and claim SS at age 62 (next year). I will not take SS till age 70; that's another subject, and I won't go into the reasons here.
My wife will have two small pension payments (single life) starting at age 65, in addition to her SS and portfolio withdrawals.
So what does this all mean? Simply, you can't follow the "4% rule" unless all your retirement income sources are available on day one of retirement. Additionally, if your plan is based upon a combined plan of both partners, both should retire within the same year (just to make it easier to measure that 4%).
I have/will have a total of four income sources. My wife will also have four. The important thing is that my income sources (starting at age 59) will not come "on-line" till age 70, when my SS starts. My wife? SS at age 62, two pension payments at 65. This leads to an 11 year span of increasing income, as our "sources" become available.
Projections show from the current 2.7% withdrawal, it will increase over the years till a bit over 10% at age 70. At age 71 (the first full year of my SS income) it drops to less than 4% and stays there till our late 80's, early 90's (with the plan going to age 100).
So should we spend less now, and for the next years to keep it at/under 4%? Of course not. If we did, our estate will certainly be large, but it will be at the "expense" of not having a good early retirement lifestyle, as we do now.
Again, the 4% is a good starting point, but it must be observed in your own personal life as to how rigidly you need to follow it.