View Poll Results: 4% withdrawal
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yes
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34 |
53.13% |
no
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20 |
31.25% |
not sure
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10 |
15.63% |
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4% withdrawal even with the drop ?
07-12-2008, 10:29 AM
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#1
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Gone but not forgotten
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 11,447
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4% withdrawal even with the drop ?
I was wondering how many are sticking with the 4% withdrawal even while the market drops . I have a lot of extra padding in my budget so I'm dropping back to under 3% until I see some positive signs .
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07-12-2008, 10:35 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Unless you think something worse than the Great Depression is coming, 4% should hold.
I don't know that people have been this panicked about their money in more than 60 years, and if that feeling persists or gets worse, you never know what self-fulfilling prophecies may lie ahead.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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07-12-2008, 10:38 AM
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#3
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Full time employment: Posting here.
Join Date: Mar 2006
Posts: 757
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I was doing less than 4% even before the drop-----
but if my net worth keeps shrinking I may have to end up doing much more than 4%! Scary!
__________________
“It is not a sign of good health to be well adjusted to a sick society”.------Krishnamurti
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07-12-2008, 10:56 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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If you are using the "4% of year end balance" rule, your withdrawals reduce automatically when your portfolio declines. That's one of the nice features of that model--it explicitly accounts for the behavior most of us actually exhibit when things get rough.
Time for a gut check for those counting on the "4% of begining balance + inflation forever" withdrawal model. If, today, you aren't comfortable withdrawing some pre-determined amount regardless of market conditions, maybe you should switch withdrawal models and see what FIRECALC gives as a result. Imagine we were having 10% inflation and your portfolio were really down 5%, would you REALLY just automatically withdraw the pre-set amount from the previous year (representing 4% of the start value with all the inflation updates) plus 10% extra to account for inflation?
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07-12-2008, 11:03 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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I won't be in the withdrawal phase until next year, but naturally have been thinking about this, since it looks like I may be retiring into a bear market at the very least.
With my conservative asset allocation and longevity genes, I am figuring on withdrawing less than 4% even in a good economy. (When I say 4%, or some other percentage, I tend to think in terms of samclem's "4% of the year-end balance" of my portfolio.)
When the economy is not good, my portfolio will be dwindling and I will not like that. So, knowing myself, I am pretty sure that I will withdraw only around 1.5% or less at times such as we have been experiencing recently.
When the economy is healthy and vibrant, or if my portfolio exceeds a certain value even in a crummy economy, I might withdraw as much as 3% - 3.5% if I could think of something to spend it on. I will probably ease into that, though, since that would be substantially more I am used to spending.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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07-12-2008, 11:14 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by samclem
Time for a gut check for those counting on the "4% of begining balance + inflation forever" withdrawal model. If, today, you aren't comfortable withdrawing some pre-determined amount regardless of market conditions, maybe you should switch withdrawal models and see what FIRECALC gives as a result. Imagine we were having 10% inflation and your portfolio were really down 5%, would you REALLY just automatically withdraw the pre-set amount from the previous year (representing 4% of the start value with all the inflation updates) plus 10% extra to account for inflation?
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Keep in mind that this model survived the Great Depression and the high inflation bad market of the 1970s. We tend to have short memories about things like this that make us think these are the worst and the scariest times ever.
Having said that, just because "4% plus inflation for life" hasn't ever failed with a 60/40 portfolio doesn't mean it *can't* fail. Then again, there are no guarantees for *any* level.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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07-12-2008, 11:17 AM
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#7
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Recycles dryer sheets
Join Date: Apr 2006
Posts: 143
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The 95% Rule
In Work Less, Live More, there is the 95% Rule, which says to tighten your belt and take out only 95% of last year's withdrawal in tough times (even if the amount you withdraw exceeds your normal safe withdrawal rate).
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07-12-2008, 11:18 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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Quote:
Originally Posted by samclem
If you are using the "4% of year end balance" rule, your withdrawals reduce automatically when your portfolio declines. That's one of the nice features of that model--it explicitly accounts for the behavior most of us actually exhibit when things get rough.
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That's how I handle getting more conservative when my portfolio shrinks. But I don't have to worry about it until next January and who knows what things might look like then.
Audrey
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07-12-2008, 11:39 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,072
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Quote:
Originally Posted by tangomonster
I was doing less than 4% even before the drop-----
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I could cut golf if I had to, but I would stick my head in a gas oven if it comes to that point. My w/d rate is much less than 4%, so I should be able to keep teeing it up.
__________________
Retired 3/31/2007@52
Investing style: Full time wuss.
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07-12-2008, 11:43 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Oct 2005
Posts: 2,713
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gas oven <=> no golf?
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07-12-2008, 01:12 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 3,895
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my brother & sil are a little upset with me that i'm not on vacation with them right now. but i just can't justify to myself spending any more money than need be when times don't look so good. to make this even more absurd, they were paying for everyone; it wouldn't have cost me a dime.
i find that even with my daily gas use. it's not like an extra thousand bucks a year in gas makes much of a difference. i just don't like the idea of spending so much money when i can do without it.
i may be cheap, but at least i'm not broke.
__________________
"off with their heads"~~dr. joseph-ignace guillotin
"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
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07-12-2008, 01:23 PM
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#12
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Moderator Emeritus
Join Date: May 2007
Posts: 12,901
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I am not yet retired but this year we have definitely curtailed our spending (5-10% lower than last year) even though our income has increased about 20%. Most of the curbing seems to be done unconsciously because we don't really feel like we are cutting back, but the truth is we must be. Maybe it's just watching the news and feeling all the gloom and doom, I don't know.
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07-12-2008, 01:39 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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If you are not liquidating stocks, it doesn't matter whether the market is up or down. 4% is either OK, or not OK, a priori to market distress.
What counts is the underlying earning power of your investments.
OTOH, if you want to save money to pour it into stocks at recent prices, then cutting back may be a good idea.
What I find really funny is that for years anyone who suggested on these forums that valuation of stocks mattered in choosing a withdrawal rate was stoned.
Now, it seems like some are indeed closet believers in valuation- although they seem to have applied the principle backwards. After all, valuations are better today than they were when the market was >20% higher, aren't they?
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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07-12-2008, 02:48 PM
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#14
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,128
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I'm only planning a 2.5% withdrawal, but if I was on a 4% withdrawal plan and my investments lost more than 5% by year end then I would withdraw the same as the year before (no inflation adjustment). More than 10% then I'd be looking at more serious cutbacks in spending.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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07-12-2008, 03:21 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by haha
What I find really funny is that for years anyone who suggested on these forums that valuation of stocks mattered in choosing a withdrawal rate was stoned.
Now, it seems like some are indeed closet believers in valuation- although they seem to have applied the principle backwards. After all, valuations are better today than they were when the market was >20% higher, aren't they?
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Great point. It goes to show that the best plans on paper are only good as the emotional resolve to follow them.
The 4% rate was tested to weather the Depression of the 1930s and the low-growth, inflationary 1970s. So if someone believed in 4% on that basis, I would submit that they have to be convincing themselves that this will be worse than BOTH of those events in order to justify dropping the rate if they believed it survived those previous lousy markets. Either that or they are discovering that fear trumps reason.
IMO, it's a perfect example of emotions like greed and fear clouding rational thinking.
If nothing else, the 4% theory is being shown as just another general truism that people abandon in bad and uncertain times -- *exactly* the kind of times that number was created to survive.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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07-12-2008, 04:33 PM
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#16
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Gone but not forgotten
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 11,447
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Thanks everybody , It's nice to read seasoned retirees take on this . I may do some remodeling so that will bring me up to 4% . I did recaclculate my 4% after this drop and that's the number I'm using not the Jan.1 4%.
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07-12-2008, 04:46 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Quote:
Originally Posted by Moemg
Thanks everybody , It's nice to read seasoned retirees take on this . I may do some remodeling so that will bring me up to 4% . I did recaclculate my 4% after this drop and that's the number I'm using not the Jan.1 4%.
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If you faithfully recalculate your 4% each time the market declines and adjust your spending accordingly, your chances of running out of money before you run out of you are virtually nil...
I'm sticking with my spending plan for now. If the market hasn't shown marked improvement by the time my cash bucket is depleted in 2 years, I'll make some changes. I might consider drastic measures like drawing SS early.
__________________
Numbers is hard
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07-12-2008, 05:37 PM
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#18
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Quote:
Originally Posted by Moemg
I was wondering how many are sticking with the 4% withdrawal even while the market drops . I have a lot of extra padding in my budget so I'm dropping back to under 3% until I see some positive signs .
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I think everyone should stick to their 4% withdrawal plans and send the excess to Bill Bengen's retirement fund.
We've saved thousands this year by not going on a college tour-- between hanging with her friends, driver's ed, and her summer job the kid isn't in much of a mood to travel anyway. Maybe we'll take a short college trip during fall break.
During the last trip we got awful tired of hearing "All y'all's from Hawaya, and yer vacationin' hee-yur?"
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07-12-2008, 06:15 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,072
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Quote:
Originally Posted by Nords
During the last trip we got awful tired of hearing "All y'all's from Hawaya, and yer vacationin' hee-yur?"
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Just curious, where was that? I know you didn't vacation in Mississippi.
__________________
Retired 3/31/2007@52
Investing style: Full time wuss.
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07-12-2008, 06:43 PM
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#20
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Full time employment: Posting here.
Join Date: Jan 2008
Posts: 798
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Quote:
Originally Posted by haha
If you are not liquidating stocks, it doesn't matter whether the market is up or down.
Ha
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Of course that is true as long as up comes after, and is more significant than, down.
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