Live And Learn
Thinks s/he gets paid by the post
First year of retirement for me. We are on track to spend 2.9% of initial portfolio value (vs budget of 3%).
I am using the method of taking a percentage of my 12/31 portfolio value each year...While my percentages average 2% during these boom times, I also compute them relative to my lowest portfolio value on 3/9/2009 just so that I know. My WR with a lower portfolio value like that averages a full percentage point higher.
But this brings to mind an interesting view I've read about - the concept of "Retire Again and Again". Mathematically and historically, you could recalculate your "SWR" each year using your new portfolio balance, and one less year for the time frame. It's valid, and solves the paradox of the two retirees exiting the workforce a few years apart and finding that their spending amount is different even though their time frame and portfolios are the same. It is the absolute best system for maximizing spending, minimizing money 'left on the table', and still assuring a historically safe portfolio. Though it is a case of 'curve fitting', but I think it could be followed a bit more conservatively, and still work very well and provide a margin of safety.
-ERD50
this is what we do. I call it the Taylor Larimore (from Bogleheads) method. We have been running in the .8%-1% range. Pension will start in two years so rate will drop. SS and RMDs will kick it way up @70 due to taxes. At that point we will be doing some significant charitable endowments so our spending rate will jump a lot.It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?
It depends on whether or not you count that cash as part of your portfolio. If not, then I agree 0 withdrawal.
But a retirement portfolio should grow, hopefully (especially in the first half of retirement), to counter inflation and have enough built up to smooth out the down years. Just because a portfolio increases enough to cover the withdrawal in a given year doesn't mean your withdrawal rate was zero.
I'm something of an outlier here, in both my NW, spending level, and overall lifestyle. I began withdrawals 5 years ago. At that point, my portfolio, which constitutes my entire NW (I don't own any property) was just 600K. (I have previously stated it was 640K, but a quick check of the facts reveals that it was lower than my memory indicates.) Ever since then, I have been withdrawing $15,600/year, which represents 2.6% of the starting portfolio value. The portfolio now stands at 780K, so those same withdrawals represent 2% if I were to "reset" and start again.
several people noting they are withdrawing very little or 0. Just curious what you are living on.
Is this cash on the side that you don't see as part of your investments?
Is this rental income?
Is this SS or pension? (some noted this)
Is this dividend or interest?
Is this an annuity purchased with your investments/retirement $?
Just curious how 0 is obtained.
A quick read through of this thread convinces me that almost everyone has their own definition of everything so naturally it is all good whatever it is.
Anyway, little matters until there is a big and lasting markdown of assets, or an expensive illness, legal problem, earthquake that destroys a home, etc,etc.
I think for our own peace of mind we tend to assume much greater stability than actually exists in the world.
Ha
I got a feeling there are going to be many happy, happy heirs of this group.
I got a feeling there are going to be many happy, happy heirs of this group.
Folks could have ER'd earlier!!
I got a feeling there are going to be many happy, happy heirs of this group.
A quick read through of this thread convinces me that almost everyone has their own definition of everything so naturally it is all good whatever it is.
Anyway, little matters until there is a big and lasting markdown of assets, or an expensive illness, legal problem, earthquake that destroys a home, etc,etc.
I think for our own peace of mind we tend to assume much greater stability than actually exists in the world.
Ha
The exponential nature of societal change provides more evidence that predicting our financial situation 30 years or more into the future is a fool's errand. Let's face it – we have no more idea what life will be like in 2046 than we could foresee today in 1986. With exponential change, the next 30 years will see a lot more changes than the last 30.
Lastly, when you see computer output that appears to predict your wealth from age 65 to 95, make sure you understand precisely what you are seeing. It's a pro forma wealth statement that shows one example of what might happen. (If you want a chuckle, ask the provider for a guarantee.) This shouldn't be the central tenet of your retirement plan. If you base your retirement plan on your ability to predict the future, you are likely to be sorely disappointed.
About predicting the future. And this is very strange. I recently ran across a old Visual Basic program I wrote in 1989. It projected my future retirement assets to 2016, including my estimates for contributions, inflation, etc. In spite of all the changes in my life and my business since then, and all the mistakes I made along the way, it was correct to within about a 7% error.
...research suggests that we’re not actually very good at figuring out what our future goals will be. The fundamental challenge is that, despite recognizing how much we change over time (think back on how different you were 5, 10, or 20 years ago!), we just don’t know how to envision the ways we’ll be different in the future. In fact, researchers have dubbed the phenomenon the “End Of History Illusion” – we just don’t know how to project a future that’s any different than the today (which is the end of our personal history as we know it).
From the perspective of financial planning, and the rising popularity of goals-based investing, the challenge of the End Of History Illusion is that we may be encouraging retirees to save towards a vision of retirement that they won’t actually care about when retirement comes. This doesn’t mean that retirement itself won’t be relevant, but that vision of a particular retirement home, vacations, a boat on the lake, or a certain lifestyle, may not actually be very desirable when the time comes.
Michael Kitces has a new thought-provoking post on goals-based investing:
https://www.kitces.com/blog/end-of-history-illusion-and-goal-based-investing/
This to me impacts one's thought process regarding saving for and spending in retirement as it relates to predictions. For example, I just read somewhere (but have now forgotten where , I think it was a link in the Dirk Cotton posts) that most people stop international travel around age 70, stop domestic travel around age 80, and stop travelling beyond their back yard (if that) at age 90. It also stated that for most people discretionary spending declines approximately 1.5% per year throughout retirement. As our needs are few and are wants are many, assuming we'll have the same wants as today and budgeting accordingly throughout retirement may not be wise. OTOH, the excess could be thought of as "padding" or legacy use, if desired.