Adjust SWR due to financial "sea change" ?

[Martha]

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Originally Posted by Rich_in_Tampa That's my point: the 95% or 99% figure (a la Firecalc) is a black and white figure, but reality is not like that. If you saw your nest egg slipping year after year after year, you wouldn't just sit there and eventually draw it down to 0. You'd make adjustments --- tighten the belt, maybe annuitize some of it, downsize, whatever. So in the real world, 95% is not a 1 in 20 chance of zero net worth. It's an end-point preceded by a long call to action to mitigate the situation. Same with 99% (though a bit less likely) and even 100% per Firecalc. One reason I am comfortable with 90% confidence is that "failure" doesn't really mean bankruptcy, it means a mid-course correction is in order. Not good but I would take that chance along with a 90% chance of "success" and even growth. To get $50k per year in distributions, you need a million (5% SWR). To get that withdrawal at 3% SWR you'd need 1.67 million. That is a big price tag (time or money) to pay in order to go from 95% to 99% sure in this context. Great if you've go it, not so easy to justify if you don't.

Don't cancel. It really is a small amount in the scope of things. But of course I say that when I am about to leave on my own two month trip. But the cash is in the bucket.

[youbet]

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Originally Posted by REWahoo I too hear a 'do it now while you still can' voice whispering in one ear and a 'you'd better cut spending now' voice in the other.

Exactly. I think the folks fortunate enough to have retired younger are missing out on this "risk of the ticking clock" phenomenon!

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Ain't life great?

Well, yes, yes it is! Despite all the roller coaster financial events of late.

[unclemick]

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Originally Posted by REWahoo Is there an echo in here? Change your "retired at 58 and am now 61" to "retired at 58 and am now 62" and this could have been my post. I too hear a 'do it now while you still can' voice whispering in one ear and a 'you'd better cut spending now' voice in the other. I'm struggling with canceling a planned 6 week RV trip to the northwest this summer - a trip we've been planning for months. Will the $5,000 I save make a significant difference in our quality of life sometime down the road? Or will I kick myself for not taking the opportunity for a wonderful trip when I had the chance? Ain't life great?

If it is renting space in my head - take the trip. Other ways to be a cheap b------ will present themselves. You can wiggle the money frugal future wise(if 'must' do penance) but you can't stop that dang clock.

heh heh heh -

[ERD50]

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Originally Posted by TromboneAl Let's say that at the start of your retirement, you print out a chart that shows how much you should have at each age if you want to end up with a balance of zero on your presumed death day. If, at age 70, you've found that you are below that line for the last three years, it might be time to go to plan B. That sounds reasonable, doesn't it?

Yes, and I would find it interesting to hear *exactly* how people plan to put this into action. By that, I mean some predetermined formula.

Now, some have mentioned drawing no more than 4% (or whatever number) of their portfolio. That is defined, easily understood, and actionable. I'm less certain that some of those people understand that that very likely means they will need to cut their withdraws in half or more for an extended period of time. If they get a good portion of their allowance from pension/SS, that might not be so bad.


Follow a few of the squiggly lines in FireCalc for an idea. Lots of nasty dips that do recover, eventually. Like others have said, maybe they recover after you gave up that trip, and now you are too old to do it.

But, like others have said, if you don't have the money, you may have no other choice, esp if going back to work at a decent salary is a low probability event. In that case, I guess you just have to take joy in life's little pleasures. It could be worse. Heck, it could be a *lot* worse!

-ERD50

[Bestwifeever]

Take the trip, REW! It's an order!

[ziggy29]

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Originally Posted by Bestwifeever Take the trip, REW! It's an order!

It does sound like the retiree's version of One More Year Syndrome...

[Bikerdude]

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Originally Posted by REWahoo Is there an echo in here? Change your "retired at 58 and am now 61" to "retired at 58 and am now 62" and this could have been my post. I too hear a 'do it now while you still can' voice whispering in one ear and a 'you'd better cut spending now' voice in the other. I'm struggling with canceling a planned 6 week RV trip to the northwest this summer - a trip we've been planning for months. Will the $5,000 I save make a significant difference in our quality of life sometime down the road? Or will I kick myself for not taking the opportunity for a wonderful trip when I had the chance? Ain't life great?

Now we have 3. I'm 61 and retired at 52. I also see the end of my ability to do some of the things I have previously enjoyed and that's what makes this downturn so cruel at this point in my life. I guess its somewhat comforting to know I have company in this dilemma.

[CuppaJoe]

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Originally Posted by REWahoo Is there an echo in here? Change your "retired at 58 and am now 61" to "retired at 58 and am now 62" and this could have been my post. ... Ain't life great?

Change that to "retired mentally at age 58 but continued to work to age 61, now 62," don't know where I'm going with this yet, where'd I leave the meds?

Yes, I'll echo the others, take the trip. I spent down my PF to four weeks living expenses in 1977 for a big trip; hey, I'm still here and not living off my kids, oh, nm, I forgot to have the kids. Your trip expense is a drop in the bucket, you could always sell the house and RV later, oh, again, nm. Bon voyage.

[2B]

I am currently 57 years old. No one in my family has ever lived past 85 so I'm not too worried about a 30 portfolio duration. DW may be in trouble since her family rots and rots for many years after they have any funtioning parts. The good news is only one made who it to 90 and the current runner up is her father with Alzheimer's who is 87.

I keep coming back to the over analysis that goes on. I confess to being guilty of it myself but the bottom line is that we can't predict what our rate of return will be, what the inflation rate will be or how long we will live. We can only do a reasonable estimate on the high side and the low side to determine a safe spending level. On a year to year basis, we must be prepared to review our plans and determine what is essential and what represents "extras" that we choose to spend our money on.

[Koolau]

For those considering canceling trips to keep the spending down, I think my approach would be to cut someplace else. Whether that's cutting back on eating out or drinking a little lower cost wine or something else would depend on your particular situation. If you are already "on the edge" so to speak, then, yeah, maybe you should cancel the trip. If not, decided once again what your actual priorities are and fund accordingly. For most of us, there is ALWAYS some fat in the budget that can be cut. Heck, I'd sell one of my 2 cars rather than give up a "trip of a lifetime" situation. 2 cars to me are CURRENTLY worth the sacrifice elsewhere - for the convenience of his and hers transportation. But, bitch and moan as I do about Hawaii taxes, we've got a superior bus system (on Oahu) that (almost) makes me feel guilty about owning 2 cars. So, in a pinch, I'd flip a coin and one car would be g-a-w-n rather than a true priority in my life. I'm sure most of us have similar "luxuries" to give up rather than something we truly want to have or experience. But, YMMV

[W2R]

I am still working and will be 61 when I retire in November. I think that my retirement activities at that time will fit within whatever I am capable of doing.

It would be very distressing to long for something that I am no longer capable of doing. I do feel the effects of aging. But for me, there is still a lot left to do in life. Glass half full, and all that.

[Bikerdude]

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Originally Posted by Want2retire I am still working and will be 61 when I retire in November. I think that my retirement activities at that time will fit within whatever I am capable of doing. It would be very distressing to long for something that I am no longer capable of doing. I do feel the effects of aging. But for me, there is still a lot left to do in life. Glass half full, and all that.

I don't believe its longing (for something that I am no longer capable of doing) as much as wanting something I had planned to do when I was at an age when I could do it. But now the $$ I had set aside for the "fun" stuff have disappeared and the future is uncertain. So the question is should you go out on a limb and spend $$ that you don't have anymore or wait until you earn them back. However, waiting now at 61 has a time limit on it for some of the more adventurous items. That's the dilemma.

[REWahoo]

What he said...

[jdw_fire]

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Originally Posted by Bikerdude I don't believe its longing (for something that I am no longer capable of doing) as much as wanting something I had planned to do when I was at an age when I could do it. But now the $$ I had set aside for the "fun" stuff have disappeared and the future is uncertain. So the question is should you go out on a limb and spend $$ that you don't have anymore or wait until you earn them back. However, waiting now at 61 has a time limit on it for some of the more adventurous items. That's the dilemma.

try bernicke's wd plan

[Rich_by_the_Bay]

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Originally Posted by TromboneAl Let's say that at the start of your retirement, you print out a chart that shows how much you should have at each age if you want to end up with a balance of zero on your presumed death day. If, at age 70, you've found that you are below that line for the last three years, it might be time to go to plan B. That sounds reasonable, doesn't it?

Yes, that's what I had in mind. It's not like you have $1mm and in year 20 it drops to zero. There is plenty of time to see the clouds on the horizon.

[Rich_by_the_Bay]

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Originally Posted by Martha Don't cancel. It really is a small amount in the scope of things. But of course I say that when I am about to leave on my own two month trip. But the cash is in the bucket.

I think you meant to quote REW on this one, but I agree with your advice whole-heartedly.

[TromboneAl]

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I too hear a 'do it now while you still can' voice whispering in one ear and a 'you'd better cut spending now' voice in the other.

Well put. I finally started listening more to the 'do it now' voice in 2008, but now the 'cut spending' voice is a little louder. We won't cancel our extended driving/camping trip to St. Louis for DDs graduation, but I'm thinking we'll eat out less along the way.

[OhSoClose]

If some of you are like me, your estimates of your personal SWR will be affected by your willingness to invest in stocks after retirement. The recent sharp downturn has left me feeling that, mentally, I can't leave a majority of my assets invested in equities following retirement. For me, its a matter of not wanting to be stressed out winning out over the logical view (i.e., that only stocks beat inflation over time). I can probably keep up to a max of thirty percent of my investments in stocks. But that probably means an SWR of no more than 2.5% of my investment pool.

[OAG]

I never heard of the 4% SWR, FIRECALC (and the rational behind it) until I got here a couple of years ago. This site has to be the most financially educational site available. Before I got here I thought you "saved like crazy" and then at some point (before the "wagon wagon" came for you) you spent like crazy. I see now that that may not work too well mainly because I do not know when the wagon comes and that you have to "live for today" too. I have decided, starting this year, I will try to "spend", at or near, 4% - but it is almost the end of February and I have spent about -1%, I really have to get to work on this "spending" thing.

[RonBoyd]

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Originally Posted by TromboneAl Well put. I finally started listening more to the 'do it now' voice in 2008, but now the 'cut spending' voice is a little louder. We won't cancel our extended driving/camping trip to St. Louis for DDs graduation, but I'm thinking we'll eat out less along the way.

And the "do it now" voice is using the "before fuel goes over $4.00 a gallon again" argument. Hard to resist, eh?