At Age 50, What SWR Do You Like?

[ksr]

I know that many folks consider 4% the Safe Withdrawal Rate, but this may assume withdrawals start at a more typical age of 65 or so, with expected withdrawals for 20-25 years. In general, what would you consider a SWR at age 50? Assume you have no reason to believe you won't live to a ripe old age.

I've run FireCalc and done a lot of my own calculations, but am curious how some of you would view this. I've not started taking withdrawals yet (I have income from a part-time j*b), but when I do I will probably be in my early 50s and don't feel comfortable with 4%.

[ziggy29]

I'd probably feel more comfortable at about 3%, personally. Then again, I tend to make extremely conservative assumptions about the future -- I figure if I can do it with assumptions that are ~98% likely to turn out better than I anticipate, I should be safe.

[bbbamI]

It would be great if I had a WR of 2%, but currently it is at 3%. I can live with that.

by the by...I'm 51.

[audreyh1]

At 50, you have to assume that at least one of you (of a couple) will live into their 90s. So you are looking at 40+ years of portfolio survival. For this reason, I consider 3.5% to be more prudent choice than 4%. I think I saw a chart somewhere that supported this but it's been a very long time.....

Also, you might consider whether your really want to do the initial SWR plus inflation adjustment method. This is only important if for some reason you feel strongly about getting the same "salary" every year with an increase for inflation. It might be more prudent to just take a fixed X% from the portfolio every year instead of adjusting for inflation and live with the volatility. That way you can be more responsive to market downturns, as well as capture upturns. Just save some money from the "good" years to help pad the "bad" years.

Audrey

[W2R]

All else being equal... that is, if I had the same assets in my portfolio at age 50, as I have now at age 61, and if my house were paid off as it is now, then I would probably want to take about 0.5% - 1.0% less than I presently plan to take. Since I presently plan to take around 3.0% - 3.5%, I checked 2.5% - 3.0% as my answer.

Bear in mind that I have a family history of longevity. If I were a guy, and if my family history indicated that most in my family died in their early 60's, that would be another matter.

[walkinwood]

I tend to agree with Audrey. You should be thinking in terms of a fixed percentage of your portfolio. Bob Clyatt has modeled a fixed percentage withdrawal of up to 4.5% from a portfolio that is 50/50 equities/bonds, and shows that it can survive 40 years (greater than 90% of the time) with the purchasing power of the portfolio intact. Be sure to include your mutual fund expenses in the withdrawal rate. He has an added wrinkle to smooth withdrawal surprises on the downside. Read his book - I found it in the library - Work Less, Live More.

I started out in May 08 (at age 48) using this method, but got hit by 2008! I also, foolishly, had a 65/35 portfolio. 4% of the portfolio doesn't cover my expenses any more. My wife and I will return to work - one of these days - to fill in the gap.

Your part-time work situation is ideal and that's what I want to aim for.

[Sam]

I'm in the minority, I voted > 4%.

[LOL!]

In 20 years you get to start collecting a big slug of SS benefits, so why use 4% in the early years?

[rescueme]

Quote:

Originally Posted by LOL! In 20 years you get to start collecting a big slug of SS benefits, so why use 4% in the early years?

True. Using forecast software, such as Fidelity's Retirement Income Planner (the full version) you can see anticipated taxes and withdrawl rates, year by year.

Our plan shows (at age 61) to have a 7.1% annual withdrawl rate, increasing to over 12% by age 70. During this nine year period, we will have changes to income, such as two SS income streams, an SS draw against my wife's SS between the ages 66 through 69 (my SS starts at age 70), and two small pensions for my wife (age 65).

The result? At age 71 (first full year of "all income sources") even with witdrawls against our retirement portfoio, the draw will drop to less than 4%.

We do spend a lot on travel each year. This is nothing more than continuing a budget item which we have had for the last dozen+ years, and expect to spend as much till age 75 (my wife/me are the same age). At that time, our forecast travel expenses will be cut back (not eliminated) to address the fact that we will probably take (health permitting) more local (e.g. US) vs. our current combined US and international travels.

Again, while the 4% is a good target withdrawl (based upon the studies), it does not take into consideration variation in income, as retirement progresses. It assumes a certain portfolio value, and income not changing from the first day of retirement. That is usually not the situation for a person retiring before "normal age" (whatever that is)...

[ksr]

Quote:

Originally Posted by walkinwood Bob Clyatt has modeled a fixed percentage withdrawal of up to 4.5% from a portfolio that is 50/50 equities/bonds, and shows that it can survive 40 years (greater than 90% of the time) with the purchasing power of the portfolio intact. Be sure to include your mutual fund expenses in the withdrawal rate. He has an added wrinkle to smooth withdrawal surprises on the downside. Read his book - I found it in the library - Work Less, Live More.

Thanks for reminding me about that part of the book. I read it about a year or two before I left full-time employment but forget some of the details. It was one of the best books I read for preparing for the kind of semi-retirement I wanted to take. I'm going to check it out again this week.

[Lawrence of Suburbia]

I'd say that the whole 4% assumption that everyone seems to make is being challenged. In fact, as dividends from nearly everything continue to decline, I think we're headed towards a 2% SWR world. if you think you can retire on a million, you're probably better off waiting 'til you've amassed two million...or more.

[ksr]

Quote:

Originally Posted by LOL! In 20 years you get to start collecting a big slug of SS benefits, so why use 4% in the early years?

I would love to count SS benefits into my future income stream, but I really worry about what will be there for me when the time comes. While I don't think SS will go away, I am concerned about changes to entitlement determination and payouts (meaning, I think I may get less than what they now tell me I will collect at the various ages). Does anyone else feel this way?

[Lawrence of Suburbia]

Yes. I look at those yearly SS statements and view them as a rug to be pulled out from under me later.

[HFWR]

Quote:

Originally Posted by Lawrence of Suburbia I'd say that the whole 4% assumption that everyone seems to make is being challenged. In fact, as dividends from nearly everything continue to decline, I think we're headed towards a 2% SWR world. if you think you can retire on a million, you're probably better off waiting 'til you've amassed two million...or more.

Yikes...

[bbbamI]

Nah...I'll takes my chances with a million....

[Cruisinthru]

My husband retired at 62 and I retired at 55 the same year. We have never taken more than 2.5% and do not plan on it until much later in our retirement. We are lucky that I have a great pension that covers the majority of our expenses.

[Rambler]

We are targeting 3%, plus or minus a skosh. It will depend to an extent on how much recovery happens in the next 3 years. If we have a full recovery to October 2007 levels by Dec 2012, then it will likely be less than 3%. We will be 51 then. If there is a partial recovery, then it may be slightly more than 3%. We're coming to the wire, and as long as we are below 3.35-3.5%, I am pretty sure we will be OK. If I were to get fired (as opposed to FIREd) in the next year, it would be about 3.5%.

I do not include SS at all in our calculations, just because I like to have reasonable conviction that I can make it on my own if it isn't there. On the other hand, I have been pondering the declining expense rule that can be used in FIREcalc. Problem with that one is that the declines start too early in my opinion, so I intend build my own spreadsheet with options for the expenses decline to begin at arbitrary ages that I can specify. I believe that I will be pretty active until at least 70 or so, meaning that I will likely continue quite a bit of travel until then (domestic - I've been doing my international travel while working, and I'm just about done with that). This is just to see if there is a slight possibility to use just a little more in the early years, while I still can.

Bottom line, somewhere right around 3% is what we are targeting. If the markets get hammered, I will reduce expenses such that they don't ever go over 3.5% or so of the remainder.

R

[CyclingInvestor]

I am 50 and retired almost 3 years now from a programming career - no pension, 100% individual stock portfolio almost entirely in my IRAs, paid off house. I try to match my spending to my dividend income, which is about 3.7% right now. This has been increasing 6-12%/year since retirement, consistent with the previous decade aand staying ahead of inflation. If I do hit a bump in dividend income, I could drop my spending substantially if needed. I do not take SS into account, although I will be happy to collect what I can.

[Helen]

Quote:

Originally Posted by LOL! In 20 years you get to start collecting a big slug of SS benefits, so why use 4% in the early years?

I'd like to do a lot of traveling from the ages of 56 - 62, so I plan on spending my "early retirement" pot of money during those years which will be way beyond 4%. When that is gone, we'll live on the two smallish pensions, 401ks, Roths and SS.

[landover]

A 3.975% annual withdrawn rate is OK for 95% success rate for 30 yrs. Someone ERing in 40's needs to plan for 60 yrs, if we divide this in two 30 yrs period and for 95% success probability we need 30yrs success rate of 98% (95%^0.5). Firecalc tells that for 98% survival rate WR would be 3.76%. So I guess for someone ERing in 40's/50's, a WR of 3.5% should be ok if the future is like past.