First Few Years of RE: Net Worth Rise or Fall?

[Independent]

Yes, this is what I was trying to say. You said it much better than I. We are at the mercy of the market.

Thanks.

But, re-reading my post, I see a typo. I expect you read it the way it was intended. It should have said:

It seems to me that people who plan to withdraw 4% from their investments will see the real value of their investments
go up if those investments yield more than 4% real, and
go down if those investments yield less than 4% real.

Since most people here have investments with market values that can fluctuate by double-digit percents in a single year, the answer the to the OP question will depend primarily on when people happened to retire.

 

[Souschef]

I am in my 6th year, and my NW continues to grow. I get SS and a small pension, My wife gets survivor's SS and a small pension. That income covers all our spending at this point.
Another nice thing is that the value of my IRA's increases every year even though I take out the RMD.

 

[Meadbh]

Since most people here have investments with market values that can fluctuate by double-digit percents in a single year, the answer the to the OP question will depend primarily on when people happened to retire.

Yup. Sequence of returns is key.

 

[Fedup]

I saw the typo and knew he meets 4%, because I don't his money will last long with 40%.


Sent from my iPad using Early Retirement Forum

 

[HomesteadDreamer]

I am curious about this topic. While obviously it is great to say that your net worth has gone up since your retired...but, is that really the goal of most people who are retired? I plan to leave a little bit behind for my kids, but my wife and I will have worked and saved for a long time when we finally retire, we plan on enjoying life. Obviously, we will live within our means, but if our withdrawal rate results in small decreases in net worth over the years, I'm not going to be too concerned. If we retire with our pensions and have (for example) $800K in savings, I don't plan on dying with $800K+ in our accounts.

 

[daylatedollarshort]

I am curious about this topic. While obviously it is great to say that your net worth has gone up since your retired...but, is that really the goal of most people who are retired?

If you are happy and can increase your NW, why spend more? At least some studies show that after a certain point, spending more money does not bring more happiness. Of course if you need basics like food, housing or medical care, more spending is probably going to make you happier. But if you already have a closet full of clothes and a house full of stuff, is spending more on even more consumer goods really going to increase your happiness levels?

 

[Meadbh]

I am curious about this topic. While obviously it is great to say that your net worth has gone up since your retired...but, is that really the goal of most people who are retired? I plan to leave a little bit behind for my kids, but my wife and I will have worked and saved for a long time when we finally retire, we plan on enjoying life. Obviously, we will live within our means, but if our withdrawal rate results in small decreases in net worth over the years, I'm not going to be too concerned. If we retire with our pensions and have (for example) $800K in savings, I don't plan on dying with $800K+ in our accounts.

Small decreases in NW are fine. Big decreases are another story, especially if (a) they occur in the first few years, thereby having a disproportionate negative effect on long term portfolio sustainability and (b) there is no pension. Those with pensions have a buffer against market crashes and should consider themselves very fortunate.

 

[fritz]

Retired at 58 (6 years now), and every year has been positive growth for taxable/retirement accounts - so far. We draw only dividends off 52/48 (stock/bond) taxable accounts for living expenses. IRAs keep growing - will be doing Roth conversions before RMDs begin.

 

[Souschef]

I am curious about this topic. While obviously it is great to say that your net worth has gone up since your retired...but, is that really the goal of most people who are retired? I plan to leave a little bit behind for my kids, but my wife and I will have worked and saved for a long time when we finally retire, we plan on enjoying life. Obviously, we will live within our means, but if our withdrawal rate results in small decreases in net worth over the years, I'm not going to be too concerned. If we retire with our pensions and have (for example) $800K in savings, I don't plan on dying with $800K+ in our accounts.

I do not either, which is why I am distributing the yearly RMD to the children rather than rolling it into a taxable account. My mom lived to 102, so I am planning for another 25 years not to run out of money. The children can use the money now, not later.

 

[nun]

I know that the point where passive income (from all stocks and bonds for us) exceeds spending is the inflection point of FI and I wonder if it is likely to continue?

That is a great point to be at.....but many ER plans include spending of principal to maximize income and the ideal plan is thought by some to be one where you have zero net worth when you die. Very few people go into retirement expecting their net worth to increase and the 4% SWR is predicated on your money lasting for some time with some probability.

Personally I use a liability matching approach from guaranteed income sources and reinvest any gains from the market so I expect my net worth to increase through retirement.

 

[kcowan]

Quick reminder that the SWR is based on a fixed withdrawal from the nest egg at the time of retirement, and not the rate this year. I look at both, but the sequence of returns risk does not change. SWR can increase in down years, and decrease in up years.

 

[jfn111]

Retired going on 4 years. NW up about 20% since I retired.

 

[Danmar]

While increasing their portfolio size may not be he primary goal of most retirees, it does add a further degree of flexibility to your retirement plans. You could up spending, charitable giving, gifts to children, etc. Seems much better than the alternative scenario?

In my case if I keep just spending portfolio income, it is pretty likely our portfolio will grow. This is not our objective though so over time we will have to find new uses for some of the portfolio. Current markets might assist here?

 

[pb4uski]

...did you see your net worth continue to RISE in your first few years post-work, or did it gradually start to FALL as you spent for your lifestyle?...

Ours rose but we retired 4 years ago.... just before some really good years of investment performance (about 11%/year since we retired). We are at about 120% of what we had when we retired and peaked at about 125%. And that is after spending money on travel, a new garage and a new car in addition to living expenses.

I don't expect that investment performance to last and part of the reason that our spending splurged was that our portfolio was doing so well.