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Old 04-17-2021, 12:41 PM   #41
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Any scheme could work depending on how the markets go over the years. My point is that if you do something like you suggested you do need to keep in mind that your FireCalc runs are no longer relevant. FireCalc assumes you start with an AA of your choice and then you re-balance (including gains) to keep it there.

Ie., be aware of how the model works and that if you don't behave like the model (inputs or algorithms) as you go through the years, don't expect the historical outcomes to necessarily include your actual result.
Yes, I agree with that.

OTOH, one could always reset to a new 30 year period, based on re-running FireCalc with a new balance. That should give one a new confidence level, based on the updated numbers.
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Old 04-17-2021, 12:50 PM   #42
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I have never understood this line of thought. As long as you're happy, what does it matter that you're not spending as much as you could?
Spending more makes me happier.

First class make me happier than coach. Wagyu makes me happier than choice. Sushi grade fish makes me happier than grocery store fish. Hotels with a jacuzzi in the room and an ocean view make me happier than the holiday inn with a view of the parking lot.
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Old 04-17-2021, 01:06 PM   #43
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Spending more makes me happier.

First class make me happier than coach. Wagyu makes me happier than choice. Sushi grade fish makes me happier than grocery store fish. Hotels with a jacuzzi in the room and an ocean view make me happier than the holiday inn with a view of the parking lot.
I'm happy for you, knowing exactly what makes you happy. It is a gift to know your own mind and heart.

For many years, I assumed this would be true for me - spending on luxuries now that I could afford them. When the chance came (not so much the fish - but, say, flying first class) I found I got more enjoyment out of helping my friend fly first/bus class so she would not need to worry about blood clots. For me, flying first class would be nice (I've been kicked up there a couple of times) but PAYING for it takes the fun away. It's my particular personal quirk I guess. Having said that, I'm seriously considering a better travel class if I get a chance to fly this summer. Check back in these pages to see if I actually pull the trigger. I know I've said this before, so I guess we'll see.
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Old 04-17-2021, 01:57 PM   #44
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But isn't using a lower WR just one part of a "safer" plan?

You really need to:

1. Aim for a sub-4% WR.
2. Overstate planned expenses by a lot.
3. Understate income such as pensions or SS by a lot.
4. Figure on living to 120.
5. Assume some black swan event (divorce, lawsuite, uninsured disaster, deserving child desperately needs financial help, etc.) hits you for all or most of your FIRE portfolio.
6. Begin with a huge "cash buffer" you don't include in portfolio survive-ability calculations.
7. Plan on a higher income tax rate in the future.

To some extent I do most of these, but not to an extreme.
1. Yes.
2. No, figuring < 4% WR covers this
3. SS yes, I take a 35% (up from 25%) haircut on that. Pension, no.
4. Not 120. At 94 my VPW plan gives the highest withdrawal, after that I start taking less. Should be fine to at least 100.
5. Not sure I call these black swan events. But to address those, I'm not married and unlikely to ever remarry. I have umbrella insurance. I've factored in gifting the max I can for my son without having to report. I'll deal with any others I hit if I have to but there's no way to plan for an event that wipes out everything.
6. No
7. I use the old tax rates that are set to resume in 2026, and figure all of my SS will be taxed rather than 85%.

Some people sleep better with a paid off house. Some people sleep better with a nearly bulletproof retirement. I'm in the 2nd group.

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And so on and so forth......... FireCalc will account for all the above if entered (or not entered) as appropriate. It's belt and suspenders ya know!
IF is the key here. I see some potential retirees talk about tracking their last two years of expenses and using that, without taking into account that they didn't replace their car, make large home repairs, take a big vacation that they'd like to do when they have more time. FireCalc is only as good as the data you enter.

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My own opinion is that the biggest threat to a (more or less) 4% WR turning out to be a SWR is your AA. I question how many folks really hold to the AA they enter into FireCalc. For example, some of our forum members feel they have "won the game" and hold a zero, or near zero, equity AA. In their case, the standard "4% for 30 years" advise is totally off the table. It's not wrong to hold zero equities, but be sure you understand the outcomes that would have produced historically through FireCalc and decide if you want to continue to assume the future will behave similarly to the past.
You may be right. My sense of the "won the game" people is that they could live on 2% or less. I never got the sense that someone taking 4% + inflation has gone all cash. I could be wrong. Where I think AA issues come is that some will panic sell after a crash, and then not get back in after a recovery. Or any other bad market timing choices.

I was going to say that underestimating expenses is the biggest threat in retirement, but I think you're onto something with veering away from their AA.
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Old 04-17-2021, 02:42 PM   #45
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Wow, if I'd ever known there were 6 or 7 rules, I probably would never have retired. I basically picked 5 (now) VERY low-cost MFs and balanced with bond equivalents (SPDAs, a GIF, I-Bonds, etc.) and a few PMs. I figure NW once a year, whether I need to or not. I go as high as 6% WDR when I rehab a house or low as 2+% (spending, not withdrawal - my charities did very well this year) when there is a Covid crisis to curtail spending. If it's too complicated, I probably won't do it. YMMV
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Old 04-17-2021, 02:55 PM   #46
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We aim for at least a 0% real return, meaning our investments at least keep up with inflation, making our maximum safe withdrawal rate 100 / number of years of remaining expected retirement. For 30 years, our safe withdrawal is 3.33% (0 / 30 years). This methodology relies mainly on having fixed income investments that at least keep up with inflation. But it gives up the potential for big gains or losses in the stock market. In our case, we live on about half of what we could, with pensions and SS covering almost all our fixed and discretionary expenses, so we don't feel the need to take any risks with our life savings. We will more likely use our savings for random large expenses like helping our kids buy houses or LTC.

This investing style was easier to implement when interest rates were higher, and investors could buy 30 year TIPS returning 2 - 3% over inflation. It might be harder to do now if one was starting from scratch as interest rates, especially TIPS rates, are much lower.

Related link - Matching strategies from Bogleheads wiki - https://www.bogleheads.org/wiki/Matching_strategy
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Old 04-17-2021, 03:18 PM   #47
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We aim for at least a 0% real return, meaning our investments at least keep up with inflation, making our maximum safe withdrawal rate 100 / number of years of remaining expected retirement. For 30 years, our safe withdrawal is 3.33% (0 / 30 years). This methodology relies mainly on having fixed income investments that at least keep up with inflation. But it gives up the potential for big gains or losses in the stock market. In our case, we live on about half of what we could, with pensions and SS covering almost all our fixed and discretionary expenses, so we don't feel the need to take any risks with our life savings. We will more likely use our savings for random large expenses like helping our kids buy houses or LTC.

This investing style was easier to implement when interest rates were higher, and investors could buy 30 year TIPS returning 2 - 3% over inflation. It might be harder to do now if one was starting from scratch as interest rates, especially TIPS rates, are much lower.

Related link - Matching strategies from Bogleheads wiki - https://www.bogleheads.org/wiki/Matching_strategy
I looked into this approach and even read a book by Zvi Bodie. As I recall, (at the time of the original - not revised) book, Bodie recommended a very large commitment to TIPS. He showed how the inflation component covered the "unknown" of inflation while the investor could play around the margins with some more speculative stuff AND take a reasonable amount from principal and "regular" 3+% real interest on TIPS. This was almost 20 years ago so do NOT pin me down on the particulars. BUT, by the time I looked into it, the "real" interest was down a lot, so I tried more conventional approaches. Anytime you can make "decent" interest that way more than beats inflation, why wouldn't you? Why reach for the stars when you can live on Planet Earth quite nicely. BUT, of course, the easy days appear to be over - for a while. Just to keep up, we all need to at least walk a bit - maybe jog occasionally. Sad but true. YMMV
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Old 04-17-2021, 04:30 PM   #48
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Wow, if I'd ever known there were 6 or 7 rules, I probably would never have retired.
Nobody said they were rules. You do what you want. I'll do what I want, like the part of those 7 things I said I do.

You may notice that I rarely answer Yes or No to the "Can I retire?" queries. I may ask some questions about things they may not have thought of. I can't speak for anyone else's level of risk or comfort, and I don't want to be responsible for something that doesn't work out. OK, I recently did recommend FIRE for someone, but they were so obviously set for life that it was a no-brainer.
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Old 04-17-2021, 05:19 PM   #49
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Nobody said they were rules. You do what you want. I'll do what I want, like the part of those 7 things I said I do.

You may notice that I rarely answer Yes or No to the "Can I retire?" queries. I may ask some questions about things they may not have thought of. I can't speak for anyone else's level of risk or comfort, and I don't want to be responsible for something that doesn't work out. OK, I recently did recommend FIRE for someone, but they were so obviously set for life that it was a no-brainer.
Sorry! I was just sort of yanking your FIRE chain. I'll not do it again. I value your feedback - agree or disagree. YMMV
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Old 04-17-2021, 05:29 PM   #50
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Well, maybe that's just me being nit-picky again. I just don't like people telling me that what I prepare for in case something bad happens is actually something I believe will happen, or that I have rules that others must follow, so I get a little defensive. Peace.
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Old 04-17-2021, 05:34 PM   #51
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Well, maybe that's just me being nit-picky again. I just don't like people telling me that what I prepare for in case something bad happens is actually something I believe will happen, or that I have rules that others must follow, so I get a little defensive. Peace.
Heh, heh, as I always tell DW (with a BIG smile): "We'll let it go - this time."
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Old 04-17-2021, 05:55 PM   #52
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There's no need to plan to 120.

With both DW & I in our 50s, 30 years is likely all we'll have, so I don't really consider retirement in one's 50s as particularly "early."

Even though DW is the spitting image of her maternal grandmother (died age 97) she still has, IIRC, a less than 1 in 4 chance of surviving into her 90s.
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Old 04-17-2021, 06:30 PM   #53
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I have never used the portfolio visualizer site before, but am intrigued. I started filling in the blanks, but got stuck on what to put in for the "Mean" percentages for allocation of each asset class. This is probably pretty basic, but could someone please expain what/how this is used? Many thanks!
@Retire2023 are you on the Monte Carlo Simulation page? I don't see the option you referred to.

https://www.portfoliovisualizer.com/...talStockMarket
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Old 04-17-2021, 06:41 PM   #54
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@Retire2023 are you on the Monte Carlo Simulation page? I don't see the option you referred to.

https://www.portfoliovisualizer.com/...talStockMarket
Yes, on the Monte Carlo Simulation. I am using the GARCH Model under Time Series Model (not sure if this has an impact). Under Asset Allocation, I am selecting the percent allocation for each of my asset classes and the far right column asks for the Mean % for each allocation I entered. I don't know what to put here, and it will not continue until this is entered.
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Old 04-18-2021, 08:01 AM   #55
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There's no need to plan to 120.

With both DW & I in our 50s, 30 years is likely all we'll have, so I don't really consider retirement in one's 50s as particularly "early."

Even though DW is the spitting image of her maternal grandmother (died age 97) she still has, IIRC, a less than 1 in 4 chance of surviving into her 90s.


One has to weigh one’s Bullet-Proof/Good Enough Ratio, if you will, to their own circumstances at w*rk and psychological risk tolerance.

DW was coming home in tears regularly in her mid 50s, so it was finally “Good Enough” for her. It was quite unexpected for a driven person like her. She found part time work and is happy as a clam and certainly no longer cries.

I finished a multiyear project last summer in a career I was tired of and decided “Good Enough” at 54. A couple of retirement calculators tell us we have about 87% Success confidence if we change nothing. If the SHTF, which we should be able to see coming from a very long ways off, I’d rather adjust lifestyle a tad or work at the hardware store down the street that is always advertising. Small changes make big differences in those calculators.

Others feel they want 500% confidence and are willing to w*rk until they achieve it. Not me, however, and YMMV.
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Old 04-18-2021, 01:54 PM   #56
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I'm going for Variable Withdrawal, because we are far more apt and able to travel in the first ~8 years of retirement. That also lines up with SS at 70. Our two SS accounts will knock the WR way down at that time. SS plus two pensions cover more than expenditures at that time, with inflation.
We'll be at 6~7% for that time period, depending on the nature of that travel. I'm with @Koolau, most times splurging for business or first class would spoil some of the fun.
It sounds pretty bold because it is, but it has a finite cap at 8 years.
If we get kicked around by the market we can reduce accordingly.
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Old 04-19-2021, 06:56 AM   #57
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4% was/is based on a 30 year retirement (not an age) and a 95% success rate using actual historical returns and inflation with an allocation of 50-75% stock market and the rest in bonds. Some people choose to believe historical returns won’t repeat in the future, and claim 3% is safer for the future...a separate debate. And some have calculated 3% to be the SWR for an indefinite number of years (much) greater than 30 years, you can play with the yourself using...



...FIRECALC. But you have to make your own longevity assumption, you don’t enter an age. If FIRECALC assumes a 65 yo should plan to live 30 years to be safe, you’d enter 45 years for a 50 yo - but it’s up to you.
  • Enter your portfolio amount and number of years on the first tab labeled “Start Here.”
  • Then go to the “Investigate” tab and click on the button near the bottom of the page labeled “Spending Level” under Given success rate, determine... and enter your desired success rate (defaults to 95%).
  • Hit “Submit” at the bottom of the page.
  • The “Results” page will show the initial spending level for your assumptions in $ and %SWR.
https://www.firecalc.com/

Thanks for this...I did not realize this was an option of FireCalc. Neat.
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Old 04-19-2021, 07:22 AM   #58
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Summary of all the comments here. All the models tell you:
  • 4% is safer than 5% WR
  • 3% is safer than 4% WR
  • 2% is safer than 3% WR
  • 1% is safer than 2% WR
  • 0% is safer than 1% WR
  • FIRE > W@RK

What is missing is actual details a significant number of people who have lived a long life, surpassing 90, and what their experience, approach and WR rates were. But then past performance is no guarantee of future performance either. So it's a crap shoot. Remain engaged with your investments, be flexible with spending, adjust as necessary. Live long and prosper.
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Old 04-19-2021, 08:28 AM   #59
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My parents are 86 and 84. They will not be able to cover their expenses if my mom lives more than 3 years longer. The main culprit is increased expenses due to Mom's memory care. They retired 24 years ago with a 6% fixed WR. Until last year they always took 6% of their original account value. That plus SS covered their expenses. I don't know what they based a 6% WR on, and I don't know what their AA was but I do know that at least some has been in stock funds. I'm not sure how a fixed 6% WR compares to 4%+inflation. Probably they'd have delayed running out of money, but Dad was so stressed out about work that he really needed to retire at 62.

Neither is in good health so they may not make 3 years, but they certainly could. Medicaid options do not look to be good where they live, and nobody wants them to move away from most of their family that live in the same town. If that hasn't changed when they run out, I will cover the difference.

Lessons?

Maybe there's not much to learn except that 6% is too high, but it did work for a long time.

Those who think they will spend more while they are healthy may be in for a surprise late in life.

I'm grateful that I ER'd with a buffer, and built up more of a buffer with good investment returns and not going crazy with spending in my 10 years of ER.
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How to calculate safe withdrawal rate for early retirement
Old 04-19-2021, 10:21 AM   #60
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How to calculate safe withdrawal rate for early retirement

^^^^^ I’m sorry to hear of their situation. What is the status of any home equity? Can it help?
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