looking for spend down type threads on here

[Gumby]

....So, why am I so jittery? I think because growing up, money was always tight - I mean like at times, one step from homeless, no heat or hot water in freezing winter, rats and other nasties living with us, bill collectors always stopping by (back when bill collectors would actually bother to stop by), like that kind of "money was tight"......

As the product of a poor, peripatetic, and parlous childhood myself, I have also always felt the pressure to make sure the larder will never go bare. Since I was 18 and walked out the door with the clothes I was wearing and $20 in my pocket, I have been financially on my own (well, after we got married, the young wife joined my team), with no one to provide a safety net. So I have also obsessed about finance, most especially my retirement plan. My final solution, as I have described here before, was just to amass such overwhelming firepower that no matter how much I screw up, we won't lose the retirement battle. So we worked to the point where our secure income sources (SS and two pensions) cover our spending. We also have a relatively conservative portfolio that would fully cover that spending at a 4% draw (we haven't needed to draw anything on the past 5 years of retirement). And we don't include our mortgage free and fairly valuable house in the portfolio.

Could we have bailed from work sooner? Probably, but we actually enjoyed our professions. Will we die with a lot of unspent money? Almost certainly. But the safety and security we enjoy now is priceless.

 

[LateToFIRE]

Variable Percentage Withdrawal (VPW)

A Simple Bogleheads Retirement Using Variable Percentage Withdrawals

I am using the Boglehead's VPW (Variable percentage rage withdrawal calculator). I also use FIRECALC as a confirmation that I'm not too far off. VPW has "flexibility" built in that deals with income after a loss. If you're retired, you simply input the year-end portfolio balance each year, AA, and distribution frequency. I think it's one of the best tools for maximizing your spending without unduly risking running out of $ later on. If your 'floor', or minimum spending is too little to cover your basics, you can always spend less than it recommends.

Note: VPW doesn't want you to die broke, but aims to allow you to safely spend as much as possible for your age, without a significant risk of actually spending down to $0. There are too many unknowns, and the SORR (sequence of returns risk) means that you could run out of $ a decade before you expire. Not a situation that most of us here want to encounter.

https://www.bogleheads.org/wiki/Variable_percentage_withdrawal

I'm checking this out. I like the concept - this is certainly showing some significant flexibility.

 

[LateToFIRE]

To alleviate that you should risk test your numbers.


I used the total I am retiring with and decreased it by 25%. That 25% with no gains on it, is more than enough to last me 6 years. (Call that my SORR test for down markets). Then I increased my take in the first 6 to 10 years of retirement to 6%, then 8% then 10%... then 15%. Of course at 93 years old there is less money, but it doesn't run out.


Use bigger numbers than you expect.... just to risk check. I am not advocating super high and risky withdrawals, but it wouldn't hurt to see what the numbers look like with something higher than your initial plan is. At any point in your retirement you can reduce your spend to something more reasonable if it looks like your spend has become an issue for long term.

Thanks - I have certainly stress-tested my numbers. Something fairly draconian would need to happen to end up in the poorhouse, though some years might require a bit of spending adjustment in an extended downturn.

 

[LateToFIRE]

As the product of a poor, peripatetic, and parlous childhood myself, I have also always felt the pressure to make sure the larder will never go bare. Since I was 18 and walked out the door with the clothes I was wearing and $20 in my pocket, I have been financially on my own (well, after we got married, the young wife joined my team), with no one to provide a safety net. So I have also obsessed about finance, most especially my retirement plan. My final solution, as I have described here before, was just to amass such overwhelming firepower that no matter how much I screw up, we won't lose the retirement battle. So we worked to the point where our secure income sources (SS and two pensions) cover our spending. We also have a relatively conservative portfolio that would fully cover that spending at a 4% draw (we haven't needed to draw anything on the past 5 years of retirement). And we don't include our mortgage free and fairly valuable house in the portfolio.

Could we have bailed from work sooner? Probably, but we actually enjoyed our professions. Will we die with a lot of unspent money? Almost certainly. But the safety and security we enjoy now is priceless.

I see where you are coming from - makes sense. Guess I've been a bit all over the map - I'd like to let off some BTD steam in the early years, but like you, have taken a very conservative approach to accumulating. So, now that I'm supposed to spend a little bit of the stash, it's making me feel queasy.

P.S. One reason for the queasiness might also be the fact there's a number of asset sale transactions yet to occur that will pad the portfolio and while I think downside risk is low, there is still a bit of unknown as to net proceeds.

 

[Koolau]

Hello

I'm looking for some spend down, die broke type of threads on here that deal with spending more than the 4% of net worth. Maybe there is another term to search related to those type of subjects. Thank you

One of the mental adjustments I've made is to consider that each year of successful retirement (financially, anyway - IOW you finish each year with more than you started) is one less year your "plan" has to w*rk for you. So (theoretically) you should be able to up your spending JUST because you have less time to live. Of course, since we don't know the length of our life, we have to make a (probably ridiculous) estimate. I'm saying I'll live to 99. So, now I'm less than 30 years of retirement to go, SO, my spending SHOULD be able to be increased with no serious financial consequences.



I have no idea if this concept helps you or not. I don't know your age, spending, assets, etc. BUT the concept still holds. The older you get the lower your stash can be (in theory.) YMMV of course, so do your own plan.

 

[MichaelB]

Hello

I'm looking for some spend down, die broke type of threads on here that deal with spending more than the 4% of net worth. Maybe there is another term to search related to those type of subjects. Thank you

Try a search with “die+broke” as the search terms. Quite a few threads turn up, including a couple around the book “Die with Zero”. See them here and here.

My search turned up this list (here) you may find helpful.

 

[jpeter1093]

found the kitces article on raises

EXECUTIVE SUMMARY

The fundamental purpose of the so-called “4% rule” is to determine an appropriate “income” or spending floor that is low enough to survive potential sequence-of-return risk – at least, based on the worst return sequences that can be found in the historical data. If market returns going forward turn out to be as bad as scenarios like the Great Depression or the stagflationary 1970s - from which the 4% rule originated - the portfolio is still anticipated to sustain inflation-adjusted spending to the end of the 30-year time horizon. If returns are better, there will simply be “extra” money left over.

Yet the reality is that in the overwhelming majority of scenarios, returns are not so bad as to necessitate a 4% initial withdrawal rate in the first place. In fact, by applying the 4% rule, over 2/3rds of the time the retiree finishes with more than double their wealth at the beginning of retirement, on top of a lifetime of (4% rule) spending! Half the time, wealth is nearly tripled by the end retirement, as retirees fail to spend their upside!

Accordingly, a more dominant approach is to plan in advance that if the portfolio gets “far enough” ahead, spending can be increased - but not increased so quickly that the retiree might have to go backwards shortly thereafter.

Of course, the reality is that retirees experiencing a “favorable” sequence of returns will inevitably sit down for a portfolio/retirement review and realize they are so far ahead that it’s “safe” to increase spending anyway.

But as it turns out, a relatively simple ratchet-style approach, where spending is increased by 10% any time the portfolio rises more than 50% above its starting value, can “dominate” the traditional 4% rule, generating equivalent or better retirement spending in all scenarios, even while being conservative enough to not require a spending cut in the event of a market pullback in the future.

https://www.kitces.com/blog/the-rat...l-rate-a-more-dominant-version-of-the-4-rule/

For folks not clicking the link; this line is very important: "but such spending bumps can only occur once every 3 years at most (to avoid having spending ratchet too high too quickly)."

 

[mathjak107]

For folks not clicking the link; this line is very important: "but such spending bumps can only occur once every 3 years at most (to avoid having spending ratchet too high too quickly)."

i mentioned that fact in the post above that one with the link .. it shouldn’t be done any sooner then every three years

we have found that the 95/5 method of withdrawal has given us a higher draw rate then the conventional 4% constant dollar method , because we have had so many years of good markets since we retired .

kitces found that 2/3’s of the time a safe withdrawal rate of 4% has left one with more then they started with so raises besides inflation adjusting could be taken .

he proposes that if one is up 50% from where they started 3 years in ,take a 10% raise ..if in another 3 years you are still up by 50% , take another 10% so on and so on .this is on top of inflation adjusting.


https://www.kitces.com/blog/url-ups...eturn-risk-in-retirement-median-final-wealth/