looking for spend down type threads on here

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Pablo1

Dryer sheet wannabe
Joined
Jan 9, 2022
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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
 
What you might want to do is to try out FIRECalc but use the Investigate tab and have FIRECalc solve for the safe spending level... they most that you could spend and not risk running out of money.... but it will still likely be ~4% WR.

You might also consider a bond tent. See https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/

But there really isn't any magic potion to be able to withdraw a lot more than 4% without risking running out of money.
 
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.

one could see a 30% draw increase over 30 years plus inflation adjusting most of the time

if we eliminated the 5 or 6 failure dates a withdrawal rate would actually be much higher at 6-1/2% .

odds of hitting a failure like one of those dates are exactly the same as ending with 6x what you started with , so that 5% chance of failure has sequence risk working to the upside too ..so both happening are very rare

https://www.kitces.com/blog/url-ups...eturn-risk-in-retirement-median-final-wealth/
 
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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/
 
Another approach is to just "retire again". Let's say that you retire with $1m and use a 4% WR. 3 years later you have 125% of what you started.

Someone retiring today could prudently start with 4% WR on $1.25m so there is no reason that you can't as well and get a 25% increase.

So basically take the larger of 4% of your current stash or 4% of your last restart adjusted for inflation.
 
Pablo1 said:
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
Click to expand...
Die With Zero - search for that. That is the title of a recent book.
 
Do you need or want to take more and just aren't sure if that is the right plan? Have you been retired for a while or are you planning to retire but in order to do so you need more than 4%?


For me, I am retiring this year. For 3 to 5 years I will be taking 6%, then when DW and I start taking SS (and get on Medicare), we will decrease to 4% or even 3%. On my personal spreadsheet I have highlighted rows for decisions at 65, 67, and 70 for taking SS. Just depends on how healthy we are at those points and how we see our investments doing.
 
I'm very interested in this topic, having just pulled the FIRE "alarm". In my case, expenses will be well above 4% for first two years, while we downsize housing situation and realize on various liquidity events. When the dust settles, and SS+pension kick in, we should be 3.5%-3.8%, somewhere in that range, excluding any lumpy expenses. My understanding is that the SWR has been updated to 4.5%-4.7% depending on what day it is, so I've got some room to play with.

What I'm finding in this early stage is that we've got a lot of pent up spending - stuff that we either didn't want to do or have the time/energy to do while I was still running hard on the megacorp hamster wheel. Like suddenly, I want to take off on some big international travel, rent that beach house for the family reunion, join a country club, rent a motorhome and venture off to the Grand Canyon, charter a yacht in the Caribbean, etc. Basically blow some dough. Now, knowing me, I'll settle down. I'd just like to get comfortable spending more, maybe a lot more in the early years, knowing we'll settle into a base line later on.

P.S. Know I'm in the minority on this, but the 4% SWR just seems ludicrously cautious to me. Now, maybe that's because I have a great deal of flexibility on spending, whereas a lot of folks need to be certain because there is no room for error. My 3.8% budget could be cut to a 2% budget in a worse case. I'm also not too concerned about legacy - the family I'd like to help, I'd like to help while I'm still awake.
 
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LateToFIRE said:
I'm very interested in this topic, having just pulled the FIRE "alarm". In my case, expenses will be well above 4% for first two years, while we downsize housing situation and realize on various liquidity events. When the dust settles, and SS+pension kick in, we should be 3.5%-3.8%, somewhere in that range, excluding any lumpy expenses. My understanding is that the SWR has been updated to 4.5%-4.7% depending on what day it is, so I've got some room to play with.

What I'm finding in this early stage is that we've got a lot of pent up spending - stuff that we either didn't want to do or have the time/energy to do while I was still running hard on the megacorp hamster wheel. Like suddenly, I want to take off on some big international travel, rent that beach house for the family reunion, join a country club, rent a motorhome and venture off to the Grand Canyon, charter a yacht in the Caribbean, etc. Basically blow some dough. Now, knowing me, I'll settle down. I'd just like to get comfortable spending more, maybe a lot more in the early years, knowing we'll settle into a base line later on.

P.S. Know I'm in the minority on this, but the 4% SWR just seems ludicrously cautious to me. Now, maybe that's because I have a great deal of flexibility on spending, whereas a lot of folks need to be certain because there is no room for error. My 3.8% budget could be cut to a 2% budget in a worse case. I'm also not too concerned about legacy - the family I'd like to help, I'd like to help while I'm still awake.
Click to expand...

I have that same situation to start with. To put it succinctly, "It is messy" :)
 
pb4uski said:
Another approach is to just "retire again". Let's say that you retire with $1m and use a 4% WR. 3 years later you have 125% of what you started.

Someone retiring today could prudently start with 4% WR on $1.25m so there is no reason that you can't as well and get a 25% increase.

So basically take the larger of 4% of your current stash or 4% of your last restart adjusted for inflation.
Click to expand...

This line of path dependent thinking on SWR had occurred to me, so glad you're thinking same.
 
mathjak107 said:
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/
Click to expand...

Always appreciate the way in which you distill/clarify/illustrate these concepts !
 
pb4uski said:
Another approach is to just "retire again". Let's say that you retire with $1m and use a 4% WR. 3 years later you have 125% of what you started.

Someone retiring today could prudently start with 4% WR on $1.25m so there is no reason that you can't as well and get a 25% increase.

So basically take the larger of 4% of your current stash or 4% of your last restart adjusted for inflation.
Click to expand...

This is exactly what I do every year. Simply re-run FIRECalc with my updated portfolio numbers and see what the 100% historically safe spending level is. I tend to get back SWRs that are around 3.4% when I do this. Unlike OP, I want to die with a lot left over so that my DW does not have to downgrade her lifestyle.
 
LateToFIRE said:
Always appreciate the way in which you distill/clarify/illustrate these concepts !
Click to expand...

thanks …

i count on those a whole lot smarter then i am to look under the hood and look at old school myth or ways of doing old school planning better.


i never found the traditional 4% constant dollar method of withdrawal good after setting an initial draw rate .

rather i want to be rewarded in up years without waiting years to compare to my starting point to get a raise other then inflation adjusting .

so we use 95/5 from bob clyatts book .

it works great for us and couldn’t be more simple .

each year we take 4% of the ending balance as our goal posts . in a down year we get the higher of 4% of the actual balance or just 5% less then the previous year .

but because when markets are good ,draws run higher , even in 2022 our reduced draw was still higher then it would be under the traditional method

it is very simple to implement .. also just because you can spend that much doesn’t mean you may .

we are almost 9 years in to retirement in queens in nyc .

we usually spend about 140 to 160k a year which is pretty much the norm or lower end for a household here .

but based on our income coming in and portfolio value , we can spend up to 245-255k .

we don’t need that much , but we will go buy a luxury end car every 4-5 years
 
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The 4% rule is not etched on a stone tablet somewhere. It is simple, though. Look at the other calculations and approaches mentioned in past posts, and you can see it's possible to get more complicated.

As you work through measurements and monitoring, rules and guidelines may not fit your specific circumstances.
 
mathjak107 said:
thanks …

i count on those a whole lot smarter then i am to look under the hood and look at old school myth or ways of doing old school planning better.


i never found the traditional 4% constant dollar method of withdrawal good after setting an initial draw rate .

rather i want to be rewarded in up years without waiting years to compare to my starting point to get a raise other then inflation adjusting .

so we use 95/5 from bob clyatts book .

it works great for us and couldn’t be more simple .

each year we take 4% of the ending balance as our goal posts . in a down year we get the higher of 4% of the actual balance or just 5% less then the previous year .

but because when markets are good ,draws run higher , even in 2022 our reduced draw was still higher then it would be under the traditional method

it is very simple to implement .. also just because you can spend that much doesn’t mean you may .

we are almost 9 years in to retirement in queens in nyc .

we usually spend about 140 to 160k a year which is pretty much the norm or lower end for a household here .

but based on our income coming in and portfolio value , we can spend up to 245-255k .

we don’t need that much , but we will go buy a luxury end car every 4-5 years
Click to expand...

I'm also in the tri-state metro area, so our numbers will be very similar to your numbers once the dust settles on our plan. I think also, studies have shown that at higher spending levels there is generally more flexibility to implement a spending plan like yours. If we had to trim our budget 5% for a couple years in a row it wouldn't kill us. And I think on an inflation-adjusted basis our spending is more likely to decline rather than increase over time - some of th expensive activities I'd engage in early in retirement (ex. golfing, boating, long-distance travel) are not going to be so attractive later in retirement. And I could see downsizing on housing again at some point, not for financial reasons, more to simplify life and especially if one of us passed away.
 
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what we find is money with us tends to be like water in that it seeks its own level somehow .

if our own spending falls off , which it has as far as travel , we just take up the slack somewhere else .

last year we bought a new car , but in good markets years we tend to make some distributions to the kids or we buy new cameras .

so for us spending just changes but doesn’t reduce much.

of course if push came to shove we certainly could reduce.
 
That is what I figure too. We want to front spend while we are fit enough to enjoy travel. We have enough annuity-type income streams that we would never be reduced to eating out of the garden and fishing for meat :)
Not that there is anything wrong with that, but it will be a choice not a necessity.
Part of the BTD is a nice trailerable boat to put in at the marina 15 minutes away, and go crabbing, salmon, halibut, and tuna fishing in the Straits of Juan de Fuca.
If things were looking good, that might be a bigger, moored boat.
 
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LateToFIRE said:
P.S. Know I'm in the minority on this, but the 4% SWR just seems ludicrously cautious to me. Now, maybe that's because I have a great deal of flexibility on spending, whereas a lot of folks need to be certain because there is no room for error. My 3.8% budget could be cut to a 2% budget in a worse case. I'm also not too concerned about legacy - the family I'd like to help, I'd like to help while I'm still awake.
Click to expand...

As with everything, 'it depends'. :cool:

1. If 4% is all essentials with no fat to cut, a lower rate might be prudent.
2. If 2% of the 4% is wants/luxuries, and one is willing to cut if needed, then higher than 4% might be prudent.
3. If retiring in early 40s with average expected lifetime, lower than 4% might be prudent.
4. If 75, the expected remaining retirement span is reduced, and higher than 4% may be prudent.
5. If legacy is unimportant, a rate might be prudent.

4% is a good starting point, based on past experience. Then adjust for your personal situation. And not the only good strategy, as pointed out in this thread (95/5, adjusting spending based on portfolio % change, and so on).
 
skyking1 said:
That is what I figure too. We want to front spend while we are fit enough to enjoy travel. We have enough annuity-type income streams that we would never be reduced to eating out of the garden and fishing for meat :)
Click to expand...

Yeh, this is exactly what I'm trying to get my head around. If all goes according to plan, in a few years will trigger an annuity stream of ~$90K/year from pension and SS (assuming no major cuts to SS). That right there guaranties we're not gonna starve - we might not be vacationing at the Ritz, but not gonna starve (absent some sort of Armageddon that would cancel everyone's plans).

On top of that will have a hefty seven figure portfolio, projected to add another digit before I croak. And I'm early 60's, so not like I need the $$$ to last more than two or three decades. 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".

So, despite having "won the game" it's still really hard to wrap my head around the idea that I can continue to live pretty well without w*rking. Yeh, I know, I'm a mess :uglystupid:
 
skyking1 said:
That is what I figure too. We want to front spend while we are fit enough to enjoy travel. We have enough annuity-type income streams that we would never be reduced to eating out of the garden and fishing for meat :)
Not that there is anything wrong with that, but it will be a choice not a necessity.
Part of the BTD is a nice trailerable boat to put in at the marina 15 minutes away, and go crabbing, salmon, halibut, and tuna fishing in the Straits of Juan de Fuca.
If things were looking good, that might be a bigger, moored boat.
Click to expand...

I like how you're thinking bout BTD - if you need crew give me a shout!
 
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.
 
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
 
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