Pre-Poll

[Midpack]

I've done several polls, and some have resulted in responses like 'none of your choices allow me to answer.' So here's a strawman for one I'd like to submit. I'd like to avoid an "other" answer if possible.

If it's already been done and I missed it, please link me up and I'll forget the poll.





Question: My goal with my/our nest egg is to (best fit answer):

1. Primarily to maintain the principal by spending only dividends and investment appreciation in retirement. ex: Norwegian widow, etc.
2. Primarly to carefully spend down the principal, making adjustments along the way. If I die broke (or with a specific $ amount to bequest), that would be ideal.
3. A hybrid of 1 & 2, leaning toward 1. ex: maintain principal for the first X years, and then consciously spend it down.
4. A hybrid of 1 & 2, leaning toward 2. ex: keep an eye on equivalent annuity cost, and spend down to maintain that option.
5. I rely mostly on a COLA'd pension or annuity and have health care, so managing principal is a tertiary concern to me/us.

I guess I could add 'grow principal' but I can't imagine many actually plan to do that aside from the mega-rich.

 

[youbet]

Good idea on the pre-poll.

You're leaving out an important choice:

6. I have no interest in differentiating between earnings and principal and will manage my FIRE portfolio on a total returns basis.

 

[chinaco]

Variation on 4. -- with Declining discretionary spending. Spend more early in FIRE (for discretionary spending) with planned reduction in discretionary spending at around 75 or 80.

 

[dex]

A couple of points -
1. Who is the person you want to answer - e.g. working, currently retired, with children at home etc.
2. What is the object of your poll? What do you want to accomplish with it?

 

[audreyh1]

Yep, I am a total return person as well. I don't care about what is "principal" and what is not or how much "income" in generated by a portfolio.

NOTE that the Trinity study type SWR method is a total return approach as well.

There is probably some validity in distinguishing whether one doesn't mind spending down the entire portfolio or one wants to leave something to heirs, but I don't know how to handle this elegantly in your poll.

Audrey

 

[Animorph]

I'm with youbet, total return. That's kind of answer one, which says investment appreciation as well as dividends.

I do indeed expect and plan to grow principal to allow for inflation. My withdrawals should increase with inflation but should stay roughly within 4% of the portfolio value, even as I hit 100.

 

[youbet]

Variation on 4. -- with Declining discretionary spending. Spend more early in FIRE (for discretionary spending) with planned reduction in discretionary spending at around 75 or 80.

Good one chinaco. And, of course, we'd need to add the 180 degree inverse of that.

Variation on 4. -- with Increasing discretionary spending. Spend more in late FIRE stages to insure continued participation in your favorite discretionary activities, even if that requires extra spending as an enabler. Examples: pay for traveling companion, fishing guide, driver, trip planner, etc.

 

[Midpack]

A couple of points -
1. Who is the person you want to answer - e.g. working, currently retired, with children at home etc. All of the above
2. What is the object of your poll? What do you want to accomplish with it? So many questions are answered here without the readers knowing the priorities of the people answering. I suspect this audience is skewed between 1 & 2, and wanted to see how it goes. I think my priorities may be part of the minority view, which would explain why many of the answers here don't quite seem to fit. Nothing wrong with either approach!

For example: sometimes exchanges here look like:
Do you like Vanguard?

If the responders where all Vanguard shareholders, I'd expect a generally positive response. If the responders are from Vanguard, Fidelity, Schwab and every other firm, I'd expect the answers would be very different. On this forum, we never know who's answering. I thought it might help to know if there was a clear majority.

 

[harley]

Despite your assumption about someone being ultra-rich, I think the "grow principal" option should be included. Some people have managed (through saving, lucky choices in investing, parents, spouses parents, etc) to have FIREd with more than they need. They can then either choose to live a more extravagant lifestyle, or live a less expensive lifestyle and grow their principal to leave to later generations. JMO.

 

[Meadbh]

Midpack, here are a few suggestions for your consideration. I've rearranged some of the questions.

Which of the statements below best describes your goals for your retirement portfolio?

1. Capital preservation is my primary goal. Income from dividend and interest income is my secondary goal. (This implies that the portfolio is sufficiently large that withdrawals will not exceed yield, or that there is another source of income.)

2. Capital preservation is my primary goal for the first few years. After that, my primary goal will change to income generation. (This retiree wither has a cash "bucket" or part time w*rk)

3. Income generation is my primary goal from Day 1. My capital may be partly depleted over time, but I hope to have some residual capital to leave as a legacy.

4. Income generation is my primary goal from Day 1. My capital may be partly depleted over time, but I want to keep enough to purchase an annuity at a later date.

5. Income generation is my primary goal. I am also hoping for some capital appreciation for the first X years. (This implies that expected portfolio yield exceeds income requirements early in retirement; this portfolio is probably large.)

6. I have retirement income sufficient to meet my needs independent from my portfolio, which I can spend, or not, at my discretion. (This retiree has a COLA'd pension and healthcare is covered).

 

[MichaelB]

So the poll really is asking if the respondent has a goal of increasing the real value, maintaining the real value or consuming the portfolio, and then through which combination of capital, dividend and interest. Given that the response is meaningfully different for people in the accumulation vs withdrawal phase, I think this is too broad and needs to be narrowed. Eliminate people in the accumulation phase (or ask their intention when in withdrawal), then differentiate between those that want to hold or increase the portfolio and those that are fine with drawdown.

Edit: Meadbh is much more articulate than I, also faster on the reply, and gave a better answer.

 

[Midpack]

This has grown into more than I wanted to know, so I won't post a poll after all. If someone else is interested, be my guest. Thanks!

 

[Meadbh]

FWIW, I think this is a great question from Midpack and I recently had to answer it in my IPS (investor policy statement). I am leaning towards this answer:

2. Capital preservation is my primary goal for the first few years. After that, my primary goal will change to income generation. (This retiree wither has a cash "bucket" or part time w*rk)

 

[Meadbh]

This has grown into more than I wanted to know, so I won't post a poll after all. If someone else is interested, be my guest. Thanks!

OK, I will post it then.

 

[dex]

2. What is the object of your poll? What do you want to accomplish with it? So many questions are answered here without the readers knowing the priorities of the people answering.

I see I'm a little late with this response.

Maybe an open ended question would have worked similar to what you said above:
What are your priorities for managing your nest egg - list from highest to lowest (and then give options)?

 

[Ed_The_Gypsy]

Mix of 1 (3.5% wr) and 2 (maybe 5% wr) , depending on when I retire and how long I expect to live by then.

Good question, by the way.