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Old 04-29-2018, 06:20 AM   #61
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People have different ways of dividing their stash, counting it, as well as spending it. It's all OK, if it makes them happy.

But no matter how they do it, it comes down to a simple truth.

You spend too much, your stash shrinks. You spend little, it will grow.

PS. The problem is that the market is often so devious, it shrinks your stash even if you do not spend. No accounting method can fix that.
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Old 04-29-2018, 08:39 AM   #62
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No it doesn't. If you sell stocks/bonds and move the proceeds into a cash account, that cash account is still very much part of your portfolio until you spend it. If you don't spend it, all you've done is change your asset allocation. Someone living off dividends and interest (and never selling stocks/bonds) is withdrawing from his portfolio.
Yes, it Does ! .... The Cash Account is NOT Part of MY Asset Allocation, because it is not part of MY Portfolio. It is a separate Account that is NEVER to be invested in Stocks or Bonds again. It is completely Different than Cash in the Portfolio, which may be invested at some point in time.
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Old 04-29-2018, 08:42 AM   #63
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It all depends on how one defines their retirement portfolio.... some include cash and others do not... there is no right answer. But I think it is right to say that once the money leaves your retirement portfolio, however you define it, that it is a withdrawal.
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Old 04-29-2018, 08:46 AM   #64
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Yes, it Does ! .... The Cash Account is NOT Part of MY Asset Allocation, because it is not part of MY Portfolio. It is a separate Account that is NEVER to be invested in Stocks or Bonds again. It is completely Different than Cash in the Portfolio, which may be invested at some point in time.
+1

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It all depends on how one defines their retirement portfolio.... some include cash and others do not... there is no right answer. But I think it is right to say that once the money leaves your retirement portfolio, however you define it, that it is a withdrawal.
+1 that was easy.
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Old 04-29-2018, 08:48 AM   #65
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It all depends on how one defines their retirement portfolio.... some include cash and others do not... there is no right answer. But I think it is right to say that once the money leaves your retirement portfolio, however you define it, that it is a withdrawal.
No right answer? Blasphemy! This is the interwebs, of course there's one right answer. In fact, there may be more than one.
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Old 04-29-2018, 11:33 AM   #66
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... Withdrawing means selling Stocks/Bonds and moving to a Cash Account... You don't have to spend it.
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No it doesn't...
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Yes, it Does ! ...


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...I think it is right to say that once the money leaves your retirement portfolio, however you define it, that it is a withdrawal.
When I transfer stock shares in-kind from my IRA account to a brokerage account , or even a Roth, within the same institution, not even selling anything to convert to cash, the IRS calls it a withdrawal. Yes, they tax me. And I suffer some "asset shrinkage". No change in AA, except for some cash loss due to tax.

When I transfer cash from an after-tax account to a checking account within the same institution, well, I call it a transfer.

When the cash leaves my checking account to go to those greedy vendors and service providers, I call it spent.

And only when it is spent that it stops showing up on my Quicken screen, and is no longer reflected in the AA summary that Quicken shows me. To do anything different than that takes more work. And I don't want more work.
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Old 04-30-2018, 06:02 AM   #67
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PS. The problem is that the market is often so devious, it shrinks your stash even if you do not spend. No accounting method can fix that.
Actually the opposite is true. The market usually goes up! If you look at history its up 2/3 of the time!
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Old 04-30-2018, 06:12 AM   #68
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PS. The problem is that the market is often so devious, it shrinks your stash even if you do not spend. No accounting method can fix that.
And this is exactly why you don't want to take an Inflation adjusted Fixed amount withdrawal. The Market Shrinking is exacerbated by continuing to withdraw into the teeth of a Bear Market.
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Old 04-30-2018, 06:22 AM   #69
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Actually the opposite is true. The market usually goes up! If you look at history its up 2/3 of the time!
On average it goes up. But there are periods where it really goes down. And one has to make it through those periods and survive.

The %remaining portfolio method is dominated by portfolio ups and downs. The modest withdrawals make little difference in the face of large market swings.
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Old 04-30-2018, 06:26 AM   #70
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And this is exactly why you don't want to take an Inflation adjusted Fixed amount withdrawal. ...
Historically the Trinity Study, Bengen, ERM, et al say otherwise if your WR is about 4%, or slightly less for longer periods. "Historically" includes both the Great Depression and the Great Inflation, so it covers some pretty extreme economic conditions.

I intend to be more flexible than a fixed inflation-adjusted withdrawal and suspect most people will too, but the SWR math works with fixed inflation-adjusted withdrawals.
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Old 04-30-2018, 06:27 AM   #71
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On average it goes up. But there are periods where it really goes down. And one has to make it through those periods and survive.

The %remaining portfolio method is dominated by portfolio ups and downs. The modest withdrawals make little difference in the face of large market swings.
True, but If you look at calendar years there has not been ONE year that the S and P was down greater than 50% and there has been ONE year down more than 40%

The number of years that market has been down more than 10 % in a calendar year is TEN.....pretty rare....

and that is in almost a 100 year time frame....
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Old 04-30-2018, 10:59 AM   #72
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To see the past periods when the market was down or flat for many years and got decimated by inflation, one can easily run FIRECalc with a WR of 0.
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Old 04-30-2018, 02:36 PM   #73
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True, but If you look at calendar years there has not been ONE year that the S and P was down greater than 50% and there has been ONE year down more than 40%

The number of years that market has been down more than 10 % in a calendar year is TEN.....pretty rare....

and that is in almost a 100 year time frame....
You canít just look at a single year in isolation - itís the sequence of years plus inflation that gets you.

I have already been through two nasty bear markets since retiring. Markets can go down multiple years in a row - look at 2000-2002. It took a long time for the S&P500 to recover from the 2000-2002 drop - and just in time next even nastier bear. Now, pile on top of that withdrawals from the portfolio AND inflation. Portfolios seriously shrink in real terms!

I know from modeling the %remaining withdrawal method with 50/50 AA, that I have to be prepared for my real income to drop as much as 60% - and that it could take as long as 16 to 25 years before finally turning around. Things have gotten that bad in the past and canít be ignored.

Sure, Iíve already been through two nasty bear markets by historic standards, but that doesnít mean that I wonít see another nasty bear any time in the next 30 years.
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Old 04-30-2018, 07:08 PM   #74
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Historically the Trinity Study, Bengen, ERM, et al say otherwise if your WR is about 4%, or slightly less for longer periods. "Historically" includes both the Great Depression and the Great Inflation, so it covers some pretty extreme economic conditions.

I intend to be more flexible than a fixed inflation-adjusted withdrawal and suspect most people will too, but the SWR math works with fixed inflation-adjusted withdrawals.
I certainly understand that "Historically" the WR of 4% may work...... But, I am preparing for something "Unprecedented". Maybe much worse than "Historically".... And the solutions here that I often see proposed are SWRs of 3.5%, 3% or even 2.5% ..... How Low can we go?

I am not interested in setting my WR below 4%... I prefer 5% or more of my portfolio balance using VPW..... Which is much safer than 2.5% fixed SWR....
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Old 04-30-2018, 07:44 PM   #75
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I certainly understand that "Historically" the WR of 4% may work...... But, I am preparing for something "Unprecedented". Maybe much worse than "Historically".... And the solutions here that I often see proposed are SWRs of 3.5%, 3% or even 2.5% ..... How Low can we go?

I am not interested in setting my WR below 4%... I prefer 5% or more of my portfolio balance using VPW..... Which is much safer than 2.5% fixed SWR....
I like the VPW and the Clyatt 4/95 methodologies. Prefer the Clyatt at this point, as not willing to take the large hit of VPW in a 2008 scenario.

Probably less upside than VPW with Clyatt, but also probably less downside, although in agreement with the % of remaining portfolio as the starting point.
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Old 04-30-2018, 07:58 PM   #76
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I think anything below 4% would be fine. Chances are that most people with a WR of less than 4% would die before going broke.

And if you are lucky to live another 30 years, near the end you would not care much about anything anyway.

PS. Forgot that the above does not apply to youngsters who ER'ed in their 40s.
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Old 04-30-2018, 08:03 PM   #77
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I think anything below 4% would be fine. Chances are that most people with a WR of less than 4% would die before going broke.
Well, sure it would ! ..... But why shortchange yourself..... You might find that 5% or more of Portfolio Balance would also work.... And be safer also!
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Old 04-30-2018, 08:09 PM   #78
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As mentioned earlier, it looks like my expenses will be 2.5% WR this year, unless the market crashes.

We have all that we desire, and feel no urge to "blow any dough". But people who want to spend more can do so. As long as the 4 or 5% WR has a lot of discretionary items that you can cut back, it should be OK.
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Old 04-30-2018, 08:30 PM   #79
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As mentioned earlier, it looks like my expenses will be 2.5% WR this year, unless the market crashes.

We have all that we desire, and feel no urge to "blow any dough". But people who want to spend more can do so. As long as the 4 or 5% WR has a lot of discretionary items that you can cut back, it should be OK.
The Portfolio drives Expenses... If I had 'Private Jet' Money, I'd buy one. And it would become part of my 'Expenses'. Since I don't have Private Jet Money, I craft my Expenses based on my Portfolio and Withdrawal Rate....

I'm sure I could live (Or eek By) on a less than 1% Withdrawal Rate, but that was not MY Retirement Dream. But, I don't kid myself that I have all that I desire. That's just being honest and human nature.
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Old 04-30-2018, 10:15 PM   #80
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Dunno about 1% WR. That's too tough. I am not that rich, nor that frugal. Well, maybe 1% WR with future SS.

It is true that I do not have all that I desire. But what I really want is something I cannot afford (a nice waterfront home on Bainbridge Island, specifically on Rockaway Beach Rd). What I can afford like a fancy car, I have no desire for.

In other words, raising 2.5% WR to 4% does not make me happier. It would take quite a bit more.

PS. My WR dropped because 1) I no longer have expenses in the past like my children college costs, helping them buy their 1st home, etc..., and 2) my stash grew. Still have the same living standards, and upgrading it will cost a lot for diminishing returns.
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