Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
SWR
Old 08-01-2021, 10:01 AM   #1
Recycles dryer sheets
 
Join Date: Mar 2018
Location: Baltimore
Posts: 73
SWR

I am 43 and I was just gifted part of my inheritance early. I now have 2.7M not counting house or efund. My grandmothers lived until about 90, my mother 86 and my father is almost 90. Given all of this data what would you consider a safe withdrawal rate if I were to leave the workforce and never plan to return? 2% 2.5% or 3%? Thanks.
AreWeThereYet0 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-01-2021, 10:13 AM   #2
Thinks s/he gets paid by the post
Major Tom's Avatar
 
Join Date: Nov 2009
Location: SF East Bay
Posts: 3,722
At 43, and with your family history, you'll be planning on a 45 - 50 year retirement. If I were in your shoes, I'd want to err on the (slightly) conservative side, and would probably go for around 2.5%. This assumes that your stash is invested in stock and bond funds with an AA of somewhere between 40/60 and 70/30, at a very rough guess, depending on your tolerance for market volatility. Is $73K/yr enough for you to live on? If you can live on $54K/yr, then the 2% WR that would require, would help me to feel very safe. I wouldn't feel nervous at 2.5% however.

Remember to pay attention to the tax efficiency of the instruments you are invested in, as I assume all the 2.7M will be in a taxable account. Oh - and give FIRECalc a spin.
__________________
Contentedly ER, with 3 furry friends (now, sadly, 1).
Planning my escape to the wide open spaces in my campervan (with my remaining kitty, of course!)
On a mission to become the world's second most boring man.

Major Tom is offline   Reply With Quote
Old 08-01-2021, 11:21 AM   #3
Moderator
Aerides's Avatar
 
Join Date: Nov 2015
Posts: 9,064
I think with a 40/60, or 70/30 AA, anything 3 or under should be golden, even at 43. The key is to be really confident in that spending, including taxes and healthcare.

Don't try to back into a spending number, but have data that shows that's totally normal.
Aerides is offline   Reply With Quote
Old 08-01-2021, 11:37 AM   #4
Recycles dryer sheets
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 368
It partly depends on what you want to DO in retirement, given all that free time you're looking at.
So the question is more: will a 3% WR fund the enhanced lifestyle you're looking at going forward...
TheWizard is offline   Reply With Quote
Old 08-01-2021, 11:39 AM   #5
Recycles dryer sheets
 
Join Date: Oct 2015
Location: Bozeman
Posts: 149
FIRECALC is your friend. Give it a whirl.

Have you tracked your spending over a year or two or more?

I ER'd at 47 with a NW of $1.6M at the time (including my home) and that's been fine for me, but my spending isn't your spending.
l8_apex is offline   Reply With Quote
Old 08-01-2021, 11:48 AM   #6
Recycles dryer sheets
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 368
Quote:
Originally Posted by l8_apex View Post
FIRECALC is your friend. Give it a whirl.

Have you tracked your spending over a year or two or more?

I ER'd at 47 with a NW of $1.6M at the time (including my home) and that's been fine for me, but my spending isn't your spending.
That might only be the starting point.
I spend a LOT more in retirement than when working, mostly for travel, both foreign and domestic...
TheWizard is offline   Reply With Quote
Old 08-01-2021, 12:00 PM   #7
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 12,275
Agreeing with Major Tom that a 2.5% rate is pretty much golden. 3% is probably ok, but getting closer to the edge. And that assumes the asset allocations mentioned.

Now you have to figure out what your spending needs are. As others have said firecalc is your friend for this. But the caveat is that firecalc assumes a GROSS spend - inclusive of taxes, healthcare, misc spending... EVERYTHING in that spending number. So make sure you include that when figuring out what your spending needs are...
__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
rodi is offline   Reply With Quote
Old 08-01-2021, 12:37 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: NC
Posts: 17,121
Quote:
Originally Posted by AreWeThereYet0 View Post
I am 43 and I was just gifted part of my inheritance early. I now have 2.7M not counting house or efund.
Not sure what “early” means, gift vs inheritance. So you’ve checked into what if any taxes may be due?
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 50% equity funds / 30% bond funds / 20% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 08-01-2021, 03:51 PM   #9
Recycles dryer sheets
 
Join Date: Mar 2018
Location: Baltimore
Posts: 73
It was a gift free of tax.

I have:
401K 1M. (Small amount is Roth 401K)
Roth IRA 330K
Brokerage 771
HSA 6K
New gift/cash 610K

Currently everything that was not part of the gift/cash chunk is in mutual funds. I am not sure what I am going to do now that I have the $.
AreWeThereYet0 is offline   Reply With Quote
Old 08-01-2021, 03:54 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 8,606
What are your projected expenses/Social Security, other income?
Like others have stated, try the attached retirement calculator called Firecalc, which will give you insight as to where you stand.
Many folks on this forum can assist with any questions on Firecalc.
__________________
TGIM
Dtail is offline   Reply With Quote
SWR
Old 08-01-2021, 03:59 PM   #11
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: NC Triangle
Posts: 4,954
SWR

Sounds like time to hit the spreadsheets. Create, review, update as things come to you (such as comments here). While still working for income.
__________________

steelyman is offline   Reply With Quote
Old 08-01-2021, 07:56 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 6,721
All good advice. Keep in mind that you can always cut back on your spending should you pick too high a withdrawal rate. I've always added "back ups" to my plan. If THIS happens, then I will cut back on THAT. Have it planned out ahead of time, so there are no misunderstandings - especially if there are wife/husband/kids involved. YMMV
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is online now   Reply With Quote
Old 08-01-2021, 08:38 PM   #13
Recycles dryer sheets
 
Join Date: Aug 2020
Posts: 465
4% will do nicely. Use the portfoliovisualizer "Financial Goals" tool. It is outstanding, and free.
chassis is offline   Reply With Quote
Old 08-01-2021, 08:56 PM   #14
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 3,828
Historically speaking, a 3.18% SWR has held up over a 50 year period 100% of the time. So I would be comfortable with a 3% SWR for a 43 year old with a 60/40 AA.
Ready is offline   Reply With Quote
Old 08-02-2021, 06:11 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Jul 2013
Posts: 1,223
Quote:
Originally Posted by chassis View Post
4% will do nicely. Use the portfoliovisualizer "Financial Goals" tool. It is outstanding, and free.
Not for 50 years.
mrfeh is offline   Reply With Quote
Old 08-02-2021, 06:16 AM   #16
Thinks s/he gets paid by the post
The Cosmic Avenger's Avatar
 
Join Date: May 2016
Location: Mid-Atlantic
Posts: 1,925
Quote:
Originally Posted by Koolau View Post
All good advice. Keep in mind that you can always cut back on your spending should you pick too high a withdrawal rate. I've always added "back ups" to my plan. If THIS happens, then I will cut back on THAT. Have it planned out ahead of time, so there are no misunderstandings - especially if there are wife/husband/kids involved. YMMV
This is my approach. Based on my family history and medical advances, I'm planning for at least 40-50 years of retirement. (Hope for the best, plan for the worst, financially speaking...) I know we could survive comfortably on a fairly low number, but we do want to travel and donate to charity, so I've been adding those to my retirement budget as we hit FI and our numbers continue to grow. But we're prepared to cut back if we retire into a recession in order to reduce SORR.
__________________
-Looking to FIRE in the mid-2020s, which would be our mid-50s.
The Cosmic Avenger is offline   Reply With Quote
Old 08-02-2021, 10:11 AM   #17
Thinks s/he gets paid by the post
Major Tom's Avatar
 
Join Date: Nov 2009
Location: SF East Bay
Posts: 3,722
Quote:
Originally Posted by Ready View Post
Historically speaking, a 3.18% SWR has held up over a 50 year period 100% of the time. So I would be comfortable with a 3% SWR for a 43 year old with a 60/40 AA.
Based on historical results, a 3% WR would most likely be survivable. At the higher WR's though, your portfolio stands a greater chance of falling to gut-wrenchingly low levels before recovering. Are you prepared for that? It is one thing to have a portfolio that survives, but quite another to be able to sleep at night through the worst periods in the market.

I mention this because I often see folk, when using FIRECalc, considering the chance that their portfolio will survive, but not seeming to take into account how low it might fall in that process, and whether they could handle that.
__________________
Contentedly ER, with 3 furry friends (now, sadly, 1).
Planning my escape to the wide open spaces in my campervan (with my remaining kitty, of course!)
On a mission to become the world's second most boring man.

Major Tom is offline   Reply With Quote
Old 08-02-2021, 10:58 AM   #18
Recycles dryer sheets
 
Join Date: Aug 2020
Posts: 465
Quote:
Originally Posted by mrfeh View Post
Not for 50 years.
@mrfeh Thanks for the reply. What is your reasoning for this?
chassis is offline   Reply With Quote
Old 08-02-2021, 11:40 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 5,721
Quote:
Originally Posted by chassis View Post
@mrfeh Thanks for the reply. What is your reasoning for this?
Not @mrfeh, but 4% in the US for typical mid-range allocations can fail before 50 years. Start years in the late 1960s typically fail, so a 1966 retiree following the strict letter of the 4% rule / of thumb / law would have run out of money (well) before 2016. In fact the 4% rule as embodied in FIREcalc is only about 95% successful for a (mere) 30 year timeframe with default inputs IIRC.

There are of course the usual caveats: nobody actually follows the 4% rule / it's a guideline not a rule, Social Security / pensions, investment fees, asset allocation, changing spending in response, Bernicke / "smile" / no-go spending reductions, non-portfolio income, dying before the 50 years is up, asteroid strike / Retirement Hell Part 3 or Part 4, and probably others I can't recall offhand.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Old 08-02-2021, 12:05 PM   #20
Full time employment: Posting here.
 
Join Date: Apr 2011
Location: Castro Valley
Posts: 725
When I retired at 51, my views on SWR were as follows:

4%: Not comfortable
3.5%: Maximum
3%: Mostly comfortable
2.5%: Very comfortable
2%: Absolutely golden

These were just feelings and not Fireclac results.
jkern is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Add Int'l equities to FireCalc = increased SWR's? Cb FIRE and Money 2 02-26-2004 03:36 AM
SWR, terminal values, TIPS, I-bnds & comm paper sgeeeee FIRE and Money 144 02-25-2004 04:35 PM
Pinging Ted on higher early SWR's.... Cut-Throat FIRE and Money 8 02-22-2004 04:13 AM
SWR in bad times sgeeeee FIRE and Money 37 02-16-2004 02:11 PM
SWR - Keep it simple Cut-Throat FIRE and Money 12 08-04-2003 05:19 AM

» Quick Links

 
All times are GMT -6. The time now is 09:59 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.