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Old 07-20-2020, 09:01 AM   #61
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Having mortgage when retired makes it much harder to qualify for ACA. You need income to make mortgage payment. That extra income may put you over subsidy cliff and cause couple to pay 20k+ for Health Insurance instead of 4k-6k.

We have health insurance in retirement through the FEHB so we aren't worried about ACA. Our projected HI costs are $450 per month through FEHB based on 2020 rates. That is a good point though for folks that have to buy through ACA.
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Old 07-20-2020, 06:08 PM   #62
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However, I'm not really familiar with rigorous published analyses that show how the regular or reverse glide path approaches affect SWR with clear charts documenting the comparisons. Anyone have anything on this?
BigERN from Early Retirement Now, did some analysis:
https://earlyretirementnow.com/2017/...ty-glidepaths/
Context for the following graphs is in the article linked.



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Old 07-20-2020, 06:48 PM   #63
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Very cool article. Thanks for that.
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Old 07-20-2020, 06:58 PM   #64
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Our current FIRE model is 4.5% WR for the first 5 years; 5% for the next 5 years; and then 3.5% after we both claim SS (67). Reading some threads makes me nervous when people are advocating a 3% perpetual WR but our numbers seem to work and we have flexibility in our budget if needed. Biggest worry at this point for us seems to be SORR, right?
You're making me feel much better about my current plan. Buying a retirement home, and will have a 2.5% WR prior to travel resuming, when we hope to bump it to 4.4%. We're taking on loan at 2.875% 30-year fixed... I do intend to pay off the property in 5-10 years....
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Old 07-20-2020, 08:45 PM   #65
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I put together a graph of historical 30 year 60/40 SWRs vs the P/E 10 for the S&P 500 (a measure of how pricey the market is). The data is from a portfolio that has small cap and international stocks, so its lowest historical SWR was 4.5%. At a P/E 10 of 30 (about what it is today), it suggests a SWR of 4.05, with a 50% chance of success. If you want an 84% chance of success, the SWR drops to 3.3%. There is reason to believe that even this withdrawal rate is too high because we have an aging population and slowing growth rate in the US, which indicates we will have slowing increases in GDP going forward. The bogleheads seem to be correct: a 3% fixed withdrawal rate seems to be reasonable for a 30 year retirement with fixed withdrawals.
Nice work! Thanks.
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Old 07-21-2020, 04:08 AM   #66
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BigERN from Early Retirement Now, did some analysis:
https://earlyretirementnow.com/2017/...ity-glidepaths
[/IMG]
I was also thinking to post pointer to BigERNs analysis.
Those are best withdrawal analysis I had ever seen.
https://earlyretirementnow.com/safe-...l-rate-series/

Most point to 3.0-3.5% WR.
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Old 07-21-2020, 06:17 AM   #67
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You're making me feel much better about my current plan. Buying a retirement home, and will have a 2.5% WR prior to travel resuming, when we hope to bump it to 4.4%. We're taking on loan at 2.875% 30-year fixed... I do intend to pay off the property in 5-10 years....
I'll post what the FA says about our plan when we meet with him. I keep reading that the current consensus is 3% but I think with a flexible budget, 2 pension payments with a COLA feature, and possibly a new income stream from the VA (that won't be taxed) I'm not too worried. We can drop all the way to 2.5% WR except for the 5 years between our FERS supplement ending and me claiming SS at 67.
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Old 07-21-2020, 07:39 AM   #68
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I'll post what the FA says about our plan when we meet with him. I keep reading that the current consensus is 3% but I think with a flexible budget, 2 pension payments with a COLA feature, and possibly a new income stream from the VA (that won't be taxed) I'm not too worried. We can drop all the way to 2.5% WR except for the 5 years between our FERS supplement ending and me claiming SS at 67.
The 3% consensus is simply due to some folks believing that the future is going to be worse than the past, plus longer retirements.
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Old 07-21-2020, 08:17 AM   #69
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I always used to think 1973 was a failure cycle, because of that graph on the front page of the FireCalc website. But just recently, I noticed it's using a 4.67% withdrawal rate, not 4% ($35K per year/$750K). I swear, I've been looking at that picture for probably 15 years now, but only recently, did I actually do the math.
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Old 07-21-2020, 01:02 PM   #70
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What was the interest rate on your 40%? Most of the 70’s, the CD interest rate was 2X your SWR. Who in their right mind would not adjust holdings when guaranteed money is more than withdrawal rates.
I realize this post is a few days old. I think you may not understand what "the 4% SWR rule" actually is. The rule is that you are supposed to increase your annual withdrawal to keep up with inflation, i.e., a 4% real withdrawal rate, not nominal.

I don't think that in the '70s, CD rates were 4% higher than the rate of inflation, let alone 8% higher.
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Old 07-21-2020, 03:55 PM   #71
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I was also thinking to post pointer to BigERNs analysis.
Those are best withdrawal analysis I had ever seen.
https://earlyretirementnow.com/safe-...l-rate-series/

Most point to 3.0-3.5% WR.
yeah the whole series is really well done. It's a big part of why I settled on 3% as an indefinite duration SWR.
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Old 07-21-2020, 04:04 PM   #72
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We are at 2.93%WR average through our first 3 years. Would be willing to go to 3.25%, but not higher yet.
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Old 07-23-2020, 09:45 AM   #73
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A related table Figure 1 in page 2 from Bengen. Pretty amazing how few times 6% failed since 1926.
https://www.fa-mag.com/news/is-4-5---still-safe-27153.html?section=47&page=1

Since I retired I keep seeing threads here and Bogelheads and online articles that the 4% rule is dead. I don't believe them. I don't think we're living in the worst of times of the last 100 years. Look at the 2000 retiree, they have gone through the dotcom bust, the great recession, and the Covid shut down. With only 10 years left on a 30 year plan they'll probably be fine.

I like Bengen's term SAFEMAX as it implies this is a guardrail on your spending. If you want to live with this much risk, you need to stay at or below that level spending.

Personally, I did a strict 4.5% withdrawal the first 5 years of retirement, and spent it almost every year. Readjusted at year 5 to a 5.5% max of the balance at that date. Almost spent that much last year with the new roof, new fence, tree removal, etc. etc., Not going to come close to it this year. I plan on readjusting every 5 years
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SWR failures from history
Old 07-23-2020, 11:17 AM   #74
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SWR failures from history

I am in my 11th year of retirement right now. I calculate my withdrawal rate as the percentage of the previous December 31st balance of my portfolio.

During those first 10 years, my average WR was 1.7%, or 2.4% if you include the costs of buying my new home in cash and moving, back in 2015.

Either way, it is less than I had planned. According to my written financial plan which I devised during the run-up to retirement, my spending limits were going to be 3.5% (or my total dividends, whichever was smaller). But I have found that since I retired I just do not want or need to spend that much in order to be happy and content. Plus, recently I have SS and a mini-pension to rely upon too.

At this rate, if my WR ever fails I'll be in a state of shock! But you never know what the future may bring.

Or maybe I'll change my lifestyle and develop a burning need for a high end Tesla, a yacht, a private plane, an RV, and a castle-like second home on a cliff overlooking the Mediterranean, in southern France. Probably not.
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Old 07-24-2020, 09:28 AM   #75
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Caveat that this ama is a few years old now, but I found it to be a valuable thread with lots of interesting questions and answers. I learned a lot that I did not know.



https://www.reddit.com/r/financialin...ed_the_4_safe/



The first reply is that Bengen states that he later found out that it should actually have been a SWR of 4.5% vs. the 4% he initially reported. For someone with longer retirement plans over the traditional 25-30 years he offers alternative SWR rates.



I was shocked that he felt one could live in perpetuity on a 4% w/d rate.



He does also point out what his research indicated is the sweet spot of an AA to maximize the SWR. This which was 45-55% equities and the remainder in bonds/cash ("According to my research, I would have a well-diversified portfolio with probably 50% equities, 40% fixed-income, and 10% cash")


I’ll point out that AWSHX on the back test model using a starting point of 1985 and a starting balance of $1million and a 7% annual withdrawal had an ending balance thru last month of $3.3million for a CAGR of 3.3% after withdrawal. I am not a fan of this mutual fund due to expenses but it is a true real life test that survived through the 1987, 2000,2008,2020 meltdowns. It’s an old fund so the Calculations are not hypothetical.
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Old 07-25-2020, 10:36 AM   #76
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I’ll point out that AWSHX on the back test model using a starting point of 1985 and a starting balance of $1million and a 7% annual withdrawal had an ending balance thru last month of $3.3million for a CAGR of 3.3% after withdrawal. I am not a fan of this mutual fund due to expenses but it is a true real life test that survived through the 1987, 2000,2008,2020 meltdowns. It’s an old fund so the Calculations are not hypothetical.
Sounds very impressive, but how would a person have known that in 1985?

If that was your holding over all these years, congratulations! You picked a good one.

I wonder what a 100% investment in the S&P500 or total us market index in 1985 would have ended up with using the same withdrawal.
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Old 07-25-2020, 11:08 AM   #77
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I’ll point out that AWSHX on the back test model using a starting point of 1985 and a starting balance of $1million and a 7% annual withdrawal had an ending balance thru last month of $3.3million for a CAGR of 3.3% after withdrawal. I am not a fan of this mutual fund due to expenses but it is a true real life test that survived through the 1987, 2000,2008,2020 meltdowns. It’s an old fund so the Calculations are not hypothetical.
I am puzzled by this because I see AWSHX is up less than 500% since 1985 while S&P 500 is up more than 1500%. (Not reinvested dividends)

Unless AWSHX pays huge dividend.
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Old 07-25-2020, 11:10 AM   #78
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I’ll point out that AWSHX on the back test model using a starting point of 1985 and a starting balance of $1million and a 7% annual withdrawal had an ending balance thru last month of $3.3million for a CAGR of 3.3% after withdrawal. I am not a fan of this mutual fund due to expenses but it is a true real life test that survived through the 1987, 2000,2008,2020 meltdowns. It’s an old fund so the Calculations are not hypothetical.



That is really impressive
looks like oldest S and P 500 ETF is SPY and that was created in 1993
$1,000,000 invested with 7% withdrawal rate has a balance today inflation adjusted $928,000
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Old 07-25-2020, 02:13 PM   #79
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That is really impressive
looks like oldest S and P 500 ETF is SPY and that was created in 1993
$1,000,000 invested with 7% withdrawal rate has a balance today inflation adjusted $928,000
There are older funds. VFINX, Vanguard 500 Index Investor, has data back to 1985 here:

https://bit.ly/2OWNyRv <<< short-link to portfoliovisualizer.com/backtest-portfolio

AWSHX and VFINX are essentially the same performance. This includes dividends in both.

-ERD50
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Old 07-25-2020, 02:23 PM   #80
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There are older funds. VFINX, Vanguard 500 Index Investor, has data back to 1985 here:

https://bit.ly/2OWNyRv <<< short-link to portfoliovisualizer.com/backtest-portfolio

AWSHX and VFINX are essentially the same performance. This includes dividends in both.

-ERD50
Oh wow okay. When I googled “ oldest s and p etf” spy came up.
That’s really amazing that a 7% WR still yielded such a high ending balance.
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