SWR for FIRE DINKS

[intent]

Trying to see how many acronyms I can fit in one subject line

Would love to hear how those of you who have no plans to leave an inheritance managed your withdrawal strategy. Did you simply stick with a 3-4% +inflation SWR method for peace of mind, or did you instead plan on some managed draw down of your principal? And is the latter, how is that working out for you "sleep at night" wise.

 

[Nords]

Would love to hear how those of you who have no plans to leave an inheritance managed your withdrawal strategy. Did you simply stick with a 3-4% +inflation SWR method for peace of mind, or did you instead plan on some managed draw down of your principal? And is the latter, how is that working out for you "sleep at night" wise.

Instead of playing "Longevity Jeopardy", you might want to consider the more straightforward alternative of leaving it to charity.

We spend 4-5% mainly because we can't quite ever get around to figuring out how to spend 6%.

 

[chinaco]

I cannot speak with experience because I am have not FIREd yet. But I am getting ready to...

The withdrawal phase is different than the accumulation phase.

There are a number of different schools of thought about how to manage it.

IMO - Jim Otar's book, "unveiling the retirement myth" is probably one of the better overall treatments of the different conventional approaches along with the pros and cons including a framework of how to make sense of the issues and make decisions.

There are many other good sources of information. There are also several different viable approaches to the problem. But most people have different experience, goals and circumstances... that seems to contribute to people having preferences for certain approaches to the problem.

You need to educate yourself and create a plan.

 

[lemming]

I don't think the 4% withdrawal rate means you never dip into principal.

Firecalc really doesn't start with the SWR premise as a percentage but it ends up being about the same numbers. If you withdraw a constant amount updated with a inflation factor in some timeline in the future you will run the principal down to nothing. Some market senario's that happens faster then others.
I'm planning on spending more in the first 5 or 6 years then hoping to drop back to a much lower percentage with social security coverage.

 

[Gone4Good]

Instead of playing "Longevity Jeopardy", you might want to consider the more straightforward alternative of leaving it to charity.

That's my plan (charity). When I'm older and if interest rates improve, I may also buy some fixed annuities - so I'll leave some to the insurance company too.

 

[donheff]

Would love to hear how those of you who have no plans to leave an inheritance managed your withdrawal strategy. Did you simply stick with a 3-4% +inflation SWR method for peace of mind, or did you instead plan on some managed draw down of your principal?

I'm 62 and DW is 58 so we are currently sticking to a conservative SWR rate. At some point, if it appears we are on one of the rosy scenarios (e.g. the portfolio has increased substantially in real terms, and our end of life horizon has substantially decreased) we will probably start gifting the kids/grandkids. At that point we would also likely increase our charity giving beyond current levels. Precisely what that point is is TBD and will be very subjective.

 

[Nodak]

Since I'm single with no kids my will is set up so that whatever's left will go into a scholarship fund for local math and science students.

 

[Nords]

Since I'm single with no kids my will is set up so that whatever's left will go into a scholarship fund for local math and science students.

You've piqued my curiosity. Can you tell us more about how you set that up? How did you research the details?

Is it a perpetual fund or will you be shutting it down after a certain number of years?

Who administers the scholarship? How are the trustees selected and changed?

How are the students selected? How do they remain eligible?

Do you specify what assets the fund will invest in?

 

[lark_L]

I've set something up with my alma mater for science scholarships. Spouse the same with her college. Contact the organization, they probably have all the details and will fall all over themselves to help set it up. Some details from them, a new will, and then change the beneficiaries on the accounts to the text that they tell you.

We set all the criteria with guidance from the school. They're pretty open to anything reasonable, but they don't want it to be so limited that it's unmanageable. Of course, it can't be discriminatory. Set a minimum GPA, minimum level (sophomore, junior, etc), field(s) of study. Some are even set up to preferentially favor those from a certain town or county.

There wasn't any talk about how the assets are managed. I guess it goes into the endowment pool and someone manages it.

I'd guess that most are set up to be perpetual, ours are.

 

[Nodak]

Nords, I don't know how much I can help you, it's been years since I even looked at the will and I don't remember all the details. We have sort of a unique situation in ND; we have a state bank, the Bank Of North Dakota. It was set up in the early part of the 20th century and worked with local banks to protect farmers from what was considered to be predatory tactics by large eastern banks and corporations. All part of the populist movement back then. It's fairly common for people to set up small scholarships through the bank and the North Dakota Dollars for Scholars program. The money is awarded to graduating high school seniors and may be only a few hundred dollars each year. The students are selected by the school based primarily on the kid's grades. The donor can specify what programs (math, science, etc.) the award is to go to. I'd have to get my will out of my safe deposit box to get into more detail. As far as I know ND has the only state bank in the US and it has had an interesting effect on the banking here. There are no national bank chains like Bank of America any where around; they seem to avoid ND.

 

[lemming]

thread has been hijacked and by a moderator...

Intent wants to know how to spend all the money before he and wife die.
problem one One of you is going to outlive the other
problem two No one has a good gauge of how to make things come out even-the suicide jokes don't really cut it.

I don't have an answer for you. Maybe cut out a big portion of portfolio now. Leave a good sized pot that you don't intead to use until 80 or so. and spend sensibly but live well. Oh and you won't be DINKs you will be Financially Independent No Kids..FINKS

 

[REWahoo]

thread has been hijacked and by [-]a[/-] an ex-moderator...

There, I fixed it for ya...

 

[o2chim2]

What are some of you doing regarding asset allocation %'s In an effort to not outlive your assets? Will retire in 2012.... making plans now and not sure exactly how to diversify. Open to reading any and all suggestions. Maybe there is a post already on here about this.... if so, please direct me to it.

 

[GregLee]

Would love to hear how those of you who have no plans to leave an inheritance managed your withdrawal strategy.

I don't want to leave an inheritance, either, so I'm also interested in the problem of how to manage assets so as to minimize the waste left at the end. If there are systematic approaches to dissipating assets, corresponding to those for conserving them, I haven't heard about it. So, thanks for bringing this up, and I hope we both get some good ideas.

 

[obgyn65]

I have no plan to leave an inheritance since I do not have children. I simply stick with a 3-4% + inflation SWR until age 95.

Would love to hear how those of you who have no plans to leave an inheritance managed your withdrawal strategy.

 

[chris2008]

We plan to use the SWR as guideline for as long as we stay out of managed care.
Once that is no longer reasonable, pensions, long term care insurance and capital will be spent for high quality care.
If money runs out, we hope to be so old and fragile that we cannot be moved to another facility by social services dept.
If we die before money runs out we will have a will in place to leave the leftovers to those relatives (nephews , nieces or their kids) who are near and dear to us at that time.
If there are no such relatives, the leftover will probably go to a charity, at the decision of the survivor so far.

 

[Gone4Good]

I don't want to leave an inheritance, either, so I'm also interested in the problem of how to manage assets so as to minimize the waste left at the end. If there are systematic approaches to dissipating assets, corresponding to those for conserving them, I haven't heard about it.

I don't think it's terribly hard to do, especially once you get into your final decades. Once you reach 85, for example, you can buy a deferred fixed annuity that starts paying out on your 100th birthday (should be extraordinarily cheap) and use the balance of your portfolio to construct a 15 year TIPS ladder. If you're worried about dieing early and leaving money unspent (which is a strange thing to worry about IMHO) then you can move the annuity date up to 90, or 85, or whatever, but it will cost more. Taken to the extreme, you can annuitize your entire portfolio today and never worry about having anything left over.

 

[GregLee]

Taken to the extreme, you can annuitize your entire portfolio today and never worry about having anything left over.

Thanks for the suggestions. Could you find something for me that doesn't involve insurance companies?

 

[JmfromTx]

We were dinks. I'm the surviving one. The only thing I care about is having enough money until the day I croak. I planned for 3% and have found I can do whatever I want for a lot less. In my mind this just provides a cushion for unexpected major expenses.

 

[Gone4Good]

Thanks for the suggestions. Could you find something for me that doesn't involve insurance companies?

Yup. Right after I finish my free lunch I'll tell you about a withdrawal strategy that allows you to spend 100% of you portfolio without fear of longevity risk and without having to pay someone else to take that risk.

Some things are just not possible (although I imagine a DFA that pays out on your 100th birthday and a TIPS ladder gets remarkably close to that goal).