Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-23-2020, 07:21 PM   #61
Recycles dryer sheets
 
Join Date: Sep 2016
Location: Way up North
Posts: 391
Quote:
Originally Posted by corn18 View Post
I'm planning on 6.2% WR from 55-70. Once SS kicks in, it goes down to 1.6%.
Very close to my plan. Spend ~6% or a bit more for 8 years until age 70. At age 70 my SS and deferred pension will be $75K/yr, which would be a substantial but tolerable cut. That's if there is nothing left of the portfolio. One thing that makes sense to me, but doesn't seem often considered here with respect to spending rules: typical spending is not linear as you age. The is so much data that shows typical spending falls as people age, quite independent of their means. A flat 4% across retirement unnecessarily shortchanges early retirement years. JMO
__________________
Retired 9/30/20 at age 61 from Evil Mega Big Oil Corp (EMBO corp)
A day in retirement is like a day on the farm. Every meal's a banquet. Every day's a parade. Every SS & pension check a fortune!
bada bing 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 10-23-2020, 08:01 PM   #62
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,551
Quote:
Originally Posted by SecondCor521 View Post
I calculate my NPV on my Social Security based on collecting from age 70 to age 85. Since I'm 51, my SS NPV goes up every month between now and 70 because that time series of payments is getting closer and is thus discounted less. It then drops from 70 to 85 because of the fewer months to collect before I die situation that you mention.
I do this, and I am close enough to 70 I am not worried about running out of money before I reach 70 or that there will be no SS. I would not do this if I was <50.
I donít want to run out of money but I donít want to die a millionaire either. Spending more of my assets earlier in retirement and waiting till 70 to take SS allows me to accomplish this.
teejayevans is online now   Reply With Quote
Old 10-23-2020, 08:43 PM   #63
Thinks s/he gets paid by the post
Out-to-Lunch's Avatar
 
Join Date: Jan 2020
Location: Milwaukee
Posts: 1,161
Quote:
Originally Posted by Koolau View Post
I've always struggled with this concept of figuring NPV of pension and/or SS. Thought Experiment: Consider you at age 62, taking SS or Pension for first time. Is not the NPV HIGHER than when you are, say, 82? IOW at age 62 you have the time between when you begin to the time when you die. At age 62, you have 20 more years to collect than when you are 82. SO, the NPV at 82 must be smaller, right?

Using the NPV to allow you to put more into equities is probably valid (treating SS or Pension as something like "bonds.") But in real terms, your SS or Pension (or purchased annuity for that matter) MUST be worth less every month because you will receive ONE LESS payment for every month you collect. What do you think since YMMV?

Yes, the NPV will decrease over time. Just like the 401(k) that you have been spending out of from age 62 to 82.

But the notion of the 4% rule is to set a rough spending level based on your assets at the point of retirement. At retirement, the NPV of your SS provides part of that knowledge.

(Caveat: I don't do it that way, using NPV. I just try to estimate income needed beyond SS and other guaranteed sources, and calculate my withdrawal rate based on this additional spending and my investable assets.)
Out-to-Lunch is offline   Reply With Quote
Old 10-23-2020, 09:55 PM   #64
Thinks s/he gets paid by the post
Rambler's Avatar
 
Join Date: Jul 2007
Posts: 2,425
From ‘13-‘17, we probably averaged a tad less than 3%...’18 and ‘19 included a big move, some things for the new house, and helping/gifting a down payment on a home for one of the kids, and we probably hit 4%. This year, with Covid, we tightened things up in March when the markets were slammed, and didnt loosen back up as they recovered. I’m thinking we may end up around 1.8-2% this year. Next year will likely be pretty similar. We’ve run out of things to buy, don’t intend to do crowded touristy things for another good while, and will use the RV for almost all travel until things get better. Pretty much all our travel will be to see the grand kids. I turn 59 next week, so I’m glad it looks safe to use more than I am using, but also quite pleased that we don’t have to use that much to be happy. All of that said, whether Bengen says 4% or 5% doesnt really matter that much to me. What matters is that I remain flexible enough, and cognizant enough, to adjust to what the market is doing to the value of my assets.
__________________
Find Joy in the Journey...
Rambler is offline   Reply With Quote
Old 10-24-2020, 03:37 AM   #65
Full time employment: Posting here.
 
Join Date: Oct 2011
Location: London
Posts: 776
Interesting insights from a smart person.

Its written, however, at a time when the market is quite high (some would say irrationally) and inflation is quite low (at least as calculated and published.)

While I wrote elsewhere that my crystal ball forecasted mild overall inflation, in my heart I'm a mean-reversion person. There are other schools of thought that forecast low annual asset returns for years.

I also think conservatism remains the smart approach on these topics.

I'm still in accumulation mode, so my planning goal of a 3-3.25% SWR isn't changing.
__________________
Luck is when Preparation meets Opportunity.
Closet_Gamer is offline   Reply With Quote
Old 10-24-2020, 04:25 AM   #66
Thinks s/he gets paid by the post
dixonge's Avatar
 
Join Date: Mar 2008
Location: On the road
Posts: 1,393
Quote:
Originally Posted by walkinwood View Post
Read the actual paper here.
https://www.fa-mag.com/news/choosing...ent-58132.html

As always, Bengen's paper is well reasoned and presented with all the caveats clearly spelled out.

Thanks for posting the article.

And thanks for posting the paper!


An interesting quote:


Quote:
Retirees facing more favorable market circumstances, on the other hand, have been able to successfully withdraw up to 13% of their portfolios
That's certainly not a number you hear often! I wonder during what timeframe a SWR of 13% worked?


[EDIT: now that I've read the article, the answer is - really low CAPE/Shiller combined with deflation]
dixonge is offline   Reply With Quote
Old 10-24-2020, 05:11 AM   #67
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 7,982
Quote:
Originally Posted by dixonge View Post
And thanks for posting the paper!


An interesting quote:



That's certainly not a number you hear often! I wonder during what timeframe a SWR of 13% worked?


[EDIT: now that I've read the article, the answer is - really low CAPE/Shiller combined with deflation]
IIRC, roughly around 1982 was one of the best years for retirement with (in hindsight) an SWR of over 10%.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 10-24-2020, 07:47 AM   #68
Recycles dryer sheets
latexman's Avatar
 
Join Date: Mar 2014
Location: Apex
Posts: 462
Quote:
Originally Posted by explanade View Post
Seem the Hummer EV they showed?
Did you notice the narrator was Lebron James?

IIRC, there was a huge brouhaha, when he graduated from High School, and "his Mom" gave him a brand new Hummer H2 with a "loan" based on Lebron's future earnings. That's when they still lived in the Cleveland projects. But, not for very much longer.

Lebron must have gotten great satisfaction out of doing that commercial.
latexman is offline   Reply With Quote
Old 10-24-2020, 07:58 AM   #69
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Location: Twin Cities
Posts: 2,135
ďHis calculations, incidentally, are all based on a conservative retirement portfolio where you keep 30% of your money in the S&P 500 SPX, +0.34%, 20% in U.S. small-caps such as the S&P 600 SML, +0.51%, and 50% in intermediate U.S. Treasury bonds TMUBMUSD07Y, 0.603%.Ē

Itís a rather large fly in the ointment that other common asset classes are not included, of course. Like the 4% Rule, the new 5% Rule is not so much a rule as a YMMV.
Markola is offline   Reply With Quote
Old 10-24-2020, 08:56 AM   #70
Recycles dryer sheets
latexman's Avatar
 
Join Date: Mar 2014
Location: Apex
Posts: 462
Quote:
Originally Posted by Markola View Post
Itís a rather large fly in the ointment that other common asset classes are not included, of course. Like the 4% Rule, the new 5% Rule is not so much a rule as a YMMV.
It's a "rule of thumb", i.e. a broadly accurate guide or principle, based on experience or practice rather than theory. It is empirical.

As with all rules of thumb, they must be applied correctly to be useful; that's where YMMV.
latexman is offline   Reply With Quote
Old 10-24-2020, 03:25 PM   #71
Thinks s/he gets paid by the post
corn18's Avatar
 
Join Date: Aug 2015
Posts: 1,191
I’ve heard stories from folks before the internet existed that 10% was a good ROT. Conservative folks lived off dividends. How the heck did anyone retire before firecalc?
__________________
Don't do something, just stand there!
corn18 is offline   Reply With Quote
Old 10-24-2020, 04:03 PM   #72
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 2,991
Quote:
Originally Posted by corn18 View Post
Iíve heard stories from folks before the internet existed that 10% was a good ROT. Conservative folks lived off dividends. How the heck did anyone retire before firecalc?
Defined Benefit pensions?
gauss is online now   Reply With Quote
Old 10-24-2020, 05:29 PM   #73
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 7,982
Quote:
Originally Posted by corn18 View Post
Iíve heard stories from folks before the internet existed that 10% was a good ROT. Conservative folks lived off dividends. How the heck did anyone retire before firecalc?
The Fidelity guy, Peter Lynch IIRC recommended a 7% WR since Stocks less inflation was around 7%. The concept of SORR was missed.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 10-24-2020, 05:30 PM   #74
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 7,982
Quote:
Originally Posted by bada bing View Post
Very close to my plan. Spend ~6% or a bit more for 8 years until age 70. At age 70 my SS and deferred pension will be $75K/yr, which would be a substantial but tolerable cut. That's if there is nothing left of the portfolio. One thing that makes sense to me, but doesn't seem often considered here with respect to spending rules: typical spending is not linear as you age. The is so much data that shows typical spending falls as people age, quite independent of their means. A flat 4% across retirement unnecessarily shortchanges early retirement years. JMO
And thus there is a Bernicke retirement option in Firecalc which addresses this concept.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 10-24-2020, 05:58 PM   #75
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: 5,646
Quote:
Originally Posted by RenoJay View Post
Apparently, Bill Bengen, creator of the 4% safe withdrawal rule, now believes that it should be 5% based on low inflation expectations.

https://www.marketwatch.com/story/th...?mod=home-page
Just refocusing for a moment on the 'new and improved' 5% rule: Looking back, the only time we ever withdrew 4% or a little more was back when we were in perpetual rehab mode (getting last mainland place ready to sell - new roof, new carpet and paint, radon remediation, landscaping and curb appeal etc.). Then there were two rehabs in Paradise (Kitchen and 2 baths each - very expensive.) AND this was before either of us started SS or MC!

Now, looking forward, Port has increased significantly AND the 30 year time frame is arguably only 15 years (actually, I'm NOW ending my time line at age 100 so that's 26 years, heh, heh.) I can't even think how I would SPEND 5%! I suppose I could buy new cars, fly 1st class, DO some vacations (after Covid), give the kids even more money, double our charities, etc. I know, I know, what a great problem to have. But seriously, I'm finding myself in a quandary as to how to proceed. We've never been about leaving a ton to the kids (we think it might ruin them - so charities will get most of it.) DW and I need a kitchen-table moment I guess though 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 10-24-2020, 08:03 PM   #76
Thinks s/he gets paid by the post
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 1,709
Quote:
Originally Posted by corn18 View Post
Iíve heard stories from folks before the internet existed that 10% was a good ROT. Conservative folks lived off dividends. How the heck did anyone retire before firecalc?
Well, FIRECalc is for early retirement - the RE part. Most retired (and still do) in their 60s with SS, pension/401(k)/IRA, and some taxable savings. Nothing new here.
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged

"All models are wrong, some are useful." - George Box
ďThere is always a well-known solution to every human problem: neat, plausible, and wrong.Ē - H.L. Mencken
USGrant1962 is offline   Reply With Quote
Old 10-26-2020, 11:16 AM   #77
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 28,784
Uh Oh!

If the market keeps on dropping like it does today, it will not be long for the 4%WR to become 5%.
__________________
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is online now   Reply With Quote
Old 10-26-2020, 03:19 PM   #78
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: 5,646
Quote:
Originally Posted by NW-Bound View Post
Uh Oh!

If the market keeps on dropping like it does today, it will not be long for the 4%WR to become 5%.
Voilŗ! Problem solved!

Well, maybe it's just the volatility one might expect what with a raging pandemic, national elections and this (bloody) 2020 - but 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 10-27-2020, 08:03 AM   #79
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 8,127
Quote:
Originally Posted by Koolau View Post
Looking back, the only time we ever withdrew 4% or a little more was back when we were in perpetual rehab mode (getting last mainland place ready to sell - new roof, new carpet and paint, radon remediation, landscaping and curb appeal etc.). Then there were two rehabs in Paradise (Kitchen and 2 baths each - very expensive.) AND this was before either of us started SS or MC!
I don't count home improvements (i.e. things that are expected to increase the selling price through something that would show on the appraisal). The idea is that you are investing in an appreciating asset, not out-the-door spending that's gone-gone. One could argue that you might (probably) will get less back than you spend, but since I usually do the sweat equity version, I call it even.
sengsational is offline   Reply With Quote
Old 10-27-2020, 08:22 AM   #80
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 22,989
Quote:
Originally Posted by sengsational View Post
I don't count home improvements (i.e. things that are expected to increase the selling price through something that would show on the appraisal). The idea is that you are investing in an appreciating asset, not out-the-door spending that's gone-gone. One could argue that you might (probably) will get less back than you spend, but since I usually do the sweat equity version, I call it even.
I agree - the money isn't really 'spent' if it went into the house and increased it's value (at least the amount increased). Of course, you still need the cash flow. But it's kinda like a Roth contribution - that money wasn't 'spent', it was a transfer. It's still on your balance sheet.

An expensive dinner, or any purchase that depreciates to near zero, is money spent. It's gone from your balance sheet.


-ERD50
ERD50 is offline   Reply With Quote
Reply

Tags
4% rule


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
80% rule? 4% Rule? What is it really? Talkjk Hi, I am... 20 09-29-2018 09:03 AM
Ok move is done now man now what. dumpster56 Hi, I am... 13 07-15-2006 06:41 AM

» Quick Links

 
All times are GMT -6. The time now is 01:18 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.