The Number

[RockMiner]

While 3.5% may be a safer 40 year SWR, a non-zero SS seems like a pretty safe bet, and so I'm thinking that 4% is reasonable even for the hyper-cautious like my self. Lately I'm giving more weight to 'live a little' in my planning, thanks to Cut-Throat. Cutting back might be easier later in life after a walker is involved.

$1-2MM seems about right for "the number" to me as well.

[mrbill]

Quote:

Originally Posted by rodmail ...I wonder if it might not be wise to recognize that 4% means zero Social Security in your 60's. If you believe you will get at least something from SS, that 4% number is simply "wrong" for the risks being assessed and built into it.*

I'm glad to see someone suggest that a rate greater than 4% might be feasible...it seems too often that a suggestion of anything greater than 4% is just not Politically Correct

[haha]

Quote:

Originally Posted by mrbill I'm glad to see someone suggest that a rate greater than 4% might be feasible...it seems too often that a suggestion of anything greater than 4% is just not Politically Correct

This is one of those things where it really won't matter what other folks think, or what is politically correct or incorrect. What will matter is how events unfold.

Ha

[REWahoo]

Quote:

Originally Posted by HaHa This is one of those things where it really won't matter what other folks think, or what is politically correct or incorrect. What will matter is how events unfold.

Yep. It doesn't matter if it's politically correct, just that it's financially correct.

[preben]

The 4% rule is based on history only as already mentioned. That said it is ALSO based on a portfolio consisting of US large caps and US bonds ONLY* , based on someone blindly pulling the same amount+inflation nomatter WHAT the market does* and based on the WORST case scenario in almost 100 years of history* .

With a well diversified portfolio that includes small/value/foreign/commodities this study concludes that a SWR of 5-6% worked historically (for the period the study covers) and that is BEFORE even considering adjusting w/r for bad years in the market where other studies have shown one can add 1-2% in SWR. (easy read; scroll to the bottom for SWR results).
http://raddr-pages.com/research/CommodityFutures.htm

Yes; the future might be very different due to current valuations, peak oil or whatever, which might bring the catious FIREe back to 4% - but that is guess work at best.

A bit tired of seeing people talking about doom and gloom and fiddling with 1-2% SWRs. Naturally fine if one can manage with a 1-2% w/r (I can if need be) but if history is anything to go by then a much higher SWR is possible from a well diversified portfolio.
Cheers!

[mathjak107]

WORK IS JUST SOMETHING I DO TO FILL THE TIME BETWEEN WEEKENDS!

[RockMiner]

In my occupation we have a joke which goes that when one of us is asked a technical question we will ponder, calculate, re-calculate, scratch our heads, and ask "what do you want it to be?"

SWR's are much the same IMO.

[SteveR]

Finding your number is step one in knowing when you have enough to ER.

Step two through whatever are what it takes to get enough $$$ to match your number.

The later steps are to generate an income stream that ebs and flows with the economy, your lifestyle and the market.

The last step is to wave your last dollar at the undertaker.

$1-2 million? Should be enough for most folks as long as their house is paid off and medical is taken care of. You won't be truly rich.....just comfortable and able to do most of what may be imporatant to most folks but not rich enough for an extravagant lifestyle. $80k before taxes is not a huge sum of money in today's economy. It gets down to expenses vs nest egg size to determine how happy you would be with a given amount of income. Even a large nest egg would not provide sufficient disposible income for fun and games if it is required to fund too much expense that does not create fun.

FunFactor=Nestegg-NonFun Expenses

The larger the FunFactor the more potential fun stuff you can fund.

[veritasophia]

Quote:

Originally Posted by ben With a well diversified portfolio that includes small/value/foreign/commodities this study concludes that a SWR of 5-6% worked historically (for the period the study covers) and that is BEFORE even considering adjusting w/r for bad years in the market where other studies have shown one can add 1-2% in SWR. (easy read; scroll to the bottom for SWR results). http://raddr-pages.com/research/CommodityFutures.htm

Does Vanguard have a commodity fund? I couldn't find one besides going through PIMCO for PCRIX (1.24 expense ratio ) Any cheaper alternatives?

[Shredder]

Quote:

Originally Posted by mathjak107 WORK IS JUST SOMETHING I DO TO FILL THE TIME BETWEEN WEEKENDS!

What's a weekend? Every day is a weekend when you retired.....Shredder

[youbet]

Quote:

Originally Posted by rodmail I wonder if it might not be wise to recognize that 4% means zero Social Security in your 60's.

I like the Firecalc tool a lot, but it does add some confusion to our discussions because it combines determing your desired withdrawal rate from your portfolio in absolute dollars with historically testing that rate as a percentage. *Firecalc adds the dimension of helping you determine what you need to withdraw from your financial portfolio given the amount you choose to budget and other income streams such as SS or pension, etc. *This seems to often confuse us into thinking that SWR is related to those other income steams and it isn't.

SWR refers to the inflation corrected percentage of your beginning portfolio you can withdraw annually for some number of years without depleting your portfolio as tested by applying historical market performance and inflation rates. *Whether or not you get SS or a pension does not matter in determining an SWR. *Those other income steams only impact the amount you need to withdraw, not what's possible.

It's a fine line, but I think significant. *That's why I prefer to use the SWR Excel spreatsheet downloadable from the RE Homepage site. *If you haven't used that, try it.

[REWahoo]

Quote:

Originally Posted by youbet SWR refers to the inflation corrected percentage of your beginning portfolio you can withdraw annually for some number of years without depleting your portfolio as tested by applying historical market performance and inflation rates. Whether or not you get SS or a pension does not matter in determining an SWR. Those other income steams only impact the amount you need to withdraw, not what's possible. It's a fine line, but I think significant. That's why I prefer to use the SWR Excel spreatsheet downloadable from the RE Homepage site. If you haven't used that, try it.

Why not just run FIRECalc without the SS, pension or other income streams if you want a "pure" SWR number?

[preben]

PCRIX is the institutional shares at the e/r is a very resonable 0.74%. While it demands $5M to buy in I presume most of us here have that . - joking aside many brokers, Incl. Vanguard have made a special deal so one can buy in at much smaller minimums.
Cheers!

Quote:

Originally Posted by Veritasophia Does Vanguard have a commodity fund?* I couldn't find one besides going through PIMCO for PCRIX (1.24 expense ratio* )* Any cheaper alternatives?

[youbet]

Quote:

Originally Posted by REWahoo! * Why not just run FIRECalc without the SS, pension or other income streams if you want a "pure" SWR number?

Yep, that works too.

[jdw_fire]

Quote:

Originally Posted by youbet I like the Firecalc tool a lot, but it does add some confusion to our discussions because it combines determing your desired withdrawal rate from your portfolio in absolute dollars with historically testing that rate as a percentage. *Firecalc adds the dimension of helping you determine what you need to withdraw from your financial portfolio given the amount you choose to budget and other income streams such as SS or pension, etc. *This seems to often confuse us into thinking that SWR is related to those other income steams and it isn't. SWR refers to the inflation corrected percentage of your beginning portfolio you can withdraw annually for some number of years without depleting your portfolio as tested by applying historical market performance and inflation rates. *Whether or not you get SS or a pension does not matter in determining an SWR. *Those other income steams only impact the amount you need to withdraw, not what's possible. It's a fine line, but I think significant. *That's why I prefer to use the SWR Excel spreatsheet downloadable from the RE Homepage site. *If you haven't used that, try it.

youbet, I think you are overlooking the real value of FIREcalc which is not determining a Safe W/D ratio (e.g. 4%) but determining a safe W/D amount in dollars that will grow with inflation.* The beauty of it including future income streams is it allows the user to determine a maximum standard of living that is maintained through out the time frame chosen (i.e. an inflation adjusted dollar W/D) that may at the start of their retirement be a larger percentage of their portfolio than the pat answer of 4%.* As time goes on and the other income streams kick in a smaller W/D is required of their portfolio thus protecting said portfolio and making the whole plan for said maximum standard of living possible.* Percentages are nice rules of thumb but maping out all the income streams is really valuable for detailed planning.

[youbet]

Quote:

Originally Posted by jdw_fire * Percentages are nice rules of thumb but maping out all the income streams is really valuable for detailed planning.

As I stated, I'm a fan of Firecalc. But people do get confused when income streams are available other than the SWR and make statements like "gee, with SS starting I can increase my SWR."