Variable Withdrawals, Pt XVII...

[Cb]

All but the most unreasonable folks* seem to agree that some form of variable withdrawals ought to either a) allow a somewhat higher withdrawal rate, or b) take the Canonical 4% and enjoy a bit more margin of safety.

The frequency with which one adjusts their draw based on market returns probably matters as well. One could let things ride until one morning when they noticed that their portfolio balance had declined by, say, 91%, and then do a bit of belt-tightening, or one could adjust their draw annually as modeled by the more reknowned Post-Trinity SWR Theorists Gummy, SG, ESRBob, and most recently, Daddy-O.

I should think that at this point the more astute readers are probably wondering, "...but I wonder what Cb's planning to do?"* That's an excellent question, one I'll answer now:

My plan (as of 10:20 last night) is to retire** with a stash that FIREcalc says is 100% safe for 55 years.* But we'll diversify much more broadly (heavy equity, Int'l, value, TIPS, dash of PCRIX) as we roll out from our pretty restrictive 401K's. Then we'll set up a withdrawal scheme based on SG's body of work, figuring on drawing 3% fixed plus 1% of portfolio balance annually.

At this point I think we'll do 2 draws annually, my reasoning being that we stand to capture the extra $37 per year by letting half our draw ride in the aforementioned portfolio rather than stashing it under the mattress, and I think we ought to benefit slightly (no idea how to compute this, so we'll call it another $37, OK?) from adjusting our burn rate every six months rather than 12. (more frequent incorporation of feedback can only help, right?)

That is all.

Cb*

*by which I do not mean to single out Nords

** by which I mean I'm quitting after another 9.5 days of the 3-day schedule I've been on since March, while Momma continues to toil away at the soap factory, allowing us a -0.3% WR until such time as she gets fed up and quits too.

[bosco]

is there a link to SG's body of work? I could search on his name, but I seem to recall a lot of parentheses etc. which I would never get right, and a search on SWR wouldn't narrow down the universe much.

[Cb]

Bosco, have a look here:

http://www.s152957355.onlinehome.us/...num=1107790433

OK...maybe "body of work" was a slight overstatement, but this is the internet, right?

Cb :P

[2B]

Quote:

Originally Posted by Cb All but the most unreasonable folks* seem to agree that some form of variable withdrawals ought to either a) allow a somewhat higher withdrawal rate, or b) take the Canonical 4% and enjoy a bit more margin of safety. Then we'll set up a withdrawal scheme based on SG's body of work, figuring on drawing 3% fixed plus 1% of portfolio balance annually.

Haven't you just effectively joined the unreasonable folks? Show some guts and go for 3% fixed + 3% of portfolio annually. Run it through FIRECalc. You might be surprised.

[Nords]

Hey, don't make me a member of the SWR Defender's Club.* Just make sure that you know your own comfort zone, but stop trying to convert the rest of us.* It reminds me of a bumper sticker-- "God save me from your followers."

I think it's interesting that a highly vocal portion of the working crowd seems to be developing a laser-like focus on the number of significant digits to which SWR can be determined, while most of those who are partially or fully ER really don't give a darn.

The extent to which I give a darn is that the Trinity study has not sent anyone back to the workforce and its tenets have so far stood the test of time.* The rest of the recent research may achieve the same status in another 10 years or so, but I sure wouldn't want to spend my ER riding the SWR razor's edge in a flat market.* Yee-haw indeed.

Is it possible that there's a lesson to be learned from the difference of opinion?* Maybe some are having a really sucky month at the office to be spending so much time on this.* Maybe others don't want to make the leap until they're absolutely positively certain that they'll achieve escape velocity.* Maybe this artificially-created frustration & controversy makes it analytically & quantitatively more palatable to stay at work when one's qualitative emotions are screaming "Get me outta here!"*

I wonder if we'd be expending the same effort on SWR divinations if everyone's time was their own? Personally I need all the time I can find to improve my knowledge of fine cheap wines (or is that cheap fine wines?) and tastes great vs less filling farm-raised vs wild...

[obryanjf]

Quote:

Originally Posted by Nords I wonder if we'd be expending the same effort on SWR divinations if everyone's time was their own?

Your right Nords. Perhaps my and some others mistake was posting to the SWR section rather than the Young Dreamers section. Certainly when I'm ER'd, I'll have no use nor time for such discussions.

Congratulations Cb.

job

[Cb]

Quote:

Originally Posted by 2B Haven't you just effectively joined the unreasonable folks?* Show some guts and go for 3% fixed + 3% of portfolio annually.* Run it through FIRECalc.* You might be surprised.

I've rarely been accused of being reasonable, Tooby.

I've run FIREcalc with a whole range of fixed + variable %'s, but my fear that leading experts such as Bernstein and Bogle and Buffett and JWR just might be right and equity returns over e next few decades may well be lower than in the past, so I'll stand pat at ~4%. Our portfolio will support 4%, and I figure I'll be so delighted simply not being at work that I won't have a great desire to spend even 4%, let alone a sportier WR.

Cb

[Cb]

Quote:

Originally Posted by Nords Hey, don't make me a member of the SWR Defender's Club.* Just make sure that you know your own comfort zone, but stop trying to convert the rest of us.* It reminds me of a bumper sticker-- "God save me from your followers." I think it's interesting that a highly vocal portion of the working crowd seems to be developing a laser-like focus on the number of significant digits to which SWR can be determined, while most of those who are partially or fully ER really don't give a darn. The extent to which I give a darn is that the Trinity study has not sent anyone back to the workforce and its tenets have so far stood the test of time.* The rest of the recent research may achieve the same status in another 10 years or so, but I sure wouldn't want to spend my ER riding the SWR razor's edge in a flat market.* Yee-haw indeed. Is it possible that there's a lesson to be learned from the difference of opinion?* Maybe some are having a really sucky month at the office to be spending so much time on this.* Maybe others don't want to make the leap until they're absolutely positively certain that they'll achieve escape velocity.* Maybe this artificially-created frustration & controversy makes it analytically & quantitatively more palatable to stay at work when one's qualitative emotions are screaming "Get me outta here!"* I wonder if we'd be expending the same effort on SWR divinations if everyone's time was their own?* Personally I need all the time I can find to improve my knowledge of fine cheap wines (or is that cheap fine wines?) and tastes great vs less filling farm-raised vs wild...

Hmmm. I think it's a bit simpler than all that.

I think all the Orthodox Trinitites (not that I'd ever want to categorize folks :P) are on pretty solid footing with their 4% WR's. But I think it's every bit as reasonable to figure on a slightly higher WR if one is willing to have their consumption decline a bit during downturns. I don't mean to suggest that there is a free lunch here...one must cut their draw during downturns, the reward for which is a slightly higher inital WR or (for chickensh7ts such as myself) a slightly greater margin of safety. I don't think one approach is any riskier or closer to a razor's edge than the other.

Cb

[2B]

Quote:

Originally Posted by Cb I've rarely been accused of being reasonable, Tooby.* I've run FIREcalc with a whole range of fixed + variable %'s, but my fear that leading experts such as Bernstein and Bogle and Buffett and JWR just might be right and equity returns over e next few decades may well be lower than in the past, so I'll stand pat at ~4%. Our portfolio will support 4%, and I figure I'll be so delighted simply not being at work that I won't have a great desire to spend even 4%, let alone a sportier WR. Cb

There are 3 risks. We just have to pick our balance between them.

(1) We take too much from our portfolio and "outlive" it.

(2) We take too little and forgo desired "luxuries" unnecessarily.

(3) To avoid (1) and (2) we stay in the harness longer than desired.

I like the philosophy I'll attribute to CT. This is to have a minimum life style and be sure you're safely funded for eternity (trailer by the trout stream) but pull out enough above that to enjoy while you can. CT said earlier this year to double minimum expenses and multiply by 25. I would say that is the ultimate conservative appoach.

Our spending will naturally fall off as we age. I expect my "wants" will be less at 75 than at 55. My desire to travel will also fall off. They way I see it. The risk of spending in my early retirement years above the 4% SWR will cut into the amount my heir's will receive or my future charitable contributions.

How your portfolio swings in value will affect your desire to spend. Run FIRECalc with different minimum portfolio values and watch how the 95% withdraw swings. This is especially true for Bernicke runs.