What if your w/d strategy is "winging it'?

[daylatedollarshort]

I love my spreadsheets. I would make a detailed year by year spreadsheet rather than wonder or worry. If you know Excel, you could make a basic one in an hour or two. I'd also use Firecalc and the Fidelity retirement planner, too, to make sure your numbers are in the right ballpark.

Do you know what your SS payments will be and when you best options are for taking SS? If you are going to stop working now you can use the calculators on the SS site to estimate payments based on your current work credits.

Are your pensions inflation adjusted? Living overseas you have to account for the possibility of different exchange & inflation rates, so I'd leave extra pad in the budget for that.

700K gives you 14 times your annual expenses. If I had 40+ times I might feel comfortable winging it without more of a detailed plan, but at 14 times I would have a year by year plan to make sure I would not run out of money.

[donheff]

It doesn't sound so much like "winging it" on withdrawals as assuming a permanent low cost life style. If you were from the area this wouldn't seem very risky but I would worry about whether I would want to come home 5, 10, or 15 years along. Bye, bye ultra-low cost living and it could be very hard to re-enter the work force after such an absence. The real issue you seem to be winging is whether the location is sustainable. Ultimately, you know more about that than anyone here does. I would recommend looking at your backup options if you were to return 15 years from now. Will you have social security and Medicare, how much from the pensions, what is likely to be left in your portfolio. If you live a frugal, local style lifestyle in Asia for many years coming back to the US and living on the cheap in a very low cost area might not feel like a privation. Lets face it, a lot of elderly Americans get by on SS alone.

Good luck, and assuming the forum keeps humming along, keep us updated over the years. Real life experiences are worth a dozen speculations and there are lots of young dreamers who may profit from yours.

[pb4uski]

Have you analyzed your situation using Quicken Lifetime Planner or FireClac?

[Independent]

Everybody wings it to a certain extent. I can't recall any posters saying they were going to run a spreadsheet before retirement and then spend exactly the amount on the spreadsheet every year in retirement, regardless of any investment or life situation changes.

Many of us have done simple calculations. That's what you've got.
Step 1 - House proceeds of $600k / annual spending of $50k = 12 years, assuming that your laddered CDs can match inflation and exchange rate issues.
Step 2 - If the remaining $700k grows at an average 5% real for 12 years, you will have $1.25 million. If you withdraw $50k in the 13th year that will be ... wait for it ...
...exactly 4% of your long term nest egg.

Most of us say that we can be flexible after retirement because we could actually live on less than our targeted withdrawals and (possibly) because we've got something on the side we haven't included in the calculation. For a lot of people, that's a paid for house they aren't selling, for others, it's a very conservative view of SS.

You seem to have similar conservatism. You probably feel you could live on less (maybe a lot less) than $50k. You've got some pensions and SS that's not in the calc.

I'd seriously consider a Plan C where you decide that you really want to come back to NA. Other than that, it looks like you're in the "standard" range for this group.

[Mulligan]

Quote:

Originally Posted by donheff It doesn't sound so much like "winging it" on withdrawals as assuming a permanent low cost life style. If you were from the area this wouldn't seem very risky but I would worry about whether I would want to come home 5, 10, or 15 years along. Bye, bye ultra-low cost living and it could be very hard to re-enter the work force after such an absence. The real issue you seem to be winging is whether the location is sustainable. Ultimately, you know more about that than anyone here does. I would recommend looking at your backup options if you were to return 15 years from now. Will you have social security and Medicare, how much from the pensions, what is likely to be left in your portfolio. If you live a frugal, local style lifestyle in Asia for many years coming back to the US and living on the cheap in a very low cost area might not feel like a privation. Lets face it, a lot of elderly Americans get by on SS alone. Good luck, and assuming the forum keeps humming along, keep us updated over the years. Real life experiences are worth a dozen speculations and there are lots of young dreamers who may profit from yours.

I agree, Donheff. Let's face it, OP is going to Asia because that is the lifestyle, they want to live, which is great. It isn't about not being able to afford to live anywhere in US for $50k a year. Granted, I live in "fly over country" but I live on under $40,000 a year. I pay child support, funding college, pay for my own health insurance, and also have a mortgage payment on a very nice, but modest sized home. I live within 30 miles of a 2 million metro area and attend music and professional sports events. Every year I take an annual trip to USVI, and fly out to Vegas or Tahoe at least 4-5 times a year. So a couple without all the overhead I have, could live just fine in the US if they needed to. But I congratulate the OP on their willingness to seek out an adventure.

[dm]

The best you can do is plan and hope for the best. But be flexible. I retired in 2007 and like everyone else saw my net worth drop like a rock in 2008, and my fall back plan of selling the house and downsizing didn't look to good either. But we watched our spending and didn't make any big purchases that year. Everything looks good now. Just make sure you have a little cushion in your plan and be willing to adapt.

[traineeinvestor]

I'm a non-US expat living in, about to FIRE in, Asia. In my case Hong Kong. Asia has a lot going for it and there are many people who love the lifestyle and the potential for a good to high quality but low cost of living. Thailand and Malaysia are popular.

That said, one of the problems with these low cost jurisdictions is that their economies are developing at a rather rapid pace and the cost of living is rising faster than US CPI. Add in some currency appreciation and there is potential for a growing mis-match between your mostly USD/CAD assets/income and your local currency expenses to develop. The combined effect of (say) 4% pa inflation and (say) 2-3% pa currency appreciation can be quite damaging to those budgeting on anything like a fixed USD level of spending.

I am not suggesting that you move more of your assets to your retirement jurisdiction as that would expose you to a different set of risks, just pointing out an issue which a number of expat retirees need to be aware of.

Good luck with your retirement.

[Katsmeow]

Quote:

Originally Posted by rodiy2k Once the house proceeds cash runs dry, I have absolutely positively no idea how much we’d need to withdraw every year to make it last another 20 or 30 years. What I do know is that nobody has a clue about future tax rates, and studying 100 years of past performance makes about as much sense to me as asking a psychic. There’s no way predicting future rates of return, political or social events that could trigger a crisis or timing the market. I’d rather concentrate on understanding how to use proper asset allocation and attempt to stay properly invested in any investing climate than worry about how much to withdraw each year. In lean times, live more modestly; in boom times I’d take an extra vacation Am I crazy?

Maybe. Maybe not.

To the extent that what you are saying is that it makes sense to be flexible and not just blindly look at the past, then you aren't crazy.

To the extent that you are saying that within a certain range you prefer to adjust your lifestyle to match the money that you have rather than delay retirement to get more money to have a certain lifestyle, then you aren't crazy.

To the extent you are saying that you aren't going to look at past successful withdrawal rates and are just going to spend willy nilly without considering how long your money might last then, yeah, that might be a little crazy.

To be absurd, let's imagine someone who is now 60 and has, say, $1,000,000 left. To say that you plan to spend $45,000 a year out of that portfolio in good years and will cut back in bad years might be a tad aggressive but I wouldn't call it crazy.

On the other hand, imagine the same situation and ratchet that $45,000 a year to $90,000 a year .... history would suggest even cutting back in bad years is unlikely to make this a successful undertaking.

For some people, doing this by winging it probably works out fine for one of 3 reasons (or a combination thereof).

1. Naturally frugal people who naturally spend way below what the experts would call a SWR. My parents fell within this category. When my dad was alive, they spent less than their combined modest social security each year. They didn't have a withdrawal rate because they were still saving money on modest social security and a couple of tiny ($2k or a year) pensions.

2. People who die well before 30 years. Most planning is based upon making withdrawals safe for a 30 year retirement at age 65. Plenty (most) people who are withdrawing amounts that would surely lead to failure before the end of 30 years never find out because they die at 75 or 80 or 85. Vanguard's calculator says that a 65 year old man has a 6% chance of living 30 years, a woman has a 13% chance and the change that either will do so is only 18%.

3. People who have so much money that even though they aren't extraordinarily frugal they don't have to worry too much about withdrawal rate. Give me a $5 million portfolio and my natural, non-frugal spending rate is such that I don't have to think too much about my withdrawal rate.