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Old 01-16-2018, 10:44 AM   #121
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This. Just use 4% rule to make sure you have enough assets to retire in the first place. It would be very silly to literally use this rule once retired. It was never intended to be used that way.
There seems to be a slavish attachment to the 4% "rule" in this crowd!
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Your "innumerate lawyer" is over-simplistic, but is doing the first basic step to the calculation.

1/30~3.33% (adjust longevity as needed).

I really think that people coming up with ultra-low SWRs have forgotten about this basic first step.
Right the 3.33% "rule"!
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Old 01-16-2018, 11:26 AM   #122
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There seems to be a slavish attachment to the 4% "rule" in this crowd!Right the 3.33% "rule"!
Could be. My biggest reason for not worrying too much about the “rule” is that my portfolio is quite different than that used in the studies. Firstly, I think the Canadian market supports a higher WR (based on historical results). Plus my portfolio has outperformed the Canadian market by about 4% per year over the last 20 years. Granted, I’m not as diversified as most people would want and that is my biggest risk, one I’m comfortable with.

In addition, once you have been retired for a while, rules of thumb seem less important. The actual sequence of return results would seem to me to be the important factor.
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Old 01-16-2018, 11:29 AM   #123
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There seems to be a slavish attachment to the 4% "rule" in this crowd!Right the 3.33% "rule"!
Interestingly, if you fiddle with FIRECalc you will find that 3.33% is exactly 100% success for a 40-year retirement at the defaults - 75/25, no SS, etc.
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Old 01-16-2018, 11:40 AM   #124
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Interestingly, if you fiddle with FIRECalc you will find that 3.33% is exactly 100% success for a 40-year retirement at the defaults - 75/25, no SS, etc.
Great so my innumerate lawyer who has never seen a spreadsheet came pretty close with his back of napkin calculation. It seems to reinforce his "Don't confuse me with numbers!" mantra...
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when to reset SWR basis
Old 01-16-2018, 12:58 PM   #125
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when to reset SWR basis

To the OP:
If you're slavishly following FIRECalc and the 4% rule notice that if you change the period from 30 to 25 years the historical failure rate is less than 2%, so you're odds of 'winning' are even better now that you're 8 years closer to the abyss.

Personally, I am hitting the 5 year mark this year and will have unfettered access to my main retirement account. The plan has always been to reevaluate this year considering both finances and health. Fortunately I'll be doing the evaluation from a position of both better health and way better finances than expected. I hope to be reevaluating every five years. We do still have free will and health and finances will change.
I expect I will be spending a bit more than the 4.5% I budgeted the last 5 years if I can figure what to spend it on. The only requirement I put on the new spending is that it is close to completely discretionary and can be cut out at will. (Not a second home, boat, or child in other words.)
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Old 01-16-2018, 03:21 PM   #126
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I agree with your statement that if I start with a WR which was successful in every one of the past 117 thirty year periods, I can ratchet up in response to good experience and say that I still have a withdrawal amount which was successful in every one of the past 117 thirty year periods.

But, the OP specified that he was withdrawing 4%, not 3.2%. FireCalc says that 4% is 95% successful.

Suppose I start with a 4% rate, and have good early results. This good news may have put me into one of those 100% successful rates, assuming I don't ratchet. If I do ratchet, I take myself out of a 100% successful WR and into a 95% successful WR.

IMO, that's a choice that requires some thought.
It requires thought in either case. And I don't see where starting from a 95% Historically Safe Withdraw Rate (HSWR) or a 100% HSWR conflicts with or materially changes anything I said.

Clearly, ratcheting up spending at any point will reduce the portfolio. It can't be any other way, that's basic arithmetic.

So if we stick strictly with the data set in FIRECalc, ratcheting up from a 100% HSWR will keep you 100% safe, but with a smaller ending portfolio (some will view this as more 'efficient'). If you start with 95%, of course, the lower portfolio means you may push more of those years into failure.

And like I said earlier "pass/fail" quantizes the data in a way that is probably not all that helpful to us. A $2 difference can take from pass to fail - but in real life, $2 might mean you run out of money before or after you decide to buy a cup of coffee with lunch on a particular day 28 years from now.

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Old 01-16-2018, 04:09 PM   #127
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It requires thought in either case. And I don't see where starting from a 95% Historically Safe Withdraw Rate (HSWR) or a 100% HSWR conflicts with or materially changes anything I said.

Clearly, ratcheting up spending at any point will reduce the portfolio. It can't be any other way, that's basic arithmetic.

So if we stick strictly with the data set in FIRECalc, ratcheting up from a 100% HSWR will keep you 100% safe, but with a smaller ending portfolio (some will view this as more 'efficient'). If you start with 95%, of course, the lower portfolio means you may push more of those years into failure.

And like I said earlier "pass/fail" quantizes the data in a way that is probably not all that helpful to us. A $2 difference can take from pass to fail - but in real life, $2 might mean you run out of money before or after you decide to buy a cup of coffee with lunch on a particular day 28 years from now.

-ERD50
Okay, it looks like we've been talking past one another.

In my first post in this thread, I suggested that the OP look at the good early results and think about how to "spread it around" between more safety, higher payout, and (possibly) a higher target estate.

The post by Dory seemed to say that the only decision was whether to take a raise or a bonus. That bothered me.
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Old 01-16-2018, 04:29 PM   #128
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Okay, it looks like we've been talking past one another.

In my first post in this thread, I suggested that the OP look at the good early results and think about how to "spread it around" between more safety, higher payout, and (possibly) a higher target estate.

The post by Dory seemed to say that the only decision was whether to take a raise or a bonus. That bothered me.
OK. When I reread Dory's post, it struck me as just a mechanical rundown of what the numbers say you could do, not really working through what you should do, or looking at other options.

Your post seemed to talk about if you started at 95%, either accept the portfolio bump up as a safety factor that maybe takes you to 100%, or take a portion of the raise or bonus. I'd bet that of those taking the raise/bonus - a strong majority would take a portion, no real need for all-or-nothing, so split the difference.

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Old 01-16-2018, 04:55 PM   #129
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OK. When I reread Dory's post, it struck me as just a mechanical rundown of what the numbers say you could do, not really working through what you should do, or looking at other options.
+1

Dory's post is in response to a request (and thread entitled) "Explain the 4% withdrawal rate". I have always seen that post as an explanation of the Trinity Study results, not a recommended course of action.
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Old 02-26-2018, 01:56 PM   #130
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There is quite a bit of effort in financial research to determine how to squeeze out all the excess money for the vast majority of cases where 4% is too low. Michael McClung uses mathematical constructs like Harvesting Ratio and Withdrawal Efficiency Rate to analyze different withdrawal strategies in his book "Living Off Your Money". He analyzes fixed percent withdrawals, the 95% rule, decision rules, floor/ceiling, mortality-based rules, etc.

His bottom line is that the variable methods that incorporate mortality tables work best. Those are all more complicated than a 4% rule. BTW, I don't believe that he analyzes Bogleheads VWP directly.
I just retired and trying to internalize some of the past discussions and their potential implications on my plans. I saw this reference to “Living Off Your Money” last night and read the 3 chapters available for free online. McClung builds a case to use “The Prime Harvesting Strategy” which leads to higher maximum SWR than annual rebalancing (say 4.4% vs 4.0%). Have any folks here been trying to apply The Prime Harvesting Strategy, and if so, what have your experiences been?
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