Why take a much smaller SWR than you can??

[GoodWishes]

Our WR has been about 2.5%. We have everything we need/want. We travel, we eat out, we gift, we donate ... Not sure where we would spend more money on.

 

[Elbata]

I'm not sold on the idea that spending more money brings greater happiness. Sure, I'd like to leave less and spend more on me. Spending money to spend money just doesn't make me happy.

 

[travelover]

Speaking for myself and DW, the reason we don't take out the full 4% is that between our pensions and SS, we have all the money we want to spend and then some. Second, neither one of us wants to bankrupt the other with long term care. Think of how crappy it would be to exhaust your savings on an expensive dementia facility for years and leave your spouse with almost nothing.

 

[Midpack]

I agree with many of the low WR views already expressed here. We’re comfortable, have some regular indulgences and when we see something outside the budget we’d like, we just buy it. Why spend more? But mostly for us, there are no guarantees as to what SAFE is, only probabilities. We don’t have pensions other than SS, and our nest egg still has to last over 30 years. I’d rather regret that we didn’t spend more, than to regret spending too much and living under a bridge for years...

 

[daylatedollarshort]

We're interested in sustainable living and a low consumption lifestyle. We feel it is better for the planet, our portfolio and mental health. Most studies show that excess materialism actually leads to unhappiness.



We spend more on experiences rather than things, but there's a lot of fun stuff to do where we live that is cheap or free so there is no need for us to spend a fortune to have a good time.

 

[DrRoy]

I was around 2% the first two years and that included a new car. Thinking of 2.5% for next year to bump travel and remodel the deck.

 

[HFWR]

Given that I’m only on FIRE-Year 3, and given that I don’t know if I have 30 min or 30 years left, I’m not quite ready to “Blow That Dough”, though my WR is around 4% anyway. And, well, I don’t have the 7 or 8 or 9 figure portfolio...

I’m not into stuff that much, but I could find plenty of ways to spend more...

 

[mystang52]

DW still w*rking so we're not drawing down yet. But my estimate is we will be withdrawing between 2 and 2 1/2%, and even that figure leaves a significant cushion in our likely spending. We know what we enjoy, and what it'll cost, so don't anticipate spending more for the sake of spending more.
I can see a little excess being spent, perhaps in an extra travel excursion or two, or maybe flying first class.

 

[pb4uski]

One splurge that I might consider is a housekeeper once a week to clean the house (I hate housework) and perhaps hiring out some of the more mubdane things that we DIY now.

 

[donheff]

We are at ~2%. We are able to do what we like and buy what we want. We have recently started flying business and have upped our giving a bit. I still worry that the economy will crash and we will appreciate the leeway. I’m 70 now and in about 5-10 years depending on the market I plan to start gifting the kids. As we get into our 80s we hope to help with the grand kids college. We haven’t told the kids that because we don’t want them to skimp on savings.

 

[Dtail]

We know we will be at 2.4% this year and any monies not spent go into our emergency buffer. The actual spending will be around 2%.
Next year we plan to go to 3% withdrawal from the portfolio. I do not feel comfortable with 4% yet, with SOR potential in our beginning years of retirement, plus currently committed to ACA income management.

 

[Dawg52]

To some degree the fear of the unknown. But I don't feel as though I'm scrimping. I'm perfectly happy with my life. I am thinking about upgrading to a more premium 4k tv tho.

 

[ShokWaveRider]

Some want to leave a legacy me thinks.

I don't have any children, so I'm gonna Blow That Dough!

Us too...… We just take what we need for our own determined satisfying Quality of Life.

 

[street]

I'm not sold on the idea that spending more money brings greater happiness. Sure, I'd like to leave less and spend more on me. Spending money to spend money just doesn't make me happy.

Excellent answer and feel the same.

 

[T-Minus]

I can’t speak for other people, but for me personally, I am an early retiree (age 57) and am concerned with early-retirement sequence of returns risk. So, my first-year withdrawal rate has been approximately 1% (my limit was established at 3.4%). My second-year (2019) withdrawal rate limit is 3.5% but, in reality, will likely wind up closer to 2.5%. I’m thinking that my actual withdrawal rate will gradually rise to my projected limit over a period of five years...unless some sort of black swan event occurs - then I can easily dial things back and, in extreme circumstances, take Social Security early (it hasn’t been figured into my retirement calcs). You know, a delayed gratification type thing...just like the years in the run-up to retirement. As it is, we have more spendable cash than before retirement, and I’m finding it difficult to loosen up my spending.

 

[dtbach]

Some interesting responses to my question and pretty much what I thought they would be, i.e. "happy with life at that WR, so why would/should we take more". And certainly the 99.9% guarantee that with so low of a WR you could make it through Black Swans, Mega Depressions, etc and still come out in good shape does give a great deal of security.


I'm probably going to stick with 3.0 to 3.5 as that gives me a bit of extra slack but meets my needs.

 

[FIREd]

I plan to spend about 2% of my liquid assets annually (and just above 1% of my total assets) for the foreseeable future. I just got divorced and I do not plan to remarry. Except for one niece, I have no heirs. And since my niece is already bound to inherit quite a bit from her grandparents, I do not feel obligated to leave much of an estate (I'd be happy to leave her only my primary residence).

So why spend so little? I am going through a big transition right now and I am not quite comfortable with my new financial situation yet. And I am only 44 years old, so a 4% WR is a bit ambitious. But once I find my footing, I might loosen a bit the purse strings. But I doubt that I will go over 3% of liquid assets / 1.5% of total assets.

 

[scrabbler1]

Having retired 10 years ago at age 45, I have had to make the taxable part of my portfolio carry the burden of meeting my expenses until my "reinforcements" begin arriving at age ~60. Those include unfettered access to my rollover IRA, my frozen company pension, and SS.


This makes calculating my SWR a little murky. Should I include the currently inaccessible IRA in the denominator, or just the taxable portfolio? Including the IRA keeps my SWR in the 2%-2.5% range. Without the IRA, my SWR rises into the 3%-4% range.


In the last 10 years, my total spending has been driven by the volatile medical costs, mostly health insurance. In my early ears of ER, HI rose sharply prior to the ACA, so sharply that I was beginning to question my ER if premiums kept rising the way they had been (50% in 2 years).


I greatly lowered my HI premiums for a few years but went underinsured until the ACA's exchanges began. In those years, my SWR dropped to under 2%. After the ACA's exchanges began in 2014, I was no longer underinsured but my total expenses were back on the rise.


When I got sick in 2015, my medical costs spiked, sending my SWR to nearly 3%. That spike settled down so my SWR is back around 2%. My diabetes is under control, thankfully.


But the whole time my medical costs were jumping up and down, the market value of both my taxable portfolio and IRA were rising quickly. This has a bigger effect on my declining SWR than anything else. My IRA's value has more than doubled, without adding any outside money to it. And it isn't like it is hugely in stocks, and I have been consistently rebalancing away from the stock side to maintain my AA, an AA which has been slowly creeping away from stocks.


The biggest major purchase I have done in recent years was the new car I bought in 2007, 18 months before I ERed in late 2008. Car maintenance costs have been minimal, as I drive maybe 3,000 miles per year and the car sits in a heated garage most of the time. My goal there is for the car to last me until at least age ~60 when I can gain unfettered access to my IRA. That's only 4 years from now.


I have been using some of my money to help out my ladyfriend, lending her money to pay down her big credit card bills. I hate seeing her pay a lot of interest as much as I hate paying it myself. To her, it's a lot of money, but for me it's little more than a rounding error. If my SWR rises to nearly 3% one year, no big deal.

 

[Helen]

We are drawing <1.5% pre-SS. We spend what we want. But other than travel most of what we like to do doesn't cost very much. I'm working on my spouse to up our donations, there is a lot of need out there.

 

[daylatedollarshort]

Another point to consider is that spending doesn't necessarily equal lifestyle. A trip can be just as enjoyable, maybe even more so for people like me, paid with credit card sign up points instead of portfolio withdrawals. Our library has free passes to around 50 cultural attractions. We don't have less fun because we didn't pay full price for the tickets. My goal is not to spend less to sit home and be a miser but to spend less and and do more. If we can have the same lifestyle as our neighbors on half the spending why not? It leaves more money for our kids, favorite charities and LTC, if we need it.

 

[Cut-Throat]

Some interesting responses to my question and pretty much what I thought they would be, i.e. "happy with life at that WR, so why would/should we take more". And certainly the 99.9% guarantee that with so low of a WR you could make it through Black Swans, Mega Depressions, etc and still come out in good shape does give a great deal of security.


I'm probably going to stick with 3.0 to 3.5 as that gives me a bit of extra slack but meets my needs.

Actually your 3.0 to 3.5 WR is pretty low to me..... (And I'm assuming that is inflation adjusted?) .... I use VPW which is safer than ANY Inflation Adjusted SWR. My current 2018 WR is 4.6% of Portfolio Balance. ... I have no trouble spending money -- two late model $60K Cars, Winters in the Bahamas, Australia, Hawaii....It's really quite easy for me to spend... If I had more money, I'd buy a Private Jet ...Money to me is not to be worshiped, if you don't spend it, someone else will ....Keeps the economy humming... You just have to plan to spend it, like you planned to save it... It's just Math..
When people here say that their SWR is 3.0%, I am guessing that no one here actually follows a plan of an Inflation Adjusted 3.0% WR ? - Correct?... I actually follow a plan of a VPW, just because I know it is "guaranteed " to work. This also 'forces' me to sell more equities in Up Markets and less in down Markets. (The reverse of dollar cost averaging).

 

[Dtail]

Actually your 3.0 to 3.5 WR is pretty low to me..... (And I'm assuming that is inflation adjusted?) .... I use VPW which is safer than ANY Inflation Adjusted SWR. My current 2018 WR is 4.6% of Portfolio Balance. ... I have no trouble spending money -- two late model $60K Cars, Winters in the Bahamas, Australia, Hawaii....It's really quite easy for me to spend... If I had more money, I'd buy a Private Jet ...Money to me is not to be worshiped, if you don't spend it, someone else will ....Keeps the economy humming... You just have to plan to spend it, like you planned to save it... It's just Math..
When people here say that their SWR is 3.0%, I am guessing that no one here actually follows a plan of an Inflation Adjusted 3.0% WR ? - Correct?... I actually follow a plan of a VPW, just because I know it is "guaranteed " to work. This also 'forces' me to sell more equities in Up Markets and less in down Markets. (The reverse of dollar cost averaging).

For those of us who follow a formulaic type WR%, there are some of us including me who use (or will use next year) a % of current portfolio assets.
This concept has some different and some similar concepts of VPW.

Nevertheless, I am not sure how VPW is guaranteed to work. Yes, conceptually one will never run out of money, but the spending levels can still be too low in certain market scenarios to not fully support one's current lifestyle.

 

[Cut-Throat]

Nevertheless, I am not sure how VPW is guaranteed to work. Yes, conceptually one will never run out of money, but the spending levels can still be too low in certain market scenarios to not fully support one's current lifestyle.

It's still a matter of planning... If you are only invested 30% in Stocks and have delayed S.S. to age 70 it is not a big problem. Say the Market drops 50% (Typical in a Severe Downturn)... Your Portfolio WR amount only Drops by 15% or so... Which is only part of your spending, because S.S. delayed amount is much higher. That is mostly a piece of cake for cutting spending.


So, that is how it is Guaranteed to work. (And if VPW doesn't work, you are pretty much talking about a Complete economic collapse, where any other Withdrawal Scheme will fare far worse.)


So, you should check it out!

 

[Dtail]

It's still a matter of planning... If you are only invested 30% in Stocks and have delayed S.S. to age 70 it is not a big problem. Say the Market drops 50% (Typical in a Severe Downturn)... Your Portfolio WR amount only Drops by 15% or so... Which is only part of your spending, because S.S. delayed amount is much higher. That is mostly a piece of cake for cutting spending.


So, that is how it is Guaranteed to work. (And if VPW doesn't work, you are pretty much talking about a Complete economic collapse, where any other Withdrawal Scheme will fare far worse.)


So, you should check it out!

Indeed I have checked it quite a few times over at Bogleheads plus @Big Papas and others excellent commentary on the concept over here.
I do believe it is a good concept, but just not for me, plus not sure if one has a much higher equity allocation (even though covered in the choices), one would still be very comfortable in a 50% downturn.

 

[Offgrid Organic Farmer]

I dont think I could convince my wife to spend more than 2%. She is completely locked into the mindset of accumulating more Net Worth.

She is okay with charity. We can give away more each month, than what we spend on ourselves, and she is fine, so long as our Net Worth still grows.

We are pre-SS.