Why take a much smaller SWR than you can??

[Cut-Throat]

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.

Exactly, if you have a high equity allocation, the 50% downturn is a Big hit... Factor that with a smaller Withdrawal Rate and the money that you did not Withdraw from Stocks in the Up Market years is now pretty much gone forever. It evaporated in the Market Downturn. BTW - I worked with the Author of VPW over at Bogelheads during the Development Phase.

 

[hesperus]

I'm always amazed at some of the members of this forum who take very low (<1%) WR when they could easily triple or quadruple it SAFELY. You can't take it with you so why leave so much $$ behind? One only gets a single go around in life.

So far, this past year we took approx .95%, or $92K from our portfolio. Primarily it comes to us in dividends (the ones that aren't reinvested), and bond interest. Frankly, it's hard to spend more. We have to make the effort. Trying...

 

[Dtail]

Exactly, if you have a high equity allocation, the 50% downturn is a Big hit... Factor that with a smaller Withdrawal Rate and the money that you did not Withdraw from Stocks in the Up Market years is now pretty much gone forever. It evaporated in the Market Downturn. BTW - I worked with the Author of VPW over at Bogelheads during the Development Phase.

Understand that. Actually using a "fixed" percentage of current portfolio has one similarity as VPW in that one is spending more in an up market and vice versa.

 

[RenoJay]

Some of us have a guilty pleasure of enjoying watching our balance grow monthly on the spreadsheet. Before you judge, is it any dumber than spending money on stuff you don't really want?

 

[Dtail]

So far, this past year we took approx .95%, or $92K from our portfolio. Primarily it comes to us in dividends (the ones that aren't reinvested), and bond interest. Frankly, it's hard to spend more. We have to make the effort. Trying...

I would think once one gets to ~10mm portfolio (kudos), it would be more difficult to spend 350k to 400k yearly.

 

[Cut-Throat]

Understand that. Actually using a "fixed" percentage of current portfolio has one similarity as VPW in that one is spending more in an up market and vice versa.

For Sure, that's the way it works... And that is only 1 component of VPW.


The fixed percentage SWR with inflation adjustment does not work this way however.
It starts consuming an even a bigger percentage of a portfolio into the teeth of a bear market.

 

[hesperus]

I would think once one gets to ~10mm portfolio (kudos), it would be more difficult to spend 350k to 400k yearly.

Thanks. It's probably because we have spent far less than we we could have that we reached that milestone over the last 7-8 years. It would be incredibly difficult to spend 4%. We're not wanting for anything, and as RenoJay stated, why spend on things you don't want just to reach your WR? It's a process to switch one's mindset out of LBYM. We have made, and are making adjustments, but they haven't yet added up to the 3-4% annual WR

 

[kimcdougc]

Me 58 and DH 60. We have been retired 3.5 years now. We currently are living on after tax funds until DH turns 62. We will re-evaluate when he turns 62 if he will start SS yet. We have 2 more years of savings to live off of if need be and a hefty emergency savings we could live on for 2 more years if needed.

When we start taking withdrawals from our IRA we plan to take between 2.5 to 3.0% of our portfolios value.

So far we haven't needed any money outside of our budget that we wrote up for 5 years when DH turns 62 and we do everything we really want to do. Have 2 newer cars. A 2013 Ford F150 with 40,000 miles to pull the paid for 2017 rv and 1 2017 Honda CRV. (Also have a little 2000 Toyota Spyder convertible to run around in the summer). All paid for with cash. Don't need much more.

We are happy spending money and just doing local things if needed at some point. Stuff doesn't make you happy but experiences do. IMHO.

 

[unclemick]

Well, I'm with you.....


But, I know a lot of people that Spending money actually causes "Pain" to them.... Some of them happily enjoy seeing their portfolio increase even after retirement. It's mostly an emotional reaction, and has no other answer. To each his own......

There's a certain emotional high being a 'cheap SOB and proud of it.'

heh heh heh - But after 25 years of ER I'm trying to get better. Really. Well sort of.

 

[RunningBum]

If someone has a pension that covers nearly everything, say all but $1000, and they have $100K investment worth, that have a 1% WR. I suspect some of the low WR people may be cases like this, though I don't know. It's certainly possible. This is clearly a different situation than someone with no pension and not yet taking SS who only takes 1%, but both share a 1% WR unless you annuitize the pension.

 

[street]

I have posted a few times on this thread mostly because I have a very low WR. I just looked at the numbers for 9 month of this year and I'm down $1700 from what I started with in Jan.. I really do need to spend more and give more to my charity. We spend and do and get what we want when ever, but still really not spending anything at all. We have just about more coming in then going out. This is pre SS so when that day comes I most likely will have a WR of .1 or .2 and still be living with out skimping and buying what we need. Even if I bought a new truck the numbers still would be less then 1% WR for the year.

In my case a large junk of the money hasn't been taxed but still have 11 years or so till it legally has to be taxed. One doesn't know what taxes will be then and if I will have any of that money left from a few bad market years.

I have one heir and a charity that will most likely get the bulk of my legacy if there is one. We spend and don't live cheap so not sure why I want too spend more on myself.

 

[audreyh1]

Some of us have a guilty pleasure of enjoying watching our balance grow monthly on the spreadsheet. Before you judge, is it any dumber than spending money on stuff you don't really want?

Who here is spending money on stuff they don’t really want?

 

[RobbieB]

Not me. I spend lots of dough on stuff I want to buy.

The key word here is want. Not need.

 

[cyber888]

4% is the target. But if the market is great in a particular year, no harm taking 5%. I don have kids or anyone to leave it to, so I’m spending all of it.

 

[Scuba]

I don’t know our WR either and don’t manage to a specific WR, but I suspect it is in the 3-4% range. We are spending a little more than we did pre-ER, mainly on travel and healthcare.

We buy what we want and travel when and where we want, and have ramped up gifts to our niece & nephew. Still, we are early in our ER and haven’t been through a down market in ER yet, so we’re not opening the floodgates.

Things we might spend more on in the future include:
- Upgrade to business or first class flights
- Once we aren’t as mobile to travel outside of the US, possibly buy a boat and/or vacation home nearby.

 

[Golden sunsets]

So far, this past year we took approx .95%, or $92K from our portfolio. Primarily it comes to us in dividends (the ones that aren't reinvested), and bond interest. Frankly, it's hard to spend more. We have to make the effort. Trying...

With that portfolio I sure hope you are spending more than $92,000 per year!!! We are withdrawing about 1% as well , but are extremely fortunate to have 4 other revenue streams that are cola'd and dwarf the 1%, so the need to tap the portfolio is secondary to spending the annual cola'd income.


Sent from my iPad using Early Retirement Forum

 

[Dtail]

For Sure, that's the way it works... And that is only 1 component of VPW.


The fixed percentage SWR with inflation adjustment does not work this way however.
It starts consuming an even a bigger percentage of a portfolio into the teeth of a bear market.

Bolded - yes we do agree on this one. I would be surprised if many folks would ever strictly use the Bengen/Trinity research as their actual withdrawal scheme, or would effectively adjust it along the way during bad markets.
However, it appears to be used by some/many folks as a good starting pre retirement reference readiness point.

 

[NW-Bound]

Not me. I spend lots of dough on stuff I want to buy.

The key word here is want. Not need.

We don't even want the "stuff". The easiest way to blow the dough is to buy a larger and more expensive home. Ugh! Lots of work to move, and our homes are comfortable enough. Maybe I can just update them from time to time.

The next thing is to buy expensive cars. My stock return last year would allow me to buy a Tesla Model S and a Model X for myself. And another pair for my wife, and we still have plenty leftover. And my stash is nowhere as big as that of Hesperus (but our spending is already comparable).

Ugh! I can see getting upset when finding a ding on the door or fender put there by a jerk when I park at Costco. Not worth it. Nope. Lost the desire for fancy cars when I was in my late 30s, and it is not coming back. And I do not have a 4-car garage.

 

[Totoro]

I like a light lifestyle.

Which means: no staff, little stuff, much flexibility. Most of what I do now I wouldn't change if my assets go up substantially. In fact, I have had roughly the same lifestyle since I was a student.

What I still could do: 1) Improve transportation: Business, first class or even personal jet when flying. 2) Go for higher quality food (high end salmon & tuna mostly) 3) Get a driver with an electric car for longer drives, and 4) arrange for snow birding.

Beyond that .. I have everything I want right now. Just to throw a number out there: I couldn't imagine spending >$80k or so a year. Even $50k feels quite luxurious.

 

[HadEnuff]

Who is to say they really know what a "safe" WR rate is, or should be?
There is enough uncertainty in my mind about inflation, rate of return on my investments, and how long I may live, that I'm not totally at peace with a 4+% WR at this point in my life.

 

[garyt]

This thread is pretty worthless without actually mentioning the amount of your nest egg. Obviously 2% or 3% of $10m is a whole different thing then 3% of $1m. Seems many on this forum have $5-$10m saved and I can see where it would be somewhat difficult to spend 4% of that for a lot of people.

 

[dtbach]

Some of us have a guilty pleasure of enjoying watching our balance grow monthly on the spreadsheet. Before you judge, is it any dumber than spending money on stuff you don't really want?

I hope I didn't come across as "judging". I was just curious about some very low WR scenarios.

 

[jkern]

Many reasons that have been mentioned also apply to me (content with lifestyle, security, legacy for children and future grandchildren).

I also self insure for LTC and Earthquakes. I don't mind having an additional $1M in case I need to rebuild my house.

 

[RenoJay]

I hope I didn't come across as "judging". I was just curious about some very low WR scenarios.

No worries. I wasn't accusing anyone of judging...I just realized that my statement about liking to see a rising balance on the spreadsheet could certainly come off as "judgement-worthy."

 

[street]

This thread is pretty worthless without actually mentioning the amount of your nest egg. Obviously 2% or 3% of $10m is a whole different thing then 3% of $1m. Seems many on this forum have $5-$10m saved and I can see where it would be somewhat difficult to spend 4% of that for a lot of people.

True.

I would like to see a poll to actually see what kind of wealth we have on this site. It would be nice to see how many at 1M, 2M and so forth in increments like that. Not NW poll just all money in your portfolio.

No responses or replies need to be added just a poll. There are some good reasons why it would be good data for posting. I'm assuming everyone here has a lot more money then I have but then again I really have no idea.

I don't feel people want something like it done from what I gather from reading between the lines. I have no problem with people that have 20M or 1M we are all here because of where we are in life, and to social on the same interests.