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Old 10-06-2018, 11:18 AM   #41
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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.
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Old 10-06-2018, 11:38 AM   #42
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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.
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Old 10-06-2018, 12:20 PM   #43
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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.
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Old 10-06-2018, 12:47 PM   #44
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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.
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Old 10-06-2018, 01:41 PM   #45
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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.
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Old 10-06-2018, 04:29 PM   #46
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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).
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Old 10-06-2018, 05:37 PM   #47
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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.
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Old 10-06-2018, 05:42 PM   #48
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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!
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Old 10-06-2018, 05:54 PM   #49
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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.
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Old 10-06-2018, 05:54 PM   #50
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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.
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Old 10-06-2018, 06:02 PM   #51
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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.
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Old 10-06-2018, 06:27 PM   #52
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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...
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Old 10-06-2018, 06:32 PM   #53
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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.
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Old 10-06-2018, 06:33 PM   #54
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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?
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Old 10-06-2018, 06:47 PM   #55
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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.
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Old 10-06-2018, 06:49 PM   #56
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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.
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Old 10-06-2018, 07:03 PM   #57
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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
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Old 10-06-2018, 07:29 PM   #58
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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.
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Old 10-06-2018, 08:24 PM   #59
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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.'

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Old 10-06-2018, 08:36 PM   #60
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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.
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