Why take a much smaller SWR than you can??

[audreyh1]

You would probably have a lower than 4% WR if the market drops 50% unless you are 100% equities.
So you can probably sleep even better.

Exactly. A 50% drop in the stock market won’t mean a 50% drop in your retirement fund unless you are 100% stocks. Few retirees are that exposed unless they have most of their expenses covered by pension+SS.

 

[Rdub]

So true, I should have said if my portfolio dropped by 50%. My investment portfolio will be about 70/30 after escrow closes. Time for a glass of wine and a nice anniversary dinner with my wife and kiddos.

 

[Chief416]

I get more wisdom from you folks than anything I see on FBN, CNBC or anywhere else on the Gloom Tube. I retired at the end of 17 at 59 w/2M in IRA and brokerage accts. My wife still owns and runs a business and I’ll start collecting a modest pension at 60. Haven’t had the need to pull a cent out of investments yet and wonder why I didn’t bail from a career that nearly destroyed me sooner. Still go to coffee now and again with former co-slaves and giggle when they sincerely express worry about how I fill my time without “meaningful employment”. Now at the point where I just giggle and ask them if they realize what they just said. How did we all get so scared?

 

[Midpack]

The overriding answer is because you can't know if you've withdrawn too little until the end of the plan (when you go poof). All we know is probabilities based on the past.

 

[MrLoco]

Haven't read every post so not sure if this has been mentioned.


If you take a smaller WR and leave money on the table....so what? You are dead and either a charity or family heirs will get the money.


But......if you take to large a WR, you could be sitting there at 82 and broke!
Which is a worse scenario?

 

[Fedup]

Good question to ask this guy, Chow Yun Fat.
https://shanghai.ist/2018/10/15/cho...-leave-entire-714-million-fortune-to-charity/

 

[big-papa]

The overriding answer is because you can't know if you've withdrawn too little until the end of the plan (when you go poof). All we know is probabilities based on the past.

It's a reason some people don't use a SWR type of withdrawal method. It seems to me that if you can survive on a very low WD, then you should be able to survive when using something like VPW, where a bad sequence can result in a low withdrawal, but for which there is the possibility of upside. And you can't deplete your portfolio any earlier than you planned to when you set it up.

https://www.bogleheads.org/wiki/Variable_percentage_withdrawal

 

[TwoByFour]

We could be withdrawing more but honestly I don't feel the need to. We eat well, we never worry about doing something because it costs too much, we just live simple lives and are pretty happy with that. I like the idea of leaving a chunk of money to a good cause so I am not worried about dying with money left over.

 

[youbet]

most people pad a bit.

Ding! Ding! Ding!

Audrey, I award you the youbet understatement of the day trophy!

Dramatically overestimate expenses. Deeply discount income streams and anticipated market performance. Assume all worse case scenarios come to pass. That's us!

 

[mickeyd]

Our WR is whatever we decide to take out of our stash. My RMD is never spent on anything as it is just rolled over to either my PMMF or TSM, depending on a variety of things. By exchanging my RMD to my taxable account does not constitute an expenditure (though it is a taxable event) as I see it, because I have not purchased anything.


SS and pensions generally take care of most of our normal living expenses. Doesn't everyone do it this way?

 

[audreyh1]

Ding! Ding! Ding!

Audrey, I award you the youbet understatement of the day trophy!

Dramatically overestimate expenses. Deeply discount income streams and anticipated market performance. Assume all worse case scenarios come to pass. That's us!

Belts and suspenders, etc. Typical of many posters here.

It’s a scary thing to step out of the rat race early.

 

[audreyh1]

Our WR is whatever we decide to take out of our stash. My RMD is never spent on anything as it is just rolled over to either my PMMF or TSM, depending on a variety of things. By exchanging my RMD to my taxable account does not constitute an expenditure (though it is a taxable event) as I see it, because I have not purchased anything.


SS and pensions generally take care of most of our normal living expenses. Doesn't everyone do it this way?

Many of us have no SS (yet) and no pensions. Many of us here are completely dependent on our investments to fund our retirement.

 

[NW-Bound]

Many of us have no SS (yet) and no pensions. Many of us here are completely dependent on our investments to fund our retirement.

Instead of a three-legged stool for retirement income, most of us just have a two-legged chair, although with SS cut, the chair will have uneven legs.

Really early retirees with a long way to go till SS, and then their SS will be small anyway due to their short work life, will be bouncing on a pogo stick.

 

[audreyh1]

Right, our SS is smallish due to retiring early, although we had good enough paying jobs - I certainly hit the top limit for several years. Even at 70 it doesn’t come near to covering our current expenses, although it would support a seriously pared down lifestyle.

 

[RunningBum]

SS and pensions generally take care of most of our normal living expenses. Doesn't everyone do it this way?

How could you be here for 14 years and think that?

 

[Dtail]

Many of us have no SS (yet) and no pensions. Many of us here are completely dependent on our investments to fund our retirement.

+1
I am trusting historical and monte carlo versions of investment performances incorporated into retirement calculators.

 

[HadEnuff]

cuz I sleep better that way.

 

[pj.mask]

I feel like if you retire early enough (~25 years to ssi) you essentially have to use a perpetual withdrawal rate. Then ssi or pensions kick in and you may end up spending less.

I plan to retire 40-45 and spend around 3% with revised spending to whatever that supports. Should be 130%-200% of current spend but will also be supporting kids through college and potentially living separately (one near kids and one on vacation) or something. Will also include travel costs. Who knows if those will materialize or I’ll just get back into computer gaming instead.

 

[USGrant1962]

Dramatically overestimate expenses. Deeply discount income streams and anticipated market performance. Assume all worse case scenarios come to pass. That's us!

Yup. I assume a higher tax rate than likely reality, neglect 95% rule or other spending adjustments, neglect the fact that I am better diversified than FIRECalc provides for, assume only 75% of my SS benefit, neglect a likely mid-6-figure inheritance, don't consider 100% equity in two houses, and don't consider consulting income.

With all that I'm still targeting a 4% WR (dropping to 3% when SS kicks in), and yet I am well over 100% success in FIRECalc. So yes I'm taking a a lower WR than my SWR [side rant - please get your WR/SWR terminology right!] but not 2.x%. I have cataloged where I am being conservative and understand each assumption, and I can add most of them back into FIRECalc to understand my real SWR.

I get a little concerned that this talk about 2.0-2.5% as some kind of SWR (IT IS NOT SWR, IT IS A WR) might lead lurkers to work much longer than necessary or even prudent. Kind of in conflict with the whole concept of ER.org.

 

[Fedup]

Instead of a three-legged stool for retirement income, most of us just have a two-legged chair, although with SS cut, the chair will have uneven legs.

Really early retirees with a long way to go till SS, and then their SS will be small anyway due to their short work life, will be bouncing on a pogo stick.

I admire you Google Fu. It made me . Made my day.

 

[pj.mask]

Yup. I assume a higher tax rate than likely reality, neglect 95% rule or other spending adjustments, neglect the fact that I am better diversified than FIRECalc provides for, assume only 75% of my SS benefit, neglect a likely mid-6-figure inheritance, don't consider 100% equity in two houses, and don't consider consulting income.



With all that I'm still targeting a 4% WR (dropping to 3% when SS kicks in), and yet I am well over 100% success in FIRECalc. So yes I'm taking a a lower WR than my SWR [side rant - please get your WR/SWR terminology right!] but not 2.x%. I have cataloged where I am being conservative and understand each assumption, and I can add most of them back into FIRECalc to understand my real SWR.



I get a little concerned that this talk about 2.0-2.5% as some kind of SWR (IT IS NOT SWR, IT IS A WR) might lead lurkers to work much longer than necessary or even prudent. Kind of in conflict with the whole concept of ER.org.

Why is 2-2.5% not a SWR? Is it only safe if firecalc gives you some % of success? The difference between a WR and a SWR is you expect a SWR to last through your retirement period and yield an expected remaining balance. It is safe by your plan. Your WR is the current actual if it differed from your plan (above or below) for whatever reason.

 

[USGrant1962]

Why is 2-2.5% not a SWR? Is it only safe if firecalc gives you some % of success? The difference between a WR and a SWR is you expect a SWR to last through your retirement period and yield an expected remaining balance. It is safe by your plan. Your WR is the current actual if it differed from your plan (above or below) for whatever reason.

No, a WR is the amount you choose to withdraw (for whatever reason). SWR is defined in the ER literature as a maximum withdrawal that survives historical back testing. SWR has nothing to do with remaining balance - it only requires that you don't go broke. Your WR may be higher or lower than an SWR, that's up to you.

There is nothing wrong with deciding to withdraw only 2.0% or 2.5%, but don't confuse that with the portfolio survival that SWR is intended to address.

 

[Fedup]

No, a WR is the amount you choose to withdraw (for whatever reason). SWR is defined in the ER literature as a maximum withdrawal that survives historical back testing. SWR has nothing to do with remaining balance - it only requires that you don't go broke. Your WR may be higher or lower than an SWR, that's up to you.

There is nothing wrong with deciding to withdraw only 2.0% or 2.5%, but don't confuse that with the portfolio survival that SWR is intended to address.

I would think this would be safer than safe, but nevertheless, it’s still safe.

 

[USGrant1962]

I would think this would be safer than safe, but nevertheless, it’s still safe.

Agreed. But don't let perfect be the enemy of good enough when deciding if you have "made your number."

 

[big-papa]

Agreed. But don't let perfect be the enemy of good enough when deciding if you have "made your number."

Yep, it's a definitional thing. This same issue came up on bogleheads a while back regarding SWR and other terms used in the same way (like MWR for Maximum Withdrawal Rate), perpetual withdrawal rate, etc.

An issue always arises when discussing these things regarding terminology. I see sometimes people talking about a withdrawal rate (WR) and it's not often clear whether they're talking about a "Bengen/Trinity Study Style" withdrawal rate that starts as some % withdrawal from a portfolio and is increased each year for inflation or whether it's just a fixed percentage of the portfolio which relies on portfolio growth to eventually keep up with inflation.