Your actual SWR goal

[kcowan]

I started at 4% in 2002 and have revised the target to 3.5% as of 2007.

Using 5% for personal inflation rate and 9% for average portfolio returns. (Used to be CPI and 7% now adjusted to be more realistic with 5 years of actual experience.)

[Lusitan]

I'm in my early 30s and planning for a (hopefully) long FIRE period that will start around 40. I'm using 4% for all my planning at this point, but with a little cushion built into the annual dollar amount.

[retire@40]

I will be using 4% of which 1% (25% of the 4%) will be purely for entertainment and travel. So I can always go down to 3% in bad times by doing more free things for entertainment.

[Sam]

Quote:

Originally Posted by Coach I'll be starting at about 6%. That will go down when SS kicks in. That's higher than may people would be comfortable with, but I'm single, no expectation of a particularly long life, no desire to leave an estate, and willing to reduce my withdrawal if things go badly. Coach

Me too, Coach. Will be starting at 6%, and down to 4.5% when SS kicks in. I'm willing to reduce my withdrawal in bad times too. Not sure what your definition of long life is, but I have no plan to hang around after 80. A few differences from your situation: I'll do 6% for 9 years (53 to 62). I do plan to leave a reasonable inheritance for my kids.

Let's update on each other in 5, 10, and 15 years, and see if we're eating cat food, deal?

[Coach]

Quote:

Originally Posted by Sam Me too, Coach. Will be starting at 6%, and down to 4.5% when SS kicks in. I'm willing to reduce my withdrawal in bad times too. Not sure what your definition of long life is, but I have no plan to hang around after 80. A few differences from your situation: I'll do 6% for 9 years (53 to 62). I do plan to leave a reasonable inheritance for my kids. Let's update on each other in 5, 10, and 15 years, and see if we're eating cat food, deal?

Sam, 80 is about what I'm using for planning, too.

If I can manage it so that the check to the funeral home bounces, I'll be delighted, but odds are I'll leave a bundle on the table. No kids, so it will probably go to great-nieces and -nephews. There should be enough of them around by then that they'll get a nice little treat but nothing that will seriously affect their lives. Enough to remember their weird Uncle Coach.

It's a deal on checking back about the cat food. But PM if the news is bad -- I'd be embarrassed to admit it in front of our friends on here!

Coach

[Sam]

Quote:

Originally Posted by Coach It's a deal on checking back about the cat food. But PM if the news is bad -- I'd be embarrassed to admit it in front of our friends on here!

Nah, let's make it public, be it success or failure. At least I will. Younger members might learn something from this old fool!

[DRiP Guy]

The graph of SWR's turned out to be an interesting distribution. any statisticians care to take a stab at what the best fit curve type is, and why?

I have no real insight myself, but it is pretty clear that there is a particular affinity for 4%, and I think it is safe to presume that's due to it being the most frequently mentioned amount. But the other amounts, both above and below, must have had some thought, analysis or rationale applied to create them, and then if we extrapolate, the peak (mode) STILL would appear to naturally occur at 4%.

[Arif]

Quote:

Originally Posted by DRiP Guy The graph of SWR's turned out to be an interesting distribution. any statisticians care to take a stab at what the best fit curve type is, and why? I have no real insight myself, but it is pretty clear that there is a particular affinity for 4%, and I think it is safe to presume that's due to it being the most frequently mentioned amount. But the other amounts, both above and below, must have had some thought, analysis or rationale applied to create them, and then if we extrapolate, the peak (mode) STILL would appear to naturally occur at 4%.

No stat guy here but I do find it interesting that over 40% chose a swr below the magical 4%. Similar to Bowtie's post about paying off his home it might be a psychological decision. A few have posted (and I'm in the same camp) that if 4% is safe then 2-3.5% must be even safer.

Thanks to everyone for sharing their thoughts. Very interesting results.

[Webzter]

Nah DRiP, it's just the graph giving us all the finger.

As for the 4% mode... I would wager this.

You need x dollars per year to live on. Let's call it 30,000. If we assume that, on average, 4% is considered a SWR. That would call for a portfolio of $750,000 to SWR. Now, say you're cautious and don't believe 4% is a good SWR for you. Then you might aim for a bigger cushion, say a 3% SWR. You still need 30,000 to live on so you're going to need $1mm in the bank to draw that 30k/year... an increase of $250k. Of course, there's additional time needed to accumulate that extra quarter of a million.

In other words, I think the mode represents the fact that the poll participants are planning to pull the trigger as soon as possible at this point. Another interesting way to slice it would be by age/expected years to retirement and also by expected years after retirement.

Expanding on all of that, the 5% likely represents those that will have a pension or SS kick in at some point. Obviously, you can either live nicer at the beginning or retire with less if you have some cushion at the tail.

Then again, this is all just guessing... I slept through stats and skipped the business courses.

[FIREd]

I voted 4% as a maximum SWR. In my planned retirement budget, my mandatory living expenses should easily be covered by a 2% WR and the other 2% I plan on using for entertainment and travel. So there is some cushion in case I need to lower the WR for whatever reason. Plus I expect that as I get older, I will be less able to travel and so the SWR might start going down in later years (unless what I used to spend on travel I then spend on healthcare...).

[retire@40]

Quote:

Originally Posted by Sam ...I have no plan to hang around after 80...

I'm thinking when you're 80, you might want another 5 to 10 years, depending on how healthy you are. So why not shoot for at least 85?

At 80, you may not be doing much more than sitting on your back porch smoking a pipe and sipping some JD, but you may still want to hang around.

[Sam]

Yeah, I know. But planning beyond 30 years does not make any sense to me at all. My only risky window is the first 9 years. Once SS kicks in, my WR will be 4.5% or less, and my portfolio should increase with time in inflation adjusted money. So the longer I live, the larger my kids' inheritance.

[yona]

[quote=Webzter;536761]
In other words, I think the mode represents the fact that the poll participants are planning to pull the trigger as soon as possible at this point. quote]

I think you are right.
My plan was to have 5% WR, since I am almost sure I can make more than 20% ROI. The "problem" is that my stocks did much better than I though in the last 2 years, but due to personal reasons I can't RE until July next year.

Now I leave on about 30K a year in one of the most expensive places in the world. So 20K a year should be piece of cake in a place like China or Thailand. So, now my plan is for 2% WR or even less. It means I will have a little bit more than 20K a year and will increase it by about 20% annually.

[unclemick]

Hmmm - back in ancient times before desk top computers, killer app.'s like speadsheets, MPT and all that new fangled clap trap - IF one would wander out to the mailbox and talk to the Norwegian widow - she would have explained to those interested that 4% was a good conservative number for a retiree's widows and orphan's portfolio.

And dividend checks are like cash - which to paraphrase that legendary guru Yogi Berra ' that's almost as good as real money.'

[CuppaJoe]

Quote:

Originally Posted by unclemick How times have changed. heh heh heh - anyone remember the high interest rates of the 70's, 80's? The famous stocks are dead article?

My goal is 3.5% but could vary between 3.3 and 4.00% depending upon actual date of retirement; I would be pleased at 3.7. I plan to retire at any moment between now and April of ‘09 latest. BTW, I’m 60 now.

"Heh heh heh," yeah, Uncle Mick, I started my IRA portfolio with Wells Fargo 18-month CDs at 15%, I was still happy with it when they gradually went down to 10%, at 6% stopped buying them, switched to whatever looked good at the time. Yeah, I’ve done ok in this up and down market history, considering I goofed around so much as a young dude; took four-months off most years until 1994. Don’t remember a "stocks are dead article" but when I bought my first stock mutual fund in 1972, kept it a secret because my dad was so anti-mutual fund, always talking about people who lost their shirts in mutual funds.

[donheff]

I voted 3.5 but I am toying with the idea of pulling 4 and putting the excess in CDs or a MM earmarked for fun. When things slowed down in Mr. Market I could scale back along Guyton lines and dip into the fun account if I want something frivolous. It is academic for now since DW doesn't pull the plug until 2008.