Die With Zero - search for that. That is the title of a recent book.Hello
I'm looking for some spend down, die broke type of threads on here that deal with spending more than the 4% of net worth. Maybe there is another term to search related to those type of subjects. Thank you
I'm very interested in this topic, having just pulled the FIRE "alarm". In my case, expenses will be well above 4% for first two years, while we downsize housing situation and realize on various liquidity events. When the dust settles, and SS+pension kick in, we should be 3.5%-3.8%, somewhere in that range, excluding any lumpy expenses. My understanding is that the SWR has been updated to 4.5%-4.7% depending on what day it is, so I've got some room to play with.
What I'm finding in this early stage is that we've got a lot of pent up spending - stuff that we either didn't want to do or have the time/energy to do while I was still running hard on the megacorp hamster wheel. Like suddenly, I want to take off on some big international travel, rent that beach house for the family reunion, join a country club, rent a motorhome and venture off to the Grand Canyon, charter a yacht in the Caribbean, etc. Basically blow some dough. Now, knowing me, I'll settle down. I'd just like to get comfortable spending more, maybe a lot more in the early years, knowing we'll settle into a base line later on.
P.S. Know I'm in the minority on this, but the 4% SWR just seems ludicrously cautious to me. Now, maybe that's because I have a great deal of flexibility on spending, whereas a lot of folks need to be certain because there is no room for error. My 3.8% budget could be cut to a 2% budget in a worse case. I'm also not too concerned about legacy - the family I'd like to help, I'd like to help while I'm still awake.
I have that same situation to start with. To put it succinctly, "It is messy"
Another approach is to just "retire again". Let's say that you retire with $1m and use a 4% WR. 3 years later you have 125% of what you started.
Someone retiring today could prudently start with 4% WR on $1.25m so there is no reason that you can't as well and get a 25% increase.
So basically take the larger of 4% of your current stash or 4% of your last restart adjusted for inflation.
found the kitces article on raises
EXECUTIVE SUMMARY
The fundamental purpose of the so-called “4% rule” is to determine an appropriate “income” or spending floor that is low enough to survive potential sequence-of-return risk – at least, based on the worst return sequences that can be found in the historical data. If market returns going forward turn out to be as bad as scenarios like the Great Depression or the stagflationary 1970s - from which the 4% rule originated - the portfolio is still anticipated to sustain inflation-adjusted spending to the end of the 30-year time horizon. If returns are better, there will simply be “extra” money left over.
Yet the reality is that in the overwhelming majority of scenarios, returns are not so bad as to necessitate a 4% initial withdrawal rate in the first place. In fact, by applying the 4% rule, over 2/3rds of the time the retiree finishes with more than double their wealth at the beginning of retirement, on top of a lifetime of (4% rule) spending! Half the time, wealth is nearly tripled by the end retirement, as retirees fail to spend their upside!
Accordingly, a more dominant approach is to plan in advance that if the portfolio gets “far enough” ahead, spending can be increased - but not increased so quickly that the retiree might have to go backwards shortly thereafter.
Of course, the reality is that retirees experiencing a “favorable” sequence of returns will inevitably sit down for a portfolio/retirement review and realize they are so far ahead that it’s “safe” to increase spending anyway.
But as it turns out, a relatively simple ratchet-style approach, where spending is increased by 10% any time the portfolio rises more than 50% above its starting value, can “dominate” the traditional 4% rule, generating equivalent or better retirement spending in all scenarios, even while being conservative enough to not require a spending cut in the event of a market pullback in the future.
https://www.kitces.com/blog/the-rat...l-rate-a-more-dominant-version-of-the-4-rule/
Another approach is to just "retire again". Let's say that you retire with $1m and use a 4% WR. 3 years later you have 125% of what you started.
Someone retiring today could prudently start with 4% WR on $1.25m so there is no reason that you can't as well and get a 25% increase.
So basically take the larger of 4% of your current stash or 4% of your last restart adjusted for inflation.
Always appreciate the way in which you distill/clarify/illustrate these concepts !
thanks …
i count on those a whole lot smarter then i am to look under the hood and look at old school myth or ways of doing old school planning better.
i never found the traditional 4% constant dollar method of withdrawal good after setting an initial draw rate .
rather i want to be rewarded in up years without waiting years to compare to my starting point to get a raise other then inflation adjusting .
so we use 95/5 from bob clyatts book .
it works great for us and couldn’t be more simple .
each year we take 4% of the ending balance as our goal posts . in a down year we get the higher of 4% of the actual balance or just 5% less then the previous year .
but because when markets are good ,draws run higher , even in 2022 our reduced draw was still higher then it would be under the traditional method
it is very simple to implement .. also just because you can spend that much doesn’t mean you may .
we are almost 9 years in to retirement in queens in nyc .
we usually spend about 140 to 160k a year which is pretty much the norm or lower end for a household here .
but based on our income coming in and portfolio value , we can spend up to 245-255k .
we don’t need that much , but we will go buy a luxury end car every 4-5 years
P.S. Know I'm in the minority on this, but the 4% SWR just seems ludicrously cautious to me. Now, maybe that's because I have a great deal of flexibility on spending, whereas a lot of folks need to be certain because there is no room for error. My 3.8% budget could be cut to a 2% budget in a worse case. I'm also not too concerned about legacy - the family I'd like to help, I'd like to help while I'm still awake.
That is what I figure too. We want to front spend while we are fit enough to enjoy travel. We have enough annuity-type income streams that we would never be reduced to eating out of the garden and fishing for meat
That is what I figure too. We want to front spend while we are fit enough to enjoy travel. We have enough annuity-type income streams that we would never be reduced to eating out of the garden and fishing for meat
Not that there is anything wrong with that, but it will be a choice not a necessity.
Part of the BTD is a nice trailerable boat to put in at the marina 15 minutes away, and go crabbing, salmon, halibut, and tuna fishing in the Straits of Juan de Fuca.
If things were looking good, that might be a bigger, moored boat.
Hello
I'm looking for some spend down, die broke type of threads on here that deal with spending more than the 4% of net worth. Maybe there is another term to search related to those type of subjects. Thank you