A review of basic withdrawal stratagies in retirement.

[photoguy]

Personal Inflation Rates vs CPI-U

Since I was working on my expense spreadsheet anyway (to tally for end of year), I made a quick chart comparing my expenses to the top category CPI-U weights.

Surprisingly (to me), they were not that different. Our spending underweights almost all categories except for recreation. I guess the big concern of mine would be medical care which is still low for us now but might be a much bigger chunk as we get older. This might result in CPI-U understating our personal inflation rate. However this might be offset by the fact that we have no educational expenses (another area with higher than normal inflation rates).

 

[audreyh1]

This year (to date) our portfolio dropped a little - down 0.47%.

When I take our Jan 2015 withdrawal into account, we are down 3.95%.

The retirement portfolio real gain since after 2012 is still positive: 5.44%. So that will more than cover next year's withdrawal. But if we don't get some portfolio growth in 2016, we'll fall behind the next year. Compared to the start of 2013 that is. We're still way ahead in real terms compared to 2000.

 

[Lsbcal]

We are somewhat ahead of the 2003 portfolio at retirement. Although a nice feeling as compared to down, we should all get used to a declining portfolio as the next several years unfold. That would be the most probably path, I think, if we are spending to enjoy the present.

Of course, there are all those up and to the right lines in FIRECalc. But we've had a nice bull market and I want to be realistic. Still I *hate* the idea of a down trending portfolio even for 1 year. This year our portfolio will probably be down 1 or 2%.

 

[Chuckanut]

Well, it felt like enough of a crash to me. But I have to agree, the path in the 1930's was similar to the 2008 to March 2009 path, but just kept going down ... and down ... and down.

FWIW, the legendary John Templeton in the 1930's bought 100 shares of every stock he could find that was selling for under $1 a share until the money ran out. (Yes, he must have had money to start with.) No doubt that took guts, but, according to his biography, that was one of the best moves he ever made.

 

[Corporateburnout]

We are somewhat ahead of the 2003 portfolio at retirement. Although a nice feeling as compared to down, we should all get used to a declining portfolio as the next several years unfold. That would be the most probably path, I think, if we are spending to enjoy the present.

Of course, there are all those up and to the right lines in FIRECalc. But we've had a nice bull market and I want to be realistic. Still I *hate* the idea of a down trending portfolio even for 1 year. This year our portfolio will probably be down 1 or 2%.

Hopefully not too many years of declining inflation adjusted portfolio value especially for those of us newly retired. Although I don't like to see my portfolio shrink in value it is the sequence of return risk for a retiree investing in the stock market and I'm psychologically ready for it.

 

[Lsbcal]

Hopefully not too many years of declining inflation adjusted portfolio value especially for those of us newly retired. Although I don't like to see my portfolio shrink in value it is the sequence of return risk for a retiree investing in the stock market and I'm psychologically ready for it.

That (red) is key. Then hope for the better outcome.