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Old 12-03-2016, 07:16 AM
 
6,220 posts, read 4,718,283 times
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Quote:
Originally Posted by TwoByFour View Post
That is an interesting concept, to recalculate a SWR every year as if you were just starting out in retirement. .........


I never said that I recalculate my SWR every year as if I were just starting retirement. The 4% actual withdrawal rate only applies to year 1. By year 30, the withdrawal would theoretically be 100%.


In 2009, I expected to retire at age 65 in 2012. I looked at a number of calculators and finally selected the old Fidelity calculator. The calculator gave me an estimate my withdrawals and portfolio totals for each year in retirement. I actually retired at age 64 and took off for 2 years of fulltime RV travel. During that time my investment returns were high and my expenses were low. I spent a lot on diesel fuel but otherwise there was not a lot to spend money on while in the national parks. When I came off the road in 2013, I needed to totally redo my retirement projections. My portfolio had grown to twice the predicted amount. Obviously there are good times and bad times, so adjusting the SWR to the maximum immediately following some strong years should only be done with caution.
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Old 12-03-2016, 07:22 AM
 
71,485 posts, read 71,652,652 times
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the 4% withdrawal rate was never ever meant to be an actual life long plan . it was only a laboratory way to stress test various draws and allocations with controlled conditions .

it was never meant to be take 4% year one and inflation adjust every year-have a nice life .it is only a ball park for comparing against other allocations and draws and has little to do with our plan once human spending intervention, health and life expectancy is introduced .

we like a variable plan that is calculated each year just to set our boundary's . we could easily spend 2x our income doing things , going places and buying things if left with no boundary's .

it looks like we will end this year less than 10% below the boundary's we set at the beginning of the year .

Last edited by mathjak107; 12-03-2016 at 07:33 AM..
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Old 12-03-2016, 07:50 AM
 
6,220 posts, read 4,718,283 times
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Some people like or need budgets. I hate them. I don't recalculate what I can spend each year. Markets go up and down. My expenses also vary greatly. This year we will end paying for an exceedingly expense new roof. Just because I need a new roof does not mean I will cut back on travel or other major expenses. I will wait another couple more years and then reevaluate. Who knows what the Trump era will bring?
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Old 12-03-2016, 08:00 AM
 
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you have to re-evaluate every few years . the deeper in to retirement you get the less cautious you have to be , the less down markets count if you had some nice run ups and the more your expenses can change up or down .

one years difference as to when you start retirement retirement can make for a totally different starting situation trying to use something like the 4% rule , which i hate saying ,because it is not a rule ...

take a hypothetical case where bill and bob both have a million bucks saved in 2008. bill retires in 2008 before the down turn and takes 40k in income . bob decides to wait a year .bill is down in 2009 and has 700k left while still taking 40k plus an inflation raise his 2nd year in retirement .

on the other hand bob now retires and has 700k left from his million , yet his draw at 4% is 28k a year initially .

so there you have 2 retirements 1 year apart with very different initial incomes . in 2009 bill draws 40k plus his inflation raise , bob draws 28k and yet they both have the same 700k balance .

you can see logically there is not a whole lot making sense here .

somewhere down the road bill either has to take a pay cut if things do not get better soon enough , or if they do get better bob has to take a pay increase .

except for 1 years difference in retirement spending they both should end up very close with adjustments . but just trying to use the 4% rule you can see would not make a whole lot of sense here .

Last edited by mathjak107; 12-03-2016 at 08:17 AM..
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Old 12-03-2016, 08:56 AM
 
Location: Mount Airy, Maryland
10,459 posts, read 5,920,270 times
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Once the paychecks stop and we start spend for moving expenses etc I'm sure I will be extremely stressed. It won't be until we settle that I"ll really be able to get a handle on our money in/money out situation.
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Old 12-03-2016, 09:10 AM
 
29,772 posts, read 34,851,819 times
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Quote:
Originally Posted by DaveinMtAiry View Post
Once the paychecks stop and we start spend for moving expenses etc I'm sure I will be extremely stressed. It won't be until we settle that I"ll really be able to get a handle on our money in/money out situation.
You are wise to realize that
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Old 12-03-2016, 09:43 AM
 
7,899 posts, read 5,028,121 times
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Quote:
Originally Posted by jrkliny View Post
What poor returns over the past 8 years??? You really would have needed to make seriously poor choices not to have done well. In the past 8 years my portfolio has way more than doubled due to the excellent returns.
Over the past 8 years, my portfolio has also more than doubled - despite being dragged down by European stocks. Unfortunately...

Quote:
Originally Posted by TwoByFour View Post
If we choose the exact last 8 years, from Nov 30, 2008 up to today, a 60/40 portfolio of total stock market and total bond market, will just about exactly double in value. But if you pick Jan 1 2008 up to Jan 1 2016, over that 8 year period the portfolio grows only 70%. By November 2008 the market was tanking and most people were fleeing, not buying.

... So what is the market performance over the last 10 years? It has exactly doubled for a CAGR of 7.5%. That is way below the historical average of 11%.
... whether we regard market-performance as spectacular, humdrum or atrocious, depends on our period of regard. Yeah, I'm grateful for the returns over the past 8 years... profoundly grateful! But the collapse from October 2007 through March of 2009 was intense. And it followed a threadbare recovery - remember that? - from the nadir of 2002-2003. Going back to 2000, the past 16 years have been merely humdrum in the American stock market, and downright disastrous for the European stock markets (in dollar-denominated terms).

Going forward, if Europe recovers and the DAX hits 20,000 and FTSE hits 12000 and the Euro rises back to $1.35, yeah, I'll be ecstatic. Until then, I'll be looking at the 0% rule.
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Old 12-03-2016, 10:28 AM
 
12,705 posts, read 9,961,918 times
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Quote:
Originally Posted by TwoByFour View Post
I totally get that and feel the same way, but the numbers don't lie - if your withdrawal rate is 3.3% or less and your longevity is 30 years, then you do not need any more return than simply to keep your portfolio at pace with inflation, and putting all your money into TIPS bonds will do that. You will drain every last penny if you live 30 years, but it will last that long.

Our withdrawal rate is under 3.3% but I won't/can't put all our money into TIPS. The reason why is uncertainty about our withdrawal rate. Black swans scare me, and a big black swan could disrupt the best laid plans. So I want a cushion.
Only if you have a TIPS "ladder" so that you never sell any before maturity. If you sell them before maturity the market could give you a haircut. And even if you hold them to maturity, you need even the short duration ones to have a real return of at least 0% (or the longer ones to have a significant real return to "make up for" the shorter ones).
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Old 12-03-2016, 10:58 AM
 
29,772 posts, read 34,851,819 times
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Are we discussing safe withdrawal rate with preservation of capital or are we talking about a draw down that last until some future age? I ask because our evaluation of age 80ish options and preferences we fully appreciate that might be a time for increased wealth if we want the CCRC or other similar platform.
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Old 12-03-2016, 12:34 PM
 
71,485 posts, read 71,652,652 times
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a safe withdrawal rate is always about providing an unbroken income stream over a specified time . what is left is not a concern of a safe withdrawal rate. it can be 1 buck at the end of 30 years and the stress test is passed .

legacy money may be a by product since 90% of the time at 4% over 30 years a 60/40 portfolio has left you with more than you started non inflation adjusted but in the other 10% some just dqueeked by using all dollars .
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