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This is a great retirement thread. It's the the kind of discourse I look for in a retirement forum.
First of all, let me congratulate those who have very successful portfolios. Increasing your withdrawals because your account is growing out of control is a great problem to have. Kudos.
But for me, the bold text in MJ's post above is my ultimate goal and not an adverse outcome.
Why? Two reasons.
1. I have come around to the "what if you live?" way of thinking even though my family's history doesn't support it. I want to make it 30 years past my retirement date. If so, I will be the first in my family to get anywhere close. I still believe genetics is king, but maybe I can make enough lifestyle tweaks to increase my longevity into new territory.
2. My spouse is significantly younger than me. I don't want to worry about leaving her in a financial lurch.
I'm a federal employee and a national guard retiree, so I will have some consistent, inflation protected income. I can tolerate a bit more risk in my 401k but I'm really tempted to keep some powder dry to buy in after a downturn.
I'm curious. Is there any trigger that would cause you to move to safer investments or do you view any deviation as poor investor behavior? If you realize we are in a sustained downturn, how are you going to adjust?
Speaking for myself at age 70 a prolonged downturn at this age is different than even ten years ago.
so what made those time frames the worst ? what made them the worst is the fact in every single retirement time frame the outcome of that 30 year period was determined not by what happened over the 30 years but the entire outcome was decided in the first 15 years.
so lets look at the first 15 years in those time frames determined to be the worst we ever had.
1907--- stocks minus 1.47%---- bonds minus .39%-- rebalanced minus .70% ---inflation 1.64%
1937---stocks -- 3.45%---bonds minus 3.07%-- rebalanced 1.23%--inflation 2.82%
1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%
it is those 15 year horrible time frames that the 4% safe withdrawal rate was born out of since you had to reduce from what could have been 6.50% as a swr down to just 4% to get through those worst of times.
while 6.50% to 4% does not sound like a lot 1 million at 4% is an initial draw rate of 40k , at 6.50% you could have had 65k . that is a whopping 60% more .
so what it boils down to is any time you fall below a 2% real return average over the first 15 years you run the danger of 4% not holding. but even a 1/2% cut in spending will make you whole again over the next 15 years or longer.
Thanks this way of looking at things is understandable. Thanks for taking the time to spell this out for me so clearly.
What if you are about 70 and modest lifestyle. 6 0r 7% all right?
What do you think is the maximum percent of assets or income a retiree should spend on housing alone--Inexpensive condo or small house? I have done the Monte Carlo simulation and long term prospects are pessimistic.
i don't look at things in that light . when we set a retirement lifestyle we did it based on discretionary and non discretionary spending .
why ? i will give you an example.
if you structure a lifestyle around your income and everything is a non discretionary expense , if markets perform less than average , where would you cut back ? it would be very hard deciding between paying your utilities , the rent or eating .
so what we did is took all the things we felt were needs and we really did not want to do without and we called that our non discretionary spending . so we did not include food , travel ,gifts , clothes , etc .anything we can have a say in was excluded .
we then doubled our non discretionary budget and made that our total budget .
now we have room to cut back if needed .
on the other hand for the same total dollars we could live in manhattan , only most of our money would be non discretionary . it would almost be like living when you are house rch and cash poor . the budget would not allow very much except the essentials .
both are living within our means yet there is a big difference in discretionary spending .
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,075 posts, read 7,515,583 times
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Quote:
Originally Posted by carnelian
Interesting thread.
What if you are about 70 and modest lifestyle. 6 0r 7% all right?
What do you think is the maximum percent of assets or income a retiree should spend on housing alone--Inexpensive condo or small house? I have done the Monte Carlo simulation and long term prospects are pessimistic.
JMO, a 6 or 7% SWR when you started out a few years ago at 4%SWR, sounds a bit aggressive. At 5%, thats a 25% increase in the Standard of Living. 6% is 50% increase. I expect to see a 33% market fall, in the near future. I am prepared to see another 40% fall in my lifetime. Both could be thru asset valuation or by inflation.
If today, you are retiring at ~70, I'd still stick to ~4% to get your, Income/LivingExpense=1.0
If today, you retired at 62 and now 70, as OP and we are, and have, Income/LE>1.0, I'd readjust.
The easiest way is just enter it in to firecalc with the number of years left . Then just keep increasing the spending figure until you fall below 90% .
I don’t enter all my expenses in to these calculators . What I’d do is stress test the portfolio for the max that is safe . That is my goal post . It just means I can go up to that number
What if you are about 70 and modest lifestyle. 6 0r 7% all right?
What do you think is the maximum percent of assets or income a retiree should spend on housing alone--Inexpensive condo or small house? I have done the Monte Carlo simulation and long term prospects are pessimistic.
figuring age 70 and planning out to 95 it looks like you can draw 45k on 1 million with a 60/40 . out of 123 25 year cycles , so far 10 cycles failed giving you a 91% success rate
FIRECalc Results
Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.
FIRECalc looked at the 123 possible 25 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 123 cycles. The lowest and highest portfolio balance at the end of your retirement was $-241,892 to $3,726,708, with an average at the end of $1,124,088. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 25 years. FIRECalc found that 10 cycles failed, for a success rate of 91.9%.
if we go out to age 92 instead of 95 you can spend 48k
FIRECalc Results
Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.
FIRECalc looked at the 126 possible 22 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 126 cycles. The lowest and highest portfolio balance at the end of your retirement was $-191,255 to $3,315,492, with an average at the end of $1,026,880. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 22 years. FIRECalc found that 9 cycles failed, for a success rate of 92.9%.
Last edited by mathjak107; 09-17-2018 at 04:47 PM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,075 posts, read 7,515,583 times
Reputation: 9798
Quote:
Originally Posted by leastprime
JMO, a 6 or 7% SWR when you started out a few years ago at 4%SWR, sounds a bit aggressive. At 5%, thats a 25% increase in the Standard of Living. 6% is 50% increase. I expect to see a 33% market fall, in the near future. I am prepared to see another 40% fall in my lifetime. Both could be thru asset valuation or by inflation.
If today, you are retiring at ~70, I'd still stick to ~4% to get your, Income/LivingExpense=1.0
If today, you retired at 62 and now 70, as OP and we are, and have, Income/LE>1.0, I'd readjust.
I can envision two types of stressors: Asset Valuations & Inflation. Both would affect your INCOME.
In an asset valuation change, ie Great Recession, housing, credit, and Equity got revalued without any inflation. As we all saw, if you were lucky enough to not get fired, getting a loan during the crisis was difficult.
In an Inflation, Income would have less buying power AND asset valuations would be revalued downward to reflect inflation, ie late 70's and early 80's.
How difficult is it to match the portfolio in the model to the real world with ETF's? Or do you simply use the model portfolio as generic for an array of equities and bond assets? Simple seems appealing to me that is matching the indexes with ETF's. In this FANG rapid growth world, we saw a narrow set of stocks dominate above overall market. How do you adjust to the right stocks over time or do you use ETF's covering sectors as well as say a Nasdaq ETF to be sure you are catching new trends or do you just keep it simple?
How do you figure large expenses, unexpected?
Fridge and computer got fried during a storm. Insurance company informed us they will no longer insure us without a new roof ($17,000). Large trees on property need trimming ($2,000). Replacement of fridge and computer ($4,000).
Ordered new fridge. Thinking of refurbished computer. Can't do anything about the roof except get it done.
Both cars are on last legs (12 yrs old).
On top of all this, husband got estimate for dental implants of $38,000!
Depressing and wondering how to pay all this
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