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Old 07-29-2019, 06:56 AM
 
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Quote:
Originally Posted by lieqiang View Post
There is no one-size-fits all for historical success rate. Some people are comfortable with 80, some 95.
there are suggested minimums ...there is no magic number .

the reality is success rates actually run higher because when combined with the statistical numbers of life expectancy most of us wont last 30 years in retirement so it ups the success rates . of course the problem is we don't know who of us will exceed 30 years either as few as it might be .

i think most of us who are at least "aware " of such things to tend to want at least a 90% success rate TO START .

Kitces highlights some impressive stats to show how safe the SWR actually is , so sure lower success rates can work out fine , but we don't know in advance which of us will be the poster children for that lower rate failing as slight as the chance is .

“the safe withdrawal rate actually has a 96% probability of leaving more than 100% of the original starting principal!”

“In fact, even when starting with a 4% initial withdrawal rate, less than 10% of the time does the retiree ever finish with less than the starting principal. And it has only happened four times in the ‘modern era’ of markets: for retirees who started a 30-year retirement time horizon in 1929, 1937, 1965, and 1966.”

“Over 2/3rds of the time the retiree finishes the 30-year time horizon still having more-than-double their starting principal. The median wealth at the end – on top of the 4% rule with inflation-adjusted spending – is almost 2.8X starting principal. In other words, it’s overwhelmingly more likely that retirees will have opportunities to ratchet their spending higher than a 4% rule, than ever need to spend that conservatively in the first place!”


As Kitces describes, “it turns out 10 years really is the ‘sweet spot’ for sequence of returns risk; a bad decade at the start of retirement is more predictive than 1-year returns and is also more predictive than 30-year returns”

Therefore, if your first decade of retirement goes smoothly, you’ll likely end up with a lot of money leftover when you die (or you can increase your spending during retirement). If your first decade isn’t great and you deplete a big chunk of your portfolio early on, you may be in trouble.

Last edited by mathjak107; 07-29-2019 at 07:14 AM..
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Old 07-29-2019, 06:59 AM
 
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Oh, please. I doubt that even 5% of the population retires with $1.7 million. They manage to survive, and most survive quite well on substantially less than that.
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Old 07-29-2019, 08:34 AM
 
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Quote:
Originally Posted by mathjak107 View Post

i just posted an example where it would take saving 400k more on top of a million if fixed income is used with no equities to get the same 40k safely .

so the catch 22 is they cant grow their savings effectively without the use of equities so they may achieve a higher savings amount to try to not have to use equities in retirement .

the difference between a 3% draw using just fixed income vs a 4% draw with at least 40% equities can be a 25% pay cut ..


.
But if a person is willing and able to work and save these extra $400k (as I was), why would this person NOT prefer to do that, rather than deal with the stock market, ie, with managing money and subjecting it to market risk? To me, extra work was preferable to stock market (since, as I said, when I was young I would have worked hard anyway, even if the reimbursement had not been good... I would have felt guilty not working until 50 at least. I haven't had to work for a long time, yet I still work on/off).


I do have a bit of money invested (in mutual funds), about an equivalent of one year's post-tax salary (if I worked full time), but I consider that a play money - I'll be converting it into a Roth IRA over the next 2-3 years, and plan to keep it there until I exhaust everything else that is exhaustable (I will additionally have annuities and soc security, which are never exhaustable anyway). It seems to me that investing is good for people who either (a) have extra money they can play with, out of curiosity to see what the market will do in the next decades (I doubt it will do the same as in the past couple of decades :-) - which is essentially what you did, because you had basic funds to secure retirement from other sources, OR (b) have very little money anyway, so the choice is either to live on soc security only (or welfare if they never qualified for soc security) and this little bit of extra money, or take a gamble and invest this little money in hope that it will grow to something more substantial (and if this little money is lost in the market, oh well, it was only a little money to start with so no big damage done).
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Old 07-29-2019, 08:36 AM
 
72,241 posts, read 72,198,066 times
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Quote:
Originally Posted by elnrgby View Post
But if a person is willing and able to work and save these extra $400k (as I was), why would this person NOT prefer to do that, rather than deal with the stock market, ie, with managing money and subjecting it to market risk? To me, extra work was preferable to stock market (since, as I said, when I was young I would have worked hard anyway, even if the reimbursement had not been good... I would have felt guilty not working until 50 at least. I haven't had to work for a long time, yet I still work on/off).


I do have a bit of money invested (in mutual funds), about an equivalent of one year's post-tax salary (if I worked full time), but I consider that a play money - I'll be converting it into a Roth IRA over the next 2-3 years, and plan to keep it there until I exhaust everything else that is exhaustable (I will additionally have annuities and soc security, which are never exhaustable anyway). It seems to me that investing is good for people who either (a) have extra money they can play with, out of curiosity to see what the market will do in the next decades (I doubt it will do the same as in the past couple of decades :-) - which is essentially what you did, because you had basic funds to secure retirement from other sources, OR (b) have very little money anyway, so the choice is either to live on soc security only (or welfare if they never qualified for soc security) and this little bit of extra money, or take a gamble and invest this little money in hope that it will grow to something more substantial (and if this little money is lost in the market, oh well, it was only a little money to start with so no big damage done).


working is working .....different topic as opposed to how much can this ole pile of money i saved generate and what allocation do i need to safely draw x-amount

saving more by working longer may drop the draw rate making fixed income work alone at the lower needed draw rate ..

these discussions are about what the portfolio can safely contribute to the party based on how you intend to allocate it .... if fixed income works because your drawer is 3% or less then great you need no equities .

but for those who need to get the biggest bang for the buck from their savings in the 4% range at least 40% equities and preferably 50% is recommended , at least to start until you see how your outcome starts to shape up ..

you either need more money saved to reduce the portfolio draw , more income outside the portfolio coming in by working or other sources to reduce the portfolio draw or a higher allocation to equities to grow what you do have so a higher draw is safer.

our first 4 years were so good market wise we could likely drop to 30-35% equities and do just fine .

Last edited by mathjak107; 07-29-2019 at 09:04 AM..
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Old 07-29-2019, 08:41 AM
 
Location: Living on the Coast in Oxnard CA
15,788 posts, read 26,866,578 times
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Quote:
Originally Posted by Rachel976 View Post
Oh, please. I doubt that even 5% of the population retires with $1.7 million. They manage to survive, and most survive quite well on substantially less than that.
Those people don't live in my neighborhood. I have known plenty of people around here that when retirement time came, the house was sold and they moved to a lower cost of living state.

I did find this online:

https://www.inc.com/business-insider...llionaire.html

So I would guess that would make it 16.66% of retired people have at least $1 million.
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Old 07-29-2019, 01:05 PM
 
1,748 posts, read 633,539 times
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Quote:
Originally Posted by mathjak107 View Post
working is working .....different topic as opposed to how much can this ole pile of money i saved generate and what allocation do i need to safely draw x-amount

saving more by working longer may drop the draw rate making fixed income work alone at the lower needed draw rate ..

these discussions are about what the portfolio can safely contribute to the party based on how you intend to allocate it .... if fixed income works because your drawer is 3% or less then great you need no equities .

but for those who need to get the biggest bang for the buck from their savings in the 4% range at least 40% equities and preferably 50% is recommended , at least to start until you see how your outcome starts to shape up ..

you either need more money saved to reduce the portfolio draw , more income outside the portfolio coming in by working or other sources to reduce the portfolio draw or a higher allocation to equities to grow what you do have so a higher draw is safer.

our first 4 years were so good market wise we could likely drop to 30-35% equities and do just fine .

The article on which this thread is based says that $1.7M is thought to be needed by most in order to retire, it does not say that you need a $1.7M portfolio, so I assume it means $1.7M in cash, with which you can do whatever you want, invest it or not. I commented earlier that the figure is close to what I figured ($1.8M) I needed in cash in order to retire, although my retirement will be based mainly on annuities (in which I had invested about $1.2M - various types of fixed annuities, both life annuities and limited-term ones, both immediate and deferred).



I did subsequently earn more, but the way I calculated it 14 years ago, I could have retired with 1.8M. In the meantime, during these 14 years, I have been actually spending only about 60% of what I projected I would be spending, so my $1.8M figure was probably an overestimate for my (not particularly limited) lifestyle.
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Old 07-29-2019, 01:06 PM
 
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Quote:
Originally Posted by elnrgby View Post
The article on which this thread is based says that $1.7M is thought to be needed by most in order to retire, it does not say that you need a $1.7M portfolio, so I assume it means $1.7M in cash, with which you can do whatever you want, invest it or not. I commented earlier that the figure is close to what I figured ($1.8M) I needed in cash in order to retire, although my retirement will be based mainly on annuities (in which I had invested about $1.2M - various types of fixed annuities, both life annuities and limited-term ones, both immediate and deferred).



I did subsequently earn more, but the way I calculated it 14 years ago, I could have retired with 1.8M. In the meantime, during these 14 years, I have been actually spending only about 60% of what I projected I would be spending, so my $1.8M figure was probably an overestimate for my (not particularly limited) lifestyle.
The article is ridiculous ...it is just click bait and useless
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Old 07-29-2019, 01:09 PM
 
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Maybe so, but it agrees pretty closely with my own estimate.
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Old 07-29-2019, 01:13 PM
 
72,241 posts, read 72,198,066 times
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It probably falls out of line with about 80% of retirees. It is way over stated for much of the country

For us it would be to little to meet our retirement expectations. But 80% of retirees will likely never have that much

Last edited by mathjak107; 07-29-2019 at 01:21 PM..
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Old 07-29-2019, 01:42 PM
 
Location: SoCal
13,503 posts, read 6,448,935 times
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Quote:
Originally Posted by SOON2BNSURPRISE View Post
Those people don't live in my neighborhood. I have known plenty of people around here that when retirement time came, the house was sold and they moved to a lower cost of living state.

I did find this online:

https://www.inc.com/business-insider...llionaire.html

So I would guess that would make it 16.66% of retired people have at least $1 million.
I didnít think Oxnard is an expensive area, I used to work in Camarillo. The reason they sold to moved to lower cost area maybe something else.
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