Today, 10:56 AM



Location: SoCal
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Quote:
Originally Posted by jrkliny
You can spend everything you have in a short around the world trip. Instead, many of us want to be able to support ourselves and a reasonable lifestyle throughout our lives. We want to have guidelines for how much we can spend to achieve without running out of money.

I agree, it’s tongue in cheek comment, but I think it’s too cautious to plan for 4% of the original amount. I rather do 4% of the balance at Dec for every year. Plus does he really have 30 year left? What about SS? These reasons are why I don’t really keep track closely of what I spend.

Today, 11:02 AM



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Quote:
Originally Posted by NewbieHere
I agree, it’s tongue in cheek comment, but I think it’s too cautious to plan for 4% of the original amount. I rather do 4% of the balance at Dec for every year. Plus does he really have 30 year left? What about SS? These reasons are why I don’t really keep track closely of what I spend.

That plan sucks. The 4% rule means you can deplete the portfolio in 30 years. So for the last years you will be taking a very high percentage and in fact at year 30 you take 100%. If you take a flat 4% you are also not even adjusting for inflation.

Today, 11:11 AM



71,687 posts, read 71,801,099 times
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Quote:
Originally Posted by jrkliny
For simplicity let us assume zero inflation. If the portfolio doubles, should the retiree recalc and take twice the amount?

i would take a draw based on what an updated firecalc showed based on number of years left

Today, 11:16 AM



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Quote:
Originally Posted by mathjak107
i would take a draw based on what an updated firecalc showed based on number of years left

And that draw would be based on the new portfolio amount, I assume.
So if the portfolio increased by 50%, firecalc would have you draw 50% more plus an additional amount based on the number of years left.
That is a long, long way from the 10% kitces guidelines you were recommending a few minutes ago.

Today, 11:16 AM



Location: SoCal
13,252 posts, read 6,345,210 times
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Quote:
Originally Posted by jrkliny
That plan sucks. The 4% rule means you can deplete the portfolio in 30 years. So for the last years you will be taking a very high percentage and in fact at year 30 you take 100%. If you take a flat 4% you are also not even adjusting for inflation.

He is 70, what is the probability that he will have another 30 years, most likely in the 12% percentile. In fact the number should be decreased every year, not keep it the same amount.

Today, 11:23 AM



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Quote:
Originally Posted by jrkliny
And that draw would be based on the new portfolio amount, I assume.
So if the portfolio increased by 50%, firecalc would have you draw 50% more plus an additional amount based on the number of years left.
That is a long, long way from the 10% kitces guidelines you were recommending a few minutes ago.

the kitces draw rate spreads it out over the years . over 30 years time you would have 10% more x 10 increases if every 3 years , that is a 100% increase in draw plus inflation adjusting.. you only get the raises as long as you continue to have more than 50% above your original starting value .
doubling the draw after year one because you are up 100% and then down 50% year 2 would have had you take a huge draw rate increase but in actuality you had zero return , so you have to be careful how you take these increases , it could be dangerous .. that is why kitces spreads it out .
that does not mean you have to follow it , but it is a conservative way to take more without likely hitting the snag i mentioned . it is simply based on the fact 90% of the time you end with more than you started ... so it gives you a way over the years to diminish that large amount left over
Last edited by mathjak107; Today at 11:31 AM..

Today, 11:23 AM



6,284 posts, read 4,740,348 times
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Quote:
Originally Posted by NewbieHere
He is 70, what is the probability that he will have another 30 years, most likely in the 12% percentile.

That is even more reason not to be shorted by a flat 4% withdrawal.
In any case, the number of years of retirement withdrawals we plan for is an individual decision. The 4% is based on the 30 years many of us plan for; ie, retiring at 65 and dying at 95. That makes a fair amount of sense especially for a couple. I know my wife's relatives are long lived. She has a reasonable chance of making it to 95 or perhaps like her mother to 100.

Today, 11:32 AM



6,284 posts, read 4,740,348 times
Reputation: 12889


Quote:
Originally Posted by mathjak107
the kitces draw rate spreads it out over the years . over 30 years time you would have 10% more x 10 increases if every 3 years , that is a 100% increase in draw plus inflation adjusting

The whole thing just seems like overthinking and nonsense. For most of us it takes years into retirement for our portfolios to run up by 50% or more. At that point the 30 year planning is usually over. Nor do I understand why anyone would want to take only 10% when the math shows they could take 50%. You seem to waver. First you said do the 10% plan, then your said recalc and do 50% and now you seem to be back to the 10% plan again.

Today, 11:32 AM



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Executive Summary
The fundamental purpose of the socalled “4% rule” is to determine an appropriate “income” or spending floor that is low enough to survive potential sequenceofreturn 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 inflationadjusted spending to the end of the 30year 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 ratchetstyle 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/theratc...ofthe4rule/

Today, 11:32 AM



Location: Florida
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Yes in your case starting over would be ok as the rule stops you from running out of money but can leave you with too much money.
Take a look at using the IRS RMD (required Minimum Distribution). This could work better for you as it considers the current market value of the assets and your life expectancy.
You could also pull out a few hundred thousand as mad money for what ever you want to do.
Good luck

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