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Old Today, 11:32 AM
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Old Today, 11:34 AM
 
Location: SoCal
13,252 posts, read 6,345,210 times
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Quote:
Originally Posted by jrkliny View Post
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.
Do you count SS in your 4% SWR? I haven’t count mine yet. My husband is 68, the oldest living relative from his dad’s side is 96, 96-68 is 28. So even though he is reasonably healthy and I did a couple longevity calculator, his number is 90, mine is 94, I don’t count on him living 30 more years.
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Old Today, 11:34 AM
 
71,695 posts, read 71,801,099 times
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Quote:
Originally Posted by jrkliny View Post
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.

read about the math in the article i posted above


here is the summary as to why

Accordingly, a simple way to establish a new, higher income floor is simply to commit that spending will only be increased (above and beyond annual inflation adjustments) once the account balance grows 50% about its initial amount. So for a retiree with $100,000, there’s no extra spending increase until the account value is over $150,000. For a retiree starting with $1,000,000, the target is $1.5M.
Of course, the caveat as well is that while growing the account more than 50% above its starting value does allow for “room” to ratchet the spending floor higher, it’s important not to ratchet it up too much or too quickly, or the new higher spending will overwhelm the available assets, even after the early growth, and force a later setback. Thus, for instance, the “rule” might be that any time the account balance is up 50% over the original value, spending is increased by 10% (over and above any ongoing inflation adjustments), but such spending bumps can only occur once every 3 years at most (to avoid having spending ratchet too high too quickly).

In fact, arguably these particular targets for the size of spending increases and the target threshold to apply them are still “too” conservative, as even with the spending ratchets, many scenarios still finish with significant wealth left over. Nonetheless, the excess wealth is at least “somewhat” diminished – especially in the scenarios with the greatest upside – in exchange for retirees being able to spend as much as double their inflation-adjusted spending throughout their retirement! Of course, in situations where final wealth was already quite low, there are generally no upwards spending adjustments, and final wealth simply finishes at the same level it would have been anyway.

Last edited by mathjak107; Today at 11:48 AM..
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Old Today, 11:35 AM
 
Location: Ohio
5,019 posts, read 1,807,325 times
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Originally Posted by old today View Post
I retired at age 61 in 2009 right at the bottom of the stock market crash. My investment portfolio of an even mix of stock and bond funds had dropped around 25% but I decided to retire anyway and strictly follow the 4% rule. (I withdrew 4% of my starting portfolio number- about one million dollars- and increased it 2-3% each year to cover inflation.)

I carefully watched my income and expenses and have lived a pleasant but financially conservative life since then.

Now it is July 2019 and the stock market crash from 2007-to early 2009 is a distant memory. Even with my annual 4% withdrawals, I now have determined my investment accounts are twice as large as they were on my retirement date of 2009. (I now have about 2 Million Dollars)

I am in good health and I want to increase my standard of living. Now that I am 10 years older and have twice as much money as I did in 2009, can't I start the 4% rule distributions all over again and start pulling out $80,000 a year from my investment accounts? What are the rules about this?
You are 71. Average life expectancy is 77 in the USA. Assuming you live to 90, seems logical to increase your withdrawal to what you need. 4%, 5%, what does it matter? Just doing some quick math, $8000 a month withdrawal rate for 13 years, you would still have over 1 million left at 90, assuming a 2% growth rate.
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Old Today, 11:36 AM
 
71,695 posts, read 71,801,099 times
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Quote:
Originally Posted by NewbieHere View Post
Do you count SS in your 4% SWR? I haven’t count mine yet. My husband is 68, the oldest living relative from his dad’s side is 96, 96-68 is 28. So even though he is trainable healthy and I did a couple longevity calculator his number is 90, mine is 94, I don’t count on him living 30 more years.
ss is never counted in the success rate of a portfolio .... the whole idea is that 4% is what the portfolio can bring to the party to be combined with ss , pension , alimony , etc .... it is added on top of the portfolio ability .
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Old Today, 11:39 AM
 
71,695 posts, read 71,801,099 times
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Quote:
Originally Posted by GearHeadDave View Post
You are 71. Average life expectancy is 77 in the USA. Assuming you live to 90, seems logical to increase your withdrawal to what you need. 4%, 5%, what does it matter? Just doing some quick math, 4% withdrawal rate for 13 years, you would still have over 1 million left, assuming a 2% growth rate.
this is wrong .. life expectancy at birth is 79 ... that plays no part beyond birth . .

at 65 :

the odds of one in a couple seeing 85 is 73%

odds of one seeing 90 are just under 50%

a child born in 2014 has a life expectancy (average age at death) of 79. However, the median age of death for the same child is 83, and the modal (most common) age at death is 89!



Last edited by mathjak107; Today at 11:51 AM..
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Old Today, 11:49 AM
 
6,285 posts, read 4,740,348 times
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Quote:
Originally Posted by mathjak107 View Post
the answer is because you don't understand the process . read about the math in the article i posted above


here is the summary as to why

Accordingly, a simple way to establish a new, higher income floor is simply to commit that spending will only be increased (above and beyond annual inflation adjustments) once the account balance grows 50% about its initial amount. So for a retiree with $100,000, there’s no extra spending increase until the account value is over $150,000. For a retiree starting with $1,000,000, the target is $1.5M.
Of course, the caveat as well is that while growing the account more than 50% above its starting value does allow for “room” to ratchet the spending floor higher, it’s important not to ratchet it up too much or too quickly, or the new higher spending will overwhelm the available assets, even after the early growth, and force a later setback. Thus, for instance, the “rule” might be that any time the account balance is up 50% over the original value, spending is increased by 10% (over and above any ongoing inflation adjustments), but such spending bumps can only occur once every 3 years at most (to avoid having spending ratchet too high too quickly).

In fact, arguably these particular targets for the size of spending increases and the target threshold to apply them are still “too” conservative, as even with the spending ratchets, many scenarios still finish with significant wealth left over. Nonetheless, the excess wealth is at least “somewhat” diminished – especially in the scenarios with the greatest upside – in exchange for retirees being able to spend as much as double their inflation-adjusted spending throughout their retirement! Of course, in situations where final wealth was already quite low, there are generally no upwards spending adjustments, and final wealth simply finishes at the same level it would have been anyway.
I see absolutely no math here that explains or justifies the 10% instead of 50% withdrawal. The only thing I see is a warning that you do not want to spend too much and have to drop back or run out of money later. There is no facts or math presented to support that. Back to the OPs concern. If he has a 100% increase why not take 100% more. If not, what makes sense?
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Old Today, 11:53 AM
 
71,695 posts, read 71,801,099 times
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Quote:
Originally Posted by GearHeadDave View Post
You are 71. Average life expectancy is 77 in the USA. Assuming you live to 90, seems logical to increase your withdrawal to what you need. 4%, 5%, what does it matter? Just doing some quick math, $8000 a month withdrawal rate for 13 years, you would still have over 1 million left at 90, assuming a 2% growth rate.
you can't calculate the remaining balance that way because you don't have a positive growth rate every year ... the years you are down require more spending ... the same exact average return can vary by 15 years difference in how long the money lasts just based on the order of the gains and losses coming in while spending down .... yep 15 years difference between the worst sequence of returns , rates and inflation vs the best , all with the same average
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Old Today, 11:58 AM
 
71,695 posts, read 71,801,099 times
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Quote:
Originally Posted by jrkliny View Post
I see absolutely no math here that explains or justifies the 10% instead of 50% withdrawal. The only thing I see is a warning that you do not want to spend too much and have to drop back or run out of money later. There is no facts or math presented to support that. Back to the OPs concern. If he has a 100% increase why not take 100% more. If not, what makes sense?
i posted the summary as to why ....it is to basically dwindle down the fact you typically end up OVER LONG PERIODS OF TIME WITH AT LEAST WHAT YOU STARTED WITH so it is spent down in a controlled fashion so just in case this is a untypical outcome there should be no pay cuts ... but you are free to do as you see fit , but like all advice given out , the advice will inflict the least repercussions if things are worse ...that is the entire basis for planning around a safe withdrawal rate ...

it does not rule out bad things , it plans and allows for those bad outcomes . so this is just one conservative suggestion for taking raises , it is not a rule .

just think of the retirement scene i illustrated above .

markets recovered back and i was taking 28k while you were taking 40k ..... yet we retired 1 year apart and now both have the same balance pretty much ...

however if markets did not bounce back quickly and were stuck in an extended downturn you would be getting a pay cut , i would not ... so the same thing applies if you take to much to soon and that is his reason for spreading out what could amount to a 100% increase in draw over the retirement time frame.

you don't have to agree , do what you want , but for someone interested in a conservative way to take raises , there is a method.


as i said above , you have 1 million and are taking 40k .... you hit it lucky and doubled your amount year 1 , you have 2 million ... so you double up and take 80k ... next year is down 50% ..... you have no gains at all .... what do you do ? do you take 80k or now have to take a huge pay cut ? what if you based a lifestyle and planned around 80k now that you had 2 million ?

you see it is not that simple

Last edited by mathjak107; Today at 12:23 PM..
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Old Today, 12:07 PM
 
6,285 posts, read 4,740,348 times
Reputation: 12889
Quote:
Originally Posted by mathjak107 View Post
i posted the summary as to why ....it is to basically dwindle down the fact you typically end up OVER LONG PERIODS OF TIME WITH AT LEAST WHAT YOU STARTED WITH so it is spent down in a controlled fashion so just in case this is a untypical outcome there should be no pay cuts ... but you are free to do as you see fit , but like all advice given out , the advice will inflict the least repercussions if things are worse ...that is the entire basis for planning around a safe withdrawal rate ...

it does not rule out bad things , it plans and allows for those bad outcomes . so this is just one conservative suggestion for taking raises , it is not a rule .
Again, no math, no facts.

This is just fear mongering. Many advisors seem to do it to drum up business and/or to control the clients.

I try to ignore the fear mongering whether it is kitces or pfau or some other supposed expert. Firecalc seems to deal with understandable approaches to looking at the variables. It certainly supports the 4% rule and all the other studies that have done so. So why not recalc using Firecalc? That seems justified versus the unsupported warning from kitces.

I think it is also important not to worry excessively about the failure rate. When on rare occasions the 4% rule fails or is near to failing, the earth just does not open up and swallow the retiree. Dialing back just slightly is all that is needed or has been needed under the worst of the worst scenarios.

Anyway, I am off to Bayard. Let me know if there are facts instead of just fears that support the 10% kitces approach.
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