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Old 07-16-2019, 06:22 PM
 
6,305 posts, read 4,746,934 times
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Quote:
Originally Posted by mathjak107 View Post
....
recalculating can potentially leave you broke under worst case outcomes the same as anytime you run a success rate and start from day 1 as that is what you are doing , you are resetting the pointer to day one again . , the same as day 1 of retirement , either poor outcomes OR EXCESSIVE SPENDING BECAUSE OF UNEXPECTED LARGE BILLS can do you you in as always ..

.....
You are mixing up two issues which is leading to foggy thinking. We have been discussing the SWR. That means just what it says. That is the rate of withdrawals that can last. It is based on withdrawals that are inflation adjusted but otherwise constant.

Having resources to handle unexpected large bills or emergencies is something completely different. I have always been a big believer in having an emergency fund. I have needed and partially used mine numerous times. At this time in life those emergencies might include major medical costs. We have done what we can with LTC insurance and planning. We have pretty much every important insurance in place including a large umbrella policy. I have a large emergency fund which is not part of my fund for regular spending. I recommend that everyone who retires consider this. It is something I started before the age of 20 and it has grown appropriately over time. How big that should be is a separate consideration based on risk tolerance and what we can afford. As with a SWR, there can be circumstances none of us can ever consider covering.
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Old 07-16-2019, 06:57 PM
 
6,305 posts, read 4,746,934 times
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Quote:
Originally Posted by old today View Post
Here is a defense of starting the clock again at age 71 and taking $80K out of a now 2 Million Dollar Portfolio:

1) I am now older and have fewer years on earth to support myself than ten years ago when I retired.

2) What if I would have stayed working until I was 71 and just retired today at age 71 and had 2 million dollars? I would have been told to take 4% out of my investment portfolio, which would be $80K

3) I could put all my money in a CD paying 3% a year and even with a 3% inflation increase each year, that money would last 25 years and I would be dead by then. Remember, I am old!
I think your concerns got lost in the arguments and discussion.

I agree that resetting at 4% of your current portfolio makes sense. You could even go higher but staying at 4% inflation adjusted for the future should give you a cushion and if it is important will likely mean leaving a decent sized inheritance. At age 73, I a have been doing the same over the past few years. My portfolio has also more than doubled since the time I retired at the beginning of 2011.

BTW if you were retiring now you should be able to take out more than the $80k unless you want to plan on constant inflation adjusted spending to beyond the age of 101.
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Old Yesterday, 02:12 AM
 
71,735 posts, read 71,853,273 times
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Quote:
Originally Posted by jrkliny View Post
You are mixing up two issues which is leading to foggy thinking. We have been discussing the SWR. That means just what it says. That is the rate of withdrawals that can last. It is based on withdrawals that are inflation adjusted but otherwise constant.

Having resources to handle unexpected large bills or emergencies is something completely different. I have always been a big believer in having an emergency fund. I have needed and partially used mine numerous times. At this time in life those emergencies might include major medical costs. We have done what we can with LTC insurance and planning. We have pretty much every important insurance in place including a large umbrella policy. I have a large emergency fund which is not part of my fund for regular spending. I recommend that everyone who retires consider this. It is something I started before the age of 20 and it has grown appropriately over time. How big that should be is a separate consideration based on risk tolerance and what we can afford. As with a SWR, there can be circumstances none of us can ever consider covering.
no , it is not two different issues because there are different ways to arrive at a safe withdrawal rate .. a safe withdrawal rate is a floor that can be counted on WITH A HIGH RATE OF SUCCESS , not a max . IT CAN BE PRONE TO FAILURE IF RUN UP AT THE LIMITS .

the max can be all over the place depending on the withdrawal method used . you are looking only at one method called constant spending , but there are other method ...you will have a bigger or smaller balance and different protection and success rates as more or less of the excess is drawn off .

the bob clyatt dynamic method i use generates a safe withdrawal rate amount too and it is different from the recalculating method or the ratcheting up method .
it too is based on 4% .

you are losing sight of the fact a safe withdrawal rate is a floor not a max day one of retirement ..no matter what method you use in practice they are likely going to be more than you started with over time.

there are advantages and disadvantages to all the methods of taking raises .

recalculating moves the pointer back to square one with a success rate that will be less than 100% over 30 years at 4% but makes you susceptible once again to the proverbial getting whacked day one and getting hurt exposure .

that is because it reduces the cushion you had that no longer made you susceptible to the general problems you can hit .

the ratcheting up method keeps more with the house and gives you less of a draw ..it does not reset your pointer to day one of retirement and it is unaffected by the usual problems a retirement can see because it has a bigger balance and is passed the danger point in time .

i use a dynamic draw ... it rewards me when markets are up but cuts me very little when down ... all inflation adjusting is automatically built in .

it can never fail so it is not susceptible to failing under worst case outcomes . but the disadvantage is it does give a pay cut in bad times although capped at 5% .

so you see , you are losing sight of the fact a safe withdrawal rate is not locked in to one method or number ... in fact there is a tab in firecalc for using other methods .

here are the results for 3 methods of determining a SAFE WITHDRAWAL RATE ..all have different draws , success rates and balances .

using 50/50 , 1 million and 30 years you have 3 different methods of finding a safe withdrawal rate and all have different draws , balances and success rates .

this is my 95/5

FIRECalc Results
Following the "95% Rule," from Work Less, Live More, each subsequent annual withdrawal will be the greater of 95% of your previous year's withdrawal, or 4.0% of your current portfolio, with no adjustment for inflation (unlike the normal FIRECalc behavior, which uses your starting portfolio, and makes adjustments for inflation). Although the calculations are based on unadjusted withdrawals, the charted withdrawals are shown using 2019 dollars.

FIRECalc looked at the 119 possible 30 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 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $526,538 to $2,280,399, with an average at the end of $1,091,168. (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.)

In other models in FIRECalc, "failure" means the portfolio drops to zero. Since you are limiting spending to a percentage of your remaining portfolio, the total balance should never reach zero — but it could become pretty small in some situations. Pay attention to the spending graph, below. Since we can't use portfolio failure as a metric, FIRECalc is following the lead of the 95% Rule from Work Less, Live More, in which one of the goals is for the portfolio to be as big (after adjustment for inflation) at the end of the 30 years as it was when you started. FIRECalc found that 48.7% of the time, the portfolio you would have left behind exceeded the portfolio you started with.


this is constant spending , the traditional method


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 119 possible 30 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 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $-223,952 to $4,145,063, with an average at the end of $1,146,780. (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 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.0%.


this is bernicke's method

FIRECalc Results
Following the "Reality Retirement Plan" as described by Ty Bernicke,

FIRECalc looked at the 119 possible 30 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 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $351,581 to $4,605,255, with an average at the end of $1,581,340. (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 30 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

Last edited by mathjak107; Yesterday at 02:59 AM..
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Old Yesterday, 05:29 AM
 
6,305 posts, read 4,746,934 times
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Quote:
Originally Posted by mathjak107 View Post
:.........

IT CAN BE PRONE TO FAILURE IF RUN UP AT THE LIMITS .

.........

recalculating moves the pointer back to square one with a success rate that will be less than 100% over 30 years at 4% but makes you susceptible once again to the proverbial getting whacked day one and getting hurt exposure .

............
Your big long rant seems to come down to insecurity. You do this frequently. You present the facts but then succumb to fear and worries.

It is true that the 4% rule is not based on 100.0000% probability of success. In fact the typical 4% SWR for 30 years has a 95% success rate. On top of that 30 years may not be long enough. Should we then plan on constant spending and living to 100 years or maybe 110 or....even more? Do we need a belt, suspenders and an elastic waist band?

I still maintain your fears and your desire for a cushion of undefined magnitude are leading to foggy thinking. The OP is a good example. At 71 he can very safely reset. In fact he is not trying to push it. With a 25 year window to age 96 he will have a calculated 98.4% probability of success. I would call that way more than conservative planning. With a 25 year planning window, if he is still alive the OP can and should reassess in 5, 10 or 15 more years. The odds are very good that he will be able to increase his spending even more over time. If instead he falls into the bottom 1.6% scenarios, he can make a slight adjustment over time.
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Old Yesterday, 06:16 AM
 
2,117 posts, read 724,871 times
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Short answer: no, and my withdrawal rate is 3.5% anyway. Not sure what I'd do with a higher withdrawal rate since life is good on my current withdrawal- maybe put more in the grandkids' 529 accounts but the oldest is only 5 and if I have a giant surplus of $$ when she starts college I'll fund it from my assets. DS, her father, is my only child and my only heir so he'll get what's left if I'm gone from this earth by that time.
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Old Yesterday, 06:45 AM
 
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I am always amazed when people state that they have no interest in more money. I find life offers endless opportunities that cost money. We have friends who travel together once a year or so. They suggested we join them this year for a cruise and trip to include the coast of Spain and Portugal. The cost would for both of us would top $20K for the 3 week trip. Grand Circle offers some nice add ons that would substantially jump the cost.

I have my doubts about the value of 529 accounts. Our older daughter did not care much about college. She lived at home and went to community college and then the local State U. Costs were relatively low. Our younger daughter went to Johns Hopkins. They wanted and took every dollar we saved outside of retirement accounts and they left us just enough income to barely get by. A 529 would have just been more for them to gobble up.
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Old Yesterday, 07:06 AM
 
7,256 posts, read 8,659,196 times
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If your investments have doubled it makes sense to me to run those numbers through Firecalc and see what the increased withdrawals would be with the remaining horizon left. I would guess taking $80K from a $2M stash would be just fine, and the amount calculated in the firecalc model could make it even higher, and still with a >90% success rate.
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Old Yesterday, 07:30 AM
 
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Firecalc show over 90% success for a 25 year window with a withdrawal of approximately $92K from the $2M portfolio.
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Old Yesterday, 07:33 AM
 
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Quote:
Originally Posted by jrkliny View Post
Firecalc show over 90% success for a 25 year window with a withdrawal of approximately $92K from the $2M portfolio.
Nice!
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Old Yesterday, 07:57 AM
 
2,689 posts, read 1,546,921 times
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Quote:
Originally Posted by jrkliny View Post
Instead of being silent and in pain, why not make some more detailed contributions to the discussion.
As should be obvious, most of us who are about to retire or who are retired struggle with this issue. It is hard to understand what we can safely withdraw. The 4% rule is a simple starting point but that really only seems to help at the start of retirement. Later on when the economy has changed, when our portfolios have done better or worst than expected, or when we have gained or lost assets, it is even more difficult to readjust and decide what makes sense.
I already did, in post 16. Maybe you didn't read it before firing off your criticism? I'll add to my analysis and point out that no one has discussed, so far, portfolio composition. Your portfolio, growth weighted with a higher risk, or structured to protect the asset base, lower risk, should be a big part of this discussion, but it's not. And that factor has a big impact on surviving market corrections.

A big focus here seems to be longevity risk. One way to deal with that is delayed annuities. Discussed here? No. Another is family support. Discussed here? No. LTC issues discussed? No. And so it goes. Just a back and forth debate about Firecalc models and a single number, the withdrawal percentage. Firecalc is a decent model, but it doesn't help you in determining your risk tolerance/portfolio mix.
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