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2-And when I was trying to calculate my withdrawals to see how long my savings will last I was using this https://www.360financialliteracy.org...ion-Calculator
and here too I need to put in rate of return and interest compunding frequency
I used compounding annually for both and estimated rate of return /interest at 4%
currently I'm 23 yrs to retirement so I'm almost 100% equities but with all the talk of stagflation I was trying to be conservative, also close to retirement I would likely be more conservative as well
Are these figures reasonable or do I need to adjust them ?
Last when I used this SS calculator www.ssa.gov , I used the amount in future [inflated ] dollars is that better or using todays dollars ?
Thanks
Mathjak has provided some excellent tools. My advice would be more general:
- Invest in aggressive growth and don't be too conservative
- Balance your extra $ between investing and using some for fun along the way
- Try to exceed what you think you'll need
the only unknown and it isn’t based on the past is whether you will sustain a 2% real return the first 15 years
Again, this is not some fundamental law of nature. If both stocks and bonds crater in year 16 and never recover, the first 15 years won't matter and the 4% draw will fail. You can say "well that's never happened", which is true, but that comment is made by looking at the past.
I'm not predicting a doomsday scenario, and I'm personally planning to start retirement with the standard 4% draw. But let's be precise with our language. There is no fundamental mathematical theorem supporting the statement that's quoted above. Most folks reading here should be able to prove this to themselves if they are curious.
Again, this is not some fundamental law of nature. If both stocks and bonds crater in year 16 and never recover, the first 15 years won't matter and the 4% draw will fail. You can say "well that's never happened", which is true, but that comment is made by looking at the past.
I'm not predicting a doomsday scenario, and I'm personally planning to start retirement with the standard 4% draw. But let's be precise with our language. There is no fundamental mathematical theorem supporting the statement that's quoted above. Most folks reading here should be able to prove this to themselves if they are curious.
could that happen ? sure it could but even a down market that is extended likely won’t matter after having so many positive real return years . but one can play it safe and just still monitor it .
then make the needed reduction, its simple enough . so still not based on the past .
the past is only to set that initial conservative draw rate .
after that one would have to be foolish to not pay attention
the past is only to set that initial conservative draw rate .
after that one would have to be foolish to not pay attention
Agreed on both comments. Personally, I think a variable draw scheme is the way to go, which more or less takes care of the "pay attention" part. I realize you use the 95/5 scheme, so no need to repeat that one again unless you feel obliged, haha.
markets have the biggest effect early on as that is when balances are highest .
losses day one of retirement when spending down are like a trader having a string of losing trades and spending down at the same time .
up years early on tend to carry a lot of weight to offset even terrible times after the retirement is half over .
so things work both ways .
even having the biggest bull markets after the fifteen year mark couldn’t save the worst time frames , as well as even having some big down markets after 15 years , after having quite a few up years didn’t see things fail either.
so far one could have just not paid attention and just drew their 4% inflation adjusted and they would have been just fine 95% of the time .
in fact they would be okay 100% of the time since most people won’t live 30 years in retirement, we just don’t know who will make it .
so doing no monitoring they likely would be fine and if anything have to much money unspent most of the time .
but i think a prudent person should monitor things , assuming they know what to monitor and adjust up or down like nudging a big ship to keep it on course.
there is plenty of time to adjust if it looks like things aren’t going well before you pass that point of no return
The calculators are good for giving you an estimate of what you can expect. But what makes retirement planning so difficult is that many of the largest variables are unknown:
1. Will you retire into a bull or bear market?
2. What will be the long term average return of the market over your retirement?
3. What will the inflation rate be over the course of your retirement?
4. How healthy will I be in 10 years? In 20 years?
5. Will you need long term health care?
Since we don't get a thousand Monte Carlo simulations, we have to get it right the first time. So, remaining flexible and continuing to monitor your situation are vital.
I have also read that spending in retirement is not linear, it tends to follow a curve which is shaped like a smile. It may start out a little high when you first retire and buy an RV or go on a cruise, but eventually you settle into retirement and many of your costs go down. You don't have to buy new clothes for work or a new car. You don't have to contribute to your 401k anymore. This is the bottom of the smile. Maybe some retired folks can say if this is true for them.
Costs can go up again towards the end of life because of increased health care costs.
the first three are exactly what a safe withdrawal rate eliminates …..it is designed to provide a pension like inflation adjusted income thru the already worst of times that you can count on as the minimum
whether you are better than worst case or not should effect the balance not the income . that income stream shouldn’t falter .
the balance is impossible to guess at in advance .
the income stream stands a very good chance of being safe ,secure and consistent in good or bad times since it is based already on the worst of the worst .
while that income stream is extremely conservative 95% of the time , one should monitor things along the the way as things can always be worse then we prepared for , it’s just odds are very slim of that , but the starting point these better calculators are a very good place to start
and then just nudge things once under way to stay on course.
As soon as I saw the thread title, I knew what I was in for if I clicked on the thread. Yep, sure enough, 5 of the 8 responses have been diatribes by "you know who".
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@mathjak107 your contribution is always appreciated
In your detailed posts you definitely bring up some solid points to back up your arguments
however for those of us who are not able to completely follow this , can you summarize your suggestions in a post please ?
Thanks
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