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I personally would ladder it out, much less at first for the first 5 years starting in year X, and a bit more by 5-year increments. Just my situation. Everyone needs their own formula, depending on the amt of their fixed income.
And remember, in all these scenarios, the vast majority of the times, the retiree ends up with the same or more principal at death! I intend to use mine up and ramp accordingly.
My plan, retiring at age 62, is to spend about 3 to 3 1/2%. Since I have a pension, my savings are earmarked for discretionary spending early in retirement (e.g., travel, entertainment) and perhaps for increasing health care costs in later years. If I have to cut this down to 2%, I'll manage. I have good health insurance that carries over into retirement. Also I'm single and I seriously doubt I will be living beyond age 90 based on family history.
i set a max budget at 4% of each years balance . it lets me spend more when we are higher .
if we are down i need to only take 5% less of what i was taking prior or 4% of the current balance , which ever is higher .
that way i don't need to worry about the 4% rule holding .
it is easy to tell if the 4% rule will hold.
if you are not averaging a 2% real return average and are 15 years in to your retirement , spending cuts are needed .
what modern researchers like michael kitces have done for us is take the data from the worst of the past and quantify it in to numbers that are meaningful to us going forward .
most folks have no idea what the supposed 4% rule is even based on and give mis-information when it comes to using it and understanding it .
I'm not overly impressed....especially with longevity risk. Their numbers are VERY high - 31% that either one of a couple of 65 year olds will live to 95? I ran the numbers using Vanguard's calculator and it came to 18% - not trivial, but a far cry from 31%. Frankly, healthcare costs being what they are (and with inflation) I don't think it is possible for any but he wealthiest to live beyond 95 and not be in a nursing home on Medicaid - and therefore have forfeited all assets. I'm afraid there's no way I can save enough to offset that, but I think the risk is relatively small and I'll have to take it. Just as large numbers of seniors are now in nursing homes (NOT private pay), so will many of us have to shed our delusions and also succumb - they are treated no worse than private pay anyway (there have been studies done).
And I've handled the investment expenses issues. This was written for retirement planners of whom many get 1% for their services and probably push higher ER funds...I have neither of those issues so I'm far ahead on that alone.
I'm not going to be frightened in saving ever-increasing amounts of money in an attempt to reduce my risk to unrealistic levels based on assumptions that don't fit. I'm living NOW and AFTER retirement.
And remember, in all these scenarios, the vast majority of the times, the retiree ends up with the same or more principal at death! I intend to use mine up and ramp accordingly.
actually at 4% inflation adjusted withdrawal rates ,90% of the 111 rolling 30 year time frames with a 60/40 mix you died with more than you started and 67% of the time died with 2x or more than you started with .
4% really is not a lot . in fact once you take off the 2 worst time frames we had, the safe withdrawal rate jumps to 6.50%.
that is a 30% increase in pay .
if anything 4% to date has been way to conservative most time frames leaving to much spent .
as you change allocations , assuming at least 35-40% equity's the income stays solid but the amount left over in the bucket goes up and down.
Last edited by mathjak107; 09-03-2015 at 03:49 AM..
This is why I'm planning to defer collecting Social Security until age 70. I have a 21% chance of making 90. My dad made it into his 80's. My mom is 83. Social Security is my insurance against out-living the rest of my assets.
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