I had posted here a few years ago leading up to retirement and was fortunate to get some nice discussion points.Anyway, I'm there. It's done. Curious if anyone has gone over the 4% SWR, or if anyone has early retired, without the sainted 100% Firecalc result?Thank you.
Curious if anyone has gone over the 4% SWR, or if anyone has early retired, without the sainted 100% Firecalc result?Here is a graph showing what the 30-year Safe Withdrawal Rate *would have been* over the last century. https://external-content.duckduckgo.com/iu/?u=https%3A%2F%2F...A lucky few would have been at 12%, although if they knew anything about SWR way back then, they'd have stayed at 4% for several years, then noticed that they had way more than they started with and possibly reset the amount. I see that only at one point does the line get close to 4%, but of course, if that's when you retired it's the hand you were dealt. I also see that the asset allocation isn't what we normally use for SWR discussions on this board.I retired last year at age 60, and will probably be taking Social Security at age 70. So, I don't really have a constant income need. For five years, I need enough extra to cover my own health insurance. Then, at 65 I'll be on Medicare so I'll need less for health insurance (although I'll need Medigap), then at 70 I'll need much less from my own portfolio thanks to SS. I understand that people travel a lot more in their early 60s than in their 70s, so there's another extra amount I'll probably need sooner but not as much later.
We had no choice and had to retire around 60, for various reasons. I did some consulting for couple of years, but we managed, and that was more than 15 years ago. We're still doing fine. Never paid any attention to 4% or whatever, either.Good luck.Vermonter
"Never paid any attention to 4% or whatever, either.Good luck.Vermonter "*******************************************************************I have found that life rarely pays any attention to my plans.Howie52But life remains quite interesting.
"Curious if anyone has gone over the 4% SWR, or if anyone has early retired, without the sainted 100% Firecalc result?"You can probably take 4.3% or so...but your risk level goes up above that. Just how far above 4% were you thinking? No, you can't take 7% or 8% like Peter Lynch said - before his empire came crashing down in the 1980s.If you are willing to take less if your portfolio value drops......then you can take 5% of current portfolio value. Of course, if the market drops 30%, so does your income. There is no free lunch.t.
Fairly young family.SWR of 5.4%Yes, it's high BUT there's 2 things I feel are relevant:1.)18% of the monthly spending is total fluff (upscale travel, etc) that is nice to do, we're used to doing it - - but if needed it's easier to cut that out, versus cutting out groceries.2.)This sounds weird, but it is what it is.NOT counted in my nest-egg: 15 years living expenses, in cash, is parked abroad. 75% of it is in cash in banks. 25% of that is in a rental property (pre-covid, rented 45 weeks per year) that my family can living in with room to spare if need arises. These funds were, and are, 100% secure from being taxed in America which is a big reason why said funds are gone abroad. Back in the mid 2000s I was in the highest tax brackets unlike now when I am just a regular Joe in shorts and a baggy t shirt most days :)So I know the 5.4% is very high. But if needed it can be cut down with minimal heartache and also, that 15 year stash is always in back of my mind. Technically, if I counted it in my nest-egg then my SWR goes to 3%. I just prefer somewhat pretending it's not there.
You’ll find that as time goes on, some years you spend more and some years you spend less overall. If you are wise, you adjust your spending to how much money you have. :)The 4% thing is an interesting thing to TALK about, but to actually use it is something else….I manage my money and that means I manage my spending and it fluctuates from year to year…..I’ve been retired a long time.Lucky Dog
Generally I keep within that the 4% limit, but have never considered it a real limit.I did my own spreadsheet where the major inputs are Net worth, Income, ROI, Inflation, Estate and lifespan. In lifespan I break down three phases: active retirement, inactive retirement and finally sat drooling in a nursing home somewhere. My calculations allow for the draw down of non liquid assets, such as property, as needed.In that active retirement phase ow. Was doing a lot of travel until COVID shut things down. But COVID taught me one valuable lesson. The wife will spend more when cooped up than when on unlimited free range. On line shopping has a lot to answer for. Need to adjust my spread sheet
the 4% is based upon ALL your assets.Most don't include the residence in which you live - since you can't 'eat it'.....or pay bills with it - unless really desperate and you get a reverse mortgage as a last resort. If you've got 15 years of CASH living expenses, you got a lot more 'portfolio'. t.
The traditional view of property is that it is a fixed asset, that you should not leverage unless absolutely necessary.I take a very different view, that it is a liability, a money pit, immovable, subject to market change and the subject many forms of taxation. Yes over time the value tends to go up, but in many cases it is break even once you consider the cost of selling and improvements. If budget were tight I would really consider moving to somewhere cheaper and renting, no ties. Spending is usually the biggest hurdle to retirement. If you can cut those fixed spending costs substantially you should strongly consider it. Mexico for one, it is local, reasonable weather, has some sizable safe US expat communities, and the total fixed cost of living is a fraction of the USA.
Article on the pitfalls of 4% from Market Watchhttps://www.marketwatch.com/story/worst-case-scenario-warnin...
The "4% Rule" is at best a wag and at worst a grand mistake. It is most useful as a general target with lots and lots of assumptions.For those spending down savings, the more useful cash flow projections model with age-adjusted consumption rates is a better model, but its just difficult for most households to use.That's one of the reasons we went with a pure income model, where time and energy are spent on screening and selecting dividend paying stocks rather than timing rebalancing to generate needed cash flow.BruceM
Thanks for chiming in Sir Donuts, appreciate it.
Hello Bruce...Thanks so much for making that point.I also am of the similar mindset in that, my commercial property investment, pays 5.9%. Certainly there's risk -- but it's a rather well known national chain, and the tenant owns 15 of the same stores so I sort of believe that by now he's got his business figured out and fires/floods/etc are insured so my risk is that this venerable chain goes under which I highly doubt and if the franchisee went under - there's just so many neighboring competitors, I'm not sure the parent company would just let the place go. So be it dividends, commercial rent, residential rent........ I show an income of around 5.2% and my SWR will run at 5.4 for awhile.So I try to keep 4% in mind - - but I pay more attention to the real income I get.
Curious if anyone has gone over the 4% SWR, or if anyone has early retired, without the sainted 100% Firecalc result?My "retirement plan" is based on 2 streams of income: one, dividends from stocks and two, rental property income. Retired this year at 56 and so far so good.JLC
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