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Real, inflation adjusted 5% rate of withdrawal during retirement

There have been a lot of threads over the years regarding what's now called the Bengen method of withdrawals, which means to simply take a real, inflation adjusted 4% out of a retirement nest egg.  Your first year withdrawal is 4% of the value of your nest egg on the day you retire, and, for each year afterwards, you adjust this dollar amount by the rate of inflation for the year.  That is, ifn you start with a $1million portfolio, your first year withdrawal is $40,000, then, ifn inflation is, say, 3% for that first year, you increase the amount for the second year by 3%, or $40,000 times 1.03, or $41,200.

This new amount, $41,200 doesn't depend on the value of your portfolio.  So, for example, if your nest egg had a bad year and had a -20% total return for the year (lost 20% of its value), its new value would be $800,000 (down from the $1 million starting value), but you would still take $41,200 from it.  But $41,200 is a 5.15% withdrawal from a portfolio worth only $800,000!

Which begs the following question.  Suppose you had a portfolio worth $1 million, on December 31, 2019, and you were thinking about retiring. You needed $40,000 for living expenses, going forward, and needed that to be in real, inflation adjusted dollars, so there was no 'discretionary expenses' factored in.  Knowing all of the retirement withdrawal studies from years past, you were fairly confident that your $1 million portfolio would last at least until 2030, but you wanted a bit of safety built in.

SO, you decided to delay retirement until after the election, since the stock market was hitting on all 12 cylinders and all indices were reaching new highs.

Unfortunately, your portfolio is now down to $800,000 and so, still needing $40,000 real withdrawal dollars, going forward, you are now at a real, inflation adjusted 5% rate of retirement withdrawal.

The question is whether or not you now pull the plug?  Note that this is the exact same question you had, back in December, where you had NOT accumulated the $1 million but only $800,000.

Note - Please disregard the following part of my OP.  I don't want this thread to degenerate into another discussion of how things worked, in the past, and whether or not they will continue to work that way, going forward.  I'm really looking for a discussion as to whether or not you would choose to take less money out, say go back down to 4%, only this time of $800,000, or $32,000/year, rather than $1 million, or $40,000/per year OR continue with the 5%, fully expecting that your chances of it lasting less than your required 30 years.  Monte Carlo seems to show that a real, inflation adjusted 4% rate of withdrawal during a time period where you experience of SOR risk still has about a 95% Probability Of Success, while only a 75% POS whenever 5% was taken out.

The second question you now have, ifn you DO choose to retire, needing a real, inflation adjusted 5%, is what assets to invest in and in what proportions.

My answer to my own question is that, yes, I would retire needing a real, inflation adjusted 5% rate of withdrawal, both back in December and today.  I would choose, then as now, a two fund portfolio, using SDY for my stock allocation and PCI for my bond allocation, allocated 50/50 for simplicity.  I would expect this portfolio to support a real, inflation adjusted 5% rate of withdrawal indefinitely, given that it distributes 7.135%.

That is, it produced $800,000 times 0.07135, or $57,080 over the last 12 months, so I expect it to produce $57,080 cash over the next 12 months.  My simple plan is to withdraw my real, inflation adjusted 5%, or $40,000, and invest the excess $17,080 into individual TIPS.  Doing so means, in essence, that, every 2 years 4 months, the excess distribution cash I receive buys 1 more year of a real, inflation adjusted 5%, withdrawal at that point in future time should my original $800,000 be depleted.

ElLobo, de la casa de la toro caca grande
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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

Very well put!

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

What happens if the inflation adjusted annualized return of your portfolio is only 2.84%, as actually happened for a 50/50 portfolio for the 53 year period of 1929-1981?

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

It's really much more simple in practice. 

Start $50 stocks / 50% investment grade bonds = $100.

Stocks drop by 50%. Your port drops 20%.

Now $25 stocks / $55 bonds = $80.

Rebalance $40 stocks / $40 bonds = $80.

You halt COLA AWR pay raises and eat from bonds until your port recoups its nominal peak value.

Rebalance to $50 stocks / $50 bonds = $100.

It's that easy.

 

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

The 4% withdraw posited by Bengen is based on a large bank of data from which different market scenarios were considered. We do not have nearly as much data for PCI and SDY. I don't have a better suggestion than El Lobo's creative approach, but I would not count on either SDY or PCI continuing indefinitely without changing distributions or becoming depleted earlier than the TIPS would support. 

Question: Why not reinvest the excess distributions back into the higher earning SDY and PCI?

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement


@archer wrote:

The 4% withdraw posited by Bengen is based on a large bank of data from which different market scenarios were considered. We do not have nearly as much data for PCI and SDY. I don't have a better suggestion than El Lobo's creative approach, but I would not count on either SDY or PCI continuing indefinitely without changing distributions or becoming depleted earlier than the TIPS would support. 

Question: Why not reinvest the excess distributions back into the higher earning SDY and PCI?


That's certainly an option, and one that would generate more and more distribution cash as more shares of SDY and/or PCI are purchased, each 'distributing' 7.135%, going forward.  It's just a matter of personal preference.  As is my original 50/50 allocation.  Had I gone with an all stock SDY portfolio, the distribution would have been less than 5%, at 3.06%.  On the other hand, an all PCI portfolio distributes 11.57%, or $92,560 per $800,000 nestegg value.

And THIS all PCI portfolio suggests something else.  Withdraw and spend $40,000.  Reinvest another $40,000 in individual TIPS, assuring 1 more year of a real, inflation adjusted 5% at ANY time in the future.  Finally, take the remaining $12,560 and put that back into your all PCI portfolio!

By the way, since this all PCI portfolio doesn't depend on the PCI share price, hence it's total return, only on its current distribution yield of 11.57%, you don't need a large bank of data for past historical performance.  You only need ttm (trailing twelve month) distribution history.

ElLobo, de la casa de la toro caca grande
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Re: Real, inflation adjusted 5% rate of withdrawal during retirement


@Mountaineer1 wrote:

What happens if the inflation adjusted annualized return of your portfolio is only 2.84%, as actually happened for a 50/50 portfolio for the 53 year period of 1929-1981?


Most around here would expect my nestegg to end up depleted, spent down, at some point in the future.  I, on the other hand, would expect it to continue, indefinately, churning out $40,000 in 2020 dollars, going forward!  8-))

Do you current live in West Virginia?  I absolutely LOVE that state!

ElLobo, de la casa de la toro caca grande
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Re: Real, inflation adjusted 5% rate of withdrawal during retirement


@ElLobo wrote:

snip ...

My answer to my own question is that, yes, I would retire needing a real, inflation adjusted 5% rate of withdrawal, both back in December and today.  I would choose, then as now, a two fund portfolio, using SDY for my stock allocation and PCI for my bond allocation, allocated 50/50 for simplicity.  I would expect this portfolio to support a real, inflation adjusted 5% rate of withdrawal indefinitely, given that it distributes 7.135%.

That is, it produced $800,000 times 0.07135, or $57,080 over the last 12 months, so I expect it to produce $57,080 cash over the next 12 months.  My simple plan is to withdraw my real, inflation adjusted 5%, or $40,000, and invest the excess $17,080 into individual TIPS.  Doing so means, in essence, that, every 2 years 4 months, the excess distribution cash I receive buys 1 more year of a real, inflation adjusted 5%, withdrawal at that point in future time should my original $800,000 be depleted.


@ElLobo 

Perhaps.  But, it's prudent to look at what could go wrong.  We have another wave of Covid-19 (or a significantly different version) this Fall/Winter ... you can kiss your dividend projections bye-bye.  With the potential for a new administration, another wave of PCI bond holdings purchases by the Fed/Treasury might also be a 'no.'  

Also, keep in mind that we haven't seen a three-year bear market in some time.  For example, It was pretty ugly in the '70's (along with significant inflation).  So ... that $800,000 level might be in jeopardy as expenses continue.  Additionally, for those that decide not to continue to work, once you stop, it is largely unlikely they will go back to work at the same level of pay, if at all.  

However, I do agree that TIPS purchases (for those that are so razor-close to their goals) with any years of excess is a prudent move. 

Depending on what state you live in, running out of money is not the worst of things.  Some have safety nets that protect senior citizens.  Probably for those that are stressed about these issues, understanding what states provide what is potentially more useful than a lot of portfolio analysis.     

ctyankee

 

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement


@ctyankee wrote:

@ElLobo wrote:

snip ...

My answer to my own question is that, yes, I would retire needing a real, inflation adjusted 5% rate of withdrawal, both back in December and today.  I would choose, then as now, a two fund portfolio, using SDY for my stock allocation and PCI for my bond allocation, allocated 50/50 for simplicity.  I would expect this portfolio to support a real, inflation adjusted 5% rate of withdrawal indefinitely, given that it distributes 7.135%.

That is, it produced $800,000 times 0.07135, or $57,080 over the last 12 months, so I expect it to produce $57,080 cash over the next 12 months.  My simple plan is to withdraw my real, inflation adjusted 5%, or $40,000, and invest the excess $17,080 into individual TIPS.  Doing so means, in essence, that, every 2 years 4 months, the excess distribution cash I receive buys 1 more year of a real, inflation adjusted 5%, withdrawal at that point in future time should my original $800,000 be depleted.


@ElLobo 

Perhaps.  But, it's prudent to look at what could go wrong.  We have another wave of Covid-19 (or a significantly different version) this Fall/Winter ... you can kiss your dividend projections bye-bye.  With the potential for a new administration, another wave of PCI bond holdings purchases by the Fed/Treasury might also be a 'no.'  

Also, keep in mind that we haven't seen a three-year bear market in some time.  For example, It was pretty ugly in the '70's (along with significant inflation).  So ... that $800,000 level might be in jeopardy as expenses continue.  Additionally, for those that decide not to continue to work, once you stop, it is largely unlikely they will go back to work at the same level of pay, if at all.  

However, I do agree that TIPS purchases (for those that are so razor-close to their goals) with any years of excess is a prudent move. 

Depending on what state you live in, running out of money is not the worst of things.  Some have safety nets that protect senior citizens.  Probably for those that are stressed about these issues, understanding what states provide what is potentially more useful than a lot of portfolio analysis.     

ctyankee

 


Remember, my first question was whether or not you would retire ifn you NEEDED 5%?  If yes, then what would you choose and why?  All things considered.

Some might say yes, but take their chances and expect that their nesting might be spent down well before 30 years.

ElLobo, de la casa de la toro caca grande
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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

Would you retire or not seems to me to be a completely different topic than what to do if the choice is yes, and then the following investment strategy you suggest. 

My point about not having history was to account for the fact that historically we are in a relatively low interest rate environment, coinciding with higher than long term average equity valuations. For this reason I would not count on PCI sustaining its current distribution/retention of capital. Same with SDY. The current 4% withdraw strategy is also handicapped by the current state of low yields and high valuations. 

However the above is only my guess as to how the future will unfold. We can invest according to our educated guesstimates, or put those aside and work with what hard historical data we have to go on. Assuming the future of SDY and PCI distributions will continue unchanged, seems El Lobo has a good plan for the time being. Plans can be changed as needed when the time comes. It is a real possibility, hopefully remote, that someday there will be nowhere to fulfill our investment goals. Maybe best to keep working as long as one can. :-)

I'm not as pessimistic as the above sounds, but do see this as a possibility. Per capita wealth is on the rise as 3rd world economies with higher birth rates and growing middle class increase. 

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement


@archer wrote:

Would you retire or not seems to me to be a completely different topic than what to do if the choice is yes, and then the following investment strategy you suggest. 

My point about not having history was to account for the fact that historically we are in a relatively low interest rate environment, coinciding with higher than long term average equity valuations. For this reason I would not count on PCI sustaining its current distribution/retention of capital. Same with SDY. The current 4% withdraw strategy is also handicapped by the current state of low yields and high valuations. 

However the above is only my guess as to how the future will unfold. We can invest according to our educated guesstimates, or put those aside and work with what hard historical data we have to go on. Assuming the future of SDY and PCI distributions will continue unchanged, seems El Lobo has a good plan for the time being. Plans can be changed as needed when the time comes. It is a real possibility, hopefully remote, that someday there will be nowhere to fulfill our investment goals. Maybe best to keep working as long as one can. :-)

I'm not as pessimistic as the above sounds, but do see this as a possibility. Per capita wealth is on the rise as 3rd world economies with higher birth rates and growing middle class increase. 


Yes, you are, obviously now, correct.  This thread was meant to be a discussion how the pereceived risks associated with retirement portfolio survivability are affected by market actions.  So ifn a potential responder to my OP came to a 'NO' answer to the question (he/she would NOT retire with a required 5% real inflation adjusted rate of withdrawal, needing it to last at least 30 years), there would be no need for him/her to post a portfolio or project/predict its Probability Of Failure!

I've edited my OP to, hopefully, refocus the discussion.  Mea culpa, mea culpa, mea maxima culpa, @archer @steelpony10 @ctyankee @galeno @Mountaineer1 

ElLobo, de la casa de la toro caca grande
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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

My answer is no, I would not retire needing 5% of my portfolio to live the lifestyle I want - more than the basics.  Not a theoretical exercise in my case. A year ago, I did my calculations and decided I needed 4% IF EVERYTHING went well for my portfolio to last for my wife's potential lifespan. Throw in a fudge factor, and I thought that 4.5% or 5% was needed, so I decided not to retire. Instead, I planned to work at about 0.5 FTE (20 h/week), to pay my bills, and re-assess annually.  A year later, starting in April, I'm now working about 0.3 FTE, less than I planned, thanks to COVID.  I did not sell any net equities during 2020, so far, but I did sell all my muni bonds and put that money into paying off my mortgage and building up my cash reserve. My rationale was that I did not expect to SAFELY make more than my mortgage rate by investing the funds in muni bonds. That reduces my cash flow need going forwards, so I can live on 0.3 FTE current income + maybe some IRA withdrawals (<1%) while I wait for the portfolio to grow to the point that we'll need 3%, maybe 3.5%.  If health issues prevent me from working, the adjustment will have to be cutting expenses, so that we live on 3%.  

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

This stuff doesn't have to be so difficult to understand, El, and the argument you present persists in conflating "% I need" with "dollars I need"; as well as ignoring that the current value of the asset is what is being used to generate a return.  I've no doubt you'll attempt to stifle these little details and simply assume that the money you chose to spend, whether expressed as a percent OR as cash, was profit generated by the portfolio.  If the portfolio isn't actually GENERATING that profit, then what you actually have invested will drop over time, and you will find it increasingly difficult to provide the actual MONEY you need (since that would require an INCREASING percent return over time).

You posted: "I don't want this thread to degenerate into another discussion of how things worked, in the past, and whether or not they will continue to work that way, going forward."

But then proceed to assume that the amount you plan on removing each year is going to actually be generated by your investment, GOING FORWARD, because it was in this PAST YEAR.  Hypocritical much?

The fact of the matter is that, in several cases, this has NOT worked out for you with various investments you've made.  As someone involved with science, you KNOW that a single exception invalidates a rule.  In your own case, we've seen several of these occur.  Your 'system' of investing has been PROVEN not to work reliably.  It, as ALL systems presented here at M* depend upon making wise investments.  If one DOES, then ANY approach can be made to work; the guiding principle is a simple one: you need to generate a PROFIT that meets your needs or you will run into a problem at some point.  The only question is whether or not you run out of money before you run out of need!  'Systems' which require a % return which can rise to unsustainable levels can not be relied upon.

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

This is not directed at any one poster.  I think we all can make the mental leap that these issues are not easy or straight-forward.  That's why presenting thoughts different from our own is of value.  That said, everyone has a viewpoint (or developing one).  We really don't need to go into the poster's agenda, lack of perceived logic et cetera to make our points.  Biases can be discussed without making things personal.  

ctyankee

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement


@racqueteer wrote:

This stuff doesn't have to be so difficult to understand, El, and the argument you present persists in conflating "% I need" with "dollars I need"; as well as ignoring that the current value of the asset is what is being used to generate a return.  I've no doubt you'll attempt to stifle these little details and simply assume that the money you chose to spend, whether expressed as a percent OR as cash, was profit generated by the portfolio.  If the portfolio isn't actually GENERATING that profit, then what you actually have invested will drop over time, and you will find it increasingly difficult to provide the actual MONEY you need (since that would require an INCREASING percent return over time).

You posted: "I don't want this thread to degenerate into another discussion of how things worked, in the past, and whether or not they will continue to work that way, going forward."

But then proceed to assume that the amount you plan on removing each year is going to actually be generated by your investment, GOING FORWARD, because it was in this PAST YEAR.  Hypocritical much?

The fact of the matter is that, in several cases, this has NOT worked out for you with various investments you've made.  As someone involved with science, you KNOW that a single exception invalidates a rule.  In your own case, we've seen several of these occur.  Your 'system' of investing has been PROVEN not to work reliably.  It, as ALL systems presented here at M* depend upon making wise investments.  If one DOES, then ANY approach can be made to work; the guiding principle is a simple one: you need to generate a PROFIT that meets your needs or you will run into a problem at some point.  The only question is whether or not you run out of money before you run out of need!  'Systems' which require a % return which can rise to unsustainable levels can not be relied upon.


Actually, Raq, this thread isn't about me.  I retired 17 years ago, and went through all of the calculations/analysis/due dilligence/whatever that most wannabe retirees usually do.  As I explained to Archer, I went back to my OP and removed the last part of it, so that none of us would get into the usual pi****g match (TR v Income).  I marked, in red, what I wanted to remove (rather than simply deleting it) and wrote in blue why I did so.

So far, @SJ60 got on topic, while you don't seem to want to by simply sticking with your long time schtick!  8-))

ElLobo, de la casa de la toro caca grande
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@SJ60 wrote:

My answer is no, I would not retire needing 5% of my portfolio to live the lifestyle I want - more than the basics.  Not a theoretical exercise in my case. A year ago, I did my calculations and decided I needed 4% IF EVERYTHING went well for my portfolio to last for my wife's potential lifespan. Throw in a fudge factor, and I thought that 4.5% or 5% was needed, so I decided not to retire. Instead, I planned to work at about 0.5 FTE (20 h/week), to pay my bills, and re-assess annually.  A year later, starting in April, I'm now working about 0.3 FTE, less than I planned, thanks to COVID.  I did not sell any net equities during 2020, so far, but I did sell all my muni bonds and put that money into paying off my mortgage and building up my cash reserve. My rationale was that I did not expect to SAFELY make more than my mortgage rate by investing the funds in muni bonds. That reduces my cash flow need going forwards, so I can live on 0.3 FTE current income + maybe some IRA withdrawals (<1%) while I wait for the portfolio to grow to the point that we'll need 3%, maybe 3.5%.  If health issues prevent me from working, the adjustment will have to be cutting expenses, so that we live on 3%.  


Yup, Doc, that's what we all, in essence, do!  A general rule of thumb, based on years of postings around here, seems to be that a real 3% should be perfectly safe, 4% is iffy, while 5%, or above, isn't safe without some very heavy pencil sharpening, almost regardless of which assets one holds or in what proportion!  Fortunately, you,  like I, could choose when and if we retire.  It's unfortunate for some people, approaching a decent retirement age, are forced to go out, because of circumstances, like the virus.

 

ElLobo, de la casa de la toro caca grande
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@ElLobo wrote:

@SJ60 wrote:

My answer is no, I would not retire needing 5% of my portfolio to live the lifestyle I want - more than the basics.  Not a theoretical exercise in my case. A year ago, I did my calculations and decided I needed 4% IF EVERYTHING went well for my portfolio to last for my wife's potential lifespan. Throw in a fudge factor, and I thought that 4.5% or 5% was needed, so I decided not to retire. Instead, I planned to work at about 0.5 FTE (20 h/week), to pay my bills, and re-assess annually.  A year later, starting in April, I'm now working about 0.3 FTE, less than I planned, thanks to COVID.  I did not sell any net equities during 2020, so far, but I did sell all my muni bonds and put that money into paying off my mortgage and building up my cash reserve. My rationale was that I did not expect to SAFELY make more than my mortgage rate by investing the funds in muni bonds. That reduces my cash flow need going forwards, so I can live on 0.3 FTE current income + maybe some IRA withdrawals (<1%) while I wait for the portfolio to grow to the point that we'll need 3%, maybe 3.5%.  If health issues prevent me from working, the adjustment will have to be cutting expenses, so that we live on 3%.  


Yup, Doc, that's what we all, in essence, do!  A general rule of thumb, based on years of postings around here, seems to be that a real 3% should be perfectly safe, 4% is iffy, while 5%, or above, isn't safe without some very heavy pencil sharpening, almost regardless of which assets one holds or in what proportion!  Fortunately, you,  like I, could choose when and if we retire.  It's unfortunate for some people, approaching a decent retirement age, are forced to go out, because of circumstances, like the virus.

      

          So my answer is yes. That’s what we tried to do to our risk limits. My opinion is safe from the start is the opposite of what should have been done as I saw our parents retirement progress up to 35 years. If you have a future beyond age 85 things can get dicey.

           In our parents case the lack of wiggle room or substantial reserves in later years led me to take positions in the now existing CEF’s, risks we’re going to try to back out of by that age. I think as a retiree I should stay on the offensive as long as possible, distance myself from a fickle unknown market as far as I can as fast as I can and compound excess gains longer as an added cushion before spend down.

 


 

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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

I agree safe at the start of retirement is not necessarily safe after 25 years.  A good balanced fund or a reasonable allocation should basically last at 3.5 to 4%, unless the S* hits the fan for a long period, e.g 1929 to 1943, or maybe 1968 to 1980.  In that case, since whatever happens will not be a replay, but will have its own idiosyncrasies, I'm not sure anything is guaranteed.  

The only thing to do then will be to either cut back on expenses or reverse retire and find some work.  That requires human capital, something that discussions here have not addressed. Why retire with the presumption that your only remaining capital is financial?  Human capital preservation is clearly easier for some than others.  I'm lucky, in that as a physician I can keep my medical licenses, knowledge and board certifications current, and my physical and cognitive health good, so that reverse retiring will be possible.  What are folks here doing on this front? I'm curious.

 

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@SJ60 wrote:

I agree safe at the start of retirement is not necessarily safe after 25 years.  A good balanced fund or a reasonable allocation should basically last at 3.5 to 4%, unless the S* hits the fan for a long period, e.g 1929 to 1943, or maybe 1968 to 1980.  In that case, since whatever happens will not be a replay, but will have its own idiosyncrasies, I'm not sure anything is guaranteed.  

The only thing to do then will be to either cut back on expenses or reverse retire and find some work.  That requires human capital, something that discussions here have not addressed. Why retire with the presumption that your only remaining capital is financial?  Human capital preservation is clearly easier for some than others.  I'm lucky, in that as a physician I can keep my medical licenses, knowledge and board certifications current, and my physical and cognitive health good, so that reverse retiring will be possible.  What are folks here doing on this front? I'm curious.

 


I chose to retire (actually, to take an early retirement) shortly after 9/11, whenever my company was going to lay off people and I chose to go, rather than a youngun, with two young children.  I was actually in the similar position as I described in my OP, having experienced the bursting of the tech bubble, along with the aftermath of 9/11.  Whenever I 'ran the numbers' (starting in the late 90's and continuing until my retirement in August, 2003), I 'dropped' from a fairly 'safe' 4% withdrawal requirement to more risky 5% level!  What made the difference was my 'strategy' that I knew I was going to use (but not discuss in this thread!)

My first 10 years out were probably the healthiest years of my life.  I went from a full time desk job (engineer) to a full time 'gentleman farmer' job, taking care of our former 15 acres.  Oh, and we were our own general contractor for designing and building our retirement dream home, as well as doing all of the interior finish work, starting with the initial painting after the new drywall was dry!  Although I had planned for a 5% real withdrawal, we never came close to actually needing that much.

We divorced in 2013 and I moved back home, to Pennsylvania, from Washington state.  At that point, I didn't have that manual labor to keep healthy and busy, so I volunteered 24 hours a week working for the curator at a state historical site, plugging and chugging data for their archive activities to at least keep my mind active.  Since then, I have taken two other part time jobs, just to keep busy.  Since moving back home, I do a lot of travel, both foreign (Ireland, Australia/New Zealand/Fiji, Costa Rica) and domestic.  I drive a lot, in my Jeep, to go off-roading in all parts of the country, as well as to visit my kids and grandkids, who live out west.

ElLobo, de la casa de la toro caca grande
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Re: Real, inflation adjusted 5% rate of withdrawal during retirement

Would I retire if I needed to withdrawal and count on 5% from my portfolio? No.  And I didn't.  My wife and I both semi-retired at the same time (I was 60, she was 54).  That was the year we paid off our house and became debt free.  My pension wasn't quite enough so we kept teaching part-time at a local university.  Maybe I should have waited but I took social security at 62.  Thanks to having no debt, it and my pension paid our bills but we still kept teaching part-time.  That was our fun money.  My wife took social security at 62.  That was when we finally retired.  I was starting to have failing health.

I had never even thought about withdrawing from our investments before the heart attack and two surgeries. I recovered completely but...  Shortly after that I wrote my first succession plan. I calculated a single person budget and compared it to the sources of income that my wife would have.  It wasn't enough.  I then studied the various withdrawal methods: Bengen, Trinity, Vanguard, etc. Some I liked and some I didn't.  It appeared that she needed to take 2 1/2% from our investments.  I decided on 4% to give her a little extra.  Many of the studies said 5% was safe.  Guyton is using that today. (I know we are not suppose to discuss history but the last 30 years would have supported 7%.)

We discussed it and she filed a copy in case it was ever needed.  Then over the last year or so I went through a series of strokes.  I can still walk and talk but I have a half-brother who is paralyzed unable to talk living in a nursing home.  It was time to revise the succession plan.  I have now incorporated nursing home costs and revisited withdrawal strategies.(There was a huge discussion on this forum and I thank everyone for helping out.)

So the answer is no.  I've been retired 10 years and even if I could go back and redo things, if I had a choice I wouldn't retire knowing I would have to take 5%.  The future is unknown.  Plan for the worst and hope for the best.

The sun is shining today.  I need to head out to meet my brother and some friends.  We're taking a motorcycle trip.  I ride a 1997 Harley Wide Glide.

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