Do retiree BHs actually run down their portfolios?

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msk
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Do retiree BHs actually run down their portfolios?

Post by msk » Tue Sep 05, 2017 8:05 am

I am a retiree, genetically programmed to be a frugal spender and a BH. I read about all these Withdrawal Rates, etc. But, frankly, do real-life BH retirees ever have declining portfolios? Let's face it, any market decline will be followed up immediately by a tightening up of the WR. Even an annual 5% withdrawal will keep a (risky?) 100% stock portfolio going for 50+ years, and spew out upwards inflation adjustments. A 5% withdrawal this year means that the portfolio still carries another 19 years of non-inflation adjusted, no income generating, 19 years. You cannot run out... Are we retirees making younger BHs unnecessarily anxious? As a retiree for the past 17 years I find that I have luckily enjoyed rather fabulous returns on my 100% stock portfolio and I suspect that even the bond-centric BH retirees have experienced real portfolio growth rather than a drawdown. Or am I totally mistaken? BH RETIREES are NOT the average Joe-Public...

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Re: Do retiree BHs actually run down their portfolios?

Post by Bob-a-job » Tue Sep 05, 2017 8:21 am

I am 3 years into retirement with a conservative 60/40 portfolio. Have only withdrawn 2% per year pre tax money so far, and put at least half back into after tax savings. A lot depends on how much you have going into retirement and if you start during a bull or bear market. I am guessing that a lot of BHs don't end up running down their portfolios.

Broken Man 1999
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Re: Do retiree BHs actually run down their portfolios?

Post by Broken Man 1999 » Tue Sep 05, 2017 8:22 am

I have withdrawn $$$ equivalent to three years of retirement spending, and my portfolio is at it's all-time peak.

But my withdrawal rate is at the most 2.5%, so that drawdown has easily been replaced by the current market conditions.

Broken Man 1999

ETA: Portfolio is 50%equities/50%bonds/cash
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Re: Do retiree BHs actually run down their portfolios?

Post by dbr » Tue Sep 05, 2017 8:30 am

msk wrote:
Tue Sep 05, 2017 8:05 am
I am a retiree, genetically programmed to be a frugal spender and a BH. I read about all these Withdrawal Rates, etc. But, frankly, do real-life BH retirees ever have declining portfolios? Let's face it, any market decline will be followed up immediately by a tightening up of the WR. Even an annual 5% withdrawal will keep a (risky?) 100% stock portfolio going for 50+ years, and spew out upwards inflation adjustments. A 5% withdrawal this year means that the portfolio still carries another 19 years of non-inflation adjusted, no income generating, 19 years. You cannot run out... Are we retirees making younger BHs unnecessarily anxious? As a retiree for the past 17 years I find that I have luckily enjoyed rather fabulous returns on my 100% stock portfolio and I suspect that even the bond-centric BH retirees have experienced real portfolio growth rather than a drawdown. Or am I totally mistaken? BH RETIREES are NOT the average Joe-Public...
Essentially you have been lucky. A BH could run down their portfolio, but more often than not in the US economy that is probably not the case. If you want to see the statistical outlook on that you can run FireCalc and look at the presentation of portfolio trajectories as outcomes for various withdrawal rates and asset allocations.

Among those who are not Bogleheads I have observed results of someone completely depleting a portfolio to buy cocaine to someone refusing to replace a ten year old car as his portfolio passed $8 million on the way up and up again.

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House Blend
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Re: Do retiree BHs actually run down their portfolios?

Post by House Blend » Tue Sep 05, 2017 8:36 am

If you plan for the worst case (or even the 25th percentile), on average you should expect to have a lot of money left over.

Whether that is tragic or not is in the eye of the beholder.

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Re: Do retiree BHs actually run down their portfolios?

Post by midareff » Tue Sep 05, 2017 8:43 am

Six years retired now and will be 70 in December. Portfolio is averaging 8.5% since 2010 and WR averaging 3.5%. $ at an all time high so I think I'm going to splurge on a bucket list dream car before year's end. Just like the market has been bountiful the last 8 years or so it can be exactly opposite.

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Re: Do retiree BHs actually run down their portfolios?

Post by truenorth418 » Tue Sep 05, 2017 8:50 am

Lots of withdrawal approaches are designed to "run down" a portfolio. It all depends on how much, if any, one wants to leave to heirs or spend on themselves.

For example, the "VPW" withdrawal approach will run down a portfolio over time as it uses an increasing % of remaining portfolio over time.

Personally, I am using the IRS's Minimum Required Distribution tables to guide my withdrawals. The % of withdrawals will increase each year. At age 55 my withdrawal will be about 2.5% of remaining portfolio, but by my early 70s the withdrawal % will be 4%, and then higher and higher as the years pass. Similar to VPW, my portfolio will never run out of money, but there will be less money depending on how long I live.

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Re: Do retiree BHs actually run down their portfolios?

Post by bsteiner » Tue Sep 05, 2017 9:03 am

People of modest means often think in terms of not running out of money during their lifetime (or the lifetimes of them and their spouses). People whose children are successful need not be as concerned about providing for their children. However, people with more money, and people with children with special needs, usually consider their children and often their grandchildren. Depending on how much they withdraw, the portfolio may maintain most or all of its value in real terms for a longer period of time.

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Re: Do retiree BHs actually run down their portfolios?

Post by DetroitRick » Tue Sep 05, 2017 9:03 am

I do think we make younger Bogleheads unnecessarily anxious. But then again, ask this question in 2008 and most of us would be a little less positive. Even so, I think a few things are often missing from this type of conversation - the individual needs that drive withdrawal rates and our personal capacities (both mental and financial) to adapt to market conditions. Non-discretionary expense levels vs. portfolio income and other income (like SS, pension, rental income, etc) vary widely from person-to-person. There are no one-size-fits-all rules. I would, almost by definition, assume discretionary needs are at least somewhat flexible for many of us. Which makes rigid withdrawal "rules" less applicable.

I've closely looked a my own situation and finally reached a point where I don't need to spend the rest of my retirement fretting about exact withdrawal assumptions. However it is something that deserves some deep soul-searching and analysis prior to retirement. There will be occasional frugal years ahead, but I don't expect to seriously drain my portfolio.

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Re: Do retiree BHs actually run down their portfolios?

Post by avalpert » Tue Sep 05, 2017 9:21 am

A 5% withdrawal rate of a 100% stock portfolio has failed about 1 out of 8 times over 20 years and 1 out of 6 in 30 years - so no, you can't plan on it working for 50+ years with any sort of confidence.

Does that make young people anxious? It shouldn't, it should make them either lower their expectations for future living expense or find ways to increase earnings today - no need to be anxious, just realistic.

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Re: Do retiree BHs actually run down their portfolios?

Post by warowits » Tue Sep 05, 2017 9:41 am

DetroitRick wrote:
Tue Sep 05, 2017 9:03 am
I do think we make younger Bogleheads unnecessarily anxious.
Finally someone to blame for our angst!
There are an army of people whose pay checks depend on convincing people to invest in ways that are against their self interest. This forum is the volunteer army that fights back!

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Re: Do retiree BHs actually run down their portfolios?

Post by MathWizard » Tue Sep 05, 2017 9:55 am

Not retired yet, but soon.

I plan to withdraw more from my portfolio than a standard 4%, before age 70, especially
from tax deferred up to the top of the 15% bracket to
  • defer SS benefits until 70
    convert to ROTH and avoid some RMDs
    spend more early on while they are young and able to travel
In other threads, others have expressed that they plan to do at least one of these.

This is probably not what you meant though.

Otherwise, I will deplete as necessary to fund needs, otherwise, I will consider excess as disposable income.

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Pajamas
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Re: Do retiree BHs actually run down their portfolios?

Post by Pajamas » Tue Sep 05, 2017 10:05 am

It is difficult to generalize about someone running down their portfolio or not because it depends on the current amount of their portfolio, future portfolio returns, and spending.

I think it is appropriate for younger people to be more concerned about this than older people. If you hadn't been concerned when you were younger about having enough money when you were older, you would be much more concerned about it now than you actually are.

My spending rate has been about 1.33% but I expect the dollar amount to increase above inflation as I get older and of course portfolio return has been exceedingly good over the past ten years, so I also expect that to change. I use a 2.5% withdrawal rate in my planning, considering my age and for peace of mind.

The recent thread on annual spending made me look closely at my actual vs. budgeted spending and it turns out that my budget has been very generous for certain categories that are optional or intermittent, such as clothing, vacation, occasional purchases such as furniture, electronics or appliances, etc.

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Re: Do retiree BHs actually run down their portfolios?

Post by vested1 » Tue Sep 05, 2017 10:14 am

truenorth418 wrote:
Tue Sep 05, 2017 8:50 am
Lots of withdrawal approaches are designed to "run down" a portfolio. It all depends on how much, if any, one wants to leave to heirs or spend on themselves.

For example, the "VPW" withdrawal approach will run down a portfolio over time as it uses an increasing % of remaining portfolio over time.

Personally, I am using the IRS's Minimum Required Distribution tables to guide my withdrawals. The % of withdrawals will increase each year. At age 55 my withdrawal will be about 2.5% of remaining portfolio, but by my early 70s the withdrawal % will be 4%, and then higher and higher as the years pass. Similar to VPW, my portfolio will never run out of money, but there will be less money depending on how long I live.
On the contrary, my WD rate is continuing to decline using VPW in the short time since I retired. I consider myself to be fortunate, having followed VPW and still increased our portfolio since my retirement 20 months ago. My wife retired over 2 years ago. I have no illusions that it was anything other than accidental good timing. I would not have spent as much as I did had the market performed poorly.

I had a large one time expense (travel trailer and accessories) immediately upon retirement which made the withdrawal rate for the 1st year 8.8%. Most would call this insane. However the gain for that 12 months was 11.48%, resulting in a net gain of 2.68% after withdrawals. This year our WD rate is projected to be 6.3%, but our gain so far in the 1st 8 months has been 9.1%, a net gain so far of 2.8% after withdrawals. Again, if the market had performed poorly we would have cut back on WD. Our buying power currently matches what it was during employment.

We are withdrawing this much in order to delay SS, which will start (me with a restricted application) in July of next year, dropping our WD rate to a projected 3.1% for the entire year, and staying at that level for 4 more years. At age 70 in July of 2022 our income will increase dramatically, and we will transition to RMD only, starting at 3.65% and either gifting or reinvesting what we don't need. Our plan should result in increasing income every year until death, even with a zero gain. Withdrawing funds from pre-tax accounts will also lower the RMD amounts and positively affect taxes due to a larger portion of income from SS due to the delay.

I think the difference you refer to for BH members is having a plan, rather than having none. As a curious aside, I've tinkered with my investments somewhat, having 5 index funds, whereas my wife only has two. Her gain has surpassed mine slightly.

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Re: Do retiree BHs actually run down their portfolios?

Post by flyingaway » Tue Sep 05, 2017 10:18 am

I will be happy to see my account balance run up year by year after I retire.

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Nicolas
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Re: Do retiree BHs actually run down their portfolios?

Post by Nicolas » Tue Sep 05, 2017 11:01 am

I'm retired 16 months and I haven't touched any of my savings and investments, I haven't needed to as my pension covers all our need. In fact I'm still saving and investing. Why? It feeIs good and I have no use for the money, so far. In fact I have no plan as yet to tap my investments. SS is five years away. Now I'm starting Roth conversions. I may never need that money.

To be honest I'm loathe to spend any of it. After a lifetime of frugality and a dedication to savings I can't bear to. I saw my father-in-law hoard his money and I said I wouldn't follow his example. But I find myself influenced by the same psychology. He was a depression-era kid and a low wage-earner, I wasn't. When the stock market is going up I want to be participating.

I'm sure something will come up eventually that'll force my hand and I'll be glad I have it. Maybe I'll need it for long term care or something. I'm sure not going to spend any of it on a sports car.

I will add that the size of my untouched portfolio makes me feel very secure so it's a great boon to my mental health.
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The Wizard
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Re: Do retiree BHs actually run down their portfolios?

Post by The Wizard » Tue Sep 05, 2017 11:02 am

I annuitized a goodly portion of my tax deferred portfolio at start of retirement in 2013.
My remaining portfolio has grown nicely since then, even though I've been withdrawing from it in lieu of SS.
When I start full SS in 2020, I will have Won the Game, in that my income will be mostly independent from my portfolio.
I'll have RMDs starting then, of course, but will be reinvesting that money...
Attempted new signature...

The Wizard
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Re: Do retiree BHs actually run down their portfolios?

Post by The Wizard » Tue Sep 05, 2017 11:09 am

Nicolas wrote:
Tue Sep 05, 2017 11:01 am
... I'm sure not going to spend any of it on a sports car.
A sports car is a excellent way to keep surplus funds from piling up in retirement!
My present Mustang convertible is ten years old now with almost 100k miles on it. So I'm thinking I'll order a new one in a couple years. It should run around $40k, nicely equipped...
Attempted new signature...

delamer
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Re: Do retiree BHs actually run down their portfolios?

Post by delamer » Tue Sep 05, 2017 11:24 am

msk wrote:
Tue Sep 05, 2017 8:05 am
I am a retiree, genetically programmed to be a frugal spender and a BH. I read about all these Withdrawal Rates, etc. But, frankly, do real-life BH retirees ever have declining portfolios? Let's face it, any market decline will be followed up immediately by a tightening up of the WR. Even an annual 5% withdrawal will keep a (risky?) 100% stock portfolio going for 50+ years, and spew out upwards inflation adjustments. A 5% withdrawal this year means that the portfolio still carries another 19 years of non-inflation adjusted, no income generating, 19 years. You cannot run out... Are we retirees making younger BHs unnecessarily anxious? As a retiree for the past 17 years I find that I have luckily enjoyed rather fabulous returns on my 100% stock portfolio and I suspect that even the bond-centric BH retirees have experienced real portfolio growth rather than a drawdown. Or am I totally mistaken? BH RETIREES are NOT the average Joe-Public...
With 100% in stocks, would you have written this same post during the 2008 crash?

Also, once people get to the old-old stage of their life (85 years and up), they often need home health aides or are living in a retirement community (CCRC, assisted living, etc.) and have high fixed expenses. When you are 70, you can not take a vacation this year if your portfolio takes a dip. But if you are 90, you don't get to pay the nursing home 20% less because your portfolio is down 20% this year.

The active retiree is in a very different position both physically and financially then the dependent retiree. A healthy concern about not having enough resources for the latter stage of life is a not a bad thing for Bogleheads.
Last edited by delamer on Tue Sep 05, 2017 11:40 am, edited 1 time in total.

bigred77
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Re: Do retiree BHs actually run down their portfolios?

Post by bigred77 » Tue Sep 05, 2017 11:26 am

Any boglehead retiree with a reasonable, diversified portfolio who used the 4% rule is now richer than when they retired unless they retired in and around the year 2000. Those retiree's are in fine shape and are now 17 years into retirement, but they probably don't have a portfolio substantially higher than what they started with in real terms.

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Re: Do retiree BHs actually run down their portfolios?

Post by mouses » Tue Sep 05, 2017 11:30 am

bsteiner wrote:
Tue Sep 05, 2017 9:03 am
People of modest means often think in terms of not running out of money during their lifetime
That would be me. I should have enough to live into my nineties, but it is what it is. I got laid off in Silicon Valley about ten years before I had planned to retire. There was a following time of lower paid jobs, then my health declined enough so the available lower paid generally physically strenuous jobs are not things I can do.

2015
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Re: Do retiree BHs actually run down their portfolios?

Post by 2015 » Tue Sep 05, 2017 11:35 am

DetroitRick wrote:
Tue Sep 05, 2017 9:03 am
I do think we make younger Bogleheads unnecessarily anxious. But then again, ask this question in 2008 and most of us would be a little less positive. Even so, I think a few things are often missing from this type of conversation - the individual needs that drive withdrawal rates and our personal capacities (both mental and financial) to adapt to market conditions. Non-discretionary expense levels vs. portfolio income and other income (like SS, pension, rental income, etc) vary widely from person-to-person. There are no one-size-fits-all rules. I would, almost by definition, assume discretionary needs are at least somewhat flexible for many of us. Which makes rigid withdrawal "rules" less applicable.

I've closely looked a my own situation and finally reached a point where I don't need to spend the rest of my retirement fretting about exact withdrawal assumptions. However it is something that deserves some deep soul-searching and analysis prior to retirement. There will be occasional frugal years ahead, but I don't expect to seriously drain my portfolio.
+1
Very well said.

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Flymore
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Re: Do retiree BHs actually run down their portfolios?

Post by Flymore » Tue Sep 05, 2017 11:38 am

My biggest concern is years like 2015, pretty much a flat year or something like a lost decade like Japan's lost decade.
During that time one has no choice but run down a portfolio.

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Re: Do retiree BHs actually run down their portfolios?

Post by VictoriaF » Tue Sep 05, 2017 11:58 am

msk wrote:
Tue Sep 05, 2017 8:05 am
I am a retiree, genetically programmed to be a frugal spender and a BH. I read about all these Withdrawal Rates, etc. ... Or am I totally mistaken? BH RETIREES are NOT the average Joe-Public...
I have been retired since 2014, and I do NOT use SWR, because I consider it inherently harmful. My philosophy of the retirement income is unrelated to the level of frugality or relationship to Joe-Public. It is a simple prudence:
1. I have a spreadsheet projecting my expenses for years ahead.
2. I have cash to pay for my expenses until I reach the age of 70 and start collecting the Social Security.
3. After the age of 70, my assets will be sufficient to cover the delta between my projected expenses and the income from the Social Security and pensions.

My strategy is based on Bill Bernstein's concept of the LMP and RP (Liability Matching Portfolio and Risk Portfolio), but I don't use precision in modeling my numbers because I have a safety margin.

The best recent discussion of these issues, by far, was provided by longinvest in these posts:
viewtopic.php?f=10&t=226782&start=150#p3518009
viewtopic.php?f=10&t=226782&start=150#p3518234
viewtopic.php?f=10&t=226782&start=200#p3519164

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Re: Do retiree BHs actually run down their portfolios?

Post by mptfan » Tue Sep 05, 2017 12:26 pm

Pajamas wrote:
Tue Sep 05, 2017 10:05 am

I think it is appropriate for younger people to be more concerned about this than older people. If you hadn't been concerned when you were younger about having enough money when you were older, you would be much more concerned about it now than you actually are.
I understand your sentiment, but I don't think this is necessarily true because we are all wired differently. Some people are simply not concerned about money or saving for retirement, at any age, and those people are not concerned about it when they are young or when they are older, they just deal with things as they come. Other people (probably the majority of Bogleheads) are concerned about money by nature, and the concern about money does not change with age or with the accumulation of savings, it's just how we are wired.
I eat risk for breakfast. :)

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Re: Do retiree BHs actually run down their portfolios?

Post by 3feetpete » Tue Sep 05, 2017 1:05 pm

I retired three months ago and am not planning to take SS until for 4 1/2 years when I reach 70. At that point non discretionary spending will be covered by SS and a small pension. In the meantime I have resigned myself to the possibility that my portfolio may decline until I begin drawing SS. I am withdrawing about 4% to cover expenses plus plan to convert another 1% or so of my IRA to a Roth IRA. So for then next 4 1/2 years my portfolio will diminish unless my investments yield at least 5%

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Re: Do retiree BHs actually run down their portfolios?

Post by Toons » Tue Sep 05, 2017 1:20 pm

So far ,6 years into retirement,
No need to draw down portfolio.
By that I mean selling investments,although
I do take dividends and cap gains in various investments in taxable accounts.
Still reinvesting in tax deferred,tax free investments. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: Do retiree BHs actually run down their portfolios?

Post by itstoomuch » Tue Sep 05, 2017 5:57 pm

Depends.
We have an Income based retirement plan vs a Investment Plan which uses S/B/C allocations, SWR, Asset gross value.
We can run down our S/B/C holdings to zero and still have Income from SS, pension, GLWB annuities, and rents, in all market conditions.
We use FundedRatio for near term planning.
YMMV
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Re: Do retiree BHs actually run down their portfolios?

Post by David Jay » Tue Sep 05, 2017 5:58 pm

avalpert wrote:
Tue Sep 05, 2017 9:21 am
A 5% withdrawal rate of a 100% stock portfolio has failed about 1 out of 8 times over 20 years and 1 out of 6 in 30 years - so no, you can't plan on it working for 50+ years with any sort of confidence.
I think he means 5% of remaining portfolio balance (a variable withdrawal strategy), not 5% inflation adjusted SWR.

Pfau has been promoting this on his website, 5% is pretty bulletproof if you don't mind the variable yearly amounts.
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Re: Do retiree BHs actually run down their portfolios?

Post by tennisplyr » Tue Sep 05, 2017 6:03 pm

Retired 6+ years and my portfolio is at an all time high. I don't have a withdrawal rate as I take out what I need. My belief is no matter what life deals me I can handle it.
Those who move forward with a happy spirit will find that things always work out.

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Re: Do retiree BHs actually run down their portfolios?

Post by avalpert » Tue Sep 05, 2017 6:52 pm

David Jay wrote:
Tue Sep 05, 2017 5:58 pm
avalpert wrote:
Tue Sep 05, 2017 9:21 am
A 5% withdrawal rate of a 100% stock portfolio has failed about 1 out of 8 times over 20 years and 1 out of 6 in 30 years - so no, you can't plan on it working for 50+ years with any sort of confidence.
I think he means 5% of remaining portfolio balance (a variable withdrawal strategy), not 5% inflation adjusted SWR.

Pfau has been promoting this on his website, 5% is pretty bulletproof if you don't mind the variable yearly amounts.
Any constant percentage will last indefinitely - it's the variability that makes it less than ideal for a retiree, particularly in the early years when they have both time and energy and are most susceptible to sequence of return risk - it is a period when you don't want to cut back 20% on spending because the market crashed if you can be (largely) confident you don't have to.

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Re: Do retiree BHs actually run down their portfolios?

Post by DaftInvestor » Tue Sep 05, 2017 7:00 pm

avalpert wrote:
Tue Sep 05, 2017 6:52 pm
Any constant percentage will last indefinitely - ....
100% ?

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Re: Do retiree BHs actually run down their portfolios?

Post by avalpert » Tue Sep 05, 2017 7:16 pm

DaftInvestor wrote:
Tue Sep 05, 2017 7:00 pm
avalpert wrote:
Tue Sep 05, 2017 6:52 pm
Any constant percentage will last indefinitely - ....
100% ?
Ok, any constant percentage between less than 100 and greater than zero

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DaftInvestor
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Re: Do retiree BHs actually run down their portfolios?

Post by DaftInvestor » Tue Sep 05, 2017 7:34 pm

avalpert wrote:
Tue Sep 05, 2017 7:16 pm
DaftInvestor wrote:
Tue Sep 05, 2017 7:00 pm
avalpert wrote:
Tue Sep 05, 2017 6:52 pm
Any constant percentage will last indefinitely - ....
100% ?
Ok, any constant percentage between less than 100 and greater than zero
sorry - I couldn't resist....

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Re: Do retiree BHs actually run down their portfolios?

Post by VictoriaF » Tue Sep 05, 2017 7:47 pm

DaftInvestor wrote:
Tue Sep 05, 2017 7:34 pm
avalpert wrote:
Tue Sep 05, 2017 7:16 pm
DaftInvestor wrote:
Tue Sep 05, 2017 7:00 pm
avalpert wrote:
Tue Sep 05, 2017 6:52 pm
Any constant percentage will last indefinitely - ....
100% ?
Ok, any constant percentage between less than 100 and greater than zero
sorry - I couldn't resist....
You have shown some self-restraint. If you really could not resist you would have asked about 150%, or 199%, or something like that.

Victoria
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Re: Do retiree BHs actually run down their portfolios?

Post by joe8d » Tue Sep 05, 2017 8:03 pm

flyingaway wrote:
Tue Sep 05, 2017 10:18 am
I will be happy to see my account balance run up year by year after I retire.
That is my situation.
All the Best, | Joe

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Re: Do retiree BHs actually run down their portfolios?

Post by gkaplan » Tue Sep 05, 2017 8:12 pm

joe8d wrote:
Tue Sep 05, 2017 8:03 pm
flyingaway wrote:
Tue Sep 05, 2017 10:18 am
I will be happy to see my account balance run up year by year after I retire.
That is my situation.

That's been my experience as well. I retired in January 2014. My portfolio has increased in size. I haven't withdrawn from Vanguard Roth, but I am taking my RMDs from my TSP G Fund and living on a small FERS pension and Social Security.
Gordon

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Sheepdog
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Re: Do retiree BHs actually run down their portfolios?

Post by Sheepdog » Tue Sep 05, 2017 8:20 pm

I will have been retired 19 years as of this coming October, living off of SS and taking out an average of 4.6% every year from my portfolio...a portfolio where I have had a low stock allocation (22-23% since 2010). Presently, I have more in my portfolio than I ever have. I didn't say that in 2008-09.
People should not say everything they think. They should think about everything they say.

2015
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Re: Do retiree BHs actually run down their portfolios?

Post by 2015 » Tue Sep 05, 2017 8:38 pm

VictoriaF wrote:
Tue Sep 05, 2017 11:58 am
msk wrote:
Tue Sep 05, 2017 8:05 am
I am a retiree, genetically programmed to be a frugal spender and a BH. I read about all these Withdrawal Rates, etc. ... Or am I totally mistaken? BH RETIREES are NOT the average Joe-Public...
I have been retired since 2014, and I do NOT use SWR, because I consider it inherently harmful. My philosophy of the retirement income is unrelated to the level of frugality or relationship to Joe-Public. It is a simple prudence:
1. I have a spreadsheet projecting my expenses for years ahead.
2. I have cash to pay for my expenses until I reach the age of 70 and start collecting the Social Security.
3. After the age of 70, my assets will be sufficient to cover the delta between my projected expenses and the income from the Social Security and pensions.

My strategy is based on Bill Bernstein's concept of the LMP and RP (Liability Matching Portfolio and Risk Portfolio), but I don't use precision in modeling my numbers because I have a safety margin.

The best recent discussion of these issues, by far, was provided by longinvest in these posts:
viewtopic.php?f=10&t=226782&start=150#p3518009
viewtopic.php?f=10&t=226782&start=150#p3518234
viewtopic.php?f=10&t=226782&start=200#p3519164

Victoria
Great minds think alike! :D This is exactly my philosophy and strategy, all of it.

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Re: Do retiree BHs actually run down their portfolios?

Post by gwrvmd » Tue Sep 05, 2017 9:12 pm

I retired at the beginning of 2006. I have a 100% stock portfolio, mostly tax deferred. My portfolio in 2017 is worth twice what it was in 2006. That includes 2008 (I didn't sell anything) and I have lived quite well.
A crash soon after retirement doesn't have to be a catastrophe if you don't panic.
I was certainly helped by the last 8 years of the stock market that was throwing money at you if you had a 100% stock portfolio. I will probably never see another 8 years like that again.
But 1982 - 2000 was great also. That's when I learned to get rid of the bonds

When you see references to the magical "4% withdrawal rate" remember that both the Bengen and the Trinity Study were based on a 60S/40B portfolio. Decrease the bonds and the safe withdrawal rate goes up

I have been lucky but part of the "luck" was I didn't sell in 1987, 2002 or 2008.........Gordon
Disciple of John Neff

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VictoriaF
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Re: Do retiree BHs actually run down their portfolios?

Post by VictoriaF » Tue Sep 05, 2017 9:19 pm

2015 wrote:
Tue Sep 05, 2017 8:38 pm
VictoriaF wrote:
Tue Sep 05, 2017 11:58 am
msk wrote:
Tue Sep 05, 2017 8:05 am
I am a retiree, genetically programmed to be a frugal spender and a BH. I read about all these Withdrawal Rates, etc. ... Or am I totally mistaken? BH RETIREES are NOT the average Joe-Public...
I have been retired since 2014, and I do NOT use SWR, because I consider it inherently harmful. My philosophy of the retirement income is unrelated to the level of frugality or relationship to Joe-Public. It is a simple prudence:
1. I have a spreadsheet projecting my expenses for years ahead.
2. I have cash to pay for my expenses until I reach the age of 70 and start collecting the Social Security.
3. After the age of 70, my assets will be sufficient to cover the delta between my projected expenses and the income from the Social Security and pensions.

My strategy is based on Bill Bernstein's concept of the LMP and RP (Liability Matching Portfolio and Risk Portfolio), but I don't use precision in modeling my numbers because I have a safety margin.

The best recent discussion of these issues, by far, was provided by longinvest in these posts:
viewtopic.php?f=10&t=226782&start=150#p3518009
viewtopic.php?f=10&t=226782&start=150#p3518234
viewtopic.php?f=10&t=226782&start=200#p3519164

Victoria
Great minds think alike! :D This is exactly my philosophy and strategy, all of it.
I have just finished playing with longinvest's spreadsheet and provided some comments here viewtopic.php?f=10&t=227051#p3521280 . It's a wonderful tool.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

JustinR
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Re: Do retiree BHs actually run down their portfolios?

Post by JustinR » Tue Sep 05, 2017 10:14 pm

msk wrote:
Tue Sep 05, 2017 8:05 am
I am a retiree, genetically programmed to be a frugal spender and a BH. I read about all these Withdrawal Rates, etc. But, frankly, do real-life BH retirees ever have declining portfolios? Let's face it, any market decline will be followed up immediately by a tightening up of the WR. Even an annual 5% withdrawal will keep a (risky?) 100% stock portfolio going for 50+ years, and spew out upwards inflation adjustments. A 5% withdrawal this year means that the portfolio still carries another 19 years of non-inflation adjusted, no income generating, 19 years. You cannot run out... Are we retirees making younger BHs unnecessarily anxious? As a retiree for the past 17 years I find that I have luckily enjoyed rather fabulous returns on my 100% stock portfolio and I suspect that even the bond-centric BH retirees have experienced real portfolio growth rather than a drawdown. Or am I totally mistaken? BH RETIREES are NOT the average Joe-Public...
Thank you for this post. Bogleheads are overly cautious (as they should be, nothing wrong with that) -- and it's refreshing to see another perspective once in a while so that we can take a step back and breathe.

As someone who's 30+ away from "regular retirement age", I have no idea what's going to happen. I've never had a war on the scale of Vietnam or larger in my lifetime. But a huge world event like that seems inevitable in the 60+ years I may have left. Never lived through a long economic depression. Life has been pretty good for us...and it seems like we might be due for something bad. So in that way Bogleheads over-cautiousness has prepared me for that kind of thinking when investing.

But it's nice hearing that maybe the world's not going to end if you do something like use a reasonable SWR.

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Re: Do retiree BHs actually run down their portfolios?

Post by Earl Lemongrab » Wed Sep 06, 2017 3:11 pm

I'm also a frugal person. However, I don't understand the business about changing of withdrawal rates due to market downturns. After all, I will only be taking money that I need to support my lifestyle. While that lifestyle is simple, I don't want it any simpler. In the early stages of retirement, I probably won't even need to access the investments at all barring unexpected expenses. I believe my pension will cover everything initially. It doesn't have COLA, so eventually it will not be adequate.
This week's fortune cookie: "You will do well to expand your horizons." Ow. Passive-aggressive and vaguely ominous.

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Re: Do retiree BHs actually run down their portfolios?

Post by El Greco » Wed Sep 06, 2017 3:33 pm

Any of you folks want to adopt me? :happy

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VictoriaF
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Re: Do retiree BHs actually run down their portfolios?

Post by VictoriaF » Wed Sep 06, 2017 3:37 pm

El Greco wrote:
Wed Sep 06, 2017 3:33 pm
Any of you folks want to adopt me? :happy
Sure. In exchange for a little gift from your collection:

Image

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

lckamp
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Re: Do retiree BHs actually run down their portfolios?

Post by lckamp » Wed Sep 06, 2017 4:57 pm

Hi:
I've been retired for 27 years and basically adopted Taylor's philosophy of spend reasonably and invest and our portfolio( 65% Equity of which about 40% is foreign and 35 % Bond funds) has grown substantially as has our net worth. I suspect we will leave a legacy for our kids.
Enjoy | Al Seekamp

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Re: Do retiree BHs actually run down their portfolios?

Post by Sheepdog » Wed Sep 06, 2017 5:03 pm

Earl Lemongrab wrote:
Wed Sep 06, 2017 3:11 pm
I'm also a frugal person. However, I don't understand the business about changing of withdrawal rates due to market downturns. After all, I will only be taking money that I need to support my lifestyle.
I don't think everyone has the same spending every year....I don't. All of us don't have pensions either. We don't put on a new roof, buy an auto, boat, a special more expensive cruise or whatever every year. Any regular withdrawals cover my everyday lifestyle, but not those things. All of us don't automatically take out my planned withdrawal automatically. Normally I will plan special purchases, but in a market downturn, I will delay some of those until the "market" is recovering. I hope that explains from my history and planning.
People should not say everything they think. They should think about everything they say.

DrGoogle2017
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Re: Do retiree BHs actually run down their portfolios?

Post by DrGoogle2017 » Wed Sep 06, 2017 5:17 pm

I think it depends on a lot of variables. Age, networth, and spending pattern.

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Re: Do retiree BHs actually run down their portfolios?

Post by Earl Lemongrab » Wed Sep 06, 2017 6:46 pm

Sheepdog wrote:
Wed Sep 06, 2017 5:03 pm
Earl Lemongrab wrote:
Wed Sep 06, 2017 3:11 pm
I'm also a frugal person. However, I don't understand the business about changing of withdrawal rates due to market downturns. After all, I will only be taking money that I need to support my lifestyle.
I don't think everyone has the same spending every year....I don't. All of us don't have pensions either. We don't put on a new roof, buy an auto, boat, a special more expensive cruise or whatever every year. Any regular withdrawals cover my everyday lifestyle, but not those things. All of us don't automatically take out my planned withdrawal automatically. Normally I will plan special purchases, but in a market downturn, I will delay some of those until the "market" is recovering. I hope that explains from my history and planning.
Some of that stuff isn't in my spending anyway. I don't go on cruises or travel much at all. But I wouldn't change my plans due to market downturn. That's one reason for a substantial allocation to fixed-income investments.
This week's fortune cookie: "You will do well to expand your horizons." Ow. Passive-aggressive and vaguely ominous.

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Re: Do retiree BHs actually run down their portfolios?

Post by FiveSigmas » Wed Sep 06, 2017 6:53 pm

VictoriaF wrote:
Wed Sep 06, 2017 3:37 pm
El Greco wrote:
Wed Sep 06, 2017 3:33 pm
Any of you folks want to adopt me? :happy
Sure. In exchange for a little gift from your collection:
<snip>
And this is why one doesn't use one's real name in one's handle. :wink:

In seriousness, though: I would amend msk's original question to: "Are retiree BHs prepared to actually run down their portfolios?" Although everyone's situation is a bit different, our experiences are all generally tied to the performances of the total stock market and total bond market, which have both been amazingly good. With the rising tide, I suspect relatively few have actually had their portfolios run aground. Many more might be prepared to do so in the worst-case scenario, though.

I still have a long way to go before worrying about retirement, but my IPS includes the (hopefully unlikely) possibility of a portfolio run-down, and I'm okay with that.

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