How many of you use the "4% rule" during retirement?

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rustymutt
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Re: How many of you use the "4% rule" during retirement?

Post by rustymutt » Mon Feb 19, 2018 10:40 am

Yes to your question of do I use this rule. But, and let you explain my position. I was taught to be flexible with what I
do remove. I good years 4% applies, but in bad years I'm setup to not withdraw even 2%. It works. Thanks to Paul Merrimen for this advice on drawdown studies. He got his message across well to me.
I'm amazed at the wealth of Knowledge others gather, and share over a lifetime of learning. The mind is truly unique. It's nice when we use it!

Case59
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Re: How many of you use the "4% rule" during retirement?

Post by Case59 » Mon Feb 19, 2018 11:39 am

I used the 4% "rule" as a benchmark to give me comfort that I could retire at age sixty, which I did approximately six years ago. Since then, I've tried to peg withdrawals at 3-3.5% without trying to be terribly precise. I certainly have been enormously lucky investing into the long-running bull market.

To my mind, the 4% plus inflation method was and is a way of testing historical boundaries. Bengen and the Trinity Study pretty much say that. I find it hard to imagine that anyone--anyone--actually uses it in a lockstep fashion.
"Most quotations on the internet are incorrect."-Mark Twain

itstoomuch
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Re: How many of you use the "4% rule" during retirement?

Post by itstoomuch » Mon Feb 19, 2018 12:48 pm

David Jay wrote:
Mon Feb 19, 2018 9:41 am
itstoomuch wrote:
Mon Feb 19, 2018 12:44 am
I'm with David Jay.
I'm not sure what that means, I don't think I wrote of my preference in this thread.

I prefer a fixed percentage (5%?) of remaining portfolio (from Merriman's research). Easy. No inflation calculations (CPI-U? CPI-W?). If there is cognitive decline I can ask my daughter to multiply account balance by .05

Because it is variable but starts 25% higher than 4% inflation adjusted, put some of the withdrawal in the Credit Union for smoothing.
You didn't. And I don't either .
I kinda divorced our assets away from any SWR.
I have no preference in the matter, other than <10% (Descretionary Accts) of our retirement portfolio can be affected by using any form of SWR and even then that SWR is excess to our needs. The other 90% is set by RE forces and by the public annuity and private annuity institutions which then offered a better payoff.
YMMB
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

smitcat
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Re: How many of you use the "4% rule" during retirement?

Post by smitcat » Mon Feb 19, 2018 1:23 pm

itstoomuch wrote:
Mon Feb 19, 2018 12:48 pm
David Jay wrote:
Mon Feb 19, 2018 9:41 am
itstoomuch wrote:
Mon Feb 19, 2018 12:44 am
I'm with David Jay.
I'm not sure what that means, I don't think I wrote of my preference in this thread.

I prefer a fixed percentage (5%?) of remaining portfolio (from Merriman's research). Easy. No inflation calculations (CPI-U? CPI-W?). If there is cognitive decline I can ask my daughter to multiply account balance by .05

Because it is variable but starts 25% higher than 4% inflation adjusted, put some of the withdrawal in the Credit Union for smoothing.
You didn't. And I don't either .
I kinda divorced our assets away from any SWR.
I have no preference in the matter, other than <10% (Descretionary Accts) of our retirement portfolio can be affected by using any form of SWR and even then that SWR is excess to our needs. The other 90% is set by RE forces and by the public annuity and private annuity institutions which then offered a better payoff.
YMMB
As long as you define real estate rental income as 'safe' and the annuity income that is not inflation adjusted as 'acceptable'.
FWIW - I never get the feeling that my rentals are 'safe' or that my annuity is inflation adjusted.

If I had maybe 10+ rentals spread around various parts of the US I would likely feel a bit better but I have lived through downturns and isssues in our area. With one or two isolated rentals in close locations it does not make me feel 'safe'.
YMMV

itstoomuch
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Re: How many of you use the "4% rule" during retirement?

Post by itstoomuch » Mon Feb 19, 2018 2:02 pm

Is anything really "safe"?
The best I can determine is to be flexible, diversify, and look at everything.
YMMV
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

Dinosaur Dad
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Re: How many of you use the "4% rule" during retirement?

Post by Dinosaur Dad » Mon Feb 19, 2018 2:14 pm

Watty wrote:
Thu Feb 15, 2018 6:12 pm
I don't use it because I know that my income needs will not be steady and will vary greatly in different phases of retirement.

I retired when I was 59 so the first phase will include paying for health insurance, not social security income yet, and being very active and doing things like a fair amount of travel.

In mid retirement I will be getting Medicare and Social Security and even if my health is pretty good I will likely slow down a lot by the time I am 75 and I will probably travel a lot less by then and eventually not much at all.

In late retirement I would expect more healthcare expenses and long term care may be needed.

I am married so it is likely that one of us will survive the other and the expenses could change then too.
+1. You really have to look at your long term plan, including both basic annual living expenses/taxes/RMD/creating your income stream, and then planning big tickets things...which for me include:

1. higher cost of medical and dental care prior to medicare at 65
2. car replacement
3. periodic home capital projects like new roof, boiler, driveway paving
4. some additional spending for an occasional "premium" vacation
5. Some sort of allocation for higher medical expenses later on: assistance at home, adult day care programs, nursing home
6. other one-time events like child's wedding, helping child with graduate school
7. would like to leave some form of legacy to child

I supposed you could include an accrual in your annual budget for these, but for me it's easier to just slot them in during years that you forecast them to occur. And be prepared for surprises.
"Take calculated risks - that is quite different from being rash." | General George S. Patton

obgraham
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Re: How many of you use the "4% rule" during retirement?

Post by obgraham » Mon Feb 19, 2018 10:15 pm

tennisplyr wrote:
Fri Feb 16, 2018 7:44 am
Retired for 7 years and take out what I need. I keep an eye on my total assets and try to live my life in balance.
This.

A succinct summary of the whole "save and then retire" discussion.

smitcat
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Re: How many of you use the "4% rule" during retirement?

Post by smitcat » Tue Feb 20, 2018 10:14 am

itstoomuch wrote:
Mon Feb 19, 2018 2:02 pm
Is anything really "safe"?
The best I can determine is to be flexible, diversify, and look at everything.
YMMV
"Is anything really "safe"?"
This I agree with 100%.

"I kinda divorced our assets away from any SWR."
This I do not agree with and I believe could be misleading to readers.

itstoomuch
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Re: How many of you use the "4% rule" during retirement?

Post by itstoomuch » Tue Feb 20, 2018 11:41 am

^50% agreement isn't too bad :) :oops:
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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tadamsmar
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Re: How many of you use the "4% rule" during retirement?

Post by tadamsmar » Tue Feb 20, 2018 12:39 pm

22twain wrote:
Wed Feb 14, 2018 9:27 am
To be clear, I'm referring to withdrawing 4% of your portfolio during the first year, then in the following years increasing the dollar amount according to the inflation rate.

When it's mentioned as a rule of thumb for starting to answer "when can we retire?" questions, the discussion often turns to elaborate methods for setting variable withdrawal rates.
I think that the 4% rule, as you stated it, is good for pre-retirement planning.

The ability to get by on less than inflation-adjusted 4% during retirement will just give you another potential tool to avoid ruin.

There are other hard problems like covering potential medical and long-term care expenses.

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Toons
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Re: How many of you use the "4% rule" during retirement?

Post by Toons » Tue Feb 20, 2018 12:42 pm

6 years in ,when haven't needed to.
Pensions
SS
Divs are sufficient. :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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Just sayin...
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Re: How many of you use the "4% rule" during retirement?

Post by Just sayin... » Tue Feb 20, 2018 12:55 pm

Retired 12/31/2017. Our initial withdrawal rate is 3.1%, with the ability to lower it to 2.6% if need be - resetting annually. As things play out, we will likely be able to “loosen the screws” considerably, but at 3.1% our budgeted post retirement spend is considerably higher than in pre-retirement and I can see the checking account growing to crazy levels. It’s hard to change a lifetime of frugality overnight.

dbr
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Re: How many of you use the "4% rule" during retirement?

Post by dbr » Wed Feb 21, 2018 9:08 am

Just sayin... wrote:
Tue Feb 20, 2018 12:55 pm
Retired 12/31/2017. Our initial withdrawal rate is 3.1%, with the ability to lower it to 2.6% if need be - resetting annually. As things play out, we will likely be able to “loosen the screws” considerably, but at 3.1% our budgeted post retirement spend is considerably higher than in pre-retirement and I can see the checking account growing to crazy levels. It’s hard to change a lifetime of frugality overnight.
Why would you withdraw money that you are not spending with the consequence that your checking account goes crazy?

ryman554
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Re: How many of you use the "4% rule" during retirement?

Post by ryman554 » Wed Feb 21, 2018 10:44 am

dbr wrote:
Wed Feb 21, 2018 9:08 am
Just sayin... wrote:
Tue Feb 20, 2018 12:55 pm
Retired 12/31/2017. Our initial withdrawal rate is 3.1%, with the ability to lower it to 2.6% if need be - resetting annually. As things play out, we will likely be able to “loosen the screws” considerably, but at 3.1% our budgeted post retirement spend is considerably higher than in pre-retirement and I can see the checking account growing to crazy levels. It’s hard to change a lifetime of frugality overnight.
Why would you withdraw money that you are not spending with the consequence that your checking account goes crazy?
On one hand, I agree. Why withdraw when you can continue to invest?

On the other hand, I could see as part of this a way to reduce exposure to volatility, a pseudo future-liability-match from good years, but the number of years of future expenses kept in "a checking account" (cash, really) quickly reaches a point a low utility.

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Just sayin...
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Re: How many of you use the "4% rule" during retirement?

Post by Just sayin... » Wed Feb 21, 2018 12:39 pm

dbr wrote:
Wed Feb 21, 2018 9:08 am
Why would you withdraw money that you are not spending with the consequence that your checking account goes crazy?
For now, we are merely accumulating cash in case some of my budgetary estimates were way off (i.e. medical expenses). If our spend levels continue to underpace our withdrawals, then it may make sense to dial back our withdrawal rate. That said, in the back of my mind, I have a fear that an early-retirement sequence of returns risk event might pop up and, as ryman554 wrote, it is a way to reduce volatility. Plus, it is earning about 1.5%, so it’s not a total loss. Do I have this wrong? Is there a better way? I’m open to input here...

Ruger
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Re: How many of you use the "4% rule" during retirement?

Post by Ruger » Wed Feb 21, 2018 2:35 pm

I haven't used it because my income from rentals and SS covers all my expenses. In a couple of years I'll loosen the purse strings and start spending liberally, but I won't need anywhere near 4%.

silverex
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Re: How many of you use the "4% rule" during retirement?

Post by silverex » Wed Feb 21, 2018 4:30 pm

Vanguard has an interesting piece of research about 4% rule with additional ceiling and floor, which makes for a safer spending, adjusting for market conditions:
http://www.vanguard.com/pdf/s823.pdf

itstoomuch
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Re: How many of you use the "4% rule" during retirement?

Post by itstoomuch » Wed Feb 21, 2018 5:06 pm

silverex wrote:
Wed Feb 21, 2018 4:30 pm
Vanguard has an interesting piece of research about 4% rule with additional ceiling and floor, which makes for a safer spending, adjusting for market conditions:
http://www.vanguard.com/pdf/s823.pdf
Such are the advantages of Multiple Streams of Income and Laddering :oops:
YMMV :annoyed
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Just sayin...
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Re: How many of you use the "4% rule" during retirement?

Post by Just sayin... » Wed Feb 21, 2018 6:58 pm

silverex wrote:
Wed Feb 21, 2018 4:30 pm
Vanguard has an interesting piece of research about 4% rule with additional ceiling and floor, which makes for a safer spending, adjusting for market conditions:
http://www.vanguard.com/pdf/s823.pdf
They've just about summarized my approach. Their starting WR is 4%, their ceiling is 5% and their floor is 2.5%, while my starting WR is 3.1%, my ceiling is 5%, and my floor is 2.6%. They quote a 92% success rate with this approach. I've used most of McClung's LOYM methodology to construct my more conservative plan, and hope it's enough for a planned 35-year horizon.

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