How old were you when you started spending your “principal”?

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Ron Scott
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How old were you when you started spending your “principal”?

Post by Ron Scott »

So you retire with $X and that amount continues to grow for some years as the plan sets itself up for the big inflation affect to catch up to you. Then, at some point, the accounts are less than the original $X.

How old were you when your accounts dropped below $X?
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Re: How old were you when you started spending your “principal”?

Post by Gill »

Don't know yet. Have been retired for 15 years and the portfolio is still larger than when I retired in spite of spending principal each year.
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Re: How old were you when you started spending your “principal”?

Post by Sandtrap »

Actionably:
If all "Bogle Basics" are in place and retirement income streams are planned properly,
and lifestyle adaptations to minimize expenses and debt are adhered to,
and one's IPS Statement is reviewed and followed and sound,
-- spending down principal might never happen.
But, it depends on each person's unique financial situation. IE: income streams, assets, etc.
It pays to look at the portfolio comprehensively, across the board, whether "principal" or not.

j :D
Last edited by Sandtrap on Sun Mar 25, 2018 6:45 pm, edited 1 time in total.
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Re: How old were you when you started spending your “principal”?

Post by Flobes »

Gill wrote: Sun Mar 25, 2018 3:15 pm Don't know yet. Have been retired for 15 years and the portfolio is still larger than when I retired in spite of spending principal each year.
Gill
Ditto^ but I've only been retired 10 years.
Ron Scott wrote: Sun Mar 25, 2018 3:10 pm How old were you when your accounts dropped below $X?
Two people cross the threshold at age 72: one retired at age 55 and the other at age 70. How many years into retirement is probably a better question than age.
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Re: How old were you when you started spending your “principal”?

Post by TheDDC »

Sandtrap wrote: Sun Mar 25, 2018 3:22 pm Actionably:
If all "Bogle Basics" are in place and retirement income streams are planned properly,
and lifestyle adaptations to minimize expenses and debt are adhered to,
and one's IPS Statement is reviewed and followed and sound,
-- spending down principal might never happen.

j :D
I was just going to say this. Isn't it anti-BH to spend principal? My goal would be not to do that. My savings/accumulation plan pretty much is designed around NOT doing that under normal circumstances. In the case of an unforeseen health emergency on the part of myself out spouse? Maybe. But hopefully not.

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Re: How old were you when you started spending your “principal”?

Post by Leif »

TheDDC wrote: Sun Mar 25, 2018 3:25 pmIsn't it anti-BH to spend principal?
Not at all. What is distasteful is going broke.
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Re: How old were you when you started spending your “principal”?

Post by littlebird »

30 years in, with spouse in assisted living for two years, having retired early and very early respectively, with very modest incomes and assets, and it hasn't happened yet. Of course, we were very lucky in our timing.

Edited to add: I've read your definition of "X" again, and I have to add that not only are we nowhere near crossing "X" on the way down, but we are (at the start of '18) at about 5X.
Last edited by littlebird on Sun Mar 25, 2018 3:37 pm, edited 1 time in total.
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Re: How old were you when you started spending your “principal”?

Post by Sandtrap »

TheDDC wrote: Sun Mar 25, 2018 3:25 pm
Sandtrap wrote: Sun Mar 25, 2018 3:22 pm :D
Actionably:
If all "Bogle Basics" are in place and retirement income streams are planned properly,
and lifestyle adaptations to minimize expenses and debt are adhered to,
and one's IPS Statement is reviewed and followed and sound,
-- spending down principal might never happen.

j :D
I was just going to say this. Isn't it anti-BH to spend principal? My goal would be not to do that. My savings/accumulation plan pretty much is designed around NOT doing that under normal circumstances. In the case of an unforeseen health emergency on the part of myself out spouse? Maybe. But hopefully not.

-TheDDC
IMHO
It can seem as if one is spending down principal, but looked at comprehensively over the long term, the total valuation should hold steady as an average.
But, there are some that approach using "FireCalc to not "run out of money in retirement" which is a success.
And, there are others, depending on the financial strategy and assets and income streams, where the result will be far greater than what they started with. This is an ideal.
It depends on what each person has to work with. IE: pension size, annuities, alternate income streams such as R/E etc, and so forth.

j :D
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Re: How old were you when you started spending your “principal”?

Post by delamer »

TheDDC wrote: Sun Mar 25, 2018 3:25 pm
Sandtrap wrote: Sun Mar 25, 2018 3:22 pm Actionably:
If all "Bogle Basics" are in place and retirement income streams are planned properly,
and lifestyle adaptations to minimize expenses and debt are adhered to,
and one's IPS Statement is reviewed and followed and sound,
-- spending down principal might never happen.

j :D
I was just going to say this. Isn't it anti-BH to spend principal? My goal would be not to do that. My savings/accumulation plan pretty much is designed around NOT doing that under normal circumstances. In the case of an unforeseen health emergency on the part of myself out spouse? Maybe. But hopefully not.

-TheDDC
Bogleheads focus on total returns, not just on interest/dividends from investments.

Yes, we limit portfolio withdrawals as to not run out of money before we run out of years.

But that is not the same as not spending principal.
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Re: How old were you when you started spending your “principal”?

Post by jebmke »

Ron Scott wrote: Sun Mar 25, 2018 3:10 pm So you retire with $X and that amount continues to grow for some years as the plan sets itself up for the big inflation affect to catch up to you. Then, at some point, the accounts are less than the original $X.

How old were you when your accounts dropped below $X?
I retired at age 55 in December, 2007. Shortly there after they dropped below $X and kept dropping until about March, 2009.
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Re: How old were you when you started spending your “principal”?

Post by TheDDC »

Leif wrote: Sun Mar 25, 2018 3:31 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pmIsn't it anti-BH to spend principal?
Not at all. What is distasteful is going broke.
If you don't know when you will die, how do you know when you will go broke?

BTW my overall bent is toward accumulation and no large unnecessary payouts during accumulation-capable years through such mechanisms as 529 accounts.

If you are withdrawing principal before a calamity later in life, I would think you're "doing it wrong".

-TheDDC
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Re: How old were you when you started spending your “principal”?

Post by retiredjg »

Ron Scott wrote: Sun Mar 25, 2018 3:10 pm So you retire with $X and that amount continues to grow for some years as the plan sets itself up for the big inflation affect to catch up to you. Then, at some point, the accounts are less than the original $X.

How old were you when your accounts dropped below $X?
I was 57. It does not always happen that the "amount continues to grow for some years...."
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Re: How old were you when you started spending your “principal”?

Post by retiredjg »

TheDDC wrote: Sun Mar 25, 2018 3:25 pm Isn't it anti-BH to spend principal?
Not at all. That is what you saved the money for in the first place so why not spend it?

People who are not spending principal almost certainly have a VERY big portfolio in relation to their spending needs. This does not happen for everyone. Maybe not even most everyone.

Or they might have a portfolio that is so tilted to dividend paying stocks and bonds that the portfolio is out of whack.
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Re: How old were you when you started spending your “principal”?

Post by Flymore »

What is your intention? Mine is to die broke, so I withdrew some last year at 61.
Some on this board may want to leave a large inheritance and they plan accordingly so don't touch the principal.
A friend intends to leave a large sum to his son and has his financial planner plan accordingly thus limiting his spending.

Good luck.
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Re: How old were you when you started spending your “principal”?

Post by Pajamas »

Ron Scott wrote: Sun Mar 25, 2018 3:10 pm So you retire with $X and that amount continues to grow for some years as the plan sets itself up for the big inflation affect to catch up to you. Then, at some point, the accounts are less than the original $X.

How old were you when your accounts dropped below $X?
Wouldn't it depend on how much there is to start with, what the returns are, and how much is withdrawn, and even when withdrawals are made? Plus the inflation rate? What about taxes? Any one of those factors alone could determine the outcome and there are probably some that I overlooked.
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Re: How old were you when you started spending your “principal”?

Post by delamer »

TheDDC wrote: Sun Mar 25, 2018 4:11 pm
Leif wrote: Sun Mar 25, 2018 3:31 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pmIsn't it anti-BH to spend principal?
Not at all. What is distasteful is going broke.
If you don't know when you will die, how do you know when you will go broke?

BTW my overall bent is toward accumulation and no large unnecessary payouts during accumulation-capable years through such mechanisms as 529 accounts.

If you are withdrawing principal before a calamity later in life, I would think you're "doing it wrong".

-TheDDC
And most posters here would say that you are “doing it wrong.”

Safe withdrawal rates don’t limit your withdrawals to your yearly income from your investments. They reflect your initial portfolio balance at retirement and allow a consistent, inflation-adjusted withdrawal amount. Some years you’ll withdraw what you earn, some years you’ll withdraw less than you earn, and some years you’ll dip into principal (that is, sell shares). But in the long run of 30 years, it is highly likely that your nest egg will survive if you adopt a safe withdrawal rate (4% of initial portfolio value with an allocation of 30% stocks or more).

Read the wiki on safe withdrawal rates to understand how it works.
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Re: How old were you when you started spending your “principal”?

Post by retiredjg »

TheDDC wrote: Sun Mar 25, 2018 4:11 pm If you are withdrawing principal before a calamity later in life, I would think you're "doing it wrong".
Hope not. :D

Imagine that you retire just before a long bear market where the market drops for more than a year. It (the market) does not return to previous values for maybe 3 years and the portfolio may not recover original values for 7 or 8 years. Do you just stop buying groceries? Stop paying the electric bill? Of course not.

This is where knowledge of the Trinity study came in handy for me (see Wiki for more information). I knew that (historically) I could go ahead and spend about 4% of my portfolio value at the time I retired (even while the portfolio was significantly smaller than that) and that should be OK as long as I also tried to stay within about that same 4% (plus inflation) when the market recovered.

Working for me so far.
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Re: How old were you when you started spending your “principal”?

Post by FrugalInvestor »

We've been retired for nearly 15 years and haven't touched our principal. Our investments have grown during that time and we've been spending 3-3.5% per year. During the '08-'09 downturn we cut back and re-balanced from bonds into stocks - but not all the way back to our target asset allocation because it was too scary!
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Re: How old were you when you started spending your “principal”?

Post by TheDDC »

delamer wrote: Sun Mar 25, 2018 4:36 pm
TheDDC wrote: Sun Mar 25, 2018 4:11 pm
Leif wrote: Sun Mar 25, 2018 3:31 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pmIsn't it anti-BH to spend principal?
Not at all. What is distasteful is going broke.
If you don't know when you will die, how do you know when you will go broke?

BTW my overall bent is toward accumulation and no large unnecessary payouts during accumulation-capable years through such mechanisms as 529 accounts.

If you are withdrawing principal before a calamity later in life, I would think you're "doing it wrong".

-TheDDC
And most posters here would say that you are “doing it wrong.”

Safe withdrawal rates don’t limit your withdrawals to your yearly income from your investments. They reflect your initial portfolio balance at retirement and allow a consistent, inflation-adjusted withdrawal amount. Some years you’ll withdraw what you earn, some years you’ll withdraw less than you earn, and some years you’ll dip into principal (that is, sell shares). But in the long run of 30 years, it is highly likely that your nest egg will survive if you adopt a safe withdrawal rate (4% of initial portfolio value with an allocation of 30% stocks or more).

Read the wiki on safe withdrawal rates to understand how it works.
I'll take a look at that. I'm 35 so I'll blame some of my ignorance on SWR on youthful indiscretion. I've always been a little shaky on how much you should have left in the pot to continue to accumulate while you are deaccumulating and err on the side of caution during my accumulation years by default as a result.

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Re: How old were you when you started spending your “principal”?

Post by plannerman »

I Retired in 1999 at age 56. On a nominal basis my portfolio went below its starting level for the first time in July 2002 and again in February 2009. Today it's 1.95 the nominal starting value.

On a more important real basis, it went below the starting level on Sept 2001, June 2002, September 2008 and May 2010. Today it is at 130% real.

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Re: How old were you when you started spending your “principal”?

Post by delamer »

TheDDC wrote: Sun Mar 25, 2018 4:50 pm
delamer wrote: Sun Mar 25, 2018 4:36 pm
TheDDC wrote: Sun Mar 25, 2018 4:11 pm
Leif wrote: Sun Mar 25, 2018 3:31 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pmIsn't it anti-BH to spend principal?
Not at all. What is distasteful is going broke.
If you don't know when you will die, how do you know when you will go broke?

BTW my overall bent is toward accumulation and no large unnecessary payouts during accumulation-capable years through such mechanisms as 529 accounts.

If you are withdrawing principal before a calamity later in life, I would think you're "doing it wrong".

-TheDDC
And most posters here would say that you are “doing it wrong.”

Safe withdrawal rates don’t limit your withdrawals to your yearly income from your investments. They reflect your initial portfolio balance at retirement and allow a consistent, inflation-adjusted withdrawal amount. Some years you’ll withdraw what you earn, some years you’ll withdraw less than you earn, and some years you’ll dip into principal (that is, sell shares). But in the long run of 30 years, it is highly likely that your nest egg will survive if you adopt a safe withdrawal rate (4% of initial portfolio value with an allocation of 30% stocks or more).

Read the wiki on safe withdrawal rates to understand how it works.
I'll take a look at that. I'm 35 so I'll blame some of my ignorance on SWR on youthful indiscretion. I've always been a little shaky on how much you should have left in the pot to continue to accumulate while you are deaccumulating and err on the side of caution during my accumulation years by default as a result.

-TheDDC
No question there is a certain appeal in living off dividends and interest, and not drawing down principal. You never end up penniless.

And it is theoretically possible to do so. But you need a much larger portfolio for any given dollar withdrawal level to use that method versus taking into account your portfolio’s total return. The S&P total return is about 2/3 growth and 1/3 dividends, so you can see the problem if you only rely on dividends.
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Re: How old were you when you started spending your “principal”?

Post by Phineas J. Whoopee »

I am not being hopelessly pedantic, although some readers may think I am.

Principal is money somebody owes somebody else. If you own stocks, directly or indirectly, nobody owes you nothing.

Capital is what you have, and it includes gains and losses. Principal only applies if you lent somebody money and they're obligated to pay it back. They might not, which is to say they might default.

Hopelessly pedantic? No. In a mixed portfolio it is a mistake to suppose somebody owes you all the money its value is today.

Thinking of capital as if it is principal can lead to serious errors.

PJW
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Re: How old were you when you started spending your “principal”?

Post by Sheepdog »

19 years 6 months out. Accounts are still growing, spending is still growing and that is with very conservative investments. That accounts growth is nominal growth, but if I recalculated my growth for the affect of inflation in this period (real growth) it is virtually even. (A good Boglehead calculated that last year when I made a similar post.)
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Re: How old were you when you started spending your “principal”?

Post by Sheepdog »

.....
Last edited by Sheepdog on Sun Mar 25, 2018 6:48 pm, edited 1 time in total.
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Re: How old were you when you started spending your “principal”?

Post by retiredjg »

Phineas J. Whoopee wrote: Sun Mar 25, 2018 5:16 pm I am not being hopelessly pedantic, although some readers may think I am.

Principal is money somebody owes somebody else. If you own stocks, directly or indirectly, nobody owes you nothing.

Capital is what you have, and it includes gains and losses. Principal only applies if you lent somebody money and they're obligated to pay it back. They might not, which is to say they might default.

Hopelessly pedantic? No. In a mixed portfolio it is a mistake to suppose somebody owes you all the money its value is today.

Thinking of capital as if it is principal can lead to serious errors.

PJW
I was wondering about that.... :annoyed
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Re: How old were you when you started spending your “principal”?

Post by Always passive »

I retired at 55, 15 years ago. My capital was going up until 2008, when it fell enough. Since then it has gone up again, but very slowly, and my capital today is a bit larger than the one I started, but not by much. I suppose that in real terms it may be a bit lower, I just do not know.
I have never followed any spending formula, nor do I monitor it. We just spend what we need and take vacations often. That is retirement for.
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Re: How old were you when you started spending your “principal”?

Post by PhilosophyAndrew »

TheDDC wrote: Sun Mar 25, 2018 3:25 pm Isn't it anti-BH to spend principal? My goal would be not to do that.
Doesn’t this depend on one’s bequest preferences? Not all Bogleheads may want their heirs or charities to inherit so much after their death.

I wonder whether there is a tendency for us to resist thinking clearly about our own deaths. If, say, I make it to 80 years old and have not yet begun to spend down my retirement assets, this means that I will die leaving most of my assets unspent. This is a perfectly reasonable state of affairs if I have a strong bequest motive — but if I were to hesitste to spend because I were afraid I would outlive my assets, I think I could be justly criticized for failing to think honestly about my own mortality.

Unless one has strong bequest motives or retires extremely early, I would argue that there is nothing un-Bogleheadish for retirees to begin spending down those assets as soon as they wish while respecting reasonable spending limits imposed by the size of their assets and their conservative-but-realistic assessment of their lifespan. To do this, it is not necessary to assume that one will live to be 120, and it is certainly not necessary to plan as if one will never die.
Last edited by PhilosophyAndrew on Sun Mar 25, 2018 5:40 pm, edited 3 times in total.
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Re: How old were you when you started spending your “principal”?

Post by Toons »

Retired 7 years.
No "need" to spend principal as of yet.
Combined sources of money have allowed that to be the case,
Portfolio value is quite higher now than when we retired.




:D
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Re: How old were you when you started spending your “principal”?

Post by cfs »

As far a "Principal" . . . I have only four years in retirement, and NO, I have not touched my "Principal."

Good luck, y gracias por leer ~cfs~
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Re: How old were you when you started spending your “principal”?

Post by FrugalInvestor »

Sheepdog wrote: Sun Mar 25, 2018 5:24 pm 19 years 6 months out. Accounts are still growing, spending is still growing That accounts growth is nominal growth, but if I recalculated my growth for the effect of inflation in this period (real growth) it is virtually even. (A good Boglehead calculated that last year when I made a similar post.)

I'm pleased with this result.
Doubly pleased I see! :D
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Re: How old were you when you started spending your “principal”?

Post by TheDDC »

PhilosophyAndrew wrote: Sun Mar 25, 2018 5:34 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pm Isn't it anti-BH to spend principal? My goal would be not to do that.
Doesn’t this depend on one’s bequest preferences? Not all Bogleheads may want their heirs or charities to inherit so much after their death.

I wonder whether there is a tendency for us to resist thinking clearly about our own deaths. If, say, I make it to 80 years old and have not yet begun to spend down my retirement assets, this means that I will die leaving most of my assets unspent. This is a perfectly reasonable state of affairs if I have a strong bequest motive — but if I were to hesitste to spend because I were afraid I would outlive my assets, I think I could be justly criticized for failing to think honestly about my own mortality.

Unless one has strong bequest motives or retires extremely early, I would argue that there is nothing un-Bogleheadish for retirees to begin spending down those assets as soon as they wish while respecting reasonable spending limits imposed by the size of their assets and their conservative-but-realistic assessment of their lifespan. To do this, it is not necessary to assume that one will live to be 120, and it is certainly not necessary to plan as if one will never die.
Yes. And this is a good point. Personally I would rather have overcalculated my retirement needs and bequeath more to the kids than start 529 accounts which would only pigeonhole money for one purpose while I was alive. I also do not believe in taking out large amounts out of the market during accumulation years except for what is absolutely needed for living conditions (car, house, etc.)

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
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Re: How old were you when you started spending your “principal”?

Post by Geologist »

Phineas J. Whoopee wrote: Sun Mar 25, 2018 5:16 pm I am not being hopelessly pedantic, although some readers may think I am.

Principal is money somebody owes somebody else. If you own stocks, directly or indirectly, nobody owes you nothing.

Capital is what you have, and it includes gains and losses. Principal only applies if you lent somebody money and they're obligated to pay it back. They might not, which is to say they might default.

Hopelessly pedantic? No. In a mixed portfolio it is a mistake to suppose somebody owes you all the money its value is today.

Thinking of capital as if it is principal can lead to serious errors.

PJW
I would have to disagree with you on terminology here. Many people think of principal exactly as foundations or colleges do in their endowment funds. My college refers to donated money for a specific scholarship or any other restricted purpose as "principal" and state law only permits income to be spent for the restricted purpose. I would certainly agree that retired individuals can't think of their nest eggs as if they were endowments that are supposed to exist perpetually and the individuals can only spend income.
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Re: How old were you when you started spending your “principal”?

Post by Sandtrap »

delamer wrote: Sun Mar 25, 2018 3:43 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pm
Sandtrap wrote: Sun Mar 25, 2018 3:22 pm Actionably:
If all "Bogle Basics" are in place and retirement income streams are planned properly,
and lifestyle adaptations to minimize expenses and debt are adhered to,
and one's IPS Statement is reviewed and followed and sound,
-- spending down principal might never happen.

j :D
I was just going to say this. Isn't it anti-BH to spend principal? My goal would be not to do that. My savings/accumulation plan pretty much is designed around NOT doing that under normal circumstances. In the case of an unforeseen health emergency on the part of myself out spouse? Maybe. But hopefully not.

-TheDDC
Bogleheads focus on total returns, not just on interest/dividends from investments.

Yes, we limit portfolio withdrawals as to not run out of money before we run out of years.

But that is not the same as not spending principal.
+1
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Re: How old were you when you started spending your “principal”?

Post by Sandtrap »

PhilosophyAndrew wrote: Sun Mar 25, 2018 5:34 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pm Isn't it anti-BH to spend principal? My goal would be not to do that.
Doesn’t this depend on one’s bequest preferences? Not all Bogleheads may want their heirs or charities to inherit so much after their death.

I wonder whether there is a tendency for us to resist thinking clearly about our own deaths. If, say, I make it to 80 years old and have not yet begun to spend down my retirement assets, this means that I will die leaving most of my assets unspent. This is a perfectly reasonable state of affairs if I have a strong bequest motive — but if I were to hesitste to spend because I were afraid I would outlive my assets, I think I could be justly criticized for failing to think honestly about my own mortality.

Unless one has strong bequest motives or retires extremely early, I would argue that there is nothing un-Bogleheadish for retirees to begin spending down those assets as soon as they wish while respecting reasonable spending limits imposed by the size of their assets and their conservative-but-realistic assessment of their lifespan. To do this, it is not necessary to assume that one will live to be 120, and it is certainly not necessary to plan as if one will never die.
Wouldn't it be "Bogleheadish" to nurture one's portfolio and have it prosper through that good and wise stewardship, whether one had "bequests" to hares or not?

aloha,
j
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PhilosophyAndrew
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Re: How old were you when you started spending your “principal”?

Post by PhilosophyAndrew »

Sandtrap wrote: Sun Mar 25, 2018 6:42 pm Wouldn't it be "Bogleheadish" to nurture one's portfolio and have it prosper through that good and wise stewardship, whether one had "bequests" to hares or not?
Sure, and appropriate spending of one's assets can be part of wise stewardship of investments that have prospered.

My claim is simply that basing financial decisions on an unrealistic assessment of your own lifespan may lead to unwise stewardship of your assets after retirement. Namely, that mistake may lead to bad outcomes just in case it (1) causes you to forego needed or strongly desired consumption and (2) leads to a level of assets at death inconsistent with your bequest wishes.

The same mistake made earlier in one's life can lead to unreasonably deferred retirement. This is not a problem for folks who enjoy work and have nothing better to retire to, but the mistake leads to unwise stewardship of one's financial assets and human capital if it causes one to pursue years of unwanted work.
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Re: How old were you when you started spending your “principal”?

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We retired over 22+ years ago with good pensions and traveled the world. Then bought into a 5 Star CCRC, but only take the RMD’s and usually reinvest them in the taxable folio. Amazing how our investments continue to grow for us to the point we prefer letting them grow ever more now that we stopped traveling.....We have Good Insurance plans, but one never knows per medical expenses, as one ages!

SeeMoe.. :mrgreen:
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Re: How old were you when you started spending your “principal”?

Post by Ged »

I haven't yet at 5 years into retirement, and currently don't anticipate ever spending into my $X.

However this is strongly dependent on sequence of returns and delay of SS.

Most people retiring just before the 'Great Recession' and also delaying SS are very likely to dip below $X. In fact I was expecting to but the strong markets have lifted me above $X despite the fact I am spending more than pensions and wife's SS.

Once I start collecting SS in a couple of years it seems unlikely that I'll dip below X unless I have an extended stay in a nursing home.
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Re: How old were you when you started spending your “principal”?

Post by Ron Scott »

I think what’s happening is that by the time the million-dollar retirement kitty reaches its mid-life, when growth is theoretically over and the decline is supposed to kick in, a) you realize you’re really NOT going to continue spending like you did before, and b) that million is only worth about $350 and you’re thinking it’d be best to nurse it.

Most Americans don’t spend down the principal.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.
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Re: How old were you when you started spending your “principal”?

Post by Sandtrap »

Sheepdog wrote: Sun Mar 25, 2018 5:22 pm 19 years 6 months out. Accounts are still growing, spending is still growing and that is with very conservative investments. That accounts growth is nominal growth, but if I recalculated my growth for the affect of inflation in this period (real growth) it is virtually even. (A good Boglehead calculated that last year when I made a similar post.)
13 years behind you. I hope that I can chart a path as successful as yours. :D

*How did you calculate in the effect of inflation?

*Where did the inflation figures come from?

Whenever I see your "avatar". . .
I still can't figure out how you got the dog to sit in front of a computer. :shock:

jim :D
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Re: How old were you when you started spending your “principal”?

Post by delamer »

Ron Scott wrote: Sun Mar 25, 2018 7:10 pm I think what’s happening is that by the time the million-dollar retirement kitty reaches its mid-life, when growth is theoretically over and the decline is supposed to kick in, a) you realize you’re really NOT going to continue spending like you did before, and b) that million is only worth about $350 and you’re thinking it’d be best to nurse it.

Most Americans don’t spend down the principal.

Can you cite a source for your last statement?
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Re: How old were you when you started spending your “principal”?

Post by Sandtrap »

SeeMoe wrote: Sun Mar 25, 2018 7:03 pm We retired over 22+ years ago with good pensions and traveled the world. Then bought into a 5 Star CCRC, but only take the RMD’s and usually reinvest them in the taxable folio. Amazing how our investments continue to grow for us to the point we prefer letting them grow ever more now that we stopped traveling.....We have Good Insurance plans, but one never knows per medical expenses, as one ages!

SeeMoe.. :mrgreen:
Sounds great!

What is a "5-Star CCRC ??

j :D
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Re: How old were you when you started spending your “principal”?

Post by diy60 »

Google says Continuing Care Retirement Community.
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Re: How old were you when you started spending your “principal”?

Post by SeeMoe »

retiredjg wrote: Sun Mar 25, 2018 4:18 pm
TheDDC wrote: Sun Mar 25, 2018 3:25 pm Isn't it anti-BH to spend principal?
Not at all. That is what you saved the money for in the first place so why not spend it?

People who are not spending principal almost certainly have a VERY big portfolio in relation to their spending needs. This does not happen for everyone. Maybe not even most everyone.

Or they might have a portfolio that is so tilted to dividend paying stocks and bonds that the portfolio is out of whack.
To true. Or they may have very good pensions to the point they can live Large, and still invest some of their pension money! Read somewhere that only about 5% of USA retirees have this luxury....

SeeMoe.. :dollar
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Re: How old were you when you started spending your “principal”?

Post by SeeMoe »

Sandtrap wrote: Sun Mar 25, 2018 7:17 pm
SeeMoe wrote: Sun Mar 25, 2018 7:03 pm We retired over 22+ years ago with good pensions and traveled the world. Then bought into a 5 Star CCRC, but only take the RMD’s and usually reinvest them in the taxable folio. Amazing how our investments continue to grow for us to the point we prefer letting them grow ever more now that we stopped traveling.....We have Good Insurance plans, but one never knows per medical expenses, as one ages!

SeeMoe.. :mrgreen:
Sounds great!

What is a "5-Star CCRC ??

j :D
Thanks. A CCRC stands for Continuing Care Retirement Community. Sometimes we feel so secure in our 1,404 acre CCRC that it feels like we have been living in a cocoon when we venture out into the world for a day or two. Everyone is of a similar age, and share in the aches and pains and era we cane from...Forgetting how everyday life evolves around work. In my estimation anyway.

SeeMoe.. :wink:
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Re: How old were you when you started spending your “principal”?

Post by Dottie57 »

I have a severance package for the next 48 weeks. So I expect next year I will need to use part of the capital I have as of now. Not expecting great returns this year at all.
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Re: How old were you when you started spending your “principal”?

Post by GerryL »

This summer I will hit the 4th anniversary of my retirement (already?!?) and will shortly after that hit 70 and the start of SS. So far I have not had to touch my principal. (Living off 2 tiny pensions, dividends and the cash I set aside for this purpose.) But once RMDs start next year, I will be shelling out for taxes and QCDs, which will likely get bigger as the RMDs grow (if that's how the math works out). It's kind of fun seeing my portfolio grow even though I stopped earning a paycheck, but that is not my goal, and I am (I think) mentally prepared for a future when the portfolio starts dipping below what it was when I retired.
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Re: How old were you when you started spending your “principal”?

Post by dbr »

Ron Scott wrote: Sun Mar 25, 2018 3:10 pm So you retire with $X and that amount continues to grow for some years as the plan sets itself up for the big inflation affect to catch up to you. Then, at some point, the accounts are less than the original $X.

How old were you when your accounts dropped below $X?
You can go into FireCalc with various withdrawal rates and various asset allocations and get about a hundred results for each run. Out of those you can see when, if ever, each of those results fell below the initial retirement amount. Click on the Investigate tab to cause the program to create an Excel spreadsheet for you where you can peruse the data. With a sufficiently low withdrawal rate your result does not occur in then data. For higher withdrawal rates and less and less in stocks you can find more and more examples. You can create a surface over withdrawal rate, %stocks, and years in of the point where one falls below initial.
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Re: How old were you when you started spending your “principal”?

Post by retire57 »

Love this practical (versus theoretical) question. Enjoy the responses from those with actual (versus speculative) experience. Though, in true BH.org style, the theoretical (versus anecdotal) responses will hijack the thread. 8-)
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Re: How old were you when you started spending your “principal”?

Post by dbr »

retire57 wrote: Sun Mar 25, 2018 8:17 pm Love this practical (versus theoretical) question. Enjoy the responses from those with actual (versus speculative) experience. Though, in true BH.org style, the theoretical (versus anecdotal) responses will hijack the thread. 8-)
For understanding investing a handful of anecdotes doesn't mean very much.

But I can add mine. After one year of retirement we started spending the principal by this definition. By four years after retirement we stopped spending the principal, started again about half a year later, then stopped, started again, stopped again then I think since then have not.
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Re: How old were you when you started spending your “principal”?

Post by Northern Flicker »

Balance in real, i.e. inflation-corrected, terms is what actually matters, but even that is squishy, as one's personal inflation rate of future expenses is not known, but that's the inflation rate that matters.
Last edited by Northern Flicker on Mon Mar 26, 2018 2:55 am, edited 1 time in total.
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