Do you plan to actually spend down your portfolio?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
TN_Boy
Posts: 1870
Joined: Sat Jan 17, 2009 12:51 pm

Re: Do you plan to actually spend down your portfolio?

Post by TN_Boy »

afan wrote: Wed Jan 15, 2020 2:39 pm
MnD wrote: Wed Jan 15, 2020 11:04 am
TheTimeLord wrote: Wed Jan 15, 2020 9:43 am
afan wrote: Wed Jan 15, 2020 9:37 am If a portfolio is largely or completely composed of stable value assets then there will be little or no risk of down years. If your income needs are covered by SS, pensions and annuities then there would be no need to withdraw anything from the portfolio.
If there is no need to draw anything from the portfolio then one could have it aggressively invested, tolerate down years, and live on reliable income.
While it is not my particular bent, I do somewhat admire the conviction of most BH not to increase spending just because they can afford to. That said after watching my parents who had sufficient pension and SS income plus covered healthcare not spend any of their modest nest egg to do any of their bucket list because seeing the number gave them an additional sense of security I hope not to follow that path.
It's fairly common that maintaining the "portfolio/pile/number" becomes the end and not the means to enhancing retirement income. This phenomena also injects a lot of bias into overall investment planning. I think the race to the bottom on what constitutes a safe withdrawal rate, ultra-low expectations of future returns and the chaining together of other numerous negative assumptions in calculating how long to work and how much to save are all related to a desire to never stop growing ones portfolio and certainly never see it diminish even a little bit. The portfolio, which should be a servant to enhance ones retirement has become the master for many.
With all due respect, this reflects a distinctly narrow view of the world. It starts by assuming that everyone shares the goal of spending up to their capacity and saves money only to guard against running out. It ignores the possibility that a growing portfolio can be a consequence of careful saving and investing while spending below ones means.

Growing the portfolio may be a goal in itself, but the above quote implies that this can never be a legitimate goal.

I spend the money I need to live a comfortable life. Yet some assume I should spend much more money, on things I don't want, simply because I could. My retirement will be just fine at a level of spending below what the portfolio will support. I should spend more anyway? Why?

Imagine for a moment that not everyone shares your goals. Once you realize this, you see how absurd it is to state that everyone's portfolio "should" be for the same purpose.
Afan,

Okay, so here is what I think your situation is ..... please correct me if I have this wrong.

1) You have a relatively low cost lifestyle.

2) But you have a job/career that covers your lifestyle with a fair bit left over.

3) Therefore you are accumulating assets (which will happen unless you give the money away of course)

4) You don't plan to increase your living expenses once you retire

5) Therefore you expect to have a bunch of money "left over" when you die.

Have I got that right?

If so, I would argue there are quite a lot of BH's with that philosophy ... at least it seems to me when I read the threads on safe withdrawal rate a lot of posters sound kinda like that.

And presumably there is some plan for the money when you are gone.

None of that sounds odd.

The spouse and I didn't make those choices; we choose to spend more, though less than many with our income. But we still expect, barring pretty bad luck, to have money left over when we are gone. And do we contribute to charities every year, etc.
User avatar
unclescrooge
Posts: 5328
Joined: Thu Jun 07, 2012 7:00 pm

Re: Do you plan to actually spend down your portfolio?

Post by unclescrooge »

Unladen_Swallow wrote: Wed Jan 15, 2020 3:14 pm
unclescrooge wrote: Tue Jan 14, 2020 11:36 am
Meg77 wrote: Thu Oct 24, 2019 2:32 pm
Yep, this is very normal and should be expected for most retirees. Studies show even those who retire with "only" $100K or $200K (and live off social security or pensions, etc.) rarely actually spend down their assets.
On the flip side, we don't really hear about the people who end up living off cat food in their retirement.

A mentor of mine told me a story about his aunt. She was living in a paid off home, but had no money for food and was literally eating canned cat food.

He put a reverse mortgage on it (he carried the note) and helped her live out her remaining years in dignity.
Alpo and cat food seem to be favourite BH bogeyman. I never quite understood this. Before the aunt resorted to cat food, my question is:

- Why didn't the nephew take care of her food needs? Is that too much to expect?
- At the cost of cat food, one could get human food. Cat food isn't cheap that I know of.
- There are many social systems that address exactly this. Making sure the elderly are fed. At no cost.
- A reverse mortgage? Sure. That is a solution. I still wonder why the nephew just didn't take over her food needs. Get a food plan in place for her. The expense is certainly affordable. $75-$100 a month for an elderly woman? I think that is even a generous estimate.
California homes hold a lot of equity in them. Instead of of just giving her $200/mo, he set it up so she could have money for clothes, entertainment, travel and maintenance without making it seem like a hand out. Hence the dignity portion.

I've seen cat for for 39 cents on sale.
User avatar
abuss368
Posts: 21504
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Do you plan to actually spend down your portfolio?

Post by abuss368 »

No. We expect to live from dividends and leave the portfolio to the kids.
John C. Bogle: “Simplicity is the master key to financial success."
Broken Man 1999
Posts: 4995
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, inland on high ground!

Re: Do you plan to actually spend down your portfolio?

Post by Broken Man 1999 »

Man plans, and God laughs!

The older I get, the more I believe in that saying!

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
Gnirk
Posts: 1320
Joined: Sun Sep 09, 2012 3:11 am
Location: Western Washington

Re: Do you plan to actually spend down your portfolio?

Post by Gnirk »

wrongfunds wrote: Wed Jan 15, 2020 5:30 pm
This again comes back to the assumption that
happiness=spending money.
Corollary to that is "happiness=having money"

Aren't both concepts really tied at the hips? How do you have one without the other?

This assumes that you do subscribe to the notion that having (adequate) money is necessary. But if you don't want to spend it, then why do you need it? You just need to answer that to yourself.
As my mom said many times: “having money doesn’t bring you happiness, but it can give you a sense of security”.
TheDDC
Posts: 1123
Joined: Mon Jan 08, 2018 11:11 am

Re: Do you plan to actually spend down your portfolio?

Post by TheDDC »

I plan to do the smart thing and only touch the gains, not the principal. A SWR that keeps withdrawals under market yield is advisable.

Passive income sources in retirement are definitely our recommendation to help with this, too.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
marcopolo
Posts: 3464
Joined: Sat Dec 03, 2016 10:22 am

Re: Do you plan to actually spend down your portfolio?

Post by marcopolo »

TheDDC wrote: Wed Jan 15, 2020 9:38 pm I plan to do the smart thing and only touch the gains, not the principal. A SWR that keeps withdrawals under market yield is advisable.

Passive income sources in retirement are definitely our recommendation to help with this, too.

-TheDDC
What will you do if the market drops 30% the year you retire and there are NO gains to touch.

It may not be such a smart thing depending on one's goals.
Once in a while you get shown the light, in the strangest of places if you look at it right.
TheDDC
Posts: 1123
Joined: Mon Jan 08, 2018 11:11 am

Re: Do you plan to actually spend down your portfolio?

Post by TheDDC »

marcopolo wrote: Wed Jan 15, 2020 9:48 pm
TheDDC wrote: Wed Jan 15, 2020 9:38 pm I plan to do the smart thing and only touch the gains, not the principal. A SWR that keeps withdrawals under market yield is advisable.

Passive income sources in retirement are definitely our recommendation to help with this, too.

-TheDDC
What will you do if the market drops 30% the year you retire and there are NO gains to touch.

It may not be such a smart thing depending on one's goals.
Unrealistic that kind of drop. Again, this is why I look at passive income sources plus market returns. It also never hurts to, you know, actually not spend so much... can't believe reading about the guy spending $80k potentially near/in retirement in a "LCOL" area.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
marcopolo
Posts: 3464
Joined: Sat Dec 03, 2016 10:22 am

Re: Do you plan to actually spend down your portfolio?

Post by marcopolo »

TheDDC wrote: Wed Jan 15, 2020 9:55 pm
marcopolo wrote: Wed Jan 15, 2020 9:48 pm
TheDDC wrote: Wed Jan 15, 2020 9:38 pm I plan to do the smart thing and only touch the gains, not the principal. A SWR that keeps withdrawals under market yield is advisable.

Passive income sources in retirement are definitely our recommendation to help with this, too.

-TheDDC
What will you do if the market drops 30% the year you retire and there are NO gains to touch.

It may not be such a smart thing depending on one's goals.
Unrealistic that kind of drop. Again, this is why I look at passive income sources plus market returns.

-TheDDC
You must be fairly new to investing in the stock market.
Once in a while you get shown the light, in the strangest of places if you look at it right.
TheDDC
Posts: 1123
Joined: Mon Jan 08, 2018 11:11 am

Re: Do you plan to actually spend down your portfolio?

Post by TheDDC »

marcopolo wrote: Wed Jan 15, 2020 9:57 pm
TheDDC wrote: Wed Jan 15, 2020 9:55 pm
marcopolo wrote: Wed Jan 15, 2020 9:48 pm
TheDDC wrote: Wed Jan 15, 2020 9:38 pm I plan to do the smart thing and only touch the gains, not the principal. A SWR that keeps withdrawals under market yield is advisable.

Passive income sources in retirement are definitely our recommendation to help with this, too.

-TheDDC
What will you do if the market drops 30% the year you retire and there are NO gains to touch.

It may not be such a smart thing depending on one's goals.
Unrealistic that kind of drop. Again, this is why I look at passive income sources plus market returns.

-TheDDC
You must be fairly new to investing in the stock market.
Actually not.

-TheDCC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
marcopolo
Posts: 3464
Joined: Sat Dec 03, 2016 10:22 am

Re: Do you plan to actually spend down your portfolio?

Post by marcopolo »

TheDDC wrote: Wed Jan 15, 2020 9:58 pm
marcopolo wrote: Wed Jan 15, 2020 9:57 pm
TheDDC wrote: Wed Jan 15, 2020 9:55 pm
marcopolo wrote: Wed Jan 15, 2020 9:48 pm
TheDDC wrote: Wed Jan 15, 2020 9:38 pm I plan to do the smart thing and only touch the gains, not the principal. A SWR that keeps withdrawals under market yield is advisable.

Passive income sources in retirement are definitely our recommendation to help with this, too.

-TheDDC
What will you do if the market drops 30% the year you retire and there are NO gains to touch.

It may not be such a smart thing depending on one's goals.
Unrealistic that kind of drop. Again, this is why I look at passive income sources plus market returns.

-TheDDC
You must be fairly new to investing in the stock market.
Actually not.

-TheDCC
Then did you happen to sleep through 2000 and 2008?
Otherwise how can you say a 30% drop in the markets is unrealistic?

There is no reason to fear touching the prinicpal portion of your investments in retirement.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Teague
Posts: 2073
Joined: Wed Nov 04, 2015 6:15 pm

Re: Do you plan to actually spend down your portfolio?

Post by Teague »

I've been retired a few years now and had planned to spend down my portfolio over the next few decades. But, the darned thing has kept going up despite occasional withdrawals. I'm embarrassed to admit it, but it seems I'm not doing things right.
Semper Augustus
TN_Boy
Posts: 1870
Joined: Sat Jan 17, 2009 12:51 pm

Re: Do you plan to actually spend down your portfolio?

Post by TN_Boy »

Teague wrote: Wed Jan 15, 2020 10:06 pm I've been retired a few years now and had planned to spend down my portfolio over the next few decades. But, the darned thing has kept going up despite occasional withdrawals. I'm embarrassed to admit it, but it seems I'm not doing things right.
Did you retire after 2009? It's been a great time for all the last decade.

The next prolonged bear market will let you (and the rest of us :happy) get to "spend down" our portfolio a bit.
afan
Posts: 5203
Joined: Sun Jul 25, 2010 4:01 pm

Re: Do you plan to actually spend down your portfolio?

Post by afan »

TheTimeLord wrote: Wed Jan 15, 2020 4:53 pm
afan wrote: Wed Jan 15, 2020 4:49 pm
TheTimeLord wrote: Wed Jan 15, 2020 4:45 pm
afan wrote: Wed Jan 15, 2020 4:31 pm
TheTimeLord wrote: Wed Jan 15, 2020 3:11 pm

I don't see how accumulating just to accumulate is a legitimate goal
. What is the value of money without purpose? What is the difference in having something you will never use and not having it in the first place? All that said there is nothing that saying you can't accumulate while finding a purpose for the assets. So maybe I am making a distinction without a difference.
I and don't see how anyone would want to fly to Paris.

I may not share their interest in travel. However, I don't claim that, because it is not something I want, then it cannot be a legitimate goal.

There are many people in the world and not all of them have the same goals. Even without traveling, that is obvious to me.

I don't see how so many people have trouble with the concept that not everyone wants what they want.
I have no trouble with the concept that everyone wants what they want. I just have trouble understanding how wanting something you have no use for and have no intention to use is a valid pursuit since I don't see how that differs from not ever having it in the first place.
And again, seeking something you don't want cannot be a "legitimate" or "valid" pursuit. Everyone in the world wants what you want, or they are wrong.

If one has the possessions one wants, why but something one does not want. THAT makes no sense to me.
Which is exactly my point. Why have a goal to accumulate more of something you have no intention or desire to use.

Because I have no need to spend all I can.
Because the portfolio provides security against ever more severe economic or personal reverses.
Because I am offended by wasting money.
Because I earn more income than I need, so the difference accumulates.
Because I value saving and investing for themselves, not only as a way of supporting more spending. As I said, I do the spending I want. Spending more is not a goal.

It depends on where one starts. You begin by assuming that the only purpose of money is to spend it, that greater spending inevitably leads to greater happiness and that seeking happiness is the only goal of life. From those assumptions you end up concluding that one should spend like crazy and die broke. But you have just begged the question.

Maybe those assumptions do not apply to everyone, even if they nicely summarize your goals. For someone who disagrees with each of those assumptions they lead to no conclusion at all.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
MnD
Posts: 4608
Joined: Mon Jan 14, 2008 12:41 pm

Re: Do you plan to actually spend down your portfolio?

Post by MnD »

afan wrote: Wed Jan 15, 2020 2:39 pm
MnD wrote: Wed Jan 15, 2020 11:04 am
TheTimeLord wrote: Wed Jan 15, 2020 9:43 am
afan wrote: Wed Jan 15, 2020 9:37 am If a portfolio is largely or completely composed of stable value assets then there will be little or no risk of down years. If your income needs are covered by SS, pensions and annuities then there would be no need to withdraw anything from the portfolio.
If there is no need to draw anything from the portfolio then one could have it aggressively invested, tolerate down years, and live on reliable income.
While it is not my particular bent, I do somewhat admire the conviction of most BH not to increase spending just because they can afford to. That said after watching my parents who had sufficient pension and SS income plus covered healthcare not spend any of their modest nest egg to do any of their bucket list because seeing the number gave them an additional sense of security I hope not to follow that path.
It's fairly common that maintaining the "portfolio/pile/number" becomes the end and not the means to enhancing retirement income. This phenomena also injects a lot of bias into overall investment planning. I think the race to the bottom on what constitutes a safe withdrawal rate, ultra-low expectations of future returns and the chaining together of other numerous negative assumptions in calculating how long to work and how much to save are all related to a desire to never stop growing ones portfolio and certainly never see it diminish even a little bit. The portfolio, which should be a servant to enhance ones retirement has become the master for many.
With all due respect, this reflects a distinctly narrow view of the world. It starts by assuming that everyone shares the goal of spending up to their capacity and saves money only to guard against running out. It ignores the possibility that a growing portfolio can be a consequence of careful saving and investing while spending below ones means.

Growing the portfolio may be a goal in itself, but the above quote implies that this can never be a legitimate goal.
Someone might have a goal of retiring with a 7 figure portfolio and "checking out" with an 8 figure one. It's not uncommon to read here from people who have been retired for greater than 10 years or more and have spent nothing from portfolio which is now multiples of the retirement date value. I recall someone opining that their significant retirement portfolio was for security and certainly not for spending. There are others who simply have zero utility, be it things, experiences, gifts or donations while living for the income that could be safely and sustainably withdrawn from their portfolio. I would just suggest that those that in these camps be very transparent about their goals when advocating for 50X expenses, working longer, spending less and making their base case for retirement planning one of chained negative assumptions about pensions, social security, future returns and taxes.

I'm transparent when discussing our retirement income plan that we are in the early healthy active years of retirement, have a high utility for portfolio income, have non-portfolio income that provides 50% of income and that our true needs are roughly 1/3 of our income so can easily tolerate both income and portfolio value variability.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
User avatar
backofbeyond
Posts: 348
Joined: Tue Apr 01, 2008 1:07 pm

Re: Do you plan to actually spend down your portfolio?

Post by backofbeyond »

In previous postings, I've mentioned that I've more or less achieved Critical Mass, I believe others may call it Financial Independence. That is, I'm to the point where my annual contributions to my TSP/Roth accounts don't move the meter at all. I also have enough allocated to safe investments (i.e. C and F TSP funds and money markets) that I could live at my current annual expenses plus $20,000 (fun money) for the rest of my life, without ever needing to touch what I have allocated to stocks. So I can simply let my stock allocation run. It's a wonderful feeling to know that no matter what the stock market does, it will not negatively impact my quality of life. Now saying that, of course, ill health, a car crash or some black swan event may make me humble very quickly. So I carry all the recommend insurance to try to mitigate these possibilities, but there is only so much you can plan for.

With that said, I have a hobby that is rather expensive, it runs between $300-$500 a week. I very much enjoy it but it makes me feel guilty that I'm blowing that kind of money on something that really I don't need to do. On the other hand, it appears that I will more than likely leave a large chunk of change on the table after I pop my clog, regardless of whether I continue with my hobby or I invest the money instead. So, I guess to answer the question, I am spending down my portfolio but the bull market hasn't made me feel the sting of doing so.
The question isn't at what age I want to retire, it is at what income. - George Foreman
Unladen_Swallow
Posts: 784
Joined: Tue Dec 10, 2019 6:12 pm

Re: Do you plan to actually spend down your portfolio?

Post by Unladen_Swallow »

MnD wrote: Thu Jan 16, 2020 10:34 am

Someone might have a goal of retiring with a 7 figure portfolio and "checking out" with an 8 figure one. It's not uncommon to read here from people who have been retired for greater than 10 years or more and have spent nothing from portfolio which is now multiples of the retirement date value. I recall someone opining that their significant retirement portfolio was for security and certainly not for spending. There are others who simply have zero utility, be it things, experiences, gifts or donations while living for the income that could be safely and sustainably withdrawn from their portfolio. I would just suggest that those that in these camps be very transparent about their goals when advocating for 50X expenses, working longer, spending less and making their base case for retirement planning one of chained negative assumptions about pensions, social security, future returns and taxes.
A very reasonable suggestion. :beer

Sometimes, those recommending 2% withdrawals, 50X savings, or working until 65 etc intend to leave large bequests or a significant portion of their savings untouched to their family. It is rather helpful to know what goals drive these suggestions so they can be considered in the appropriate context.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman
User avatar
TheTimeLord
Posts: 8249
Joined: Fri Jul 26, 2013 2:05 pm

Re: Do you plan to actually spend down your portfolio?

Post by TheTimeLord »

Unladen_Swallow wrote: Thu Jan 16, 2020 11:09 am
MnD wrote: Thu Jan 16, 2020 10:34 am

Someone might have a goal of retiring with a 7 figure portfolio and "checking out" with an 8 figure one. It's not uncommon to read here from people who have been retired for greater than 10 years or more and have spent nothing from portfolio which is now multiples of the retirement date value. I recall someone opining that their significant retirement portfolio was for security and certainly not for spending. There are others who simply have zero utility, be it things, experiences, gifts or donations while living for the income that could be safely and sustainably withdrawn from their portfolio. I would just suggest that those that in these camps be very transparent about their goals when advocating for 50X expenses, working longer, spending less and making their base case for retirement planning one of chained negative assumptions about pensions, social security, future returns and taxes.
A very reasonable suggestion. :beer

Sometimes, those recommending 2% withdrawals, 50X savings, or working until 65 etc intend to leave large bequests or a significant portion of their savings untouched to their family. It is rather helpful to know what goals drive these suggestions so they can be considered in the appropriate context.
I understand why people correlate 2% and 50X, it is perfectly logical, but I think some of us might look at it more like this. I have 50X of my expected/needed expenses for a good life, not just the basics, but I will still have a withdrawal rate of greater than 2% because of splurges, gifting or charitable donations. I don't even know if what I am trying to say will make sense to anyone else.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
Stoic9
Posts: 116
Joined: Mon Dec 10, 2018 7:14 am

Re: Do you plan to actually spend down your portfolio?

Post by Stoic9 »

I've been retired 900 days and not touched my portfolio. As you can imagine my 7 figure 75/25 AA portfolio has increased a bit over 900 days. I may need it in the future but only in my worst case COA. My passive income continues to rise ( noticed that the 2019 inflation report states rents increased an average 3.7 in 2019). Guess I'll raise our rents about 3% for 2020. I haven't even started SS which would add almost 50K a year to our passive income. All this was a part of the plan, the portfolio was just a fun way to save.
User avatar
Darth Xanadu
Posts: 786
Joined: Sat Jan 27, 2018 1:47 am
Location: Middle Earth

Re: Do you plan to actually spend down your portfolio?

Post by Darth Xanadu »

afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
SQRT
Posts: 1414
Joined: Sat Feb 05, 2011 9:44 am

Re: Do you plan to actually spend down your portfolio?

Post by SQRT »

Darth Xanadu wrote: Thu Jan 16, 2020 12:00 pm
afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
Can only spend of give it away, now or later. If you give it away, someone else spends it.

I guess some people might feel that simply looking at their investment statements might provide some enjoyment (perhaps security) that doesn’t include or assume future spending/gifting. I certainly don’t feel this way.
Last edited by SQRT on Thu Jan 16, 2020 12:29 pm, edited 1 time in total.
Unladen_Swallow
Posts: 784
Joined: Tue Dec 10, 2019 6:12 pm

Re: Do you plan to actually spend down your portfolio?

Post by Unladen_Swallow »

TheTimeLord wrote: Thu Jan 16, 2020 11:26 am
I understand why people correlate 2% and 50X, it is perfectly logical, but I think some of us might look at it more like this. I have 50X of my expected/needed expenses for a good life, not just the basics, but I will still have a withdrawal rate of greater than 2% because of splurges, gifting or charitable donations. I don't even know if what I am trying to say will make sense to anyone else.
Makes perfect sense. Context is everything.
One ought to save and spend as much or as little as they choose to. And work however long they like.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman
User avatar
TheTimeLord
Posts: 8249
Joined: Fri Jul 26, 2013 2:05 pm

Re: Do you plan to actually spend down your portfolio?

Post by TheTimeLord »

Darth Xanadu wrote: Thu Jan 16, 2020 12:00 pm
afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
You could possibly make a case for it serving the purpose of providing security. But that would only seem to be against unexpected expenses which would require you spend it so I guess we are back to money is only good for spending either through purchases, gifting or donations. Although some bars use $1 bills as wallpaper.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
StealthRabbit
Posts: 528
Joined: Sat Jun 13, 2009 1:25 am

Re: Do you plan to actually spend down your portfolio?

Post by StealthRabbit »

"...spend down your portfolio"

Glad everyone is different and there is room for that.

My primary goal is to live a decent life, while contributing to the quality of life of others while I'm still alive.

Perpetual bequests were orchestrated in my 30's (DAF funded by appreciated company shares).

Lived on less than we made (which was never above $60k Single earner income).
Diversified assets, (Should have never bought the farm... but DW and kids enjoyed it, good QoL)
Checked out of 'employment' pre age 50. no pension / no HC

Have high medical need spouse and likely more care needs in future, so spending on travel and enjoyment now (ER).
Expect to 'Spend Down Portfolio', but as of yet have not had to touch it. (only 15 yrs into ER, not to medicare age yet).

Remainder (if any) will go to DAF
Kids will designate DAF, or transfer to their own DAF's.

Then, 'the race' is over.

Would be interesting to hear from someone in their late 80's and 90's... How has it worked out?
My 90+ YO friends have always been a lot of fun, but being 90 is not so much fun. (They are a great example to me, and I am so glad they share their life with my family). Portfolio discussions never come up. :wink:
User avatar
TomatoTomahto
Posts: 11111
Joined: Mon Apr 11, 2011 1:48 pm

Re: Do you plan to actually spend down your portfolio?

Post by TomatoTomahto »

SQRT wrote: Thu Jan 16, 2020 12:05 pm
Darth Xanadu wrote: Thu Jan 16, 2020 12:00 pm
afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
Can only spend of give it away, now or later. If you give it away, someone else spends it.

I guess some people might feel that simply looking at their investment statements might provide some enjoyment that doesn’t include or assume future spending/gifting. I certainly don’t feel this way.
I guess it’s a form of giving it away, but I consider it being taken from me a very special case :D
Okay, I get it; I won't be political or controversial. The Earth is flat.
randomguy
Posts: 9205
Joined: Wed Sep 17, 2014 9:00 am

Re: Do you plan to actually spend down your portfolio?

Post by randomguy »

Darth Xanadu wrote: Thu Jan 16, 2020 12:00 pm
afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
Unspent money has potential that you can use. If someone thinks you might give them 2 million dollars, they might behave differently. Think about all the stories of people getting threatened with disinheritance. For the retiree, unspent money acts a safety blanket to help them sleep at night.

Not spending down the portfolio to me is just a result of having to planning for the worst 5% cases and those being unlikely to show up. IOther than things like giving away a ton of money (kids or charity), it seems to be pretty hard to spend down a portfolio.
TN_Boy
Posts: 1870
Joined: Sat Jan 17, 2009 12:51 pm

Re: Do you plan to actually spend down your portfolio?

Post by TN_Boy »

randomguy wrote: Thu Jan 16, 2020 12:17 pm
Darth Xanadu wrote: Thu Jan 16, 2020 12:00 pm
afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
Unspent money has potential that you can use. If someone thinks you might give them 2 million dollars, they might behave differently. Think about all the stories of people getting threatened with disinheritance. For the retiree, unspent money acts a safety blanket to help them sleep at night.

Not spending down the portfolio to me is just a result of having to planning for the worst 5% cases and those being unlikely to show up. IOther than things like giving away a ton of money (kids or charity), it seems to be pretty hard to spend down a portfolio.
I mostly agree with the "truthfulness" of your post, though I think people differ on how much of a safety blanket they need. But if you are well into retirement, no real chance of ever having a job again, well, a big portfolio is reassuring. I do think many take that to extremes.

That said, your last sentence may reflect recency bias. We are 10 years into a bull market. Inflation has been muted. The last crash was scary for a few months then I think sober observers realized the situation was (mostly) under control, and the market rebounded quickly.

In contrast, people who retired, even with a lot of money, in the 60s and 70s probably had very very little trouble spending down their portfolio. I think a lot of brave people on this forum (this comment is not directed at you randomguy) are in for a shock when the next big, longer lasting bear market hits. It is so easy to be brave when the markets have been going up for a decade.
Last edited by TN_Boy on Thu Jan 16, 2020 2:00 pm, edited 1 time in total.
skp
Posts: 71
Joined: Tue May 01, 2018 8:12 am

Re: Do you plan to actually spend down your portfolio?

Post by skp »

I am lucky enough to be getting a pension on top of social security, plus a spouse who gets social security. That more than covers my known expenses plus a reasonable sum of money for wants. I could use my portfolio if there is something that I feel I absolutely needed/ wanted, but since I regard my portfolio as insurance money for long term care. I don't plan on willy nilly blowing it. If I don't need long term care, great...my kids will reep the benefits.
randomguy
Posts: 9205
Joined: Wed Sep 17, 2014 9:00 am

Re: Do you plan to actually spend down your portfolio?

Post by randomguy »

TN_Boy wrote: Thu Jan 16, 2020 1:27 pm
randomguy wrote: Thu Jan 16, 2020 12:17 pm
Darth Xanadu wrote: Thu Jan 16, 2020 12:00 pm
afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
Unspent money has potential that you can use. If someone thinks you might give them 2 million dollars, they might behave differently. Think about all the stories of people getting threatened with disinheritance. For the retiree, unspent money acts a safety blanket to help them sleep at night.

Not spending down the portfolio to me is just a result of having to planning for the worst 5% cases and those being unlikely to show up. IOther than things like giving away a ton of money (kids or charity), it seems to be pretty hard to spend down a portfolio.
I mostly agree with the "truthfulness" of your post, though I think people differ on how much of a safety blanket they need. But if you are well into retirement, no real chance of ever having a job again, well, a big portfolio is reassuring. I do think many take that to extremes.

That said, your last sentence may reflect recency bias. We are 10 years into a bull market. Inflation has been muted. The last crash was scary for a few months then I think sober observers realized the situation was (mostly) under control, and the market rebounded quickly.

In contrast, people who retired, even with a lot money, in the 60s and 70s probably had very very little trouble spending down their portfolio. I think a lot of brave people on this forum (this comment is not directed at you randomguy) are in for a shock when the next big, longer lasting bear market hits. It is so easy to be brave when the markets have been going up for a decade.
And the people in the early 20s, late 30s, 40s,50s,late 70s, 80s, and 90s had real problems spending down portfolio.:) It isn't recency bias as much as looking at past results and knowing if I pick a 4% SWR, the odds of me not having a portfolio that grow over time is down around 15% or so (depends a bit on exact methodology and AA). I am sure somewhere in the next 50 years there will be a a stretch of periods with a low SWR. The odds of me picking those years to start my retirement though is pretty low. Look at the past 40 years. The guys that retired in 1998 did fine. The guy that retired in 2002 did fine. You only have a couple years in the middle were things got sketchy (but still not really close to failure). You need to be prepared to spend down your portfolio, but the odds of it happening just aren't high.

Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
TN_Boy
Posts: 1870
Joined: Sat Jan 17, 2009 12:51 pm

Re: Do you plan to actually spend down your portfolio?

Post by TN_Boy »

randomguy wrote: Thu Jan 16, 2020 2:03 pm
TN_Boy wrote: Thu Jan 16, 2020 1:27 pm
randomguy wrote: Thu Jan 16, 2020 12:17 pm
Darth Xanadu wrote: Thu Jan 16, 2020 12:00 pm
afan wrote: Thu Jan 16, 2020 7:42 am You begin by assuming that the only purpose of money is to spend it
I'd be curious to hear from someone who disagrees with this assumption. What other purpose does money serve other than to be spent?
Unspent money has potential that you can use. If someone thinks you might give them 2 million dollars, they might behave differently. Think about all the stories of people getting threatened with disinheritance. For the retiree, unspent money acts a safety blanket to help them sleep at night.

Not spending down the portfolio to me is just a result of having to planning for the worst 5% cases and those being unlikely to show up. IOther than things like giving away a ton of money (kids or charity), it seems to be pretty hard to spend down a portfolio.
I mostly agree with the "truthfulness" of your post, though I think people differ on how much of a safety blanket they need. But if you are well into retirement, no real chance of ever having a job again, well, a big portfolio is reassuring. I do think many take that to extremes.

That said, your last sentence may reflect recency bias. We are 10 years into a bull market. Inflation has been muted. The last crash was scary for a few months then I think sober observers realized the situation was (mostly) under control, and the market rebounded quickly.

In contrast, people who retired, even with a lot money, in the 60s and 70s probably had very very little trouble spending down their portfolio. I think a lot of brave people on this forum (this comment is not directed at you randomguy) are in for a shock when the next big, longer lasting bear market hits. It is so easy to be brave when the markets have been going up for a decade.
And the people in the early 20s, late 30s, 40s,50s,late 70s, 80s, and 90s had real problems spending down portfolio.:) It isn't recency bias as much as looking at past results and knowing if I pick a 4% SWR, the odds of me not having a portfolio that grow over time is down around 15% or so (depends a bit on exact methodology and AA). I am sure somewhere in the next 50 years there will be a a stretch of periods with a low SWR. The odds of me picking those years to start my retirement though is pretty low. Look at the past 40 years. The guys that retired in 1998 did fine. The guy that retired in 2002 did fine. You only have a couple years in the middle were things got sketchy (but still not really close to failure). You need to be prepared to spend down your portfolio, but the odds of it happening just aren't high.

Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
Yes, but you only know that in hindsight. Even in 30 year spells that turned out well, there may have been times during the retirement when the market dropped a lot.

All I meant to say was, it's been an easy 10 years in the market.
Bronko
Posts: 123
Joined: Mon Dec 03, 2018 4:17 pm
Location: No matter where you go, there you are.....

Re: Do you plan to actually spend down your portfolio?

Post by Bronko »

brad.clarkston wrote: Sun Jan 12, 2020 5:04 pm I tell the wife if she doesn't kill me before I retire I'm drawing down for beer & hookers ... I doubt I make it that far ;)

But in reality at 20 years out I have no clue.
Once you draw it down in your method you can just waste the rest.
Never let a little bit of money get in the way of a real good time.
User avatar
willthrill81
Posts: 20817
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Do you plan to actually spend down your portfolio?

Post by willthrill81 »

randomguy wrote: Thu Jan 16, 2020 2:03 pm Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
A retiree could have literally had a 0% withdrawal rate but still watched their portfolio go backwards from 2000-2009. Retirees must be prepared to see their portfolio balance go down and stay that way for a long time, regardless of their withdrawal rate.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
afan
Posts: 5203
Joined: Sun Jul 25, 2010 4:01 pm

Re: Do you plan to actually spend down your portfolio?

Post by afan »

Among other things, one can plan for progressively worse case scenarios as the ability to cover less bad outcomes increases. My bad scenario starts with both of us entering skilled nursing facilities and staying there for decades. In general, people do not stay in such places for decades because their poor health limits their length of life. But planning includes the unusual.

Assuming 30 years of skilled nursing facility, for quite a while the costs would be covered by SS and RMDs. Eventually, RMDs would deplete the accounts and their annual value would decrease. At first, we would raw on income from the taxable accounts. If we made it 30 years, we would have to start spending some principal, probably, depending on what happens with the markets. My base assumption is 1% real returns on a balanced portfolio, long term.

If we made it 30 years in SNFs our taxable accounts should carry us indefinitely and certainly another 10 years. I figure 40 years in SNF, starting at age 70, is too long to worry about going longer. Right now, we should still be able to cover these costs and leave some money to heirs. At least that is the goal.

"If money can only be spent, then money can only be spent." is begging the question. Assume your conclusion, then "prove" that your conclusion follows from your assumption.

Here is something that can only be consumed and much of it goes bad if not consumed promptly- Food. Does this mean that one should eat as much food as possible, since you cannot save it?

"the only thing one can do with money is spend it" is clearly wrong. As this thread indicates, it can be saved and invested. So starting with an assumption that is definitely wrong is not likely to lead to an interesting conclusion.

Embedded in the, false, assumption is also the assumption that one MUST, apparently as a matter of religious conviction, no logic required, DO SOMETHING with money. If one must "do something" with money and "the only thing one can do with money is spend it" then one must spend money.

But if neither assumption is true, then the conclusion is not proven.

The way logic works, you start with an assumption that it true, or at least different from the conclusion. Then you show that if the assumption holds then the conclusion holds. Starting with a conclusion gets you nowhere.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
afan
Posts: 5203
Joined: Sun Jul 25, 2010 4:01 pm

Re: Do you plan to actually spend down your portfolio?

Post by afan »

I do not have a particularly frugal lifestyle. What I have is a lifestyle that has not become more expensive as my means have increased. I still like what I like and I remain indifferent to the the many expensive things that at least some people assume are vital to a contented life. As I have tried more of these expensive things over the years I have learned that I don't want them. So I probably consume, inflation adjusted, less money now than I did 20 years ago. Back then I was till in the later stages of figuring out that I did not want those toys. So I was far more likely than now to try something to see whether I wanted it. Now I know better.

Years ago I used to work with a group of people who LOVED expensive restaurants. They would find any excuse to convert a meal into a business expense. Charge it to the business, or better yet, get some supplier to pay for it. I tried and failed to get them to distribute this money as cash to those of us who earned it. To them, this made no sense. They would have to pay taxes on the cash and then could only use what was left to go to dinner. Finally I gave up on arguing, long after I stopped attending the dinners.

I may not have been able to get the money instead of the restaurant meal. At least I no longer had to endure the restaurants. If I would want not to go there when it was free, why in the world would I want to go to such a place and pay for it? Yes, it would be a way to spend money. Since I don't see a need to spend money for the sake of spending it, that is not a reason for me to go to a fancy restaurant.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
afan
Posts: 5203
Joined: Sun Jul 25, 2010 4:01 pm

Re: Do you plan to actually spend down your portfolio?

Post by afan »

willthrill81 wrote: Thu Jan 16, 2020 4:14 pm
randomguy wrote: Thu Jan 16, 2020 2:03 pm Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
A retiree could have literally had a 0% withdrawal rate but still watched their portfolio go backwards from 2000-2009. Retirees must be prepared to see their portfolio balance go down and stay that way for a long time, regardless of their withdrawal rate.
Exactly. If one is not drawing from the portfolio such an turn of event would not force reductions in spending, but it would still be unnerving. If one IS drawing from the portfolio, then a large and sustained downturn can be a big problem. The lower the withdrawal rate, the less of a problem.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
User avatar
TheTimeLord
Posts: 8249
Joined: Fri Jul 26, 2013 2:05 pm

Re: Do you plan to actually spend down your portfolio?

Post by TheTimeLord »

willthrill81 wrote: Thu Jan 16, 2020 4:14 pm
randomguy wrote: Thu Jan 16, 2020 2:03 pm Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
A retiree could have literally had a 0% withdrawal rate but still watched their portfolio go backwards from 2000-2009. Retirees must be prepared to see their portfolio balance go down and stay that way for a long time, regardless of their withdrawal rate.
Didn't Total U.S. Bond go up 80% over that period? Worse year +2.40%, Best year +11.39%.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
wrongfunds
Posts: 2313
Joined: Tue Dec 21, 2010 3:55 pm

Re: Do you plan to actually spend down your portfolio?

Post by wrongfunds »

afan wrote: Thu Jan 16, 2020 6:35 pm
willthrill81 wrote: Thu Jan 16, 2020 4:14 pm
randomguy wrote: Thu Jan 16, 2020 2:03 pm Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
A retiree could have literally had a 0% withdrawal rate but still watched their portfolio go backwards from 2000-2009. Retirees must be prepared to see their portfolio balance go down and stay that way for a long time, regardless of their withdrawal rate.
Exactly. If one is not drawing from the portfolio such an turn of event would not force reductions in spending, but it would still be unnerving. If one IS drawing from the portfolio, then a large and sustained downturn can be a big problem. The lower the withdrawal rate, the less of a problem.
I don't think you get it. As the saying goes "I will back up the truck and load on the market because it would be on sale". Don't you get it? If I have other source of income, I am NOT spending it all. When the market tanks, I clamp down on my expenses and I go complete hog wild and buy by truckload.

Doesn't everybody do that before retiring? It is the same principle.
User avatar
willthrill81
Posts: 20817
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Do you plan to actually spend down your portfolio?

Post by willthrill81 »

TheTimeLord wrote: Thu Jan 16, 2020 6:48 pm
willthrill81 wrote: Thu Jan 16, 2020 4:14 pm
randomguy wrote: Thu Jan 16, 2020 2:03 pm Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
A retiree could have literally had a 0% withdrawal rate but still watched their portfolio go backwards from 2000-2009. Retirees must be prepared to see their portfolio balance go down and stay that way for a long time, regardless of their withdrawal rate.
Didn't Total U.S. Bond go up 80% over that period? Worse year +2.40%, Best year +11.39%.
It would depend on the retiree's bond allocation.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
User avatar
LadyGeek
Site Admin
Posts: 66270
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Do you plan to actually spend down your portfolio?

Post by LadyGeek »

I removed an off-topic post. As a reminder, see: General Etiquette
At all times we must conduct ourselves in a respectful manner to other posters.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
randomguy
Posts: 9205
Joined: Wed Sep 17, 2014 9:00 am

Re: Do you plan to actually spend down your portfolio?

Post by randomguy »

willthrill81 wrote: Thu Jan 16, 2020 4:14 pm
randomguy wrote: Thu Jan 16, 2020 2:03 pm Not spending down the portfolio isn't a goal. It is just a side effect of being conservative.
A retiree could have literally had a 0% withdrawal rate but still watched their portfolio go backwards from 2000-2009. Retirees must be prepared to see their portfolio balance go down and stay that way for a long time, regardless of their withdrawal rate.
Sure. And today those people are up 10% today. They picked the worse year in the past 40 and are still up 20 years in. If you look at the distribution of all the people that retired post 1980 on, they are all up. That is no guarantee that you will be up in the future but it is the likely outcome. It is only when a bottom 10% or so result shows up that you end up down after 30+ years.
User avatar
JDCarpenter
Posts: 1466
Joined: Tue Sep 09, 2014 2:42 pm

Re: Do you plan to actually spend down your portfolio?

Post by JDCarpenter »

Admiral wrote: Wed Jan 15, 2020 11:50 am ....

it's hard to change to a profligate lifestyle at age 58 when you have not lived that way your entire adult life. Not impossible, but it's just not something one is used to.
Nah, it isn't that hard. ;-)

We don't plan to spend the portfolio down to zero, but it will definitely diminish. Retired in 2017 at 57/56 with no pension, plan taking whatever socials might be available at our respective age 70s. Traveling 6-9 months of the year so far (about 1/2 domestic by car). So many years of being tethered to our jobs to make up for, and so many oceans to dive, wild animals to photo-stalk, mountains to hike, cuisines to sample, and cities to see....

You never know how long you have to travel, but we are hoping to be doing long, high-altitude hikes and diving until at least our mid-70's. But, just to make sure, we'll continue to hit everything hard as long as we can. :beer

(and yeah, there was no difficulty in getting our our non-tax spending to be far higher than our pre-retirement spending excluding education costs of children)
Edit Signature
User avatar
abuss368
Posts: 21504
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Do you plan to actually spend down your portfolio?

Post by abuss368 »

Leave it to the kids. Spend the dividends.
John C. Bogle: “Simplicity is the master key to financial success."
honduranhurricane
Posts: 150
Joined: Tue Oct 18, 2016 10:18 pm
Location: boston, ma

Re: Do you plan to actually spend down your portfolio?

Post by honduranhurricane »

Ideally, interest and divs are spent and less so the principal. Also ideally, leave a chunk to kids so they can provide great opportunities for their kids. But things can change.
marcopolo
Posts: 3464
Joined: Sat Dec 03, 2016 10:22 am

Re: Do you plan to actually spend down your portfolio?

Post by marcopolo »

JDCarpenter wrote: Thu Jan 16, 2020 9:24 pm
Admiral wrote: Wed Jan 15, 2020 11:50 am ....

it's hard to change to a profligate lifestyle at age 58 when you have not lived that way your entire adult life. Not impossible, but it's just not something one is used to.
Nah, it isn't that hard. ;-)

We don't plan to spend the portfolio down to zero, but it will definitely diminish. Retired in 2017 at 57/56 with no pension, plan taking whatever socials might be available at our respective age 70s. Traveling 6-9 months of the year so far (about 1/2 domestic by car). So many years of being tethered to our jobs to make up for, and so many oceans to dive, wild animals to photo-stalk, mountains to hike, cuisines to sample, and cities to see....

You never know how long you have to travel, but we are hoping to be doing long, high-altitude hikes and diving until at least our mid-70's. But, just to make sure, we'll continue to hit everything hard as long as we can. :beer

(and yeah, there was no difficulty in getting our our non-tax spending to be far higher than our pre-retirement spending excluding education costs of children)
Congrats on enjoying your active retirement. We retired in 2018, and are now spending 150% of our pre-retirement spending for many of the same reasons you stated, not quite as much traveling, but filling our time with activities we enjoy. It was not hard at all. We kind of planned it this way.

We did a lot of things when working/raising kids, but were constrained by time limits. Now, we are loving our freedom.
If we had continued to live the same life we did prior to retiring, i would have just kept working (I enjoyed my career). That was the whole point of retiring early was to take advantage of the free time at a relatively young age when it can still be enjoyed. The next stage of life.
Once in a while you get shown the light, in the strangest of places if you look at it right.
KandT
Posts: 134
Joined: Sun Mar 26, 2017 2:32 am

Re: Do you plan to actually spend down your portfolio?

Post by KandT »

Old Guy wrote: Wed Oct 23, 2019 11:25 am First world problem.
It would be odd to discuss the need for refrigeration on this forum.
manatee2005
Posts: 933
Joined: Wed Dec 18, 2019 9:17 pm

Re: Do you plan to actually spend down your portfolio?

Post by manatee2005 »

Freefun wrote: Tue Jan 14, 2020 6:23 pm I will spend it. Last $ is for the coffin.
Do you have kids?
wrongfunds
Posts: 2313
Joined: Tue Dec 21, 2010 3:55 pm

Re: Do you plan to actually spend down your portfolio?

Post by wrongfunds »

JDCarpenter wrote: Thu Jan 16, 2020 9:24 pm
Admiral wrote: Wed Jan 15, 2020 11:50 am ....

it's hard to change to a profligate lifestyle at age 58 when you have not lived that way your entire adult life. Not impossible, but it's just not something one is used to.
Nah, it isn't that hard. ;-)

We don't plan to spend the portfolio down to zero, but it will definitely diminish. Retired in 2017 at 57/56 with no pension, plan taking whatever socials might be available at our respective age 70s. Traveling 6-9 months of the year so far (about 1/2 domestic by car). So many years of being tethered to our jobs to make up for, and so many oceans to dive, wild animals to photo-stalk, mountains to hike, cuisines to sample, and cities to see....

You never know how long you have to travel, but we are hoping to be doing long, high-altitude hikes and diving until at least our mid-70's. But, just to make sure, we'll continue to hit everything hard as long as we can. :beer

(and yeah, there was no difficulty in getting our our non-tax spending to be far higher than our pre-retirement spending excluding education costs of children)
Serious Question:- Has your portfolio *actually* gone down? If so, how much in percentage? I have suspicion that the answer is "No". Same question to marcopolo.
smectym
Posts: 845
Joined: Thu May 26, 2011 5:07 pm

Re: Do you plan to actually spend down your portfolio?

Post by smectym »

TN_Boy wrote: Wed Jan 15, 2020 10:15 pm
Teague wrote: Wed Jan 15, 2020 10:06 pm I've been retired a few years now and had planned to spend down my portfolio over the next few decades. But, the darned thing has kept going up despite occasional withdrawals. I'm embarrassed to admit it, but it seems I'm not doing things right.
Did you retire after 2009? It's been a great time for all the last decade.

The next prolonged bear market will let you (and the rest of us :happy) get to "spend down" our portfolio a bit.
TN Boy makes the key point: more likely that Mr. Market will “spend down” our portfolios than we ourselves. We’re not in as much control of the “glide path” (a deceptively tranquil metaphor) as we think.
Topic Author
flyingaway
Posts: 2962
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

marcopolo wrote: Thu Jan 16, 2020 9:55 pm
JDCarpenter wrote: Thu Jan 16, 2020 9:24 pm Nah, it isn't that hard. ;-)

We don't plan to spend the portfolio down to zero, but it will definitely diminish. Retired in 2017 at 57/56 with no pension, plan taking whatever socials might be available at our respective age 70s. Traveling 6-9 months of the year so far (about 1/2 domestic by car). So many years of being tethered to our jobs to make up for, and so many oceans to dive, wild animals to photo-stalk, mountains to hike, cuisines to sample, and cities to see....

You never know how long you have to travel, but we are hoping to be doing long, high-altitude hikes and diving until at least our mid-70's. But, just to make sure, we'll continue to hit everything hard as long as we can. :beer

(and yeah, there was no difficulty in getting our our non-tax spending to be far higher than our pre-retirement spending excluding education costs of children)
Congrats on enjoying your active retirement. We retired in 2018, and are now spending 150% of our pre-retirement spending for many of the same reasons you stated, not quite as much traveling, but filling our time with activities we enjoy. It was not hard at all. We kind of planned it this way.

We did a lot of things when working/raising kids, but were constrained by time limits. Now, we are loving our freedom.
If we had continued to live the same life we did prior to retiring, i would have just kept working (I enjoyed my career). That was the whole point of retiring early was to take advantage of the free time at a relatively young age when it can still be enjoyed. The next stage of life.
I certainly want a completely different life style in retirement, otherwise working for another year is not that bad. I actually want to sell the house and travel the world, but my wife wants something not that dramatic. My compromise is to be semi-retired and starts spending some money seriously.
Topic Author
flyingaway
Posts: 2962
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

TN_Boy wrote: Tue Jan 14, 2020 9:24 am
flyingaway wrote: Mon Jan 13, 2020 8:08 am
willthrill81 wrote: Sun Jan 12, 2020 5:03 pm
flyingaway wrote: Mon Oct 28, 2019 8:38 am For me, I prefer to see my portfolio balance to be flat throughout my retirement life, i.e., it always maintains the same nominal level.
How will you deal with withdrawals then when the market is down significantly? Will you cease all withdrawals until/if your balance recovers?

Why would you care about your nominal balance? $1 million today is worth a lot less than $1 million 30 years ago.
I need to have a large portfolio, I guess. It is a different way to say that will not run out of money in my life.
I still don't understand what you are thinking of doing here. It's not possible to guarantee your portfolio maintains a level nominal balance if you are investing in stocks and bonds. Let's try numbers and explain to me what you would do.

Example: you have a 1M portfolio, 40% stocks, 60% bonds. This is fairly conservative.

The stock market drops about 50%, via a slower bear market, such as we saw in 2000 to 2003. It then takes several years to recover. At the bottom of a 50% stock drawdown, your portfolio will be worth about 800k (perhaps a bit more if your bonds go up some).

What, exactly, will you be doing during those years? Your portfolio is sharply down in nominal terms and will remain so for a while. Will you avoid pulling money from it until it reaches or surpasses 1M again?

Obviously, as others have noted, it doesn't matter whether you have 1M or 10M; the portfolio behavior is the same.

It's a separate question whether thinking about the portfolio in nominal versus real terms is a good idea, but I'm puzzled on exactly what your stated plan to keep the portfolio balance level means. It seems like an impossible/ill-advised goal.
I did not mean to guarantee anything. I said I prefer (or I wish), which means it would make me feel good. I don't know how that can actually be done.
Post Reply