snarlyjack wrote: ↑
Tue Jan 09, 2018 8:09 am
The problem I have with this whole conversation is:
I' am 23 years old. My mortality is age 100 - age 23 = 77 more years.
I cannot wrap my head around the 4% Trinity (guideline) of
selling off my portfolio & making it last 40, 50, 60 years & then
be able to pass down wealth to my children someday.
I think the 4% Trinity (guideline) might work for 30 years (?)
but after that the withdrawal get's really questionable. And,
the portfolio value is very questionable.
Do you have any (good) suggestions for my situation? Thanks...
It really depends on when you plan to retire. As posted above, 77 years isn't relevant unless you plan on retiring today.
For someone planning for a retirement longer than 30 years, I would suggest investigating what's known as the perpetual withdrawal rate, the rate at which your portfolio's principal will never be depleted (based on the historic data, of course). Portfolio Charts
has some great info and calculators for this.
Using data going back to 1970, the perpetual withdrawal rate for the OP's portfolio has been about 3.75%. However, this does not include most of the worst case scenarios (e.g. 1966, several years around the Great Depression) for retirees. If all of the data were examined, the rate would probably be around 3% (fixed, plus inflation annually).
That being said, I think that a flexible withdrawal rate may be a better solution. One means of using this approach is to simply withdraw X% of a portfolio's value at intervals, such as 5% per year. When the portfolio increases or decreases, so do the withdrawals. However, you must be prepared for serious cutbacks to your withdrawals with this approach. If your portfolio drops in value by 40%, so do your withdrawals. So there must be a significant amount of discretionary spending that could be reined in if needed, particularly in the early stages of retirement.
“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