How Much Is The Value of Your Net Worth Important to You?

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Mon Dec 02, 2019 5:53 pm

Artful Dodger wrote:
Mon Dec 02, 2019 4:22 pm
The plan is that our net worth will decline in the years before both of us hit age 70, and start taking SS. This is also the period of time when I have built in a larger annual expense for travel, finishing off the mortgage, and paying off some student loans for our kids. Then there should be a slight decline as pension and SS covers all the necessary expenses, but we spend over that for whatever we want. We're also at a 50/50 equity to fixed allocation, so a market decline won't be as daunting. That's the plan. The retirement planner (Fidelity) still shows $900k remaining at our planned demise.
I am sure you feel very secure with your planned scenario...especially with the long term cushion the Fidelity planner predicts. That is a good thing.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Mon Dec 02, 2019 5:56 pm

dmcmahon wrote:
Mon Dec 02, 2019 4:48 pm
I’ll answer yes. I have twin goals, one is retirement income and the other is leaving a legacy. It matters to the latter goal.
:thumbsup Couldn't agree more.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

retire2022
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by retire2022 » Mon Dec 02, 2019 6:02 pm

op

2.5 Million net worth and 1.7 million portfolio at 60x times expenses, I am retiring end of April 2020 so that my RMD will be lower at 70.5, my Asset Allocation is 93/6 % and will beat inflation with pension.

My portfolio will out live me until I expire.

Not bad for child of single parent working poor.

Best

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Mon Dec 02, 2019 6:44 pm

abuss368 wrote:
Mon Dec 02, 2019 2:13 pm
It may have been many years ago. With our transformation to simplifying our financial and non-financial lives, we don't formally track or keep any type of spreadsheet or files any longer regarding net worth.
Once in a while I may grab the calculator and it takes seconds to arrive at an estimate. When I do that I essentially add our cash, portfolio, and home equity.
I think it is a good idea to take a peek at least once in a while. And if all/most assets are under one roof it certainly does simplify the process even more.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

Nowizard
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by Nowizard » Mon Dec 02, 2019 6:48 pm

Net worth is of no value to us as long as our net worth sustains our spending patterns in retirement. If there is an issue, it relates to the possibility of spending net worth to support assisted care or nursing care as we age. We do not want to spend assets in that manner but have ethical issues with techniques commonly used to become eligible for Medicaid or other governmental payment for such care. Our goal is to take care of ourselves and experience minimal time between that last health issue and death.

Tim

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Mon Dec 02, 2019 6:59 pm

retire2022 wrote:
Mon Dec 02, 2019 6:02 pm
op

2.5 Million net worth and 1.7 million portfolio at 60x times expenses, I am retiring end of April 2020 so that my RMD will be lower at 70.5, my Asset Allocation is 93/6 % and will beat inflation with pension.

My portfolio will out live me until I expire.

Not bad for child of single parent working poor.

Best
Fantastic!!! And at 93/6 it proves you feel the stock market is worth the risk into the future. That is a bold AA for a retiree.
Congratulations on your upcoming retirement.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Mon Dec 02, 2019 7:01 pm

Nowizard wrote:
Mon Dec 02, 2019 6:48 pm
Net worth is of no value to us as long as our net worth sustains our spending patterns in retirement. If there is an issue, it relates to the possibility of spending net worth to support assisted care or nursing care as we age. We do not want to spend assets in that manner but have ethical issues with techniques commonly used to become eligible for Medicaid or other governmental payment for such care. Our goal is to take care of ourselves and experience minimal time between that last health issue and death.

Tim
As I posted a little ways above that is our biggest concern also.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

retire2022
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by retire2022 » Mon Dec 02, 2019 7:02 pm

rossington wrote:
Mon Dec 02, 2019 6:59 pm
retire2022 wrote:
Mon Dec 02, 2019 6:02 pm
op

2.5 Million net worth and 1.7 million portfolio at 60x times expenses, I am retiring end of April 2020 so that my RMD will be lower at 70.5, my Asset Allocation is 93/6 % and will beat inflation with pension.

My portfolio will out live me until I expire.

Not bad for child of single parent working poor.

Best
Fantastic!!! And at 93/6 it proves you feel the stock market is worth the risk into the future. That is a bold AA for a retiree.
Congratulations on your upcoming retirement.
forgot to mention Social Security will be applied at 67 or 70, with 8% ascension the later I apply, better than the stock market.

flyingaway
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by flyingaway » Mon Dec 02, 2019 7:43 pm

rossington wrote:
Sun Dec 01, 2019 4:03 pm
You have achieved your portfolio value goal and now you will be retiring or have already retired.

The success and accomplishment of achieving this (no matter how you got there) plus all of your other assets has given you a net worth that is (or may be) the most you have ever had in your lifetime. This obviously is a wonderful financial situation to be in. The comfort and peace of mind a very secure financial net worth provides us is invaluable.

Your retirement income strategy has been well planned out. But now do you feel that because of the value of your net worth you do not want to ever be worth any less?

Have you changed your retirement withdrawl strategy at all to maintain your comfortable net worth because you will feel regret if your assets are otherwise going to possibly diminish over time? (Let's assume we will all be unhappy if the market tanks for an extended period,I am talking about "normal" drawdowns).

Does it matter to you at all?
I think I answered a similar question on this forum before. I am not fully retired yet.

I would like to see the size of my portfolio to be a flat line (in nominal dollars) from the day of my retirement to the day of my death. If I retire with $1M, I will be happy if my children inherit $1M inflation depreciated.

TN_Boy
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by TN_Boy » Mon Dec 02, 2019 8:15 pm

rossington wrote:
Sun Dec 01, 2019 4:03 pm
You have achieved your portfolio value goal and now you will be retiring or have already retired.

The success and accomplishment of achieving this (no matter how you got there) plus all of your other assets has given you a net worth that is (or may be) the most you have ever had in your lifetime. This obviously is a wonderful financial situation to be in. The comfort and peace of mind a very secure financial net worth provides us is invaluable.

Your retirement income strategy has been well planned out. But now do you feel that because of the value of your net worth you do not want to ever be worth any less?

Have you changed your retirement withdrawl strategy at all to maintain your comfortable net worth because you will feel regret if your assets are otherwise going to possibly diminish over time? (Let's assume we will all be unhappy if the market tanks for an extended period,I am talking about "normal" drawdowns).

Does it matter to you at all?
The money is there to be spent. It would be awesome if our withdrawals were less than the portfolio growth.

But we have lots of money in equities. Even with a somewhat conservative asset allocation. If there is a major stock market crash (and of course there will be, many people have been lulled to sleep by the last 10 years) our net worth is going to decrease by a good bit. Or if we just have a poor set of returns during retirement, yes there will be a drawdown.

So my answer to your question is yes, it matters, but not much. Unless the portfolio drops to an alarming value, it doesn't make much difference. The answer would be at least somewhat different if we were determined that our heirs get a lot. We are not.

Dink2018
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by Dink2018 » Mon Dec 02, 2019 9:27 pm

I'm not anywhere near retirement but my net worth matters to me a lot.

It's saved up energy I don't have to work for again.

If I stopped earning I'd spend it pretty quickly but hey I've got a 3-4 year runway whereas most people my age have 3-4 months "maybe" lots have 3-4 weeks of reserves.

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Re: How Much Is The Value of Your Net Worth Important to You?

Post by LilyFleur » Mon Dec 02, 2019 11:15 pm

My Schwab advisor (free sessions) has run Monte Carlo simulations for me for two scenarios:
1-preserve all my capital for inheritances for my children
2-preserve half my capital for inheritances for my children

I am leaning toward #2, which will give me the pleasure of being able to help them before I die. (I help them, modestly, when they are working hard and doing the right things, which has been pretty constant help for one of my children, and somewhat sporadic but fairly constant help now for the other one of my children.) One has graduated from a state university with no debt, and I think the second one will as well.

My (mostly) paid-for condo in a HCOL area is my nursing home insurance.

I am single, retired now for a few years, and 60 years old.

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Tue Dec 03, 2019 3:02 am

flyingaway wrote:
Mon Dec 02, 2019 7:43 pm
rossington wrote:
Sun Dec 01, 2019 4:03 pm
You have achieved your portfolio value goal and now you will be retiring or have already retired.

The success and accomplishment of achieving this (no matter how you got there) plus all of your other assets has given you a net worth that is (or may be) the most you have ever had in your lifetime. This obviously is a wonderful financial situation to be in. The comfort and peace of mind a very secure financial net worth provides us is invaluable.

Your retirement income strategy has been well planned out. But now do you feel that because of the value of your net worth you do not want to ever be worth any less?

Have you changed your retirement withdrawl strategy at all to maintain your comfortable net worth because you will feel regret if your assets are otherwise going to possibly diminish over time? (Let's assume we will all be unhappy if the market tanks for an extended period,I am talking about "normal" drawdowns).

Does it matter to you at all?
I think I answered a similar question on this forum before. I am not fully retired yet.

I would like to see the size of my portfolio to be a flat line (in nominal dollars) from the day of my retirement to the day of my death. If I retire with $1M, I will be happy if my children inherit $1M inflation depreciated.
You can do it...and there is a good chance it will be better than you think. The growth of your portfolio does not have to stop when you retire.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Tue Dec 03, 2019 4:12 am

TN_Boy wrote:
Mon Dec 02, 2019 8:15 pm

The money is there to be spent. It would be awesome if our withdrawals were less than the portfolio growth.
Living a comfortable life in retirement comes first.
But we have lots of money in equities. Even with a somewhat conservative asset allocation. If there is a major stock market crash (and of course there will be, many people have been lulled to sleep by the last 10 years) our net worth is going to decrease by a good bit. Or if we just have a poor set of returns during retirement, yes there will be a drawdown.
If the market tanks (or as you said -when the market crashes) yes as I posted we will all have to accept the consequences. But the equities we hold should be the assets that continue to grow our portfolios the most up to that point. Then they will be the assets that will increase net worth again post crash. My feeling is to now, if possible, carefully try to benefit from the current market environment by investing a little extra to grow net worth as a cushion for the future. Investing (by taking on some extra risk) does not have to stop with retirement...but I realize it's not what many would choose to do. Hopefully we won't experience sustained poor returns during retirement.
So my answer to your question is yes, it matters, but not much. Unless the portfolio drops to an alarming value, it doesn't make much difference. The answer would be at least somewhat different if we were determined that our heirs get a lot. We are not.
It's those large medical/assisted living/LTC costs in the future that give me concern. We're living a comfortable life now but these things are always in the back of our minds.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Tue Dec 03, 2019 4:25 am

LilyFleur wrote:
Mon Dec 02, 2019 11:15 pm
My Schwab advisor (free sessions) has run Monte Carlo simulations for me for two scenarios:
1-preserve all my capital for inheritances for my children
2-preserve half my capital for inheritances for my children

I am leaning toward #2, which will give me the pleasure of being able to help them before I die. (I help them, modestly, when they are working hard and doing the right things, which has been pretty constant help for one of my children, and somewhat sporadic but fairly constant help now for the other one of my children.) One has graduated from a state university with no debt, and I think the second one will as well.

My (mostly) paid-for condo in a HCOL area is my nursing home insurance.

I am single, retired now for a few years, and 60 years old.
You are definitely a great Mom. It is your life to live as wonderfully as you wish, your children need to know it is your money to be used for a comfortable life for you as long as you live...whatever money is left is what it is. Hope your net worth continues to grow well into the future.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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rossington
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Tue Dec 03, 2019 4:27 am

Dink2018 wrote:
Mon Dec 02, 2019 9:27 pm
I'm not anywhere near retirement but my net worth matters to me a lot.

It's saved up energy I don't have to work for again.

If I stopped earning I'd spend it pretty quickly but hey I've got a 3-4 year runway whereas most people my age have 3-4 months "maybe" lots have 3-4 weeks of reserves.
Keep it up!
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: How Much Is The Value of Your Net Worth Important to You?

Post by rossington » Tue Dec 03, 2019 4:39 am

ruralavalon wrote:
Sun Dec 01, 2019 5:12 pm

Age 74, retired 9 years.

Net worth is an interesting number to know, but has little impact on our lives. Net worth includes the value of our home, which we own mortgage free. It is illiquid, and we cannot spend it to pay our living expenses in retirement.

We have not changed withdrawal strategy to maintain net worth.

We do care about net worth.

Our net worth has been increasing since my retirement, because of the happy accident of good stock market returns. This year so far investment returns have been more than three times as large as our portfolio withdrawals.
In my opinion this makes you one happy retiree with the comfort and peace of mind that an increasing net worth provides. More than likely not a "happy accident" but smart investment decisions on your part.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

grettman
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by grettman » Tue Dec 03, 2019 5:02 am

At first I think I will have a hard time seeing my balance go down. I have been in in the accumulation phase for a long time and I am thinking that I am a hoarder when it comes to money. I am okay with spending money that is in my checking account or our savings account (which I use to float expenses here and there) but once money enters the "lock box" (retirement and taxable investments), I can't see myself touching it without having to first overcome some mental hurdles.

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Re: How Much Is The Value of Your Net Worth Important to You?

Post by smitcat » Tue Dec 03, 2019 7:29 am

grettman wrote:
Tue Dec 03, 2019 5:02 am
At first I think I will have a hard time seeing my balance go down. I have been in in the accumulation phase for a long time and I am thinking that I am a hoarder when it comes to money. I am okay with spending money that is in my checking account or our savings account (which I use to float expenses here and there) but once money enters the "lock box" (retirement and taxable investments), I can't see myself touching it without having to first overcome some mental hurdles.
The only purpose and value to money is to spend it. Whether you spend it on yourself, others , or if it is left in your estate is your choice.
I figure the best choice for anyone is to bring them the most happiness & comfort whatever you choose to spend it on.
Good luck with your choices.

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MillennialFinance19
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by MillennialFinance19 » Tue Dec 03, 2019 7:35 am

I mean it definitely holds importance as a metric and has real world implications.

If your NW is $5m, that should mean that you can liquidate all assets and be left with $5m cash. Regardless of other factors, that provides context to whether or not you'll outlive your money. On the inverse, if your NW is $100k and you're about to retire, you can conclude that if you liquidated all assets you would have almost nothing. Yes, pensions aren't factored in, neither are social security payments, etc., but you get the point. The number can provide a partial "big picture" view.

flyingaway
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Re: How Much Is The Value of Your Net Worth Important to You?

Post by flyingaway » Tue Dec 03, 2019 9:09 am

smitcat wrote:
Tue Dec 03, 2019 7:29 am
The only purpose and value to money is to spend it. Whether you spend it on yourself, others , or if it is left in your estate is your choice.
I figure the best choice for anyone is to bring them the most happiness & comfort whatever you choose to spend it on.
Good luck with your choices.
What you said is correct. But it is easier said than done.
I am nor fully retired, but I am sure that I could. It is that lingering thought of uncertainty in my mind that prevent me from walking away.

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Re: How Much Is The Value of Your Net Worth Important to You?

Post by scifilover » Tue Dec 03, 2019 9:12 am

Retired 18+ years. Managing your retirement financing isn't about net worth, it is about cash flow. You need cash to pay for your travel, cash to pay taxes, cash to pay for grandchildren's education, cash to buy replacement autos, perhaps cash to buy a Winter home, etc.

Our portfolio, except for minor re-balancing, contains the same assets as when we retired. Just how the market values them changes. In good times like recent times, the numbers grow and we feel better. In bad times the numbers decline and we don't feel as good. At the bottom of the last big recession, March 9th, 2009, we were down 7 digits. Because of cash flow planning, it didn't really affect how we lived. A good cash flow plan helps provide the mental strength to just continue to hold on to your investments and wait for the market to recover.

For some cash flow planning means an expectation than retirement will draw down assets. For others with larger amounts asset values may continue to increase during their retirement. In retirement, a cash flow plan means knowing specifically how you will pay for the next five years, between SS, pension, dividends, cash withdrawal, or other sources.

Knowing you have 25X times your annual expenses in your retirement fund provides a great strategic big picture view type of comfort. But knowing exactly how you will pay for the next five years lets you relax.

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Re: How Much Is The Value of Your Net Worth Important to You?

Post by ruralavalon » Tue Dec 03, 2019 9:29 am

rossington wrote:
Tue Dec 03, 2019 4:39 am
ruralavalon wrote:
Sun Dec 01, 2019 5:12 pm

Age 74, retired 9 years.

Net worth is an interesting number to know, but has little impact on our lives. Net worth includes the value of our home, which we own mortgage free. It is illiquid, and we cannot spend it to pay our living expenses in retirement.

We have not changed withdrawal strategy to maintain net worth.

We do care about net worth.

Our net worth has been increasing since my retirement, because of the happy accident of good stock market returns. This year so far investment returns have been more than three times as large as our portfolio withdrawals.
In my opinion this makes you one happy retiree with the comfort and peace of mind that an increasing net worth provides. More than likely not a "happy accident" but smart investment decisions on your part.
It could have been different if the stock market had gone down after I retired in January 2011, but it has almost consistently risen since then. That was not the result of smart planning on my part.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: How Much Is The Value of Your Net Worth Important to You?

Post by smitcat » Tue Dec 03, 2019 9:34 am

flyingaway wrote:
Tue Dec 03, 2019 9:09 am
smitcat wrote:
Tue Dec 03, 2019 7:29 am
The only purpose and value to money is to spend it. Whether you spend it on yourself, others , or if it is left in your estate is your choice.
I figure the best choice for anyone is to bring them the most happiness & comfort whatever you choose to spend it on.
Good luck with your choices.
What you said is correct. But it is easier said than done.
I am nor fully retired, but I am sure that I could. It is that lingering thought of uncertainty in my mind that prevent me from walking away.

Easier said then done - yes absolutely. But its is a very important trait to acquire that takes time and focus.
We have worked towards spending money in a valuable way (to us) all of our life.
Although we did complete a goal to work less and spend more over the past years we will likely retire shortly (fully) as well.
For us it was never an "On" or "Off" switch it was more gradual....so we never felt like we were 'missing' anything.

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Re: How Much Is The Value of Your Net Worth Important to You?

Post by TN_Boy » Wed Dec 04, 2019 9:41 am

rossington wrote:
Tue Dec 03, 2019 4:12 am
TN_Boy wrote:
Mon Dec 02, 2019 8:15 pm

The money is there to be spent. It would be awesome if our withdrawals were less than the portfolio growth.
Living a comfortable life in retirement comes first.
But we have lots of money in equities. Even with a somewhat conservative asset allocation. If there is a major stock market crash (and of course there will be, many people have been lulled to sleep by the last 10 years) our net worth is going to decrease by a good bit. Or if we just have a poor set of returns during retirement, yes there will be a drawdown.
If the market tanks (or as you said -when the market crashes) yes as I posted we will all have to accept the consequences. But the equities we hold should be the assets that continue to grow our portfolios the most up to that point. Then they will be the assets that will increase net worth again post crash. My feeling is to now, if possible, carefully try to benefit from the current market environment by investing a little extra to grow net worth as a cushion for the future. Investing (by taking on some extra risk) does not have to stop with retirement...but I realize it's not what many would choose to do. Hopefully we won't experience sustained poor returns during retirement.
So my answer to your question is yes, it matters, but not much. Unless the portfolio drops to an alarming value, it doesn't make much difference. The answer would be at least somewhat different if we were determined that our heirs get a lot. We are not.
It's those large medical/assisted living/LTC costs in the future that give me concern. We're living a comfortable life now but these things are always in the back of our minds.
What I meant about the market crashing is that we could have so-so returns for a while, then a market crash followed by a typical recovery, but the combination of so-so returns, withdrawals, and the market crash, could easily result in a scenario where the portfolio was down by 25 to 50% percent from when retirement started. It doesn't take a massive extended downturn; various "not great" scenarios can and will result in the portfolio losing substantial value, especially in real terms. The "4%" rule studies with that withdrawal strategy had plenty of scenarios where the portfolio lost money over the retirement. That doesn't mean the retirement itself is in jeopardy. I think the possibility that the portfolio will be down in real terms at the end of one's retirement (i.e., when we have gone to the great golf course in the sky) is far from non-zero and frankly not avoidable.

If you are arguing for an extremely low withdrawal rate, then sure, that will help, but that is not a choice we would make.

For LTC, obviously one could get unlucky (both spouses need 10 years of skilled nursing ....) but of course LTC expenses are part of retirement planning. I think one way to decide how worried you are about LTC is your yearly expenses in retirement. If you are spending 150k per year in retirement, with obviously a correspondingly sized portfolio and/or pension + SS, then LTC costs are probably not going to be a tragedy for you (and of course you could get LTC insurance, though expensive, to hedge some of that risk). But if your yearly retirement expenses are 50k per year, LTC is potentially a much bigger issue for you, since even assisted living is more per year than your budget!

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