Take 5% of Folio age 75 Onward?

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SeeMoe
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Take 5% of Folio age 75 Onward?

Post by SeeMoe » Fri Jul 13, 2018 8:12 pm

I’m curious to know others thoughts regards taking more off the top with your retiree investments as one ages. 3% appears to be a wise decision when First retired in ones early 60’s onward to, say, 75 years of age. Then, if still in decent health with just a couple of chronic maladies that are manageable, why not increase the payout to oneself to about 5% of the retirement portfolio? Still keeping all, or most of, the principal for unanticipated emergencies in older age.

Regards, SeeMoe.. :?:
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Quaestner
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Re: Take 5% of Folio age 75 Onward?

Post by Quaestner » Fri Jul 13, 2018 8:26 pm

Will you increase that 5% for inflation each year? Does social security or pension meet your basic expenses? Do you have a plan if you need long-term care? If the market crashes and you live to 105, what might things be like for you? Are you someone who will be able to adjust that 5% downward in response to market conditions? Do you have a plan in place to manage the portfolio if/when your financial acumen declines? In other words, I think it depends! Would annuitizing a portion of your portfolio give you the increased income you desire with more certainty? I'm starting to think about these things - it's tough.

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SeeMoe
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Re: Take 5% of Folio age 75 Onward?

Post by SeeMoe » Fri Jul 13, 2018 9:01 pm

Quaestner wrote:
Fri Jul 13, 2018 8:26 pm
Will you increase that 5% for inflation each year? Does social security or pension meet your basic expenses? Do you have a plan if you need long-term care? If the market crashes and you live to 105, what might things be like for you? Are you someone who will be able to adjust that 5% downward in response to market conditions? Do you have a plan in place to manage the portfolio if/when your financial acumen declines? In other words, I think it depends! Would annuitizing a portion of your portfolio give you the increased income you desire with more certainty? I'm starting to think about these things - it's tough.
Good points to consider. We are fortunate, by slowly making our fortunes over many frugal, lean years by the way, and spend less of our fixed pensions than we take in by about 45%! Invest the rest in mostly tax exempt bond funds at Vanguard now , keeping a 45/55 folio because we can ride out a market decline fairly easily. One has LTC, then other is self-insured for later years. We have the Vanguard Trust Services in place in the event of senility too. We are just curious about the 5% withdrawals as one reaches 75+ and, as you suggest, to each his own...

SeeMoe.. :D
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averagedude
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Re: Take 5% of Folio age 75 Onward?

Post by averagedude » Fri Jul 13, 2018 10:11 pm

I believe you will be fine taking a 5% withdrawal every year since you are 75. Studies have shown that retirees that started retirement withdrawing 4% , has seen their net worth increase as they age. Alot of these retirees went through the great recession also.

02nz
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Re: Take 5% of Folio age 75 Onward?

Post by 02nz » Fri Jul 13, 2018 10:14 pm

5% seems quite safe at that age - the Variable Percentage Withdrawal system calls for withdrawals between 5.3% and 6.5%, depending on asset allocation:

https://www.bogleheads.org/wiki/Variabl ... withdrawal

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tennisplyr
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Re: Take 5% of Folio age 75 Onward?

Post by tennisplyr » Sat Jul 14, 2018 7:36 pm

Do it, you only come this way once. Don't let fear rule you life.
Those who move forward with a happy spirit will find that things always work out.

Dandy
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Re: Take 5% of Folio age 75 Onward?

Post by Dandy » Sun Jul 15, 2018 9:59 am

It doesn't seem like a significant risk. But, I don't think there is a set it and forget it approach. Have 5% as the default option and see how it goes.

mptfan
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Re: Take 5% of Folio age 75 Onward?

Post by mptfan » Sun Jul 15, 2018 10:07 am

I think you would be fine with 5% even before age 75, and I think 3% is too low before 75 and 5% is a bit low after 75, you would probably be fine with 6 or 7 or 8%. How long do the life expectancy tables say you will live? 10-12 years?

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Sheepdog
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Re: Take 5% of Folio age 75 Onward?

Post by Sheepdog » Sun Jul 15, 2018 10:20 am

averagedude wrote:
Fri Jul 13, 2018 10:11 pm
I believe you will be fine taking a 5% withdrawal every year since you are 75. Studies have shown that retirees that started retirement withdrawing 4% , has seen their net worth increase as they age. Alot of these retirees went through the great recession also.
I agree, obviously, as I have averaged 4.6% taken out since age 65 with savings growth even with a low stock percentage portfolio (age in bonds and only 23% stock since age 77) and gone thru 2 major downturns. 5% would have been no problem.
p.s. I have been taking out more than 5% the last 5 years with the extra going to charities and yet my savings still grew.
People should not say everything they think. They should think about everything they say.

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willthrill81
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Re: Take 5% of Folio age 75 Onward?

Post by willthrill81 » Sun Jul 15, 2018 10:24 am

Looking at the cold hard reality of it, most 75 year olds don't have more than 20 years life remaining, usually less. And taking 5% of a portfolio's balance is actually about as conservative as the '4% rule of thumb' because the former generally has no inflation adjustment built in. When the portfolio is up, you withdraw more, and vice versa. And of course, it's mathematically impossible to run out of money while strictly using a percentage of portfolio withdrawal method.

I actually plan on primarily using the percentage of portfolio withdrawal method myself in retirement, probably starting at around 5%, perhaps a bit more.
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Re: Take 5% of Folio age 75 Onward?

Post by RadAudit » Sun Jul 15, 2018 10:39 am

Seems as if you have a pretty good chance if you factor in life expectancy.

https://www.forbes.com/sites/wadepfau/2 ... 671dc46860


Of course, time has a way of providing a more definitive answer to the question.
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Hyperborea
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Re: Take 5% of Folio age 75 Onward?

Post by Hyperborea » Sun Jul 15, 2018 11:35 am

Most of the time 3.5/4% is far too conservative for 30 years. For shorter times it's even more conservative. If you look at the graph of the withdrawal rates that would have survived for 30 years over time you'll see that for the majority of the historical data it was over 5%. Much more likely to be fine for 20 years.

I wouldn't suggest using bare life expectancy. Half of the people will live longer than that. Consider using joint life expectancy (you and partner) to a 10% level.

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willthrill81
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Re: Take 5% of Folio age 75 Onward?

Post by willthrill81 » Sun Jul 15, 2018 4:09 pm

Hyperborea wrote:
Sun Jul 15, 2018 11:35 am
Most of the time 3.5/4% is far too conservative for 30 years. For shorter times it's even more conservative. If you look at the graph of the withdrawal rates that would have survived for 30 years over time you'll see that for the majority of the historical data it was over 5%. Much more likely to be fine for 20 years.

I wouldn't suggest using bare life expectancy. Half of the people will live longer than that. Consider using joint life expectancy (you and partner) to a 10% level.

Image
Keep in mind as well that the OP is talking about 5% as a percentage of the portfolio annually. The '4% rule of thumb' only applies the 4% to year 1 withdrawals and then adjusts upward for inflation beyond that. In a real way, the PoP method, even at 5%, is even more conservative because (1) there is no inflation adjustment and (2) it's mathematically impossible to run out of money with it, though the portfolio and withdrawals could obviously shrink considerably over time.
“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

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Hyperborea
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Re: Take 5% of Folio age 75 Onward?

Post by Hyperborea » Sun Jul 15, 2018 4:43 pm

willthrill81 wrote:
Sun Jul 15, 2018 4:09 pm
Hyperborea wrote:
Sun Jul 15, 2018 11:35 am
Most of the time 3.5/4% is far too conservative for 30 years. For shorter times it's even more conservative. If you look at the graph of the withdrawal rates that would have survived for 30 years over time you'll see that for the majority of the historical data it was over 5%. Much more likely to be fine for 20 years.

I wouldn't suggest using bare life expectancy. Half of the people will live longer than that. Consider using joint life expectancy (you and partner) to a 10% level.

Image
Keep in mind as well that the OP is talking about 5% as a percentage of the portfolio annually. The '4% rule of thumb' only applies the 4% to year 1 withdrawals and then adjusts upward for inflation beyond that. In a real way, the PoP method, even at 5%, is even more conservative because (1) there is no inflation adjustment and (2) it's mathematically impossible to run out of money with it, though the portfolio and withdrawals could obviously shrink considerably over time.

It isn't clear to me that he is talking about a 5% of current balance withdrawal but just instead upping the WR to 5% of current balance and then going from there in the "standard 4% rule" way. Either would likely be fine especially given the probable 20 year horizon. The "standard 4% rule" isn't necessarily fixed as some have proposed and executed a reset by starting a new 30 year period if the balance has grown significantly.
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

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