If someone appears to be repeatedly personal, lean towards patience as they might not mean offense. If you are sure, however, then do not deepen the problem by being negative; instead, simply place them on ignore by clicking the unhappy yellow face to the right of their name.
- Manlobbi
Personal Finance Topics / Retirement Investing
No. of Recommendations: 5
An interesting method for estimating retirement spending:
Total Portfolio Allocation and Withdrawal (TPAW) is a financial planning tool that implements the lifecycle model of investing and spending from economics.Long thread on Bogleheads:
https://www.bogleheads.org/forum/viewtopic.php?t=3...The author just appeared on the Rational Reminder podcast. Thread here:
https://community.rationalreminder.ca/t/episode-34...There's a spreadsheet and an online planner:
https://tpawplanner.com/The method uses expected returns and expected longevity in calculating a variable withdrawal rate. It's a good deal more sophisticated than a simple SWR (like the 4% 'rule'). With so many unknowns it may not be an improvement.
The default expected returns in the planner are based on current valuations (CAPE for stocks and TIPS yields for bonds).Suspect some folks will not like that - likely will give lower than 4% withdrawal rate for long retirements. I haven't thrown our numbers into it yet.
No. of Recommendations: 2
I put my details in:
40-year retirement starting next year, taking SS at age 70 for both of us.
Initial withdrawal rates:
5th pct 2.6%
50th pct 3.5% (the most likely scenario)
95th pct 4.3%
Pretty much as expected.
No. of Recommendations: 3
And there is also the VPW
https://www.bogleheads.org/wiki/Variable_percentag...
Variable percentage withdrawal (VPW) is a method which adapts portfolio withdrawal amounts to the retiree's retirement horizon, asset allocation, and portfolio returns during retirement. It combines the best ideas of the constant-dollar, constant-percentage, and 1/N withdrawal methods to allow the retiree to spend most of the portfolio using return-adjusted withdrawals. By adapting withdrawals to market returns, VPW will never prematurely deplete the portfolio.
No. of Recommendations: 0
Variable percentage withdrawal (VPW)....
We've been using a fixed amount withdrawal since we retired (me at 55, my wife at 70). That works out to a VPW, but the emphasis is on the fixed amount without looking at what per cent that works out to.
So far, that's been working fine, with our portfolios growing in each of our accounts. One thing that helps, to be sure is our Social Security payments are good due to the nature of our jobs when we were working (and we're tracking potential events here carefully).
Eric Hines
No. of Recommendations: 2
I have considered another option. Divide my portfolio into two parts. 70/30 division. Spend down the 70 percent part over seventeen years starting at one seventeenth of the total, next year one sixteenth, etc. After seventeen years the second part should grow into enough to repeat. Allows more spending earlier and time to adjust if things aren’t going well.
No. of Recommendations: 9
I have considered another option. Divide my portfolio into two parts. 70/30 division. Spend down the 70 percent part over seventeen years starting at one seventeenth of the total, next year one sixteenth, etc.
That's just playing mind games about your money. Look up "mental accounting bias".
And it doesn't really work, you are assuming that the 70% you've carved out will continue to grow---which is not guaranteed. What happens if at year 5 the market takes a huge dump like it did in 2008/2009? In year 4 you took, say, 1 twelveth of $500,000 = $41,700. Then year 5 you would take 1 eleventh of the remaining $300,000 = $27,300.
That's a HUGE hit to spending. Kinda hard on your budget.
Where the declining percentage withdrawals do work out is in cases where you must empty the account in X years. For example an inherited IRA, which must be emptied in 10 years. 1/10 the first year, then 1/9, 1/8 ... 1/1 in year 10. The goal here is to stretch out the withdrawals while minimizing the tax hit in any one year.
After seventeen years the second part should grow into enough to repeat.
That word "should" is doing a lot of heavy lifting here.
No. of Recommendations: 14
I have considered another option. Divide my portfolio into two parts. 70/30 division. Spend down the 70 percent part over seventeen years starting at one seventeenth of the total, next year one sixteenth, etc.
This is very elegant, and I like it. Your 70% divided into 17 divisions is 70/17 = approx. 4% withdrawal of your total equity. Of course, the 70% would need to remain in bonds or have a return that is at least the level of inflation so that the real value of your divisions of the 70% are not reduced over time owing to inflation.
However 17 years - with your expected high chance of much of another 17 years on top of that after - is a really enormous amount of time to have cut off, with so much of your equity off (70%) prevented from compounding over so many years. That is a tremendous opportunity cost.
I would recommend to allow the intrinsic value to grow at higher compounding rate, ignoring the stock quotations, and take out 4%.
This can be done, for example, by purchasing an international diversified high dividend low cost ETF, and just take the dividend and completely ignore the capital.
You can then extract at the same initial amount of cash (even slightly higher at 5%) but the amount you are extracting will grow over time at a higher real rate than the bonds.
I would recommend VYMI which his Vanguard ETF which fits by description "international diversified high dividend low cost ETF". Put 100% of your equity there, and just take the dividend and do nothing else. You would not even need to ever visit your brokerage account.
Your starting dividend is about 5% of your equity - higher than your starting amount, and this will increase at a higher rate than inflation over time. You can completely ignore the stock price, as the dividend will be far more stable than you would think.
During the 1930s Great Depression, the real (CPI adjusted) dividends of US stocks did not change much.
There is a bit of variation in the dividend from one quarter to the next, but over a whole year it should remain fairly fixed.
The alternative is to buy RSP (equal weight US stocks) and extract at a fixed rate of 4% year after year, which is certain (over your 20+ years) to be lower than the rate of value increase. The fixed 4% income from RSP will be less stable than the VYMI dividend strategy, but it would likely generate a little more value over time so your initial 4% cash amount would rise at a faster rate than the VYMI dividend.
Both strategies would be better than having 70% locked away for so long in bonds though.
- Manlobbi
No. of Recommendations: 4
I would recommend VYMI which his Vanguard ETF which fits by description "international diversified high dividend low cost ETF". Put 100% of your equity there, and just take the dividend and do nothing else. You would not even need to ever visit your brokerage account.VYMI is ex-US. That would be an extreme tilt to international stocks.
"Seeks to track the performance of the FTSE All-World ex US High Dividend Yield Index."
https://investor.vanguard.com/investment-products/...VYM is the US counterpart.
No. of Recommendations: 0
No. of Recommendations: 1
Divide my portfolio into two parts. 70/30 division. ....
A back of the envelope calculation. Say you start with a $1M portfolio, begin this retirement process at 70, have a 3% inflation rate over the 17 years, and no market blowups over that interval.
That means you'll have around $500k available when you're 87. Is that enough for your remaining lifetime? Maybe. Likely you don't have many years left; on the other hand, your medical costs will be quite a bit higher. If that includes time in a "rest home," which is deucedly expensive, maybe not. That no blowups bit is an heroic assumption.
Start at age 67, and the odds do not improve for you.
Eric Hines
