Author Topic: Anyone actually doing a 5% WR or higher ?  (Read 29609 times)

Blissful Biker

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #100 on: July 23, 2017, 11:52:20 AM »
Tremendously useful thread.  Loving the graphs!  Thanks.

I see they are based on 100% stocks and understand that a fixed asset allocation is required for comparison of SWRs.  But is 100% stocks common within this forum?  I have recently moved into DIY investing and have set up our $1M in investable assets in 80% stocks / 20% bonds, which is unfortunately a source of contention as my husband would like to see a higher % in bonds.  He is 53 and I am 45, 2 youngsters and a paid off house.  Goal is to FIRE in 7 years with $1.8M CDN.

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #101 on: July 23, 2017, 12:25:35 PM »
There are arguments that 100% stocks will give you the highest return over very long periods, but it will be more volatile than a split portfolio.

Most will say the safer bet is to slowly transfer a higher percentage into bonds as you and your husband age, to lower the volatility.
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Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #102 on: July 23, 2017, 02:09:55 PM »
There are arguments that 100% stocks will give you the highest return over very long periods, but it will be more volatile than a split portfolio.

Most will say the safer bet is to slowly transfer a higher percentage into bonds as you and your husband age, to lower the volatility.

You need the bonds at the start to mitigate a poor sequence of returns risk. Once your are through that phase of retirement you need more stocks to mitigate the risk of high inflation. So I would do the exact opposite of what you are suggesting.

maizeman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #103 on: July 23, 2017, 03:11:00 PM »
Yup. Really one of these days I need to redo the death and bankruptcy chart with a reverse glide path asset allocation strategy. (FIRE with a significant percentage in bonds and then move towards a higher and higher stock market allocation over time).

@Blissful, I don't think 100% stocks is uncommon on this forum, but certainly lots of folks also have a small to moderate proportion of their assets in bonds. I just picked one asset allocation strategy that seems reasonable and kept using it so that at least all the different charts would be based on the same underlying assumptions.
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onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #104 on: July 23, 2017, 10:29:08 PM »
You need the bonds at the start to mitigate a poor sequence of returns risk. Once your are through that phase of retirement you need more stocks to mitigate the risk of high inflation. So I would do the exact opposite of what you are suggesting.

Good point - you're seeing my lack of experience with stocks given we're mostly real-estate and alternative investors :-)

Does this apply though also before FIRE? The OP is not FIRE'd yet from what I can tell.
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Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #105 on: July 24, 2017, 06:53:32 AM »
Does this apply though also before FIRE? The OP is not FIRE'd yet from what I can tell.

Before FIRE you are trying to grow your portfolio quickly so I would be heavy stocks. I plan to only buy my bonds as I am getting ready to FIRE since they serve me no purpose until I am going to pull my money out to live on. I don't need to tame the volatility in my investments when I am just buying and holding.

You can make the argument what happens if there is a big market crash just before I buy those bonds and FIRE? Well whether the crash happens the day before or the day after I buy the bonds I personally don't see myself stopping work into a serious financial crisis. I'd keep working through the crisis and the FIRE when markets recover even if I had the bonds sitting in my investment account.

If you were more worried about such an occurrence you could start buying your bonds earlier.

dividendman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #106 on: July 24, 2017, 09:06:08 AM »
Does this apply though also before FIRE? The OP is not FIRE'd yet from what I can tell.

Before FIRE you are trying to grow your portfolio quickly so I would be heavy stocks. I plan to only buy my bonds as I am getting ready to FIRE since they serve me no purpose until I am going to pull my money out to live on. I don't need to tame the volatility in my investments when I am just buying and holding.

You can make the argument what happens if there is a big market crash just before I buy those bonds and FIRE? Well whether the crash happens the day before or the day after I buy the bonds I personally don't see myself stopping work into a serious financial crisis. I'd keep working through the crisis and the FIRE when markets recover even if I had the bonds sitting in my investment account.

If you were more worried about such an occurrence you could start buying your bonds earlier.

There is a good argument for the apex of your bond weightage in your portfolio should be the day you FIRE.

So... if you're 10 years from FIRE, have no bonds, maybe increase it by 2% per year until the year your FIRE, then reduce it 2% per year for the first 10 years of FIRE.

This allows you to mitigate sequence of returns risk and somewhat mitigate a big shit the day before you FIRE.

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #107 on: July 24, 2017, 09:18:40 AM »
This allows you to mitigate sequence of returns risk and somewhat mitigate a big shit the day before you FIRE.

If you have to FIRE on a very specific day then I agree get your bonds in place so that a market crash is not an issue when that day rolls around. Personally I'm not constrained by FIREing on an exact date and even if I had my bonds in place I would not FIRE into the teeth of a severe market crash. I'd keep working and investing until the market recovered coming out in a better position financially and with my mental health intact! ;)

I wouldn't start buying bonds 10yrs out if your purpose is to mitigate a sequence of returns risk on the day you want to FIRE though. That's way too early if that's your goal with your bond allocation.

itchyfeet

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #108 on: July 24, 2017, 02:08:42 PM »
This allows you to mitigate sequence of returns risk and somewhat mitigate a big shit the day before you FIRE.

If you have to FIRE on a very specific day then I agree get your bonds in place so that a market crash is not an issue when that day rolls around. Personally I'm not constrained by FIREing on an exact date and even if I had my bonds in place I would not FIRE into the teeth of a severe market crash. I'd keep working and investing until the market recovered coming out in a better position financially and with my mental health intact! ;)

I wouldn't start buying bonds 10yrs out if your purpose is to mitigate a sequence of returns risk on the day you want to FIRE though. That's way too early if that's your goal with your bond allocation.

I guess it depends how you feel about your job security in the event of a recession/ market crash etc.

if you are comfortable that you'll keep your job then I agree that there is little point in being overly conservative with investments pre fire.

Personally, I will just build up a pool of cash over the last 6 months pre-Fire.

I definitely agree that for a normal retirement on a set date then a more conservative approach makes sense. Still, investing in lower returning bonds 10 years ahead of retire,met seems quite bearish.

GenXbiker

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #109 on: July 24, 2017, 02:15:16 PM »
You can make the argument what happens if there is a big market crash just before I buy those bonds and FIRE? Well whether the crash happens the day before or the day after I buy the bonds I personally don't see myself stopping work into a serious financial crisis. I'd keep working through the crisis and the FIRE when markets recover even if I had the bonds sitting in my investment account.
I'm cash heavy right now and would use a market crash (or even a nice dip) as a buying opportunity for stocks.  Otherwise, I've been saying the same thing to people - depending on my investments and what happens in the market, my 2 to 4 year plan could be delayed as I wouldn't want to FIRE in a bear market, but it all depends, how long, how much, etc.

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #110 on: July 24, 2017, 02:27:26 PM »
I guess it depends how you feel about your job security in the event of a recession/ market crash etc.

if you are comfortable that you'll keep your job then I agree that there is little point in being overly conservative with investments pre fire.

I do contract work that can end at a moment's notice. I hold no EF and no bonds. Being somewhat close to FIRE I have a huge investment account relative to my minimal spending needs. I am also a useful person to have around so I have little fear I could not find work ahead of 75% of the other people in my town should push come to shove. Might not be my dream job, but as long as I am not pulling $$ out of my investments that's fine.

A market crash in the near future would be speed bump on my way to FIRE and whatever hassle it might entail would be worth it coming out the other side and being able to FIRE into the recovery phase.

Mr. Green

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #111 on: July 24, 2017, 05:38:37 PM »
You can make the argument what happens if there is a big market crash just before I buy those bonds and FIRE? Well whether the crash happens the day before or the day after I buy the bonds I personally don't see myself stopping work into a serious financial crisis. I'd keep working through the crisis and the FIRE when markets recover even if I had the bonds sitting in my investment account.
I'm cash heavy right now and would use a market crash (or even a nice dip) as a buying opportunity for stocks.  Otherwise, I've been saying the same thing to people - depending on my investments and what happens in the market, my 2 to 4 year plan could be delayed as I wouldn't want to FIRE in a bear market, but it all depends, how long, how much, etc.
Right as a bear market starts to recover is the best time to FIRE because it's statistically the least likely to have another big drop in the first few years. I think I would be most comfortable FIREing in a bear market if I hit my "walk away" numbers at that point.
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thriftycanadian

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #112 on: July 29, 2017, 12:07:16 PM »
You can make the argument what happens if there is a big market crash just before I buy those bonds and FIRE? Well whether the crash happens the day before or the day after I buy the bonds I personally don't see myself stopping work into a serious financial crisis. I'd keep working through the crisis and the FIRE when markets recover even if I had the bonds sitting in my investment account.
I'm cash heavy right now and would use a market crash (or even a nice dip) as a buying opportunity for stocks.  Otherwise, I've been saying the same thing to people - depending on my investments and what happens in the market, my 2 to 4 year plan could be delayed as I wouldn't want to FIRE in a bear market, but it all depends, how long, how much, etc.
Right as a bear market starts to recover is the best time to FIRE because it's statistically the least likely to have another big drop in the first few years. I think I would be most comfortable FIREing in a bear market if I hit my "walk away" numbers at that point.

Who knows when that time is....

Mr. Green

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #113 on: July 31, 2017, 08:37:53 AM »
Just pointing out the math. I certainly wouldn't wait on a bear market if I was ready.
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Acastus

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #114 on: August 08, 2017, 01:59:11 PM »
Does this apply though also before FIRE? The OP is not FIRE'd yet from what I can tell.

Before FIRE you are trying to grow your portfolio quickly so I would be heavy stocks. I plan to only buy my bonds as I am getting ready to FIRE since they serve me no purpose until I am going to pull my money out to live on. I don't need to tame the volatility in my investments when I am just buying and holding.

You can make the argument what happens if there is a big market crash just before I buy those bonds and FIRE? Well whether the crash happens the day before or the day after I buy the bonds I personally don't see myself stopping work into a serious financial crisis. I'd keep working through the crisis and the FIRE when markets recover even if I had the bonds sitting in my investment account.

If you were more worried about such an occurrence you could start buying your bonds earlier.

This works great as long as the market is well behaved before and as you buy bonds. You probably want to start buying bonds before you need them in case the market tanks just before you happen to FIRE. It will slow your progress a little, but not as much as waiting for the market to come back. The allocation is up to you. A 60/40 long term stock/bond is more aggressive than many. JLCollins plans on 75/25, but I bet he has a cushion.

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #115 on: August 08, 2017, 02:10:11 PM »
This works great as long as the market is well behaved before and as you buy bonds. You probably want to start buying bonds before you need them in case the market tanks just before you happen to FIRE. It will slow your progress a little, but not as much as waiting for the market to come back. The allocation is up to you. A 60/40 long term stock/bond is more aggressive than many. JLCollins plans on 75/25, but I bet he has a cushion.

It doesn't matter to me if the market crashes just before I was going to buy bonds or if it crashes right after I do. I am not FIREing into the teeth of a crash with or without bonds. I'll just keep working through the crash and FIRE once my investments have recovered.

I also won't be going as high as 25% - 40% bonds. In fact I am not even looking at it that way. I plan to buy enough bonds to get me through 3 years or normal spending or say 5 years of reduced spending. So that might be $120K of bonds. I have no plans to rebalance the bonds to maintain that allocation. Either I'll spend them during a market crash or I'll just let my stocks out run the bonds so they become a smaller and smaller % of my overall portfolio.

gerardc

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #116 on: August 08, 2017, 03:01:54 PM »
I also won't be going as high as 25% - 40% bonds. In fact I am not even looking at it that way. I plan to buy enough bonds to get me through 3 years or normal spending or say 5 years of reduced spending.

So 12% bonds? :)

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #117 on: August 08, 2017, 03:22:12 PM »
So 12% bonds? :)

I can't tell you the % since I don't know what my FIRE $$ value will be and I don't know how big a cushion exactly I will want when the day comes to buy the bonds. I would also prefer not to refer to the value of the bonds as a % since I am buying a fixed amount that I don't intend to be maintained as a % of the overall account.

I think a range of $100K to $150K  is pretty likely given the likely amounts I'll have invested at the time.

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #118 on: August 08, 2017, 04:09:35 PM »
Retire-Canada - do you therefore intend to utilize a rising equity glide path. So spend your bonds at the start and not replace them.

I was thinking of doing something similar to this but I think I will try and hold my bond component and only utilise it in market downturns so I avoid selling my stock portfolio.

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #119 on: August 08, 2017, 04:50:34 PM »
Retire-Canada - do you therefore intend to utilize a rising equity glide path. So spend your bonds at the start and not replace them.

I was thinking of doing something similar to this but I think I will try and hold my bond component and only utilise it in market downturns so I avoid selling my stock portfolio.

I would hold onto the bonds like you are planning on as long as market returns outrun my withdrawals. If/when a crash occurs I'll spend them. I'll keep the amount of bonds fixed [at the mercy of interest and price changes] with no plans to rebalance or replenish them once spent.

I will write out some sort of investment plan around my bonds before I FIRE. At the moment I'm just gathering the rough strokes of a plan and considering my options.

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #120 on: August 08, 2017, 04:58:38 PM »
I like that approach. I like having some bonds in my portfolio but I see them as you do as being my safety net and mainly for the first 10 years. There is no way though that I would hold 10 years worth of bonds.

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #121 on: August 08, 2017, 05:45:23 PM »
There is no way though that I would hold 10 years worth of bonds.

Agreed. I figure 3 years full spend and say 5 years reduced spend should be enough to get me through a crash. I'm fine with some part-time work so that can easily stretch out quite a ways.

gerardc

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #122 on: August 08, 2017, 06:39:46 PM »
Retire-Canada - do you therefore intend to utilize a rising equity glide path. So spend your bonds at the start and not replace them.

I was thinking of doing something similar to this but I think I will try and hold my bond component and only utilise it in market downturns so I avoid selling my stock portfolio.

I would hold onto the bonds like you are planning on as long as market returns outrun my withdrawals. If/when a crash occurs I'll spend them. I'll keep the amount of bonds fixed [at the mercy of interest and price changes] with no plans to rebalance or replenish them once spent.

I will write out some sort of investment plan around my bonds before I FIRE. At the moment I'm just gathering the rough strokes of a plan and considering my options.

When your withdrawal strategy is planned*, let me know, I have some code to backtest it historically, so we can see if it's really superior to constant allocation or just some psychological peace-of-mind feel-good placebo BS :)

*It can be arbitrarily complex but only depend on market returns, stash amount, inflation, and only include bonds and US stocks.

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #123 on: August 08, 2017, 07:14:45 PM »
Retire-Canada - do you therefore intend to utilize a rising equity glide path. So spend your bonds at the start and not replace them.

I was thinking of doing something similar to this but I think I will try and hold my bond component and only utilise it in market downturns so I avoid selling my stock portfolio.

I would hold onto the bonds like you are planning on as long as market returns outrun my withdrawals. If/when a crash occurs I'll spend them. I'll keep the amount of bonds fixed [at the mercy of interest and price changes] with no plans to rebalance or replenish them once spent.

I will write out some sort of investment plan around my bonds before I FIRE. At the moment I'm just gathering the rough strokes of a plan and considering my options.

When your withdrawal strategy is planned*, let me know, I have some code to backtest it historically, so we can see if it's really superior to constant allocation or just some psychological peace-of-mind feel-good placebo BS :)

*It can be arbitrarily complex but only depend on market returns, stash amount, inflation, and only include bonds and US stocks.

I don't think my approach is going to be the best approach based on historical data. I think it's more likely to be a feel good placebo.

My approach will be difficult to code up as well because I have the following factors involved in my plan:-

1. 2 years no drawdowns - I will receive 6 months full time pay which I intend to last me 2 years without touching my stash.
2. Post point 1 I'll have 11 years until access Super (I'm Australian and we have a retirement fund which you cannot access until 60). I intend to have 400k-500k saved up. You could code 400k.
3. Super from 60 onwards but that is already at 300k and will grow up until retirement and then up until I reach 60.
4. From 67 onwards we should be able to receive a pension for all our living expenses.

Basically my only possible failure point will be up until point 3. If we make it to 60 we will have more than enough money post that point. I estimate my expenses at 30k -50k per year.

I do have backup options when it comes to getting to point 3. I could go back to work. I could get another job. I could sell my house and downsize.



« Last Edit: August 09, 2017, 05:07:56 PM by steveo »

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #124 on: August 08, 2017, 08:15:08 PM »
When your withdrawal strategy is planned*, let me know, I have some code to backtest it historically, so we can see if it's really superior to constant allocation or just some psychological peace-of-mind feel-good placebo BS :)

*It can be arbitrarily complex but only depend on market returns, stash amount, inflation, and only include bonds and US stocks.



So I ran some cFIREsim numbers results in table above. Comparing fixed stock/bond allocations to a sliding allocation where I went to 100% stocks in the first 10yrs. Ignore the third column over that says "fixed" I meant to delete that. The sliding allocation always produces lower success rates in cFIREsim.

If you want to simulate some withdrawal strategies you could try:

- $1M and $800K stash with $40K WRs [4% & 5%]
- $120K bonds for $1M & $100K for $800K
- any year where portfolio return is negative take $4K from bonds/-1% of the return up to -10%+ where you'll be at the full $40K
- if portfolio is equal or greater than starting value ignore the bond rule above in a year with negative returns
- don't rebalance, when bonds are gone let them run out and go 100% stocks

I'm open to other ways to implement. Just throwing some ideas to get the ball rolling.

Like Steveo my situation is more complicated and I have a number of government benefits kicking in 10 & 15yrs in plus done the mortgage after 15yrs assuming we don't buy another house. So getting through that first 15yrs is key.
« Last Edit: August 08, 2017, 09:15:14 PM by Retire-Canada »

dividendman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #125 on: August 10, 2017, 10:53:12 AM »
My glide-path situation is straightforward, but I haven't back-tested it. If you're so inclined gerardc you can probably simulate it the easiest:

Starting with a portfolio of $1M and $475000 in VTI, $275000 in VEU and $250000 in BND. Withdrawal of $36k/yr (fixed).

(copying from my IPS)

- To implement a rising equity glide-path of investments
      - this means starting with VTI/VEU/BND of 47.5%/27.5%/25%
      - reducing the bond allocation by 2% (1% to each VTI and VEU) a year for the first 10 years
      - the final breakdown after 10 years will be 57.5/37.5/5

I don't have any government benefits besides social security eventually and I'll be re-balancing twice a year (on my birthday and 6 months after my birthday) but only the birthday re-balance will move the allocation to more stocks.
« Last Edit: August 10, 2017, 10:57:24 AM by dividendman »

gerardc

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #126 on: August 10, 2017, 07:48:58 PM »
dividendman: I don't have VEU historical data, only US stock and bond.
For basic linearly increasing stock allocations, you can look at this post.

Retire-Canada, steveo: I'll set a bookmark to implement this when I have a minute.

We should do a "withdrawal strategy contest", that you could submit and I'd backtest, see which one would win :D

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #127 on: August 10, 2017, 11:42:51 PM »
dividendman: I don't have VEU historical data, only US stock and bond.
For basic linearly increasing stock allocations, you can look at this post.

Retire-Canada, steveo: I'll set a bookmark to implement this when I have a minute.

We should do a "withdrawal strategy contest", that you could submit and I'd backtest, see which one would win :D

We should have a comp but on the flip side I'm not sure if I want to know because I don't think my approach will be optimum. I think the best approach would probably be 100% stocks. I don't feel comfortable though with 100% stocks.

gerardc

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #128 on: August 11, 2017, 12:02:08 AM »
We should have a comp but on the flip side I'm not sure if I want to know because I don't think my approach will be optimum. I think the best approach would probably be 100% stocks. I don't feel comfortable though with 100% stocks.

Being in denial does not solve the problem though :P

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #129 on: August 11, 2017, 02:36:31 AM »
We should have a comp but on the flip side I'm not sure if I want to know because I don't think my approach will be optimum. I think the best approach would probably be 100% stocks. I don't feel comfortable though with 100% stocks.

Being in denial does not solve the problem though :P

It'd be good to see the analysis. I don't think it'd change my decision though. I've picked an asset allocation and an approach and I'm cool with it. I like having some bonds to smooth the road out a bit.

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #130 on: August 11, 2017, 09:08:45 AM »
I have run some additional cFIREsim simulations using my personal data [Gov't benefits] and try the fixed vs. sliding equity options. I get a 1% increase going from 80/20 stocks/bonds to 100/0 over the first ~10yrs. So that's like 95.3% to 96.3%. It's  small difference so I am not claiming any major victory and it requires a higher % of bonds than I was planning on and a continual slide from 80/20 to 100/0 regardless of market conditions.

honeyfill

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #131 on: August 29, 2017, 12:20:55 PM »
I am 60 yrs old and planning on 5% WDR from a 100% equity portfolio. I use cFIREsim with a 6% maximum WDR if the market tanks and a 4% minimum if the market starts going up.  3% WDR covers all expenses (including health care until my wife and I are 65)  which gives me a 2% buffer.  Plus I can always start  SS early if the market crashes.  I also plan on keeping 1yrs living expenses in cash/ST bonds+ a HELOC for another years expenses (I don't count the cash or home equity in  my portfolio). Naturally I never run out of money because I am taking a percentage of my yearly balance.  However, cFIREsim shows my annual withdrawals could drop as far as 66% from my initial withdrawal.  As long as the bear market lasts less than 5 years , I can keep a reasonable lifestyle.  Not a 100% chance, but good enough for me.   



TomTX

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #132 on: September 04, 2017, 06:29:30 PM »
These models assume that you can stomach the market drops and not panic sell. There's a lot riding on this money and a $200k drop in value from a $1m portfolio isnt easy for most people.
We've all been spoiled from this bull market, and if you sell on the way down and miss the recovery you'll never make that money back.
The higher your withdrawal rate the more important this is.

Only a 20% drop? Meh.

I've been investing since 1990, so I've been through a couple of true market crashes, 100% in stocks.
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SnackDog

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #133 on: September 05, 2017, 01:56:16 AM »
If I tell cfiresim I plan to be flexible on withdrawals and that I own some property, it wants me to start at a nearly 8% SWR. I delete the property entry but it still thinks 5% is a good idea for 40 years.
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honeyfill

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #134 on: September 06, 2017, 04:31:38 PM »
These models assume that you can stomach the market drops and not panic sell. There's a lot riding on this money and a $200k drop in value from a $1m portfolio isnt easy for most people.
We've all been spoiled from this bull market, and if you sell on the way down and miss the recovery you'll never make that money back.
The higher your withdrawal rate the more important this is.

Only a 20% drop? Meh.

I've been investing since 1990, so I've been through a couple of true market crashes, 100% in stocks.



I'm with TomTX,  I've been 100% stocks since the mid 80's so I've seen crashes in 1987, 2001, 2008.   5% WR with a 100% Equity allocation is the way to go. 



HawkeyeNFO

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #135 on: September 21, 2017, 07:02:10 PM »
I've been 100% stocks since the mid 80's so I've seen crashes in 1987, 2001, 2008.   5% WR with a 100% Equity allocation is the way to go.
I agree with staying with equities.  Keep in mind that the Trinity study was based on a mix of stocks and bonds, so it was somewhat conservative.  Historically, bonds have returned less than stocks.  As has already been pointed out, the bonds mitigate market fluctuations and risk.  If you can stomach the risk of bear markets, your asset allocation should be more aggressive in search of higher returns.

I will probably only be at or above 5% during the next 12 months.  I FIRE in just 10 days, and will be spending lots of money to make the house how I want it.  After that is complete, my spending will drop to 4% or less.  100% stocks and mutual funds.  In my case, bear market risk is mitigated with a military pension, beginning next month. 

Eric

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #136 on: September 22, 2017, 11:39:54 AM »
I've been 100% stocks since the mid 80's so I've seen crashes in 1987, 2001, 2008.   5% WR with a 100% Equity allocation is the way to go.
I agree with staying with equities.  Keep in mind that the Trinity study was based on a mix of stocks and bonds, so it was somewhat conservative.  Historically, bonds have returned less than stocks.  As has already been pointed out, the bonds mitigate market fluctuations and risk.  If you can stomach the risk of bear markets, your asset allocation should be more aggressive in search of higher returns.

I will probably only be at or above 5% during the next 12 months.  I FIRE in just 10 days, and will be spending lots of money to make the house how I want it.  After that is complete, my spending will drop to 4% or less.  100% stocks and mutual funds.  In my case, bear market risk is mitigated with a military pension, beginning next month.

The Trinity Study was updated to include a range of AAs, including 100% stocks.

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TomTX

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #137 on: September 23, 2017, 09:24:15 AM »
Something is fishy when the 20 and 25 year periods at a certain WR are zeroed, yet the 30 has residual cash.
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Re: Anyone actually doing a 5% WR or higher ?
« Reply #138 on: September 23, 2017, 09:45:06 AM »
That is indeed fishy.

Maybe there was a bad sequence of returns that started 26-29 years ago? (So it could be included in the 25 year interval dataset but not the 30 year dataset.)
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thriftycanadian

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #139 on: September 23, 2017, 09:52:22 AM »
Something is fishy when the 20 and 25 year periods at a certain WR are zeroed, yet the 30 has residual cash.

These are median numbers, so it's entirely possible.

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #140 on: September 23, 2017, 10:05:34 AM »


I like this chart better from that article.

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #141 on: September 23, 2017, 11:45:49 AM »
Thanks.  This table is interesting and comforting.  I am planning a 4%WR with a 75/25 portfolio which the table gives a 100% chance of success.   Hooray!  The table only goes up to 30 years, and I am planning for a 45 year retirement but I do not expect that would make a substantial difference to the results.

Our current portfolio is 80/20 but we are down 5% ($50K) in the last 5 months and it is causing my DH distress.  I think I'll take it up to 75/25 for his sake and then hold the line, forwarding him every article I see about the wisdom of the simple buy and hold philosophy.

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #142 on: September 23, 2017, 01:02:28 PM »
Our current portfolio is 80/20 but we are down 5% ($50K) in the last 5 months and it is causing my DH distress.

The key is not to look at the total unless you need to. Especially if you know it's likely to cause distress.

TomTX

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #143 on: September 23, 2017, 08:58:21 PM »
Thanks.  This table is interesting and comforting.  I am planning a 4%WR with a 75/25 portfolio which the table gives a 100% chance of success.   Hooray!  The table only goes up to 30 years, and I am planning for a 45 year retirement but I do not expect that would make a substantial difference to the results.

Our current portfolio is 80/20 but we are down 5% ($50K) in the last 5 months and it is causing my DH distress.  I think I'll take it up to 75/25 for his sake and then hold the line, forwarding him every article I see about the wisdom of the simple buy and hold philosophy.

Having everyone on board is important.

IIRC, the "peak" for success was something like 90% stocks/10% bonds  - but it's all pretty flat in the 75%-100% stocks range.
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HawkeyeNFO

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #144 on: September 24, 2017, 10:07:18 AM »
Thanks for posting the updated charts.  They further confirm that 100% equities is the place for me.  Especially the one with the dollar values.  Compare the 30 year all equity portfolio to the same length of time with 25% bonds.  It's a significant difference.

TempusFugit

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #145 on: September 24, 2017, 12:56:01 PM »
I happened upon the Success Rate chart a couple of weeks ago (gocurrycracker's blog I think) and found it enlightening.    I have particular interest in the shorter time frames represented because I have responsibility for managing my mother's finances.  I'm estimating a 15 year horizon that her funds need to last (based on actuarial tables + family history)

This is a really informative thread. Thanks for the effort some of you guys put into it.