Author Topic: Anyone actually doing a 5% WR or higher ?  (Read 25061 times)

Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #50 on: March 29, 2017, 10:32:09 AM »
So, you guys are nerding out with your graphs and various data sets - and it is great.  Are those available somewhere or do I have to ask you to make on for a 35 year old? :)

Maizeman would have to generate that for you, but it's going to look nearly identical to the one we have already posted for a 30yr old FIREr.

Tyler

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #51 on: March 29, 2017, 11:22:34 AM »
Intuitively, failure rates shouldn't decrease as we go to longer retirement lengths, but the problem is that really bad years (like the mid 60s) start dropping out of your dataset once your retirement window gets long enough.

(Tyler, I think you recommend the perpetual withdrawal rate, which also does a much better job than the conventional Trinity method for extremely long retirements, right?)

You'll probably find my most recent post interesting WRT the problem you note with the traditional failure rate calculation methodology. 

I personally like the perpetual rate for very early retirees because it focuses on maintaining your inflation-adjusted principal rather than spending it down.  Think of it as the point where the red completely disappears from your chart even over long timeframes.  For reference, the long-term PWR for a 100% US stock portfolio is right around 3.5% which matches your charts pretty well. 
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FIREby35

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #52 on: March 29, 2017, 02:07:44 PM »
So, you guys are nerding out with your graphs and various data sets - and it is great.  Are those available somewhere or do I have to ask you to make on for a 35 year old? :)

Maizeman would have to generate that for you, but it's going to look nearly identical to the one we have already posted for a 30yr old FIREr.

You are correct, request withdrawn. Don't know how I missed that!

maizeman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #53 on: March 29, 2017, 03:37:04 PM »
Intuitively, failure rates shouldn't decrease as we go to longer retirement lengths, but the problem is that really bad years (like the mid 60s) start dropping out of your dataset once your retirement window gets long enough.

(Tyler, I think you recommend the perpetual withdrawal rate, which also does a much better job than the conventional Trinity method for extremely long retirements, right?)

You'll probably find my most recent post interesting WRT the problem you note with the traditional failure rate calculation methodology. 

I personally like the perpetual rate for very early retirees because it focuses on maintaining your inflation-adjusted principal rather than spending it down.  Think of it as the point where the red completely disappears from your chart even over long timeframes.  For reference, the long-term PWR for a 100% US stock portfolio is right around 3.5% which matches your charts pretty well.

Very cool. Yes, I think the solution you're describing and the one I'm describing are both attempting to address the same problem: there's an awful lot of useful information about how portfolios return in the time series return information from start dates that don't already have 30 years of history (or 50, or 75, or whatever length of time people are trying to calculate a SWR for). I'm not quite clear on the math being used for projecting SWR out past where historical data stops, but I can envision how it would be done.

Do you know if anyone has done any cross validation of the technique? (In other words if you train the mode with just historical data through 1990 or something, how well do the predictions match the observed changes in SWR for portfolios which didn't have 30 years of data by 1990).
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Tyler

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #54 on: March 29, 2017, 04:42:01 PM »
Do you know if anyone has done any cross validation of the technique? (In other words if you train the mode with just historical data through 1990 or something, how well do the predictions match the observed changes in SWR for portfolios which didn't have 30 years of data by 1990).

The simple 3-frame animation in the post offers snapshots of the trajectories from different historical reference points even while crossing a large market drop. Try eyeing the projections for various lines for yourself and watch as they unfold.  The ultimate endpoint is certainly not set in stone, but IMHO it's reasonably predictable and a lot more realistic than just ignoring the issue.  In any case, exploring that in more in depth to fine-tune the projection method is a good idea -- I'll add it to the to-do list. 
« Last Edit: March 29, 2017, 05:20:06 PM by Tyler »
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concealed stache

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #55 on: March 29, 2017, 06:09:41 PM »
Intuitively, failure rates shouldn't decrease as we go to longer retirement lengths, but the problem is that really bad years (like the mid 60s) start dropping out of your dataset once your retirement window gets long enough.

(Tyler, I think you recommend the perpetual withdrawal rate, which also does a much better job than the conventional Trinity method for extremely long retirements, right?)

You'll probably find my most recent post interesting WRT the problem you note with the traditional failure rate calculation methodology. 

I personally like the perpetual rate for very early retirees because it focuses on maintaining your inflation-adjusted principal rather than spending it down.  Think of it as the point where the red completely disappears from your chart even over long timeframes.  For reference, the long-term PWR for a 100% US stock portfolio is right around 3.5% which matches your charts pretty well.

The intuitive presentation of quite a lot of data in that new chart really is very nicely done. Thank you.

frugal_c

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #56 on: March 29, 2017, 08:51:29 PM »
I would probably do 5% once I am at a point where I receive public pension.  It would basically just be discretionary income so I wouldn't have much to lose.  Basically just fewer vacations and less fun money if my withdrawal rate got reduced.  I would still eat and be comfortable off the pension.  Worst case I drop it down to 2 or 3% if there is a big crash.
« Last Edit: March 29, 2017, 08:55:14 PM by frugal_c »

checkedoutat39

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #57 on: March 31, 2017, 03:00:00 PM »
Very cool. Yes, I think the solution you're describing and the one I'm describing are both attempting to address the same problem: there's an awful lot of useful information about how portfolios return in the time series return information from start dates that don't already have 30 years of history (or 50, or 75, or whatever length of time people are trying to calculate a SWR for). I'm not quite clear on the math being used for projecting SWR out past where historical data stops, but I can envision how it would be done.

This has always bothered me too. Put another way, if you have the 100 years of data from 1917-2016 and are looking at 30-year horizons, 1932 gets used only 16 times and 2008 gets used only nine times. Of course this applies to some of good years too.

I'd be interested in seeing Monte Carlo type analyses where you have the actual performance of stock/bond/whatever markets for each year, but the years are randomized. Now if you have 1932 followed by 1974 followed by 2001 followed by 2008 you probably end up with the next sequel in the Mad Max franchise. But now you've got a sample size on the order of 10^57 (100!/70!) 30-year sequences.

Alternatively, keep decades intact and randomize the decades. You can make a good argument that periods this long exhibit a consistent sentiment regarding valuations and political/economic/cultural landscape, so the market returns should be kept together. So 1930s-1970s-2000s gives you Mad Max and 1950s-1980s-1990s gives everyone a pile of $100 bills to roll around in in a sample size of 720 (10*9*8).

Then there's the childishly simple idea of just wrapping the years around with 1917 following 2016. Or run the years in reverse... boy do I got ideas.

Anyway, back to the original question. Started at 5-plus a few years back figuring I'd find a job after a few months off and the worst of the 2008-09 crash was over. I was right about the second thing but not the first thing, so I'm down to the low 4's and can get it below 4 with a few hacks. It's hard to send out resumes when the stock market pays you better than a job would.
« Last Edit: March 31, 2017, 03:04:33 PM by checkedoutat39 »

Mr. Green

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #58 on: March 31, 2017, 04:05:06 PM »
The problem I have with monte carlo sequences is that they remove the human element and humans inevitably drive the market. The possibility of having years like 1932 and 2008 is an extreme example of that but really I think the "averages" become skewed because a random simulation will end up with scenarios that simply wouldn't happen in real life. If anything, I view a monte carlo simulation as even safer than historical simulations because of this. If the monte carlo sim says you're alright then you're really alright.
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maizeman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #59 on: March 31, 2017, 04:36:24 PM »
The problem I have with monte carlo sequences is that they remove the human element and humans inevitably drive the market. The possibility of having years like 1932 and 2008 is an extreme example of that but really I think the "averages" become skewed because a random simulation will end up with scenarios that simply wouldn't happen in real life. If anything, I view a monte carlo simulation as even safer than historical simulations because of this. If the monte carlo sim says you're alright then you're really alright.

I actually tested this once way back in the day.

Essentially what I saw was that you get more extreme returns (lower worst case scenarios and higher best case scenarios) by using market data in the actual sequence they occurred rather than randomly shuffling the order of your datapoints.



Now that was on a "per month" basis, so maybe the effect wouldn't be as strong if you only shuffled data on a per year or per decade basis. But ever since, my view was been that monte carlo data tends to be a less stringent test than straight historical data.
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checkedoutat39

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #60 on: March 31, 2017, 04:46:25 PM »
I actually tested this once way back in the day.

Essentially what I saw was that you get more extreme returns (lower worst case scenarios and higher best case scenarios) by using market data in the actual sequence they occurred rather than randomly shuffling the order of your datapoints.

Interesting; thanks. Sounds like more evidence of the herd mentality in financial markets.

I was trying to say saying you'd be able to run billions of trials and shooting for two or three 9's success rate. If the ones that don't work are the ones that chain together 32-74-01-08, there's probably other stuff going on in the equivalent real world that makes 4% SWR failing the least of my problems. And in which case I'll be grateful to have spent the few years FIREing that I did. Or put more directly: In another Great Depression, who doesn't get screwed anyway?

Also that's why I suggested grouping decades together (they don't have to be strict 0-9 periods, of course). There's a reason we had three straight down years in 2000-01-02 when straight probability gives it a chance of 1/250 or so.

Tyler

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #61 on: March 31, 2017, 08:20:49 PM »
I actually tested this once way back in the day.

Essentially what I saw was that you get more extreme returns (lower worst case scenarios and higher best case scenarios) by using market data in the actual sequence they occurred rather than randomly shuffling the order of your datapoints.



Now that was on a "per month" basis, so maybe the effect wouldn't be as strong if you only shuffled data on a per year or per decade basis. But ever since, my view was been that monte carlo data tends to be a less stringent test than straight historical data.

You should read "The Misbehavior of Markets" by Benoit Mandelbrot (the fractal guy).  He explains this exact phenomenon in detail.  TL;DR -- you're absolutely right, and your example is not isolated.
« Last Edit: March 31, 2017, 08:22:27 PM by Tyler »
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maizeman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #62 on: March 31, 2017, 08:33:47 PM »
Thanks! Looks interesting from the amazon blurb. I'm putting that one on my reading list.
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gerardc

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #63 on: March 31, 2017, 09:50:20 PM »

What I am understanding is that a 4% withdrawal rate (or even 5% or higher) is actually very conservative because it has failure rates that are very low and does not account for any external variables that can be avoided through proactive management by the owner of such a portfolio. For example, the owner of the portfolio can register for social security (full or diminished), modify withdrawals, earn income or diagnose a portfolio failure based on known risks (like sequencing of return risks). Assuming the manager of the portfolio is aware of these risks, they should have years (decades?) to react (with really easy fixes they might do anyway) and, hopefully, avoid the small group of scenarios leading to portfolio failure. Not to mention the "chances" are that you will end up rich compared to ending up broke even without taking any of those steps.

In summary, these withdrawal rates and their data are extremely conservative because they don't (and can not) account for active intervention. Is that the conclusion you all are making?

Yeah, I think the 4% rule is useful as a ballpark estimate, but flexibility (i.e. your withdrawing algorithm) is probably a bigger factor.

Retiring on 4% barely covering living expenses and not wating to work EVER again... risky.

But if your barebones expenses are 3% and you have energy for a potential unFIRE, you can absolutely indulge in luxury experiences at 6% for a few years, which still has 50% success but in case of imminent failure you have plenty of room to adjust.

So 4% can be risky and 6% can be safe depending on your flexibility.

TheAnonOne

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #64 on: April 03, 2017, 08:34:07 AM »

What I am understanding is that a 4% withdrawal rate (or even 5% or higher) is actually very conservative because it has failure rates that are very low and does not account for any external variables that can be avoided through proactive management by the owner of such a portfolio. For example, the owner of the portfolio can register for social security (full or diminished), modify withdrawals, earn income or diagnose a portfolio failure based on known risks (like sequencing of return risks). Assuming the manager of the portfolio is aware of these risks, they should have years (decades?) to react (with really easy fixes they might do anyway) and, hopefully, avoid the small group of scenarios leading to portfolio failure. Not to mention the "chances" are that you will end up rich compared to ending up broke even without taking any of those steps.

In summary, these withdrawal rates and their data are extremely conservative because they don't (and can not) account for active intervention. Is that the conclusion you all are making?

Yeah, I think the 4% rule is useful as a ballpark estimate, but flexibility (i.e. your withdrawing algorithm) is probably a bigger factor.

Retiring on 4% barely covering living expenses and not wating to work EVER again... risky.

But if your barebones expenses are 3% and you have energy for a potential unFIRE, you can absolutely indulge in luxury experiences at 6% for a few years, which still has 50% success but in case of imminent failure you have plenty of room to adjust.

So 4% can be risky and 6% can be safe depending on your flexibility.
I think people retiring at 4% that are barely covering living expenses are doing mental gymnastics to say "4%". People in this situation are going to actually withdraw more than 4% (meaning they were never 4% in the first place)

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Retire-Canada

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #65 on: April 03, 2017, 08:51:24 AM »
I think people retiring at 4% that are barely covering living expenses are doing mental gymnastics to say "4%". People in this situation are going to actually withdraw more than 4% (meaning they were never 4% in the first place)

One way to look at it is this:

- say $40K/yr is your basic living expenses
- say an extra $5K/yr is your luxuries
- FIRE at $1M at 4%WR on basic living expenses
- most FIRE start years your portfolio will grow while you take $$ out
- so when you hit $1.125M reset the FIRE clock and start WR 4% of the new amount at $45K/yr

You take on a small risk that a bad sequence of returns outcome means your portfolio doesn't grow on it's own, but you can mitigate that a number of ways. If you are tired of working I don't think this is a crazy approach to take.

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #66 on: April 03, 2017, 04:57:43 PM »
I think people retiring at 4% that are barely covering living expenses are doing mental gymnastics to say "4%". People in this situation are going to actually withdraw more than 4% (meaning they were never 4% in the first place)

Exactly. This to me is the biggest flaw in the 4% rule. The real question is related to having a budget that is realistic. I state that we spend about $40k per year but we have 3 kids that we support right now and we've spent this amount for years. It's unlikely that we will go over this amount. I think we could cut costs if we had too and the kids were a little older.

This is one of the reasons why I have no problems with a 5% or even a touch higher WR.

You have to look at the whole picture rather than trying to play games with the 4% rule.
« Last Edit: April 04, 2017, 01:48:01 AM by steveo »

toro78

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #67 on: April 03, 2017, 06:17:12 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.


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positiveogre00

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #68 on: April 07, 2017, 09:13:06 AM »
Withdrawal rates are actually a lot more complicated and interesting than the old 4% rule implies. Yes, a WR higher than 4% may be perfectly fine based on your specific portfolio and personal situation.  Here are a few articles to explain how the math works and how you might approach retirement investing a bit differently.  https://portfoliocharts.com/portfolio/retirement-income/

For very early retirees, pay particular attention to perpetual withdrawal rates.

I read a few of this guys articles, including this one https://portfoliocharts.com/2015/11/17/how-safe-withdrawal-rates-work/. He is proposing that an allocation of 100% stocks, as well as 60% stocks 40% bonds are two of the worst allocations when trying to maximize SWR. Im not an expert on this, and it seems to contradict a lot of what I have gathered from this forum and others. Anybody care to help explain?

Davids

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #69 on: April 07, 2017, 10:41:14 AM »
I am a coward I plan on going 3-3.5% WR

FIPurpose

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #70 on: April 07, 2017, 10:59:34 AM »
Withdrawal rates are actually a lot more complicated and interesting than the old 4% rule implies. Yes, a WR higher than 4% may be perfectly fine based on your specific portfolio and personal situation.  Here are a few articles to explain how the math works and how you might approach retirement investing a bit differently.  https://portfoliocharts.com/portfolio/retirement-income/

For very early retirees, pay particular attention to perpetual withdrawal rates.

I read a few of this guys articles, including this one https://portfoliocharts.com/2015/11/17/how-safe-withdrawal-rates-work/. He is proposing that an allocation of 100% stocks, as well as 60% stocks 40% bonds are two of the worst allocations when trying to maximize SWR. Im not an expert on this, and it seems to contradict a lot of what I have gathered from this forum and others. Anybody care to help explain?

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positiveogre00

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #71 on: April 07, 2017, 11:52:47 AM »
Withdrawal rates are actually a lot more complicated and interesting than the old 4% rule implies. Yes, a WR higher than 4% may be perfectly fine based on your specific portfolio and personal situation.  Here are a few articles to explain how the math works and how you might approach retirement investing a bit differently.  https://portfoliocharts.com/portfolio/retirement-income/

For very early retirees, pay particular attention to perpetual withdrawal rates.

I read a few of this guys articles, including this one https://portfoliocharts.com/2015/11/17/how-safe-withdrawal-rates-work/. He is proposing that an allocation of 100% stocks, as well as 60% stocks 40% bonds are two of the worst allocations when trying to maximize SWR. Im not an expert on this, and it seems to contradict a lot of what I have gathered from this forum and others. Anybody care to help explain?

You don't have to talk like he isn't here. Tyler is that guy.

Did not realize he was the author. Any help for a newbie @Tyler?

maizeman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #72 on: April 07, 2017, 01:56:07 PM »
You're looking at the "Safe WRs for a Variety of Lazy Portfolios" right? Essentially it looks like this is comparing just domestic US stock/bond portfolio to portfolios that also contain other asset classes. Because some of these asset classes are not correlated with the performance of stocks OR bonds in the dataset, that means these portfolios didn't drop nearly as much in bad years. Since the worst years define what the safe withdrawal rate of a given portfolio is, that means these portfolios have higher SWRs.

Some of the most common additional asset classes used in alternative portfolios are international/developing world stocks or bonds, and gold. Just to give you both sides, below is my attempt to summarize why these asset classes don't get used in a lot of "conventional" simulations.

I really wish we had better historical data on international stocks or bonds going back as far as the USA dataset (1870s-present). Unfortunately a lot of the international stock/bond data (whether country specific or global index) in the public sector doesn't go back far at all.*

Adding gold to backtested portfolios tends to increase the SWR substantially. However, a big driver of this is that in the middle of "stagflation" in the mid 1970s, when inflation was destroying the value of fixed rate bonds, and the stock market dropped like a rock and then stayed down for more than a decade, the USA also went off the Bretton Woods system (end of the gold standard, read up on the "Nixon shock"), and the price of an oz of gold shot from a fixed rate of $35/oz to $450/oz by the early 80s (not adjusting for inflation, which was admittedly substantial). Since we're not back on the gold standard, we cannot go off the gold standard again in a future economic crisis, so the question is whether gold prices would respond in a similar fashion to economic conditions like the 1970s in the future.**

So basically the amount of historical data for these asset classes is shorter and, arguably, may not be representative. Of course excluding things because they make our models messy runs the risk of turning into a spherical cow in a frictionless vacuum. Either way, no easy answer.

*Typically not even to world war II, although I know there are much better datasets that go back further for the folks who do this for a living and subscribe to various financial databases.

**Reasonable people can disagree on this point.
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Tyler

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #73 on: April 07, 2017, 02:58:06 PM »
Did not realize he was the author. Any help for a newbie @Tyler?

Sure!  :)

The short story is that the famous SWR studies that the 4% rule is based on assume there are only two investment options -- an S&P500 fund and an intermediate bond fund.  I believe they generally do this because 1) there's lots of data to study, and 2) it's much easier to compute and analyze when you concentrate on only two options.  But not all stocks and bonds are created equal, and I like computation challenges.  The Portfolio Charts tools simply apply the same SWR calculation methodologies that the old studies used to modern portfolio options.

More diverse portfolios that think beyond the S&P500 and intermediate bonds often have higher SWRs because they have similar returns with lower volatility.  And volatility is more important in the drawdown phase than people realize. 
« Last Edit: April 07, 2017, 03:31:33 PM by Tyler »
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Fishingmn

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #74 on: April 08, 2017, 06:50:39 AM »
One thing to think about for those of us that have a large % of funds in 401k or IRA and retiring later -

We are in our mid 50's. Most of our non-retirement funds went into real estate which is providing a big chunk of our retirement needs but this means we will be tapping our IRA's at 59 or 60.

Our withdrawal rate is less than 3% right now but once we start taking withdrawals we will be hit with much higher expenses since we will have significant taxes due. That's going to push us right up to the 4% range. At some point I will also hire a Property Manager for our rentals which will also add significant expenses affecting our withdrawal rate.

Our situation is probably different than many as we aren't really that mustachian but the point is that withdrawal rates aren't static.

Strick

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #75 on: April 08, 2017, 08:22:24 AM »
Sure can do 45. I'm afraid it looks an awful lot like the 50 though. ;-)



Chances of going broke before dying are ~3.3% at a 4% withdrawal rate, ~9.4% at 4.5% WR and ~15.6% at 5% WR.

Things to know that mean my projections may not line up with the standard ones you might get out of a website like cfiresim: 1) I use monthly data on stock returns (shiller data) to calculate a lot more total scenarios. 2) that means I also calculate withdrawals on a monthly basis, not one lump sum per year 3) to calculate failure rates I use portfolio life expectancy, which I think provides a more accurate estimate of failure rates over extremely long retirements than looking at the number of failures out of all the time intervals that are as long as your estimate retirement in historical data (traditional Trinity approach).



My approach is the green line, the traditional approach is the blue line. Intuitively, failure rates shouldn't decrease as we go to longer retirement lengths, but the problem is that really bad years (like the mid 60s) start dropping out of your dataset once your retirement window gets long enough.

(Tyler, I think you recommend the perpetual withdrawal rate, which also does a much better job than the conventional Trinity method for extremely long retirements, right?)
So I mainly am just replying to this to see these cool graphs come up again....

Given I myself am around 45, considering a 5% SWR and don't really factor in SS often when thinking SWR of stache, I do immediately notice that the little red "broke" part is appearing and growing during the range of ages I could start taking SS, and getting big (though never very large percentage-wise) around the age of 70 when one can start taking the largest SS benefit.  Like most mustachians who keep their expenses very low compared to income, SS benefits for me starting at 70 would (assuming no huge changes) cover a significant portion of my expenses.  So even "broke" might not be that bad...

thriftycanadian

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #76 on: May 06, 2017, 09:47:36 PM »
5% WR is more than fine, especially if you choose a variable WR.  Just lower the WR to 3.5%-4% if the market dips.

Nothin is guaranteed in life - I would consider jumping in at 5% withdrawal.  For me the challenge is not the money, more of mental challenge adjusting to the new way of lifestyle, be it, better.
« Last Edit: July 12, 2017, 09:30:10 PM by thriftycanadian »

SimpleSpartan

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #77 on: June 26, 2017, 07:31:49 PM »
I'm pretty sure most of us are going to feel like idiots for having any stache at all, so it's all going to feel like overkill. Why?

Universal Basic Income is coming sooner than we think.
I'd rather not live on $15,000 with a world of lazy fucks in a more/less communist society.
But hey, that's just me.

nawhite

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #78 on: July 20, 2017, 10:21:04 AM »
Yay graphs! This thread was one of the best I've read in these forums. Thanks for all the extra effort you all put into making it awesome!

I am currently looking at pulling the plug when we're at a 5-6% WR so this thread has been really illuminating, but I'm 100% sure either my wife or I will end up working some part time jobs for fun (both of our hobbies are really easy to get paid a little to do). So we'll probably only end up withdrawing around 3-4% per year. Just means we'll have no problem whatsoever doing big travel plans when the market is up.
We live in an RV full time while still working remotely. Check it out at http://therecklesschoice.com

maizeman

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #79 on: July 20, 2017, 11:37:16 AM »
Thanks nawhite! It's really nice to get to hear when these types up discussions end up being useful.
"Itís a selective retirement," Richard explained, "a retirement from boring s**t."

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onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #80 on: July 21, 2017, 12:50:06 AM »
This might sound crazy but we retired at just over a 9% SWR.

It has improved since though (mostly because of ~20% increase in our stash - enabled by a 6-month long campervan trip around Northern Australia where we bought the van for $17,750, and sold it at the exact same price at the end of the trip - making our 'accomodation expenses' for those 6 months go down to less than $2,000).

However, we didn't FIRE based on SWR's or Net Worth figures - we FIRE'd solely based on rental and investment income exceeding our expenses - so the second this happened we were ready to go, it never really mattered to us what our net worth was at the time.

Edit: Sorry forgot to add an important point - while we have US citizenship, we also have 3 other citizenships - all in first-world countries (including the EU) that give access to Universal Healthcare - this means that our rough 'budget' for healthcare is like under $1,000 a year. This is a huge benefit and pure luck basically.
« Last Edit: July 21, 2017, 12:51:53 AM by onewayfamily »
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #81 on: July 21, 2017, 12:55:37 AM »
That being said, for people like myself looking to fire in their early 30s, SS is so far out it's hard to use it in any meaningful way.
...

This is such an important point that often gets overlooked when people are projecting for retirement income.

Given we finished up in our late 20's, social security has always been so far out that we have never included it in our calculations. Honestly I would take my retirement savings out now at 10 cents on the dollar just to be able to have control over them rather than leave them locked up with the state for the next 50+ years before I can access them (Australia - forced retirement contributions ~9% and basically no way to access them before retirement age - it would be great if Aussie's had their own version of the 'back-door roth').
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #82 on: July 21, 2017, 12:58:23 AM »
I'm pretty sure most of us are going to feel like idiots for having any stache at all, so it's all going to feel like overkill. Why?

Universal Basic Income is coming sooner than we think.

Very Wrong

I think it depends where we're talking about - the U.S. is probably a long way off politically/socially.

Parts of Europe, Australia, NZ, Canada etc. - could be within a couple decades and they all basically have some form of it now with vast swathes of the population already receiving and entitled to various family/welfare payments.
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #83 on: July 21, 2017, 01:06:49 AM »
I'm pretty sure most of us are going to feel like idiots for having any stache at all, so it's all going to feel like overkill. Why?

Universal Basic Income is coming sooner than we think.
I'd rather not live on $15,000 with a world of lazy fucks in a more/less communist society.
But hey, that's just me.

Couldn't you just save/invest - like you already have - and live on more than $15,000?
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

life_travel

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #84 on: July 21, 2017, 04:54:17 AM »
This might sound crazy but we retired at just over a 9% SWR.

It has improved since though (mostly because of ~20% increase in our stash - enabled by a 6-month long campervan trip around Northern Australia where we bought the van for $17,750, and sold it at the exact same price at the end of the trip - making our 'accomodation expenses' for those 6 months go down to less than $2,000).

However, we didn't FIRE based on SWR's or Net Worth figures - we FIRE'd solely based on rental and investment income exceeding our expenses - so the second this happened we were ready to go, it never really mattered to us what our net worth was at the time.

Edit: Sorry forgot to add an important point - while we have US citizenship, we also have 3 other citizenships - all in first-world countries (including the EU) that give access to Universal Healthcare - this means that our rough 'budget' for healthcare is like under $1,000 a year. This is a huge benefit and pure luck basically.
Just read your blog post , can you elaborate more on how you got to $700 passive income per month after only 72k net worth ? We are in Australia too and gearing up to travel full time hopefully in 2020.
I'm 42 and my DH is 50 so I'd want to leave tomorrow so any ideas on how to speed things up would be appreciated :)

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #85 on: July 21, 2017, 07:28:00 AM »
Just read your blog post , can you elaborate more on how you got to $700 passive income per month after only 72k net worth ? We are in Australia too and gearing up to travel full time hopefully in 2020.
I'm 42 and my DH is 50 so I'd want to leave tomorrow so any ideas on how to speed things up would be appreciated :)

Sure - though I think you meant to write $500 passive income rather than $700 - although that's beside the issue.

If you're not interested in property, or don't yet have enough of a deposit together to secure a loan, you can look into other high-yielding investments like P2P lending, dividend focused ETFs (YMAX, HVST etc.) or even just build as much as you can up in a high-interest savings account which in Australia can still yield around 3% which isn't terrible given the fact that they're (essentially) zero risk and fully liquid.
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

life_travel

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #86 on: July 21, 2017, 03:04:23 PM »
We had properties that we bought at peak in 2007 that dropped in value by 50-60% AND required monthly top up , expensive repairs , tenant damage , etc . We finally sold them this year , the minute the values rose enough . We also had a business in 2008 that tanked due to GFC so we lost 150k there so yeah all that put us 10 years behind but it's all in the past .
Now we still travel ( some say too much) and plan to aggressively save by 2020.
We bought a house where we lived to do up and resell , but with lots of personal things going on , we decided to rent it out and just bought a smaller unit for ourselves . However with 100k tied up in equity it's still cash flow negative .
For our travels we plan just to save in 3% account and use that money up while super grows , ect
Was curios where you bought your property and other details to get such a good return .
You can PM me if you like .

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #87 on: July 21, 2017, 11:39:37 PM »
Was curios where you bought your property and other details to get such a good return .
You can PM me if you like .

We walked blindly into a niche without realising it - we had our properties on AirBnB early on while we were travelling, and when we wanted to stop with AirBnB (after the 2nd kid came through) we leased them out long term, but because they were already full-furnished from being on AirBnB we had all these people moving from interstate and overseas applying - and they're willing to pay a premium to walk into a place that is ready to go with everything from beds and linen to cutlery and pots and pans.

The other part of the niche is pets - we're animal lovers and my wife is a dog trainer, so we would never disqualify a potential tenant just for having pets - so we actively advertise that we welcome pets. This is another thing that a lot of people are willing to pay a premium for.

Most of our tenants so far have been either interstate/international or with pets - or both.

By the way, these are all 2 bedroom apartments with a car space in St Kilda, Melbourne.

You're right, considering we only put 20% down on each, the cash-on-cash returns are great.
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

CDP45

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #88 on: July 21, 2017, 11:50:33 PM »
I'm pretty sure most of us are going to feel like idiots for having any stache at all, so it's all going to feel like overkill. Why?

Universal Basic Income is coming sooner than we think.

Very Wrong

I think it depends where we're talking about - the U.S. is probably a long way off politically/socially.

Parts of Europe, Australia, NZ, Canada etc. - could be within a couple decades and they all basically have some form of it now with vast swathes of the population already receiving and entitled to various family/welfare payments.

See Greece. Plus various pension implosions globally. And I bet it could only be financed through ASSET taxation.

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #89 on: July 22, 2017, 12:52:03 AM »
How about the Nordic countries, Germany etc.?
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

life_travel

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #90 on: July 22, 2017, 01:39:36 AM »
Was curios where you bought your property and other details to get such a good return .
You can PM me if you like .

We walked blindly into a niche without realising it - we had our properties on AirBnB early on while we were travelling, and when we wanted to stop with AirBnB (after the 2nd kid came through) we leased them out long term, but because they were already full-furnished from being on AirBnB we had all these people moving from interstate and overseas applying - and they're willing to pay a premium to walk into a place that is ready to go with everything from beds and linen to cutlery and pots and pans.

The other part of the niche is pets - we're animal lovers and my wife is a dog trainer, so we would never disqualify a potential tenant just for having pets - so we actively advertise that we welcome pets. This is another thing that a lot of people are willing to pay a premium for.

Most of our tenants so far have been either interstate/international or with pets - or both.

By the way, these are all 2 bedroom apartments with a car space in St Kilda, Melbourne.

You're right, considering we only put 20% down on each, the cash-on-cash returns are great.
You are lucky ( to stumble to profitable niche),  I realise you still saved money so I'm not saying it's all luck and not hard work :) thanks for clarifying . I talked to my husband and said if we want to be done by 2020 ( our plan) or latest 2021 we now have to be strategic of what we do.
How many properties do you own ? Do you also have shares or is it all rental income ?

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #91 on: July 22, 2017, 08:09:14 AM »
How many properties do you own ? Do you also have shares or is it all rental income ?

We've made use of high-yielding ETFs before several times, but right now it's mostly the 3 apartments and P2P lending, with a sprinkling of freelance, side-hustle etc income in there.
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

gerardc

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #92 on: July 22, 2017, 01:22:20 PM »
I don't get the obsession with high dividends / yields / cash flow, since you can get similar or better total returns with growth stocks in the long term. Is it because you like the convenience of having regular cash deposits in your account? Or don't like selling stocks regularly? Diversification? Or you like paying more taxes? I don't get it.

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #93 on: July 22, 2017, 07:14:15 PM »
Was curios where you bought your property and other details to get such a good return .
You can PM me if you like .

We walked blindly into a niche without realising it - we had our properties on AirBnB early on while we were travelling, and when we wanted to stop with AirBnB (after the 2nd kid came through) we leased them out long term, but because they were already full-furnished from being on AirBnB we had all these people moving from interstate and overseas applying - and they're willing to pay a premium to walk into a place that is ready to go with everything from beds and linen to cutlery and pots and pans.

The other part of the niche is pets - we're animal lovers and my wife is a dog trainer, so we would never disqualify a potential tenant just for having pets - so we actively advertise that we welcome pets. This is another thing that a lot of people are willing to pay a premium for.

Most of our tenants so far have been either interstate/international or with pets - or both.

By the way, these are all 2 bedroom apartments with a car space in St Kilda, Melbourne.

You're right, considering we only put 20% down on each, the cash-on-cash returns are great.

No offence but something sounds off here to me. The yield on property in Australia is ridiculously low. I think it would be 2%-3% at best. The return comes from capital gains.

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #94 on: July 22, 2017, 11:26:07 PM »
No offence but something sounds off here to me. The yield on property in Australia is ridiculously low. I think it would be 2%-3% at best. The return comes from capital gains.

If you invest for capital growth, then yes, the gains might come from capital gains.

We don't do that however, we invest for income. All 3 of our properties were purchased for between $400-500,000 - with 20% deposits. They are currently renting for: $550, $550 and $675 per week.

Like I said apparently we walked blindly and luckily into a niche of people prepared to pay a significant premium for fully-furnished places that allow pets. We've had returns around this level for 4 years now.

Happy to answer any further questions you have steveo.

Edit: sorry the most expensive of the 3 was actually $475,000, not $500,000.
« Last Edit: July 22, 2017, 11:28:20 PM by onewayfamily »
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #95 on: July 22, 2017, 11:55:07 PM »
It's still not making sense to me. A realistic yield would be something like 2% once you take into account additional costs of maintaining a unit. There would be strata fees and upkeep.

Then with 20% down you are paying 5% on your loan on the remaining 80%. It might be possible if you bought years ago and the property increased in value significantly.

With your proposed yield your properties would have to be worth close to $5 million. Assuming that you are being honest you'd be better off selling your properties, paying off your loans and investing the remaining money into index funds.

Anyway - I'm pretty confident that you aren't retired and doing a 5% or higher WR that is in any way shape or form sustainable. You just aren't working at the moment.

Itchyfeet

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #96 on: July 23, 2017, 04:34:52 AM »
It's still not making sense to me. A realistic yield would be something like 2% once you take into account additional costs of maintaining a unit. There would be strata fees and upkeep.

Then with 20% down you are paying 5% on your loan on the remaining 80%. It might be possible if you bought years ago and the property increased in value significantly.
We
With your proposed yield your properties would have to be worth close to $5 million. Assuming that you are being honest you'd be better off selling your properties, paying off your loans and investing the remaining money into index funds.

Anyway - I'm pretty confident that you aren't retired and doing a 5% or higher WR that is in any way shape or form sustainable. You just aren't working at the moment.

Steveo, not all rental markets in Oz are the same. We bought a 4 bed house in Brissy with a gross rental yield of 5.4% and net yield of more than 3.5%, even setting aside a little for long term, major
Repairs. We have had the place for about 4 years.

steveo

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #97 on: July 23, 2017, 07:51:18 AM »
It's still not making sense to me. A realistic yield would be something like 2% once you take into account additional costs of maintaining a unit. There would be strata fees and upkeep.

Then with 20% down you are paying 5% on your loan on the remaining 80%. It might be possible if you bought years ago and the property increased in value significantly.
We
With your proposed yield your properties would have to be worth close to $5 million. Assuming that you are being honest you'd be better off selling your properties, paying off your loans and investing the remaining money into index funds.

Anyway - I'm pretty confident that you aren't retired and doing a 5% or higher WR that is in any way shape or form sustainable. You just aren't working at the moment.

Steveo, not all rental markets in Oz are the same. We bought a 4 bed house in Brissy with a gross rental yield of 5.4% and net yield of more than 3.5%, even setting aside a little for long term, major
Repairs. We have had the place for about 4 years.

Maybe but you'd be extremely hard pressed to get a net yield that is anywhere near the mortgage rate anywhere in Australia. If you are borrowing 80% I don't see how you can get that to work out when it comes to somehow funding your retirement off the rental yield. You'd be extremely lucky not to be out of pocket. Rent - mortgage payment - repairs - holding costs would tend to be negative.

Something smells real funny in that story. Add to that selling a blog and you get the picture.
« Last Edit: July 23, 2017, 07:55:54 AM by steveo »

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #98 on: July 23, 2017, 10:14:11 AM »
Something smells real funny in that story. Add to that selling a blog and you get the picture.

All the apartments were purchased after the recent wave or price rises (unfortunately).

You can see by the purchase prices and rental returns that I posted above what the returns are - they're yeilding far higher than 2%...

Cheers and best of luck mate!
« Last Edit: July 23, 2017, 12:27:51 PM by onewayfamily »
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com

onewayfamily

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Re: Anyone actually doing a 5% WR or higher ?
« Reply #99 on: July 23, 2017, 10:39:44 AM »
Then with 20% down you are paying 5% on your loan on the remaining 80%. It might be possible if you bought years ago and the property increased in value significantly.

Also sorry forgot to add - the loans are currently at 3.66%, 3.67% and 3.84% - so averaging around 25% cheaper than the rate you mention there.
We FIRE'd at age 28 (me) and 29 (Mrs. OneWayFamily) and are now trying to travel to every country on Earth - it takes longer with 2 toddlers!

If you'd like to keep track of where we're at - check out our photos @ Instagram or our lame attempt at a blog at onewayfamily.com