Author Topic: What is an ultra-conservative SWR?  (Read 18487 times)

FastStache

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Re: What is an ultra-conservative SWR?
« Reply #50 on: March 04, 2015, 09:11:47 AM »
Are you serious with the 50% success rate. That sounds way too optimistic.

I was very careful with my choice of words.  By definition, anything more than a 50 percent success rate means you are more likely to have oversaved than undersaved.

I get what you are trying to say, again that would also assume a perfect model and that is hard to accomplish. A success will vary person to person so that is accounted for in your choice of words.

TreeTired

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Re: What is an ultra-conservative SWR?
« Reply #51 on: March 04, 2015, 09:35:32 AM »
I often,  just for yucks,   figure how long my money will last with 0 return.  That would be the ultimate "ultra-conservative" rate, to use as a benchmark.  Of course the problem here is I am also assuming zero inflation,  but the point is to see how long the money lasts.   I like to keep it simple. 

  So if I have $1million and I withdraw $100k per year I run out of money in 10 years. (10% per year)   But if I have $2mm and withdraw $50k per year that will last me 40 years,  which for me at age 61 is almost long enough.    :)     So in the second case,   $50k/2mm  =  2.5%

DoubleDown

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Re: What is an ultra-conservative SWR?
« Reply #52 on: March 04, 2015, 10:07:37 AM »
Tried to come up with the most conservative portfolio. Assume:
Retire at 40
Live to 110

But what if you live to one hundred and eleven?


arebelspy

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Re: What is an ultra-conservative SWR?
« Reply #53 on: March 04, 2015, 10:31:13 AM »
I often,  just for yucks,   figure how long my money will last with 0 return.  That would be the ultimate "ultra-conservative" rate, to use as a benchmark.  Of course the problem here is I am also assuming zero inflation,  but the point is to see how long the money lasts.   I like to keep it simple. 

  So if I have $1million and I withdraw $100k per year I run out of money in 10 years. (10% per year)   But if I have $2mm and withdraw $50k per year that will last me 40 years,  which for me at age 61 is almost long enough.    :)     So in the second case,   $50k/2mm  =  2.5%

This situation is assuming your investment real return is 0, i.e. you have a positive nominal return equal to inflation (say 3-4% or whatever).  A real worst case would be a negative real return (i.e. your investments don't keep up with inflation).  And there's a crash right after you FIRE.  Also someone punches you in the gut when you're at the supermarket.
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Scandium

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Re: What is an ultra-conservative SWR?
« Reply #54 on: March 04, 2015, 12:46:49 PM »
I often,  just for yucks,   figure how long my money will last with 0 return.  That would be the ultimate "ultra-conservative" rate, to use as a benchmark.  Of course the problem here is I am also assuming zero inflation,  but the point is to see how long the money lasts.   I like to keep it simple. 

  So if I have $1million and I withdraw $100k per year I run out of money in 10 years. (10% per year)   But if I have $2mm and withdraw $50k per year that will last me 40 years,  which for me at age 61 is almost long enough.    :)     So in the second case,   $50k/2mm  =  2.5%

So a 100% TIPS portfolio you be the ticket for you then?

steveo

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Re: What is an ultra-conservative SWR?
« Reply #55 on: March 04, 2015, 12:54:06 PM »
But I'd probably try to stay around 4%. And let social security and potentially inheritance be the safety net.

I worry I'll only get one shot at retirement.  As an engineer, after a few years out of the workforce there's no way I'd get a job again (especially not at 40-50), unless it's flipping burgers. When rapidly changing technical knowledge is your only marketable skills you have to be careful.

I agree with your premise of getting to around 4%. I also went through cFiresim and did some figures and I think I will be ready to retire earlier than what I initially thought. I don't buy your issue with getting another job. I figure that you can probably be more frugal and you could just get any old job. An income of $10k for instance assuming that you have already saved enough to be at a 5% WR (or close to it) is probably a lot of money at that point in time. You don't have to go back to a high paying job.

steveo

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Re: What is an ultra-conservative SWR?
« Reply #56 on: March 04, 2015, 12:58:02 PM »
Are you serious with the 50% success rate. That sounds way too optimistic.

I was very careful with my choice of words.  By definition, anything more than a 50 percent success rate means you are more likely to have oversaved than undersaved.

Okay. I'm not sure that I agree with this simply for peace of mind concerns. If I only had a 50% success rate I could see myself getting stressed about the situation. I do agree though with your basic premise in that there is no need to try and save way too much in order to be completely confident that your stash will last. This thread has made me reassess my premises with regards to how much stash I need.

steveo

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Re: What is an ultra-conservative SWR?
« Reply #57 on: March 04, 2015, 01:03:01 PM »
The idea of frugal from some people here sounds like that to me. Never turning the heat on, no car or travel anywhere, Starbucks wifi only and finding food in dumpsters. This is "cutting back"... Good for them, but not for me.

I wouldn't live like you state however there is a line. For instance I'd be happy to live more frugally and cut back a little by selling my cars or not driving them, eating cheaper food, not travelling and minimizing my use of electricity.

deborah

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Re: What is an ultra-conservative SWR?
« Reply #58 on: March 04, 2015, 08:38:44 PM »
The idea of frugal from some people here sounds like that to me. Never turning the heat on, no car or travel anywhere, Starbucks wifi only and finding food in dumpsters. This is "cutting back"... Good for them, but not for me.

I wouldn't live like you state however there is a line. For instance I'd be happy to live more frugally and cut back a little by selling my cars or not driving them, eating cheaper food, not travelling and minimizing my use of electricity.
I'm soon going on a rather expensive trip - something I dreamed of doing this year for probably at least the last 15 years. However, last year I traveled for two months, and spent less than I normally do while I am at home. The way I figure it, I should be able to adjust my travel to be more frugal depending upon how my investments are doing. I have the rest of my life.

DavidAnnArbor

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Re: What is an ultra-conservative SWR?
« Reply #59 on: March 05, 2015, 07:40:18 AM »
0.7% - the Japanese SWR - this is the worst country SWR that has been calculated. On the assumption that any country can change.

This is the one thing I worry about - what if we have a Japanese type occurrence?  Savings will be basically worthless.

To help mitigate this risk it makes sense to diversify geographically, portion of index funds in US total stock market, but another portion in international index funds.

theoverlook

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Re: What is an ultra-conservative SWR?
« Reply #60 on: March 05, 2015, 07:52:49 AM »
Also someone punches you in the gut when you're at the supermarket.

Shit just got real.