Author Topic: Withdraw more money (or accumulate less) in retirement by being flexible  (Read 1964 times)

bo_knows

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The "withdrawal methods" of cFIREsim, after it's last update, are finally in a state that I am happy with, and I wanted to do an in-depth piece on why someone would want to choose a "variable" spending method rather than the standard 4% rule.

This blog post is hopefully the first of many discussing more in-depth uses for retirement simulators.

Included in this discussion are:
- Goals of a withdrawal strategy (capital preservation vs. capital drawdown)
- The "Retire Again and Again" method
- The "Guyton-Klinger" method
- The "Hebeler's Autopilot" method

I know that a lot of people on these boards strictly think of the 4% rule as the end-all be-all, and I wanted to open up the discussion for this.  Hopefully these strategies can not only lead to withdrawing more money, but in the case of many mustachians, it can lead to having to accumulate less of a stash before pulling the plug on work.

Enjoy.

http://cfiresim.com/blog/2013/09/25/withdraw-more-money-in-retirement-by-being-flexible/
« Last Edit: September 25, 2013, 01:48:13 PM by bo_knows »

DoubleDown

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Re: Withdraw more money (of accumulate less) in retirement by being flexible
« Reply #1 on: September 25, 2013, 12:51:36 PM »
Nice post Bo, gave me lots of great food for thought. I think my goals will fall somewhere between "Retire Again and Again" and "Hebeler's Autopilot." That is, I'll aim for being a little more conservative in the early years of retirement, offsetting expenses with part time work and such. Then in later years, I'll have a little more reckless abandon spending down principal if I can safely predict I'll have only a few years left. I don't want to end up with only $21.70 in my last year though, like in the test scenario -- I would like to leave something to my heirs, not to mention not cutting it quite so close ;-)

I'll look forward to trying out some of these different strategies using my own figures in this latest release of cfiresim.

bo_knows

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Re: Withdraw more money (of accumulate less) in retirement by being flexible
« Reply #2 on: September 25, 2013, 12:57:51 PM »
I don't want to end up with only $21.70 in my last year though, like in the test scenario -- I would like to leave something to my heirs, not to mention not cutting it quite so close ;-)


Yeah. Reality is, no one will be even able to effectively cut it that close.  What I really need is to implement a "floor" value to the portfolio, so that you can always be sure to have $X in there for heirs.

I'm a big fan of the autopilot method, because it actually takes longevity into consideration.  If you look at it during some of the boom periods of the stock market, you'll see insane spending levels up to $180k/yr for portfolios that started at a mere $1M.  Those portfolio's still survived.

footenote

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Re: Withdraw more money (of accumulate less) in retirement by being flexible
« Reply #3 on: September 25, 2013, 01:26:46 PM »
Bo - Thanks again for outstanding tools and thoughtful exploration of alternatives. I'm with DoubleDown - I'll continue to work part time (or FT only part of the year) in the early years, falling somewhere in the Retire Again & Again and Hebeler's Autopilot zone.

(Although, unlike DoubleDown, I'm ok partying in older age and stiffing my heirs. ; )