Year 2000 retirees using the '4% rule' - Where are they now?

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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by aj76er »

Oatmeal wrote: Wed Feb 19, 2020 7:50 pm It would require tracking spending closely.
Tracking and understanding one’s spending is key to a successful retirement.

Automated tools such as Mint and YNAB make it pretty easy to do these days.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Sandtrap »

siamond wrote: Sun Feb 16, 2020 10:10 am
willthrill81 wrote: Sun Feb 16, 2020 10:05 amYou allude to one of my biggest problems with physical RE: it's expensive and time-consuming to get geographic diversification.
Having seen two generations in my -large!- family (+ various acquaintances) getting very involved in physical RE, I think you can actually simplify your statement: it's expensive and time-consuming (period).
Good points.
Also have a large and extended family, and friends, who were/are heavily involved in physical R/E income property of all types.
Yes. It is a "business" and viewed otherwise underestimates the effort that businesses require to be successful.

Physical R/E Income Property can generate tremendous wealth over time. The process is very slow if conservatively done. I've seen many who try to rush the process and most fail or suffer huge setbacks. OTOH: There are many that survive well in sustained economic downturns and still profit immensely in the long run.

j :happy
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EnjoyIt
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by EnjoyIt »

Sandtrap wrote: Fri Feb 28, 2020 7:14 am
siamond wrote: Sun Feb 16, 2020 10:10 am
willthrill81 wrote: Sun Feb 16, 2020 10:05 amYou allude to one of my biggest problems with physical RE: it's expensive and time-consuming to get geographic diversification.
Having seen two generations in my -large!- family (+ various acquaintances) getting very involved in physical RE, I think you can actually simplify your statement: it's expensive and time-consuming (period).
Good points.
Also have a large and extended family, and friends, who were/are heavily involved in physical R/E income property of all types.
Yes. It is a "business" and viewed otherwise underestimates the effort that businesses require to be successful.

Physical R/E Income Property can generate tremendous wealth over time. The process is very slow if conservatively done. I've seen many who try to rush the process and most fail or suffer huge setbacks. OTOH: There are many that survive well in sustained economic downturns and still profit immensely in the long run.

j :happy
I would assume those who fail over leverage and are unable to survive during a downturn. Am I right? What do you think?
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

EnjoyIt wrote: Fri Feb 28, 2020 10:24 am
Sandtrap wrote: Fri Feb 28, 2020 7:14 am
siamond wrote: Sun Feb 16, 2020 10:10 am
willthrill81 wrote: Sun Feb 16, 2020 10:05 amYou allude to one of my biggest problems with physical RE: it's expensive and time-consuming to get geographic diversification.
Having seen two generations in my -large!- family (+ various acquaintances) getting very involved in physical RE, I think you can actually simplify your statement: it's expensive and time-consuming (period).
Good points.
Also have a large and extended family, and friends, who were/are heavily involved in physical R/E income property of all types.
Yes. It is a "business" and viewed otherwise underestimates the effort that businesses require to be successful.

Physical R/E Income Property can generate tremendous wealth over time. The process is very slow if conservatively done. I've seen many who try to rush the process and most fail or suffer huge setbacks. OTOH: There are many that survive well in sustained economic downturns and still profit immensely in the long run.

j :happy
I would assume those who fail over leverage and are unable to survive during a downturn. Am I right? What do you think?
That's probably the most common reason. Another is buying RE with the expectation of property appreciation that doesn't materialize. And another is buying (or continuing to own) RE with very poor cash flow.

Back on the topic of the thread, our hypothetical year 2000 retirees are still in very good shape, despite the current stock correction.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Sandtrap »

EnjoyIt wrote: Fri Feb 28, 2020 10:24 am
Sandtrap wrote: Fri Feb 28, 2020 7:14 am
siamond wrote: Sun Feb 16, 2020 10:10 am
willthrill81 wrote: Sun Feb 16, 2020 10:05 amYou allude to one of my biggest problems with physical RE: it's expensive and time-consuming to get geographic diversification.
Having seen two generations in my -large!- family (+ various acquaintances) getting very involved in physical RE, I think you can actually simplify your statement: it's expensive and time-consuming (period).
Good points.
Also have a large and extended family, and friends, who were/are heavily involved in physical R/E income property of all types.
Yes. It is a "business" and viewed otherwise underestimates the effort that businesses require to be successful.

Physical R/E Income Property can generate tremendous wealth over time. The process is very slow if conservatively done. I've seen many who try to rush the process and most fail or suffer huge setbacks. OTOH: There are many that survive well in sustained economic downturns and still profit immensely in the long run.

j :happy
I would assume those who fail over leverage and are unable to survive during a downturn. Am I right? What do you think?
R/E Income Property Investing primary reasons for failing.
(also in business)

Poor buying and timing in buying skills.
Underestimate that R/E is a "business".
Wrong impression that R/E is an easy path to wealth with little risk and zero work.
Poor or no understanding of financial investment strategy in R/E.
Trying to do too much with too little and no backup nor exit plan.
Overconfident, ignorant, in de'Nile, cowardly, reactive, or other behavioral weaknesses.
Poor people skills.
Bad with numbers.
Unwilling to learn. Seek help from business mentors, etc.
Half - hearted efforts.
Comfort zone a must: must have vacations, day's off, leave, sick days, a pension, security, etc.


j :happy
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by EnjoyIt »

willthrill81 wrote: Fri Feb 28, 2020 10:42 am
EnjoyIt wrote: Fri Feb 28, 2020 10:24 am
Sandtrap wrote: Fri Feb 28, 2020 7:14 am
siamond wrote: Sun Feb 16, 2020 10:10 am
willthrill81 wrote: Sun Feb 16, 2020 10:05 amYou allude to one of my biggest problems with physical RE: it's expensive and time-consuming to get geographic diversification.
Having seen two generations in my -large!- family (+ various acquaintances) getting very involved in physical RE, I think you can actually simplify your statement: it's expensive and time-consuming (period).
Good points.
Also have a large and extended family, and friends, who were/are heavily involved in physical R/E income property of all types.
Yes. It is a "business" and viewed otherwise underestimates the effort that businesses require to be successful.

Physical R/E Income Property can generate tremendous wealth over time. The process is very slow if conservatively done. I've seen many who try to rush the process and most fail or suffer huge setbacks. OTOH: There are many that survive well in sustained economic downturns and still profit immensely in the long run.

j :happy
I would assume those who fail over leverage and are unable to survive during a downturn. Am I right? What do you think?
That's probably the most common reason. Another is buying RE with the expectation of property appreciation that doesn't materialize. And another is buying (or continuing to own) RE with very poor cash flow.

Back on the topic of the thread, our hypothetical year 2000 retirees are still in very good shape, despite the current stock correction.
I’m interested to see how this will play out for those retirees this year.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by TravelforFun »

EnjoyIt wrote: Fri Feb 28, 2020 11:42 am
willthrill81 wrote: Fri Feb 28, 2020 10:42 am
EnjoyIt wrote: Fri Feb 28, 2020 10:24 am
Sandtrap wrote: Fri Feb 28, 2020 7:14 am
siamond wrote: Sun Feb 16, 2020 10:10 am
Having seen two generations in my -large!- family (+ various acquaintances) getting very involved in physical RE, I think you can actually simplify your statement: it's expensive and time-consuming (period).
Good points.
Also have a large and extended family, and friends, who were/are heavily involved in physical R/E income property of all types.
Yes. It is a "business" and viewed otherwise underestimates the effort that businesses require to be successful.

Physical R/E Income Property can generate tremendous wealth over time. The process is very slow if conservatively done. I've seen many who try to rush the process and most fail or suffer huge setbacks. OTOH: There are many that survive well in sustained economic downturns and still profit immensely in the long run.

j :happy
I would assume those who fail over leverage and are unable to survive during a downturn. Am I right? What do you think?
That's probably the most common reason. Another is buying RE with the expectation of property appreciation that doesn't materialize. And another is buying (or continuing to own) RE with very poor cash flow.

Back on the topic of the thread, our hypothetical year 2000 retirees are still in very good shape, despite the current stock correction.
I’m interested to see how this will play out for those retirees this year.
I retired 6 months ago and am completely ok with this correction because I have 10 years of living expenses in bonds and cash. I don't need to sell any equities to survive.

TravelforFun
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Stef »

So any update?

Will the 4% rule fail this time?
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by tvubpwcisla »

Stef wrote: Tue Mar 17, 2020 7:12 am So any update?

Will the 4% rule fail this time?
The 4% rule works awesome if your monthly outflow of expenses is low. The main reason folks get into trouble with the 4% rule is due to having an expensive home and an expensive car to pay for. Before you retire, pay off your house, all debt, get into a very reliable, safe, vehicle with good gas mileage, and reduce your expenses to a minimum. This will ensure you can not only survive the 4% rule, but also that you may not even need to withdraw any funds during a financial downturn years. The 4% rule works great under these conditions.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by MathIsMyWayr »

tvubpwcisla wrote: Tue Mar 17, 2020 7:21 am
Stef wrote: Tue Mar 17, 2020 7:12 am So any update?

Will the 4% rule fail this time?
The 4% rule works awesome if your monthly outflow of expenses is low. The main reason folks get into trouble with the 4% rule is due to having an expensive home and an expensive car to pay for. Before you retire, pay off your house, all debt, get into a very reliable, safe, vehicle with good gas mileage, and reduce your expenses to a minimum. This will ensure you can not only survive the 4% rule, but also that you may not even need to withdraw any funds during a financial downturn years. The 4% rule works great under these conditions.
The 4% rule works as long as you do not always stick to the 4% rule. Any color as long as it is black. An interesting logic.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

Stef wrote: Tue Mar 17, 2020 7:12 am So any update?

Will the 4% rule fail this time?
I was just thinking that an update is probably in order for this thread after the onset of the current bear market.

Using the 60/40 portfolio described in the OP, the theoretical year 2000 retirees would, as of today, have a nominal balance of $779,566. In year 2000 dollars, this is $508,705.

This means that these retirees would still have more than 12 years of additional withdrawals, assuming 0% real returns going forward, after having experienced three bear markets in stocks in just over 20 years of their 30 year retirement.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by btenny »

See below for what I posted in 2016. It is still accurate. I spend about 3% to 4% per year and have more than when I retired. I went to a 50/50 AA when I retired and am at 38/62 now after 21 years. And yes I have lost a lot in the recent crash. In my case the oil prices and bond prices are hitting me as well as the COVID 19 mess. So I am down 20% or so. I have not looked at exact numbers as I do not plan to rebalance or buy/sell anything just yet. My once a year rebalance plan is the 3rd-4th quarter. So I am staying the course except for a little bargain shopping of XOM at $40.

Good Luck.

Thu May 26, 2016 2:00 pm

Well I retired in December of 1998. I had just about enough $$ then and now I have more. I have spent 3-4% of my money every year since I retired. I did some maneuvers to get financially better situated like downsizing and diversifying more. I sold some investment real estate. But net I have earned over 5.5% returns for the entire time since I retired. I did suffer losses in 2001-2 and again in 2009. Each time I stayed the course and even rebalanced near the bottom. So I recouped my losses and made more money as the market recovered.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by CnC »

willthrill81 wrote: Tue Mar 24, 2020 5:05 pm
Stef wrote: Tue Mar 17, 2020 7:12 am So any update?

Will the 4% rule fail this time?
I was just thinking that an update is probably in order for this thread after the onset of the current bear market.

Using the 60/40 portfolio described in the OP, the theoretical year 2000 retirees would, as of today, have a nominal balance of $779,566. In year 2000 dollars, this is $508,705.

This means that these retirees would still have more than 12 years of additional withdrawals, assuming 0% real returns going forward, after having experienced three bear markets in stocks in just over 20 years of their 30 year retirement.

Really? That's fascinating. Mind running through the numbers?


I would like to see the math if you have time.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

CnC wrote: Tue Mar 24, 2020 9:39 pm
willthrill81 wrote: Tue Mar 24, 2020 5:05 pm
Stef wrote: Tue Mar 17, 2020 7:12 am So any update?

Will the 4% rule fail this time?
I was just thinking that an update is probably in order for this thread after the onset of the current bear market.

Using the 60/40 portfolio described in the OP, the theoretical year 2000 retirees would, as of today, have a nominal balance of $779,566. In year 2000 dollars, this is $508,705.

This means that these retirees would still have more than 12 years of additional withdrawals, assuming 0% real returns going forward, after having experienced three bear markets in stocks in just over 20 years of their 30 year retirement.

Really? That's fascinating. Mind running through the numbers?


I would like to see the math if you have time.
I had to do a little math via Excel to get it. I used Portfolio Visualizer (this link) to get to the end of February. I then used Morningstar to get the returns via the equivalent ETFs through today. Since the end of February, the two stock funds were down about -32% and 33%, IIRC, and the bond fund was up about .35%.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Godot »

willthrill81 wrote: Tue Mar 24, 2020 5:05 pm
Stef wrote: Tue Mar 17, 2020 7:12 am So any update?

Will the 4% rule fail this time?
I was just thinking that an update is probably in order for this thread after the onset of the current bear market.

Using the 60/40 portfolio described in the OP, the theoretical year 2000 retirees would, as of today, have a nominal balance of $779,566. In year 2000 dollars, this is $508,705.

This means that these retirees would still have more than 12 years of additional withdrawals, assuming 0% real returns going forward, after having experienced three bear markets in stocks in just over 20 years of their 30 year retirement.
Not bad at all.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by carminered2019 »

thanks Will, here I am at 50 keep worrying about running out of money at 1.5% withdraw rate at 100% equities.

Will, you posted some where your parents are retired and 100% equities correct ?
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

vipertom1970 wrote: Tue Mar 24, 2020 10:45 pm thanks Will, here I am at 50 keep worrying about running out of money at 1.5% withdraw rate at 100% equities.
Anyone seriously contemplating a withdrawal rate below 3% should, by my estimation, seriously consider buying a SPIA and/or creating a TIPS ladder in order to cover their essential spending and then be more aggressive with the remainder of their portfolio.
vipertom1970 wrote: Tue Mar 24, 2020 10:45 pmWill, you posted some where your parents are retired and 100% equities correct ?
Yes, that's right, but my dad's a timer (and not the trend following kind either), and he's been completely out of stocks since 2/24. He's happy as a clam right now. Their essential spending is completely covered by SS benefits, so their portfolio is only for discretionary spending and potential LTC, so they can afford to be more aggressive than some.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by billlumber1981 »

willthrill81 wrote: Tue Mar 24, 2020 5:05 pm
Stef wrote: Tue Mar 17, 2020 7:12 am So any update?

Will the 4% rule fail this time?
I was just thinking that an update is probably in order for this thread after the onset of the current bear market.

Using the 60/40 portfolio described in the OP, the theoretical year 2000 retirees would, as of today, have a nominal balance of $779,566. In year 2000 dollars, this is $508,705.

This means that these retirees would still have more than 12 years of additional withdrawals, assuming 0% real returns going forward, after having experienced three bear markets in stocks in just over 20 years of their 30 year retirement.

Hi willthrill,

I saw a post on reddit about Year 2000 retirees (will PM you the link), and someone posted that with 100% S&P500 and a 4% withdrawal rate, a year 2000 retiree would have only 17% (170K) of the original portfolio left on an inflation-adjusted basis.

However, when running a portfolio visualizer backtest with 100% VFINX (Vanguard S&P500 Index Fund) and a 4% withdrawal rate annually starting with $1MM, I am coming up with much more than 17% ($170k) of my original portfolio on an inflation adjusted basis.

As of 3/31/20, I would have 73% (~732k out of $1MM) of my original portfolio (inflation-adjusted).

I don't know if my parameters will populate in this link, but you can input them and run it to see the results.

https://www.portfoliovisualizer.com/bac ... sisResults


Am I missing something here?


The other thing I noticed, is that regardless of a lower withdrawal rate, Feb 2009 is still a scary month. I input a 2% SWR and in Feb 2009 I only had ~65k more than I had with a 4% SWR (I had 385k with a 2% SWR vs 320k with a 4% SWR). This works out in the end (present-day) though because by 3/31 I would have 1.1MM vs 771k (so about 330k or 33% more by having a lower withdrawal rate).
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by JoMoney »

billlumber1981 wrote: Wed Apr 01, 2020 7:04 am...
I don't know if my parameters will populate in this link, but you can input them and run it to see the results.

https://www.portfoliovisualizer.com/bac ... sisResults


Am I missing something here? ...
After you submitted your parameters in PV, if you had scrolled down and selected "Link", then it would have translated your entry into a share-able hyperlink that already had your parameters entered.
Image

https://www.portfoliovisualizer.com/bac ... ion1_1=100

FWIW, my results from a 4% inflation adjusted withdrawal on a 100% S&P 500 index fund since 2000 only leaves about 25% of the original balance remaining.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by billlumber1981 »

JoMoney wrote: Wed Apr 01, 2020 7:26 am
billlumber1981 wrote: Wed Apr 01, 2020 7:04 am...
I don't know if my parameters will populate in this link, but you can input them and run it to see the results.

https://www.portfoliovisualizer.com/bac ... sisResults


Am I missing something here? ...
After you submitted your parameters in PV, if you had scrolled down and selected "Link", then it would have translated your entry into a share-able hyperlink that already had your parameters entered.
Image

https://www.portfoliovisualizer.com/bac ... ion1_1=100

FWIW, my results from a 4% inflation adjusted withdrawal on a 100% S&P 500 index fund since 2000 only leaves about 25% of the original balance remaining.

Ok, here is my link with parameters. I see what may have been the issue. If I choose withdraw fixed percentage, I don't think it adjusts it for inflation. So it would just pull 4% each year without increasing the amount for inflation. However, if I use withdraw fixed amount and set it to 40,000 out of $1M portfolio and tell it to adjust each withdrawal for inflation, then I do come up with the similar numbers that you have:

https://www.portfoliovisualizer.com/bac ... ion1_1=100
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by JoMoney »

billlumber1981 wrote: Wed Apr 01, 2020 7:41 am ..
Ok, here is my link with parameters. I see what may have been the issue. If I choose withdraw fixed percentage, I don't think it adjusts it for inflation. So it would just pull 4% each year without increasing the amount for inflation. However, if I use withdraw fixed amount and set it to 40,000 out of $1M portfolio and tell it to adjust each withdrawal for inflation, then I do come up with the similar numbers that you have:

https://www.portfoliovisualizer.com/bac ... ion1_1=100
The 4% "Safe Withdrawal Rate" studies (that some people have called a "4% rule") are not based on a percentage of the balance each year.
The methodology calls for taking 4% of the balance at the first year, and each year after the $ amount is increased by inflation.
Simply taking 4% of whatever the balance was each year would last forever, but the income could be extremely variable and even then could have a portfolio diminished to a point that 4% of whatever remained was nowhere near meeting their needs.

In your results, if you click on the "Annual Returns" tab, you'll see the "Portfolio Adjustment" column that represents the withdrawal each year.
At the end of first year 2000 they would have taken $36,378
At the end of 2008 they would have taken $20,570 ... that would mean the retiree had to cut there income almost in half, and that's not even counting inflation.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by AerialWombat »

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This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by HomerJ »

willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
This is what people don't understand...

4% is working even after retiring at the highest valuations in U.S. history, AND experiencing THREE, THREE, count them, THREE bear markets in the first 20 years.

And still 4% worked.

Yet people don't think 4% is conservative.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

HomerJ wrote: Mon Apr 06, 2020 10:17 pm
willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
This is what people don't understand...

4% is working even after retiring at the highest valuations in U.S. history, AND experiencing THREE, THREE, count them, THREE bear markets in the first 20 years.

And still 4% worked.

Yet people don't think 4% is conservative.
I can see how some might want to start somewhat lower than 4%, even for a 30 year retirement, but this business of starting withdrawals at age ~65 of under 3% are beyond me unless the individual explicitly wants to have a very high probability of leaving behind a large bequest.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Sheepdog »

This is an update on my reply from January 2018
Sheepdog wrote: Tue Jan 09, 2018 12:16 pm I retired in 1998, but I will look at what I had on January 2000. At retirement I decided not to use the "4% rule", but to take out an annual average of 4.5% and not increase for inflation. The reasons were that I knew that expenses would not be the same annually so my withdrawals were certain to be variable and that I thought that my inflation would probably not follow the CPI (home was paid for and this retiree would not spend the same as the average American).
And, by 2000, I decided to reduce my stock allocation to 100 minus my age until I reached age 77 with 23% stock where it remains. This plus our Social Security would support us.

So, this is my history:

Jan 2000, age 67, $708,000 invested with 55% stock and $61,375 spent in 2000

Average annual withdrawal 2000 thru 2017 4.59%
Total spending $1,103,953, or $61,338 average per year

Jan 2018, age 84, $958,000 remains invested with 23% stock and $73,113 spent in 2017).
UPDATE Apr 6, 2020, age 86, $898,662 remains invested with 26.7% stock.
Average annual withdrawal 2000 thru 2019 4.61%
$62,029 spent in 2018 and $105,432 spent in 2019.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by flyingaway »

Sheepdog wrote: Mon Apr 06, 2020 11:39 pm This is an update on my reply from January 2018
Sheepdog wrote: Tue Jan 09, 2018 12:16 pm I retired in 1998, but I will look at what I had on January 2000. At retirement I decided not to use the "4% rule", but to take out an annual average of 4.5% and not increase for inflation. The reasons were that I knew that expenses would not be the same annually so my withdrawals were certain to be variable and that I thought that my inflation would probably not follow the CPI (home was paid for and this retiree would not spend the same as the average American).
And, by 2000, I decided to reduce my stock allocation to 100 minus my age until I reached age 77 with 23% stock where it remains. This plus our Social Security would support us.

So, this is my history:

Jan 2000, age 67, $708,000 invested with 55% stock and $61,375 spent in 2000

Average annual withdrawal 2000 thru 2017 4.59%
Total spending $1,103,953, or $61,338 average per year

Jan 2018, age 84, $958,000 remains invested with 23% stock and $73,113 spent in 2017).
UPDATE Apr 6, 2020, age 86, $898,662 remains invested with 26.7% stock.
Average annual withdrawal 2000 thru 2019 4.61%
$62,029 spent in 2018 and $105,432 spent in 2019.
Sheepdog:

Thank you for your update. It seems that your stock light portfolio worked well so far.

Is there a reason that you spent much more money in 2019?
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Sheepdog »

flyingaway wrote: Tue Apr 07, 2020 1:21 am $62,029 spent in 2018 and $105,432 spent in 2019.

Sheepdog:

Is there a reason that you spent much more money in 2019?
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by MikeG62 »

HomerJ wrote: Mon Apr 06, 2020 10:17 pm
willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
This is what people don't understand...

4% is working even after retiring at the highest valuations in U.S. history, AND experiencing THREE, THREE, count them, THREE bear markets in the first 20 years.

And still 4% worked.

Yet people don't think 4% is conservative.
This thread and the latest update should be required reading for those who continue to think/suggest that 4% is wildly aggressive. Thanks willthrill81 for initiating this thread and providing these updates. Very informative.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

Sheepdog wrote: Mon Apr 06, 2020 11:39 pm This is an update on my reply from January 2018
Sheepdog wrote: Tue Jan 09, 2018 12:16 pm I retired in 1998, but I will look at what I had on January 2000. At retirement I decided not to use the "4% rule", but to take out an annual average of 4.5% and not increase for inflation. The reasons were that I knew that expenses would not be the same annually so my withdrawals were certain to be variable and that I thought that my inflation would probably not follow the CPI (home was paid for and this retiree would not spend the same as the average American).
And, by 2000, I decided to reduce my stock allocation to 100 minus my age until I reached age 77 with 23% stock where it remains. This plus our Social Security would support us.

So, this is my history:

Jan 2000, age 67, $708,000 invested with 55% stock and $61,375 spent in 2000

Average annual withdrawal 2000 thru 2017 4.59%
Total spending $1,103,953, or $61,338 average per year

Jan 2018, age 84, $958,000 remains invested with 23% stock and $73,113 spent in 2017).
UPDATE Apr 6, 2020, age 86, $898,662 remains invested with 26.7% stock.
Average annual withdrawal 2000 thru 2019 4.61%
$62,029 spent in 2018 and $105,432 spent in 2019.
Thanks for the update.

While I'm normally a big stock advocate, there's been a lot to be said for ~25% stock allocations. I can't help but think that such a low stock allocation might not work so well going forward with bond yields being close to zero though.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by MathIsMyWayr »

Sheepdog wrote: Mon Apr 06, 2020 11:39 pm This is an update on my reply from January 2018
Sheepdog wrote: Tue Jan 09, 2018 12:16 pm I retired in 1998, but I will look at what I had on January 2000. At retirement I decided not to use the "4% rule", but to take out an annual average of 4.5% and not increase for inflation. The reasons were that I knew that expenses would not be the same annually so my withdrawals were certain to be variable and that I thought that my inflation would probably not follow the CPI (home was paid for and this retiree would not spend the same as the average American).
And, by 2000, I decided to reduce my stock allocation to 100 minus my age until I reached age 77 with 23% stock where it remains. This plus our Social Security would support us.

So, this is my history:

Jan 2000, age 67, $708,000 invested with 55% stock and $61,375 spent in 2000

Average annual withdrawal 2000 thru 2017 4.59%
Total spending $1,103,953, or $61,338 average per year

Jan 2018, age 84, $958,000 remains invested with 23% stock and $73,113 spent in 2017).
UPDATE Apr 6, 2020, age 86, $898,662 remains invested with 26.7% stock.
Average annual withdrawal 2000 thru 2019 4.61%
$62,029 spent in 2018 and $105,432 spent in 2019.
A little confusing, but it is reassuring that sheepdog withdrew only the market returns on the average over the last 20 years, roughly speaking.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by EnjoyIt »

willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
I don’t know what it would file like if I was this investor but, I suspect having $958,866 when I started with $1 million would be ok. But, with the understanding of inflation, being down to $623,583, I may not feel so good about the situation and potentially worry that I don’t have enough money. It is so hard to tell without actually living out those previous 20 years.

As an early retiree, with the hopes of a retirement well over 30 years, I am pretty sure I would not be happy with the results.

Also, if I did retire early and the market collapsed under me right as I retired, I may very well try and supplement my portfolio with some kind of employment for a few years. It is so hard to tell without actually living that life and feeling that stress.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

EnjoyIt wrote: Tue Apr 07, 2020 4:01 pm
willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
I don’t know what it would file like if I was this investor but, I suspect having $958,866 when I started with $1 million would be ok. But, with the understanding of inflation, being down to $623,583, I may not feel so good about the situation and potentially worry that I don’t have enough money. It is so hard to tell without actually living out those previous 20 years.

As an early retiree, with the hopes of a retirement well over 30 years, I am pretty sure I would not be happy with the results.

Also, if I did retire early and the market collapsed under me right as I retired, I may very well try and supplement my portfolio with some kind of employment for a few years. It is so hard to tell without actually living that life and feeling that stress.
Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by EnjoyIt »

willthrill81 wrote: Tue Apr 07, 2020 4:09 pm
EnjoyIt wrote: Tue Apr 07, 2020 4:01 pm
willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
I don’t know what it would file like if I was this investor but, I suspect having $958,866 when I started with $1 million would be ok. But, with the understanding of inflation, being down to $623,583, I may not feel so good about the situation and potentially worry that I don’t have enough money. It is so hard to tell without actually living out those previous 20 years.

As an early retiree, with the hopes of a retirement well over 30 years, I am pretty sure I would not be happy with the results.

Also, if I did retire early and the market collapsed under me right as I retired, I may very well try and supplement my portfolio with some kind of employment for a few years. It is so hard to tell without actually living that life and feeling that stress.
Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
You and I have very similar plans on early retirement and also capability to dial down spending. I can tell you that I don’t think I would be very reassured by this data if I retired at 50, now 70 with maybe another 15 or hopefully more years to go. On another note, if I was 70 I would start collecting SS which would help bolster my portfolio significantly.

As an early retiree with well over a decade to potentially collect social security I would not consider SS in my planing/calculations when deciding when to retire on 25x expenses. With that in mind maybe being down to $620k is not that big of a deal.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

EnjoyIt wrote: Tue Apr 07, 2020 4:22 pm
willthrill81 wrote: Tue Apr 07, 2020 4:09 pm
EnjoyIt wrote: Tue Apr 07, 2020 4:01 pm
willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
I don’t know what it would file like if I was this investor but, I suspect having $958,866 when I started with $1 million would be ok. But, with the understanding of inflation, being down to $623,583, I may not feel so good about the situation and potentially worry that I don’t have enough money. It is so hard to tell without actually living out those previous 20 years.

As an early retiree, with the hopes of a retirement well over 30 years, I am pretty sure I would not be happy with the results.

Also, if I did retire early and the market collapsed under me right as I retired, I may very well try and supplement my portfolio with some kind of employment for a few years. It is so hard to tell without actually living that life and feeling that stress.
Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
You and I have very similar plans on early retirement and also capability to dial down spending. I can tell you that I don’t think I would be very reassured by this data if I retired at 50, now 70 with maybe another 15 or hopefully more years to go. On another note, if I was 70 I would start collecting SS which would help bolster my portfolio significantly.

As an early retiree with well over a decade to potentially collect social security I would not consider SS in my planing/calculations when deciding when to retire on 25x expenses. With that in mind maybe being down to $620k is not that big of a deal.
I too plan to wait until 70 to begin collecting SS benefits, and even with the anticipated reduction in benefits, they should cover all of our anticipated essential spending needs, leaving our portfolio for discretionary spending. So we'll need to rely on our portfolio between retirement, hopefully around age 52, and age 70. But if I was planning on longer than a 30 year retirement, I'd be inclined to start withdrawing under 4%. But I'm planning on using the time value of money formula for determining annual withdrawals anyway.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by MP123 »

willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
Thanks for the update.

It's a good thing our retirees made their withdrawal for this year back in December and are now somewhat insulated from the market's moves. At least until this coming December.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by EnjoyIt »

willthrill81 wrote: Tue Apr 07, 2020 4:50 pm
EnjoyIt wrote: Tue Apr 07, 2020 4:22 pm
willthrill81 wrote: Tue Apr 07, 2020 4:09 pm
EnjoyIt wrote: Tue Apr 07, 2020 4:01 pm
willthrill81 wrote: Mon Apr 06, 2020 7:00 pm As of March 31st, our hypothetical year 2000 retirees with 60/40 portfolios had a nominal balance of $958,866, which is $623,583 adjusted for inflation.

So after three bear markets and 20 years of withdrawals, the retirees would still have more than 15 years of inflation-adjusted spending left, assuming a 0% real return.
I don’t know what it would file like if I was this investor but, I suspect having $958,866 when I started with $1 million would be ok. But, with the understanding of inflation, being down to $623,583, I may not feel so good about the situation and potentially worry that I don’t have enough money. It is so hard to tell without actually living out those previous 20 years.

As an early retiree, with the hopes of a retirement well over 30 years, I am pretty sure I would not be happy with the results.

Also, if I did retire early and the market collapsed under me right as I retired, I may very well try and supplement my portfolio with some kind of employment for a few years. It is so hard to tell without actually living that life and feeling that stress.
Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
You and I have very similar plans on early retirement and also capability to dial down spending. I can tell you that I don’t think I would be very reassured by this data if I retired at 50, now 70 with maybe another 15 or hopefully more years to go. On another note, if I was 70 I would start collecting SS which would help bolster my portfolio significantly.

As an early retiree with well over a decade to potentially collect social security I would not consider SS in my planing/calculations when deciding when to retire on 25x expenses. With that in mind maybe being down to $620k is not that big of a deal.
I too plan to wait until 70 to begin collecting SS benefits, and even with the anticipated reduction in benefits, they should cover all of our anticipated essential spending needs, leaving our portfolio for discretionary spending. So we'll need to rely on our portfolio between retirement, hopefully around age 52, and age 70. But if I was planning on longer than a 30 year retirement, I'd be inclined to start withdrawing under 4%. But I'm planning on using the time value of money formula for determining annual withdrawals anyway.
Ohh yeah, right. Have8you run those calculation using TVM and see how your spending would have fluctuated during the last 2 years?

As we discussed before, about 50% of our spending is discretionary which allows for lots of flexibility when needed.

Either way, I think if I retired at 50 using 4% and today, 20 years later I had 38% less than when I started but also got to start collecting SS, I would be very comfortable and happy with todays results.
lets just look at what some consider FAT FIRE. $2.5 million portfolio living on $100k/yr. 20 years later would leave the portfolio down to an inflation adjusted $1.55 million. I figure anyone who can amass $2.5 million will likely get past the second bend point on the SS curve getting $34k per year at 70 with the spouse getting half at a minimum. Together that is another $51k/yr.
This family would need the portfolio to supplement $49k/yr which 1.55 million should be able to do with ease.

More calculations:
a $2 million starting portfolio would need to withdraw 2.3% at age 70
a $2.5 million starting portfolio would need to withdraw 3.1% at age 70
a $3 million starting portfolio would need to withdraw 3.7% at age 70
a $3.5 million starting portfolio would need to withdraw 4.1% at age 70

None of the above look bad to me.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

EnjoyIt wrote: Tue Apr 07, 2020 5:14 pm
willthrill81 wrote: Tue Apr 07, 2020 4:50 pm
EnjoyIt wrote: Tue Apr 07, 2020 4:22 pm
willthrill81 wrote: Tue Apr 07, 2020 4:09 pm
EnjoyIt wrote: Tue Apr 07, 2020 4:01 pm

I don’t know what it would file like if I was this investor but, I suspect having $958,866 when I started with $1 million would be ok. But, with the understanding of inflation, being down to $623,583, I may not feel so good about the situation and potentially worry that I don’t have enough money. It is so hard to tell without actually living out those previous 20 years.

As an early retiree, with the hopes of a retirement well over 30 years, I am pretty sure I would not be happy with the results.

Also, if I did retire early and the market collapsed under me right as I retired, I may very well try and supplement my portfolio with some kind of employment for a few years. It is so hard to tell without actually living that life and feeling that stress.
Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
You and I have very similar plans on early retirement and also capability to dial down spending. I can tell you that I don’t think I would be very reassured by this data if I retired at 50, now 70 with maybe another 15 or hopefully more years to go. On another note, if I was 70 I would start collecting SS which would help bolster my portfolio significantly.

As an early retiree with well over a decade to potentially collect social security I would not consider SS in my planing/calculations when deciding when to retire on 25x expenses. With that in mind maybe being down to $620k is not that big of a deal.
I too plan to wait until 70 to begin collecting SS benefits, and even with the anticipated reduction in benefits, they should cover all of our anticipated essential spending needs, leaving our portfolio for discretionary spending. So we'll need to rely on our portfolio between retirement, hopefully around age 52, and age 70. But if I was planning on longer than a 30 year retirement, I'd be inclined to start withdrawing under 4%. But I'm planning on using the time value of money formula for determining annual withdrawals anyway.
Ohh yeah, right. Have8you run those calculation using TVM and see how your spending would have fluctuated during the last 2 years?

That's more of a topic for this thread, but spending would not likely have fluctuated much for most retirees (remember that the TVM incorporates the investor's time horizon) if year-end withdrawals were made. Depending on the AA, 2019 might have seen a drop in spending due to real bond yields falling by around 1% from the year prior.
EnjoyIt wrote: Tue Apr 07, 2020 5:14 pmAs we discussed before, about 50% of our spending is discretionary which allows for lots of flexibility when needed.

Either way, I think if I retired at 50 using 4% and today, 20 years later I had 38% less than when I started but also got to start collecting SS, I would be very comfortable and happy with todays results.
lets just look at what some consider FAT FIRE. $2.5 million portfolio living on $100k/yr. 20 years later would leave the portfolio down to an inflation adjusted $1.55 million. I figure anyone who can amass $2.5 million will likely get past the second bend point on the SS curve getting $34k per year at 70 with the spouse getting half at a minimum. Together that is another $51k/yr.
This family would need the portfolio to supplement $49k/yr which 1.55 million should be able to do with ease.

More calculations:
a $2 million starting portfolio would need to withdraw 2.3% at age 70
a $2.5 million starting portfolio would need to withdraw 3.1% at age 70
a $3 million starting portfolio would need to withdraw 3.7% at age 70
a $3.5 million starting portfolio would need to withdraw 4.1% at age 70

None of the above look bad to me.
I'm explicitly planning on us spending down around 40% of our portfolio between age 52 and 70, when SS benefits begin, because our portfolio will only be needed for discretionary spending and LTC beyond that point. Also, we'll likely inherit a fairly significant amount during that time as well to further pad things.

As you point out, deferring SS benefits to age 70 is likely to substantially reduce portfolio withdrawals for most retirees. I also agree that none of the above withdrawal rates for a 70 year old look bad at all to me. Very few 70 year olds will need to make withdrawals for 30 years anyway.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Leesbro63 »

willthrill81 wrote: Tue Apr 07, 2020 5:38 pm
EnjoyIt wrote: Tue Apr 07, 2020 5:14 pm
willthrill81 wrote: Tue Apr 07, 2020 4:50 pm
EnjoyIt wrote: Tue Apr 07, 2020 4:22 pm
willthrill81 wrote: Tue Apr 07, 2020 4:09 pm

Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
You and I have very similar plans on early retirement and also capability to dial down spending. I can tell you that I don’t think I would be very reassured by this data if I retired at 50, now 70 with maybe another 15 or hopefully more years to go. On another note, if I was 70 I would start collecting SS which would help bolster my portfolio significantly.

As an early retiree with well over a decade to potentially collect social security I would not consider SS in my planing/calculations when deciding when to retire on 25x expenses. With that in mind maybe being down to $620k is not that big of a deal.
I too plan to wait until 70 to begin collecting SS benefits, and even with the anticipated reduction in benefits, they should cover all of our anticipated essential spending needs, leaving our portfolio for discretionary spending. So we'll need to rely on our portfolio between retirement, hopefully around age 52, and age 70. But if I was planning on longer than a 30 year retirement, I'd be inclined to start withdrawing under 4%. But I'm planning on using the time value of money formula for determining annual withdrawals anyway.
Ohh yeah, right. Have8you run those calculation using TVM and see how your spending would have fluctuated during the last 2 years?

That's more of a topic for this thread, but spending would not likely have fluctuated much for most retirees (remember that the TVM incorporates the investor's time horizon) if year-end withdrawals were made. Depending on the AA, 2019 might have seen a drop in spending due to real bond yields falling by around 1% from the year prior.
EnjoyIt wrote: Tue Apr 07, 2020 5:14 pmAs we discussed before, about 50% of our spending is discretionary which allows for lots of flexibility when needed.

Either way, I think if I retired at 50 using 4% and today, 20 years later I had 38% less than when I started but also got to start collecting SS, I would be very comfortable and happy with todays results.
lets just look at what some consider FAT FIRE. $2.5 million portfolio living on $100k/yr. 20 years later would leave the portfolio down to an inflation adjusted $1.55 million. I figure anyone who can amass $2.5 million will likely get past the second bend point on the SS curve getting $34k per year at 70 with the spouse getting half at a minimum. Together that is another $51k/yr.
This family would need the portfolio to supplement $49k/yr which 1.55 million should be able to do with ease.

More calculations:
a $2 million starting portfolio would need to withdraw 2.3% at age 70
a $2.5 million starting portfolio would need to withdraw 3.1% at age 70
a $3 million starting portfolio would need to withdraw 3.7% at age 70
a $3.5 million starting portfolio would need to withdraw 4.1% at age 70

None of the above look bad to me.
I'm explicitly planning on us spending down around 40% of our portfolio between age 52 and 70, when SS benefits begin, because our portfolio will only be needed for discretionary spending and LTC beyond that point. Also, we'll likely inherit a fairly significant amount during that time as well to further pad things.

As you point out, deferring SS benefits to age 70 is likely to substantially reduce portfolio withdrawals for most retirees. I also agree that none of the above withdrawal rates for a 70 year old look bad at all to me. Very few 70 year olds will need to make withdrawals for 30 years anyway.
I’m not a far out whacko extremist type guy. But after what’s happening now, I wouldn’t plan for Social Security to be a big piece of retirement for the upper middle class and above. And I would guess health care costs for the same group, even on Medicare, will be much higher than today. Heck, those at the top of IRMMA are paying $1600/month/couple NOW. We’re looking at a “reset”. While there will always be superwealthy, it might be that the ability to maintain what today is an upper middle class lifestyle becomes “the new rich”. For many (most?) Bogleheads this might actually be the lifetime payoff for years of prudent living.
Jags4186
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Jags4186 »

Leesbro63 wrote: Wed Apr 08, 2020 6:46 am I’m not a far out whacko extremist type guy. But after what’s happening now, I wouldn’t plan for Social Security to be a big piece of retirement for the upper middle class and above. And I would guess health care costs for the same group, even on Medicare, will be much higher than today. Heck, those at the top of IRMMA are paying $1600/month/couple NOW. We’re looking at a “reset”. While there will always be superwealthy, it might be that the ability to maintain what today is an upper middle class lifestyle becomes “the new rich”. For many (most?) Bogleheads this might actually be the lifetime payoff for years of prudent living.
I’m not 100% sure I follow what you mean regarding increased costs and less benefits providing a payoff for Bogleheads. Are you assuming Bogleheads will just have more money and therefore are able to continue living regardless of government benefits?

I tend to think the opposite. I think we will see government benefits increase, healthcare spending come down, and taxes increase on capital gains. The super rich will always have an “out” but it wouldn’t surprise me to see capital gains get taxed at ordinary income rates in my lifetime. At least in my lifetime which (hopefully) has another 60 years or so.

This country has a fascination with the rich, so they will always be there, but I envision the bottom 50% getting a big boost, the 50-20% crowd getting a boost, the 20-10% crowd being relatively unchanged, the 10-2% crowd getting “screwed”, and the top 2% making a killing. The top top rich people are always spared because regular folks can’t imagine the wealth they have, so they point towards what they think is rich and say “they need to pay!”.
chw
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by chw »

Sandtrap wrote: Fri Feb 28, 2020 11:16 am
EnjoyIt wrote: Fri Feb 28, 2020 10:24 am
Sandtrap wrote: Fri Feb 28, 2020 7:14 am
siamond wrote: Sun Feb 16, 2020 10:10 am
willthrill81 wrote: Sun Feb 16, 2020 10:05 amYou allude to one of my biggest problems with physical RE: it's expensive and time-consuming to get geographic diversification.
Having seen two generations in my -large!- family (+ various acquaintances) getting very involved in physical RE, I think you can actually simplify your statement: it's expensive and time-consuming (period).
Good points.
Also have a large and extended family, and friends, who were/are heavily involved in physical R/E income property of all types.
Yes. It is a "business" and viewed otherwise underestimates the effort that businesses require to be successful.

Physical R/E Income Property can generate tremendous wealth over time. The process is very slow if conservatively done. I've seen many who try to rush the process and most fail or suffer huge setbacks. OTOH: There are many that survive well in sustained economic downturns and still profit immensely in the long run.

j :happy
I would assume those who fail over leverage and are unable to survive during a downturn. Am I right? What do you think?
R/E Income Property Investing primary reasons for failing.
(also in business)

Poor buying and timing in buying skills.
Underestimate that R/E is a "business".
Wrong impression that R/E is an easy path to wealth with little risk and zero work.
Poor or no understanding of financial investment strategy in R/E.
Trying to do too much with too little and no backup nor exit plan.
Overconfident, ignorant, in de'Nile, cowardly, reactive, or other behavioral weaknesses.
Poor people skills.
Bad with numbers.
Unwilling to learn. Seek help from business mentors, etc.
Half - hearted efforts.
Comfort zone a must: must have vacations, day's off, leave, sick days, a pension, security, etc.


j :happy
I generally agree with most of this. I would add location of the RE is most important, with factors such as barriers to entry (both physical and local), density, average income, and average education levels(which drive income levels) in the area having impacts on long term value growth.
Leesbro63
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by Leesbro63 »

Jags4186 wrote: Wed Apr 08, 2020 7:03 am I’m not 100% sure I follow what you mean regarding increased costs and less benefits providing a payoff for Bogleheads. Are you assuming Bogleheads will just have more money and therefore are able to continue living regardless of government benefits?
The payoff is that the stereotypical Boglehead lives well below his/her means to begin with. So there will be no painful lifestyle cut required. I disagree with the rest of your analysis but don’t want to turn this into more discussion on speculation about the future. I’m just generally saying that we all need to think about how the coming economic and cultural reset will change our original plans.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by huskerfan1414 »

This thread has been interesting and informative. At my age of 33 I'm struggling to figure out what my retirement goal numbers should be. In the meantime I am upping my allocations and opening some different accounts. I do not need a portfolio review anymore, but I find it is helpful to show much wife some numbers when trying to talk her into the saving methods.

So, based on what I've read in this thread, I formulated the following hypothetical. I realize it is no guarantee, just a hypothetical to help me as I try to make predictions.

So if we retired at age 60 with $2.5 million and spent 4% of that in one year, it is $100k. If we spent $100k each year, and also averaged a modest 3% in our portfolio each year, we could expect to end up with approximately $2.179 million after ten years at these rates at age 70.

Is this correct? Am I expecting too much with a 3% average return estimate? I am no math wizard so perhaps my numbers are way off.
“I’m confident, but not really sure.” -Tom Petty
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

huskerfan1414 wrote: Wed Apr 08, 2020 11:39 am This thread has been interesting and informative. At my age of 33 I'm struggling to figure out what my retirement goal numbers should be. In the meantime I am upping my allocations and opening some different accounts. I do not need a portfolio review anymore, but I find it is helpful to show much wife some numbers when trying to talk her into the saving methods.

So, based on what I've read in this thread, I formulated the following hypothetical. I realize it is no guarantee, just a hypothetical to help me as I try to make predictions.

So if we retired at age 60 with $2.5 million and spent 4% of that in one year, it is $100k. If we spent $100k each year, and also averaged a modest 3% in our portfolio each year, we could expect to end up with approximately $2.179 million after ten years at these rates at age 70.

Is this correct? Am I expecting too much with a 3% average return estimate? I am no math wizard so perhaps my numbers are way off.
The issue with your calculations is that they don't take sequence of returns risk into account. You won't get steady 3% real returns from stocks or bonds.

I would suggest that you investigate a tool like FIRECalc to look at different historic outcomes from various asset allocations.
The Sensible Steward
MathIsMyWayr
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by MathIsMyWayr »

huskerfan1414 wrote: Wed Apr 08, 2020 11:39 am This thread has been interesting and informative. At my age of 33 I'm struggling to figure out what my retirement goal numbers should be. In the meantime I am upping my allocations and opening some different accounts. I do not need a portfolio review anymore, but I find it is helpful to show much wife some numbers when trying to talk her into the saving methods.

So, based on what I've read in this thread, I formulated the following hypothetical. I realize it is no guarantee, just a hypothetical to help me as I try to make predictions.

So if we retired at age 60 with $2.5 million and spent 4% of that in one year, it is $100k. If we spent $100k each year, and also averaged a modest 3% in our portfolio each year, we could expect to end up with approximately $2.179 million after ten years at these rates at age 70.

Is this correct? Am I expecting too much with a 3% average return estimate? I am no math wizard so perhaps my numbers are way off.
Correct assuming you take out $100k at the same time of the year for 10 years and 3% return year after year.
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by bligh »

willthrill81 wrote: Tue Apr 07, 2020 4:09 pm
Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
Not only would most people not have stuck to the 4% withdrawal rate while in the middle of a major market crash, this was from a starting point of one of the worst times to have retired. It is amazing how well the 4% withdrawal rate has done. Just goes to show how conservative and solid it is.

Add in the one thing most people hate to think about. Assuming a starting age of 65, more than one-third of the year 2000 retirees would have died by now anyway. A 65 year old male only has a 55% chance of making it to 85 (a female has a 65% chance, so I am being generous with that 1/3rd number.

Why do I mention that? Because your probability of running out of money is equal to your probability of running out of money over 30 years times your probability of living 30 more years. So if the 4% withdrawal rate has a 96% success rate, there is only a 4% chance of running out of money in 30 years. But there is only a 20% chance you will actually live to 90 anyway. (again being generous - for 30 years you would want to use the probability of getting to 95).. 0.04 * 0.2 = 0.8% probability of running out of money. = 99.2% chance you will be okay... even if you have ZERO wiggle room in your 4% inflation adjusted withdrawal budget.
Last edited by bligh on Wed Apr 08, 2020 12:36 pm, edited 1 time in total.
huskerfan1414
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by huskerfan1414 »

willthrill81 wrote: Wed Apr 08, 2020 11:56 am
huskerfan1414 wrote: Wed Apr 08, 2020 11:39 am This thread has been interesting and informative. At my age of 33 I'm struggling to figure out what my retirement goal numbers should be. In the meantime I am upping my allocations and opening some different accounts. I do not need a portfolio review anymore, but I find it is helpful to show much wife some numbers when trying to talk her into the saving methods.

So, based on what I've read in this thread, I formulated the following hypothetical. I realize it is no guarantee, just a hypothetical to help me as I try to make predictions.

So if we retired at age 60 with $2.5 million and spent 4% of that in one year, it is $100k. If we spent $100k each year, and also averaged a modest 3% in our portfolio each year, we could expect to end up with approximately $2.179 million after ten years at these rates at age 70.

Is this correct? Am I expecting too much with a 3% average return estimate? I am no math wizard so perhaps my numbers are way off.
The issue with your calculations is that they don't take sequence of returns risk into account. You won't get steady 3% real returns from stocks or bonds.

I would suggest that you investigate a tool like FIRECalc to look at different historic outcomes from various asset allocations.
Yes, I realize, that's why I said hypothetical. I know you cannot "count" on it being that way. I just wanted to know if my math was correct. I believe it was. It does not mean my assumptions are correct, I realize this is impossible to figure.

As an estimate based on past (which again I understand past returns are not a guarantee of future!) is 3% in retirement investing realistic?

I will check out FIRECalc thank you for suggesting it.
“I’m confident, but not really sure.” -Tom Petty
huskerfan1414
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by huskerfan1414 »

MathIsMyWayr wrote: Wed Apr 08, 2020 11:57 am
huskerfan1414 wrote: Wed Apr 08, 2020 11:39 am This thread has been interesting and informative. At my age of 33 I'm struggling to figure out what my retirement goal numbers should be. In the meantime I am upping my allocations and opening some different accounts. I do not need a portfolio review anymore, but I find it is helpful to show much wife some numbers when trying to talk her into the saving methods.

So, based on what I've read in this thread, I formulated the following hypothetical. I realize it is no guarantee, just a hypothetical to help me as I try to make predictions.

So if we retired at age 60 with $2.5 million and spent 4% of that in one year, it is $100k. If we spent $100k each year, and also averaged a modest 3% in our portfolio each year, we could expect to end up with approximately $2.179 million after ten years at these rates at age 70.

Is this correct? Am I expecting too much with a 3% average return estimate? I am no math wizard so perhaps my numbers are way off.
Correct assuming you take out $100k at the same time of the year for 10 years and 3% return year after year.
Thank you
“I’m confident, but not really sure.” -Tom Petty
huskerfan1414
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by huskerfan1414 »

willthrill81 wrote: Wed Apr 08, 2020 11:56 am
huskerfan1414 wrote: Wed Apr 08, 2020 11:39 am This thread has been interesting and informative. At my age of 33 I'm struggling to figure out what my retirement goal numbers should be. In the meantime I am upping my allocations and opening some different accounts. I do not need a portfolio review anymore, but I find it is helpful to show much wife some numbers when trying to talk her into the saving methods.

So, based on what I've read in this thread, I formulated the following hypothetical. I realize it is no guarantee, just a hypothetical to help me as I try to make predictions.

So if we retired at age 60 with $2.5 million and spent 4% of that in one year, it is $100k. If we spent $100k each year, and also averaged a modest 3% in our portfolio each year, we could expect to end up with approximately $2.179 million after ten years at these rates at age 70.

Is this correct? Am I expecting too much with a 3% average return estimate? I am no math wizard so perhaps my numbers are way off.
The issue with your calculations is that they don't take sequence of returns risk into account. You won't get steady 3% real returns from stocks or bonds.

I would suggest that you investigate a tool like FIRECalc to look at different historic outcomes from various asset allocations.
FIRECaclc rocks. Thanks again.
“I’m confident, but not really sure.” -Tom Petty
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Re: Year 2000 retirees using the '4% rule' - Where are they now?

Post by willthrill81 »

bligh wrote: Wed Apr 08, 2020 12:29 pm
willthrill81 wrote: Tue Apr 07, 2020 4:09 pm
Yes, it's doubtful that anyone would have rigidly stuck with the withdrawal scheme throughout this period, especially during 2008-2009. Reducing withdrawals would have resulted in the retirees in all likelihood having over $1 million nominal today. And retirees who were concerned about outliving their portfolio could, at this point, buy a SPIA that would have a very attractive payout ratio by this point being that they're likely in their 80s by now. According to www.immediateannuities.com, an opposite-sex 85 year old couple could get a joint lifetime SPIA with a 10.17% payout rate right now. So such a couple could put about $620k of their almost $1 million into a joint lifetime SPIA, replacing their current portfolio withdrawals permanently, albeit with no inflation adjustment, and still keep about a third of their portfolio intact. If they were both in reasonable health, that would be a pretty attractive option at this point, by my reckoning at least.
Not only would most people not have stuck to the 4% withdrawal rate while in the middle of a major market crash, this was from a starting point of one of the worst times to have retired. It is amazing how well the 4% withdrawal rate has done. Just goes to show how conservative and solid it is.

Add in the one thing most people hate to think about. Assuming a starting age of 65, more than one-third of the year 2000 retirees would have died by now anyway. A 65 year old male only has a 55% chance of making it to 85 (a female has a 65% chance, so I am being generous with that 1/3rd number.

Why do I mention that? Because your probability of running out of money is equal to your probability of running out of money over 30 years times your probability of living 30 more years. So if the 4% withdrawal rate has a 96% success rate, there is only a 4% chance of running out of money in 30 years. But there is only a 20% chance you will actually live to 90 anyway. (again being generous - for 30 years you would want to use the probability of getting to 95).. 0.04 * 0.2 = 0.8% probability of running out of money. = 99.2% chance you will be okay... even if you have ZERO wiggle room in your 4% inflation adjusted withdrawal budget.
Yes, I've often reminded everyone that the probability of 65 year olds outliving their portfolio is tiny, even without any flexibility in withdrawals.
The Sensible Steward
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