Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by invest2bfree »

https://www.portfoliovisualizer.com/bac ... tion2_2=40


It is really a sad state of affairs if we are going to repeat the last 20 years especially with low yields going forward.

If I plan to withdraw $50,000 with a starting total of $1M ran out of money in 2016 for 100% S&P 500 allocation.

60% stocks and 40% cash barely made it with only $197,096 as the remainder. I used cash because of the low yields we are experiencing. I do not believe the bond markets returns of last 20 years cannot be repeated.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
User avatar
Brianmcg321
Posts: 1875
Joined: Mon Jul 15, 2019 8:23 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Brianmcg321 »

Well, hopefully you won't have to retire in 2000.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Marseille07 »

5% is way too high imo. No study I'm aware calls it safe.
User avatar
Brianmcg321
Posts: 1875
Joined: Mon Jul 15, 2019 8:23 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Brianmcg321 »

You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
https://www.portfoliovisualizer.com/bac ... tion2_2=40
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
Nathan Drake
Posts: 6234
Joined: Mon Apr 11, 2011 12:28 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Nathan Drake »

Brianmcg321 wrote: Sun Aug 01, 2021 12:57 am Well, hopefully you won't have to retire in 2000.
Could be worse and he has to retire in 2021
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
User avatar
Robert T
Posts: 2803
Joined: Tue Feb 27, 2007 8:40 pm
Location: 1, 0.2, 0.4, 0.5
Contact:

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Robert T »

.
Would not have been the case for a global small value tilted portfolio. 2016 value > 2000 starting value. https://www.portfoliovisualizer.com/bac ... tion5_3=13
minimalistmarc
Posts: 1636
Joined: Fri Jul 24, 2015 4:38 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by minimalistmarc »

Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
https://www.portfoliovisualizer.com/bac ... tion2_2=40
Bogleheads should find this highly reassuring as I’m guessing most of us have a lot of extras we can cut if required (for example luxury holidays/restaurants) and over estimate our annual expenses.
sfnerd
Posts: 348
Joined: Tue Apr 08, 2014 1:16 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by sfnerd »

minimalistmarc wrote: Sun Aug 01, 2021 3:24 am
Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
https://www.portfoliovisualizer.com/bac ... tion2_2=40
Bogleheads should find this highly reassuring as I’m guessing most of us have a lot of extras we can cut if required (for example luxury holidays/restaurants) and over estimate our annual expenses.
That's not reassuring at all... In this method your withdrawal drops to 25k in one year. If that were your actual strategy you'd be eating dog food.

The original poster had it right: withdrawing 5% of the portfolio and adjusting for inflation.

The only thing this shows is that high withdrawal rates aren't safe, and if you have a bad sequence it will kill your portfolio.
minimalistmarc
Posts: 1636
Joined: Fri Jul 24, 2015 4:38 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by minimalistmarc »

sfnerd wrote: Sun Aug 01, 2021 4:00 am
minimalistmarc wrote: Sun Aug 01, 2021 3:24 am
Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
https://www.portfoliovisualizer.com/bac ... tion2_2=40
Bogleheads should find this highly reassuring as I’m guessing most of us have a lot of extras we can cut if required (for example luxury holidays/restaurants) and over estimate our annual expenses.
That's not reassuring at all... In this method your withdrawal drops to 25k in one year. If that were your actual strategy you'd be eating dog food.

The original poster had it right: withdrawing 5% of the portfolio and adjusting for inflation.

The only thing this shows is that high withdrawal rates aren't safe, and if you have a bad sequence it will kill your portfolio.
My take is that it shows high rates are safe if you can make significant drops to your expenses (without having to resort to dog food. Let’s settle on porridge and lentil soup!)
NS_Bane
Posts: 117
Joined: Sat Mar 17, 2018 12:27 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by NS_Bane »

Just to mess around I replaced SPY with VFIAX, and suddenly the numbers look a lot better. Why is that?
User avatar
Rotwang
Posts: 16
Joined: Mon Apr 01, 2019 9:31 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Rotwang »

NS_Bane wrote: Sun Aug 01, 2021 4:14 am Just to mess around I replaced SPY with VFIAX, and suddenly the numbers look a lot better. Why is that?
The time period was constrained by the available data for Vanguard 500 Index Admiral (VFIAX) [Dec 2000 - Jul 2021]
JDonaghy
Posts: 36
Joined: Thu Aug 06, 2015 5:48 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by JDonaghy »

I got the portfolio to last up to $44,500 in annual withdrawal, which is about 10% lower withdrawal rate.

If you make withdrawal $35K it was still worth about 750K+ currently depending on portfolio

To me just illustrates the high sensitivity to market performance, timing and withdrawal rates - all of which are unknown going forward.

Makes sense to have a more nuanced withdrawal strategy - If a real person has $200K left in portfolio and 50K$ withdrawl annually, they should probably adjust lifestyle not blindly take out money.

Also would figure portfolio would do better with a bond fund instead of cash anchor of 40% but i don't know any that go back to that time period.
iamblessed
Posts: 1808
Joined: Sat Jun 09, 2018 11:52 am
Location: St. Louis

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by iamblessed »

JDonaghy wrote: Sun Aug 01, 2021 6:01 am I got the portfolio to last up to $44,500 in annual withdrawal, which is about 10% lower withdrawal rate.

If you make withdrawal $35K it was still worth about 750K+ currently depending on portfolio

To me just illustrates the high sensitivity to market performance, timing and withdrawal rates - all of which are unknown going forward.

Makes sense to have a more nuanced withdrawal strategy - If a real person has $200K left in portfolio and 50K$ withdrawl annually, they should probably adjust lifestyle not blindly take out money.

Also would figure portfolio would do better with a bond fund instead of cash anchor of 40% but i don't know any that go back to that time period.
I was going to say 4.5% does better than 5% You beat me to it.
z3r0c00l
Posts: 3807
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by z3r0c00l »

Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
5% variable is already too much, but 50,000 fixed is doomed to fail. In 2009 would a person really pull 20% of their portfolio out? I think the conservative move is 3%, 4% should be okay for most scenarios.
70% Global Stocks / 30% Bonds
Escapevelocity
Posts: 1145
Joined: Mon Feb 18, 2019 7:32 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Escapevelocity »

z3r0c00l wrote: Sun Aug 01, 2021 6:09 am
Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
5% variable is already too much, but 50,000 fixed is doomed to fail. In 2009 would a person really pull 20% of their portfolio out? I think the conservative move is 3%, 4% should be okay for most scenarios.
What is the 20% reference above?
supersharpie
Posts: 838
Joined: Wed Dec 22, 2010 12:28 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by supersharpie »

Also, some of you Debbie Downers act like your portfolio is your only source of income, when roughly 95% of Americans qualify for Social Security. Assuming you don't enter retirement with a mortgage, the Social Security benefit alone insures you won't need to eat the proverbial cat food.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by JoeRetire »

supersharpie wrote: Sun Aug 01, 2021 6:12 am Also, some of you Debbie Downers act like your portfolio is your only source of income, when roughly 95% of Americans qualify for Social Security. Assuming you don't enter retirement with a mortgage, the Social Security benefit alone insures you won't need to eat the proverbial cat food.
The estimated average Social Security retirement benefit in 2021 is only $1,543 a month.

And cat food is getting expensive.
This isn't just my wallet. It's an organizer, a memory and an old friend.
User avatar
galawdawg
Posts: 5231
Joined: Thu Dec 14, 2017 11:59 am
Location: Georgia

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by galawdawg »

That's a very misleading title. Here is the same analysis with a 60/40 portfolio consisting of Vanguard Total Stock Market and Vanguard Total Bond Market: https://www.portfoliovisualizer.com/bac ... tion4_1=40

Not only would the year 2000 retiree with 60/40 allocated as stated not have run out of money, they would still have nearly $600k in their portfolio of the original $1m.
z3r0c00l
Posts: 3807
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by z3r0c00l »

Escapevelocity wrote: Sun Aug 01, 2021 6:10 am
z3r0c00l wrote: Sun Aug 01, 2021 6:09 am
Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
5% variable is already too much, but 50,000 fixed is doomed to fail. In 2009 would a person really pull 20% of their portfolio out? I think the conservative move is 3%, 4% should be okay for most scenarios.
What is the 20% reference above?
Well of course it becomes 100% during that last pull where the hypothetical retiree pulls their last 50,000. But even in the middle of this test run, as their account crashes to about $250 K, are they really going to keep pulling $50K a year? (20%)
70% Global Stocks / 30% Bonds
supersharpie
Posts: 838
Joined: Wed Dec 22, 2010 12:28 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by supersharpie »

JoeRetire wrote: Sun Aug 01, 2021 6:17 am
supersharpie wrote: Sun Aug 01, 2021 6:12 am Also, some of you Debbie Downers act like your portfolio is your only source of income, when roughly 95% of Americans qualify for Social Security. Assuming you don't enter retirement with a mortgage, the Social Security benefit alone insures you won't need to eat the proverbial cat food.
The estimated average Social Security retirement benefit in 2021 is only $1,543 a month.

And cat food is getting expensive.
Yeah, but the full benefit rate for the average BH is somewhere between $2500-$3000. $50,000 to $72,000 for a married couple is some decent scratch. Two married workers who have each maxed out their FICA contributions AND wait to 70 to file are eligible for a touch over $92,000 in annual combined benefits.

So it all depends.

To your point though, if you have no mortgage and are a single person, you can buy normal healthy groceries on a $1500/budget. I mean, the average grocery bill for a single person is what? Cannot be much more than $200/month, probably less for plenty of people.

The problem is that if you run out of assets you probably won't be able to do much fun stuff, like travel and dining out.
Somethingwitty92912
Posts: 490
Joined: Mon Sep 14, 2020 9:43 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Somethingwitty92912 »

sfnerd wrote: Sun Aug 01, 2021 4:00 am
minimalistmarc we wrote: Sun Aug 01, 2021 3:24 am
Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
https://www.portfoliovisualizer.com/bac ... tion2_2=40
Bogleheads should find this highly reassuring as I’m guessing most of us have a lot of extras we can cut if required (for example luxury holidays/restaurants) and over estimate our annual expenses.
That's not reassuring at all... In this method your withdrawal drops to 25k in one year. If that were your actual strategy you'd be eating dog food.

The original poster had it right: withdrawing 5% of the portfolio and adjusting for inflation.

The only thing this shows is that high withdrawal rates aren't safe, and if you have a bad sequence it will kill your portfolio.
If you are eating dog food on 25k a year you must only eat golden plated steak on golden plates.

Don’t go out to eat, learn to cook, and you’d still eat very very good on 25k a year. This is where the hcola living standard and keeping up with the Jones bites a lot of people in the ass.
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Grt2bOutdoors »

Don’t withdraw on an inflation adjusted basis “all” years and don’t withdraw 5 percent.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Retiring in 2000 withdrawing fixed 5% never ran out of money!

Post by JoeRetire »

invest2bfree wrote: Sun Aug 01, 2021 12:48 am https://www.portfoliovisualizer.com/bac ... tion2_2=40


It is really a sad state of affairs if we are going to repeat the last 20 years especially with low yields going forward.

If I plan to withdraw $50,000 with a starting total of $1M ran out of money in 2016 for 100% S&P 500 allocation.

60% stocks and 40% cash barely made it with only $197,096 as the remainder. I used cash because of the low yields we are experiencing. I do not believe the bond markets returns of last 20 years cannot be repeated.
Replace SPY with VOO. Problem solved.
You are welcome.

Tools are fun. They are even more fun with cherry-picked inputs.

"Notes on results:
Past performance is no guarantee of future results, which may vary. "
This isn't just my wallet. It's an organizer, a memory and an old friend.
supersharpie
Posts: 838
Joined: Wed Dec 22, 2010 12:28 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by supersharpie »

Somethingwitty92912 wrote: Sun Aug 01, 2021 7:20 am
sfnerd wrote: Sun Aug 01, 2021 4:00 am
minimalistmarc we wrote: Sun Aug 01, 2021 3:24 am
Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
https://www.portfoliovisualizer.com/bac ... tion2_2=40
Bogleheads should find this highly reassuring as I’m guessing most of us have a lot of extras we can cut if required (for example luxury holidays/restaurants) and over estimate our annual expenses.
That's not reassuring at all... In this method your withdrawal drops to 25k in one year. If that were your actual strategy you'd be eating dog food.

The original poster had it right: withdrawing 5% of the portfolio and adjusting for inflation.

The only thing this shows is that high withdrawal rates aren't safe, and if you have a bad sequence it will kill your portfolio.
If you are eating dog food on 25k a year you must only eat golden plated steak on golden plates.

Don’t go out to eat, learn to cook, and you’d still eat very very good on 25k a year. This is where the hcola living standard and keeping up with the Jones bites a lot of people in the ass.
Exactly, there are plenty of folks with seven or eight figure net worths who are so far removed from the average Joe that they have forgotten that a little money goes a long way if spent wisely.

This woman cooked herself three healthy meals for $5 per day in NYC no less! It can be done. Step away from the can opener :D

https://youtu.be/IfWTLD1LEB0
Topic Author
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Re: Retiring in 2000 withdrawing fixed 5% never ran out of money!

Post by invest2bfree »

JoeRetire wrote: Sun Aug 01, 2021 7:32 am
invest2bfree wrote: Sun Aug 01, 2021 12:48 am https://www.portfoliovisualizer.com/bac ... tion2_2=40


It is really a sad state of affairs if we are going to repeat the last 20 years especially with low yields going forward.

If I plan to withdraw $50,000 with a starting total of $1M ran out of money in 2016 for 100% S&P 500 allocation.

60% stocks and 40% cash barely made it with only $197,096 as the remainder. I used cash because of the low yields we are experiencing. I do not believe the bond markets returns of last 20 years cannot be repeated.
Replace SPY with VOO. Problem solved.
You are welcome.

Tools are fun. They are even more fun with cherry-picked inputs.

"Notes on results:
Past performance is no guarantee of future results, which may vary. "
I choose spy because VOO does not run until 2000.
Iam just making a point that if you are retiring at the market peak be very careful.

You are better of buying dividend focused etfs or value etfs which you dd much better.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Topic Author
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by invest2bfree »

JDonaghy wrote: Sun Aug 01, 2021 6:01 am I got the portfolio to last up to $44,500 in annual withdrawal, which is about 10% lower withdrawal rate.

If you make withdrawal $35K it was still worth about 750K+ currently depending on portfolio

To me just illustrates the high sensitivity to market performance, timing and withdrawal rates - all of which are unknown going forward.

Makes sense to have a more nuanced withdrawal strategy - If a real person has $200K left in portfolio and 50K$ withdrawl annually, they should probably adjust lifestyle not blindly take out money.

Also would figure portfolio would do better with a bond fund instead of cash anchor of 40% but i don't know any that go back to that time period.
with current bond yields you will probably get returns closer to cash for the next 20 years. So you need to plan for it.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
seajay
Posts: 1656
Joined: Sat May 01, 2021 3:26 pm
Contact:

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by seajay »

minimalistmarc wrote: Sun Aug 01, 2021 3:24 am
Brianmcg321 wrote: Sun Aug 01, 2021 1:02 am You used a fixed withdrawal rate of 50,000, not 5%.

A 5% rate would fair much better.
https://www.portfoliovisualizer.com/bac ... tion2_2=40
Bogleheads should find this highly reassuring as I’m guessing most of us have a lot of extras we can cut if required (for example luxury holidays/restaurants) and over estimate our annual expenses.
5% rate saw income more than halved in 2008. That might not be a option for some. The OP posted 5% SWR, which would have seen income maintained in inflation adjusted terms, at least up to the point of failure.
seajay
Posts: 1656
Joined: Sat May 01, 2021 3:26 pm
Contact:

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by seajay »

galawdawg wrote: Sun Aug 01, 2021 6:29 am That's a very misleading title. Here is the same analysis with a 60/40 portfolio consisting of Vanguard Total Stock Market and Vanguard Total Bond Market: https://www.portfoliovisualizer.com/bac ... tion4_1=40

Not only would the year 2000 retiree with 60/40 allocated as stated not have run out of money, they would still have nearly $600k in their portfolio of the original $1m.
That inflation had deflated down to $357K of the inflation adjusted $1M start date amount.

Including some foreign, and gold helped - still have $766K of the inflation adjusted start date value.

Recent Covid fears has seen a flight to safety (fear), US$ and gold both up. At some point fear will subside and see outflight to 'better potential rewards elsewhere' (greed). 25% each domestic/foreign/bonds/gold takes a more neutral stance.
seajay
Posts: 1656
Joined: Sat May 01, 2021 3:26 pm
Contact:

Re: Retiring in 2000 withdrawing fixed 5% never ran out of money!

Post by seajay »

invest2bfree wrote: Sun Aug 01, 2021 8:51 am Iam just making a point that if you are retiring at the market peak be very careful.
So are we at a market peak now? Or are just the 2010's decade gains a compensation for the 0% overall 2000's Bunny decade?
User avatar
galawdawg
Posts: 5231
Joined: Thu Dec 14, 2017 11:59 am
Location: Georgia

Retiree in 2000 using SWR of 4% adjusted for inflation still realized 30% portfolio growth

Post by galawdawg »

invest2bfree wrote: Sun Aug 01, 2021 8:51 am
JoeRetire wrote: Sun Aug 01, 2021 7:32 am
invest2bfree wrote: Sun Aug 01, 2021 12:48 am https://www.portfoliovisualizer.com/bac ... tion2_2=40


It is really a sad state of affairs if we are going to repeat the last 20 years especially with low yields going forward.

If I plan to withdraw $50,000 with a starting total of $1M ran out of money in 2016 for 100% S&P 500 allocation.

60% stocks and 40% cash barely made it with only $197,096 as the remainder. I used cash because of the low yields we are experiencing. I do not believe the bond markets returns of last 20 years cannot be repeated.
Replace SPY with VOO. Problem solved.
You are welcome.

Tools are fun. They are even more fun with cherry-picked inputs.

"Notes on results:
Past performance is no guarantee of future results, which may vary. "
I choose spy because VOO does not run until 2000.
Iam just making a point that if you are retiring at the market peak be very careful.

You are better of buying dividend focused etfs or value etfs which you dd much better.
You could have chosen Vanguard Total Stock Index and Vanguard Total Bond Index, which is the two-fund portfolio many here hold.

Let's see how those funds, allocated 60/40, did with a 4% withdrawal rate, adjusted for inflation, for your hypothetical year 2000 retiree with $1 million.

https://www.portfoliovisualizer.com/bac ... tion4_1=40

That retiree would today still have a portfolio balance of over $1.3 million. So your hypothetical retiree not only didn't run out of money but they have realized growth of over 30% of their portfolio since retirement despite the withdrawals. And 4% is the often-cited fixed withdrawal rate in retirement, not 5%.

But as I noted before, even with a 5% withdrawal rate, the 2000 hypothetical retiree would today still have close to $600k in their portfolio.
Last edited by galawdawg on Sun Aug 01, 2021 9:18 am, edited 1 time in total.
Topic Author
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Re: Retiring in 2000 withdrawing fixed 5% never ran out of money!

Post by invest2bfree »

seajay wrote: Sun Aug 01, 2021 9:14 am
invest2bfree wrote: Sun Aug 01, 2021 8:51 am Iam just making a point that if you are retiring at the market peak be very careful.
So are we at a market peak now? Or are just the 2010's decade gains a compensation for the 0% overall 2000's Bunny decade?
Cannot say, we are one bad event away from a market peak.

AAPL\TSLA and so many stocks other US Large Cap have substantial business from China.

With tensions in taiwan will China flex its muscles on US corporations?
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Topic Author
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Re: Retiree in 2000 using SWR of 4% adjusted for inflation still realized 30% portfolio growth

Post by invest2bfree »

galawdawg wrote: Sun Aug 01, 2021 9:16 am
invest2bfree wrote: Sun Aug 01, 2021 8:51 am
JoeRetire wrote: Sun Aug 01, 2021 7:32 am
invest2bfree wrote: Sun Aug 01, 2021 12:48 am https://www.portfoliovisualizer.com/bac ... tion2_2=40


It is really a sad state of affairs if we are going to repeat the last 20 years especially with low yields going forward.

If I plan to withdraw $50,000 with a starting total of $1M ran out of money in 2016 for 100% S&P 500 allocation.

60% stocks and 40% cash barely made it with only $197,096 as the remainder. I used cash because of the low yields we are experiencing. I do not believe the bond markets returns of last 20 years cannot be repeated.
Replace SPY with VOO. Problem solved.
You are welcome.

Tools are fun. They are even more fun with cherry-picked inputs.

"Notes on results:
Past performance is no guarantee of future results, which may vary. "
I choose spy because VOO does not run until 2000.
Iam just making a point that if you are retiring at the market peak be very careful.

You are better of buying dividend focused etfs or value etfs which you dd much better.
You could have chosen Vanguard Total Stock Index and Vanguard Total Bond Index, which is the two-fund portfolio many here hold.

Let's see how those funds, allocated 60/40, did with a 4% withdrawal rate, adjusted for inflation, for your hypothetical year 2000 retiree with $1 million.

https://www.portfoliovisualizer.com/bac ... tion4_1=40

That retiree would today still have a portfolio balance of over $1.3 million. So your hypothetical retiree not only didn't run out of money but they have realized growth of over 30% of their portfolio since retirement despite the withdrawals. And 4% is the often-cited fixed withdrawal rate in retirement, not 5%.

But as I noted before, even with a 5% withdrawal rate, the 2000 hypothetical retiree would today still have close to $600k in their portfolio.
My opinion is your bond returns are going to be close to cash. We had 5% returns in Bonds which we may not get in the future.

This is from Vanguard.

Fixed income Return projection Median volatility
U.S. aggregate bonds 1.4%–2.4% 4.5%
U.S. Treasury bonds 1.1%–2.1% 4.7%
U.S. credit bonds 1.8%–2.8% 5.7%
U.S. high-yield corporate bonds 2.2%–3.2% 10.2%
U.S. Treasury Inflation-Protected Securities 0.8%–1.8% 7.0%
U.S. cash 1.3%–2.3% 1.3%
Global bonds ex-U.S. (hedged) 1.3%–2.3% 3.8%
Emerging markets sovereign 2.1%–3.1% 9.9%
U.S. inflation 1.4%–2.4% 2.4%
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Escapevelocity
Posts: 1145
Joined: Mon Feb 18, 2019 7:32 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Escapevelocity »

JoeRetire wrote: Sun Aug 01, 2021 6:17 am
supersharpie wrote: Sun Aug 01, 2021 6:12 am Also, some of you Debbie Downers act like your portfolio is your only source of income, when roughly 95% of Americans qualify for Social Security. Assuming you don't enter retirement with a mortgage, the Social Security benefit alone insures you won't need to eat the proverbial cat food.
The estimated average Social Security retirement benefit in 2021 is only $1,543 a month.

And cat food is getting expensive.
Ok. But still, it is way too common on this board for people to talk about withdrawal rates with no consideration of how social security factors into taking care of most or all of the essential needs of the average retiree on THIS board. Not talking about folks with minimal assets/benefits.
supersharpie
Posts: 838
Joined: Wed Dec 22, 2010 12:28 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by supersharpie »

Escapevelocity wrote: Sun Aug 01, 2021 9:24 am
JoeRetire wrote: Sun Aug 01, 2021 6:17 am
supersharpie wrote: Sun Aug 01, 2021 6:12 am Also, some of you Debbie Downers act like your portfolio is your only source of income, when roughly 95% of Americans qualify for Social Security. Assuming you don't enter retirement with a mortgage, the Social Security benefit alone insures you won't need to eat the proverbial cat food.
The estimated average Social Security retirement benefit in 2021 is only $1,543 a month.

And cat food is getting expensive.
Ok. But still, it is way too common on this board for people to talk about withdrawal rates with no consideration of how social security factors into taking care of most or all of the essential needs of the average retiree on THIS board. Not talking about folks with minimal assets/benefits.
Exactly! BHs often act as though if they exhaust their savings that they will be flat broke. Thanks to FDR, that is not the reality for American senior citizens.

A middle class person’s Social Security benefit easily covers food, clothing, utilities, and healthcare. If you own your own home, what else do you truly need to live comfortably? Billions of people can only dream of that sort of financial security.

I think there is another element at play here. BHs rightfully pride themselves on being financially savvy. I think many view exhausting one’s assets as a personal, and perhaps even moral, failure.
AlwaysLearningMore
Posts: 1934
Joined: Sun Jul 26, 2020 2:29 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by AlwaysLearningMore »

invest2bfree wrote: Sun Aug 01, 2021 12:48 am https://www.portfoliovisualizer.com/bac ... tion2_2=40


It is really a sad state of affairs if we are going to repeat the last 20 years especially with low yields going forward.

If I plan to withdraw $50,000 with a starting total of $1M ran out of money in 2016 for 100% S&P 500 allocation.

60% stocks and 40% cash barely made it with only $197,096 as the remainder. I used cash because of the low yields we are experiencing. I do not believe the bond markets returns of last 20 years cannot be repeated.
Withdrawing a fixed 5% in the first year and maintaining that, without making adjustments as the portfolio depleted, would have been foolhardy (and an unlikely course for an investor with even average common sense).

A simple set-it-and-forget-it investment in Vanguard Balanced Index Fund (VBINX) in 2000 provided the following returns with a 5% yearly account balance withdrawal https://tinyurl.com/h2j8zjq


Image

Image
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
delamer
Posts: 17453
Joined: Tue Feb 08, 2011 5:13 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by delamer »

iamblessed wrote: Sun Aug 01, 2021 6:07 am
JDonaghy wrote: Sun Aug 01, 2021 6:01 am I got the portfolio to last up to $44,500 in annual withdrawal, which is about 10% lower withdrawal rate.

If you make withdrawal $35K it was still worth about 750K+ currently depending on portfolio

To me just illustrates the high sensitivity to market performance, timing and withdrawal rates - all of which are unknown going forward.

Makes sense to have a more nuanced withdrawal strategy - If a real person has $200K left in portfolio and 50K$ withdrawl annually, they should probably adjust lifestyle not blindly take out money.

Also would figure portfolio would do better with a bond fund instead of cash anchor of 40% but i don't know any that go back to that time period.
I was going to say 4.5% does better than 5% You beat me to it.
I don’t understand the OP’s concern/outrage.

Use the frequently-recommended SWR of 4% of the initial balance, inflation adjusted.

Both portfolios have an ending balance of about $500,000.

Remember that a 5% withdrawal is 25% larger than a 4% withdrawal. One percentage point is a huge deal in this context.

Knock the withdrawal back to 3% — a 40% decrease from 5% — and the ending balances are well over $1 million.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Escapevelocity
Posts: 1145
Joined: Mon Feb 18, 2019 7:32 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by Escapevelocity »

supersharpie wrote: Sun Aug 01, 2021 9:37 am
Escapevelocity wrote: Sun Aug 01, 2021 9:24 am
JoeRetire wrote: Sun Aug 01, 2021 6:17 am
supersharpie wrote: Sun Aug 01, 2021 6:12 am Also, some of you Debbie Downers act like your portfolio is your only source of income, when roughly 95% of Americans qualify for Social Security. Assuming you don't enter retirement with a mortgage, the Social Security benefit alone insures you won't need to eat the proverbial cat food.
The estimated average Social Security retirement benefit in 2021 is only $1,543 a month.

And cat food is getting expensive.
Ok. But still, it is way too common on this board for people to talk about withdrawal rates with no consideration of how social security factors into taking care of most or all of the essential needs of the average retiree on THIS board. Not talking about folks with minimal assets/benefits.
I think there is another element at play here. BHs rightfully pride themselves on being financially savvy. I think many view exhausting one’s assets as a personal, and perhaps even moral, failure.
Either that or dying with less than $5 million to your heirs is a failure.
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by namajones »

JoeRetire wrote: Sun Aug 01, 2021 6:17 am And cat food is getting expensive.
You can save by making your own cat food minus the meat products. Also, a lot of grocery stores throw away an amazing amount of very good food. You just need to know which times of day to hang around out back.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by skierincolorado »

Given current Shiller PE and interest rates, SWR is around 3.25-3.5% for retiring under age 40. Assumes you can stick to your plan and have at least some flexibility if expenses change for some reason (medical) like picking up a couple shifts at fun gig.

https://i0.wp.com/earlyretirementnow.co ... C849&ssl=1
TheHouse7
Posts: 576
Joined: Fri Jan 13, 2017 1:40 am
Location: Washington State

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by TheHouse7 »

namajones wrote: Sun Aug 01, 2021 11:03 am
JoeRetire wrote: Sun Aug 01, 2021 6:17 am And cat food is getting expensive.
You can save by making your own cat food minus the meat products. Also, a lot of grocery stores throw away an amazing amount of very good food. You just need to know which times of day to hang around out back.
Awesome reply, would not be surprised about a cat going vegetarian :D
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.
surfstar
Posts: 2853
Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: Retiring in 2000 withdrawing fixed 5% never ran out of money!

Post by surfstar »

invest2bfree wrote: Sun Aug 01, 2021 9:18 am
seajay wrote: Sun Aug 01, 2021 9:14 am
invest2bfree wrote: Sun Aug 01, 2021 8:51 am Iam just making a point that if you are retiring at the market peak be very careful.
So are we at a market peak now? Or are just the 2010's decade gains a compensation for the 0% overall 2000's Bunny decade?
Cannot say, we are one bad event away from a market peak.

AAPL\TSLA and so many stocks other US Large Cap have substantial business from China.

With tensions in taiwan will China flex its muscles on US corporations?
OP, your thread is so very right on point. You should work until you die, because that would be the only way to not run out of money.
"invest2bfree" is that an ironic username?
supersharpie
Posts: 838
Joined: Wed Dec 22, 2010 12:28 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by supersharpie »

Escapevelocity wrote: Sun Aug 01, 2021 11:01 am
supersharpie wrote: Sun Aug 01, 2021 9:37 am
Escapevelocity wrote: Sun Aug 01, 2021 9:24 am
JoeRetire wrote: Sun Aug 01, 2021 6:17 am
supersharpie wrote: Sun Aug 01, 2021 6:12 am Also, some of you Debbie Downers act like your portfolio is your only source of income, when roughly 95% of Americans qualify for Social Security. Assuming you don't enter retirement with a mortgage, the Social Security benefit alone insures you won't need to eat the proverbial cat food.
The estimated average Social Security retirement benefit in 2021 is only $1,543 a month.

And cat food is getting expensive.
Ok. But still, it is way too common on this board for people to talk about withdrawal rates with no consideration of how social security factors into taking care of most or all of the essential needs of the average retiree on THIS board. Not talking about folks with minimal assets/benefits.
I think there is another element at play here. BHs rightfully pride themselves on being financially savvy. I think many view exhausting one’s assets as a personal, and perhaps even moral, failure.
Either that or dying with less than $5 million to your heirs is a failure.
That too! In fairness, I do understand the mindset that inherited wealth should be preserved and passed on. That is what I like about being a self-made millionaire. There is no pressure to pass it on. You make it, you spend it as you see fit is my philosophy.
supersharpie
Posts: 838
Joined: Wed Dec 22, 2010 12:28 pm

Re: Retiring in 2000 withdrawing fixed 5% never ran out of money!

Post by supersharpie »

invest2bfree wrote: Sun Aug 01, 2021 9:18 am
seajay wrote: Sun Aug 01, 2021 9:14 am
invest2bfree wrote: Sun Aug 01, 2021 8:51 am Iam just making a point that if you are retiring at the market peak be very careful.
So are we at a market peak now? Or are just the 2010's decade gains a compensation for the 0% overall 2000's Bunny decade?
Cannot say, we are one bad event away from a market peak.

AAPL\TSLA and so many stocks other US Large Cap have substantial business from China.

With tensions in taiwan will China flex its muscles on US corporations?
China would be toast without American consumers buying their products. Neither side has a clear upper hand on the other. It is a co-dependent relationship.
User avatar
galawdawg
Posts: 5231
Joined: Thu Dec 14, 2017 11:59 am
Location: Georgia

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by galawdawg »

delamer wrote: Sun Aug 01, 2021 10:59 am I don’t understand the OP’s concern/outrage.

Use the frequently-recommended SWR of 4% of the initial balance, inflation adjusted.

Both portfolios have an ending balance of about $500,000.

Remember that a 5% withdrawal is 25% larger than a 4% withdrawal. One percentage point is a huge deal in this context.

Knock the withdrawal back to 3% — a 40% decrease from 5% — and the ending balances are well over $1 million.
Actually, as I noted above, using Vanguard Total Stock Index and Vanguard Total Bond Index allocated 60/40 is even better than that. Forget the SPY used by OP to support his theory...how many here hold SPY and cash rather than a two or three-fund portfolio of Vanguard index funds???

Using a 60/40 allocation of Vanguard Total Stock Index and Vanguard Total Bond Index, with a 4% withdrawal rate adjusted for inflation, for the hypothetical year 2000 retiree with $1 million results in a current
portfolio balance of over $1.3 million! A growth of over 30% since retirement despite the withdrawals.
https://www.portfoliovisualizer.com/bac ... tion4_1=40

And as I pointed out earlier in the tread, even with a 5% withdrawal rate adjusted annually for inflation, the 2000 hypothetical retiree invested 60/40 in Vanguard Total Stock Index and Vanguard Total Bond Index would today still have close to $600k in their portfolio. https://www.portfoliovisualizer.com/bac ... tion4_1=40

Run the numbers using Taylor's three-fund portfolio (allocated 50/10/40), instead using the two-fund portolio. leaves the same retiree with over $550k with a 5% inflation adjusted withdrawal rate1 and nearly $1.25m with a 4% inflation adjusted withdrawal rate2.

Of course, planning on the 5% withdrawal rate in retirement that OP selected for his theory goes against the vast weight of intelligent investment advice. I prefer VPW myself but for a fixed withdrawal rate, a wise investor should plan on no greater than the most often recommended 4%.



1https://www.portfoliovisualizer.com/bac ... tion5_2=10

2https://www.portfoliovisualizer.com/bac ... tion5_2=10
pasadena
Posts: 2337
Joined: Sat Jul 02, 2016 1:23 am
Location: PNW

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by pasadena »

Yep. But if you:

- Use $40k (4% rule), you still have about $500k in 2021:
- Use VTSAX instead of SPY to cover the whole market, you still have $800k in 2021 (and that's with $50k withdrawal).
- use VTSAX and $40k withdrawal, you have $1.7M in 2021.

I don't think I ever saw anyone recommend a 5% withdrawal rate (adjusted for inflation) and a 100% stocks portfolio in retirement.

tl;dr: your problem isn't bond yields (!), it's your withdrawal rate and/or fund choice (also, frankly, the AA is really not safe at all)
johnrbain
Posts: 22
Joined: Sat Dec 19, 2015 1:16 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by johnrbain »

Run your numbers with either Wellington or Wellesley. You come out looking much better.
DB2
Posts: 1396
Joined: Thu Jan 17, 2019 9:07 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by DB2 »

invest2bfree wrote: Sun Aug 01, 2021 12:48 am https://www.portfoliovisualizer.com/bac ... tion2_2=40


It is really a sad state of affairs if we are going to repeat the last 20 years especially with low yields going forward.

If I plan to withdraw $50,000 with a starting total of $1M ran out of money in 2016 for 100% S&P 500 allocation.

60% stocks and 40% cash barely made it with only $197,096 as the remainder. I used cash because of the low yields we are experiencing. I do not believe the bond markets returns of last 20 years cannot be repeated.
Lots and lots of flaws here as have been pointed out. Your thread title reminds me of the type of stuff Marketwatch or Yahoo finance might post.
Topic Author
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by invest2bfree »

johnrbain wrote: Sun Aug 01, 2021 12:08 pm Run your numbers with either Wellington or Wellesley. You come out looking much better.
Another post driving forwards and looking backwards.

Wellington and Wellsey funds performance cannot be reproduced the next 20 years because they are bond heavy.

If we get 1966-1982 all bets are off.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Topic Author
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by invest2bfree »

pasadena wrote: Sun Aug 01, 2021 12:00 pm Yep. But if you:

- Use $40k (4% rule), you still have about $500k in 2021:
- Use VTSAX instead of SPY to cover the whole market, you still have $800k in 2021 (and that's with $50k withdrawal).
- use VTSAX and $40k withdrawal, you have $1.7M in 2021.

I don't think I ever saw anyone recommend a 5% withdrawal rate (adjusted for inflation) and a 100% stocks portfolio in retirement.

tl;dr: your problem isn't bond yields (!), it's your withdrawal rate and/or fund choice (also, frankly, the AA is really not safe at all)
VTSAX is not a right comparison because it starts in 2001, spy started in 2000.
it is like comparing starting from 2009 instead of 2008.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
johnrbain
Posts: 22
Joined: Sat Dec 19, 2015 1:16 pm

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

Post by johnrbain »

I may have misunderstood your original post.
You did reference the year 2000 going forward and did state you ran out in year 2016. So all I did was take your original statement and ran it with different investments. You more than likely can pick a 20 year period and run out of money with either Wellington or Wellesley but their track record does hold up fairly well over the long run and it's true past performance is no guarantee of the future but what else have we got to work with?
Locked