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Thread: Another take on SWR

  1. #81
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    Quote Originally Posted by AltaRed View Post
    Or better yet, use the Variable Percentage Method (VPW). SWR is too inflexible and misguided.
    As you know Alta, SWR is not really a "method". It is a guide that is useful in determining how much you need to save before retirement.

    Choosing a constant withdrawal percentage (like 4%) is no worse than guessing at a constant rate of return or inflation rate when planning for retirement. Most retirement calculators do that. VPW is, I guess aimed at those who have or are about to reach retirement. Has some merit, but may be too complex for many.

    I use CSWR (Common Sense Withdrawal Rate). Just spend what you can afford If you overspend one year, spend less the next year. Keeping average at somewhere in 3.5-4% range seems to work and is simple enough, It is what I use to "control" household spending (no new kitchen this year if we put new roof on last year )

    Last edited by agent99; 2017-03-20 at 10:37 AM.

  2. #82
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    Quote Originally Posted by agent99 View Post
    I use CSWR (Common Sense Withdrawal Rate). Just spend what you can afford If you overspend one year, spend less the next year. Keeping average at somewhere in 3.5-4% range seems to work and is simple enough, It is what I use to "control" household spending (no new kitchen this year if we put new roof on last year )
    The problem with common sense, as the joke goes, is that it is not very common....
    "That's what I do, I drink and I know things" - Tyrion Lannister

  3. #83
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    Quote Originally Posted by Koogie View Post
    The problem with common sense, as the joke goes, is that it is not very common....
    I think, to agent99's point, most people would have the intuition to cut back 'intuitively' in a year where their portfolio dropped in value due to financial market malaise BUT most likely don't have a framework to understand how much, especially if their SWR includes a capital withdrawal. IOW, does that person cut back so much that s/he doesn't bite into capital at all? That would be the safest approach in 'bad' years but would not really be necessary with a balanced portfolio.

    That is really what VPW is about if people took the time to understand that indeed, it is merely a process that resets the clock each year, based on an asset allocation, to determine what percentage is safe to withdraw. It intuitively makes sense but alas, most will not take the time to understand it...even though it will likely result in a higher spending retirement without risking premature depletion.

    P.S. I am with GreatLaker. It seems perverse not to fully enjoy the fruit of one's labour. It may take people some years of retirement to fully understand what they can really do with their portfolio. I started off with a conservative approach immediately pre, and post, retirement. My spending has more than doubled, and is heading even higher, 11 years into retirement. I have a good understanding of what my portfolio can do for me and I don't plan on leaving much of it behind. Capital depletion is (will be) part of it.

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  5. #84
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    I was being facetious.

    However, lets not forget the VAST majority of people in this country are in significant debt at any given time and saving poorly for retirement. If they can't see the lack of common sense inherent in either of those failures, they will probably never acquire the sense (or interest) to understand the fine differences between SWR and VPW.

    I happen to agree with spending down the capital and it is a significant part of my future plans. I like the VPW approach as well but don't place to much stock in its results, nor in the results of any SWR calculations. I am in my forties. For me at this point in time there are to many moving parts, assumptions and future unknowns for those type of calculations to produce any result that can be relied on. They can be widely useful guidelines but not much else.
    "That's what I do, I drink and I know things" - Tyrion Lannister

  6. #85
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    Quote Originally Posted by Koogie View Post
    I am in my forties. For me at this point in time there are to many moving parts, assumptions and future unknowns for those type of calculations to produce any result that can be relied on. They can be widely useful guidelines but not much else.
    Indeed, clarity improves considerably when retirement is looming in front of you, and even more after some years of retirement.

    FWIW, I provide financial guidance to a few retirees. It goes from the extreme of someone with a small DB pension and a low 6 digit RRSP (to convert soon to an RRIF) and someone with a pretty nice DB pension with a 7 figure portfolio. As you can imagine, my guidance to those individuals is radically different. The first is based on a balanced 50/50 portfolio and a necessary SWR/VPW type discipline and the latter is based on an 80/20 equity/FI portfolio where the individual lives happily on the cash flow only and with whom I am trying to encourage a step up in lifestyle and to start thinking about estate planning options.

  7. #86
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    Hmmm... how to create cash flow so we can either buy more stocks when they are cheap or live on the cash flow when we have to?

    Explain to me again how lousy distributing stocks are? lol!

    I'm an R-E guy. That's why I'm able to retire. Still, distributing stocks make up a significant portion of my monthly cash flow. Without distributing stocks, I would need to buy more properties and property ownership doesn't scale easily.

    There are a lot of things I would do differently, were I to start again. ... like start with distributing stocks from day one and leave the growth stocks until the core of distributing stocks are stable. We did almost that, though. The only mis-step was buying FCR. I sold that at the end of 2015 when business was booming, they were hardly paying a distribution, and the books didn't look that great. Thats when I knew there was a leak so we bought even more DRG-UN in Feb 2016 when it was distributing over 10%. I have to admit, we were very lucky with DRG-UN.

    The formula is so simple, it's really difficult to follow.

    - simple stocks that are understandable
    - debt that isn't too off the hook
    - I look at bonuses paid during bad years. If they set bonus records during periods of loss, I black ball the stock. For that reason, my short list has only about 45 stocks on it. lol!
    - they either need to distribute a good amount of their profit, buy back their stock, or be in a significant expansionary phase without trying to maximize market capitalization with every merger... some of the money needs to be returned to investors in a direct way such as described
    - from there, I buy and hold
    - distributions, new contributions, and other investment income is used to expand the investments based on the best value of the moment, and only when there is a decent value available. I don't get too caught up in balancing. Our portfolio has become more balanced over time but I just look to buy good businesses and then I hang in there through thick and thin.
    Last edited by TomB19; 2017-03-21 at 01:58 AM.

  8. #87
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    Quote Originally Posted by Koogie View Post

    I happen to agree with spending down the capital and it is a significant part of my future plans.
    Our portfolio value is about 50% higher that it was when we retired about 14 yrs ago. We don't know what it will be over the coming 20-25 yrs, but we could no doubt double our spending by drawing down capital and likely still not deplete our savings very much. However, markets could drop back as they did in 2008/9. We have a comfortable enough lifestyle and don't see changing it. Our grown up kids do not look to be on track to have enough saved by the time they retire. So, in a way, we are doing it for them. We will be there to help if they need it.

  9. #88
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    Quote Originally Posted by agent99 View Post
    Our portfolio value is about 50% higher that it was when we retired about 14 yrs ago. We don't know what it will be over the coming 20-25 yrs, but we could no doubt double our spending by drawing down capital and likely still not deplete our savings very much. However, markets could drop back as they did in 2008/9. We have a comfortable enough lifestyle and don't see changing it. Our grown up kids do not look to be on track to have enough saved by the time they retire. So, in a way, we are doing it for them. We will be there to help if they need it.
    And it is your choice to help out your children in that way. We could probably debate the morals of that but why bother since it comes down to personal preference.

    We will be drawing down the capital but at nowhere near a rate that would "double our spending". More like goosing it by a percent or two a year.

    And no, we have no kids and no real need to leave a "legacy" Not that we necessarily would anyway. I've seen to many poor examples of what that can do to the beneficiaries.
    "That's what I do, I drink and I know things" - Tyrion Lannister

  10. #89
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    As regards to children, I think that we have a responsibility to minimize the chances of becoming a financial burden if it happens that we "fail to die in a timely manner". I think too few retirees think enough about longevity insurance... Or what a prolonged bout of higher inflation could do to a fixed income portfolio...

  11. #90
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    ^Good point.

    We can't plan our date of death. We will either have too little money and become a burden - or - too much money and leave a legacy. The later is the better choice.

    If you have something to say - then say.

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