Retirement - Managing your money

[boatpoker]

Originally Posted by Rumrace

You can’t help everyone. Stupid people have rights too.

Point proven.

[Rumrace]

Fire calc is a good idea. I don’t think inflation is going to end any year soon in the luxury market. We will slowly loose access to diesel as a fuel I buy bridge mortgages with honest developers. It’s easier than flipping smaller properties and returns are in the 40% area over the build period. Toronto is kinda unique we need 56,000 homes a year the majority condos.
I like investments in your back yard. Separates the BS from the buckwheat quickly.
The second mortgage holders are paid out the day the banks take over the property. We are just financing the build of the condo.
But as to US advise we can provide you with a massive list but let’s just take one. General Motors. They borrowed 650 million from the province of Ontario 2008 never pad back 450 million while handing 6 figure bonuses.out. I hope your 401k got some of their rape. There are only 38 million Canadians. Do the math.
It’s why any clear thinking Canadian won’t but anything from them and why they are boycotted from all levels of government fleet sales. And why they are advertising like nuts to new immigrants.

[AKA-None]

Why would you ask a bunch of strangers how to manage your retirement funds when there are people who do that for a living?

[danstanford]

Originally Posted by AKA-None

Why would you ask a bunch of strangers how to manage your retirement funds when there are people who do that for a living?

Because we don't really trust those people who do it for a living and are looking for 'experienced' advice.

[Uncle Bob]

Originally Posted by danstanford

Because we don't really trust those people who do it for a living and are looking for 'experienced' advice.

Fair response, I will offer the view at which I arrived some time ago, that is to embrace the concept "do what you do well and pay others to what they do well",of course with the caveat that research and due diligence on your part are of extreme importance.

[Kd9truck]

Sooo what’s this post about ? Are you advertising Finacial planing?

[clamshack]

Originally Posted by Uncle Bob

Fair response, I will offer the view at which I arrived some time ago, that is to embrace the concept "do what you do well and pay others to what they do well",of course with the caveat that research and due diligence on your part are of extreme importance.

At the present time it's difficult to find anybody that does anything well. If they are one of the very few who do something well they usually charge a fortune (rightfully so I guess).

So, currently it makes sense to do as much as you can yourself. These days investing is more or less free at the big brokerage firms and mutual funds have made diversification simple. I don't trust an "advisor" that tells me they can beat the market, so this poster just seems to be presenting a withdrawals strategy for the DIY investor.

[smac999]

With the stock market crashing 80% any month now. And actual Inflation at 100% There is nothing to do to prepare. Stock up on food while you still can. . The next few years are going to be rough for most people.

[Captain Graham]

Originally Posted by valhalla360

So:
- 16% Cash equivalents
- 6.4% Bonds
- The rest in stocks.

It's OK but a little more conservative than I would go and it ignores inflation. If you want to play the 4% rule, it assumes the annual amount taken out is increased annually to offset inflation.

Honestly, very rare for a downturn to last more than 3yrs and if it was that bad, I would compensate by reducing withdrawals rather than lock in lower returns. In fact, in such a bad situation, there is a good chance of deflation and you don't need the annual inflation increase anyway.

Personally, I would split the budget into need vs want and cover the need portion, so I can benefit from the higher returns on a larger portion of the account.

And as someone else said, you have to include Social Security and pensions.

Keep in mind also that the vast majority of the time the 4% rule results in your accounts actually growing faster than inflation. The 30yr running out of money is basically a worst case scenario and the author who came up with it believes it's too low. A better solution would be 4% of the end of year balance. It can never run out and if the market does well, you get a raise.

But what did this have to do with cruising and boats?

Sorry I missed your post.

Here are 2 other withdrawal strategies.
I am assuming no inflation just to make the numbers easy

1. The 4% rule fixed withdrawal.
The withdrawal amount is fixed at 4% of your first years savings ($1,000,000) and no matter what happens in the stock market you still take out the $40,000
So if the market drops for a few years your retirement savings can get so low it does not recover.
2. Simple 4% withdrawal rate where the amount you withdrawal is always 4% of your total retirement savings.
So year 1 you have $1,000,000 in savings and you withdraw 4% or $40,000.
Year 2 the market drops to $800,000 you withdraw 4% of the $800,000 or $32,000
But if the market increased to $1,200,000 you would be withdrawing $48,000
(4% of $1,200,00)
The problem is your withdrawal amount is always changing.

Nothing wrong with any of the strategies just know what the advantages and disadvantages are.

[Captain Graham]

Some have wondered why I started this thread.
Many people have a dream to cruise the world when they retire.
They will need money to make their dream a reality.

This thread is not how to save and invest your money.
It is how to manage withdrawing your money from your saving to help fund your retirement dream.

I just though some on this forum may have some ideas that would help us all.

[Anders]

Originally Posted by Captain Graham

Sorry I missed your post.

Here are 2 other withdrawal strategies.
I am assuming no inflation just to make the numbers easy

1. The 4% rule fixed withdrawal.
The withdrawal amount is fixed at 4% of your first years savings ($1,000,000) and no matter what happens in the stock market you still take out the $40,000
So if the market drops for a few years your retirement savings can get so low it does not recover.
2. Simple 4% withdrawal rate where the amount you withdrawal is always 4% of your total retirement savings.
So year 1 you have $1,000,000 in savings and you withdraw 4% or $40,000.
Year 2 the market drops to $800,000 you withdraw 4% of the $800,000 or $32,000
But if the market increased to $1,200,000 you would be withdrawing $48,000
(4% of $1,200,00)
The problem is your withdrawal amount is always changing.

Nothing wrong with any of the strategies just know what the advantages and disadvantages are.

The usual 4% rule that was pioneered by Bill Bengen and later used by firecalc and most of the retire early sites is that you take 4% of your starting portfolio and increase by inflation every year. This will be safe for 30 years if you make the assumption that the future will not be worse than the past and that your portfolio has a reasonable large cap/treasury bond mix.

[5BTM]

I am getting 4.5% in dividend yield without touching the capital.
No advisor, discount brokerage through my bank, mostly ETF's.

[dannc]

Originally Posted by Anders

The usual 4% rule that was pioneered by Bill Bengen and later used by firecalc and most of the retire early sites is that you take 4% of your starting portfolio and increase by inflation every year...

Firecalc does not use the 4% rule. One can run a variety of models on Firecalc, I have, and one sees the 4% pop up as a withdrawal rate that will not likely run out of money in my lifetime, with our investments. The Firecalc website allows one to play around with quite a few variables, pages of variables, but it does not use a 4% factor.

https://www.firecalc.com/

How it works - the philosophy:
FIRECalc makes a single fundamental assumption:
If your retirement strategy would have withstood the worst ravages of inflation, the Great Depression, and every other financial calamity the US has seen since 1871, then it is likely to withstand whatever might happen between now and the day you no longer have any need for your retirement funds.

If you accept that assumption, then just tell FIRECalc how much you have and how much you'll be spending, and FIRECalc will tell you how often your strategy would have worked throughout history. Or what you need to change to make it all work.

Firecalc takes a bunch of variables, including current investment, rate of return, inflation, withdrawals, etc, and generates output including a graph and this text:

FIRECalc looked at the 122 possible 30 year periods in the available data, starting with a portfolio of $750,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 122 cycles. The lowest and highest portfolio balance at the end of your retirement was $-300,739 to $4,259,606, with an average at the end of $1,419,766. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.1%.

This was based on the Firecalc defaults which includes spending $30K a year from a $750K investment amount for 30 years. With the model assumptions, one has a 95% chance of not running out of money before one dies based on the HISTORICAL events back to 1871. Will the future mimic the past? Is 95% a good number or does want a 100% result? That is up to the user to decide.

Later,
Dan

[Anders]

Originally Posted by dannc

Firecalc does not use the 4% rule. One can run a variety of models on Firecalc, I have, and one sees the 4% pop up as a withdrawal rate that will not likely run out of money in my lifetime, with our investments. The Firecalc website allows one to play around with quite a few variables, pages of variables, but it does not use a 4% factor.

https://www.firecalc.com/


Firecalc takes a bunch of variables, including current investment, rate of return, inflation, withdrawals, etc, and generates output including a graph and this text:



This was based on the Firecalc defaults which includes spending $30K a year from a $750K investment amount for 30 years. With the model assumptions, one has a 95% chance of not running out of money before one dies based on the HISTORICAL events back to 1871. Will the future mimic the past? Is 95% a good number or does want a 100% result? That is up to the user to decide.

Later,
Dan

Firecalc defaults to a 4% withdrawal rate plus inflation and it uses the same methodology that Bengen did when he found out that 4% was 100% safe. The difference is that Firecalc by default uses different portfolio allocation while Bengen in his original paper used a 50%/50% mix of s&p500 and intermediate term treasury. Bengen does not mention portfolio expenses and he probably did not include them in the calculations.

[NPCampbell]

Originally Posted by Captain Graham

2. We will be taking out 4% or $40,000 each year to spend.
4% is the considered a normal withdrawal rate.
If your expenses are less you can take out less.
If you take out more then 4% you are at risk of running out of money.
4% assumes you will live 30 years in retirement.

The rule of 4% does not mean you withdraw 4% every year. Your withdrawal rate needs to be adjusted by inflation every year or your buying power will disappear by the time you reach the end of retirement. The withdrawal rate will basically increase every year.

For example, if your withdrawal rate last year was 4% and this year inflation is 9% then the withdrawal rate this year should be 4.36% (4x1.09). Next year the withdrawal rate would be 4.36% x (1+next years inflation rate).

As long as your investment return is 1.3% greater than inflation then your funds should last 30 years. If your funds earn significantly more than inflation+1.3% then you can lower your rate to make your funds last longer than 30 years or alternatively increase your withdrawal amounts.


As far as buckets are concerned, I am only planning on 2 buckets. An inflation hedged bucket (like TIPS) to pull from in down markets and an investment bucket composed of primarily buffered ETFs.