Retirement Saving Benchmarks

[Anonymous]

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

Here is the thing, your last comment is spot on. No one knows. It is just a rule of thumb. 4% should not be too conservative. But when you retire matters. And your portfolio matters. International stocks should be there but they are crap and always will be -- same for bonds. Your portfolio to use the 4% rule should be pretty stock heavy. And you have to with stand the down markets -- so what does that mean? You may have to cut spending in down markets. Take 3% or even 2.5%. No trips; little fun. If you can limit your withdrawals in down times you can recover in the good times. Also a good trick that really does wonders for the portfolio is to reduce spending 2% a year for five years at a point when you think you will be doing less. That is a 10% decrease after it is all kicked in which will help keep your portfolio active. The trick is when you start this -- for some people 75 for other 80 to 85. If you account for this now I think you will see there is a good chance for your portfolio to make it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My 2 largest expenses by far are my kids’ private school and my mortgage, both of which will be gone when I’m in my early 50s. I’m not sure why I would project those expenses going into my retirement. If I’m anything like my own parents my expenses will go way down in retirement.

My parents expenses haven't gone down that much. The mortgage is dwarfed by increases in property taxes/insurance premiums with house appreciation and the memories of private school were distant memories by the time they were retired. They travel a lot more and spend a lot more on healthcare.

By contrast, my dad spends almost nothing in retirement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

[Anonymous]

Anonymous wrote:How does SS income factor in? Let’s say both spouses can expect $3000 or so per month based in the calculator on the SS website. That’s 70,000 per year right there. What am I missing? I agree with some posters who say that the formulas don’t apply for people with a higher HHI. Right now, 80% of my expenses are child related: private school, lessons, tutors, clothes, hobbies, and more than 50% of vacation expenses as I have to travel at peak season. So I really don’t think that the models apply. In terms of healthcare - I already pay for private insurance and max out all co pays etc. So what am I missing? Honestly, if I need institutional care when I am old, I’ll get it in my home country and not the US. Can’t afford quality care here (and unwilling to spend all my hard earned savings on that).

You have to start with your best estimate of retirement expenses. Harder to do the further out you are, but you do the best you can - what will go away, what will increase, etc. You can use different numbers or ranges if you want to .

Then you can do what almost all financial planners do and plug it into one of the available calculators. I like cfiresim but firecalc and others are fine. I find that the calculators from the brokers and advisers tend to skew much more pessimistic. Tell it when you’re planning on taking SS and the amount - and definitely think about deferring until age 70 if you can. If you have an expected inheritance, plug it in. If you plan on selling your home to move into a retirement community, plug that in too. Adjust rates of return and inflation to see what those do to your projections.

Do a bunch of runs with different assumptions and you’ll get a great idea of what your retirement will look like. Way better than any “benchmark.”

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

no, i get your pt. your pt wasn't that complicated

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

no, i get your pt. your pt wasn't that complicated

Complicated enough that you missed it, but whatever.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

no, i get your pt. your pt wasn't that complicated

Complicated enough that you missed it, but whatever.

i clap you

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

no, i get your pt. your pt wasn't that complicated

Complicated enough that you missed it, but whatever.

DP: I know a lot of people find security gives them more happiness than spending, so having a 2-3% withdrawal rate might allow them to enjoy the fruits of their labor rather than taking a risk. There are a lot of critiques of the 4% withdrawal rate--it's based on US data in one historical time period--when US was the dominant growing country. And it was calculated at a time when statistics were more simple and it's based on a 30 year retirement. The idea that you can safely and confidently set 4% of your initial retirement account and then get that amount inflation-adjusted return for your whole retirement just isn't that sensible. Sometimes you would likely fall short, other times you would be wildly underspending. In my opinion, it's better to forget this idea of a SWR and instead set a minimum floor of what you need and get that through safe sources (e.g., social security, treasury bills, annuities), set a reserve fund for emergencies/health care/long-term care, and then spend more based on the earnings of what is left. Stock market goes up--spend more, down --spend less. Seems more fun too.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

no, i get your pt. your pt wasn't that complicated

Complicated enough that you missed it, but whatever.

DP: I know a lot of people find security gives them more happiness than spending, so having a 2-3% withdrawal rate might allow them to enjoy the fruits of their labor rather than taking a risk. There are a lot of critiques of the 4% withdrawal rate--it's based on US data in one historical time period--when US was the dominant growing country. And it was calculated at a time when statistics were more simple and it's based on a 30 year retirement. The idea that you can safely and confidently set 4% of your initial retirement account and then get that amount inflation-adjusted return for your whole retirement just isn't that sensible. Sometimes you would likely fall short, other times you would be wildly underspending. In my opinion, it's better to forget this idea of a SWR and instead set a minimum floor of what you need and get that through safe sources (e.g., social security, treasury bills, annuities), set a reserve fund for emergencies/health care/long-term care, and then spend more based on the earnings of what is left. Stock market goes up--spend more, down --spend less. Seems more fun too.

+1. Know your spending needs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

no, i get your pt. your pt wasn't that complicated

Complicated enough that you missed it, but whatever.

DP: I know a lot of people find security gives them more happiness than spending, so having a 2-3% withdrawal rate might allow them to enjoy the fruits of their labor rather than taking a risk. There are a lot of critiques of the 4% withdrawal rate--it's based on US data in one historical time period--when US was the dominant growing country. And it was calculated at a time when statistics were more simple and it's based on a 30 year retirement. The idea that you can safely and confidently set 4% of your initial retirement account and then get that amount inflation-adjusted return for your whole retirement just isn't that sensible. Sometimes you would likely fall short, other times you would be wildly underspending. In my opinion, it's better to forget this idea of a SWR and instead set a minimum floor of what you need and get that through safe sources (e.g., social security, treasury bills, annuities), set a reserve fund for emergencies/health care/long-term care, and then spend more based on the earnings of what is left. Stock market goes up--spend more, down --spend less. Seems more fun too.

I don't disagree that some type of VPW is probably the best. I just personally think 2-3% fixed, unless you're really rich, is probably unnecessarily restrictive.

[Anonymous]

Don't go more than 3%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

A lot of folks can do that without spending money. More money = money happiness is not always right.

You’re 100 percent missing my point.

no, i get your pt. your pt wasn't that complicated

Complicated enough that you missed it, but whatever.

DP: I know a lot of people find security gives them more happiness than spending, so having a 2-3% withdrawal rate might allow them to enjoy the fruits of their labor rather than taking a risk. There are a lot of critiques of the 4% withdrawal rate--it's based on US data in one historical time period--when US was the dominant growing country. And it was calculated at a time when statistics were more simple and it's based on a 30 year retirement. The idea that you can safely and confidently set 4% of your initial retirement account and then get that amount inflation-adjusted return for your whole retirement just isn't that sensible. Sometimes you would likely fall short, other times you would be wildly underspending. In my opinion, it's better to forget this idea of a SWR and instead set a minimum floor of what you need and get that through safe sources (e.g., social security, treasury bills, annuities), set a reserve fund for emergencies/health care/long-term care, and then spend more based on the earnings of what is left. Stock market goes up--spend more, down --spend less. Seems more fun too.

+1. This is the common sense (and conservative) way to go. I'm hoping the long-term rates go up a lot more and stocks fall a lot more so I can load up on treasuries and divy stocks so I can get a combined interest/divy cash flow of about 100-120K/year. combine with SS, this would be more than enough to meet our spending needs. Let the rest of my portfolio run with stocks to take care of my legacy/charity wishes or of course dip into for late life care.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Not anecdotal, the 4% was based on research, though obviously all the data is backwards looking and past results may not be indicative of future results.

Still, I think there is a significant group of folks who are way too conservative, they wouldn’t be satisfied even with at $20M portfolio and a 2% withdrawal rate. Fine if they want to hoard, I suppose, but isn’t the point to know when you can relax and enjoy the fruits of your labor?

The 4% has recently been re-adjusted to be a recommendation of 3.5%.