Backtesting (2018-2024) your static 5% of balance non-inflation withdrawal(variable) vs 4% inflation adjusted portfolio withdrawal (Trinity), I found you would have ended up with more cash in the way of withdrawals, higher CAGR in total return and a higher ending balance in 2024 had you used the Trinity 4% inflation adjusted SWR. I used portfolio visualizer and a 60/40 portfolio (VTI/BND).I thought I would provide an update since I'm one of those weirdos that:
A) Has set and followed a % of portfolio withdrawal plan almost exactly since retiring
and
B) Is happier spending as much as a variable balance portfolio can reasonably provide versus setting a fixed and inflation-adjusted spending amount at the start of retirement.
So we've been withdrawing 5% of our annually updated portfolio balance since retirement in our mid-50's at the end of 2018. Our IPS and retirement withdrawal plan is in my signature below.
Our goals were to:
1) increase retirement income versus a lower(3-4%) inflation-adjusted SWR's in most sequences of returns.
2) Avoid massive runaway portfolio balances to the upside in average or better sequences (1982 example).
3) Avoid outright portfolio failure or amplifying portfolio declines in poor sequences (1966 example).
4) "Check out" with a legacy around what we started with in real $'s in average sequences.
5) Have a simple, easy to explain and follow IPS and retirement income plan
5 and 1/3 years in.....
Starting balance $1.56M
Current balance $1.91M
Time-weighted rate of return 9.3%
CAGR 3.9% (Includes effect of 5% withdrawals)
Inflation adjusted CAGR -0.2% (including effects of withdrawals and inflation).
Compared to an ultra-conservative 3% and inflation-adjusted SWR, we will have withdrawn and spent (by the end of 2024) over a quarter million $'s more from portfolio.
6-year spending from portfolio 2019-2024 $538K
6-year spending from portfolio using a 3% inflation-adjusted SWR $308K
I selected this plan after a couple years pre-retirement contemplating various options, and being most inspired by this test of the plan using historical sequences of returns in CFiresim.
https://www.cfiresim.com/0a7b06fc-4b6d- ... 93d4553787
Notes:
- Our portfolio provides about 50% of our retirement income. Safe sources (my pension and her SS) providing the other 50%.
- Our fixed expenses (needs) are low and around 30% of our retirement income.
- We set the annual withdrawal amount based on 5% of the prior year November 30 balance. Actual withdrawals are monthly for spending and quarterly for income taxes.
- An ace in the hole in the case of future poor sequence of returns and reduced portfolio income is my yet to be claimed and almost maxed out Social Security benefit.
So, I guess my question is, what is your point?
Statistics: Posted by retireIn2020 — Sun May 05, 2024 12:20 am