SWR Question

ErinGoBrath

Linton said:

michaels said:

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

As I see it the whole role of SWR, or any other retirement planning approach, is to give you the confidence to retire despite the future being entirely unknown. From my experience of retirement it is difficult to believe that anyone would actually blindly implement it.  Things change too much.

Quite.

Otherwise people will rely on annuities and work for much longer than they need to to build up much higher funds to buy annuities due to the poor rates on offer. So would work to 70 for an annuity whereas could go at 60 with drawdown atba similar level and some sensible guidance.

jamesd

westv said:

Just curious to know whether people count the any cash funds in the total pot from which any withdrawal percentage is calculated or whether their cash funds are totally separate.

Part of the pot, counts as bonds for drawdown rules that don't treat it differently.

jamesd

coyrls said:

With a classic SWR strategy, the withdrawal percentage is only calculated once, from the total pot.  The calculated sum is then increased each year by inflation; there is no subsequent withdrawal percentage calculation.

That's how the analysis is done but it isn't what people are expected to do and a new SWR can be calculated at any time. Normally after years of average or good performance which make it necessary to avoid dying with too much money. You'd also do it for downwards adjustment after a particularly bad decade or maybe worse five years.

jamesd

michaels said:

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

Hopefully you're using drawdown rules that vary income and whether you are or not, you aren't expected to walk towards an apparent cliff but recalculate. If you have a bad decade you shouldn't continue as if nothing happened.

Hopefully by year fifteen even a 55 year old initial retiree will have some years of state pension deferral done and can stop deferring for a while to avoid excessive depletion. Or if retired before that, could claim instead of deferring.

If using cash or low volatility set-aside money to fund deferral, that pot could temporarily be drawn on. Or deferral could continue as planned to get to the minimum desired amount of guaranteed income.

michaels

jamesd said:

michaels said:

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

Hopefully you're using drawdown rules that vary income and whether you are or not, you aren't expected to walk towards an apparent cliff but recalculate. If you have a bad decade you shouldn't continue as if nothing happened.

Hopefully by year fifteen even a 55 year old initial retiree will have some years of state pension deferral done and can stop deferring for a while to avoid excessive depletion. Or if retired before that, could claim instead of deferring.

If using cash or low volatility set-aside money to fund deferral, that pot could temporarily be drawn on. Or deferral could continue as planned to get to the minimum desired amount of guaranteed income.

Not sure if cfiresim is working properly, at the moment it is giving a higher return for a 100% success constant real terms income than for a variable income using for example Guyton Klinger or any of the other variable drawdown strategies...

Thrugelmir

Sea_Shell said:

Linton said:

michaels said:

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

As I see it the whole role of SWR, or any other retirement planning approach, is to give you the confidence to retire despite the future being entirely unknown. From my experience of retirement it is difficult to believe that anyone would actually blindly implement it.  Things change too much.

You'd need nerves of steel to keep spending at your SWR if your investments are tanking!!!

And if your investments flat line.  Will you be tempted to tinker in an attempt to improve the returns? Majority of overall stock market returns are being made by fewer and fewer companies. The past 3/4 years clearly illustrate this. 

jamesd

michaels said:

Not sure if cfiresim is working properly, at the moment it is giving a higher return for a 100% success constant real terms income than for a variable income using for example Guyton Klinger or any of the other variable drawdown strategies...

The author seems quite responsive so a bug report including a saved link to a run of each should work.

michaels

jamesd said:

michaels said:

Not sure if cfiresim is working properly, at the moment it is giving a higher return for a 100% success constant real terms income than for a variable income using for example Guyton Klinger or any of the other variable drawdown strategies...

The author seems quite responsive so a bug report including a saved link to a run of each should work.

Agreed, I was just hoping before looking like an idiot someone might have a view on whether lower withdrawals under  guyton-klinger than constant real terms draw-down is ever likely to happen?

coyrls

michaels said:

jamesd said:

michaels said:

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

Hopefully you're using drawdown rules that vary income and whether you are or not, you aren't expected to walk towards an apparent cliff but recalculate. If you have a bad decade you shouldn't continue as if nothing happened.

Hopefully by year fifteen even a 55 year old initial retiree will have some years of state pension deferral done and can stop deferring for a while to avoid excessive depletion. Or if retired before that, could claim instead of deferring.

If using cash or low volatility set-aside money to fund deferral, that pot could temporarily be drawn on. Or deferral could continue as planned to get to the minimum desired amount of guaranteed income.

Not sure if cfiresim is working properly, at the moment it is giving a higher return for a 100% success constant real terms income than for a variable income using for example Guyton Klinger or any of the other variable drawdown strategies...

Are you starting with the same withdrawal percentage for both, or is the Guyton Klinger starting at a higher point?
 [edit] sorry you are working backwards from 100% success, so my comment doesn't apply.

jamesd

michaels said:

Agreed, I was just hoping before looking like an idiot someone might have a view on whether lower withdrawals under  guyton-klinger than constant real terms draw-down is ever likely to happen?

Not that I can think of.