SWR Question

BritishInvestor

jamesd said:

If I remember correctly the UK worst starting year was 1937, so severely influenced by WW2 early in retirement and post-war rationing.

An atypical time but by their nature a 100% success rate SWR is atypical because it's set by the worst observed sequence for the rules and investments being used.

Depends on a number of factors - late 60s tends to feature regularly.

Nov-68

May-61

May-61

Apr-61

Nov-68

Jan-29

Jan-15

Jan-29

Jul-55

Nov-68

Jan-15

jamesd

Yes, the inflation-affected 1960s is pretty bad and worst case normally for US investors. Lots of bad periods that aren't quite the worst.

It's very easy at the moment for people not to understand just how bad high inflation can be.

JohnWinder

Here's Michael Kitces' take on this - inflation early in retirement is the killer:

'...it’s not necessarily just about the danger of getting a severe bear market on the eve of retirement. In fact, a deeper look at the data reveals that there is remarkably little relationship between returns in the first year or two of retirement, and the safe withdrawal rate that can be sustained in the portfolio… even if retirement starts out with a market crash. Instead, it turns out that the true driver of sequence of return risk and safe withdrawal rates are the returns that the retiree earns over the first decade – and specifically, the real returns over the first decade,....'

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

BritishInvestor

JohnWinder said:

Here's Michael Kitces' take on this - inflation early in retirement is the killer:

'...it’s not necessarily just about the danger of getting a severe bear market on the eve of retirement. In fact, a deeper look at the data reveals that there is remarkably little relationship between returns in the first year or two of retirement, and the safe withdrawal rate that can be sustained in the portfolio… even if retirement starts out with a market crash. Instead, it turns out that the true driver of sequence of return risk and safe withdrawal rates are the returns that the retiree earns over the first decade – and specifically, the real returns over the first decade,....'

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

"the real returns over the first decade"
Agreed, which why the late 60s was a bad time to retire with the impending inflation AND poor market returns.

westv

BritishInvestor said:

JohnWinder said:

Here's Michael Kitces' take on this - inflation early in retirement is the killer:

'...it’s not necessarily just about the danger of getting a severe bear market on the eve of retirement. In fact, a deeper look at the data reveals that there is remarkably little relationship between returns in the first year or two of retirement, and the safe withdrawal rate that can be sustained in the portfolio… even if retirement starts out with a market crash. Instead, it turns out that the true driver of sequence of return risk and safe withdrawal rates are the returns that the retiree earns over the first decade – and specifically, the real returns over the first decade,....'

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

"the real returns over the first decade"
Agreed, which why the late 60s was a bad time to retire with the impending inflation AND poor market returns.

Although I can't imagine many then relied on drawdown. 

Thrugelmir

westv said:

BritishInvestor said:

JohnWinder said:

Here's Michael Kitces' take on this - inflation early in retirement is the killer:

'...it’s not necessarily just about the danger of getting a severe bear market on the eve of retirement. In fact, a deeper look at the data reveals that there is remarkably little relationship between returns in the first year or two of retirement, and the safe withdrawal rate that can be sustained in the portfolio… even if retirement starts out with a market crash. Instead, it turns out that the true driver of sequence of return risk and safe withdrawal rates are the returns that the retiree earns over the first decade – and specifically, the real returns over the first decade,....'

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

"the real returns over the first decade"
Agreed, which why the late 60s was a bad time to retire with the impending inflation AND poor market returns.

Although I can't imagine many then relied on drawdown. 

Nor had access to US or other international stock markets.  Let alone exposure to US rates of inflation.

BritishInvestor

Thrugelmir said:

westv said:

BritishInvestor said:

JohnWinder said:

Here's Michael Kitces' take on this - inflation early in retirement is the killer:

'...it’s not necessarily just about the danger of getting a severe bear market on the eve of retirement. In fact, a deeper look at the data reveals that there is remarkably little relationship between returns in the first year or two of retirement, and the safe withdrawal rate that can be sustained in the portfolio… even if retirement starts out with a market crash. Instead, it turns out that the true driver of sequence of return risk and safe withdrawal rates are the returns that the retiree earns over the first decade – and specifically, the real returns over the first decade,....'

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

"the real returns over the first decade"
Agreed, which why the late 60s was a bad time to retire with the impending inflation AND poor market returns.

Although I can't imagine many then relied on drawdown. 

Nor had access to US or other international stock markets.  Let alone exposure to US rates of inflation.

Not sure of the relevance of US inflation?

Thrugelmir

BritishInvestor said:

Thrugelmir said:

westv said:

BritishInvestor said:

JohnWinder said:

Here's Michael Kitces' take on this - inflation early in retirement is the killer:

'...it’s not necessarily just about the danger of getting a severe bear market on the eve of retirement. In fact, a deeper look at the data reveals that there is remarkably little relationship between returns in the first year or two of retirement, and the safe withdrawal rate that can be sustained in the portfolio… even if retirement starts out with a market crash. Instead, it turns out that the true driver of sequence of return risk and safe withdrawal rates are the returns that the retiree earns over the first decade – and specifically, the real returns over the first decade,....'

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

"the real returns over the first decade"
Agreed, which why the late 60s was a bad time to retire with the impending inflation AND poor market returns.

Although I can't imagine many then relied on drawdown. 

Nor had access to US or other international stock markets.  Let alone exposure to US rates of inflation.

Not sure of the relevance of US inflation?

Nor am I.  Hence my comment. 

BritishInvestor

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

westv said:

BritishInvestor said:

JohnWinder said:

Here's Michael Kitces' take on this - inflation early in retirement is the killer:

'...it’s not necessarily just about the danger of getting a severe bear market on the eve of retirement. In fact, a deeper look at the data reveals that there is remarkably little relationship between returns in the first year or two of retirement, and the safe withdrawal rate that can be sustained in the portfolio… even if retirement starts out with a market crash. Instead, it turns out that the true driver of sequence of return risk and safe withdrawal rates are the returns that the retiree earns over the first decade – and specifically, the real returns over the first decade,....'

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

"the real returns over the first decade"
Agreed, which why the late 60s was a bad time to retire with the impending inflation AND poor market returns.

Although I can't imagine many then relied on drawdown. 

Nor had access to US or other international stock markets.  Let alone exposure to US rates of inflation.

Not sure of the relevance of US inflation?

Nor am I.  Hence my comment. 

I think we're getting UK and US historical outcomes mixed up. My 60s reference was in the context of a UK retiree (assuming drawdown etc was available back then).

westv

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.