If you are an SWR purist, when does your retirement start?

Hoenir

michaels said:

Of course, that 10% market decline between handing in my notice and stating my retirement was so last weeks news, more like 20% now?

Has your portfolo lost 20% ?

zagfles

westv said:

OldScientist said:

westv said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

If the future is worse than the worst period in the past then we are all in big trouble!

The worst case in the past depends on a) whose past (e.g., for 30 year retirements there is a difference between the well-known '4% rule' for the US and the 3.0 %to 3.5% 'rule' for the UK and b) the data used (e.g., even for the well-researched US, there is a difference in SWR between different data sets, for different durations of fixed income and with the resolution of the data - monthly resolution gives a lower SWR than annual resolution).

I'm referring to the great depression, WW1 and WW2. We will all be in a sorry state if the future ends up worse than that.

It doesn't have to be a massive worldwide disaster like WW2, look at Japan, it was only last year the stockmarket got back to the 1989 level! No major wars, no great depression, no loony govt, yet stagnation for over 3 decades, longer than a typical retirement. 

zagfles

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Pat38493

Hoenir said:

michaels said:

Of course, that 10% market decline between handing in my notice and stating my retirement was so last weeks news, more like 20% now?

Has your portfolo lost 20% ?

I am not sure if he means the equities part or overall.

My portfolio which currently is about 57% equities has lost 8% overall.  14% on the equities (but I suspect that will up between 15 and 20% by the end of today).  That is since the peak at 24th January.

Small cap index funds are getting hammered more again - adding to the debate about whether small cap stocks are really a good diversifyer in market crashes anymore or if this is just slanted by historical periods from many decades ago.

It's an interesting week because a lot of advisers who use cash flow planning tools like Voyant Go, use April 6th as the date to update the balances (although probably many may do stress testing on current balances during the year).  What if this is a flash in the pan, tariffs are quietly diluted and the markets goes back up to last week's level?

Albermarle

michaels said:

Of course, that 10% market decline between handing in my notice and stating my retirement was so last weeks news, more like 20% now?

Even taking todays drops into account 

Vanguards FTSE All world is down 12.6% ( weak Dollar not helping)

Typical medium risk pension fund portfolio will be down between 4 and 6%  in 3 months.

michaels

Albermarle said:

michaels said:

Of course, that 10% market decline between handing in my notice and stating my retirement was so last weeks news, more like 20% now?

Even taking todays drops into account 

Vanguards FTSE All world is down 12.6% ( weak Dollar not helping)

Typical medium risk pension fund portfolio will be down between 4 and 6%  in 3 months.

The exchange rate hasn't been helping either

S&P down 15% from peak, GBP up from 1.22 to 1.31 in similar time frame

Hoenir

michaels said:

Albermarle said:

michaels said:

Of course, that 10% market decline between handing in my notice and stating my retirement was so last weeks news, more like 20% now?

Even taking todays drops into account 

Vanguards FTSE All world is down 12.6% ( weak Dollar not helping)

Typical medium risk pension fund portfolio will be down between 4 and 6%  in 3 months.

The exchange rate hasn't been helping either

S&P down 15% from peak, GBP up from 1.22 to 1.31 in similar time frame

Exchange rates are part and parcel of investing. November 2007 was trading to $2.10 to the £. 

Trump wants a weaker $ to improve the USA's export competitiveness. 

Hoenir

Pat38493 said:

Hoenir said:

michaels said:

Of course, that 10% market decline between handing in my notice and stating my retirement was so last weeks news, more like 20% now?

Has your portfolo lost 20% ?

Small cap index funds are getting hammered more again - adding to the debate about whether small cap stocks are really a good diversifyer in market crashes anymore or if this is just slanted by historical periods from many decades ago.

In the fog it's red across the board as investors stream for the exits. Selling tracker funds , in particular , of any description is non discriminatory. As it takes time to digest the news and assess the full financial impact on a company by company basis.  Shifting through the wreckage for gems is a worthwhile pastime. Smaller companies generally are more agile and are better at navigatating through the challenges. 

Apple employs over one million people in China directly and indirectly. Onshoring back to the USA isn't going to happen any time soon. Nor are consumers going to pay £2,500 for the latest Iphone. 

Time4T_Accounts

This is when I’m glad I shouted “bank” a few months ago, and shifted 9-ish years of future withdrawals to cash / STMM. On the other hand, if, in 8 years’ time, the equities element of my portfolio hasn’t recovered from this drop, then my view of my SWR may require modification. Until then, compass in hand, onwards…

Bostonerimus1

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.