The 4% "rule" should be treated with extreme caution in an Irish context -
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Stocktake: Is the 4% rule is too risky for Irish retirees?
Traditional rule of thumb would leave pensioners in financial squeeze
I very much agree with this conclusion.
Case study Have I enough to retire now ?
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Gordon Gekko
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Even in that article, it states that the ‘4% rule’ applied to a traditional ‘60/40’ portfolio in the US would have failed 5% of the time.
I consider 5% way too high a risk to take in terms of running out of money in old age.
I wouldn’t board a plane that crashes “only 5% of the time”.
Running out of money when you’ve no capacity to make any more if it is disastrous.
67% failure rate in Italy…Mamma Mia!
I consider 5% way too high a risk to take in terms of running out of money in old age.
I wouldn’t board a plane that crashes “only 5% of the time”.
Running out of money when you’ve no capacity to make any more if it is disastrous.
67% failure rate in Italy…Mamma Mia!
Personally for me as an early retiree and someone one who has a high tolerance for risk the idea of retiring with a fund of €1.25 mil and a dependant partner who is only 45 is not something that I would ever consider as a viable option, I would even hazard a guess that if the OP did retire today that by the time the partner reaches their state pension entitlement age the fund will be so depleted that it will add little or no benefit
to either of them and both will become solely reliant on the state pension, that's of course if both are entitled to the state pension
My advise for the op would be to sit down with a financial advisor and crunch out the numbers and see where they land but I think more importantly than that the OP needs to more aware or get a better understanding to their exact financial requirement during retirement
to either of them and both will become solely reliant on the state pension, that's of course if both are entitled to the state pension
My advise for the op would be to sit down with a financial advisor and crunch out the numbers and see where they land but I think more importantly than that the OP needs to more aware or get a better understanding to their exact financial requirement during retirement
NoRegretsCoyote
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There is the risk of a sequence of bad returns. There is also the risk of living to 95. These risks are uncorrelated!
You would need some combination of a very high ARF and very low drawdowns to insure against a bad sequence of returns AND a very long life. The expected value of your ARF on death would be really high.
You have to take some risks with the rate at which you draw down your ARF. Most retiring couples have a baseline level of insurance anyway in the shape of a paid-off dwelling, two state pensions and kids through college.
OP claims his 45-year-old non-working spouse will get a full contributory state pension. I'm not sure how given she is not in employment and the kids are grown up.
Gordon Gekko
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General life expectancy is from birth, so the life expectancy of a person starting to draw on an ARF or indeed a 45 year old woman are not the same. The couple could quite easily have a 50 year time horizon.
A retirement plan that fails 5% of the time would worry me greatly, and I’m pretty relaxed about investment risk. And let’s not forget, that was just the US data.
I don’t think that the OP can retire right now.
A retirement plan that fails 5% of the time would worry me greatly, and I’m pretty relaxed about investment risk. And let’s not forget, that was just the US data.
I don’t think that the OP can retire right now.
To be fair I think the analogy needs tweaking, although the point still stands..
It should read, be kicked out of first class and have to walk all the way down to economy, only 5% of the time.
50
No, failure in this context means that the portfolio has been fully depleted - it’s not simply a shift to economy class.It should read, be kicked out of first class and have to walk all the way down to economy, only 5% of the time.
Bear in mind that the so-called 4% “rule” refers to the dollar-amount that can be “safely” withdrawn from a portfolio every year over a 30-year period without fully depleting that portfolio. So, the dollar-amount is calculated at 4% of the initial portfolio value and then adjusted for inflation in each subsequent year.
Obviously withdrawing a fixed % from a portfolio with a variable value can never fully deplete the portfolio. The only snag is that the income will be, well, variable.
Surely the monetary denomination is irrelevant to the 4% rule (of thumb)?
Duke of Marmalade
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This is a very valid point. Do you want to reach the age of 90 with a big pot and say to yourself "if only I had this to spend 20 years ago".To be fair I think the analogy needs tweaking, although the point still stands..
It should read, be kicked out of first class and have to walk all the way down to economy, only 5% of the time.
50
The pursuit of absolute security leads to Howard Hughes style isolation. One could argue that with the various state safety nets you won't be left destitute in your 90s so plan for a fuller lifestyle in early retirement.
Sorry, I don't understand your question.
The currency in which the drawdowns are denominated is obviously irrelevant if that's what you are asking.
Who said that the original poster's ARF is denominated in US$?
AAAContributor
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Nobody.
@Sarenco was just referring to the finer points of the research on which the "4% rule" is based such as Bill Bengen's original work, the subsequent Trinity study and all that follow.
If you are at a similar fork in the road to the OP, and you have the time and the curiosity, these are useful resources to wade through in advance of your own decision-making. Confusion re some of the points discussed will be gone!
https://www.amazon.co.uk/How-Much-Spend-Retirement-Investment-Based/dp/1945640022
https://www.amazon.co.uk/Living-Off-Your-Money-Retirement/dp/0997403403/ref=sr_1_1?dchild=1&keywords=living+off+your+money&qid=1629983759&s=books&sr=1-1
The Safe Withdrawal Rate Series - Early Retirement Now
One of the most important topics in financial planning is how to transform an initial portfolio into a safe and sustainable retirement income stream. I’ve put a lot of thought into this topic and published 50+ posts on my blog. To make my research more accessible, I created this “landing page”...
earlyretirementnow.com
The chances are that at 90 one would be spending less time in restaurants and pubs and would be taking fewer foreign holidays. In other words the cash burn rate should reduce over time. The biggest losers will probably be children and grandchildren who might see Grandad spending their inheritance.
Yes the portfolio has been depleted, and then you land in the economy class of state supports - you don't die.
Agree the first phase of retirement will have higher outgoings and the ARF will see me through that period. if it is completely bombed out due to some bad luck then the 2nd phase when slowing down will be shored up by state support.
I am not gonna holdback any lifestyle choices just to give some kind of guarantee of passing some money on to kids/grandkids who are not losing out on something that they never earned or owned, they might miss out on a bumper windfall, but I know I for one and gonna spend my money I earned as I see fit, help them out when I am alive sure, but they'll be under no illusion who deserves to benefit from the hard earned wonga
That's my plan too. I've a few more decades of work ahead of me though. I expect to be working into my 70's.I am not gonna holdback any lifestyle choices just to give some kind of guarantee of passing some money on to kids/grandkids who are not losing out on something that they never earned or owned, they might miss out on a bumper windfall, but I know I for one and gonna spend my money I earned as I see fit, help them out when I am alive sure, but they'll be under no illusion who deserves to benefit from the hard earned wonga
wheeler dealer
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There are plenty of handy part time jobs no commitment .A local teacher who gave up her job teaching because of ill health got a job as a sna in a school ,she says it is so easy but not all sna jobs are like this .At 57 with good health plenty of easy peasy jobs out there for you just to keep finances ticking over to delay dipping into pension