How much is enough 2014

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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ghariton
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Re: How much is enough 2014

Post by ghariton »

blonde wrote:It is IMPOSSIBLE to have Youth and Wisdom at the same time.
Old French saying:

Si jeunesse savait... Si vieillesse pouvait...

(Rough translation: If youth knew, if old age could act.)

George
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Re: How much is enough 2014

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kcowan wrote:
SQRT wrote:...Our plans can change. I am wondering if setting up a charitable foundation with my daughter as trustee, might be a good idea? Any way, I don't expect others to share my views on this but I thought I would give you my perspective.
For ten years, we had our will set up with two sons as joint trustees for a charitable trust. On the last iteration 5 years ago, we simplified it to 50% to charity and the remainder split between them. We decided that the trust was too much like trying to manage from the grave.
There have been some significant changes in British Columbia regarding probate, estate law, and wills.

You may wish to explore these further. I don't claim to be an expert however a friend has advised me that recent legislation in BC has changed the game.

I suggest you explore the recent changes.

Cheers...S
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Re: How much is enough 2014

Post by parvus »

ghariton wrote:
blonde wrote:It is IMPOSSIBLE to have Youth and Wisdom at the same time.
Old French saying:

Si jeunesse savait... Si vieillesse pouvait...

(Rough translation: If youth knew, if old age could act.)

George
The traditional translation is "if the young but knew, if the old only could."

(But don't mind me, I've been reading too much lately about the evolution of French from its Gallo-Roman and Occitan origins. Curiously, French is not French, that is, it is not the language of the Franks whose conquest gave rise to the nation's name.)
Wovon man nicht sprechen kann, darüber muß man schweigen — a wit
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Re: How much is enough 2014

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Und vergessen nicht auf "deutsch", "Vee get too soon Alt und too late Schmart."
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Re: How much is enough 2014

Post by parvus »

Wie geht's, ein älterer mir fragte, vor mir zu sagen, dass ich zu jung um Schmattes zu tragen.
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SQRT
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Re: How much is enough 2014

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There was an interesting article in the G&M today by McGugan concerning the 4% SWR. The author referred to papers written by a fellow (Guyton) that suggests the 4% rule is too conservative if you adjust your withdrawals so as to reflect your portfolio's current performance. This seems intuitive and reasonable to me. Has anyone else thought about this?
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Re: How much is enough 2014

Post by Shakespeare »

Has anyone else thought about this?
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Re: How much is enough 2014

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SQRT wrote:There was an interesting article in the G&M today by McGugan concerning the 4% SWR.
This one? How much money can retirees safely withdraw? - The Globe and Mail
Ian McGugan wrote:Jonathan Guyton, a financial planner with Cornerstone Wealth Advisors in Minneapolis, has published several articles outlining a rule-based strategy that adjusts withdrawals depending on how your portfolio has fared.
If I've Googled correctly, the published articles are: Adding to Shakespeare's reply, another resource is Wade Pfau's blog, check out Guyton and Kitces with Continued Discussions on Safe Withdrawal Rates and Spending Decision Rules. From Wade's blog post
Wade Pfau wrote:Jonathan Guyton and Michael Kitces discuss further about systematic withdrawals and safe withdrawal rates. Michael explains the origins of William Bengen’s initial research on the 4% rule. They also discuss the potential upside from using the 4% rule, the inclusion of additional asset classes, the role of market valuations in guiding the initial sustainable withdrawal rate, and the impact of variable spending on the safe withdrawal rate. Michael reminds that the 4% rule was never meant to be an autopilot guide to sustainable spending over 30 years.
This discussion has been a mainstay of FWF since it opened, check out Sustainable Withdrawal Rates and the corresponding wiki article, Sustainable withdrawal.
Last edited by Peculiar_Investor on 10 Sep 2014 09:33, edited 1 time in total.
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Re: How much is enough 2014

Post by Peculiar_Investor »

More insight with some actual tracking from Norbert, The Plight of the Y2K Retiree discussion.
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Re: How much is enough 2014

Post by Peculiar_Investor »

Another timely piece of the puzzle to consider -- Payroll survey shows weakening financial picture for employed Canadians.
Retiring older and needing more retirement savings

Fully 79% expect to delay retirement until age 60 or older – up from 70% over the past three years. The number one reason cited for retiring later in life is that employees are not able to save enough money.
The original press release 2014 NPW National News Release and 2014 CPA NPW Employee Survey Findings, for those interested in looking further into the details themselves.

The G&M's take, Canadians are feeling the financial squeeze - The Globe and Mail and the National Post's, More Canadian workers are living paycheque to paycheque, saving less: survey | Financial Post
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Re: How much is enough 2014

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Thanks for all that great stuff. I was wondering more about what people have actually done or plan to do.
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Re: How much is enough 2014

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SQRT wrote:Thanks for all that great stuff. I was wondering more about what people have actually done or plan to do.
When we first retired, we used the 4% SWR as a guide to determine just what our retirement spending should be. For example, if we had had $1Million in retirement savings, we would be able to spend $40k pa. Plus pensions. And all before tax.

I could never buy the 4% plus inflation method. Each year, I just assume I am a new retiree and if needed, can draw 4% for current year.

In actual fact, we draw what we need. We do have a rough budget that we try to stay within.

The total return of our portfolios has been about double the 4% SWR, so after 11 years, our savings have continued to grow faster than the inflation rate. We could draw more, and may have to because of taxes on RRIF withdrawals.

ADDED: Although this subject as been discussed many times, much of the discussions was somewhat theoretical. It is interesting to hear what people really do! One problem though, is that many have pension income which makes comparisons difficult. In our case we have the government pensions plus a minuscule company pension that just provides for beer money ;)
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Re: How much is enough 2014

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SQRT wrote:Thanks for all that great stuff. I was wondering more about what people have actually done or plan to do.
My portfolio is all income producing, and admittedly, that income has slowly been reducing over the last few years as a result of low interest rates on GIC's) . I don't pay attention to the % SWR. I just look at the income that is generated and use the amount that I need. I never (after eight years of retirement) touch the principal. I am lucky that the income produced is much higher than I need, but if it wasn't, I guess I'd be dipping into the principal. The % SWR means nothing to me.

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Re: How much is enough 2014

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My situation is very similar to ltr's. My portfolio generates more than enough income to meet my annual spending requirements. I looked at my % SWR when I retired, but found my annual expenses were well below the benchmark 4% SWR level, and I haven't really looked at % SWR since then. Unlike ltr, the income generated by my portfolio has been steadily increasing over the years. My asset allocation for fixed income is only around 25%, so the drop in interest rates for fixed income has been more than offset by increased dividends from my equity allocation.
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Re: How much is enough 2014

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Most retirees do not have the luxury of living only off the income thrown off by their investments. Hence % SWR is a somewhat meaningful exercise in that a financial planner can show them how they can draw down a portion of their capital each year to live a little better than just eating dog food for the remaining days of their lives and then finding out they die at 95 with twice the capital that they started with (exaggeration intended).
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Re: How much is enough 2014

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AltaRed wrote:Most retirees do not have the luxury of living only off the income thrown off by their investments. Hence % SWR is a somewhat meaningful exercise in that a financial planner can show them how they can draw down a portion of their capital each year to live a little better than just eating dog food for the remaining days of their lives and then finding out they die at 95 with twice the capital that they started with (exaggeration intended).
I agree and have spent considerable time kicking this idea around along with a what I cheekily call BRIAN5000 risk, which is when a person saves a disproportionately large amount and remains overly frugal. For myself, the reason I view this as a risk is two fold: risk of premature death (in terms of the life cycle of investing) and the possibility of a life less lived. All because a person is unwilling and/or unable to adapt their mindset as their life circumstances (dramatically) change.

I am few years from 40 and already spending dividends from time to time. However, so far I'm still growing my portfolio at an unsustainable rate due to dividends and capital gains (security gains exceed that of the underlying businesses). I ran a whole whack of scenarios and decided I will not deprive myself of something I want. Now in the next down market like 2008, I will change my tune and plow cash from my job into the portfolio but that's because I will be levering up at the same time.
Show me the incentive and I will show you the outcome

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Re: How much is enough 2014

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Very useful, thanks. This is exactly what I was wondering about. Theory is fine and certainly a good starting point, but how does one maximize "the life lived" (great phrase, BTW). while keeping an eye on the risk of running out or not being able to bequeath to an heir.
My experience so far: just spending portfolio (100% equity) income and pension. Portfolio has grown to the point where I am thinking I could liquidate maybe 3-5% and not effect future prospects much. Not sure what I would do with this cash though. Maybe help daughter buy a house? Upgrade some real estate? Could just let it ride but at some point the market will correct and I might wish I had sold some.
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Re: How much is enough 2014

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what I cheekily call BRIAN5000 risk, which is when a person saves a disproportionately large amount and remains overly frugal
LOL, good one, theres good examples and bad examples I believe people can learn from both. I think I'm a good example of a "dumb-ass retail investor" Over the last 3 years my plan has evolved a bit not sure if its good or bad yet.
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Re: How much is enough 2014

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Re: How much is enough 2014

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BRIAN5000 wrote:
what I cheekily call BRIAN5000 risk, which is when a person saves a disproportionately large amount and remains overly frugal
LOL, good one, theres good examples and bad examples I believe people can learn from both. I think I'm a good example of a "dumb-ass retail investor" Over the last 3 years my plan has evolved a bit not sure if its good or bad yet.
We're all here to learn from one another and you are no dumbass investor. Along with an individual I met at work when I was younger, your posts over the years made me think along the lines of 'risk of having much more than I need decades from now'. Investing is part of the game but we're all deferring consumption so that we (or our heirs) can consume a greater amount at a later time. In my view, not enough discussion is had about what to do with the winnings.
SQRT wrote: Very useful, thanks. This is exactly what I was wondering about. Theory is fine and certainly a good starting point, but how does one maximize "the life lived" (great phrase, BTW). while keeping an eye on the risk of running out or not being able to bequeath to an heir.
My experience so far: just spending portfolio (100% equity) income and pension. Portfolio has grown to the point where I am thinking I could liquidate maybe 3-5% and not effect future prospects much. Not sure what I would do with this cash though. Maybe help daughter buy a house? Upgrade some real estate? Could just let it ride but at some point the market will correct and I might wish I had sold some.
Keeping the discussion about normal people, i.e. assuming no desire to live like a jet set celebrity, what you have described is best scenario a person can wind up in. I think it's also the one which requires the most creativity think through and takes significant courage to expand a person's willingness to experiment. People like you are in the best place there is for turning thought experiments into reality. Is there anything you wanted to do but the time was never right or couldn't justify the cost? Anything appeal to you that your friends and family mock you for wanting to try or self limiting beliefs prevented you from making a serious go of it?

All I can say is that I am glad I started investing in my late teens because odds are, financially speaking, I will end up like many of you guys. And that's why we're all at the FWF in the first place.
Show me the incentive and I will show you the outcome

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Re: How much is enough 2014

Post by Flaccidsteele »

SQRT wrote:There was an interesting article in the G&M today by McGugan concerning the 4% SWR. The author referred to papers written by a fellow (Guyton) that suggests the 4% rule is too conservative if you adjust your withdrawals so as to reflect your portfolio's current performance. This seems intuitive and reasonable to me. Has anyone else thought about this?
I had no problem with the 4% SWR and prior to the latest US housing crisis, anticipated doing this in retirement. My confirmation bias convinced me that if I followed Buffett's "sell-off" approach that the long-term compounding of my portfolio would be more than enough to compensate for a 4% SWR. My portfolio consisted of individual stocks. Most of the value being in 3-4 stocks.

However, once the US housing crisis hit, I found myself buying US real estate. My portfolio is now 50%-50% split between individual stocks (the same stocks as mentioned above) and FI in the form of rental property. So now I don't need to liquidate anything. But I still think if I had continued with Buffett's "sell-off" approach that the 4% SWR would have been fine. I recognize that my methods are unconventional and considered "risky" by conventional metrics.

With regards to the "winnings", from my perspective, after a certain (and fairly low) point, the amount that I have will not contribute any further to a life well lived.
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Re: How much is enough 2014

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FinEcon wrote:
SQRT wrote: Very useful, thanks. This is exactly what I was wondering about. Theory is fine and certainly a good starting point, but how does one maximize "the life lived" (great phrase, BTW). while keeping an eye on the risk of running out or not being able to bequeath to an heir.
My experience so far: just spending portfolio (100% equity) income and pension. Portfolio has grown to the point where I am thinking I could liquidate maybe 3-5% and not effect future prospects much. Not sure what I would do with this cash though. Maybe help daughter buy a house? Upgrade some real estate? Could just let it ride but at some point the market will correct and I might wish I had sold some.
Keeping the discussion about normal people, i.e. assuming no desire to live like a jet set celebrity, what you have described is best scenario a person can wind up in. I think it's also the one which requires the most creativity think through and takes significant courage to expand a person's willingness to experiment. People like you are in the best place there is for turning thought experiments into reality. Is there anything you wanted to do but the time was never right or couldn't justify the cost? Anything appeal to you that your friends and family mock you for wanting to try or self limiting beliefs prevented you from making a serious go of it?

All I can say is that I am glad I started investing in my late teens because odds are, financially speaking, I will end up like many of you guys. And that's why we're all at the FWF in the first place.
Thanks for the advice. Can't think of much at this point but great to have the option. Daughters wedding coming up and the cost of real estate in Toronto is crazy, so some will go there. Cheers.
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Re: How much is enough 2014

Post by SQRT »

@Flaccid: does your portfolio generate sufficient cash flow for your needs or do you have to liquidate holdings from time to time?
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Re: How much is enough 2014

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Reading the first sentence of that article made me think there may be more to his happiness than just Thoreauvian simplicity ... :rofl:


"Tucked behind the women’s residence halls in a back corner of Huston-Tillotson University’s campus in Austin, Texas,...."
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Re: How much is enough 2014

Post by Flaccidsteele »

SQRT wrote:@Flaccid: does your portfolio generate sufficient cash flow for your needs or do you have to liquidate holdings from time to time?
My portfolio generates sufficient cash flow for my needs.
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