The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by steves »

Thanks Dad. How's Mom? :D
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

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Mother's fine...you make us proud every day son. :wink:
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by ghariton »

I personally find the 4 % rule useful, albeit in a different way than it is usually discussed. Every year I calculate my real return for the past year. If it is above four per cent (as it usually is), I feel free to give away the excess. If it is less, then I carry over the shortfall to the next year, counting it against any new gains. Note that this is 4 % of the current portfolio, not the original one.

Note that we live very frugally. For example, with two old dogs, we don't travel much.

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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by longinvest »

If we're to suggest 4% applied to current* portfolio balance as a rule of thumb, then we should at least make it age dependent. 4% is generally OK in one's 60s. In one's 70s, it should be increased to 5%. In one's 80s, it should be at least 6%. I prefer the more precise VPW table which takes asset allocation into consideration, but the simpler age-dependent rule of thumb would work.

Note that a joint 2% indexed SPIA** pays out more than 7% at age 80 (source). At some age, it makes no sense anymore to only spend 4% of current portfolio for someone without bequest motives. (I would definitely prefer a CPI-indexed SPIA quote, but I am unable to find any on the web).

* Instead of retirement-day portfolio balance.
** Single Premium Immediate Annuity.
Last edited by longinvest on 26 May 2017 11:37, edited 1 time in total.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by kcowan »

longinvest wrote: VPW: Every few years, you should review your overall retirement plan. (If you are over 80 years old and your health is better than anticipated, for example, you might want to lookup withdrawal percentages using (age - 5 years) or (age - 10 years)).
This strikes me as the ultimate escape clause. What health can I expect when I am 80?
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

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Shakespeare wrote: 25 May 2017 12:09 Above ground is good. :wink:
Every day above ground is a good one. Miss one and you will find out.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by hamor »

longinvest wrote: 23 May 2017 09:55 Let's estimate his age 65 CPP pension by simply accounting for his CPP contributions from age 35 to 65. That's 30 years of contribution out of (65-18) - 17% = 39.01. So at age 65, he could get $9,613.
what is that calc - (65-18) - 17% = 39.01

Thank you for this thread, very helpful.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by longinvest »

hamor wrote: 26 May 2017 07:04
longinvest wrote: 23 May 2017 09:55 Let's estimate his age 65 CPP pension by simply accounting for his CPP contributions from age 35 to 65. That's 30 years of contribution out of (65-18) - 17% = 39.01. So at age 65, he could get $9,613.
what is that calc - (65-18) - 17% = 39.01
The CPP pension calculation drops out 17% of the lowest contributions years between age 18 and the start of payments. For those taking the pension after 65, CPP has a special post-age-65 drop out rule which comes down to limiting the number of years considered into the calculation to 39.01.

Note for Quebec readers: QPP does not have a special post-age-65 drop out rule, and its general drop out provision is 15% instead of 17%.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by Profit not Prophet »

I was disappointed the table didn't have a 'congratulations you won' spot when it turned from 99 to 100. I suppose in most cases 100 is a curse. Thanks for the chart link, it's kinda comforting in a confusing world.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

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To repeat myself, I'm glad I found The Connolly Report and switched our investment style from growing the pot, to growing the Income. What we found was that over the years we could see the income grow and see how close we ere coming to meeting our needs with just income. We don't have a pension, invest in bonds, preferred's, GIC's or funds.

Every month, quarter and year the income kept growing regardless if the value of our investments were up or down. Some might say you can achieve the same results with ETF's, but I'm glad we never owned any. We'll leave diversification to others as we've achieved our goal without it.

No 4% SWR, using the 20% times expenses or any of the other calculations to decide how much money we might need to save or grow our investment (or worry how we were going to recover from a market crash, like 2008/2009).
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by gaspr »

cannew wrote: 26 May 2017 14:30 To repeat myself, I'm glad I found The Connolly Report and switched our investment style from growing the pot, to growing the Income. What we found was that over the years we could see the income grow and see how close we ere coming to meeting our needs with just income. We don't have a pension, invest in bonds, preferred's, GIC's or funds.

Every month, quarter and year the income kept growing regardless if the value of our investments were up or down. Some might say you can achieve the same results with ETF's, but I'm glad we never owned any. We'll leave diversification to others as we've achieved our goal without it.

No 4% SWR, using the 20% times expenses or any of the other calculations to decide how much money we might need to save or grow our investment (or worry how we were going to recover from a market crash, like 2008/2009).
Sounds terribly inefficient to me. You may end up the richest guy in the cemetery. If that is your goal, then you are doing well. Most of these retirement spending discussions are focused on trying to be efficient, that is, to maximize spending while alive.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by SQRT »

gaspr wrote: 26 May 2017 15:36
cannew wrote: 26 May 2017 14:30 To repeat myself, I'm glad I found The Connolly Report and switched our investment style from growing the pot, to growing the Income. What we found was that over the years we could see the income grow and see how close we ere coming to meeting our needs with just income. We don't have a pension, invest in bonds, preferred's, GIC's or funds.

Every month, quarter and year the income kept growing regardless if the value of our investments were up or down. Some might say you can achieve the same results with ETF's, but I'm glad we never owned any. We'll leave diversification to others as we've achieved our goal without it.

No 4% SWR, using the 20% times expenses or any of the other calculations to decide how much money we might need to save or grow our investment (or worry how we were going to recover from a market crash, like 2008/2009).
Sounds terribly inefficient to me. You may end up the richest guy in the cemetery. If that is your goal, then you are doing well. Most of these retirement spending discussions are focused on trying to be efficient, that is, to maximize spending while alive.
Agree. Cannew is very consistent. Can't seem to get over his investing success in the sense of "what is he going to do with it". This is fine as long as he values leaving a big legacy. I've asked him about this but no satisfactory (in my view) response to this point.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by adrian2 »

SQRT wrote: 27 May 2017 10:44
gaspr wrote: 26 May 2017 15:36
cannew wrote: 26 May 2017 14:30 To repeat myself, I'm glad I found The Connolly Report and switched our investment style from growing the pot, to growing the Income. What we found was that over the years we could see the income grow and see how close we ere coming to meeting our needs with just income. We don't have a pension, invest in bonds, preferred's, GIC's or funds.

Every month, quarter and year the income kept growing regardless if the value of our investments were up or down. Some might say you can achieve the same results with ETF's, but I'm glad we never owned any. We'll leave diversification to others as we've achieved our goal without it.

No 4% SWR, using the 20% times expenses or any of the other calculations to decide how much money we might need to save or grow our investment (or worry how we were going to recover from a market crash, like 2008/2009).
Sounds terribly inefficient to me. You may end up the richest guy in the cemetery. If that is your goal, then you are doing well. Most of these retirement spending discussions are focused on trying to be efficient, that is, to maximize spending while alive.
Agree. Cannew is very consistent. Can't seem to get over his investing success in the sense of "what is he going to do with it". This is fine as long as he values leaving a big legacy. I've asked him about this but no satisfactory (in my view) response to this point.
Cannew has been very consistent in refusing to answer simple questions when asked to substantiate his claims. I'm taking all his success allegations with a bag of salt.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by cannew »

SQRT wrote: 27 May 2017 10:44
cannew wrote: 26 May 2017 14:30 To repeat myself, I'm glad I found The Connolly Report and switched our investment style from growing the pot, to growing the Income. What we found was that over the years we could see the income grow and see how close we ere coming to meeting our needs with just income. We don't have a pension, invest in bonds, preferred's, GIC's or funds.

Every month, quarter and year the income kept growing regardless if the value of our investments were up or down. Some might say you can achieve the same results with ETF's, but I'm glad we never owned any. We'll leave diversification to others as we've achieved our goal without it.

No 4% SWR, using the 20% times expenses or any of the other calculations to decide how much money we might need to save or grow our investment (or worry how we were going to recover from a market crash, like 2008/2009).
Agree. Cannew is very consistent. Can't seem to get over his investing success in the sense of "what is he going to do with it". This is fine as long as he values leaving a big legacy. I've asked him about this but no satisfactory (in my view) response to this point.
We just revised our wills because nearly all of our assets are in securities and I wondered how I was going to distribute them if we suddenly died and we had not allowed for that in our earlier ones. If only one passes it all goes to the other spouse, but I wanted to clarify how the shares can be distributed simply. Checked with our accountant and came up with a solution to allow for the changes over time.
The majority will be distributed to family with specific donations.
We live on about $60k-$70k so the income and portfolio will continue to grow and even if one or both need extended care we won't outlive our funds. That's my main concern and if it means leaving a sizable estate, I don't mind. Our kids have copies of our wills and are not holding their breath waiting for the day, rather I think they understand and agree,

ps As for Adrian2 the only question I ignore of his is "What exactly are my holdings" and will continue to do so. Yes, Ive made some claims and one can accept, question and/or dis-believe them.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

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cannew wrote: 28 May 2017 09:04 ps As for Adrian2 the only question I ignore of his is "What exactly are my holdings" and will continue to do so. Yes, Ive made some claims and one can accept, question and/or dis-believe them.
One can question your claims, but, as you write above, receive no real answers.

My question was not out of morbid curiosity, but to check your claim that your portfolio generates enough dividends to cover the mandatory RRIF withdrawals. The Beardstown Ladies were claiming to have beaten the S&P 500 handily, selling an investment guide on how to do it,until somebody went to verify their numbers.

Hence I have no choice but to disbelieve you.
Last edited by adrian2 on 28 May 2017 15:10, edited 1 time in total.
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Re: The Relationship Between Guaranteed Income And Safe Withdrawal Rates

Post by cannew »

adrian2 wrote: 28 May 2017 10:51
cannew wrote: 28 May 2017 09:04 ps As for Adrian2 the only question I ignore of his is "What exactly are my holdings" and will continue to do so. Yes, Ive made some claims and one can accept, question and/or dis-believe them.
One can question your claims, but, as you write above, receive no real answers.

My question what not out of morbid curiosity, but to check your claim that your portfolio generates enough dividends to cover the mandatory RRIF withdrawals. The Beardstown Ladies were claiming to have beaten the S&P 500 handily, selling an investment guide on how to do it,until somebody went to verify their numbers.

Hence I have no choice but to disbelieve you.
No problem and I'm not offering anything for sale.
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