Thanks for watching everyone, let me know which strategy you prefer in the comments! Here are some follow-up videos: Retirement Income Planning: Risks and Strategies: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-7rWG17zHZ3g.html Asset Allocation Explained [Modern Portfolio Theory]: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-QTgvWPAihIc.html Healthcare Before Medicare - Early Retirement: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE--z1zYMT03fk.html
I suspect a large part of the reason the results of all the strategies you analyzed came out so similar is that you applied the same minimum and maximum withdrawal amounts to all of them. I noticed that nearly every strategy hit both the min and the max points unless it failed in which case the minimum went to $0 of course. Perhaps your approach is what a typical retiree would do, but it seems like it somewhat obscures true potential of each strategy to generate the maximum amount of income while still sufficiently managing the risks. I’m glad you included the Vanguard Dynamic Spending strategy as I have seldom seen it covered in the various withdrawal strategy videos I’ve watched.
Hi Peter, thanks for the feedback. My main goal with this video was to highlight a few of the simpler strategies and tools/framework to compare them. You make a good point that it would be interesting to look at some other aspects of the strategies too. :)
Excellent presentation Nick. Lots of interesting strategies to consider. I like the small fixed amount plus a percentage of the annual gain strategy. The taxes on an RMD are an additional draw on a portfolio. Also, a big impact on a portfolio would be if you take a large distribution to make an investment, for example real estate. Hopefully, the investment does not lose money.
Thanks Tony, I like that strategy too. I think it matches psychology pretty well of "doing something" (ie: cutting back on wants) in down markets. There are definitely a lot of factors to include in the modeling when doing it "for real," like taxes as you mention. It would need to be accounted for that some of your withdrawal would likely be taxed.
I think one thing that could also be of interest is how well each strategy would be able to handle a withdrawal at higher percentages. What if one were to check the threshold of each strategy at about 5%-7% withdrawal rates; this would allow one to verify the percentage at which each had a 95% percent success rate. Let me know if this makes sense。
Hi Marco, Yes I think you could estimate those different scenarios similar to how I did in the spreadsheet. I also made another video with other tools/comparisons: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-7rWG17zHZ3g.html
@@nickdoyle-achievefinancial2464 I'm going to take a look at those, too. I don't feel the need to leave to much money on table, so to speak, as I do not have any children that will inherit it.
Hi Nick did you read work done by Big Earn, However CAPE process is too complicated. Did you consider other options in FI calc such as Guyton-Klinger. Great research also published lately by Morning Star’s Christine Benz. Thanks for your time and expertise
I generally don't like complicated withdrawal strategies. The Guyton-Klinger strategy is interesting, but I personally think it's a little complicated and arbitrary. Some of the others on ficalc are similar or don't seem to align with goals most people would have (ex: 95% strategy goal to maintain original portfolio). I think the work from Big Earn is interesting and can be useful for those that want to dig in and deal with the complexity. I may do a review on it at some point. I may use it for initial retirement planning. However, I cant imagine my wife using it for retirement planning if I die before her. She just isn't interested in going that deep.
Being able to live with flexible option as it supplements a pension, then SS age 70. I will probably opt for a constant percentage 4.5% with historical inflation adjustment 3%. Withdrawal rate could fluctuate if needed in between 3 and 5%. Some adjustments but nothing too complicated
Nick, an excellent work, very valuable for most retirees or prospective retirees. I wonder, however if you have a preference for one strategy or another? Put differently, which strategy do you feel is best for you? Thank you very much for this very instructive work. I'm sure you invested many hours in bringing this video to your viewers.
I have a preference for the longevity-based strategies, but want to spend and make sure I'm doing things like traveling when young and in good health. I like the endowment strategy and the sensible withdrawals strategy. I'm not sure which I plan to use yet, but would gravitate towards a simple strategy like these.
This is a good topic for a video. Maybe I'll make one with more details! I think most investors do it with an increased bond allocation or working a little longer to save extra. For the bond allocation, some use a "bond tent" where they increase bonds for the period before/after retirement. After the first few years of retirement they may start reducing the bond allocation/increasing risk.
Your videos are very educational thanks! Q: The total dollars at the end of retirement in the FI_calc., are they "real" dollars ..ie.. the same buying power dollars as the beginning of retirement. For example if you start with $1M and at the end of retirement you have $2M then you are twice as rich in real terms? Thanks!
Hi Franklin, as far as I can tell nearly all of the numbers are automatically adjusted for inflation by default and the results section says "All dollars and returns shown in the results are real." Some strategies, like constant dollar have a checkbox to disable adjusting for inflation, but the min/max values on the others indicate they are adjusted for inflation if you click the little ? mark next to them. Hope this helps!
Thank you for answering my question. They take inflation out of the end balance so it can be compared to the starting dollars. If you have a $1M at the start and it shows $2M at the end then you are twice as rich in real terms (buying power). It showed it in the spread sheet. @@nickdoyle-achievefinancial2464
I'm glad you like the content. I am assume you mean weighting more spending before 80 and less spending after 80? I am not aware of a specific strategy for this. One idea is to allocate x% of your portfolio to a standard withdrawal strategy, then use the remaining y% for extra spending before age 80. For example, with a $1.5m portfolio, you could use $1m with the endowment strategy. Then the 1/N strategy for the remaining 0.5m, using N as the number of years until age 80.
I would withdraw based on my target asset allocation. For example, if you have target allocation of 60% stocks and 40% bonds, $1.1 million portfolio, and want to withdraw $100k. I would target my withdrawals so the remaining $1m is $600k stocks and $400k bonds. Hopefully, that makes sense!
One very overlooked item with all these methods is that people planning their retirement have not retired. Yeah, kinda a big problem. There doesn't seem to be any data regarding people in retirement. I'm pretty sure it is not linear or increases each year by inflation. It's more likely to be event-driven. Without knowing what these events are it's very difficult to know how much money you'll need in the future. And not many people want a frugal retirement with millions left untouched
