Locums Market Temp Check

[pgg]

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How do you define when someone or you can safely retire. 3% rule based on liquid portfolio plus 1-2 years of cash living expenses?
Maybe thats extreme as most push 3.5-4% liquid portfolio as pretty safe.

Beyond a modest liquid/cash emergency fund, I think that the 1-2 years of cash living expenses you mention ought to be rolled into the overall asset allocation for their portfolio. The idea being that if the equity market declines for a while, you'd be selling bonds (not stocks) to fund your withdrawals anyway, as part of planned rebalancing.

In general I think people should just pick an overall asset allocation and stick with it. When people say they're 100% stocks but then also say they're holding cash on the side for a future buy-the-dip scenario, they're not actually 100% stocks.


I think aspects that are often overlooked in these calculations are that (1) it's usually possible for wealthier retirees to adjust their spending in response to market events, and (2) retirees typically spend much less in their later years than their earlier years.

3% is rather pessimistic/conservative unless your retirement budget is dominated by fixed/non-discretionary spending. That's often true for lower income retirees, whose retirement budget is dominated by housing food and healthcare, but it's probably NOT true for people like us.

A retiree with a $200,000 yr budget might want a portfolio of $X million to yield that $200K post tax at a SWR of Y% ... but there's a world of difference between a retiree whose $200K budget has $180K of fixed expenses, vs one whose $200K budget is $120K of fixed expenses plus $60K of travel. The former should probably choose a lower SWR and therefore set his portfolio goal higher, while the latter should be safe with a higher SWR and therefore a smaller portfolio.

The ability to spend an extended period of time withdrawing less money, and especially not selling equity holdings during a downturn, is very important.

 

[finalpsychyear]

Beyond a modest liquid/cash emergency fund, I think that the 1-2 years of cash living expenses you mention ought to be rolled into the overall asset allocation for their portfolio. The idea being that if the equity market declines for a while, you'd be selling bonds (not stocks) to fund your withdrawals anyway, as part of planned rebalancing.

In general I think people should just pick an overall asset allocation and stick with it. When people say they're 100% stocks but then also say they're holding cash on the side for a future buy-the-dip scenario, they're not actually 100% stocks.


I think aspects that are often overlooked in these calculations are that (1) it's usually possible for wealthier retirees to adjust their spending in response to market events, and (2) retirees typically spend much less in their later years than their earlier years.

3% is rather pessimistic/conservative unless your retirement budget is dominated by fixed/non-discretionary spending. That's often true for lower income retirees, whose retirement budget is dominated by housing food and healthcare, but it's probably NOT true for people like us.

A retiree with a $200,000 yr budget might want a portfolio of $X million to yield that $200K post tax at a SWR of Y% ... but there's a world of difference between a retiree whose $200K budget has $180K of fixed expenses, vs one whose $200K budget is $120K of fixed expenses plus $60K of travel. The former should probably choose a lower SWR and therefore set his portfolio goal higher, while the latter should be safe with a higher SWR and therefore a smaller portfolio.

The ability to spend an extended period of time withdrawing less money, and especially not selling equity holdings during a downturn, is very important.

Good points. I do think there is more nuance and fear if your trying to do it before 50. There is the SORR issue. Which can be overcome with a porfolio of 1.14x and using the 3% rule on the 1.0x value of the portfolio. There also need to be a variable withdrawal rate esp in the first 3-5 years IMO but more ideally minimum 3 year bond or cash reserve separate from whatever number your basing your 3% swr on.

IMO anyone doing this where they are walking away at 45-50yo needs to be more conservative esp with future CAPE and market valuations currently.

All in all I've settled on the 3% swr on half my liquid. Not sure that i can get there by 50 yo but worth a shot.

More likely than not after a few years into the retirment one will be somewhere in the 3-4% swr. Assuming fixed costs to your point would be like 1.5% at least my targets.

 

[anonperson]

your right i do think too much into this. Im a bit paranoid. Currently im considering 3% on half of liquid portfolio. Also understand that we are talking about a young retiree lets use 45-50 yo as age range. Days and weeks i don't work i am a full time tennis player loving it and never get bored. My passion meter for medicine is on empty and the yellow fuel light is on. This is with me working 95% from home 8a-7pm M-F, 8 weeks off in 2025 thus far.

You're working 11 hours a day?

That's a lot

 

[finalpsychyear]

You're working 11 hours a day?

That's a lot

i have 2 hours of paid admin time daily. usually by 6 ish done and 5pm on fridays. Only doing this till 2030 max or if magic money doubles and/or tesla doubles. I think both happen by 2030 its not exactly that crazy for thinking a cagr of 14-15 is possible when qqq/voo/vti have done around that. Would cut back if some of that happens. Can't count my chickens early so let's see how it unfolds. I think the cagr are very conservative on whats about to happen next 5 years.

 

[aneftp]

You're working 11 hours a day?

That's a lot

I didn’t comment because I misread what he wrote and thought he was chillin at home 8a-7p “from
Home” as in work from home (WFH).

Holy crap. Those are long hours daily away from the house. To do it daily. Just hope the job isn’t stressful.

 

[finalpsychyear]

I didn’t comment because I misread what he wrote and thought he was chillin at home 8a-7p “from
Home” as in work from home (WFH).

Holy crap. Those are long hours daily away from the house. To do it daily. Just hope the job isn’t stressful.

95% of time hours are WFH.

 

[aneftp]

95% of time hours are WFH.

Nice. So u have some down time during the day I assume when u are working from home?

 

[finalpsychyear]

Nice. So u have some down time during the day I assume when u are working from home?

15-20 min per hour worked downtime. Not always but 50% of the time.

The biggest advantage is i can sleep till 750am go to bed at midnight, dress shirt over pajamas, workout during lunch hour, no commute 95% of the days, easier to eat healthy when no drug rep food or free food.
I still have abs and i wouldnt if i had to go into work bc i would be tempted to eat the goodies.

 

[dabears505]

Is this wfh anesthesia?

 

[finalpsychyear]

Is this wfh anesthesia?

I do hypnosis..

 

[BLADEMDA]

Beyond a modest liquid/cash emergency fund, I think that the 1-2 years of cash living expenses you mention ought to be rolled into the overall asset allocation for their portfolio. The idea being that if the equity market declines for a while, you'd be selling bonds (not stocks) to fund your withdrawals anyway, as part of planned rebalancing.

In general I think people should just pick an overall asset allocation and stick with it. When people say they're 100% stocks but then also say they're holding cash on the side for a future buy-the-dip scenario, they're not actually 100% stocks.


I think aspects that are often overlooked in these calculations are that (1) it's usually possible for wealthier retirees to adjust their spending in response to market events, and (2) retirees typically spend much less in their later years than their earlier years.

3% is rather pessimistic/conservative unless your retirement budget is dominated by fixed/non-discretionary spending. That's often true for lower income retirees, whose retirement budget is dominated by housing food and healthcare, but it's probably NOT true for people like us.

A retiree with a $200,000 yr budget might want a portfolio of $X million to yield that $200K post tax at a SWR of Y% ... but there's a world of difference between a retiree whose $200K budget has $180K of fixed expenses, vs one whose $200K budget is $120K of fixed expenses plus $60K of travel. The former should probably choose a lower SWR and therefore set his portfolio goal higher, while the latter should be safe with a higher SWR and therefore a smaller portfolio.

The ability to spend an extended period of time withdrawing less money, and especially not selling equity holdings during a downturn, is very important.

"Not selling equities during a downturn." That is the key to the entire investing thesis. For me that means holding a % of the portfolio in non equities so I know there is time for my equities/stocks to recover. At my age I hold a minimum of 5 years of liquidity in Cash/CDs/MYGAs/Short term bonds. That money in those investments are earning a poor return and I accept that fact so I worry less/sleep better. In addition to that 5 years of short term money I keep an additional % in fixed income/bonds earning slightly better returns. This entire set up makes up my allocation which gives me "dry powder" to buy when the market corrects significantly by re-allocating back to my desired exposure to equities. I am a believer in the "reverse glidepath" allocation model as one progresses in retirement as you get past the sequence of return risk. That said, my limit for my glidepath will likely be 85/15.

For those more than 20 years away from retirement the allocation should be 100% equities or 90/10 if you want a cushion. For those 10-20 years from retirement the allocation should be at least 80/20 or 85/15. If you are less than 10 years from retirement then consider 75/25 or 80/20 depending on your risk tolerance. But most are just 100% equities regardless of age, timing or CAPE. They must be willing to suffer some extreme losses with the next bear market-and there will be a bear market.

The Benefits Of A Rising Equity Glidepath In Retirement

A look at recent research by Michael Kitces and Wade Pfau, finding that a "rising equity glidepath" that increases equities during retirement may be best.

www.kitces.com

 

[finalpsychyear]

"Not selling equities during a downturn." That is the key to the entire investing thesis. For me that means holding a % of the portfolio in non equities so I know there is time for my equities/stocks to recover. At my age I hold a minimum of 5 years of liquidity in Cash/CDs/MYGAs/Short term bonds. That money in those investments are earning a poor return and I accept that fact so I worry less/sleep better. In addition to that 5 years of short term money I keep an additional % in fixed income/bonds earning slightly better returns. This entire set up makes up my allocation which gives me "dry powder" to buy when the market corrects significantly by re-allocating back to my desired exposure to equities. I am a believer in the "reverse glidepath" allocation model as one progresses in retirement as you get past the sequence of return risk. That said, my limit for my glidepath will likely be 85/15.

For those more than 20 years away from retirement the allocation should be 100% equities or 90/10 if you want a cushion. For those 10-20 years from retirement the allocation should be at least 80/20 or 85/15. If you are less than 10 years from retirement then consider 75/25 or 80/20 depending on your risk tolerance. But most are just 100% equities regardless of age, timing or CAPE. They must be willing to suffer some extreme losses with the next bear market-and there will be a bear market.

The Benefits Of A Rising Equity Glidepath In Retirement

A look at recent research by Michael Kitces and Wade Pfau, finding that a "rising equity glidepath" that increases equities during retirement may be best.

www.kitces.com

So im assuming u are 80/20 or 75/25?
Since ur still working full time i believe lets say 30% correction happens u would buy equity from ur cash/bond portion till ur ratio returned to ur starting allocation?
Even if by doing that ur 5 year cash reserve drops to only 2-3 years?

 

[BLADEMDA]

So im assuming u are 80/20 or 75/25?
Since ur still working full time i believe lets say 30% correction happens u would buy equity from ur cash/bond portion till ur ratio returned to ur starting allocation?
Even if by doing that ur 5 year cash reserve drops to only 2-3 years?

You are thinking my 5 year cash reserve is a larger percentage of my portfolio than it actually is. Let's say I need $300K per year then 300 x5 is $1.5 million. That is the amount of liquidity I need during bull markets. During a bear market I can utilize that liquidity to pay expenses (when in retirement) until the market recovers somewhat. The bond/fixed income portion can be used to re-allocate towards equities in order to bring my allocation back into sync of 75/25 or whatever allocation model that you have chosen.

Remember when a bear market occurs a typical reduction of 20-25% of equities will likely take place in your portfolio meaning you may want to move some fixed income into stocks/Etfs.

The cash reserve is used to ride out bear markets and once stocks are back to reasonable levels those reserves should be replenished. The cash counts as part of your allocation model. I think what your missing is what % of a portfolio that 1.5 million of cash reserves occupies in a portfolio. You shouldn't plan on a 5 year cushion until your portfolio is large enough where that % is not a big number. Perhaps if your portfolio is smaller you can use a 3 year cushion of cash reserves instead of 5 as many advisors use 3 years; in addition, your yearly expenses may be lower at $200K meaning a total of $600K in cash reserves is needed. Finally, you will be earning 3-4% interest on those reserves so there is some small return.

I want to emphasize that if you are working full time in a stable position then you don't need more than 6-12 months of cash reserves. As you enter pre-retirement (3 years or less from retirement) then perhaps you should consider a bigger reserve like 3 years. Again, the goal is to be fiscally and mentally prepared for a bear market when you decide to call it quits or work 1 day per week.

 

[BLADEMDA]

We also need to define "cash" vs fixed income. I view cash as more liquid investments such as money markets, CDs, MYGAs, short term bond funds (less than 1 year). These "investments" return 3-5% per year depending on the Fed's interest rate. The "experts" recommend cash be no more than 5-10% of a portfolio due to the historically low returns. I agree with that sentiment along with counting cash as part of my portfolio's allocation model. For example, 70% equities, 23 percent fixed income, 7% Cash. If you are working full time and more than 3-5 years from retirement then cash should be less than 5% of a portfolio especially for a younger investor.

Conservative, younger investors who want say an 85/15 allocation model would be 85% equities, 10% fixed income and 5% cash. The cash portion of 5% could be reduced to say 3% if that percentage covers 6 months of expenses.

On SDN most are 95% equities/5% cash.

One final example is that certain individuals have pensions like PGG. That means the pension occupies the "cash" portion of a portfolio as well reducing the % needed in the portfolio. The same holds true for social security.

 

[finalpsychyear]

We also need to define "cash" vs fixed income. I view cash as more liquid investments such as money markets, CDs, MYGAs, short term bond funds (less than 1 year). These "investments" return 3-5% per year depending on the Fed's interest rate. The "experts" recommend cash be no more than 5-10% of a portfolio due to the historically low returns. I agree with that sentiment along with counting cash as part of my portfolio's allocation model. For example, 70% equities, 23 percent fixed income, 7% Cash. If you are working full time and more than 3-5 years from retirement then cash should be less than 5% of a portfolio especially for a younger investor.

Conservative, younger investors who want say an 85/15 allocation model would be 85% equities, 10% fixed income and 5% cash. The cash portion of 5% could be reduced to say 3% if that percentage covers 6 months of expenses.

On SDN most are 95% equities/5% cash.

One final example is that certain individuals have pensions like PGG. That means the pension occupies the "cash" portion of a portfolio as well reducing the % needed in the portfolio. The same holds true for social security.

Thanks. I used to be 100% equities. Now I am 90/10 because I have built a decent cash position earning 4%. I have no bonds. Some of that may or may not get used for a house downpayment but i continue to rent month to month. Using the 2-3% swr for simplicity lets say thats my current spending level range. However without a house mortage, future 1-2 kids plus nanny in the mix, and being young ish for example assume Im 40 yo. I can no way say that won't increase drastically in a year or two as i am likely entering the most expensive heavy phase of life. Friends around me simply say add anywhere from 50-100% of your current spending to incorporate the house mortage, nanny, 1-2 kids (located in midwest).

2030 is a checkpoint for me as I will have likely established whatever peak costs I have assuming the mortage, nanny, 1-2 kids are in play. For margin whatever that number is I would say that's what i would ideally want to base my 3% swr on before cutting down.

Getting another 5-6 year run in VOO again like we have had would solve my worries as thats essentially doubling anyones portfolio. So my angst is largely not knowing my actual future expenses aside from adding 50-100% and not knowing if we are due for some major 5-6 year bad stretch likely overdue if you pay attention to CAPE values.

Any advice is appreciated.

 

[aneftp]

Thanks. I used to be 100% equities. Now I am 90/10 because I have built a decent cash position earning 4%. I have no bonds. Some of that may or may not get used for a house downpayment but i continue to rent month to month. Using the 2-3% swr for simplicity lets say thats my current spending level range. However without a house mortage, future 1-2 kids plus nanny in the mix, and being young ish for example assume Im 40 yo. I can no way say that won't increase drastically in a year or two as i am likely entering the most expensive heavy phase of life. Friends around me simply say add anywhere from 50-100% of your current spending to incorporate the house mortage, nanny, 1-2 kids (located in midwest).

2030 is a checkpoint for me as I will have likely established whatever peak costs I have assuming the mortage, nanny, 1-2 kids are in play. For margin whatever that number is I would say that's what i would ideally want to base my 3% swr on before cutting down.

Getting another 5-6 year run in VOO again like we have had would solve my worries as thats essentially doubling anyones portfolio. So my angst is largely not knowing my actual future expenses aside from adding 50-100% and not knowing if we are due for some major 5-6 year bad stretch likely overdue if you pay attention to CAPE values.

Any advice is appreciated.

Keep working hard for another 5 years. Doesn’t matter what the market is doing. Your earning potential softens even a 50-% crash in the market.

You may not like that ur net worth tanks. But u are still minting cash by Working.

 

[amyl]

I agree. Best to keep working as long as you can… part time, no call, whatever you can do is your best financial move. My current group has 4 guys in their 70s - 2 still take call!
6 in their 60s 4 in their 50s and 4 younger than 50.
It’s a relatively easy job so they’re all inclined to stay on even part time. I think I’ll work 7-8 more years and then go day doc and do that until I can’t…

 

[kidthor]

I agree. Best to keep working as long as you can… part time, no call, whatever you can do is your best financial move. My current group has 4 guys in their 70s - 2 still take call!
6 in their 60s 4 in their 50s and 4 younger than 50.
It’s a relatively easy job so they’re all inclined to stay on even part time. I think I’ll work 7-8 more years and then go day doc and do that until I can’t…

It's a blessing that our line of works pays well and lets you scale to as much or as little as you want. I'm no where near retirement but it's great to know I could still pick up a week a month (or whatever) and see bring in money if needed... plus it's a fun job.

 

[finalpsychyear]

It's a blessing that our line of works pays well and lets you scale to as much or as little as you want. I'm no where near retirement but it's great to know I could still pick up a week a month (or whatever) and see bring in money if needed... plus it's a fun job.

Yeah your field might have the most flexibility in that you could work 1 day to 1 week to a few months a year and see if thats the direction to go by stair stepping it down or back up. Most fields outside of locums you have to stay like pseudo commited i.e. 1-2 days a week etc.

Once your financially set money wise in your field you can literally find out how life is without gas..

 

[BLADEMDA]

Thanks. I used to be 100% equities. Now I am 90/10 because I have built a decent cash position earning 4%. I have no bonds. Some of that may or may not get used for a house downpayment but i continue to rent month to month. Using the 2-3% swr for simplicity lets say thats my current spending level range. However without a house mortage, future 1-2 kids plus nanny in the mix, and being young ish for example assume Im 40 yo. I can no way say that won't increase drastically in a year or two as i am likely entering the most expensive heavy phase of life. Friends around me simply say add anywhere from 50-100% of your current spending to incorporate the house mortage, nanny, 1-2 kids (located in midwest).

2030 is a checkpoint for me as I will have likely established whatever peak costs I have assuming the mortage, nanny, 1-2 kids are in play. For margin whatever that number is I would say that's what i would ideally want to base my 3% swr on before cutting down.

Getting another 5-6 year run in VOO again like we have had would solve my worries as thats essentially doubling anyones portfolio. So my angst is largely not knowing my actual future expenses aside from adding 50-100% and not knowing if we are due for some major 5-6 year bad stretch likely overdue if you pay attention to CAPE values.

Any advice is appreciated.

I can't predict the future but another 5 year run like we just had is highly unlikely. A more likely scenario is a 12 month bear market in the next 5 years. That said, your plan seems solid and your predicted expenses reasonable in terms of cost. I don't like SWR of 3% prior to age 55 because you may live 40 more years so that needs adjustment. If you want to go to a 2.5% SWR and work part time then your plan at age 50 seems solid. I can tell you those kids are expensive so most of us like to get them through college before we go part time or retire. But, if you can add another 1% SWR as needed for a short time (4-5 years) then that works. Baseline 2.5% SWR with flexible SWR of another 1% as needed.

Time in the market without withdrawing money is your friend. That nest egg can double every 7-8 years. Over 16 years that means 3 million become 12 million. That is the power of staying the course and remaining invested in the market.

 

[finalpsychyear]

I can't predict the future but another 5 year run like we just had is highly unlikely. A more likely scenario is a 12 month bear market in the next 5 years. That said, your plan seems solid and your predicted expenses reasonable in terms of cost. I don't like SWR of 3% prior to age 55 because you may live 40 more years so that needs adjustment. If you want to go to a 2.5% SWR and work part time then your plan at age 50 seems solid. I can tell you those kids are expensive so most of us like to get them through college before we go part time or retire. But, if you can add another 1% SWR as needed for a short time (4-5 years) then that works. Baseline 2.5% SWR with flexible SWR of another 1% as needed.

Time in the market without withdrawing money is your friend. That nest egg can double every 7-8 years. Over 16 years that means 3 million become 12 million. That is the power of staying the course and remaining invested in the market.

very helpful. Not sure me adding this extra bit of info helps. Current SWR for lifestyle is actually 1.8% swr. If theoretically you said double your expenses (anticpated future house, kids, nanny) then we would be at 3.5-3.6% tmrw.

Your suggestion is basically dont walk untill doubling your expenses puts you at about 2.5% swr and the extra 1% for buffer? Good to know. Ive def got some work cut out.

 

[BLADEMDA]

very helpful. Not sure me adding this extra bit of info helps. Current SWR for lifestyle is actually 1.8% swr. If theoretically you said double your expenses (anticpated future house, kids, nanny) then we would be at 3.5-3.6% tmrw.

Your suggestion is basically dont walk untill doubling your expenses puts you at about 2.5% swr and the extra 1% for buffer? Good to know. Ive def got some work cut out.

A new house, 2 kids and nanny would represent 3/4 of my budget, FYI. That's why you need to actually see these expenses in real time before I believe 1.8% SWR that goes to just 3.6% SWR.

 

[Account1]

I can't predict the future but another 5 year run like we just had is highly unlikely. A more likely scenario is a 12 month bear market in the next 5 years. That said, your plan seems solid and your predicted expenses reasonable in terms of cost. I don't like SWR of 3% prior to age 55 because you may live 40 more years so that needs adjustment. If you want to go to a 2.5% SWR and work part time then your plan at age 50 seems solid. I can tell you those kids are expensive so most of us like to get them through college before we go part time or retire. But, if you can add another 1% SWR as needed for a short time (4-5 years) then that works. Baseline 2.5% SWR with flexible SWR of another 1% as needed.

Time in the market without withdrawing money is your friend. That nest egg can double every 7-8 years. Over 16 years that means 3 million become 12 million. That is the power of staying the course and remaining invested in the market.

Bro, a 30 year bond is yielding 4.8% right now. A SWR of 3.5% is literally 20% less than a decent bond ladder yields. Current ibonds are 4.0%

Your math is just all kinds of wrong.

 

[Lab Lover]

Bro, a 30 year bond is yielding 4.8% right now. A SWR of 3.5% is literally 20% less than a decent bond ladder yields. Current ibonds are 4.0%

Your math is just all kinds of wrong.

your point doesn't account for inflation risk

 

[BLADEMDA]

Our “base case” safe withdrawal rate is up slightly from the starting safe withdrawal percentage of 3.7% we estimated in last year’s report. (The base case estimates for starting safe withdrawal rates for a new retiree with a 30-year horizon with a 90% probability of success were 3.3% in 2021, 3.8% in 2022, and 4.0% in 2023.) However, these numbers aren’t meant to imply that people who are already retired should shift their spending up or down from year to year; rather, they represent our best estimate of the starting safe withdrawal rate for a person currently embarking on retirement.

Morningstar



What is a safe withdrawal rate for a 50 year retirement?

AI Overview

For a 50-year retirement, a safe withdrawal rate is generally considered to be around 3% to 3.5%, though some studies suggest a figure as low as 3.25%.

 

[finalpsychyear]

A new house, 2 kids and nanny would represent 3/4 of my budget, FYI. That's why you need to actually see these expenses in real time before I believe 1.8% SWR that goes to just 3.6% SWR.

Thanks i rent a house now which is 75-80% of the future mortage i would get likely. This is included in my 1.8% swr. Id like to think those additional costs r closer to 50 percent more but def planning for doubling to be safe.

 

[BLADEMDA]

The younger you retire the more important the SWR and/or part-time to generate $100K in income. Sevo has his real estate investments which produce nice monthly or quarterly income. PGG has his military pension. 2 examples of reliable income besides stock market returns.

Don't forget that many facilities require a certain case load/volume to obtain privileges. Once you "retire" your case numbers may dwindle to the point you can only work at current facilities where case numbers are not a requirement. Maybe a surgicenter who won't care about your last 2 years of cases? If you completely walk away from this field there may not be an easy way back.

 

[Account1]

Our “base case” safe withdrawal rate is up slightly from the starting safe withdrawal percentage of 3.7% we estimated in last year’s report. (The base case estimates for starting safe withdrawal rates for a new retiree with a 30-year horizon with a 90% probability of success were 3.3% in 2021, 3.8% in 2022, and 4.0% in 2023.) However, these numbers aren’t meant to imply that people who are already retired should shift their spending up or down from year to year; rather, they represent our best estimate of the starting safe withdrawal rate for a person currently embarking on retirement.

Morningstar



What is a safe withdrawal rate for a 50 year retirement?

AI Overview

For a 50-year retirement, a safe withdrawal rate is generally considered to be around 3% to 3.5%, though some studies suggest a figure as low as 3.25%.

The AI is dumb and wrong in this case and so is Morningstar. This is well researched and established.

 

[pgg]

Bro, a 30 year bond is yielding 4.8% right now. A SWR of 3.5% is literally 20% less than a decent bond ladder yields. Current ibonds are 4.0%

Your math is just all kinds of wrong.

Fundamental to the concept of SWR (as the term is traditionally used) is keeping inflation adjusted spending power constant throughout retirement. The principal actually needs to grow despite withdrawals. The idea assumes investments that will outpace inflation, and that requires equity risk.

The SWR calculations aren't done with the idea of "timing your death perfectly and dying broke" - although that is one possible successful outcome. The starting point of the math is aiming to die with the principal intact, with a low/negligible probability of running out of money.

4.0 - 4.8% bond returns are too conservative to produce a high probability of success with a 3.5% SWR. Especially when you account for sequence-of-returns risk.

 

[pgg]

The younger you retire the more important the SWR and/or part-time to generate $100K in income. Sevo has his real estate investments which produce nice monthly or quarterly income. PGG has his military pension. 2 examples of reliable income besides stock market returns.

It's turning out that the cheap (almost free) health insurance I get with the pension might approach 1/2 of the actual value of the cash payments from the pension.

~12 years ago when I did the math and decided to stay in another 8 years at sub-market pay in order to get the pension, I didn't even factor the health insurance into the decision. I didn't even consider the possibility that health insurance would start costing north of $30K/year.

Crazy world we live in.

 

[narcotics999]

I agree. Best to keep working as long as you can… part time, no call, whatever you can do is your best financial move. My current group has 4 guys in their 70s - 2 still take call!
6 in their 60s 4 in their 50s and 4 younger than 50.
It’s a relatively easy job so they’re all inclined to stay on even part time. I think I’ll work 7-8 more years and then go day doc and do that until I can’t…

I am planning to work as long as I can. Maybe in my 60s, 20 hours per week for 40weeks. Assume modest 300$/hr, 240K per year still good $$.

 

[narcotics999]

It's turning out that the cheap (almost free) health insurance I get with the pension might approach 1/2 of the actual value of the cash payments from the pension.

~12 years ago when I did the math and decided to stay in another 8 years at sub-market pay in order to get the pension, I didn't even factor the health insurance into the decision. I didn't even consider the possibility that health insurance would start costing north of $30K/year.

Crazy world we live in.

Why do you need so many years? Just work for VA for 5 yrs at 55.

 

[pgg]

Why do you need so many years? Just work for VA for 5 yrs at 55.

I joined the Navy in return for tuition, long ago.

The obligated service requirements and the way payback years are credited are complex and vary depending on the various accession programs the military has for doctors. The short version is that by the time I was eligible to leave, I had 12 years of creditable service.

The pension is all or nothing - leave before 20, get nothing. Retire after 20, get the pension.

As I approached 12 years and the option of leaving, I did the math - basically weighed the pay differential between military and civilian pay for the next 8 years, vs the value of the pension. There were some other financial factors (two of the big ones were GI bill transfer to my kids, and a funded civilian fellowship year at my then-current rank and pay).

The VA was/is not a comparable option. Besides, I didn't (and don't) want to work for the VA.

(In case it's not clear, this is all history. I retired several years ago and am now at a private practice.)

 

[BLADEMDA]

It's turning out that the cheap (almost free) health insurance I get with the pension might approach 1/2 of the actual value of the cash payments from the pension.

~12 years ago when I did the math and decided to stay in another 8 years at sub-market pay in order to get the pension, I didn't even factor the health insurance into the decision. I didn't even consider the possibility that health insurance would start costing north of $30K/year.

Crazy world we live in.

My Medicare costs for my wife and myself are likely to exceed $1,800 per month. This number will only go up. The reason is due to some income from part time work, investments/dividends/interest and Roth conversions of IRA/401K money. When you add all those up irmaa is significant.
Can I afford the big healthcare payments? Of course. But, I wanted you to see the benefit of your Tricare for life.

Charles Schwab

 

[aneftp]

It's turning out that the cheap (almost free) health insurance I get with the pension might approach 1/2 of the actual value of the cash payments from the pension.

~12 years ago when I did the math and decided to stay in another 8 years at sub-market pay in order to get the pension, I didn't even factor the health insurance into the decision. I didn't even consider the possibility that health insurance would start costing north of $30K/year.

Crazy world we live in.

Yes. Healthcare costs these days is crazy these days

This is one one the reasons its perfect for older docs age 57 to try to jump to a VA medical center. Do 5 years. Get the immediate retirement plus subsidized healthcare from the Feds.

The pension for the Feds isn’t great at 5 years with a 1.0x multiple (16k ish per year) but the healthcare subsidies for life is worth another 15-16k now.

 

[ToKingdomCome]

Those working Christmas day, what rate are you being paid @aneftp

 

[finalpsychyear]

My Medicare costs for my wife and myself are likely to exceed $1,800 per month. This number will only go up. The reason is due to some income from part time work, investments/dividends/interest and Roth conversions of IRA/401K money. When you add all those up irmaa is significant.
Can I afford the big healthcare payments? Of course. But, I wanted you to see the benefit of your Tricare for life.

Charles Schwab

700 is the top medicare paymnets just for part B based on income roughly. Im guessing all the add ons for part D and then if you are getting supplementary care you could easily be over 1000-1200 easily per person. Not that it matters and really only while your working making a top income. It will go down of course if you were to stop working your main job.

 

[finalpsychyear]

Yes. Healthcare costs these days is crazy these days

This is one one the reasons its perfect for older docs age 57 to try to jump to a VA medical center. Do 5 years. Get the immediate retirement plus subsidized healthcare from the Feds.

The pension for the Feds isn’t great at 5 years with a 1.0x multiple (16k ish per year) but the healthcare subsidies for life is worth another 15-16k now.

Id rather be in a position where i could care less for a 2k/mo payment for health insurance. In fact I'll consider it a bonus if social security basically offsets the medicare premiums since its deducted from your SS before your even get it. The remainder I'll use for some supplementary program. That wont kick in till 65 yo. Thats how i look at it. Also, working my ass off now cause blade says anyone sub 50 better be at 2.5% swr based on there most expensive years (dream house mortage, nanny, 2 kids in full flight).

Regardless i go to the gym 5 days minimum, only eat real whole foods, net carbs sub 50grams most of the times. Planning on doing DEXA scans and all those whole body cancer screens and calcium scoring etc over the coming years. Also fasting esp 24-72 hours water fasting every so often
(i do it monthly or bi monthly) or even with some bone broth is the 5D chess move that no pharma ever wants you to know about.

 

[aneftp]

Id rather be in a position where i could care less for a 2k/mo payment for health insurance. In fact I'll consider it a bonus if social security basically offsets the medicare premiums since its deducted from your SS before your even get it. The remainder I'll use for some supplementary program. That wont kick in till 65 yo. Thats how i look at it. Also, working my ass off now cause blade says anyone sub 50 better be at 2.5% swr based on there most expensive years (dream house mortage, nanny, 2 kids in full flight).

Regardless i go to the gym 5 days minimum, only eat real whole foods, net carbs sub 50grams most of the times. Planning on doing DEXA scans and all those whole body cancer screens and calcium scoring etc over the coming years. Also fasting esp 24-72 hours water fasting every so often
(i do it monthly or bi monthly) or even with some bone broth is the 5D chess move that no pharma ever wants you to know about.

Yes but the psychology of paying 20-30-40k a year for healthcare impacts people’s decisions. It really does.

So right now healthcare costs aren’t on your radar. It will be when you are approaching age 60.

 

[BLADEMDA]

700 is the top medicare paymnets just for part B based on income roughly. Im guessing all the add ons for part D and then if you are getting supplementary care you could easily be over 1000-1200 easily per person. Not that it matters and really only while your working making a top income. It will go down of course if you were to stop working your main job.

Roth Conversions. Municipal Bond Income. Dividends. Capital Gains. All these count towards IRMAA as though they are "earned dollars."
IRMAA counts almost every single dollar from every source as part of the calculations.

 

[Account1]

Fundamental to the concept of SWR (as the term is traditionally used) is keeping inflation adjusted spending power constant throughout retirement. The principal actually needs to grow despite withdrawals. The idea assumes investments that will outpace inflation, and that requires equity risk.

The SWR calculations aren't done with the idea of "timing your death perfectly and dying broke" - although that is one possible successful outcome. The starting point of the math is aiming to die with the principal intact, with a low/negligible probability of running out of money.

4.0 - 4.8% bond returns are too conservative to produce a high probability of success with a 3.5% SWR. Especially when you account for sequence-of-returns risk.

A 4.0% SWR rate succeeds an overwhelming % of the time over 30 years with a normal allocation. Don't be 100% bonds, but the yields on corporate and government bonds right now make it truly a miserably stupid decision to use a 3.5%, or even worse, a 2.5% withdrawal strategy!?!?

Seriously, this comes up every other month here and no one has even seen the data behind these withdrawal rates. Most people live in this fantasy world where they're 85 and blowing more money than they did at 65 on strippers and coke in Bali with their entire family of 8 as they live out their last 15 years to 100, because we're all so special. Play the odds, know the odds. It makes your life better

You can literally retire at 40 with a 4% SWR and be fine:

"See the darker greens? That's rich. See the black? That's dead. See the red? That's broke. What are the real issues at 80 or 90 if you retire at 40 using a 4% withdrawal rate? Well, there's the issue of having so much money that you'll ruin your heirs. On average, using the 4% rule you'll die with 2.7X what you retired with. But by age 90, you've got an 85% chance of being dead. And if you think that's a big risk at 90, wait until 100."

Trinity study

 

[Lab Lover]

A 4.0% SWR rate succeeds an overwhelming % of the time over 30 years with a normal allocation. Don't be 100% bonds, but the yields on corporate and government bonds right now make it truly a miserably stupid decision to use a 3.5%, or even worse, a 2.5% withdrawal strategy!?!?

Seriously, this comes up every other month here and no one has even seen the data behind these withdrawal rates. Most people live in this fantasy world where they're 85 and blowing more money than they did at 65 on strippers and coke in Bali with their entire family of 8 as they live out their last 15 years to 100, because we're all so special. Play the odds, know the odds. It makes your life better

You can literally retire at 40 with a 4% SWR and be fine:

"See the darker greens? That's rich. See the black? That's dead. See the red? That's broke. What are the real issues at 80 or 90 if you retire at 40 using a 4% withdrawal rate? Well, there's the issue of having so much money that you'll ruin your heirs. On average, using the 4% rule you'll die with 2.7X what you retired with. But by age 90, you've got an 85% chance of being dead. And if you think that's a big risk at 90, wait until 100."

Trinity study



View attachment 412529


View attachment 412528

If you have enough money, you won’t ever die.

 

[aneftp]

It’s cray thinking about all these % withdrawal.

I like my ghetto worst case calculations
Portfolio 8 million

Worst case is its 50% crash meaning I got 4 million to live off

I live 20 years
So I can spend 200k a year.

Very simple. Whatever is left. I give to the family

 

[Southpaw]

I read these threads and of course I think it’s wise to prepare. But after reading a bit I tend to feel stressed and like I haven’t taken a deep breath in 15 minutes. I remind myself I’m an anesthesiologist. If I’m stressing about it what’s everyone else in America feeling ?

 

[BLADEMDA]

Those charts are if want want to die with zero left in the bank. A few of us want to leave our kids an inheritance. Also, planning for a "worst case scenario" is just prudent as who wants to go broke at age 85 knowing the math just didn't work out because you lived too long.

There is no way in hell I am using a SWR of 4% every year with some years pushing 5% because the home needs a new roof or the adult kid needs a "loan" of $50K for a car. To each his own but I want a 0% chance of failure with a cushion built in.

My conservative brain sees a 3% SWR or so starting at age 60 for a safe retirement leaving me a 1% cushion on average. If you choose to "gamble" based on recent returns and use a 5% SWR that is on you. Again, nobody is going to hire you at age 80 if you are wrong.

 

[BLADEMDA]

 

[BLADEMDA]

 

[Gern Blansten]

I read these threads and of course I think it’s wise to prepare. But after reading a bit I tend to feel stressed and like I haven’t taken a deep breath in 15 minutes. I remind myself I’m an anesthesiologist. If I’m stressing about it what’s everyone else in America feeling ?

They are thinking how virtuous you are for hating yourself and everyone like you so much but loving the rest of mankind.

 

[BLADEMDA]

Now let's say you retire at age 40 and want to plan for the next 50 years. Guess what your SWR is based on the chart above?

Answer: 2.8%

 

[pgg]

You stated that bond yields of >4% were sufficient to support a SWR of 3.5%, implying bonds were all that were needed:

Bro, a 30 year bond is yielding 4.8% right now. A SWR of 3.5% is literally 20% less than a decent bond ladder yields. Current ibonds are 4.0%

I replied that this would not be likely to work:

4.0 - 4.8% bond returns are too conservative to produce a high probability of success with a 3.5% SWR.

And you changed / clarified your original statement to say that what you really meant was a normal (not 100% bonds) allocation:

A 4.0% SWR rate succeeds an overwhelming % of the time over 30 years with a normal allocation. Don't be 100% bonds

And then you posted a chart which showed a 65% failure rate for a 100% bonds allocation with 4% SWR:

View attachment 412528

I think we're basically in agreement - 4% SWR should be just fine, given an asset allocation that is majority equity.