On Jan 8, 7:05*pm, tiger <ti...[at]starnberg-mail.de> wrote:
- quote -

I couldn't give a % to DECREASE the starting withdraw rate for early
retirement, but I know some factors to consider.

1) asset allocation- a portfolio with 50% equities and a portfolio
with 80% equities will have different withdraw rates and longevities.
The 4% rule was originally from the trinity study, which used 60%
equities for the duration of retirement (30-40 years duration).
Trinity study was based on past market performance.

2) Taxes. One state might tax 401k withdraws, another might not. One
state might tax dividends where as another might not. Some states
have no income tax at all. Plus property taxes and federal income
taxes.

3) Types of accounts. A person with 100% of portfolio in Roth
accounts will need less than a person with 100% of money in 401k/ tax
deferred type accounts. In addition if portfolio was dividend paying
stocks (meaning dividends accounted for 100% of needed income), I
would be confident portfolio could sustain itself, regardless of past
market performance. This is probably a 3.5% withdraw rate...
dividends tend to keep up with inflation is my interpretation of what
I have read on the subject.

4) Sources for income. Similar to 3, if a person had an annuity to
cover basic expenses and indexed to inflation, then it's possible they
would need less in an equity based account. Maybe person also has
real estate holdings or other assets not typically held in equity
investing. Art, a business or something else.

Here is a whole forum dedicated to such discussions (and people on it
are in their 40's and retired- ask them how they did it).

http://early-retirement.org/forums/

HTH

In article
<069d0619-fd5c-42b9-828c-ea7e99b0a963[at]q77g2000hsh.googlegroups.com> ,
tiger <tiger[at]starnberg-mail.de> wrote:

- quote -

It is life expectancy (and allocation and probability of success) rather
than age at retirement that determines the sustainable withdrawal rate.

You can play around with the TRowePrice Retirement calculator.

AN article in the Journal of Financial planning (10/94) showed that a
portfolio of 50% stock and 50% bonds indicated that a 3% withdrawal rate
would last 59 years, 4% would last 35 years, 5% would last 20 years and
6% would last 6%. The implication is that at age 80 cone could have a
larger withdrawal rate than at age 65

Remember that this is all based on probability and the assumption that
stocks and bonds will continue to behave the way they have in the past.

People develop rules of thumb after working out the details over and
over again. There is no substitute for doing this. People reading
this may live in Texas, Callifornia, London or Berlin. Their
situations are not in any way the same.

Let's say you retire at 35 and live to 87 (same as retiring at 67 for
20 years). That is 52 years. Let's say you start out wtih $36,000
living expenese at age 35. You will need $162,555 at age 87 assuming
3% inflation. Your total living expenses for 52 years is $4.38
million.

On person may think they can earn 12% on stocks and pay no tax because
it is all in a Roth IRA. Another person may want to load up on CDs
and Tax Free Muni Bonds and earn 5% before 25% federal tax and 9.3%
state tax.

The details matter. You have to work out relevant examples over and
over before coming up with rules of thumb.

Is there a rule, how many percent must be added for every year of
earlier retirement to a withdrawal rate determined for retirement with
67? Is it more than an additional 1% when it would be 35 instead of
67?

Even when there is not the intention to retire now, it is of interest
whether it would be possible. Especially this would help with
questions of occupational disability or the possibility to take more
risk in investment.