How Much Money Will You Take to Your Grave?

It’s a good reminder that, in spite of a rough patch here and there, most well-prepared retirees in the past have ended up with much larger portfolios than they started with on their retirement day.

Read on to learn how much money you might have left over for your charities or children if you follow a reasonably safe withdrawal rate pattern when retired.

If your goal is to enjoy your money and use it to increase your happiness (and that of others) in life, then I would suggest that a withdrawal rate that is very likely to leave you with 10 times as much as you had on the eve of retirement is probably the wrong approach.

Six Other Reasons To Avoid Hyper-Conservatism

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Remember that if the odds of you running out of money in 30 years are 10%, and the odds of you actually living 30 more years are 10%, then your actual risk is 1%. That’s lower than the risk of an experienced mountaineer dying on Mt. Everest. 

1: You probably won’t live for 30 years after retirement.

Everybody I know in real life retirement keeps track of how they’re doing. If their returns are poor, they cut back, tighten their belt, cancel a few vacations, give less to charity, give less to heirs and make it work.

2: Nobody actually follows a fixed SWR

Retirement spending follows a curve where it is highest the first few years of retirement when lots of purchases are made and traveling is done and then gradually decreases until just before death, when it ramps up dramatically with medical and/or long-term care costs.

3: Most Retirees Spend Less As They Go

So if 4% (indexed to inflation) provides plenty of money for those first 5 years, it’ll probably be more than enough for the 20 after that!

Well, 75-80% certainty over a 25-30 year retirement for a portfolio of 50-75% stocks corresponds to an SWR in the 5-6% range. That’s 25-50% more money to spend each year in retirement. That’s hardly insignificant.

4: 75% Certainty Is Good Enough

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