#31241
Postby vrdiver » February 13th, 2017, 3:03 pm
We live off of our HYP. Our dividends exceed our planned budget. Should dividends be slashed by Mr Market, we have a contingency cash reserve (currently a little over three years budget, but that's because I like to pay for a lot of things up front, so replacement cars etc are also accruing cash). Should dividends take too long to recover, we would adjust our lifestyle. The budget includes holidays, hobbies etc. In hard times we'd have to swap to less expensive alternatives. If dividends were cut by 50% and hadn't started to recover after a couple of years we'd review and re-budget.
The point is that SWR and Firecalc models all start to assume you are inflexible and once spending 4% you'll continue to do so, increasing by inflation, every year, regardless of reality. My own view is rather different - just like a salesman earning commission, there are good years and bad years. The trick seems to be to have a buffer against bad years being any year of under-performance and actively reviewing spending and affordability.
Of course, this latter method does mean you will leave a HYP-load of equity behind when you snuff it, but I quite like the idea, so it's not a problem to me.
I'll let you know how it goes, maybe in 20 or 30 years!
VRD