2015 Withdrawal Rate

[Lsbcal]

I think it depends a lot on your age. If you are in your 70s or 80s, you might be a little too Scroogy. But for a typical 30 year retirement expectancy, I think you are about where you want to be.

Aren't we assuming a certain wealth in many of these comments?

Example: NW-Bound is spending about 4% of his portfolio. But the big secret is he hasn't told us that the massive portfolio he manages is $50M. I'm not going to worry if he draws this down to a mere $5M through possible poor spending decisions and poor portfolio performance (sorry NW-Bound, this is only a fictional example but I did award you a massive portfolio ). In this case the 4% spending hides a lot. He could have spent only 1% and not been at all a Scrooge in my view.

 

[NW-Bound]

Good points both, about the age and wealth of the retiree.

I am not a youngster, but still have a few years till SS. FIRECalc says I can go as high as 5.5% when SS is considered. And if I go with Bernicke's plan, which I strongly believe my spending pattern will fit, then I can spend even higher.

The above is mitigated by my pessimism that investment returns will not be great in future years. Hence, I think a 3.5%WR is about right even if I have SS coming.

And speaking of real wealth, can we imagine Buffett or Gates spending 4%WR? The billionaires of yesteryear like Rockefeller, Morgan, Hearst, etc... might have spent 4% back then, but nowadays such decadence would not be PC.

 

[audreyh1]

Good points both, about the age and wealth of the retiree.

I am not a youngster, but still have a few years till SS. FIRECalc says I can go as high as 5.5% when SS is considered. And if I go with Bernicke's plan, which I strongly believe my spending pattern will fit, then I can spend even higher.

The above is mitigated by my pessimism that investment returns will not be great in future years. Hence, I think a 3.5%WR is about right even if I have SS coming.

And speaking of real wealth, can we imagine Buffett or Gates spending 4%WR? The billionaires of yesteryear like Rockefeller, Morgan, Hearst, etc... might have spent 4% back then, but nowadays such decadence would not be PC.

That's why they donate so much of it.

 

[pb4uski]

This thread will probably cause me to actually calculate mine. Our typical annual withdrawals in relation to our initial retirement nestegg when we retired was ~3.75% but in the 3 years our portfolio has increased about 20% and we have not seen the need to give ourselves a raise, so based on our current portfolio it is probably ~ 3.0%.

I plan to calculate two rates each year - the year's withdrawals divided by our retirement date nestegg and divided by the beginning of year balance.... along with a prospective WR based on 2015 planned withdrawals.

 

[scrabbler1]

I haven't finalized my SWR for 2014 yet, but a rough estimate of it will be about the same as what it was in 2013 and 2012, 1.8%. I use the end-of-year portfolio balance in the denominator. In 2009, 2010, and 2011, my first 3 years of ER, my SWR was around 2.5%, give or take a 0.1% but that was due more to my pre-ACA insurance premiums being much higher and my portfolio balance being a lot lower.

 

[Niuatoputapu]

There are two basic retirement "sins." The first, which I am guilty of, it the OMY well after you have enough for a solid retirement. The second is to have amassed a decent retirement fund and then parsimoniously dole it out like Ebeneezer Scrooge. You can't take it with you. You will probably be spending less naturally when you are in your 80s anyway so why be so worried about under 3% withdrawal rates?

Thank you 2B for your comments. I find the under 3% WR discussions worrisome because I do not intend such a low WR. I ask myself - am I miscalculating my ability to RE? I think not. FI for me is being able to live comfortably on a 3% (or less), but living it up or giving it away at 5% (pre-SS) and 4% (after SS). You can't take it with you.

 

[Major Tom]

I'll be withdrawing the same dollar amount that I've been withdrawing since I started, just 2.5 years ago. The WR was about 2.45% of the starting value and still is, of course, though it is now about 2% of the current portfolio.

I'm going to keep up this constant dollar withdrawal until things start to hurt a bit, or until the urge to purchase a used class C RV gets the better of me

 

[truenorth418]

I am going with 2.5% of end of year portfolio. That's a slightly higher rate than the last couple of years. I am 50 years old so still taking a pretty conservative approach.

Frankly, 2.5% is more $ than I need to live comfortably, and I would be surprised if I actually spend that much.


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[MichaelB]

We will withdraw around 4%, the exact percentage will be determined at the close of 2014 later today.

 

[2B]

I seem to have changed the thread a bit so I'll expand my comment a little.

Being a OMY-er for so long has let me accumulate more than I really need to support the lifestyle I and DW have been living. That can actually be supported by our SS and pensions. The pensions will start next year - non-COLA'd and relatively small. SS is a few years off.

Once I create my SS bridge fund, the rest of the portfolio is actually "extra." I'm not including traveling in our basic budget and it certainly isn't a "need." Plus there are also other nice extras available for a little more money than we would typically spend. Therefore, I've decided to allocate 5% of the "extra" portfolio to these more decadent spending options. The market may go up or down but I'll never run out of money. I'll just have more or less in my extra fund each year. I really don't think I can spend it all in 2015. I'm already having trouble getting DW to commit to a couple of trips.

 

[Ronstar]

I figure DW and mine as separate accounts. We split expenses about 70 me/30 her. I'll withdraw around 3.0% of my portfolio. She'll take her pension with no withdrawal of her IRA.

 

[bbbamI]

WR = 1.05% on a massive portfolio value.




... just kidding

To those of you posting your WR, are you measuring it against your initial portfolio amount or your current portfolio amount?

I prefer to take the current portfolio amount.

Both retired in 2009. At the time dh was 54 and yours truly 51. DH receives a small non cola'd pension.

2009 Projected WR.....0 (dh worked part of that year, we had to take no reserves)
2010 Projected WR....3%......Actual 2.71%
2011 Projected WR....3%......Actual 3.27% (health issues)
2012 Projected WR....3%......Actual 2.87%
2013 Projected WR....3.5%...Actual 4.94% (new car)
2014 Projected WR....3.5%...Actual >3% (all numbers aren't in yet)
2015 Projected WR....3.5%...Actual.....who knows?

In 2016 dh will start taking SS. We could drop our WR lower, but at this point I plan to keep the WR at around 3%...even when I get my SS in 2019.

Projections/plans can change...often times more than not.

btw...Firecalc says we can spend 70% more than we do... Unless we get a wild hair or something big blows up, I don't see that happening.

 

[Chuckanut]

About 3%, but I could easily go to 4% if needed. Actually, I had planned on having a 5% WR until SS kicks in at 70. But, it seems I am not spending as much as I thought I would. Bad me for not helping out the economy.

 

[W2R]

About 3%, but I could easily go to 4% if needed. Actually, I had planned on having a 5% WR until SS kicks in at 70. But, it seems I am not spending as much as I thought I would. Bad me for not helping out the economy.

That is what is happening to me, but I figure I can make up for it in one fell swoop if/when I find and buy my dream house. Likewise, some others can go on dream vacations if they like to travel, or buy that pricey car or boat, or get that elusive college degree or whatever their dream may be.

I figure that spending doesn't have to be constant during the entirety of retirement. As much as people criticize when one's WR is low, they will probably criticize just as much or more in years when it is high. You can't win unless you withdraw exactly 3.5% every year, and who lives like that? Well, maybe some really do, but not everybody. I think most of us tend to do what we think is best in our individual situations.

 

[NW-Bound]

Although 3.5% WR of current portfolio value has been my goal, I have been exceeding it for the first 3 years of full retirement. And my expenses are quite lumpy. When unexpected things happen that call for money to be spent, one often cannot wait.

Still, I need to set a goal to work towards, else who knows what deluge might happen if the flood gate opens? Looking forward to next year, a lot of expenses this year will not recur, but something else may happen. If it's not one thing, then it's 'nother. I am having fun, and in the end that's what counts.

 

[audreyh1]

Around 3% of portfolio value today.

 

[Throwdownmyaceinthehole]

This is the first year I've really tracked expenses as retired, and compared to SWR, even tho I am still working part time. After a whole lot of travel, 2 international trips, boat buying, carpet replacement, lots of wine drinking, we are only at 4.4%, 1.2% if I add back in my earnings. I'm training my replacement in Jan /Feb, so again, we look like it's a go for FIRE. This is FUN!

 

[Live And Learn]

To those of you posting your WR, are you measuring it against your initial portfolio amount or your current portfolio amount?

First year of ER will be 2015, so for me they are one in the same .... but thank you - I haven't yet set up my spreadsheet to calc % of initial portfolio by year, so thats something I should do now !

 

[2B]

That is what is happening to me, but I figure I can make up for it in one fell swoop if/when I find and buy my dream house. Likewise, some others can go on dream vacations if they like to travel, or buy that pricey car or boat, or get that elusive college degree or whatever their dream may be.

I figure that spending doesn't have to be constant during the entirety of retirement. As much as people criticize when one's WR is low, they will probably criticize just as much or more in years when it is high. You can't win unless you withdraw exactly 3.5% every year, and who lives like that? Well, maybe some really do, but not everybody. I think most of us tend to do what we think is best in our individual situations.

DW and I bought a too big house (IMHO) three years ago when her father finally passed away. We have poured money into landscaping, patio and new furniture. These were meaningful expenses but they weren't budget busters under my plan. I don't think paying cash for a house really should be included in any year's WR calculation but it definitely would reduce the portfolio for future year.

I don't see where anyone would always spend exactly the same percentage unless they were of limited means and wanted to make sure they didn't run out.

My 5% spending (plus SS and pension) is more of a challenge to me. My 2015 budget is more than I have ever spent in any one year - not counting buying houses. It has become clear I have been working for my grandchildren for the last few years. I've committed the first sin of amassing more than I need. Now I want to avoid the second sin by not being miserly into the grave.

 

[Alan]

Since we have 4 more income streams coming on line over the next 10 years with pensions, SS etc, then I don't have a real target % each year, instead I look at projections of what we can spend as per FIDO and FireCalc. We are also committed to high spending the first 6 or 7 years of retirement while we do lots of extensive travel.

This year was very expensive because of a 5 month trip "down under", replacement of our car and ROTH conversions to the top of the 25% bracket (planned move back to the UK in 2016).

Year|Trinity|1st of Year %
2010|0%| 0%
2011|0.99%|0.86%
2012|1.96%|1.27%
2013|5.89%|3.51%
2014|9.84%|5.4%
2015|6.81%|3.73%

 

[Cobra9777]

First full year of retirement, I'm at 1.0%. But DW is still working, so probably not a meaningful comparison to others. When she retires (next year?), and we replace her net pay with her pension annuity, the WR goes up to 1.7%. It will rise slowly after that, as one of the pensions is non-COLA. But when SS kicks in, it drops below 1.0% and then starts slowly rising again. We don't really plan anything based around WR, but that's the resulting profile. For now, I try to "insulate" DW from these figures, as her retail [-]obsession[/-] [-]habit[/-] hobby is the #1 threat to our retirement prospects.

 

[NW-Bound]

This year was very expensive because of a 5 month trip "down under", replacement of our car and ROTH conversions to the top of the 25% bracket...

Your Roth conversions caught my eyes. I have been doing Roth conversions too, but that does not count in my WR.

Yes, my conversions do result in WR from my before-tax accounts, but then my Roth account gain from the conversion. The only net WR is for paying taxes, and only the tax is counted.

I count as expenses or WR what leave my checking account, disappear and never to return. If it stays and still adds to Quicken's bottom line, it's still mine.

PS. On 2nd thought, perhaps you only counted the tax too. I just do not know your financial situation.

 

[rodi]

I worked half the year this past year - and had unpaid PTO, etc to add to the coffers.

This next year, 2015, is my first full year of retirement. It looks like DH will be rejoining me within a few weeks. (He flunked retirement and went back to work part time.)

Our planned withdrawal from investments is 3.4%. Our total budget is higher - but we have rental income and DH has SS coming in.

We actually have one big spend that is off books - money set aside before I retired... a summer long vacation in Europe.

 

[NW-Bound]

I do not have money set aside for anything; money is fungible. It's all one big pot. It's at the bottom line of the Quicken screen.

So, I just think of all my big expenses as "one-time" non-recurrent expenses.

Of course they do not recur each year, but take turn happening one after another. Else, I would be in big trouble if they all occur each year.

 

[Alan]

Your Roth conversions caught my eyes. I have been doing Roth conversions too, but that does not count in my WR.

Yes, my conversions do result in WR from my before-tax accounts, but then my Roth account gain from the conversion. The only net WR is for paying taxes, and only the tax is counted.

I count as expenses what leave my checking account, disappear and never to return. If it stays and still adds to Quicken's bottom line, it's still mine.

PS. On 2nd thought, perhaps you only counted the tax too. I just do not know your financial situation.

I count all taxes as expenses including those paid to do ROTH conversions, which come from after-tax accounts. (I don't count the actual amount converted as that was never withdrawn, just moved to a different account).

Our retirement savings have no adjustment for tax deferred IRA money, it is just a $ amount, and the total at the start of our retirement in 2010 had 0% ROTH, but ROTH money is now 19% of the total, and tax deferred is 27%. I suppose I am effectively moving money from taxable to tax-free as I pay taxes to do the conversion, and in the longer term it will result in lower taxes (expenses) when the ROTH is drawn down.