2015 Withdrawal Rate

[NW-Bound]

OK. We are doing the same accounting. I forgot that you went up to the top of the 25% bracket, and that resulted in a big tax bill.

I am still taking my sweet time with the Roth conversion, but perhaps should figure out whether I should step that up. Our Roth is still only 5% of portfolio.

 

[Chuckanut]

3%. It seems to work for me.

 

[Alan]

OK. We are doing the same accounting. I forgot that you went up to the top of the 25% bracket, and that resulted in a big tax bill.

I am still taking my sweet time with the Roth conversion, but perhaps should figure out whether I should step that up.

In my case the UK tax rates are 0/20/40/45 and I would bump up from the 20% to the 40% bracket with RMD's if I have too large a tax deferred pot.

 

[Chuckanut]

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

Picky! Picky! Picky!

 

[rodi]

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.

Ok - by that accounting - our planned WR is 4.7% when I add back in the set aside money. (I have money set aside for new roof, solar panels, new car, and $25k planned. I still didn't include the 529's for the kids college... Since that is specific and dedicate... less fungible.

 

[NW-Bound]

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

Picky! Picky! Picky!

To do it like FIRECalc, one must account for inflation since he started retirement. That's more work.

I will just go with current portfolio value, and if 2009 happens again, my stash shrinks and my roof leaks, I will buy some blue tarp.

Ok - by that accounting - our planned WR is 4.7% when I add back in the set aside money. (I have money set aside for new roof, solar panels, new car, and $25k planned. I still didn't include the 529's for the kids college... Since that is specific and dedicate... less fungible.

I am lazy, and besides if I set money aside for this, I would worry if I still forgot that. So, all in a big pot it goes.

The one really BIG thing I could never think of was an illness that could have taken my life, but I luckily survived. After that, what's so important? Party on!

 

[REWahoo]

Year|Trinity %|1st of Year %
2006|4.8%|4.8%
2007|9.8%|9.2%
2008|7.9%|7.6%
2009|6.1%|7.8%
2010|5.4%|8.7%
2011|4.2%|4.7%
2012|3.9%|4.3%
2013|3.5%|3.7%
2014|3.7%|3.9%
2015|3.7%|3.5%(budgeted)

 

[NW-Bound]

And I thought you said "Numbers is hard". Still saying it actually...

I guess when it comes to one's money, he cares more and it's no longer hard.

 

[REWahoo]

I've been working on that table since 2006...

 

[RobLJ]

Year|Trinity %|1st of Year %
2006|4.8%|4.8%
2007|9.8%|9.2%
2008|7.9%|7.6%
2009|6.1%|7.8%
2010|5.4%|8.7%
2011|4.2%|4.7%
2012|3.9%|4.3%
2013|3.5%|3.7%
2014|3.7%|3.9%
2015|3.7%|3.5%(budgeted)

REWahoo,
It looks like you started with a larger withdrawal rate, then declined--after SS or pension (or as a result of portfolio gains?)
I ask because I intend to withdraw at a higher rate until SS kicks in for both myself and DW, so I was curious about your experience, if this was the case for you. I'd like to draw 5-6%, then reduce to 4 and 3.5 after both of us start drawing SS.

 

[W2R]

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.

That's a good way of looking at it. In my case, I would want to pay for the house in cash and I have been looking in some pretty pricey neighborhoods, so I would only get about half from the sale of my present home.

After thinking about it, I think I will use your method (thanks!) and consider my portfolio to have decreased when I purchase the house.

After buying the house, my WR would increase to a more normal one in two ways. First, the denominator (portfolio size at the beginning of the year) would be smaller. And second, the numerator (spending) would be larger, because the taxes, insurance, maintenance, upkeep, and so much more would be added. Not to mention the infamous lifestyle creep that so many report after buying a more expensive home.

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.

I applaud you for that! You can't take it with you, as they say. One great thing about retirement, is that there is no further need to save for retirement. What better time to enjoy what we have earned, within what our common sense tells us is OK? I think that with the market thriving as it has, this is an especially good time to be spending. We can always tighten the belt a little later on, if necessary, if the market crashes again.

 

[REWahoo]

REWahoo,
It looks like you started with a larger withdrawal rate, then declined--after SS or pension (or as a result of portfolio gains?)

Yes, our withdrawals were higher the first few years before SS and my wife's small pension kicked in. We also had some 'big ticket' RV purchases during that time period.

 

[W2R]

Year|Trinity %|1st of Year %
2006|4.8%|4.8%
2007|9.8%|9.2%
2008|7.9%|7.6%
2009|6.1%|7.8%
2010|5.4%|8.7%
2011|4.2%|4.7%
2012|3.9%|4.3%
2013|3.5%|3.7%
2014|3.7%|3.9%
2015|3.7%|3.5%(budgeted)

Woo-hoo! EXCELLENT table. Very cool. It is such fun to see that others have been making the same computations that I have [-]sweated over[/-] worked on over the years.

I remember when you bought that RV, and when you took SS due to the crash. It's one thing to have read your descriptions of how these events impacted your finances, and quite another to see the actual numbers in your table. They speak for themselves! Looking at the numbers, it is difficult to deny that claiming SS earlier than planned was a brilliant thing to do at that time (either late 2008 or early 2009, IIRC).

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%

Ditto for your table, EXCELLENT! It's fascinating to see your numbers too, and wow, they say a lot about how much it did cost spending much of this year in Australia. From what you have said, it was an amazing experience, though.

 

[RockyMtn]

For 2015 am looking at about 1.5%. 2014 was 1.9% but had high taxes due some rebalancing that had to be done and a bunch of gains from KMP stock that was liquidated as part of a merger.

Well below what firecalc, fido and quicken planner say I can spend as I have SS and two pensions awaiting in 10 years. Maybe I'll give myself a raise in 2016. Right now we are not wanting for anything though.

 

[BBQ-Nut]

So...LBYM is a 'virtue' (per the FIRE mantra)...but it's a 'sin' to leave any $$ on the table after 'end game'....


What is the label if we live happily during life *and* help our family with the leftovers?

 

[W2R]

So...LBYM is a 'virtue' (per the FIRE mantra)...but it's a 'sin' to leave any $$ on the table after 'end game'....


What is the label if we live happily during life *and* help our family with the leftovers?

To me, the "virtue" is appreciating what others do and why they make the decisions they make, and applauding them for making the right decisions for their own particular context.

To me the "sin" is judging and condemning congenial posts discussing members' individual and varying points of view regarding withdrawal rates, when you haven't walked a mile in the other person's moccasins (as the saying goes).

So, I think it is GREAT if you want to live happily during life, *and* help your family with the leftovers since that is apparently your (very valid) choice and point of view.

 

[Sunset]

I don't know yet. I retired last January and spent a lot this year but had vacation payout and inheritance so spent freely doing some one time things like a new boat and started helping pay for college for a great nephew, plan to keep helping him.
Now my portfolio is well over a million I figure I can withdraw about 30-40K if I feel like it, giving the boy 10K giving me about 2K a month on top of my 800 SS which is more than I am likely to spend. I don't actually have a budget but figure I spend about $1,500 a month on everything so will have twice that.

Not trying to pry so no need to publicly answer.
Your portfolio is nice and high considering your low income you must have had as SS of $800/mo is low.
Are you sure you are collecting SS the correct way ?
example if you were married for 10 yrs or more, then divorced, you have a choice of collecting on your earnings record or your ex-spouses (does not change theirs).
Hopefully you at least talked to SS about the options available.

 

[Lsbcal]

I know everyone is breathless for my actual data so here it is with age:

So we under spent last year even though we went on several domestic trips and helped DS with his elective eye surgery. Spending was lower after 2012 because of (1) added SS, (2) Medicare, (3) DS graduated from college, (4) lower taxes.

Note the bump up in plans for 2015. That is because I spent some time with the VPW retirement calculator and decided we've been too frugal.

Using VPW I found that even with depletion of the portfolio to zero at age=110, the WR = 4.5% for 2015. That VPW run shows the inflation adjusted portfolio at greater then 50% of the current one up to age 100 even with a very bad sequence starting in 1968.

Happy spending to all in 2015!!!

 

[NW-Bound]

... Spending was lower after 2012 because of (1) added SS, (2) Medicare, (3) DS graduated from college, (4) lower taxes...

It is lower in terms of %WR but I certainly hope it got a lot higher in terms of $.

 

[Lsbcal]

...(snip)...
After buying the house, my WR would increase to a more normal one in two ways. First, the denominator (portfolio size at the beginning of the year) would be smaller. And second, the numerator (spending) would be larger, because the taxes, insurance, maintenance, upkeep, and so much more would be added. Not to mention the infamous lifestyle creep that so many report after buying a more expensive home....

Getting a new house is a great way for you to spend excess money I think. I know you've said you don't enjoy a lot of travel so why not splurge on where you live every day. We spend a lot on our house, but it feels well worth it for the daily pleasures. Post a pic if you feel comfy doing it.

 

[Lsbcal]

It is lower in terms of %WR but I certainly hope it got a lot higher in terms of $.

It did get a lot higher. The "fun" column was 28% of our spending for 2014. Next year it could go to 45% of spending if I can think of enough sensible stuff to do with it.

That might make an interesting thread: how much is your fun spending as a percentage of overall spending?
Fun could include house items not absolutely required.

 

[NW-Bound]

All right! As much as I like to count money, I will admit that spending money can be fun too, but it has to be done right.

About leisure spending, it's a good topic for a thread or poll, and I cannot recall a past one despite my superior memory.

 

[Theseus]

I will just go with current portfolio value, and if 2009 happens again, my stash shrinks and my roof leaks, I will buy some blue tarp.

Same thought I had regarding the blue tarp Plans are great, but knowing that being able to adapt to unexpected circumstances and still survive has value too.

I look at my savings WR based on overall plan horizon, as there are just too many changing variables with non COLA pensions vs. inflation, SS down the road dictating an initially greater rate of withdrawal, balancing frugality and ACA subsidy with living & travel expenses, all while keeping an eye out for RMD's even further down the road. Average runs about 3.5% over the plan life, which has us reaching the upper quintile of actuarial survival rate - and that, given our family and personal histories doesn't seem all that likely. Spend, baby, spend!

 

[NW-Bound]

Glad someone else also has the blue tarp contingency plan.

Here's another advantage for simpler planning. While some people set aside for a new roof, I will fund the repair when it is needed out of the one single "big pot". And if that "big pot" becomes a "small pot", heaven forbid, well, I always carry the contingency funding for roof repair in my wallet: a Jackson dollar note.

 

[Meadbh]

Just did my month end expense log and year end NW calculation. Debt is going down and NW is going up. I have been RE for two years. 2015 is a projection based on 3% of current NW. I don't expect to spend that much as 2014 was an anomaly. I had unexpected income in 2013 and had to pay more tax than I had bargained for. And my car loan will disappear in July 2015!

Year | % of NW Spent | % of Investable Assets Spent | % of Investable Assets at RE Spent (Trinity)
2013 |3.04% |3.35% |3.35%
2014 |3.09% |3.37% |3.77%
2015 |3.00% |3.26% |3.84%

.....and now I know how to insert a table. Wow, it's just like the 1980s! O0

Thank you Janet H, for the clear instructions.