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Old 06-09-2015, 09:26 AM   #21
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Interesting conversation.
Can understand the emotional feeling of loss, but our planning defined this in the very beginning, so it's not something that affects us.
The plan was to be lowest risk possible for ROI, and to recognize a spend-down of assets. The loss of capital and cash was expected. So far, we're far enough ahead of our plan to be able to accept unexpected expenses with equanimity.

It's kind of like eating a cone of ice cream, before it melts.
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Old 06-09-2015, 10:00 AM   #22
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My cash account is fine, growing from dividends. My equities took a big hit with the collapse of oil last year, though, and that gives me anxiety. The holdings are solid and will continue to earn and ought to recover eventually, but I feel squeezed.

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Old 06-09-2015, 11:00 AM   #23
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Been retired a couple of months and I am surprised that I get a bit sad watching us spend down our cash reserves after years of watching them grow.

I anticipated the FACT but not the EMOTION associated with the reverse flow. Is this temporary?
Like Katsmeow, we had a higher SWR early on because we still had kids in high school and college when we decided to semi-ER. The closer the kids get to being off the payroll, the closer we get to SS eligibility age, and the longer we see that we are tracking well to our initial plan, I've relaxed.

We also have more of a capital preservation type portfolio, with pretty low volatility, so that helps. I don't have the temperament to have a portfolio that could lose 30 - 50% of my life savings in a given year at my age.
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Old 06-09-2015, 12:58 PM   #24
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Like Katsmeow, we had a higher SWR early on because we still had kids in high school and college when we decided to semi-ER.
I guess I compartmentalize more than you. My son is still in college, so there are expenses for that. But they are segregated from our other funds. When I write a check to pay for tuition (or whatever) it comes out of the college money. Its literally a different account and I don't even think of it coming out of the money we have for living on - i.e. not part of our SWR (or actually VWR).

I know money is fungible, but since I would never spend the money earmarked for DS's college education on something like a new car, I don't really see it as my money any more.
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Old 06-09-2015, 01:36 PM   #25
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I guess I compartmentalize more than you. My son is still in college, so there are expenses for that. But they are segregated from our other funds. When I write a check to pay for tuition (or whatever) it comes out of the college money. Its literally a different account and I don't even think of it coming out of the money we have for living on - i.e. not part of our SWR (or actually VWR).

I know money is fungible, but since I would never spend the money earmarked for DS's college education on something like a new car, I don't really see it as my money any more.
It is not mainly college. Our kids qualify for financial aid so college has not been expensive for us. We do pay for their car insurance, dental bills, medical insurance and bills, cars, cell phones, food, travel, our umbrella insurance is higher with younger drivers and a bunch of other expenses. I don't have separate checking accounts by person for all the people in our household.

With the kids off the payroll our annual expenses will drop significantly.
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Old 06-09-2015, 02:38 PM   #26
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The difficult thing for me after the paycheck stopped was initiating transfers from VG to checking. After years of moving money to VG most every month it was hard to take but I've gotten used to it now.

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Old 06-09-2015, 03:08 PM   #27
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For me I always get a big pay check at the end of June September, and December (VTI and VXUS).
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Old 06-09-2015, 04:11 PM   #28
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I am starting to feel this way too. Last couple of years we have spent more than plan for a number reasons. Not the least of which is that the portfolio has done so well. Haven't liquidated any of the portfolio other than dividends, so cash has declined. Pretty easy solution is to sell some stock. Don't like doing this but obviously will. Just need to get going on it. Total net worth has increased and that is the important thing.
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Old 06-09-2015, 04:53 PM   #29
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Originally Posted by jabbahop View Post
Been retired a couple of months and I am surprised that I get a bit sad watching us spend down our cash reserves after years of watching them grow.

I anticipated the FACT but not the EMOTION associated with the reverse flow. Is this temporary?
Normally I add my entire portfolio and the spending money in my bank account together, to get a total. It is not quite net worth, but close. That total varies a lot more depending on the stock market, than it does due to my spending.

So normally this doesn't bother me at all. I think that the reason it is bothering you, might be that the market is going down at the same time as you are starting your retirement. So, that probably makes it less rewarding to look at net worth.

This year is a little different for me:
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Last couple of years we have spent more than plan for a number reasons. Not the least of which is that the portfolio has done so well.
Like Danmar, I am spending a lot more lately than I usually do. In my case, it is because I am buying my dream house, and it seems like every time I turn around there is somebody with their hand out some other expense associated with buying the house or moving. Plus, I am buying the house in cash, so there go the cash reserves (temporarily, until I sell my present house). I am a bit of a tightwad so I have to remind myself constantly that I can afford this and that this is OK and something that will make me very happy in the long run.
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Old 06-09-2015, 05:04 PM   #30
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It bothers me a bit, but after three years it's only a minor bother. But net worth has gone up those years, as others have said, and that's the number I watch.

Now the first year I have a serious investment reversal will likely be a different story, but I have my allocation plan and will stay the course. However, I suspect discretionary expenses will get cut back a bit during tougher times. Some habits just die hard.
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Old 06-09-2015, 08:25 PM   #31
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For all these folks who spend the dividends, do you just take them out of after tax accounts or also out of tax deferred?


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Old 06-09-2015, 11:15 PM   #32
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For all these folks who spend the dividends, do you just take them out of after tax accounts or also out of tax deferred?
We are tapping Divs from some, not all, of our taxable funds. But none from tax-deferred funds. We might tap another taxable fund this year, to help pay for the extra FIT required for Roth conversion up to the top of the 15% bracket.
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Old 06-10-2015, 07:01 AM   #33
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For all these folks who spend the dividends, do you just take them out of after tax accounts or also out of tax deferred?


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So far just after tax accounts. My tax deferred account is immaterial.
Extra spending on daughter's wedding, renovations, and other lumpy real estate related expenses all seem to be coming up at once. Good thing the market is cooperating.
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Old 06-10-2015, 08:11 AM   #34
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For all these folks who spend the dividends, do you just take them out of after tax accounts or also out of tax deferred?


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I am not old enough (52) to have unfettered access to my IRA. The IRA is part of what I call my "reinforcements" due to arrive starting around age 60. I live off my non-retirement assets and their dividends only.
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Old 06-10-2015, 09:09 AM   #35
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I used up all my after-tax money first. Now I take monthly stipends from my Vanguard MMF in my tIRA.

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Old 06-10-2015, 09:23 AM   #36
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Thank you for the posts answering my question. I don't know what would be the best strategy, but I am currently younger than 59.5 years old, and I left my last employer after 55, and according to their 401K summary plan doc, so technically, I can start taking distribution from it penalty free now (before 59.5 years old)... And I am seriously considering taking some money out of there starting next year, so I won't delete all my after tax money first.
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Old 06-10-2015, 09:33 AM   #37
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Thank you for the posts answering my question. I don't know what would be the best strategy, but I am currently younger than 59.5 years old, and I left my last employer after 55, and according to their 401K summary plan doc, so technically, I can start taking distribution from it penalty free now (before 59.5 years old)... And I am seriously considering taking some money out of there starting next year, so I won't delete all my after tax money first.
Thanks to you for bringing up the topic, and to the posters. The posts have helped me in planning how/where to withdraw $ in the future.
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Old 06-10-2015, 09:34 AM   #38
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As others have said, cash accounts are just one component of the picture. Money is fungible, so the amount of cash in a specific account is important only for cash management: making sure there is enough in the account to cover current expenses and avoid bank charges. To that end, I keep a HISA buffer.

The major financial indicators that I follow are:
1. Net Worth (annually, increasing in ER so far)
3. Liabilities (annually, down over 80% from its peak 5 years ago)
3. Lifestyle expenses (excluding taxes and debt repayment, monthly, more modest than expected)
4. Debt service expenses (monthly, about to drop by 50% as my car gets paid off this summer)

As for taxes, they vary according to the sources of income used. In 2014 I had a very low tax rate, but I am now implementing a strategy of drawing down on tax sheltered accounts for part of my expenses, which will lead to withholding and somewhat higher taxes in the short term. My goal is to avoid ginormous tax grabs due to RMDs from age 71.
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Old 06-10-2015, 03:27 PM   #39
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Can someone explain to me why this is? I noticed the same thing in i-orp also, but I feel like I want to keep some of my cash reserves and take some tax deferred out at the same time.
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Thank you for the posts answering my question. I don't know what would be the best strategy, but I am currently younger than 59.5 years old, and I left my last employer after 55, and according to their 401K summary plan doc, so technically, I can start taking distribution from it penalty free now (before 59.5 years old)... And I am seriously considering taking some money out of there starting next year, so I won't delete all my after tax money first.
The idea is (generally) let Roth accounts build tax free, so leaving those alone is a good idea. That goes for HSA's too, I think. If you think tax rates will be the same later as now, it's probably not a big deal to pull out of your 401k using the 55 rule as opposed to after tax money. But if you can get money out of the 401k any time you want to, then it can become after tax money, but pulling has tax consequences, of course. i-orp is trying to minimize taxes over the entire span of the model, and it WILL suggest pulling big out of pre-tax if you're going to run into big taxes at RMD time. If you had your i-orp parameters accurate, and you didn't have anything that "didn't fit" into the model, I'd be inclined to do what it said unless there's something you know is not going to be good (which would probably fit into the "didn't fit the model" category). For instance, let's say you have some cash you're saving for the zombie apocalypse, then model that using the minimum cash on hand. That will allow you to optimize while obeying that constraint.
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Old 06-10-2015, 04:06 PM   #40
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If you had your i-orp parameters accurate, and you didn't have anything that "didn't fit" into the model, I'd be inclined to do what it said unless there's something you know is not going to be good (which would probably fit into the "didn't fit the model" category). For instance, let's say you have some cash you're saving for the zombie apocalypse, then model that using the minimum cash on hand. That will allow you to optimize while obeying that constraint.
Thanks, that makes sense. One reservation i had about the i-orp recommendations (spend down all after-tax money early) is it can put you in a bad tax spot later if you need a big chunk of cash for something. In that case, it would hurt a lot less to take that money out at the CG rate than to take it from tIRAs as earned income. All this depends on the exact brackets and rates the person is subject to, obviously.
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