Do you have a zero withdrawal rate?

Floridatennisplayer said:
Curious who else has a zero withdrawal rate. Income that meets or exceeds expenses.
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I currently have a federal pension based on 34 years as a government engineer at 2% per year. I retired at 55 and then went to work with the county for 10 years at 2.75% per year. Adding my social security means my retirement income exceeds my engineer's salary while I was working.

I also have a large sum of money in my IRA which is not needed for my retirement income and I consider my IRA as a"disposable" asset. I withdraw from my IRA for vacations, buying properties, and helping family members who has a financial need. I have to pay taxes on my withdrawal so I used TurboTax on different withdrawal situations and I found that a 6% yearly withdrawal is ideal in my situation. I only exceed 6% withdrawal if I need to buy property.

My vanguard account noted that my performance is about 10% per year since I am an active investor who focuses on various sector investments. My wife is 20 years younger than me and she will probably inherit my IRA so my IRA is a life insurance policy for her since she does not have a pension. Commercial life insurance are very expensive after you get older. My wife does not know how to become an active trader so the IRA will likely be invested in a passive index fund.
 
I’m taking nothing out of my stocks or IRA savings. Retired at 55, house paid off at age 60. Rent out my grandma’s old house, and have a small Navy pension (about $25k/yr). I keep an emergency/car/roof fund of about $50K in CDs and money markets. If it ever gets too low I may skim something off my stocks to replenish it, but that would be a negligible draw.
 
I think we fit into your idea. Our combined pensions are twice as much than we actually need. The entire portfolio of stocks, IRA's, etc. haven't been touched for the past 10 years except we are taking minimum distributions as required by law and rolling those over to our brokerage account which continues to grow. We have yet to touch that as we generally accumulate around $40k a year in cash which is used as needed for major items and splurges. We have changed our lifestyle to start doing a lot more travel as we have no interest in leaving anything for our families. Her side is already way richer than us and my side don't need it our it will ruin them to get too much. So, we overestimated our retirement needs badly which is a good thing in the long run.
 
I'm happy for the OP and his set, if I understand the question correctly; I realize there are pockets where pensions paying everything is still a thing.

I'm a relatively young Boomer and DW is right at the transition from Boomerism, so the whole meme of only withdrawing from pensions and SS is.......quaint, if not a bit fantastical.

We had 401ks and 403bs as our "options", so withdrawing from dividends and or gains was the only option, other than savings. Along this perspective, about 1/2 of our withdrawals is dividends, and about half is capital gains or gains.

I suppose to withdraw only from pensions/SS is a grand strategy if the goal is to bequeath a big nut to one's heirs, assuming one has something outside of this. But my assumption was that the 401k/403 and rollovers had to fund most of the retirement before and after SS. But I'm not casting judgement, just pointing out that the segment of those able to do what the OP suggests are 1) extremely rare and 2) older than me and DW who saved without pensions.

I don't begrudge pensions to anyone, however. Power to you; it just wasn't an option to us, so I never even considered it. It would have been foolish to do so. (DW will earn a 2600/year pension in about 7 years, though, so I guess I'm exaggerating).

Actually, the whole meme is evidence of how much retirement planning turned on its head when pensions were killed for..... I guess shareholder returns. I'm glad I didn't plan on a pension, though. And I pity those who did plan on a pension and got screwed, but those probably aren't the ones in Florida talking to OP. We're doing fine, by the way, without pensions (other than the pittance mentioned.)
 
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Again, for those a generation earlier where pensions is the whole thing (or Federal employees or teachers without much alternatives), this should be the norm.
If you have huge 401ks plus pensions that pay everything, what is your additional money intended for? This sounds I suppose like an attack, but it's a philosophical question that plagues me.

If to leave a huge bequest, bully for you. If to dive in a bathtub of gold like Scrooge McDuck, that's OK also.


I think we will have a large excess, after 4% withdrawals from the nut, but my plan is to tap the excess for the grandkids' college as we get older and SS kicks in; and, after that, to the dear sons & family while we are still alive, and then to fund higher education scholarships.

That's just me, though. Y'all can do with your extra beyond your zero withdrawals whatever you think is apt. I never expected to have excess wealth, so it's more of a conundrum on what I should do with what was given me.

By given, I mean given. I suppose I "earned" it, but it doesn't really seem that way. The question troubles me, although I don't mean to say it should trouble you, necessarily.
 
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Rob, I get your issues. However, the largest employer in the US is the Federal Government which used to have the best retirement in the world with the CSRS (Civil Servant Retirement System) where you could earn up to 90% of your salary if you hung in there long enough. CSRS employees did not participate in Social Security. That was replaced with FERS (Federal Employee Retirement System) in 1987 which is far less lucrative as it is a mix of the Federal IRA, Social Security and pension plan. There are also a great number of military retirees such as myself who are receiving both military pensions and Social Security. Congress added the military to the SS program as they needed more contributions figuring they would shaft us later which thankfully hasn't happened...yet. I also get a paltry amount from FERS (1% at 10 years) as I moved directly over to the civil service after my forced retirement from the Army. I stayed at my same laboratory in my same position but instead of in uniform was a term (5 year) civil servant which I renewed once and then bagged it.

My point is that it is not all that rare but perhaps those from Federal and Military programs don't do any FIRE planning at all they just retire and usually early like myself.
 
Yea, my Okie grandad worked for the Postal Service after getting hired after the war (WWII), so I understand completely (well, not completely of course). He even built a cabin in Colorado, although that was because he was a carpenter and he did it on about 25k. (I remember him framing it when I went up with him and Grandma when I was 6, with a trailer with 2x4s from condemned houses behind his pickup when we driving up there.) He saved and had a good pension, although I wouldn't consider it much; as a Depression adult, he was extremely LBYM.

I'm not criticizing pensions at all, no way no how.
Just pointing out the question is not much of a reality to the below 55 set, although it can be to a few.


Actually the point was more philosophical (and self-directed) in that, if you aren't spending your means (i.e. 0 withdrawal), what are you going to do with that money when you croak? I obviously haven't solved the question, but I don't know how much I will have left over since I'm still relatively young. I suspect we will have to keep changing the will.
 
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Rob, that is an excellent point about what to do with the excess. We built up over $1M prior to retirement which is a mix of roughly 50% brokerage account, 30% in IRA's and the rest in cash which is just sitting unused as a liquid reserve. Before we decided to retire to Hungary our assumption was we needed a huge reserve for potential catastrophic medical expenses. Here medical is so cheap it is not actually a factor. We pay cash and refuse to pay the US Medicare Part B required to retain the "free" military health care. Tricare Overseas (the military health care plan we are under) sucks horribly and isn't worth the money, time and effort just to get 60% back. The care here is excellent and not a burden despite several major problems none of which cost more than $1.5K. So, that left us with the problem of what to do with the money. Our house is filled to capacity with luxurious antiques so that is maxxed out. We have all the electrical gadgets we can possibly ever use and an excellent car we rarely drive. We splurged on some expensive art work although I am a painter myself so have my stuff all over the house. The garden is maxxed out and I have an excellent yacht I sail nearly every day. So, that only leaves travel and our burn rate is still within reason and we still haven't touched our equities or IRA's. My wife Day Trades for fun and generally earns $700 a day (on the days she plays which are becoming fewer) and I always laugh at this as we will never touch it so I ask her who this is all for? The cash is slowly depleting but not significantly as we only spend 1/2 of the pensions on living expenses including emergencies. We had my 90 y/o mother living with us which limited travel but she is now back in the US in an assisted living covered by her teacher's pensions and social security. I suppose my kids will end up inheriting most of this (my wife's 2 sons are deceased) but I know they don't want to deal with selling a house in Europe and certainly don't want any of our antiques nor art or even jewelry. That is not what the millenials are about. So, I suppose we will end up donating the lion's share to a local advanced STEM high school. It is a real dilemma and one we never thought would occur. So, it is a pleasant surprise. It does; however, cause minor friction between us as to what to do with it all.

I know quite a few military retirees who went over to the postal service after retirement. Generally, they are very happy people and enjoy the more relaxed pace of the postal system. Many, like myself stayed in civil service. I know quite a few enlisted who opted to not collect their military pensions but rolled it over into the CSRS and many got high ranked civil service positions so ended up with way more than if they had taken just the military pension. The new military retirement plan, which I do not understand at all, is relatively inadequate. Probably, it saves a lot on the military budget at the expense of the soldiers. It's not like the military is short of cash as they receive more than 50% of the Federal Budget but they always screw the soldiers first. One thing you learn quick in the military is the government never gives you anything for free but will take it from you as often as they can.
 
SecondCor521 said:
On a serious note, my understanding (and I'm no expert) is that a wealth tax is considered by many to be unconstitutional in the US. So to implement one here might require an amendment, which is no easy thing to do.
Click to expand...

Are you sure about this?

Florida used to have a tax on intangible personal property. Essentially, this was a wealth tax. Fortunately, it was repealed a number of years ago.
https://www.cga.ct.gov/2007/rpt/2007-r-0197.htm

I don't remember all the reasons it was repealed, but I'm pretty sure constitutionality wasn't one of the reasons.
 
I am close to a zero withdrawl rate - for sure less than 1%. I am early in my retirement journey (just 56) so I am curious about what the next few years will bring in terms of net worth and withdrawals. All my calculations say my net worth will continue to increase even with modest returns.

Our biggest question is how to generate decent income without a large equity exposure. Right now we are 55% in equities and 45% fixed income and with that i can keep a withdrawal rate quite low. Will probably stay at this ratio for the next 3- 5 years or so anyway.
 
Old Microbiologist said:
Rob, that is an excellent point about what to do with the excess. We built up over $1M prior to retirement which is a mix of roughly 50% brokerage account, 30% in IRA's and the rest in cash which is just sitting unused as a liquid reserve. Before we decided to retire to Hungary our assumption was we needed a huge reserve for potential catastrophic medical expenses. Here medical is so cheap it is not actually a factor. We pay cash and refuse to pay the US Medicare Part B required to retain the "free" military health care. Tricare Overseas (the military health care plan we are under) sucks horribly and isn't worth the money, time and effort just to get 60% back. The care here is excellent and not a burden despite several major problems none of which cost more than $1.5K. So, that left us with the problem of what to do with the money. Our house is filled to capacity with luxurious antiques so that is maxxed out. We have all the electrical gadgets we can possibly ever use and an excellent car we rarely drive. We splurged on some expensive art work although I am a painter myself so have my stuff all over the house. The garden is maxxed out and I have an excellent yacht I sail nearly every day. So, that only leaves travel and our burn rate is still within reason and we still haven't touched our equities or IRA's. My wife Day Trades for fun and generally earns $700 a day (on the days she plays which are becoming fewer) and I always laugh at this as we will never touch it so I ask her who this is all for? The cash is slowly depleting but not significantly as we only spend 1/2 of the pensions on living expenses including emergencies. We had my 90 y/o mother living with us which limited travel but she is now back in the US in an assisted living covered by her teacher's pensions and social security. I suppose my kids will end up inheriting most of this (my wife's 2 sons are deceased) but I know they don't want to deal with selling a house in Europe and certainly don't want any of our antiques nor art or even jewelry. That is not what the millenials are about. So, I suppose we will end up donating the lion's share to a local advanced STEM high school. It is a real dilemma and one we never thought would occur. So, it is a pleasant surprise. It does; however, cause minor friction between us as to what to do with it all.

I know quite a few military retirees who went over to the postal service after retirement. Generally, they are very happy people and enjoy the more relaxed pace of the postal system. Many, like myself stayed in civil service. I know quite a few enlisted who opted to not collect their military pensions but rolled it over into the CSRS and many got high ranked civil service positions so ended up with way more than if they had taken just the military pension. The new military retirement plan, which I do not understand at all, is relatively inadequate. Probably, it saves a lot on the military budget at the expense of the soldiers. It's not like the military is short of cash as they receive more than 50% of the Federal Budget but they always screw the soldiers first. One thing you learn quick in the military is the government never gives you anything for free but will take it from you as often as they can.
Click to expand...

The CSRS ended for new employees January 1, 1987...nice while it lasted, though.

New military retirement (BRS) reduces pension to 2% (instead of 2.5%) but offers 5% TSP match...since few military members stay long enough for the pension they'll at least get something if they meet the match.
 
ncbill, You are right. It is similar to what they did to the CSRS with FERS although FERS is 1% not 2% and the matching isn't as good. The fly in the ointment is the performance of the TSP which has been pretty awful for most. I cashed out when I retired and rolled it over and didn't do any matching during my civil service as I wasn't actually planning on staying long. I would have been fine as a contractor except those in power at our Major Command changed the rules and contractors couldn't be Principal Investigators and I had something like 6 grants I was in charge of at the time so being civil service was the only way to stay in charge of my own projects. Everything shifted to entrepreneurial management (meaning you go find your own money) in the late 90's and I was very successful at finding money. Of course then you have to actually do the work which is the harder part. But, success brings more money and partnerships. So, I ended up staying until they finally assigned a complete incompetent and aggressively awful colonel as my director so I retired after working for this god-awful person for a year. He closed my entire research program as revenge after I left. The good news is he was courts martialed later for a lot of heinous things but was permitted to retire (1 grade lower as he didn't make the high 3 as colonel) as he was politically connected to Bush through family.
 
Lewis Clark said:
Are you sure about this?

Florida used to have a tax on intangible personal property. Essentially, this was a wealth tax. Fortunately, it was repealed a number of years ago.
https://www.cga.ct.gov/2007/rpt/2007-r-0197.htm

I don't remember all the reasons it was repealed, but I'm pretty sure constitutionality wasn't one of the reasons.
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Thanks for sharing.

I search the Web for the history of this tax, and this is what I find:

Taxation of Florida’s intangible personal property dates back to 1924 when local municipalities began imposing taxes on it. However, the state took over administering the tax in 1972. Each year, Florida taxpayers were required to determine the market value of items like certificates of deposits, trusts, retirement plans, franchises and real estate mortgage investment conduits, then pay a tax based on that value. At the time the tax was repealed, it had reached 50 cents per $1,000 of valuation, which was actually a reduction from the $1 per $1,000 taxpayers had paid before. Single filers could claim an exemption of up to $250,000, while the exemption rose to $500,000 for married filing jointly.
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Note that the above paragraph includes "retirement plans". Yet, another Web site specifically stated that retirement accounts were excluded.

In any case, the tax was levied from 1924 to 2006, and nobody contested its constitutionality. Or perhaps some did, and lost the case.
 
Our intangibles tax was repealed after a successful lawsuit...that argued the tax was unconstitutional based on the fact that the state didn't tax stock of businesses domiciled in our state, just those outside it.
 
audreyh1 said:
If income from pension, SS, part-time job covers expenses such that no withdrawals are made from the portfolio and all investment income reinvested, then of course it’s a zero withdrawal rate.
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Do I qualify? Zero wd but the job is full-time
 
ncbill said:
Our intangibles tax was repealed after a successful lawsuit...that argued the tax was unconstitutional based on the fact that the state didn't tax stock of businesses domiciled in our state, just those outside it.
Click to expand...

That is valuable president in todays state/township/federal taxation schemes current proliferation.

A Ma township came around to a registered business I frequent attempting to tax its tools used to operate. Do you believe that?
One item was its broken lathe' used for resurfacing auto parts that cost XK 25yrs ago. (drums/rotors/etc.). It's now broken, outdated, and only good for scrap. The town backed down. But had it been paid then that $ is GONE!
Tax,Tax,Tax....:nonono:

Best wishes....
 
ncbill said:
Our intangibles tax was repealed after a successful lawsuit...that argued the tax was unconstitutional based on the fact that the state didn't tax stock of businesses domiciled in our state, just those outside it.
Click to expand...

I wonder if the above means that if Florida had decided to tax everyone, then it would have been decreed constitutional.

Nice! More tax makes it legal. What taxman does not like that? :)
 
There is an argument to be made that if your WR is zero that you might have worked far longer than you needed to. Just sayin'.
 
pb4uski said:
There is an argument to be made that if your WR is zero that you might have worked far longer than you needed to. Just sayin'.
Click to expand...

Nope. One day earlier and there would have been no pension.
 
Kwirk said:
Nope. One day earlier and there would have been no pension.
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While one day being the difference between getting a pension and no pension seems pretty extreme, one day can surely make a difference between a few months of pension checks and losing them. I know 2 people who changed their original retirement dates by one day in order to preserve a few extra pension checks. The first was my dad, who moved his retirement date from July 1st to June 30th so he would be able to collect 3 months of pension checks from July through September. Same thing with a coworker who moved his from October 1st to September 30th, so he could collect 3 extra months of pension checks. If they were employed for even a single day in a quarter, they were ineligible to receive a pension, even if they didn't actually work on that day.
 
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