Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 09-10-2008, 08:08 PM   #21
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,934
Quote:
Originally Posted by mschiap View Post
I do something similar: calculate the amount for the year, divide by 12, and move that much cash monthly into our "transaction" account. Then you can easily "track" against your monthly budgeted expense.
Then do you pay your taxes out of what's left over in your "transaction" account, or are they separate? I am not retired quite yet but was thinking of adjusting my spending by subtracting an estimate of my taxes from my withdrawals and putting that aside.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-10-2008, 08:23 PM   #22
Confused about dryer sheets
 
Join Date: Jul 2008
Posts: 3
Income Tax comes out of the "leftover" in my "transaction" account.

Property Tax is kept out of the "transaction" account; it is set aside before I calculate the monthly amount.
__________________

__________________
mschiap is offline   Reply With Quote
Old 09-10-2008, 08:35 PM   #23
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,934
Quote:
Originally Posted by mschiap View Post
Income Tax comes out of the "leftover" in my "transaction" account.

Property Tax is kept out of the "transaction" account; it is set aside before I calculate the monthly amount.
Sounds reasonable - - Thanks.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 09-10-2008, 08:42 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,386
I have never done any of these things. I just go along spending what I need to spend to feel reasonably happy. Most months I have more cash income than I spend. Since this 4% business is tested on a fairly narrow set of investments and assumptions, and these are not even close to how I invest, I feel that is is almost useless for me.

I think once you get to a certain portfolio size, stocks invesments are a business like any other. Pay attention, try to avoid big mistakes, do some high potential pay-off things, watch your overhead and you should be fine.

I am trying to get a better handle on tax expense.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 09-10-2008, 08:50 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,439
I thought the 4% was supposed to be based on the total net worth the first year you were retired, then that amount is adjusted up for inflation each year. Are y'all just taking 4% of whatever your net worth is at some point each year? I know that's one choice, as is the 95% of 4% option. But I guess I was assuming most people used option one, if they were doing a "4%" strategy.

I started at 3.5% of my NW my first year, and I'm adjusting up for inflation at 3% per year. In about 10 years (at age 62) we'll start our SS draw, assuming it's still available. Then when we reach 70.5 I'll repay the total and do the John Greaney SS annuity plan.

In 5 years or so I will readdress our situation, and may increase the draw to 4% if we're doing well. But even if we can't we should be fine with the original plan.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 09-10-2008, 09:01 PM   #26
Recycles dryer sheets
 
Join Date: Mar 2005
Posts: 352
The efficacy of 4% implies that everyone of a certain remaining actuarial number of years has a similar (performing) asset allocation. Where do I find the formula for the appropriate asset allocation at a given year on the continuum to maintain 4%?
__________________
windsurf is offline   Reply With Quote
Old 09-11-2008, 12:11 AM   #27
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
Quote:
Originally Posted by harley View Post
I thought the 4% was supposed to be based on the total net worth the first year you were retired, then that amount is adjusted up for inflation each year. Are y'all just taking 4% of whatever your net worth is at some point each year?
i was never clear if it was net worth or portfolio minus personal home as i've seen it argued both ways. regardless, from the little roller coaster ride (mostly down) i've experienced during the last two years, i'll be looking at 4% at least annually, adjusting on the way down as best i can and likely leaving it be on the way up. this is easier to do as a single person, not responsible for others. while i neither require nor get my kicks from excessive purchasing (my little convertible and some road trips make up my one big thrill these days), if i wind up with a large surplus later, i'll figure out how to spend it or life will become expensive enough to spend it for me. also, i'd rather "rough it" while i'm relatively younger to better assure more comforts in older age.

also, i'm flexible on what i include in that 4%. for now i consider my house because i'm planning to either downsize or sell-out and vagabond. if i downsize i would take the new-to-me lower cost home out of my 4% projection (and likely even get a place suitable for renting out a room or two). i'd rather not consider my pension nor social security as part of my 4% but temporarily i do because i'm stuck in south florida's market and it makes me feel better about spending more than i would if i could move to a less expensive location.

so at best that 4% swr, for me, is sort of like god is for others. you can't really prove its existance or importance. it can mean different things to different people. you can apply it in many ways and use it to suit your purposes. you can apply some presumptions to it and as such let it guide you to eternal retirement.
__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Old 09-11-2008, 08:39 AM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,036
Quote:
Originally Posted by harley View Post
I thought the 4% was supposed to be based on the total net worth the first year you were retired, then that amount is adjusted up for inflation each year.

So far I'm doing a straight 4% of my portfolio value so if the market drops so does my spending .I never thought of including the value of my house is anybody besides Lazy doing that ?
__________________
Moemg is offline   Reply With Quote
Old 09-11-2008, 08:43 AM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,735
Send a message via Skype™ to kcowan
We roll with the punches. Because we are value investors, we sometimes have a big capital gains bill, then for the next couple of years we pay nothing. Since downsizing we don't buy much stuff, and since retiring our clothes, car and meals budget are down substantially.

Our only concern is is we lose our health and have not budgetted for anything there, We have run as high as 5% and down as low as 3%.

To compensate for the next tough 10 years in the markets, we are going to spend half a year in Mexico starting next month. This will reduce our cash requirement by 30% and give us a 15% budget buffer. We have rented our northern place and that should improve the buffer. Since early last year we have reduced our equity position from 70% to 30% through profit-taking. This has increased our tax burden but saved us from serious loses.

During all these changes, we no longer have a baseline. So it will take a couple of years to establsh one. But most of the changes are in the direction of improvements. With any luck, we will be able to incorporate 2 extensive trips each year.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 09-11-2008, 02:22 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,386
Quote:
Originally Posted by Moemg View Post
So far I'm doing a straight 4% of my portfolio value so if the market drops so does my spending .I never thought of including the value of my house is anybody besides Lazy doing that ?
I hope not.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 09-11-2008, 03:32 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,036
Quote:
Originally Posted by haha View Post
I hope not.

Ha

Darn ,that would have given me one heck of a 4% allotment not sure what I'd do with all that extra money but I'd like to try !
__________________
Moemg is offline   Reply With Quote
Old 09-11-2008, 03:48 PM   #32
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 1,763
Quote:
Originally Posted by Moemg View Post
Darn ,that would have given me one heck of a 4% allotment not sure what I'd do with all that extra money but I'd like to try !

It's magic money! Can be used for anything you can dream up!

-- Rita
__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
i exceed 4%
Old 09-12-2008, 04:33 AM   #33
Recycles dryer sheets
 
Join Date: Feb 2006
Location: Valencia
Posts: 121
i exceed 4%

In general, I think the 4% rule is a good one. However, every time I see the explanation for this percentage, I see assumptions by the authors that donít apply to me.. For example, I really think that people who are 45 years old, do have (and should have) a signficantly different financial strategy from those who are 55 or 65 or 75. Simply put, in my opinion, the 4% rule does not apply to my situation.

This website is for people who retire early. Because of that, I would assume that most of the people are younger than 65. In my situation, my wife and I will not collect SS for 5 years or so. As a result, our withdrawal rates (right now) are significantly higher than 4%. However, 5 years from now we will have additional SS income and my wife will start to collect a monthly retirement check from her former company. When this happens, our withdrawal rate will drop to be slightly less than 4%. As a result, I can tolerate a withdrawal rate at 8.5% for the time being.

A withdrawal rate of 8.5% ? Perish the thought! This man is possessed by the devil!

Hey, itís just that our situation is different from the norm. And I think many people in this forum may have reasons for not using the 4% withdrawal rate. FWIW, I've only been retired for one year, so my opinion should be valued less than others. Nevertheless, after one year I'm still comfortable with my calculations and we're staying within our planned budget.
__________________
*
using an 8.5% withdrawal rate until SS kicks in
*
albundyz is offline   Reply With Quote
Old 09-12-2008, 07:38 AM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,036
Quote:
Originally Posted by albundyz View Post

This website is for people who retire early. Because of that, I would assume that most of the people are younger than 65. In my situation, my wife and I will not collect SS for 5 years or so. As a result, our withdrawal rates (right now) are significantly higher than 4%. However, 5 years from now we will have additional SS income and my wife will start to collect a monthly retirement check from her former company. When this happens, our withdrawal rate will drop to be slightly less than 4%. As a result, I can tolerate a withdrawal rate at 8.5% for the time being.

.


I hope everything goes according to plan because if one of you die you are left with a diminished portfolio and half the amount in SS & pension .
__________________
Moemg is offline   Reply With Quote
Old 09-12-2008, 08:02 AM   #35
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,134
Moemg, the withdrawal plan albundyz describes is similar to what I suspect many of us who retired a few years before collecting SS are using. The numbers vary by individual circumstance of course (I'm at a 6.5% prior to collecting SS), but FIRECalc tells us we can withdraw more up front since SS and pensions will reduce portfolio withdrawals to much smaller numbers once they kick in.

Quote:
Originally Posted by Moemg View Post
I hope everything goes according to plan because if one of you die you are left with a diminished portfolio and half the amount in SS & pension .
The portfolio will be the same amount whether one of them dies or not.

Yes, SS will be reduced and perhaps the survivor's pension as well. However, expenses will also be reduced. I have two examples in my family (my sister and my SIL) where the surviving spouse has more disposable income than they did when their husbands were still living.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 09-12-2008, 09:59 AM   #36
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
Quote:
Originally Posted by haha View Post
I hope not.
by that then i guess you've already set aside from your 4% generating pile an amount equal to what you plan to use to purchase your downtown seattle condo?

and by extension, if i am going to sell my house relatively soon, shouldn't i be able to consider that cash part of my 4% generating stash now?

although, as the market seems to say, a house certainly seems worthless today, but then, that just means it wouldn't cost anything to buy back in anyway.

if i decide to vagabond--which i am very strongly considering--should i keep aside enough to buy back in without utilizing 4% of that setaside over the next 15 years to life while i rent around the world? perhaps i could find someone else who might like to make use of it instead.
__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Old 09-12-2008, 11:19 AM   #37
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 1,763
Quote:
Originally Posted by lazygood4nothinbum View Post

and by extension, if i am going to sell my house relatively soon, shouldn't i be able to consider that cash part of my 4% generating stash now?
LG4NB,
I suppose you could if you are reasonably sure of the net amount you'll receive. However, if the sale isn't in the near-term, that means the investment in your home isn't liquid. I would think, that in that case, you'd want to exclude the equity value when determining your annual drawdown (4% or otherwise).

-- Rita
__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Old 09-12-2008, 11:21 AM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,036
Quote:
Originally Posted by REWahoo View Post
Moemg, the withdrawal plan albundyz describes is similar to what I suspect many of us who retired a few years before collecting SS are using. The numbers vary by individual circumstance of course (I'm at a 6.5% prior to collecting SS), but FIRECalc tells us we can withdraw more up front since SS and pensions will reduce portfolio withdrawals to much smaller numbers once they kick in.



So I'm living on 4% while I could be at a higher percentage ? I'm returning to firecalc.
__________________
Moemg is offline   Reply With Quote
Old 09-12-2008, 11:37 AM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Yep. Every time we have the 'social security' discussion, a lot of people say they're not going to incorporate SS or make a decision on when to take it until they're 62.

I always say that if you're over 50 and can pretty much count on receiving a major portion of your social security benefit, that by putting it into firecalc you may realize that you can retire earlier, with less money and/or spend more while you're in your 40's and 50's. In fact, I've said that 11 times, starting in 2004!

The introduction of ANY reliable income stream into a portfolio at ANY time during its run affects the spending THROUGHOUT the run. A lot of firecalc 'failures' happen in the middle or towards the end. Injecting money into that scenario at mid stream that allows the retiree to slow or halt portfolio withdrawals sort of solves those failures.

Of course, if you're 47 like I am, its a good idea to pretend its not there, at least for now. If things are the same when I'm 55 as they are now, I'd incorporate it and consider upping my spending.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 09-12-2008, 11:52 AM   #40
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
Quote:
Originally Posted by Gotadimple View Post
I suppose you could if you are reasonably sure of the net amount you'll receive. However, if the sale isn't in the near-term, that means the investment in your home isn't liquid. I would think, that in that case, you'd want to exclude the equity value when determining your annual drawdown (4% or otherwise).
thanx for the reminder but i think by now i understand illiquidity. happens i quit work right when i got super depressed which was right when i got inheritance and right when i thought i'd be selling out but happened that right then the market crashed. the tsunami of e.r.

at this point i'm not reasonably sure of anything. but since i'm stuck here in expensive hurricaneville without a job it makes me feel better to consider all assets including house, pension & social security values so that i can see i'm really only currently spending down about 3% of all my assets, instead of thinking, oh crap! the sky really is falling. once the sky has settled and the horizon is flat, i'll again remove housing (if i even own one by then) ss & pension from my fifth grade dropout ciphering of a swr.

attitudes are more important than facts, ya know. so stop trying to confuse me. it's not as if others haven't already tried.
__________________

__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How long would you be willing to stick it out for FIRE ? Linney Young Dreamers 20 09-10-2007 05:02 PM
I need some advice on the best way to stick my pole... Andre1969 Other topics 10 03-23-2006 02:31 PM

 

 
All times are GMT -6. The time now is 01:52 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.