Let it ride or hold it aside?

[Gumby]

I am seeking opinions on what to do with amounts that FIRECalc says I can safely withdraw, but which I cannot spend. For purposes of the question assume the following:

FIRECalc gives me a 100% success rate when I spend $200k per year from a 70/30 portfolio, and shows an 8 figure portfolio when I am 90.

Even if I spent every waking moment trying to "blow that dough", I realistically can't spend more than $150k per year.

I have no children and have no need to leave a bequest.


QUESTION: As to the $50k per year that I can't spend, should I leave it in the market (70/30), or withdraw it anyway and put it in a CD ladder?

I am inclined to do the latter, because it reduces the risk that FIRECalc is wrong, but I wonder if I am missing something.

What would you do?

 

[RunningBum]

I'm in a similar situation, just with lower numbers. I only withdraw what I need, and keep the rest invested according to my AA. My situation is a little different from you as I have an heir so there's a benefit to getting a higher return over time.

I do keep a tally on my spreadsheet of how much under I am each year, and I could easily total it. I'm not even sure why, but if I wanted to splurge on something like an RV, I might be able to justify it more easily by "using" this money. I don't really have a plan to do that though. If I did, I might be more included to put it in cash.

I'm not sure that doing the CD ladder reduces your risk any more than investing it. Firecalc could be wrong about market returns, or it could be wrong about inflation. If it's the latter, getting a low return now with a CD ladder is more risky. If you think a market crash is more likely than runaway inflation, the CD ladder is less risky. And vice versa.

I don't think there's really a wrong answer.

 

[pb4uski]

I would leave it in the market and then try to figure out some sort of legacy that benefits humanity in some way... like for example, an endowed scholarship or something like that.... something so that 20 years after you are pushing up dasies that the name Gumby will have some meaning and not be totally lost.

 

[ckelly78z]

If you are burdened with excess $$ with no heirs, it gives a soul great satisfaction to anonymously help those who are down on their luck, but not looking for handouts...it's good karma, and you can see the gratitude at work when THEY pay it forward as well.....start a movement !

 

[W2R]

I’d leave most of it in the market. You never know if/when massive inflation might arrive for the first time in nearly forever, and might decimate our bank accounts.

 

[HarveyS]

I'd leave it invested (that's what I do). If you withdraw it you are possibly going to be paying capital gains taxes and resetting the tax basis. But, as was said, there is no wrong answer.

 

[kgtest]

I would leave it in the market and then try to figure out some sort of legacy that benefits humanity in some way... like for example, an endowed scholarship or something like that.... something so that 20 years after you are pushing up dasies that the name Gumby will have some meaning and not be totally lost.

My ole man spent some of his dough fixing up / repairing some of his ancestor's headstones. I thought that was pretty cool.

But yeah, let it ride into the sunset with the markets...then bequest to someone other than the Gubbmint...some sort of cause that would make you feel good. If leaving it to the gubbmint is something near and dear, let the probate lawyers get some practice in the courts.

 

[Mdlerth]

You want to see less volatility? Don't check your balance so often.

Leaving it in the market provides

1. Better protection against inflation;
2. Greater chance of it growing into a larger amount that would allow you more options in your later years;
3. Capital that is busy being used by businesses to improve and expand, create jobs, and deliver useful goods and services to the general population. Do not be misled into thinking that only by giving your money away does it help others.

Putting it in the CD ladder adjusts the fixed portion of your portfolio from 30% to >30%, but it's been mentioned many times on these pages that FIRECalc success is a wide, flat plateau in the middle AA range. The conclusion I draw is that going from 70/30 to 60/40 or 40/60 reduces volatility, not risk.

 

[bolt]

I’d leave most of it in the market. You never know if/when massive inflation might arrive for the first time in nearly forever, and might decimate our bank accounts.

+1

These resets happen more often than recognized, Nixons, and Wilson's re-set of GLDs value and its relation to the usa's currencies went unrecognized at the time.

Jackson, Lincoln, JFKennedy, iirc HerbertHoover and a few other people in positions of power in the usa adminstration were assassinated or attempted to be killed/removed from office while they were attempting to restructure this countries wealth providers supply of the countries currency.

Theses days with the worlds systemic currency multi-valuations sooner or later there must be a worlds economic currency reset.
Thats not what's taught in History101.
Thats JMHO from decades of monetray mechanics study.

 

[Chuckanut]

What would you do?

Buy a couple dozen donuts. Stand on a street corner and just give them away. Do this a few times a week with different treats. Make others happy.

 

[pb4uski]

If you are burdened with excess $$ with no heirs, it gives a soul great satisfaction to anonymously help those who are down on their luck, but not looking for handouts...it's good karma, and you can see the gratitude at work when THEY pay it forward as well.....start a movement !

I like the secret Santa piece that CBS does each year... some rich, old guy with more money than he needs and hands out $100 bills to those in need around Christmas each year.

https://www.cbsnews.com/video/how-on-the-roads-secret-santa-got-his-start/

 

[tdv2]

I find myself in a situation almost identical to yours. FIRECalc actually says I can spend close to $250k but since I have been tracking expenses (about 7 years), I have not spent even half that amount in any given year. I fired just under 2 years ago. I am slowly loosening up the purse strings.....traveling more and thinking about blowing a chunk on a class a motor home.

As far as your question is concerned, I would just reduce your allocation to equities a bit and let things ride....maybe raise a little more cash to ride out the inevitable market volatility that is sure to come at some point. When I fired I moved to 60% equities and now even considering ratcheting it down to 50%. I’m holding about 3 years living expenses in cash/short term cd’s.

I guess as others have said, there is no definitive right or wrong answer. The good news is you have a real nice cushion which makes it easier to sleep at night with whatever decision you make.

 

[COcheesehead]

Establish a scholarship in your name. Best way in my opinion to pay it forward.

 

[The Cosmic Avenger]

If it were me, I think I'd withdraw the $200K (or more), and put it in a money market account. Then, if I couldn't spend it (I think I could, but that's not what you asked...), I'd start performing random acts of kindness with it, like ckelly78z suggested. The excess in the MM fund would function as my "generosity" budget!

 

[ATX78701]

Be the anonymous man who pays off layaways at the holidays? Or buy toys for an orphanage?

https://www.cbsnews.com/news/mystery-man-pays-off-all-layaway-items-at-walmart-in-derby-vermont/

 

[MarieIG]

Under those circumstances, I would let it ride.

I would have reciprocal wills each spouse named as the primary beneficiary, with a pour over into a charitable trust (or with the contingent beneficiaries being charities of your choice).

If you have a very large unexpected expense - it is available. You also have the option to donate a percent sooner rather than later, i.e. setting up a donor advised fund with ten percent.

 

[RobbieB]

I like sitting on a fat stack of cash. Don't care that the interest rate is low, I like a fat checking account. In case something comes up you know. Build it up to say a quarter mill and let the rest ride.

 

[GR111]

I love the stock market. I think of corporate employees that my few shares combined with their hard work stay employed, the customers enjoying goods and services, the economy generating taxes that pay salaries for teachers and the first responders who will save someone I care about one day. I also try never to underestimate how much future medical and assisted living costs might be. I would keep it working in the market, and try to do something fun each day.

 

[DrRoy]

We are leaving it invested, but also spending rather more. Fly first class!

 

[Humbooster]

If you are burdened with excess $$ with no heirs, it gives a soul great satisfaction to anonymously help those who are down on their luck, but not looking for handouts...it's good karma, and you can see the gratitude at work when THEY pay it forward as well.....start a movement !

Well said brother, that is so true.

 

[mrfeh]

I am seeking opinions on what to do with amounts that FIRECalc says I can safely withdraw, but which I cannot spend. For purposes of the question assume the following:

FIRECalc gives me a 100% success rate when I spend $200k per year from a 70/30 portfolio, and shows an 8 figure portfolio when I am 90.

Even if I spent every waking moment trying to "blow that dough", I realistically can't spend more than $150k per year.

I have no children and have no need to leave a bequest.


QUESTION: As to the $50k per year that I can't spend, should I leave it in the market (70/30), or withdraw it anyway and put it in a CD ladder?

I am inclined to do the latter, because it reduces the risk that FIRECalc is wrong, but I wonder if I am missing something.

What would you do?

I would only withdraw what I needed and start looking for charities.

 

[Gumby]

I'm not sure that doing the CD ladder reduces your risk any more than investing it. Firecalc could be wrong about market returns, or it could be wrong about inflation. If it's the latter, getting a low return now with a CD ladder is more risky. If you think a market crash is more likely than runaway inflation, the CD ladder is less risky. And vice versa.

I don't think there's really a wrong answer.

I'd leave it invested (that's what I do). If you withdraw it you are possibly going to be paying capital gains taxes and resetting the tax basis. But, as was said, there is no wrong answer.

Leaving it in the market provides

1. Better protection against inflation;
2. Greater chance of it growing into a larger amount that would allow you more options in your later years;
3. Capital that is busy being used by businesses to improve and expand, create jobs, and deliver useful goods and services to the general population. Do not be misled into thinking that only by giving your money away does it help others.

Putting it in the CD ladder adjusts the fixed portion of your portfolio from 30% to >30%, but it's been mentioned many times on these pages that FIRECalc success is a wide, flat plateau in the middle AA range. The conclusion I draw is that going from 70/30 to 60/40 or 40/60 reduces volatility, not risk.

I’d leave most of it in the market. You never know if/when massive inflation might arrive for the first time in nearly forever, and might decimate our bank accounts.

Excellent points you have all made. I guess I have been more focused on a market downturn in the near future and a resulting adverse sequence of returns problem, but a jolt of inflation could prove equally harmful to long term success. The young wife agreed with your position when we discussed it, so that is almost certainly what we'll end up doing.

I also appreciate all the suggestions on ways to spend more through charitable donations. (I especially like the thought of handing out donuts.) I have closely tracked our spending for over 15 years now, and aside from our mortgage, which is now paid off, and major home additions and remodeling, which are now all done, we have never reached $100k year in spending, so even my proposed $150k is optimistic.

We've only been at this for 6 months, so I am currently reluctant to start handing out funds until we see how things are going. I'll post an update on my success in spending/giving more money.

 

[Chuckanut]

I let my chosen AA decide how to treat any leftover money. After all, that's what the AA is there for.

 

[W2R]

I let my chosen AA decide how to treat any leftover money. After all, that's what the AA is there for.

Oh GREAT post! That is what I wish I had said (but didn't, oops, must not have been thinking clearly!). That is exactly what an AA is there for.

As for a market downturn in the near future, Gumby, I know you remember that this has been expected every year for the past decade or so, ever since we first started to recover from the last market downturn. It's easy to read articles by doom-n-gloomers and feel uneasy; I know, I do it all the time. But as you know the reality is that nobody has a clue about this sort of thing, even if/when they act like they do. So it's best to prepare for any eventuality, whether it's a market downturn or even a market upturn.

 

[donheff]

I track my SWR at 3% but don't spend any more that 2%. I leave the remainder in the portfolio but track it as a separate "mad money" pseudo account in my spreadsheet. I keep a separate line identified as SWR portfolio to keep tracking what my portfolio would have been without the "mad money." That amount is what I use to track various SWR approaches against my portfolio. Last year I tapped the "mad money" account for the first time to help DD put a down payment on a house. I did not count that as part of the SWR I took last year.