Toddtheformeraccountant
Recycles dryer sheets
I am the schmuck who was going to quit this year, but the boss gave me an offer I couldn't refuse. So I OMY. And here I am, still schlepping.
Here's the cliff notes version: Once your withdrawal rate drops pretty low, and you're in a pretty high tax rate to begin with, incremental additional savings does not help you that much or reduce your risk.
That is based upon the interplay of the level of assets, the income that it throws off, and higher marginal tax rates, and an already low WR.
Here's the results of the calculations.
We have an already low WR of about 2.5% before social security and 1.6% after. If I work another three years (rather than just one more), which would net approximately $2.1 more net of taxes, would pump up our assets (including tax and non tax advantaged assets, excluding home) from approximately $7.3M to $9.4M, that would adjust the withdrawal rate pre SSI from 2.5% to...drum roll....2.2%...and post SSI goes from 1.6% to...another drum roll....1.5%. Almost no impact!
To be clear, the WR is based upon living expenses AND taxes expected to be incurred (ran it through Turbotax 2017 on a pro forma basis) assuming 60/40 equities/debt and 2% dividend yield and 4% debt yield.
I found that amazing that even such large amounts of income and additional assets could have such a negligible impact upon the withdrawal rate. I guess that's a function of an already low withdrawal rate.
Anybody else see the same results in their calculations? It's just math, so I think it's right, but wondering if anybody else has seen such a result who is in a similar situation.
Here's the cliff notes version: Once your withdrawal rate drops pretty low, and you're in a pretty high tax rate to begin with, incremental additional savings does not help you that much or reduce your risk.
That is based upon the interplay of the level of assets, the income that it throws off, and higher marginal tax rates, and an already low WR.
Here's the results of the calculations.
We have an already low WR of about 2.5% before social security and 1.6% after. If I work another three years (rather than just one more), which would net approximately $2.1 more net of taxes, would pump up our assets (including tax and non tax advantaged assets, excluding home) from approximately $7.3M to $9.4M, that would adjust the withdrawal rate pre SSI from 2.5% to...drum roll....2.2%...and post SSI goes from 1.6% to...another drum roll....1.5%. Almost no impact!
To be clear, the WR is based upon living expenses AND taxes expected to be incurred (ran it through Turbotax 2017 on a pro forma basis) assuming 60/40 equities/debt and 2% dividend yield and 4% debt yield.
I found that amazing that even such large amounts of income and additional assets could have such a negligible impact upon the withdrawal rate. I guess that's a function of an already low withdrawal rate.
Anybody else see the same results in their calculations? It's just math, so I think it's right, but wondering if anybody else has seen such a result who is in a similar situation.
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