Poll: What's your withdrawal scheme?

[wabmester]

OK, I admit that I haven't been keeping track of all the different schemes, so tell me if I missed the latest algorithm.

 

[Cb]

I'll start by saying we're not in the withdrawal phase yet, as Momma is still working and adding to her 401K ( negative 0.3 WR at present )

When she does pack it in I think we'll do something along the following lines:

- use a 3% fixed plus 1% of portfolio withdrawal scheme

- sell equities from our taxable accounts at 6 month intervals to do that (in the early going)

- and in December, selling the additional equities required to cover the taxes resulting from conversions of Trad IRA --> Roth IRA's to use the top of the 15% tax bracket.

 

[Khan]

Don't have one yet, covering all needs with small pension.

 

[tryan]

rents = dividends (that's what I checked)

 

[kaudrey]

I'm not retired yet, but my calculations are for a variable withdrawal rate. It will be higher than 4% for the first 5 years, then my pension will kick in, so it goes below 4% for a while, then 8 years later SS kicks in so it will go even lower.

 

[sgeeeee]

So far I'm doing whatever I want and spending well below 4%. I still check my spending/portfolio ratio every year just to be sure. But basically, the gods take care of fools like me.

 

[Zipper]

5% of the December 31 balance.

The 2007 amount is now in my cash account to be drawn out in 12 equal payments.

 

[unclemick]

5% of the December 31 balance.

Did that last year. This year took about 1/3 of 5% and put in money market. Will do the rest around tax time probably.

heh heh heh - does that make me a dirty market timer

 

[Zipper]

Good point unclemick.

Taxes on the 5% are deducted at source. The net deposited in the cash account is divvied up in 12 installments.

 

[mickeyd]

I suspect that the distribution phase of my plan will be much more difficult to execute than the accumulation phase of my plan.

I have found it quite easy to put aside money in many different ways over the years and I have been very successful in getting that money to some investment that has made it grow. I know how to do it and it is not that difficult. But that part about spending that build-up is very troublesome for me.

My Plan calls for your basic 4%+SWR, but I know deep down that I will probably not follow that when it comes to the more difficult task of making my stash stretch out for an unknown number of years.

In other words, I understand that the "rule of 72" works both ways.

 

[2B]

The poll failed me. I am planning to split my withdrawls with minimum living costs coming from the 4% SWR plus pensions and SS. The assets beyond the minimum I was looking at doing Bernicke since it would be mostly travel and extras. When it was all said and done, I'd still have a little cushion above the bare bones withdrawls. I'm not quite there but it's close.

I don't see a reason to have a large "SWR" when the data shows we won't spend that amount of money as we age.

 

[kat]

interest/divs, as I've pegged them, more than cover my needs, so for now that's what I'm using. future years, i'll take out of cap. app. if need to.

 

[RE2Boys]

Have a DB pension, meets most of our needs. Dip into stash (incl div and int) only as needed for "special" items such as newer (never new) vehicle, house remodel. Stash withdrawals so far have been worst case 2% of stash. Of course, once boys get into teenage years and college, that's when stash will get attacked more aggresively.

RE2Boys

 

[cute fuzzy bunny]

So far I'm doing whatever I want and spending well below 4%. I still check my spending/portfolio ratio every year just to be sure. But basically, the gods take care of fools like me.

The job doesnt hurt either...still working arent you? How do you figure things like withdrawal rates when you're offsetting costs with income?

 

[sgeeeee]

The job doesnt hurt either...still working arent you? . . .

No.

 

[paradiseken]

Funny this poll comes up right before my first withdrawal. I have not had to touch our portfolio for two years into retirement, but now it's time. Maybe there should be a category for "gut-feel approach". I'm just taking out what I think I need for now, well below the 4% SWR. Lots of room for flexibility.

I voted "other".

 

[REWahoo]

I checked 'other'. I'll explain...

After tracking expenses for 3+ years immediately before retiring, I had a good idea of what they would be once I hung it up.

After playing with every withdrawal calculator I could get my hands on, I developed confidence in the logic behind FIRECalc.

After running FIRECalc six ways from Sunday, I have a good idea for what my annual withdrawal rate should be...or more accurately, should not exceed.

Happily, after adjusting for my personal annual inflation rate of 3.141592653589793238462643383279502884197169399375105820974944592% , our annual expenses have been below what FIRECalc says we can safely withdraw.

 

[hogwild]

Happily, after adjusting for my personal annual inflation rate of 3.141592653589793238462643383279502884197169399375105820974944592% , our annual expenses have been below what FIRECalc says we can safely withdraw.

Easy as pi(e)

 

[paradiseken]

Sort of like having your Pi and eating it too. Good strategy REWahoo!

 

[2B]

Happily, after adjusting for my personal annual inflation rate of 3.141592653589793238462643383279502884197169399375105820974944592% , our annual expenses have been below what FIRECalc says we can safely withdraw.

But I will challenge you with the the fact that you are probably underwithdrawing from your stash.  Your discretionary spending will fall as you age.  What you now think of as "essential" will soon become "discretionary."

Live a little REW, put some ice cream on your Pi.

 

[paradiseken]

But I will challenge you with the the fact that you are probably underwithdrawing from your stash. Your discretionary spending will fall as you age. What you now think of as "essential" will soon become "discretionary."

Live a little REW, put some ice cream on your Pi.

Good point 2B. I know we will start out underwithdrawing, but that could change in a hearbeat. If we keep with this plan, we should leave behind over 5mm when we die. Does that make sense? We have no kids, so a lot will go to "other" family members and charity.

 

[REWahoo]

But I will challenge you with the the fact that you are probably underwithdrawing from your stash.

Yeah, I think you are probably right. But I'm less than 2 years into retirement, and not doing much traveling since DW decided to become a full-time babysitter for the grandkids. So for now I'm going to 'bank' the difference for a rainy day in the not too distant future. That way I'm pretty sure I can eat ice cream on my Pi rather than worry about eating it on my cat food.

 

[Jarhead*]

Happily, after adjusting for my personal annual inflation rate of 3.141592653589793238462643383279502884197169399375105820974944592% , our annual expenses have been below what FIRECalc says we can safely withdraw.

ReWahoo: Pretty impressive, considering your advanced age (Without counting Soc. Sec. also).

When the Cavalry showed up. (Soc. Sec.), I remember wasting a lot of time prior to that event, trying to convince my wife that she should consider getting some work experience. All I got out of that was a lot of eye rolls. (Giving up golf was not negotiable).

Your wife's committment to your Grandchildren are understandable, (Women are like that). Plus, she doesn't have to put up with you all day.

Congratulations, you're in great shape financially.

 

[2B]

I know we will start out underwithdrawing, but that could change in a hearbeat. If we keep with this plan, we should leave behind over 5mm when we die. Does that make sense? We have no kids, so a lot will go to "other" family members and charity.

The answer is that it doesn't make sense. If you have a "conservative" balanced portfolio and still plan on a $5MM residual, I recommend you reevaluate your priorities. I know I would like to have a rich, miser uncle die and leave me $5MM but I don't want to be him.

Remember that every study points to a drop off in spending as we age and that includes out of pocket medical care. Create a safe base (pension, SS, CDs and bonds) for a secure living and an "end of life stash" and then enjoy your wealth.

Yeah, I think you are probably right. But I'm less than 2 years into retirement, and not doing much traveling since DW decided to become a full-time babysitter for the grandkids. So for now I'm going to 'bank' the difference for a rainy day in the not too distant future. That way I'm pretty sure I can eat ice cream on my Pi rather than worry about eating it on my cat food.

Cat food costs more than chicken on sale. If you look at what you really spend for "necessities" you will be shocked on how little you can live on. My DW is threatening the same activity but I am looking forward to some relaxing fishing trips either alone or with friends.

 

[W2R]

I'm not retired yet, but as I read about withdrawal schemes I kind of like Gummy. http://www.gummy-stuff.org/sensible_withdrawals.htm

I might add my own "flavor" to Gummy, by keeping 7-10 years' minimal expenses in laddered CD's and using that to reduce the withdrawal rate even further (hopefully to zero) during bear markets and then replenishing during bull, using the excess once the principal has caught up with inflation.

Maybe that's a variant of Gummy, or maybe that's somebody else's method (?).