Poll: What's your withdrawal scheme?

[paradiseken]

Quote:

Originally Posted by 2B 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]

Quote:

Originally Posted by 2B 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*]

Quote:

Originally Posted by REWahoo! Happily, after adjusting for my personal annual inflation rate of 3.141592653589793238462643383279502884197169399375 105820974944592% , 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]

Quote:

Originally Posted by paradiseken 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.

Quote:

Originally Posted by REWahoo! 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 (?).

[Nords]

Quote:

Originally Posted by 2B 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.

Enough nitpicking, 2B, and set out an example. If you're not spending all of your SWR yet, then how are you planning to raise your outgo?

Buffett originally let his personal wealth pile up because he felt that he could make it grow faster than any charity (and probably out of a sense of responsibility toward providing for Susan). When he died and no one could handle his money as well as he could, then the charity could have it. Now that he's decided to dispense with taking care of his estate and give most of it to the Gates foundation, even he's adopted a 20-year spending plan.

People who aren't spending could be depraived misers, but they could also be frugal simple livers who haven't found much worth spending their money on. That includes spending on charities, too, so if you have a constructive example then we're ready to read about it.

[cute fuzzy bunny]

Quote:

Originally Posted by Nords they could also be frugal simple livers

Some might be spleens. It sounds a lot funnier.

Quote:

Originally Posted by paradiseken 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?

Not to me! - But, hey you're driving your own bus!

[REWahoo]

Quote:

Originally Posted by Jarhead* 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.

If you ask her, she'll tell you it's a classic 'win-win' situation...

[wabmester]

Quote:

Originally Posted by 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".

Just to clarify the options, the "roughly 4% cap" option was intended to capture your scheme. You can withdraw well under 4% as longer as you're capping it at some "sane" level. That's what I do too.

I'm surprised at the number who give themselves an annual inflation adjustment. I would simply end up reinvesting such a raise each year, just like when I was working.

[2B]

Quote:

Originally Posted by Nords Enough nitpicking, 2B, and set out an example. If you're not spending all of your SWR yet, then how are you planning to raise your outgo?

Et tu Nords? Oh well, busted. I'm guilty of delaying retirement because I'm a big chicken. If I truly believed in Bernicke, I'd be long gone because it has my after tax initial withdrawl above my current paycheck. Of course, I'm well short of that following the traditional FIRECalc.

I've developed the Bernicke-Chicken philosophy. I put my "essentials" in the FIRECalc and credit this area with "really safe" assets. This includes SS, a pathetic pension and whatever assets I need to be barely economically viable in my dotage.

The other assets are run on FIRECalc in the Bernicke mode and here it becomes a desired lifestyle for the next 20 years and then whatever is left is left. Unfortunately, I'm not excited by the "living large" potential of what this generates.

My options are to downgrade the first "safe" amount. That requires a significant lifestyle change far greater than DW and I have discussed. The second is to not worry about it and just do it. If I lost my job right now, I would go that route.

I've decided to keep working since my present job presents little stress so it's not a major negative to keep going. Also, I may have the opportunity later this year to have several short term foreign assignments over the next few months and so far that sounds like a nice diversion. It would broaden my traveling exposure. DW could also test out a longer trip since she could come along. I'd still have to work except on the weekends so DW would get the real foreign experience.

Depending on the equity markets, I may meet my target for the B-C in 2008. We'll see.

[bongo2]

Is there somewhere that summarizes what the heck all these different rules are? I think I understand some of them, but what is Bernicke, Guyton, and Gummy?

[Nords]

Quote:

Originally Posted by bongo2 Is there somewhere that summarizes what the heck all these different rules are? I think I understand some of them, but what is Bernicke, Guyton, and Gummy?

Hey, if it was easy then everyone would be ER'd.

Gummy's been talking to himself for a very long time. Start with these two links and then use either one of them to browse further Gummy stuff:
http://www.gummy-stuff.org/Returns-Canuck.htm
http://www.gummy-stuff.org/Sam-retires.htm

[albundyz]

well, I'm cheating a bit because I won't start making serious withdrawals until next year, but my plans are.....

It seems that most retirement calculators assume nice, neat required income streams and therefore they produce nice, neat 4% withdrawal rates.

We will need to withdraw more from our retirement funds the first few years, until Soc Sec kicks in, then the withdrawal rate moderates.

For example, my last (916th) spreadsheet shows withdrawal rates of 8-8-8- for the first three years. yes, I know, my retirement balance will likely decline until SS kicks in.......then it, resorts back to 4%.

Currently, I'm intentionally delaying taking Soc Security in my projections.

I ran my numbers thru Firecalc and they projected just fine. I also ran them thru the ORP calculator and the project just fine there, too.

I am a little concerned, however, when everyone keeps talking about the magic 4% withdrawal rates, when mine are significantly higher the first few years.

[2B]

Quote:

Originally Posted by bongo2 Is there somewhere that summarizes what the heck all these different rules are? I think I understand some of them, but what is Bernicke, Guyton, and Gummy?

In brief, Bernicke says that after age 55 spending will decrease 3% every year until age 70. This is based on spending data of real people that are not "short" of money. That means that the 4% SWR you could barely get by on at age 55 goes unspent when you are 70. There a link on FIRECalc to a pretty good description of his approach.

Guyton is more complicated but his "rules" allow a higher withdrawl rate (up to 6.2% with an aggressive portfolio) but the risk is that a prolonged down market would trigger spending cuts of 10% to maintain portfolio survivablilty. Of course, good stock returns would trigger a spending increase. He has an article in the Journal of Financial planning that you could probably google.

Both methods present a way to take more now or retire sooner by assuming future spending cuts are acceptable. Most of us agree that we will be less interested in travel when we are 85 than we are now but not all. Some people think they are going to be in those commercials showing 100 year olds flying gliders and climbing mountains (or some such crap). About once a week, I see a whole nursing home full of people that aren't going to the grocery store across the street. Even if I can fly the glider at 100, I'd rather do the fun stuff now and run the risk I make it healthy that long and can't afford it.

Unfortunately, we put up our lives and money and take our chances. Do you feel lucky?

[2B]

Quote:

Originally Posted by albundyz I am a little concerned, however, when everyone keeps talking about the magic 4% withdrawal rates, when mine are significantly higher the first few years.

If FIRECalc says you are good, you are about as good as you can get. It is conservative. FIRECalc also allows for portfolio drawdown waiting for SS or pensions to kick in. Don't let the initial high withdrawl rate worry you if FIRECalc considers it.

[REWahoo]

Quote:

Originally Posted by albundyz We will need to withdraw more from our retirement funds the first few years, until Soc Sec kicks in, then the withdrawal rate moderates.

Yup. I'm there now, doing just that.

Retired at 58 1/2, withdrawing in the neighborhood of 6% until SS kicks in and not planning to take that until 66 or later. Firecalc gives me 95+% success rate, and I'm not losing any sleep over taking more than 4% the first few years.

Ya takes your money, and ya takes your chances...

[mickeyd]

Quote:

I am a little concerned, however, when everyone keeps talking about the magic 4% withdrawal rates, when mine are significantly higher the first few years.

Oh, don't let it bother you.

We are all pretty-much obsessed with 4% here, but when it comes to actually making a withdrawal from our stash it probably will be (is) more pragmatic.

Speaking only for myself, all of my plans have indicated 4% + inflation as my W/D rate (not started yet) however I know darn well that I will probably yank out more than 4% at times as well as keeping it under 2% at other times.

It all depends on who wins the argument between DW and me. ~~~~~

DW "We need to go on a 14 day cruise to Alaska this summer"

Me "Well, we already have exceeded our travel budget for this year"

DW " Do you want me to make arrangements for one or two?"

Me " Two, but inside cabin. OK?"

[vickifool]

VickiSpouse actually retired last July at 54. Our kids are 15, 17, and 20. So college is still a BIG consideration.

We're planning to use the classic 4% with inflation increases except for large one-time expenses.

I projected our regular budget and extraordinary expenses out until age 95. Those extraordinary expenses are mostly fantasy--where and when we travel and when the weddings are--who really knows? One kid has already had a drastic change of college plans. That spreadsheet was how I convinced VickiSpouse to take the package and retire.

Vickifool

[paradiseken]

Quote:

Originally Posted by Cute Fuzzy Bunny Some might be spleens. It sounds a lot funnier.

Can you please 'spleen yourself CFB?

Actually, we are not miserly or depraived and will spend in retirement. I just want to try an experiment this first year of really limiting our withdrawals. It's like holding one's breath for as long as one can. When the pressure gets too great, I'll increase our withdrawals. I just want to see what our needs really are.

Now, about that new Z06 Corvette I lust for ....