Poll: What's your withdrawal scheme?

[jdw_fire]

Not retired yet, but I was planning on using the KM rule

I created a spreadsheet a few years ago - one row per year. I plugged in our savings. I give them a conservative 5% annual growth (which we have exceeded to date, as we are 70/30, but moving to 65/35 in the next few years....). Then I determined a retirement budget based on what we spent each year. I added in some nice healthy vacations, increased the medical line item, etc. I inflate that by 3% each year. Then, starting the year we retire, I determined how much we would need to withdraw each year, after our pensions. I don't factor in SS....as who knows where it will be when I am 65. Anyway, if it says I can live to 100 and still have money, I am happy. It does.....so I am happy.

I went back and looked. It is about 2.5% -3% until we are 80 and then it goes to 4-5+%. Being an overly conservative view, we should be fine. And it is always fun to play with and say "Gee, I could really retire next year, if I wanted to ...." and "Hmm...if we get 8% we can go on 2 cruises each year"

I hope you don't leave too much on the table with this method.

 

[ex_CFO_now_RVer]

We buy what we want and dont limit our spending...it is about a 3% withdrawal rate.


Dave

 

[KM]

I hope you don't leave too much on the table with this method.

Actually, I am kinda hoping/planning on it. My daughter was diagnosed with diabetes are age 9. I never want her to want for medical care or supplies because she can't afford it. I've seen too much of that. I plan/hope to leave both of my children quite comfortable.

But don't worry, I have factored in some pretty hefty vacation money in our budget. If I get travel a lot, I will be very happy.

 

[rmark]

Divide mixed portfolios and after tax fixed pensions annually over IRS life expectancies.
Spend the lesser of the new annual division or the previous year’s division plus inflation.
Withdrawal varies with portfolio value, but stable cash from pensions, bonds, dividends.

 

[walkinwood]

I am not retired yet, but planning to use the ESPlanner to determine an appropriate annual consumption rate. My latest results show 4% of portfolio assets at retirement. This assumes that I'll supplement my earnings with SS# when eligible, and have some regular special expenses like buying a car every 10 years.

Since all the results are in a spreadsheet, I think I can keep track of it. I haven't figured out a scheme for selling assets to fund the withdrawals.

Is anyone else here using ESPlanner?

I agree with some of the posts - I don't find a direct correlation between spending money (after the bare essentials) and enjoyment, so I do foresee years (or at least months) where I spend less than I have planned for.

 

[ESRBob]

Walkinwood,

The easiest way I've found to fund spending with selling assets is to set a percent of cash into your annual rebalancing. Let's say you're a trusting soul who doesn't much care to set aside any cash for emergencies, but you know you need to spend 4% of your portfolio this year. Your historical analysis tells you that you'll earn 2% of your portfolio value in cash dividends and interest in your taxable accounts (where you can get access to it) and that you'll likely have 1% capgains distributions which you also wisely no longer automatically reinvest, but which instead you route to your money market account.

So on Jan 1, you have zero dollars in your MM, but you are about to do your rebalancing. Set the Cash/Money Market asset class to 1% and then go about rebalancing that along with all the other asset classes with their various weights in your portfolio. Complete your trades/rebalancing and you'll find 1% in that money mkt account -- the right things will have been bought and sold, and the right amount left in MM. Over the course of the year, the other 3% will trickle in and you'll have spending money the year through, while having kept trades to a minimum, and keeping the maximum amount of your capital at work in higher-expected-earnings asset classes throughout the year.

As a practical matter, much of your cash distributions or dividends may show up in December, so play with this system to meet your own cashflow needs and portfolio's behavior. I put 2% in my MM every January and it always sees me through the year, despite the fact that a decent chunk of my assets are still automatically reinvested.