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Old 02-09-2017, 04:03 PM   #21
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Reading this thread I started to feel uneasy. You guys that are taking 1-2% are really in a great position!

My initial withdrawal rate is 4.4%.
However, depending on the market , I expect it be go down once SS kicks in in 12-20 years
I would not read too much into the 0% to 1% withdrawal rate as it is not the norm. People with pensions, rental income that covers their expenses don't need to withdraw money from their portfolio so its survival is never in question.

This is our 3rd year in retirement and we spend entirely from our portfolio. Our WR was over 5% the first year, 4.8% the second and we are on target for 5% this year as well. This rate will be lower when SS comes online in a few years.
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Old 02-09-2017, 04:06 PM   #22
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People drawing 1 to 2% either had way more than they needed when they finally retired (maybe because so much of their expenses are covered with other income), and/or their investments have grown a lot during retirement and their spending has not kept up.
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Old 02-09-2017, 04:12 PM   #23
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People drawing 1 to 2% either had way more than they needed when they finally retired (maybe because so much of their expenses are covered with other income), and/or their investments have grown a lot during retirement and their spending has not kept up.
Low spending requirements and income sources other than withdrawals from retirement accounts lead to very low withdrawal rates.

My annual budget is $35k and I get $39k from rent and pension. My plan was always to leave the retirement funds to accumulate for my heirs.
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Old 02-09-2017, 04:19 PM   #24
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I would not read too much into the 0% to 1% withdrawal rate as it is not the norm. People with pensions, rental income that covers their expenses don't need to withdraw money from their portfolio so its survival is never in question.

This is our 3rd year in retirement and we spend entirely from our portfolio. Our WR was over 5% the first year, 4.8% the second and we are on target for 5% this year as well. This rate will be lower when SS comes online in a few years.


How old will you be when SS comes online?
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Old 02-09-2017, 04:27 PM   #25
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We've focused on maximizing our lifestyle while minimizing expenses in retirement, so once SS come online, along with pensions and a little hobby income, we're in the 0 - .5% withdrawal camp in our current house, less after we downsize. One of my hobbies in retirement has been getting event ticket and restaurant deals, so we can go frequently and it doesn't cost much.
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Old 02-09-2017, 04:34 PM   #26
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Just finishing up our first full year of retirement. We are spending freely right now with a travel budget of around $10k and a total withdrawal before taxes of just over $100k. Approx 75% is tax deferred. Approx 40% is DW SS and pension. The remainder is around 3.3% of portfolio. I see this for the next four years at least until FRA or 70 or the market tanks.
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Old 02-09-2017, 04:57 PM   #27
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3.5% of whatever the portfolio value is every Dec 31. No other income sources.

We may bump this up when I get past 60. DH is already there.

No direct heirs, but siblings we would leave money to, hopefully gifting plenty while we are alive.
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Old 02-09-2017, 05:23 PM   #28
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I was relatively young (52) when I retired... and we have kids under roof with college expenses ahead of us.

For the first year it was a partial year - and we took a chunk out of investments to a) pay off the last little bit of mortgage and b) set aside money for our trip of a lifetime (taken the next year.)

2014 - annualized to account for partial year - 3%
(does not include the money we took off the top for a) and b) above.
2015 - 2.8 % (does not count the money spent on b) above - but does include other travel. This includes coming close to maxing family max OOP because kids has multiple sports injuries.
2016 - 2.8% - this includes maxing out son's HDHP max OOP for a surgery.
2017... expected 2.8% - but might go up more.

One of the reasons I'm keeping a close watch on this is because the kids still have college ahead. That and we're looking at older son getting his license (maybe) later this year.... which will mean more spending on insurance.

All percentages are based on original portfolio value - no adjustments for inflation.

We have a few income sources outside our portfolio though... Only half of our spending comes from the portfolio, the rest is SS (dh) and rental income.
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Old 02-09-2017, 07:26 PM   #29
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I watch my spending by taking my last six months expenses, multiplying by 2, then dividing by my FIRE stash (essentially net worth - house). I'm currently at a 3.71% WR.

But I have discovered that I have what I call NPI - non-portfolio income. This is income that I receive that isn't capital gains or dividends or interest on my FIRE stash. Income from rents, gifts, and side gigs, basically. This NPI represents about 2.7% of my FIRE stash on an ongoing basis, so I'm essentially at about a 1% net WR.

Also, in the last year I received some life insurance money when my Mom passed away, as well as the sale of some small company stock which was never counted on. Those funds represent about 6.7% of my FIRE stash but are really one-time things.

47, FIRE for about a year.
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Old 02-09-2017, 07:40 PM   #30
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People drawing 1 to 2% either had way more than they needed when they finally retired (maybe because so much of their expenses are covered with other income), and/or their investments have grown a lot during retirement and their spending has not kept up.
I do see your point and think it's a good one. But people who are like me and think it's perfectly great to spend 3.5%, also may be trying to save for big stuff (like my Dream Home, or long term care later on), and chose to leave that saved money in the market.

A lot of this just depends on how you think about the money. You withdraw 3.5% IIRC, and save the excess outside of your portfolio. But if you wanted to keep the excess in the market you might be withdrawing less. Or, maybe you could just mentally label that part of your portfolio as "not portfolio" and leave it in the market that way.

After so many years of saving money, I like the idea of continuing to save during retirement, too. I think you and I both do that, but just use different mental labels for it.

After summing the expenses related to my house, move, and so on, I figured out that if I withdrew 3.4% of my CPI adjusted initial portfolio value each year and saved the excess in the bank for those years until I needed it, that would cover everything. So really, I am spending 3.4%; I am just withdrawing in kind of an erratic way.

But hmm, 3.4% and not my target percentage of 3.5%? Maybe I should have bought a fancier house. (just kidding!)
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Old 02-09-2017, 08:26 PM   #31
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That said, without waxing political, I am keeping a bit closer eye on things since a change in administration can always brings some surprise, both positive and negative.
You win the understatement of the year award!

Just started our third year of ER and haven't touched the port yet, drawing down the cash buffer to get to 5% of total portfolio (had a nice severance, cash is still 7% of total now). But we're kind of outliers, heavily LBYM while trying to keep income low to max out ACA subsidies. I expect that once the ACA goes TU we'll be spending a LOT more every year. We're spending about 1.5% of the port right now, not including cash.
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Old 02-10-2017, 05:48 AM   #32
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all these acronyms are killing me lol
seriously
LBYM , TU

??
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Old 02-10-2017, 05:54 AM   #33
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all these acronyms are killing me lol
seriously
LBYM , TU

??
http://www.early-retirement.org/foru...rum-34884.html
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Old 02-10-2017, 06:00 AM   #34
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ahh haha
nice
thank you
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Old 02-10-2017, 06:41 AM   #35
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I appreciate all your questions and insight. If I was prepared in all areas you question, we would never retire.

We do have $400,000 extra that I did not include in the retirement money calculation so yes, we have a buffer. This is not in our house.

Health wise we are both healthy and never met our deductible in the past 10 years nor do we take any medicine. However, we are aware some major health condition or injury could occur. Last year was first time with procedures and dr visits including surgery. Spent 4,000 out of pocket.

Income in retirement dividend and interest will run 15,000 - 18,000 annually. We are selling a large asset so that money will be invested later this year.

I don't know what an ACA PTC is.
PTC is premium tax credit. That is also know as ACA subsidy. This would make your insurance less expensive.

Having 400k that is left out of the optimization is something like I would do. We too went most years without reaching our deductible, even when it a $500 deductible. On time my younger son had an accident and needed part of his hand reconstructed... that blew the deductible.

So everything was going well until a pacemaker 4 years back. Ok, that only blew the deductible one year. That has only made a small yearly increase in medical costs with the exception of the year on installation. But I have friends in their mid 50's that blow by their deductible in the first month most years. I think it is important to plan for blowing by your deductible some years and to realize that you most likely with have increases in health care costs as you age. I think that is prudent. Assuming having exceeding the deducible every year as I budgeted is likely nuts. But I then can spend it on other things most years.
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Old 02-10-2017, 06:55 AM   #36
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PTC is premium tax credit. That is also know as ACA subsidy. This would make your insurance less expensive.


I think it is important to plan for blowing by your deductible some years and to realize that you most likely with have increases in health care costs as you age. I think that is prudent. Assuming having exceeding the deducible every year as I budgeted is likely nuts. But I then can spend it on other things most years.
I agree. When I signed us up for a high deductible health plan (HDHP) with HSA on retirement I budgeted for, but did not mentally plan for, hitting the full max OOP. I've hit, or come close to hitting max OOP (out of pocket) for the last two years. I'm hoping this is the year we don't have any major medical expenses. We're a healthy family that just hit the reverse medical lottery. Better to have the funds and not need them. Or budget now calls for max OOP, topped up. If we don't use it all then there is more money for fun stuff.
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Old 02-10-2017, 07:04 AM   #37
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Retired 7 years, spent about 2.5% of invested net worth last year. This year had to start SS and RMD from IRA. That together just about covers expenses so we are looking for ways to invest in some real estate that we can enjoy for a few months down south in the winter.
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Old 02-10-2017, 07:09 AM   #38
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Great thread I like these kind of threads because you really get true numbers from people that have been there and done it. Thanks for sharing your information a great help for people early into RE.
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Old 02-10-2017, 12:50 PM   #39
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Retired early 4+ years ago, and we target our withdrawal rate below 3%.... 2.5% for 2016.
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Old 02-10-2017, 01:01 PM   #40
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I didn't bother tracking this metric until a few years ago, but my recent WR percentages (from original portfolio) are:

2014 2.67%
2015 3.77%
2016 4.07%
2017 targeting 2.95%

So it varies quite a bit.

ER date was in 2001.
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