Retirement - 3% - 4% Withdrawal

[COcheesehead]

I'd be delighted. It's yielding to the heat from money burning a hole in one's pocket.

DW and I endured watching four of our five sprogs go through this syndrome starting the instant they began earning a paycheck. The first symptoms appeared as pizza boxes in the trash can, supplemented by the recycle bins overflowing with empty containers of trendy beverages. It progressed to new and puzzling articles of clothing appearing in the laundry, and bedrooms cluttered with toys of unrecognizable utility and mysterious provenance.

The definitive symptom was that within a short time they were in debt, despite having had a regular income stream virtually all of which was discretionary.

The same phenomenon afflicts many lottery winners and celebrities and government officials: a discomfort over seeing a sum of money unspent. What they acquire with it doesn't matter; until the cash is gone it's like an itch they can't quite reach to scratch.

Maybe I'm the only one who doesn't get it. I dunno. DW often suggests that maybe I lack a gene or got dropped on my head or something.

There was a reference that travel was empty spending. That I do not agree with.

 

[Mdlerth]

There was a reference that travel was empty spending. That I do not agree with.

Did I say that? I didn't intend to, and I can't find it in my previous posts.

Sorry if it came off that way. All I did was agree with an observation that more spending is not equal to more fun.

 

[COcheesehead]

Did I say that? I didn't intend to, and I can't find it in my previous posts.

Sorry if it came off that way. All I did was agree with an observation that more spending is not equal to more fun.

No, no, no not you. My question regarding define empty spending came as a result of my comment on leaving too much money sit unused. My goal is to spend it for travel, but someone else said it is better to let it sit than use for empty spending. I don't think travel is empty spending. Your results may vary.

 

[sengsational]

OP here

Thanks for all the responses. What works for everyone seems to vary but 3% seems to be the average.

I'm surprised so many percentages mentioned in this thread without many (any?) mention of plan duration. If I've only got a year or two left, my rate would be 30%, versus 40 years to fund? Yeah, then maybe 3.5% or less, especially if the market is over valued.

We are considering a 5% withdrawl for 4 years and then dropping it down to 3-4% in 4 years when FRA ss benefits kick in.

This seems a little bit 'seat of the pants' for my pointy head. Have you entered your numbers into i-orp? It actually does the calculation with SS. It levels the spending across all years, so you can get a better idea of how much more you can spend before SS kicks-in.

 

[daylatedollarshort]

No, no, no not you. My question regarding define empty spending came as a result of my comment on leaving too much money sit unused. My goal is to spend it for travel, but someone else said it is better to let it sit than use for empty spending. I don't think travel is empty spending. Your results may vary.

I don't recall any one posting that travel was empty spending. Do you have a post number for that comment? Per my previous post and link, research shows people can buy happiness with their money if they spend it on what is important to them, and not all personality types are into extensive travel. And some that are still don't spend a lot of money due to travel hacks, bargain cruises, frequent flyer points, last minute deals, etc.

 

[Dd852]

I'm surprised so many percentages mentioned in this thread without many (any?) mention of plan duration. If I've only got a year or two left ...

I'm 56. My father died at 82. My mother is 80 and healthy ... maternal grandmother high 80s and maternal great grandmother 91. DW is 62 - her mother died at 56 but her father was 87.

Realistically I'm planning for 30-35 years so hovering between 3 and 3.2 seems ok.

 

[Moemg]

On January 1 I calculate what 4% of my portfolio and use that as a guideline . In the nine years that I have been retired I only spent 4% once . The rest were mostly 3.4% , two years of 2,5% and one 3% year . The extra under 4% stays invested but I label it under mad money or money needed for crap year . I just turned 70 so if I go over 4% oh well .

 

[NW-Bound]

When we start SS, if we continue to draw 3.5-4% on the stash, it would mean spending deep into the 6 figures.

What the heck do I spend that money on, if I am happy with the homes that I have, crave no new fancy cars, and continue the same lifestyle I am happy with now?

Maybe the market will just crash and save me the trouble of having money without knowing the use.

 

[Danmar]

When we start SS, if we continue to draw 3.5-4% on the stash, it would mean spending deep into the 6 figures.

What the heck do I spend that money on, if I am happy with the homes that I have, crave no new fancy cars, and continue the same lifestyle I am happy with now?

Maybe the market will just crash and save me the trouble of having money without knowing the use.

Sounds like you may have changed your thinking on this issue? I seem to recall you posting several years ago that a deca-million portfolio would be desireable?

 

[NW-Bound]

Non, je n'ai pas changé.

I still want to have more, even if I do not spend it. It is for the pleasure of counting.

"Money is much more exciting than anything it buys." - Mignon McLaughlin

 

[Danmar]

Non, je n'ai pas changé.

I still want to have more, even if I do not spend it. It is for the pleasure of counting.

"Money is much more exciting than anything it buys." - Mignon McLaughlin

Ya, I hear you on that. But I haven't given in yet. If you include gifting as a type of spending it's a closed loop. Ie you either spend it or gift it, now or later.

 

[NW-Bound]

I do intend to give money to my children and charity, as I have done.

Another reason for getting more money is it proves to myself that I am a good investor. I remember Soros (who is not my hero) once said something to the effect that investing successfully shows that one has the correct view of the world.

 

[kcowan]

My financial plan is for 7% portfolio growth and 4% spending. It worked for a while but then portfolio growth took off and spending as a % has dropped. So after 15 years, I am looking at more gifting to charities and heirs.

(I think that Firecalc no longer applies. Inflation has dropped and returns are up. But its relevance stopped applying to me about 15 years ago so I am not current.)

 

[audreyh1]

When we start SS, if we continue to draw 3.5-4% on the stash, it would mean spending deep into the 6 figures.

What the heck do I spend that money on, if I am happy with the homes that I have, crave no new fancy cars, and continue the same lifestyle I am happy with now?

Maybe the market will just crash and save me the trouble of having money without knowing the use.

Business class international airfare?

 

[audreyh1]

If you include gifting as a type of spending it's a closed loop. Ie you either spend it or gift it, now or later.

Exactly!

 

[NW-Bound]

Business class international airfare?

Still have not paid for it in my life, though I know how nice it is (when megacorp paid for it).

When this miser does it, he will make an announcement here.

 

[ejman]

Business class international airfare?

Not going to happen. Certainly enjoyed it when MegaCorp paid for it. But a few relatively uncomfortable hours in exchange for additional multi $$$ to spend at the destination? When I get to the age where it's a requirement in order to barely survive the trip I suspect I'll be done with the traveling thang.

 

[NW-Bound]

But then one gets to the point where he thinks to himself, "What a few additional thousand dollars to go on a few more trips while I can still walk around without a walker", he may loosen his purse strings some.

I am not there yet, obviously. I dunno. I cannot tell until I get there. I may very well say "Travel ain't worth it even if I could afford a private jet", and just stay home to listen to music and watch TV. Dunno...

 

[audreyh1]

Not going to happen. Certainly enjoyed it when MegaCorp paid for it. But a few relatively uncomfortable hours in exchange for additional multi $$$ to spend at the destination? When I get to the age where it's a requirement in order to barely survive the trip I suspect I'll be done with the traveling thang.

I haven't been able to do it either. Mainly because I can look at the extra $6000 to $8000 it would cost for the two of us and know that would cover several weeks of the lavish land-based portion of our Europe trip.

The neighbors - late 70s, early 80s, routinely go first/business class, so they are shelling out the big bucks for those international flights. But if we were their age we'd probably do it too!

 

[pb4uski]

The assumption with that approach as stated in your link is that you will die with lots of money because you won't touch the principle. If that is your goal, then that is a good rule to follow, but man, you are leaving lots of "fun" sitting in your investments.

Not only that... but you also probably worked a lot longer than you needed to.

 

[Danmar]

(I think that Firecalc no longer applies. Inflation has dropped and returns are up. But its relevance stopped applying to me about 15 years ago so I am not current.)

My thinking as well. Haven't looked at firecalc for years. Spending has been dependant on div growth as well as portfolio growth. Both have almost doubled since retirement. Currently 66 retired 10 years. Taking a percentage of the original portfolio and only spending that seems a little silly at this point. Actuals usually much more accurate than old projections.

 

[Dd852]

I haven't been able to do it either. Mainly because I can look at the extra $6000 to $8000 it would cost for the two of us and know that would cover several weeks of the lavish land-based portion of our Europe trip.

I'm with you - I miss the flat bed for sure but I'd much rather up the class of hotel a notch or two for a couple of weeks or have a massage after the flight. Premium economy works out to be a decent compromise.

 

[DEC-1982]

How many out there are using the 3 - 4% withdrawal rate during retirement?

Not me. It's been (and will be) lower than 3-4% for a few years; then it will be higher at some point and then lower again when SS kicks in at 70, and even lower when 2 SS are pulling in money.

Everybody does it differently. You should create a poll (aka pole or pol).

 

[Elbata]

Enjoying this thread.

One thing I'm curious about--The folks talking about their percentage withdrawal rate, are your figures back of the envelope kind of estimating or do you still track your expenses?

I don't, so I'm envious of those who have the discipline to do this.

 

[NW-Bound]

Quicken downloads all of my spending. It also has the current balance of all of my accounts.

All I have to do is to hit "Expenses over the last 12 months", and up comes my expense total.

What is that total expense as a percentage of my total account balance? A mental calculation is enough here, and there's no need to compute out to 3.49999% for example.