Retirement withdrawal variability

[youbet]

The thing about inflation is that it is a permanent loss, never to be recovered from.

This is an important concept some folks struggle to understand. But, yes, we always seem to have some level of inflation going on while periods of deflation are almost non-existent historically.

FIRE'd a mere 12 years, and in a period of relatively low inflation, DW and I already note spending on non-discretionary items (utilities, real estate taxes, repairs, essential transportation, etc.) is up significantly since their levels at the time of our last earned income in 2006. We don't expect these things to ever recover (go back down in price). I'm glad we planned for that.

OTOH, our investments did fully recover and grow following the so-called Great Recession. There's no guarantee that's how it will go next time, but we can always hope!

 

[Dd852]

+1 Besides politics and religion, the only thing worse I've found is in my audiophile discussion groups. Try floating "digital vs analog" and duck for cover!



-BB

I’ve settled on 256 kbps as transparent enough for me...

 

[SAtoUS]

Chillax people!

 

[GravitySucks]

I retired in 2013. Before retiring I did a lot of research on optimum withdrawal strategies and settled on a modified fixed-percentage scheme.

So basically, I have recalculated our withdrawal percentage based on recurring costs rather than total budget. Money for infrequent non-recurring costs stays invested, to be grabbed not as part of a scheduled withdrawal but when needed. Part of our portfolio is very liquid so I can get at it quickly if need be.

I believe that dealing with the variability in spending is an issue no matter what withdrawal strategy is being used. This whole experience makes me wonder if a withdrawal strategy is even needed. Some people just take out money on an as-needed basis and don't really have a strategy. I am curious what others are doing.

I'm pretty much doing what your doing. I was going to do all sorts of mental buckets for non recurring expenses such as a new car, new roof, vet emergencies. After five years though I just leave what I don't use invested and make sure there's enough in the after tax account to cover multiple emergencies in any one year so I don't have to pull so much out of the IRA that I'll get pushed to the next tax bracket.
I don't do any calculations, just take what I need as long as it's lower per year than the Fido retirement tool says is ok. If it does run up higher than that any year I'll worry then.

 

[muchohucho]

I just take out money from a 457plan account on a monthly basis as needed. I don't have a strategy, just a firm grip on my spending habits, which are pretty steady and simple. If I was a bit smarter I'd have a regular amount withdrawn automatically, which would have less tax taken out up front.

 

[cnocmmz]

I used to live in a condo in the US and learned how the Homeowners' Association would budget (and set aside) each year a certain amount for projected long-term capital costs--infrastructure updates, replacements, etc.

My wife and I use the same approach. In our budget every line is coded as either current expense or long term, and each has a Rollover (Y/N) notation. That way, we project/estimate long term costs -- for example our plan to apply for Swiss citizenship will cost about 7,000 Swiss Francs altogether -- and then divide by the number of years until projected expenditure. The Rollover notation reminds us that at the end of the each year, we need to be sure to rollover the funds and not spend them as "surplus".

-BB

 

[muchohucho]

so many undefined acronyms, makes it hard to understand what's being said here

 

[MichaelB]

so many undefined acronyms, makes it hard to understand what's being said here

This may help http://www.early-retirement.org/for...slang-frequently-used-on-the-forum-34884.html

 

[braumeister]

Like most forums, there is a FAQ section.

http://www.early-retirement.org/forums/f47/acronyms-and-slang-frequently-used-on-the-forum-34884.html

 

[jollystomper]

I developed our planned retirement budget based on 5 and ten year expenditures averages, adjusted for known future expenses. We then subtracted my non-COLA pension to look at what the difference was. From this we came up with a monthly expected amount to draw from savings. To keep us from being forced to sell equities during downturns, the monthly amount total from my first month of retirement (July) through my Social Security full retirement age we put in cash - six months of the monthly in a local savings account, the rest in higher yielding online accounts and CDs.

My pension check, along with DW's part time work paychecks, get deposited into our checking account to pay our known regular bills. We then enjoy life off of the surplus. if it is not enough, we transfer from the savings account into the checking. We monitor the actual withdrawals and compare that to the expected withdrawals.

Three months is not a large sample size, but so far, even with unexpected-but-anticipated home and auto maintenance expenses, our actual draws are running well below our expected draws.

At the beginning of the year we will evaluate our status - if surplus, we will judge to what degree we will increase our retirement budget. If deficit, we will also look at how our investments did, before taking any action, as good performance will cover any deficit issues.

This is how we have started, but of course will fine tune as things progress.

 

[muchohucho]

Thank YOU!!!

 

[Huston55]

I developed our planned retirement budget based on 5 and ten year expenditures averages, adjusted for known future expenses. We then subtracted my non-COLA pension to look at what the difference was. From this we came up with a monthly expected amount to draw from savings. To keep us from being forced to sell equities during downturns, the monthly amount total from my first month of retirement (July) through my Social Security full retirement age we put in cash - six months of the monthly in a local savings account, the rest in higher yielding online accounts and CDs.

My pension check, along with DW's part time work paychecks, get deposited into our checking account to pay our known regular bills. We then enjoy life off of the surplus. if it is not enough, we transfer from the savings account into the checking. We monitor the actual withdrawals and compare that to the expected withdrawals.

Three months is not a large sample size, but so far, even with unexpected-but-anticipated home and auto maintenance expenses, our actual draws are running well below our expected draws.

At the beginning of the year we will evaluate our status - if surplus, we will judge to what degree we will increase our retirement budget. If deficit, we will also look at how our investments did, before taking any action, as good performance will cover any deficit issues.

This is how we have started, but of course will fine tune as things progress.

So, this sounds very much like a “Safety First” approach; a guaranteed ‘floor’ for total expenses, with an ‘upside’ funded by an at-risk investment portfolio.