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Re: Varying Withdrawal rates
Old 02-21-2004, 09:25 AM   #21
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Join Date: Jul 2002
Posts: 26
Re: Varying Withdrawal rates

I played around with the variable rates idea a good bit, and even contributed a few spreadsheets on the idea over at TMF, but was never happy with trying to model the withdrawal strategy. *Too many differences in everyone's ideas of when to take out extra.

I decided personally to take a different approach. Mentally I divide my portfolio into 3 buckets.

Bucket one is what I feel I need to maintain my lifestyle until social security kicks in. I withdraw at the nearly 100% safe rate from this now, nut the time frame is only until SS kicks in.

Bucket two is the part I'll need to add to SS to maintain that lifestyle. No withdrawals now; nearly 100% safe rate starting when I start withdrawals, with a time frame to outlast me.

Bucket three is "play" money, and I feel comfortable withdrawing at a more risky rate, like 85%.

Taking this approach, rather than trying to make a single decision on what I needed, has helped me a lot -- and speeded up my early retirement by about 2 years.

I take a similiar approach to figuring out how much money I can spend during early retirement. I created an Excel spreadsheet that lets me divide up the money into the various buckets. Here's a tip that I would like to share--let's say you have a certain portfolio size and you want to know how what is the total withdrawal amount that maximizes your withdrawal from each bucket. To get that number, I use the "goal seek" function found under the "Tool" menu. You might find this helpful if you want to adjust your withdrawal amount say for a a POPR.

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