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Old 09-06-2011, 11:39 AM   #21
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I pay divs and interest to a sweep account and then spend them as part of my income needs. I calculate the WR each year and this includes these payments as I no longer re-invest them.
Follow Alan's dividend sweep account method - we're targeting a rolling two years cash reserves. Also somewhat utilize Nords method in that we don't sell investments to make up any dividend shortfalls in down years (letting cash reserves fall off two year reserve target, until market improves).
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Old 09-07-2011, 12:19 AM   #22
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Ours is a bit more complicated than just a straight SWR withdrawal from a single account. Essentially, we started out ER with 4 years in cash and the
rest in various IRAs and after tax accounts. Due to some family issues, buying a business and feeding it from our cash accounts, we will be starting
distributions earlier than I wanted from one of the IRAs. Another reason is to avoid a huge RMD later in the life of the IRA with a corresponding huge tax bill.

Our ER budget was designed to spend more earlier in ER for a variety of reasons. In 10 years or so our demand for cash flow will be half or less than our current cash flow and our plan reflects this in the withdrawal rates. Over the long haul it will even out as we continue to spend our kid's inheritance.
Some income streams will eventually move from IRA back to After Tax account later in the plan as RMDs are in excess of our expenses. Once the IRAs are exhausted, the Ater tax accounts will again create an income stream.

By then I will be too old to travel, too old to RV, too old to do yard work, too old to do photography, and too old to care much about anything. When you get that old, you don't spend much except on healthcare and that is covered unless Congress destroys the entire Healthcare system; then we will move to Canada...it they still have any money by then. If not, then there are less expensive solutions to check out of the California Hotel.
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Old 10-21-2013, 02:28 PM   #23
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Wife and I are 56 years old. Our investment horizon = 39 years. We use a 60/35/5 portfolio. We are retired.

We withdraw 3.0 + portfolio expenses per year. Our portfolio expenses are: ER+TR=0.15+0.43=0.58%. So our SWR=3.58%. i.e. TR=tax ratio.

As we gradually shift costless 5yrCD money into (offshore bond fund) PTTAX.lw which costs 0.85% per year, our portfolio costs will eventually climb to 0.75% of port.

firecalc.com says we can safely (95%) withdraw 3.44% per year. We're in the ballpark.
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Old 10-21-2013, 06:18 PM   #24
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Wife and I are 56 years old. Our investment horizon = 39 years. We use a 60/35/5 portfolio. We are retired.

We withdraw 3.0 + portfolio expenses per year. Our portfolio expenses are: ER+TR=0.15+0.43=0.58%. So our SWR=3.58%. i.e. TR=tax ratio.

As we gradually shift costless 5yrCD money into (offshore bond fund) PTTAX.lw which costs 0.85% per year, our portfolio costs will eventually climb to 0.75% of port.

firecalc.com says we can safely (95%) withdraw 3.44% per year. We're in the ballpark.
Please tell me what you based your TR on? How did you calculate that? Would be most interested. Thanks!
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Old 10-21-2013, 06:34 PM   #25
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We take out $5K a month from taxable and non-taxable accounts (It's my salary) which comes up to about a 3.6% WR. I also get $2.5K for a military retirement each month. All my dividends and interest get swept into the cash account which is withdrawn from each month. Has worked so far, no worries. . .
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Old 10-21-2013, 07:30 PM   #26
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This is a 2 year old thread. I suppose if people want to share their withdrawal method (or other information that doesn't even seem to relate to the topic) they can, but it's not very timely.
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Old 10-21-2013, 08:19 PM   #27
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This is a 2 year old thread. I suppose if people want to share their withdrawal method (or other information that doesn't even seem to relate to the topic) they can, but it's not very timely.
Not timely, just timeless. I rethink the issue from time to time.

I am always interested in hearing from galeno, as well. He got me thinking for the first time about a withdrawal method.

Quote:
Please tell me what you based your TR on? How did you calculate that? Would be most interested. Thanks!
options, galeno's situation is very different from most of ours. He is Costa Rican and I bet his custodians nick a bit for taxes that are quite foreign to us.
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Old 10-21-2013, 10:04 PM   #28
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Now that I'm getting closer to "the date", I find that there is very little on draw down methods (versus a myriad of books and articles on accumulation methods).

I've read Lucia's buckets and also articles from others who live off the interest.

What method do you use? Why do you think it is best?
I target 18-24 months of cash/short-term investments (~6% of total).

I take dividends from my taxable portfolio in cash. I replenish an online savings account when I rebalance my investments, generally at least annually. I have a monthly automatic transfer from the online savings account to the checking account from which my bills are paid.
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Old 10-21-2013, 10:13 PM   #29
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I maintain a cash bucket in MM and CDs. That lets me avoid selling in down market years, and wait for the up market to replenish the cash bucket.
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Old 10-21-2013, 10:46 PM   #30
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I keep 2 years living expenses in a bank account and spend down half of it each year. Meanwhile my portfolio throws off 80% of what I need for a year in interest and dividends. At the end of Dec I rebalance and take some cap gains in order to replenish the difference back up to 2 years living expenses. Then repeat every year.

The extra year's worth of expenses I keep for emergencies and piece of mind, or hopefully an especially good buying opportunity if one arises.
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Old 10-22-2013, 07:13 AM   #31
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We try not to drawdown; i.e., spend more than we take in. Always have & we can't shake that mindset. For what we do spend & have to have income for - vs. using post-tax assets - we focus on minimizing taxes to derive that income.
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Old 10-22-2013, 02:29 PM   #32
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I have 5 yrs of cash, assuming the same rate of return on my investments. For example lets say I need 50k for my annual budget. If I get, on average, 25k investment income I need to fund the rest from my investments. I do not exceed the 4% rule and the 5 yrs of cash is earning ~1%.

This way most of my $ is working for me and I have a good safety net. This method has stood the test of time, since 2000.
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Old 10-22-2013, 03:54 PM   #33
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Originally Posted by galeno View Post
Wife and I are 56 years old. Our investment horizon = 39 years. We use a 60/35/5 portfolio. We are retired.

We withdraw 3.0 + portfolio expenses per year. Our portfolio expenses are: ER+TR=0.15+0.43=0.58%. So our SWR=3.58%. i.e. TR=tax ratio.

As we gradually shift costless 5yrCD money into (offshore bond fund) PTTAX.lw which costs 0.85% per year, our portfolio costs will eventually climb to 0.75% of port.

firecalc.com says we can safely (95%) withdraw 3.44% per year. We're in the ballpark.
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Please tell me what you based your TR on? How did you calculate that? Would be most interested. Thanks!
I would think that if you look at the effective tax rate of your last return you would find something around the 15% rate.

My effective TR last year was 13%, but I chose to pay more taxes than I needed to that year by converting some tIRA money to a ROTH otherwise it would have been lower.
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Old 10-22-2013, 04:41 PM   #34
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Spend divs and interest in taxable. When that runs out, I sell something.
What, you mean like the kitchen table, or that exercise machine you thought was cool, but never used?

Just kidding, just kidding
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Old 10-22-2013, 04:57 PM   #35
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I've got enough interest and dividends flowing through my taxable acct to take care of my monthly needs. If I need to buy something out of the ordinary like a car, then I would have to sell something to take care of that. But I try to plan for that too by selling at the appropriate time(or waiting for a bond to mature) and setting that money aside for the purchase.
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Old 10-22-2013, 04:59 PM   #36
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I have always had a lot of cash sloshing around, even when I was still working. Dunno about these stocks, which I do have quite a few of, because their prices go up and down, and you are never sure what they are worth. Plus they say cash is king, and having some cold cash makes me feel rich. I guess some prefer gold to cash, but I am OK with greenbacks for now.

Back when I was a lot younger, having enough cash so that I could buy a luxury car for cash at any time I would like made me feel rich. Of course I never did buy any fancy car, but just the average run-of-the-mill. It's the feeling that counts.

And when I got older and accumulated more, my cash level also grew, and I had more cash than any of my friends and relatives would guess. Again, it makes this scroogey guy feel rich when he thinks he can just write a check for another house whenever he feels like it, although he never will because he's now too stingy to even buy a new car that would be less than 1% of his NW.

This is the guy who bought new the 1st minivan that came out in 1986, paid cash of course, because he needed it to haul his 1st born. Now, he cringes at the thought of a new car. Isn't that several steps backward or not?

I have never had less than 10 to 15% in cash (meaning I-bonds, MM, CDs, etc...). I currently have 28% in cash due to holding very little bonds. However, not all of that cash is in taxable accounts that I can get at without paying taxes.

So, back on the drawdown method, I still have a few more years to spend down that cash that's currently earning very little. Not much of a method, but that's how it is.

PS. No, my cash is all inside brokerage accounts, treasury.org and such. No lump in my mattress, or jars buried in my backyard. Don't ever think of finding out where I live, because I do not keep it at home. And I am heavily armed!
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Old 10-22-2013, 09:30 PM   #37
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I would think that if you look at the effective tax rate of your last return you would find something around the 15% rate.

My effective TR last year was 13%, but I chose to pay more taxes than I needed to that year by converting some tIRA money to a ROTH otherwise it would have been lower.
Initially intended to start ROTH conversions after I FIRE at 59 1/2 end of next year(okay, so it's not really early--but it's "early" for me) up to the 15% bracket until age 70. No, not so sure. Have a slightly unusual FIRE plan as it includes/adds substantial amount of proceeds from RE sale at age 65 (about 5 years after I FIRE). I know most people here do not include principal residence but I have no mortgage, have an enormous amount of equity, will be downsizing from one of the more highly desirable, trendy areas in los angeles (important, because trendy people create trendy neighborhoods and drive up property values: even at the bottom of the recent RE crash, values here dropped, then reverted quickly (no, I'm hardly "trendy", but sure am $thankful the neighborhood has become that way)). Will be downsizing to a *much* cheaper location, so I'm including the funds in my plan.

However, this plan basically renders total SWR calculations useless, so will be relying on ESPlanner year by year. Am good to go after next year based on other calculators, including FIRP, FIRECALC, ORP, and also according to consultation with VG FP. Long-winded way of saying I'll play the ROTH conversions by ear, depending on yearly portfolio values, at least until I add $ to the portfolio from downsizing.
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