What is your withdrawal rate?

[youbet]

Quote:

Originally Posted by Dtail But effectively aren't you just moving a tax sheltered asset to a taxable asset in your portfolio (less the taxes of course) and thus conceptually this really wouldn't be considered a WR% inclusion.

+1

[aja8888]

Quote:

Originally Posted by youbet My point was that you are not forced into withdrawing the entire RMD, just the taxes.

How do you know what the correct tax would be if you only did that?

The 1099 I get for my RMD withdrawal has a box (7 i think) which delineates what the funds were pulled for.

[SecondCor521]

Quote:

Originally Posted by aja8888 You withdraw the amount in dollars in your tax sheltered account value @ 12/31/____(year) based on the percentage listed in the RMD table. Then you pay ordinary income tax on that amount based on your total taxable income. What you do with the money not paid in income tax from the withdrawal is up to you.

Just to nitpick so others aren't confused later, it's a divisor, not a percentage. You take your previous year 12/31 balance and divide it by the appropriate number in the table. (The next year, you take the new 12/31 balance and divide it by the previous divisor minus one. I think.)

[RunningBum]

Quote:

Originally Posted by aja8888 How do you know what the correct tax would be if you only did that? The 1099 I get for my RMD withdrawal has a box (7 i think) which delineates what the funds were pulled for.

You're not getting it.

This thread is talking about the withdrawal rate from all your investments. In other words, your spending rate.

You are talking about your required distribution (not withdrawal) from an IRA, which just goes into your taxable account. Until you actually spend it, it's not a withdrawal from your whole portfolio. The taxes paid are spent (including taxes, donations, etc), so that part of the RMD is a withdrawal.

I suppose if you move your RMD into some account you no longer consider part of your investments, it all counts, but why would you do that?

Or if you spend it all, of course it all counts, but that's only because you spent that much, not because of the RMD.

[youbet]

Quote:

Originally Posted by aja8888 How do you know what the correct tax would be if you only did that? The 1099 I get for my RMD withdrawal has a box (7 i think) which delineates what the funds were pulled for.

I've been pretty good at estimating the withholding for my RMD so far. I figure what my estimated tax payments should be for the year on my non-RMD income then add the RMD and recalculate. The difference in taxes is the amount I have withheld from the RMD. It's never exact, but close enough. My goal is to get a very small refund overall, and I'm usually pretty close.

My 1099 shows the amount of the entire RMD withdrawal and how much of that was withheld for fed taxes. The amount withheld for fed taxes is the part I consider a "withdrawal" for purposes of calculating my withdrawal rate.

[aja8888]

Quote:

Originally Posted by youbet I've been pretty good at estimating the withholding for my RMD so far. I figure what my estimated tax payments should be for the year on my non-RMD income then add the RMD and recalculate. The difference is taxes is the amount I have withheld from the RMD. It's never exact, but close enough. My goal is to get a very small refund overall, and I'm usually pretty close. My 1099 shows the amount of the entire RMD withdrawal and how much of that was withheld for fed taxes. The amount withheld for fed taxes is the part I consider a "withdrawal" for purposes of calculating my withdrawal rate.

My misunderstanding. I thought you were just pulling out of the tax sheltered account the amount you figured you will eventually owe in tax (on the distribution) for that year and not the entire RMD for the tax year.

I don't have any taxes withheld from my RMD distribution. I have the amount I figure to distribute moved to my taxable account and just pay the taxes I owe for the year (based on all taxable income for that year) in April when I file.

And sorry about the mistake above; The factor is a divisor, not a percentage.

[Helena]

.

Since I early retired, my nest egg has grown.

I only need to use a portion of the increase every year.

[W2R]

Quote:

Originally Posted by audreyh1 Only a few people here use VPW. There is a Boglehead group that talks more about it. Your concern is about withdrawal rates being to high. Seems like you need to review that issue with folks who understand and use VPW. I don’t see how collecting data from a bunch of folks who don’t use VPW is going to help.

+1

It does make one wonder about what the purpose of collecting this might be, doesn't it?

[Cobra9777]

Most info is in my signature. Other info...

Portfolio is currently 131% of the value when I retired. It helped that DW decided to work another 3 years after I retired.

The portfolio mainly consists of low-ER broad-market ETFs like VTI, AGG, and VXUS. There's a slight tilt to high-dividend on the equity side (VYM), and corporate on the bond side (LQD, HYG). Real estate consists of one rental house and SCHH.

We have two small pensions that cover about half our expenses. The portfolio value at ER, relative to the other half of expenses, is 27X. Based on current value, it's 35X and our WR is 2.8%.

Tentative plan for SS is for DW to claim at some point between 62 and FRA, depending on several factors. I'll defer to 70. Once we're both collecting SS, we won't need to make withdrawals from the portfolio. Dividends and RMDs will be reinvested unless something highly unusual pops up.

Regarding expense planning, I have a spreadsheet with many years of history as well as projections to age 100. This is broken down into 19 categories. Projections for each category include life events (e.g. downsizing house, Medicare at 65) as well as expected changes in consumption (e.g. less travel as we age, fewer cars and miles driven), along with a unique inflation rate for each category (e.g. high for energy and medical, low for clothing). I'm more comfortable with this level of detail as opposed to broad assumptions and models about the overall spending profile.

[levindb]

When I retired, I assumed we would need the same take home pay that I was receiving. That was our starting point.

Next, I assume we will run out of money at my age 105. All calculations are done in Today's Dollars, so inflation is not a factor. However, I also assume our ROI is just 3% over inflation and that SSA COLA is about the same as inflation.

Finally, I ask Excel to calculate my annual withdrawals and spending so we have no money at age 105. As long as I do not exceed that amount each year, we are comfortable.

We have averaged just 74% of that number over the first 6 years allowing our assets to grow more. SSA starts next year for me (age 70) and 2022 for DW (age 70). We have averaged 5.7% withdrawal rate for the past 6 years, and that will drop to 2.5% after both our SSA benefits are factored in.

Net, we have a max spend for each year. We have to pay taxes from that amount in addition to spending on us. We have flexibility because we are living well below that number. Works for us.

[pb4uski]

Quote:

Originally Posted by aja8888 My misunderstanding. I thought you were just pulling out of the tax sheltered account the amount you figured you will eventually owe in tax (on the distribution) for that year and not the entire RMD for the tax year. I don't have any taxes withheld from my RMD distribution. I have the amount I figure to distribute moved to my taxable account and just pay the taxes I owe for the year (based on all taxable income for that year) in April when I file. And sorry about the mistake above; The factor is a divisor, not a percentage.

But the divisor can easily be converted to a percentage by 1/divisor. So if divisor is 25.6, percentage is 3.9% (1/25.6).

[SecondCor521]

Quote:

Originally Posted by pb4uski But the divisor can easily be converted to a percentage by 1/divisor. So if divisor is 25.6, percentage is 3.9% (1/25.6).

Sure. My point was that you wouldn't want to mistake a divisor for a percentage or vice versa.

Someone thinking that their first RMD is $X*27.4% instead of $X/27.4 is way off the mark.

[jollystomper]

When you retired. June 2018
Age at retirement. 60
Asset mix or portfolio style 40/36/24
What growth you have seen in portfolio since retirement 2.8% in 11 months (not counting interest and dividends)
How much you retired with/saved (how many x of expenses) 19x expenses (but pension covers about 60% of projected expenses)
pension now or later? now
SS at what age? undecided, between 64 and 70


My first year (July-June) withdrawal rate is going to be about 1%. I underestimated my interest/dividend income, and with savings/CD rates up a lot since I retired, living off of these has so far helped keep my cash withdrawals low.

[4nursebee]

Quote:

Originally Posted by W2R +1 It does make one wonder about what the purpose of collecting this might be, doesn't it?

If it matters what method we PLAN to use, then just ignore that part of my original post, I do not think it is material. The info would be used the same regardless of the method.

[HI Bill]

Quote:

Originally Posted by levindb When I retired, I assumed we would need the same take home pay that I was receiving. That was our starting point. Next, I assume we will run out of money at my age 105. All calculations are done in Today's Dollars, so inflation is not a factor. However, I also assume our ROI is just 3% over inflation and that SSA COLA is about the same as inflation. Finally, I ask Excel to calculate my annual withdrawals and spending so we have no money at age 105. As long as I do not exceed that amount each year, we are comfortable. We have averaged just 74% of that number over the first 6 years allowing our assets to grow more. SSA starts next year for me (age 70) and 2022 for DW (age 70). We have averaged 5.7% withdrawal rate for the past 6 years, and that will drop to 2.5% after both our SSA benefits are factored in. Net, we have a max spend for each year. We have to pay taxes from that amount in addition to spending on us. We have flexibility because we are living well below that number. Works for us.

That sounds great for the period you've been retired. But the whole point of FIRECALC (and Monte Carlo) is to simulate the SORR. When the market drops, you may not return inflation + 3% on an annual basis.

Are you using a annualized fixed WR, or are you just spending a % of remaining assets? Once you drop to 2.5% WR, this will be a mute point. My mom took out 5-6% annually, and over the course of 15 years, depleted some 37% of her investments.

[4nursebee]

Thanks everyone, more info added.

[levindb]

Quote:

Originally Posted by HNL Bill Are you using a annualized fixed WR, or are you just spending a % of remaining assets? Once you drop to 2.5% WR, this will be a mute point. My mom took out 5-6% annually, and over the course of 15 years, depleted some 37% of her investments.

My assumption of 3% over inflation is just a conservative ROR for my lifetime. That number says I do not need to take a lot of risk. I have been averaging about 8% over my first 6 years of freedom. The Goal Seek (or What If) function in Excel gives me my annual salary that I have to live with. I don't need to spend it all, and we live comfortably well below that number, just like what we did in our prior lives.

To answer your question, we do neither. We have a smaller fixed $$/month (same as my old take home pay) moved to our checking account, and then we may also have chunky withdrawals for our World Cruise last year or our 6 week Safari this year. We do not look at % of remaining assets per se, we have Excel tell us the maximum/year...which is adjusted whenever a press ReCalc on the spreadsheet. If the market is not doing well, then the salary number goes down a bit, and we adjust our lifestyle a bit.

There are only 2 numbers we are guessing at:

ROR - 3% over inflation
Age at death - 105

FIRECALC asks me to guess at a lot more numbers and I am not smart enough to do that.

[Souschef]

In our case, our investments are split about 50/50 between IRA and taxable assets. So this year my RMD divisor is 17.4 , or 5.7%. Divided in half, it is 2.9% (approx) WR. The funds are used to pay all our taxes, gifts for our 4 sons, and a cruise

[dtbach]

Retired in 2010 at 57. 65/25/10 portfolio. WR is ~3.4%. Portfolio is up over 30% since retiring. Have a military pension. DW taking SS this year at 62, while I take restricted. Will take my own at 70.

[RetireAge50]

We withdraw about 3.5%. Way low but this site has brainwashed us plus this is all we really need. I’ll probably be spending a bunch later or kids will be happy.