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Old 01-01-2015, 07:14 PM   #21
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That's why they invented those budget thingies!
I do have my budget thingy. I look at the expenses YTD, and the expenses over the last 12 months. If they look a lot lower than 3.5%, I go ahead with big ticket expenses. If not, I look at the year before, and the year before that to see what they were. If they bounce around 3.5%WR, then it's good. If they stay consistently above 3.5%WR, then I should slow down or delay big projects if at all possible.

Just a quick look at Quicken tells me that in 2015 if there's nothing else that will suck up $20K like the home repair in 2014, then that's money I can spend on other stuff if I want to, or I can just let it sit there for money counting pleasure. I do not need a fancy spreadsheet.
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Old 01-01-2015, 08:39 PM   #22
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Originally Posted by JDARNELL View Post
I will fully fund my TSP and HSA before I leave, thus the reason for a couple of months work this year.
Does the IRS allow you to fully fund an HSA if you aren't paying for a high deductible health plan for the full year?
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Old 01-01-2015, 08:41 PM   #23
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Does the IRS allow you to fully fund an HSA if you aren't paying for a high deductible health plan for the full year?
No. You can only fund 1/12 of the annual limit for each month you were enrolled in a qualifying health plan.
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Old 01-01-2015, 08:55 PM   #24
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So do any of you take extra SWR each year and if so do you just set it aside?

I remember a decade ago Galeno talked about a smoothing strategy with using a living fund. Even though I was FI in 2011 after retiring from the military I am working a bridge career for now. I actually will be giving my notice in the next 30 days and completely retiring in my mid 40s with college funding around the corner for my kids. Going to walk away from the FERS deferred annuity for now and I figure if I ever need it I can go back and do something until I get 5 yrs vested at a much lower grade and less crap. High three is already set and I will fully fund my TSP and HSA before I leave, thus the reason for a couple of months work this year.

At this point I don't think I am going to take a SWR for 2015 but rather go ahead and pull 2 yrs of projected college cost off the table tomorrow. Then in 2016 start a small SWR just to have more cash on hand.

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I never put money withdrawn back in the portfolio, even if I don't spend it all in one year. It can go in a rainy day fund, or saving for something special, or whatever. Once I've withdrawn the amount the calcs say that I can each year, I see no reason to expose those funds to market risk again. It's there to be spent in the not so distant future.

I have long-term investments (the retirement portfolio) and short term investments - a couple of years of living expenses plus money earmarked for various thing I might do in the next few years. They are managed independently, and only the long term investments hold equity funds.

Unspent money doesn't have to sit in checking. There are FDIC savings that pay 1% - which is where I put my annual withdrawal, and short-term bond funds for money needed 2 years out. Or CDs for money needed after a year.
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Old 01-01-2015, 09:18 PM   #25
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I never put money withdrawn back in the portfolio, even if I don't spend it all in one year. It can go in a rainy day fund, or saving for something special, or whatever. Once I've withdrawn the amount the calcs say that I can each year, I see no reason to expose those funds to market risk again. It's there to be spent in the not so distant future.

I have long-term investments (the retirement portfolio) and short term investments - a couple of years of living expenses plus money earmarked for various thing I might do in the next few years. They are managed independently, and only the long term investments hold equity funds.

Unspent money doesn't have to sit in checking. There are FDIC savings that pay 1% - which is where I put my annual withdrawal, and short-term bond funds for money needed 2 years out. Or CDs for money needed after a year.
I agree. I withdraw 2-3 times in the year to my current account, and then put most of it into TDB8150, an investment savings account with a current yield of 1.5% (only available in Canada). Right now, that account has about $11K in it, half of which is capital gains from a share buyout and the other half of which is a surplus from the second half of 2014. It will get used up in the first half of 2015; I just won't have to withdraw as much as I otherwise would.
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Old 01-01-2015, 09:21 PM   #26
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Old 01-01-2015, 09:35 PM   #27
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Unspent withdrawal stays in my Money Market until I have a need for it . My excess from last year was $28,000.One day I may want to take a really expensive trip and the money is there but in reality I will probably use it to upgrade my house & help out my family .
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Old 01-01-2015, 10:37 PM   #28
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Does the IRS allow you to fully fund an HSA if you aren't paying for a high deductible health plan for the full year?
Actually it is my FSA
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Old 01-02-2015, 06:47 AM   #29
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I track a theoretical SWR amount. If there is a remainder at the end of the year, whether it is withdrawn or still sitting in the portfolio, it goes into a psuedo "mad money" fund in the portfolio earmarked to be used for splurges or one-time large expenses. Last year I had some unusual expenses so I pulled $20K from the fund which is now down to $68K.
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Old 01-02-2015, 09:46 AM   #30
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Our aim is to stay a bit under budget and we've been doing that since I FIREd in January 2011. Unspent budget amounts just stay in the portfolio.

Staying on budget so far has been pretty easy for us. One reason is that it's similar to what we spent before FIRE. Another reason is that we always budget for the entire amount of our medical OOP deductible in our HDHP/HSA. It's about $11,000 and while some day I expect we'll actually spend it, so far we've never even spent 10% of that.

Our budget is pretty coarse, there is one big "monthly" spending item (about our budget) for normal life expenses. We transfer money into the checking account for this (our monthly "paycheck") and we track it in Mint, but don't worry about the details as long as we stay under our limit. Additionally, there are seperate budget items for spending that is lumpy: property taxes, other taxes, health, auto, home, and umbrella insurance, travel, and a reserve category for normal stuff that comes up but it's a monthly expenses (e.g. last year we bought a new door, some furniture, and paid some unusual vet bills from this).

We were about 10% under budget this year and we don't treat that as "found money", it just stays in the portfolio and lets us spend a little more in the future.

We set our budget by figuring 4.5% of our financial assets at year end (this ignores our house) and average that with the last two years' budget amount. Basically a moving average. This smooths out our budget as the market blips up and down.

We have no pension and are not yet drawing SS.
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Old 01-02-2015, 10:13 AM   #31
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We were about 10% under budget this year and we don't treat that as "found money", it just stays in the portfolio and lets us spend a little more in the future.
How to treat unspent funds is personal preference, for sure. But that extra money because you spent under budget is not "found money" in any way. It's simply money marked for spending that you did not spend this year.

To spend a little more in the future: once it goes back in the portfolio, only 4% (or whatever your withdrawal rate) of that money is the "extra" you get to spend each of the 30+ years in the future.
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Old 01-02-2015, 10:20 AM   #32
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that extra money because you spent under budget is not "found money" in any way. It's simply money marked for spending that you did not spend this year.
Maybe a poor choice of words.

Someone in this thread mentioned storing up their unspent budget amounts for future spending. My point was that we don't do that.
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Old 01-02-2015, 12:20 PM   #33
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I'm 1.5 years into ER but with a still-working wife more than covering all our bills with half her check (because we spend little, not because she makes a ton!), I haven't quite figured out the withdrawal mechanics.

My expectation is that we will pull together a big cash buffer of a year or two of expenses (~$32k/yr). That will cover any sudden unexpected expenses and let us ignore downturns in the market (we can live off the cash pile).

When markets are good (like right now) we would probably add more than 1 year's expenses each year to replenish the fund. Eventually, we might get 4 or 5 years worth of expenses in cash or short term CD's or short bonds. That seems like "enough" (plus dividends from the portfolio) to get us through an almost Great Depression market.

At $32k, our WR is about 2.6%, just slightly higher than our current dividends ($30k for 2014). So there's a decent chance we won't have to dip too far into our principal each year.
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Old 01-02-2015, 02:03 PM   #34
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It's unclear to me if OP is referring to RMD withdrawal cash. If so, I plan on stashing my RMD unspent cash in my taxable TSM or STB fund, depending a number of variables.

If OP was referring to "unspent" 4% taxable (or non RMD cash) money, just don't take it out unless you need it.
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Old 01-03-2015, 11:22 AM   #35
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First, congratulations on retiring-- again! I'm glad to see that there's still plenty to do each day...

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Originally Posted by JDARNELL View Post
So do any of you take extra SWR each year and if so do you just set it aside?
At this point I don't think I am going to take a SWR for 2015 but rather go ahead and pull 2 yrs of projected college cost off the table tomorrow. Then in 2016 start a small SWR just to have more cash on hand.
In the first half of 2014, we weren't spending it fast enough and the cash was piling up. That situation reversed itself during our daughter's college graduation week, and we managed to keep up the pace through a couple more trips. This month we're back to two years' expenses in cash. We're getting ready to visit our daughter in Spain in a few weeks, so I doubt any cash will be piling up in 2015 either. At the end of 2015 I'll need to replenish the cash stash through the end of 2017.

Our travel spending has been very lumpy, but our overall spending has been flat or dropping since our daughter left the nest. I'll make sure we have two years of projected expenses in cash, but otherwise I'm leaving the portfolio alone. This year we might have enough dividends, interest, and rental income to maintain that cash stash without additional withdrawals.

If we need to replenish the cash at the end of 2015, it's tempting pull out a Roth IRA contribution or two instead of paying capital-gains tax on our taxable portfolio.

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SWR for me is something that I have never really thought about as my other revenue streams cover spending and more. Just not sure at what point I will start using portfolio money.
It's quite possible that your portfolio money would only be used for really big expenses-- a new roof, a massive rental rehab, a blowout family reunion, or... more motorcycles. Your rental income (in particular) should really grow with inflation and minimize the need for selling portfolio shares.
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