What to do with unspent withdrawal money?
- Thread starter JDARNELL
- Start date
Moemg
Gone but not forgotten
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 .
Actually it is my FSA
donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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 If there is a remainder at the end of the year, whether it is withdrawn or still sitting in the portfolio, it goes into a psuedo "mad money" fund in the portfolio earmarked to be used for splurges or one-time large expenses.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.
mpeirce
Thinks s/he gets paid by the post
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 ½ 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.
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 ½ 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.
audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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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mpeirce
Thinks s/he gets paid by the post
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.
FUEGO
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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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.
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.
mickeyd
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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.
If OP was referring to "unspent" 4% taxable (or non RMD cash) money, just don't take it out unless you need it.
First, congratulations on retiring-- again! I'm glad to see that there's still plenty to do each day...
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.
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.
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.
