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04-08-2018, 08:28 PM
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#81
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Syracuse
Posts: 3,502
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Quote:
Originally Posted by Markola
Yep, yep and yep.
Here’s one thing I’ve wondered about but have never seen someone comment on. Say one takes a 4% SWR: Wouldn’t there be an advantage over the long term to taking 1%/quarter vs. 4% once/year? More would remain invested that way.
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That what I did the first 5 years. More as a way my budgeting brain works rather than a way to squeeze ever last penny.
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
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04-08-2018, 08:38 PM
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#82
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Dryer sheet wannabe
Join Date: Dec 2017
Posts: 14
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Quote:
Originally Posted by SecondCor521
Yup. That's effectively what I do and partly why I do it. Although the effect is probably small it might add up to something over a number of years. See the last paragraph in post #66 in this thread where I allude to it.
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It would seem it would depend on the market condition.
During a hot market it would pay more returns to take incremental withdrawals later in the calendar allowing more returns
During a poor market (bear), it would make more sense to withdraw greater amounts earlier in hopes of preventing the market further reducing the values as it declines and selling at a lower price later.
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04-08-2018, 08:58 PM
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#83
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Recycles dryer sheets
Join Date: Feb 2014
Posts: 157
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My plan, I just retired at 55.
1. Withdraw from investments twice a year.
- If portfolio hit target over past 6 months, withdraw 4%. If More, draw more. If Less, draw less.
2. Two year CDs at 2.6% staggered for insurance premiums & income tax (April $15K), Property Taxes (December $10K), annual tractor payment ( Jan $16K),
3. three $50K CD laddered 12, 24, 36 months for cash to hedge against market downturn.
4. I have a non COLA pension that we plan to live on. Investments have to offset inflation impact on pension & are for travel, Christmas, etc.
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04-08-2018, 09:41 PM
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#84
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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Quote:
Originally Posted by Markola
Yep, yep and yep.
Here’s one thing I’ve wondered about but have never seen someone comment on. Say one takes a 4% SWR: Wouldn’t there be an advantage over the long term to taking 1%/quarter vs. 4% once/year? More would remain invested that way.
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Well since I only rebalance once a year after withdrawal, that won’t work for me. And rebalancing once a year works better than more frequently in the long run.
Besides I prefer to pull a year’s worth out at once so I can ignore market fluctuations for a whole year.
Plus it works better with most of my distributions being paid in December.
__________________
Retired since summer 1999.
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04-08-2018, 09:45 PM
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#85
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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Quote:
Originally Posted by Jonesee
It would seem it would depend on the market condition.
During a hot market it would pay more returns to take incremental withdrawals later in the calendar allowing more returns
During a poor market (bear), it would make more sense to withdraw greater amounts earlier in hopes of preventing the market further reducing the values as it declines and selling at a lower price later.
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Of course. One of my operating assumptions is that my investments are likely to be more frequently up than down over the next 40 years. Time will tell.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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04-09-2018, 05:43 AM
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#86
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,228
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Quote:
Originally Posted by Jonesee
It would seem it would depend on the market condition.
During a hot market it would pay more returns to take incremental withdrawals later in the calendar allowing more returns
During a poor market (bear), it would make more sense to withdraw greater amounts earlier in hopes of preventing the market further reducing the values as it declines and selling at a lower price later.
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Most asset allocation strategies have you doing the opposite, unless you have some knowledge that you're starting or continuing a bull or bear market. (Hint: you don't.) Once you're in it, you have no idea how long it will last. It could be an extended run, or could be ready to turn. It certainly doesn't follow a calendar.
When people balance their AA, they sell stocks if they are higher, and buy, or at least don't sell, when they are lower. You know, "buy low, sell high". Likewise, in retirement, pile up some cash while the market is high, so you don't have to sell more stocks when the market is low.
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04-09-2018, 05:48 AM
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#87
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,228
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Quote:
Originally Posted by SecondCor521
Of course. One of my operating assumptions is that my investments are likely to be more frequently up than down over the next 40 years. Time will tell.
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Yes, this is the other plan. Don't try to time the market at all. Just try to stay as invested as possible on that principle that investments generally go up, and take money only as you have to. I tend to favor this method, though last year I did sell a good chunk in the hot market. I had tax/subsidy reasons for doing so, but might not have done so if the market had not been so hot leading up to it. Once this cash dwindles, I'll probably go back to selling when I need to, but not on a strict schedule.
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04-09-2018, 06:08 AM
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#88
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,941
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Quote:
Originally Posted by audreyh1
Well since I only rebalance once a year after withdrawal, that won’t work for me. And rebalancing once a year works better than more frequently in the long run.
Besides I prefer to pull a year’s worth out at once so I can ignore market fluctuations for a whole year.
Plus it works better with most of my distributions being paid in December.
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All good points. Sounds like you first withdraw all the dividends and interest. Do you then favor a particular asset class to sell for the balance to hit your SWR, ie always stocks or bonds, the class that was up the most, or evenly from each? After that, I understand you rebalance as necessary for the new year. Thanks for sharing your system.
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04-09-2018, 07:13 AM
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#89
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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Quote:
Originally Posted by Markola
All good points. Sounds like you first withdraw all the dividends and interest. Do you then favor a particular asset class to sell for the balance to hit your SWR, ie always stocks or bonds, the class that was up the most, or evenly from each? After that, I understand you rebalance as necessary for the new year. Thanks for sharing your system.
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I do take all my distributions in cash and let them accumulate during the year rather than reinvest them for a brief time which is more complicated tax wise. Most are paid in Dec, so they aren’t sitting around for long.
These usually cover my annual withdrawal, but if they don’t, I use any additional selling needed to rebalance - so of course it comes out of the asset classes that are above target. It’s all the same rebalancing whether some of it contributes to the withdrawal or not.
I try to minimize the sales and choose highest basis long-term shares to minimize the tax impact. If my portfolio is not far off from target after the withdrawal, I won’t even rebalance that last little bit.
__________________
Retired since summer 1999.
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04-09-2018, 05:21 PM
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#90
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,941
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Makes sense. Also, I’ve wondered before about your comment above that it is better to rebalance once/year than more often. Those life cycle and target date funds, which have many investors buying and selling, rebalance almost daily to keep their strict AA. I wondered if someone had shown if there’s a difference in outcomes.
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04-09-2018, 05:33 PM
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#91
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,809
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Quote:
Originally Posted by Markola
Makes sense. Also, I’ve wondered before about your comment above that it is better to rebalance once/year than more often. Those life cycle and target date funds, which have many investors buying and selling, rebalance almost daily to keep their strict AA. I wondered if someone had shown if there’s a difference in outcomes.
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It seems pretty obvious. If the market does well never rebalance. If it does extremely poorly never rebalance. If it varies a lot there is no obvious formula unless you know the period in advance.
Historically it’s gone up with setbacks. But what if we get into a lost decade or two. That possibility is why I don’t rebalance in down markets until a trend up happens.. A very defensive posture.
Well maybe not so obvious.
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04-09-2018, 09:17 PM
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#92
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Thinks s/he gets paid by the post
Join Date: Sep 2007
Posts: 1,214
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Quote:
Originally Posted by Jonesee
As a mitigating factor; has anyone ever run the numbers assuming a multi-year cash cushion.
Having sufficient cash to forgo any withdrawals for 3 years. Would that effectively protect a portfolio?
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No it won't. What do you do after the 3rd year, when your cash is depleted? Now you have to sell stocks. All you've done is shift the timing of when you sell stocks.
And you're going to want to replenish your cash hoard after you've been spending it, so again you have to sell stocks.
I created a comprehensive spreadsheet to examine this question. Summary: It's best to follow Michael Kitces advice and just stick with your chosen stock/bond asset allocation.
https://www.dropbox.com/s/xf4ma5blug27aws/SPY_Withdraw_by_CashBucket_rules.xls
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