What was your WR YTD

[audreyh1]

I would count outside deposits against my WR, like SS and pensions and the like, but not interest, dividends, or portfolio gains. Otherwise you'd have to count losses as "withdrawals", too.

No it doesn’t work that way. Your portfolio grows or shrinks. You take X out for spending. Generally you would compare that X as a ratio to your beginning year value. A lot of folks compare it to their year end value. Whatever. Portfolio losses are never counted as withdrawals.

If you don’t take X out because your income streams, which are not part of your portfolio, exceed your expenses and you add unspent money to your portfolio then your withdrawal rate goes negative, just like when you were working and adding to your portfolio.

 

[scrabbler1]

To me a WR is simply spending divided by portfolio's value, which can never be negative. The latter could be the value at the start of the year, end of year, or something in between (I choose end-of-year, because that is when I calculate my spending).

For 2023, my WR ticked up slightly, from 1.3% in 2022 to 1.4% in 2023. Both spending and portfolio were up for the year.

 

[audreyh1]

Our largest annual WR by far at 3.2%, but that's meaningless - because I bought a car, did another large Roth conversion in 2023, and haven't started SS yet...

I assume only the taxes owed on Roth conversions was counted as part of the withdrawal?

 

[OnTheBeach]

2.42% of investments excluding income taxes. I exclude income taxes from my expenses because I calculate the value of my investments on an after tax basis.

 

[audreyh1]

To me a WR is simply spending divided by portfolio's value, which can never be negative. The latter could be the value at the start of the year, end of year, or something in between (I choose end-of-year, because that is when I calculate my spending).

For 2023, my WR ticked up slightly, from 1.3% in 2022 to 1.4% in 2023. Both spending and portfolio were up for the year.

If instead of withdrawing from your portfolio you add to your portfolio from outside income sources such as SS or pension then your WR is negative. It doesn’t matter what the person spent if their income streams exceeded their spending.

 

[Ronstar]

To me the "W" in withdrawal rate is "Withdrawal" So WR is sum of portfolio withdrawals divided by portfolio. Any $ received and spent from anywhere other than a portfolio withdrawal is not figured in the calculation.

 

[disneysteve]

To me a WR is simply spending divided by portfolio's value, which can never be negative.

That is the standard definition of the term which I thought everyone was using but clearly I was quite mistaken. People are making up all kinds of other definitions of withdrawal rate including ones that can have it turn out negative, a concept I had never heard of until today in this thread.


Carry on.

 

[Lewis Clark]

I calculate differently - I don't base WR on total spending, because most of our spending is not from withdrawals from our portfolio.

Most of our spending comes from SS, DW's pension and an annuity. I don't include the PV of the annuity, SS, or pension in our portfolio.

I do take some "withdrawals" from our portfolio (so far only cash), and only these withdrawals are used in WR calculations.

I should have been more clear. This spending refers to funds taken from my portfolio. I have a pension that pays for some of our spending each year. I'll edit my post accordingly.

 

[MichaelB]

That is the standard definition of the term which I thought everyone was using but clearly I was quite mistaken. People are making up all kinds of other definitions of withdrawal rate including ones that can have it turn out negative, a concept I had never heard of until today in this thread.


Carry on.

Standard definition, everyone using? That made me smile. No such thing exists in the real world, much less here on the inter-webs.

 

[old medic]

Even though I'm gainfully unemployed, My nest egg has increased about 24%
The DW had nearly doubled hers... Jointly looks like 41%. But 7% of that will get used in January as we both will meet our out of pocket.

 

[Surewhitey]

Still w*rking, but...

3.4% of investment assets and
2.95% of NW

If we were all in with SS & small pension, <.5%, but many years to go for that.

Our spending was considerably higher than any past year's... 15% more than last. Lots of travel.

 

[FLSUnFIRE]

.7% to 1.1% of my 12/29/23 portfolio balance depending how you calculate it. .9% would be sale of assets only but adjusted up for interest and dividends would be about 1.1%. I contributed to HSA and will contribute 100% of my meager earned income to an IRA so if those "reinvestments" are netted out it would be .7%. A bit higher based off of 12/31/22 portfolio balance. My withdrawals were less than my expenses due to cash on hand.

 

[lemming]

Thank you Ronstar. That is a formula I can grasp.
I took RMD's but put them in a taxable account less tax paid
I took dividends in cash from one stock
I took out a lump sum to pay dentist bills 10k
Those 3 things add up to 3.14 percent of portfolio . So I had my pi and ate it too.

 

[Plantman]

To me the "W" in withdrawal rate is "Withdrawal" So WR is sum of portfolio withdrawals divided by portfolio. Any $ received and spent from anywhere other than a portfolio withdrawal is not figured in the calculation.

This is the method I use. Using the beginning of the year portfolio total: .48 percent. Using the end of the year portfolio total: .41 percent.

 

[audreyh1]

To me the "W" in withdrawal rate is "Withdrawal" So WR is sum of portfolio withdrawals divided by portfolio. Any $ received and spent from anywhere other than a portfolio withdrawal is not figured in the calculation.

Yep.

 

[perez99]

Is this before or after taxes? Although, I am not sure this is a valid question as if one has only say ... $10k of portfolio income and pays minimal taxes, it may be moot. Although if one has $100k of taxable portfolio income, then it may be relevant.

To me taxes are just another expense.

 

[audreyh1]

Standard definition, everyone using? That made me smile. No such thing exists in the real world, much less here on the inter-webs.

Much less in this forum!

 

[street]

I also agree with Ronstar. If I do that math, I end up with a little larger negative WR. It is basically the way I do the numbers but with smaller numbers from just the one account that is used for expenses including taxes etc..

 

[ShokWaveRider]

So, what if one takes SS but simply reinvests it in one's portfolio, then at the end of the year one takes a distribution. I know I am splitting hairs here, but then is it still SS or part of one's portfolio WR.

 

[audreyh1]

Not a withdrawal if the amount added to the portfolio was greater than the amount withdrawn.

 

[sengsational]

To me the "W" in withdrawal rate is "Withdrawal" So WR is sum of portfolio withdrawals divided by portfolio. Any $ received and spent from anywhere other than a portfolio withdrawal is not figured in the calculation.

This is more of the way I've been thinking about it. What's important to a retiree? Well, I'd say if the bucket holding your life savings has a big leak (using a lot of it) isn't as "good" as having a small leak (using a little of it). If you actually dribble funds into a non-leaking bucket, that would be adding, not a "withdrawal", so negative withdrawal rate.

People are making up all kinds of other definitions of withdrawal rate ...

Yes, yes they are There's a Spend Rate which is a useful metric that is also of interest to a retiree. I'd say it's less interesting than withdrawal rate. If a retiree pulls cash from a pension and Social Security in an amount equal to their annual spending, there's no worry about having your life savings be gone before you croak. But another retiree, spending the same amount and starting the year with the same amount of life savings (same spend rate) but no pension or SS will have a withdrawal rate that might indicate a non-sustainable plan.

 

[DJRR]

I thought for FIRE purposes that WR was determined at retirement. ie. If you have a million dollars and withdraw $40k that is 4%. Next January 1 you withdraw $40k plus CPI for last year and you should be able to make 30 withdrawals 95% of the time.

This is a 4% WR to me. Anything else is some kind of variable withdrawal scheme where you are trying to mitigate some perceived risk or benefit from current market and life conditions. This is more practical and probably wise, but undercuts the math behind the 4% recommendation in the first place.

 

[audreyh1]

I thought for FIRE purposes that WR was determined at retirement. ie. If you have a million dollars and withdraw $40k that is 4%. Next January 1 you withdraw $40k plus CPI for last year and you should be able to make 30 withdrawals 95% of the time.

This is a 4% WR to me. Anything else is some kind of variable withdrawal scheme where you are trying to mitigate some perceived risk or benefit from current market and life conditions. This is more practical and probably wise, but undercuts the math behind the 4% recommendation in the first place.

Yes, this is the classic safe withdrawal model used by FIREcalc and the Trinity Study and Bengan. This was focused on making the annual income predictable yet inflation adjusted. But it’s not the only one that has been modeled with regards to risk/safety.

FIREcalc also models other withdrawal methods. I use the % of remaining portfolio method which is based on prior Dec31 value and takes the same % every year. This method will never run out of money but can have quite a bit of income volatility year to year.

There is also the Clyatt 95% rule which is also based on the prior Dec31 value and seeks to limit income volatility without running out of money. It’s kind of a combination of the two.

Yet another withdrawal method worth looking at but not modeled by FIREcalc is the variable percentage withdrawal VPW. This aims to spend down more efficiently over a lifetime but is more complex and requires more future guessing modeling parameters.
https://www.bogleheads.org/wiki/Var... VPW method uses an,at the time of withdrawal.

No one has modeled the popular end of year “my spending/my portfolio value” method.

 

[scrabbler1]

If instead of withdrawing from your portfolio you add to your portfolio from outside income sources such as SS or pension then your WR is negative. It doesn’t matter what the person spent if their income streams exceeded their spending.

But but but.......try this one: I have had 1 or 2 people repaying (interest-free) personal loans over the years. I take those monthly checks and deposit them into my bank account. These are independent income streams, not coming from my basic portfolio of investments. They don't have any impact on my spending, even though they were as much as 37% of my spending for a given year. (Now, it is about 20% of spending.)

These outside income streams have had a small impact on my calculated WR because the portfolio's value (i.e. denominator of WR calculation) is slightly higher than it would have been. But the numerator, my spending, remained unaffected.

 

[RobLJ]

4.8%. We withdrew 5.7% from 401k and 403b but didn't spend it all.
I start witihdrawing SS at the start of 2025 and the portfolio grew in 2023 like everyone else here, so that withdrawal rate should go down in 2025, if the creek don't rise and the market does.