2022 Withdrawal Rates?

[53anddone]

I finished 2022 with a 3.79% withdrawal rate. Still have two kids in college and we bought a hot tub in 2022 so I feel OK with this.

2021 I was at 2.71%
2020 I was at 2.22%

A large part of the bump was certainly due to an 11% drop in investible asset value thanks to Mr. Market.

I am 60 so follow this closely!

 

[youbet]

What was your WR vs. your beginning portfolio value?

 

[joesxm3]

My WR was 3.1%. Compared to my all the high portfolio value in 2021 it would be 2.09%.

 

[SecondCor521]

I just track annualized net WR% based on trailing six months expenses. At the moment I'm at 1.17%.

 

[audreyh1]

I’m currently withdrawing 3% of whatever my Dec 31 value is every year, withdrawn in early January.

I take the same % out each year regardless of what I spend during the year.

 

[DawgMan]

Well, 2022 was my first year of retirement. Not sure this is how most view their WR, but I looked at my balances at the end of 2021 (market high balances), set a desired spend amount and calculated my WR for 2022 based on that number. However, now that 2022 has passed I can look back and see what I actually spent. In my case, my 2022 planned WR was 2.52%, but my actual spend was 2.01%. For 2023, using my year end 2022 balances (a good bit lower) and my planned spend (same as last year), I am at 2.87%. My planned spend has allot of fat in it so its very easy to reduce without missing much if needed. One thing I am a little fuzzy on is how to view additional taxes due to Roth conversions? Should I consider that part of my WR or treat it differently?

 

[SecondCor521]

One thing I am a little fuzzy on is how to view additional taxes due to Roth conversions? Should I consider that part of my WR or treat it differently?

Like all other taxes, I include such conversion-related taxes as part of my expenses (and thus part of my WR). But I would also consider them discretionary because Roth conversions are never required even though they may be a very good idea in certain cases.

I think a lot of people at least somewhat track their "full WR%" based on what they plan to spend, and then a lower "bare bones WR%" based on minimum required spending however one assesses that.

 

[COcheesehead]

2.19% without skimping on anything.

 

[OnTheBeach]

My withdrawal rate was 2.8% without taxes and 4.04% with taxes.

 

[DawgMan]

I’m currently withdrawing 3% of whatever my Dec 31 value is every year, withdrawn in early January.

I seem to remember you stating you keep any unspent $$ from year's past in cash to draw from in the future if/as needed? I would assume 3% from this year's balance is somewhat lower than last years?

While I am new to this, my 10 yr bond ladder effectively locks in 10 years of "planned spend", however, after 1 year I found I spent almost 20% less... and I thought I was reasonably BTD. My "rules" have me living off my bonds until my stocks hit new highs, but I still plan on trying to keep my WR 3% or less since DW and I are only 58. That's the plan for the moment.

 

[audreyh1]

I seem to remember you stating you keep any unspent $$ from year's past in cash to draw from in the future if/as needed? I would assume 3% from this year's balance is somewhat lower than last years?

While I am new to this, my 10 yr bond ladder effectively locks in 10 years of "planned spend", however, after 1 year I found I spent almost 20% less... and I thought I was reasonably BTD. My "rules" have me living off my bonds until my stocks hit new highs, but I still plan on trying to keep my WR 3% or less since DW and I are only 58. That's the plan for the moment.

Right, I have have a lower withdrawal (pay cut) this year due to the retirement portfolio being down 12.4% on top of last year’s withdrawal. But the amount is still higher than just a few years ago, so not painful. Also 2022 taxes dropped quite a bit.

Yes, unspent funds are kept in short-term investments close to cash equivalents including T-bills and short-term CDs.

 

[DawgMan]

Like all other taxes, I include such conversion-related taxes as part of my expenses (and thus part of my WR). But I would also consider them discretionary because Roth conversions are never required even though they may be a very good idea in certain cases.

I think a lot of people at least somewhat track their "full WR%" based on what they plan to spend, and then a lower "bare bones WR%" based on minimum required spending however one assesses that.

Yep, I think that's how I view them as well. I am fortunate to be in a position where I have options as to what accounts I could pull from to fund my spend until RMDs. I have run some mock returns to see the tax impacts which can be relatively significant. Eg. I could spend only interest/dividends/capital gains form after tax accounts until RMDs and pay the least amount of taxes, or, I could pull from tax deferred accounts and save my after tax $$, or, I could do Roth conversions up to X and live off after tax. The analysis can affect the actual taxes I would pay easily 3 fold+. While I started Roth conversions this year, I really just dipped my toes in and converted up to NIIT. I will start getting more aggressive this year and going forward, but I sure love how my taxes look on my mock return when I only spend after tax $$!

 

[W2R]

I didn't withdraw anything but my $600/month RMDs, so my WR was about a third of one percent.

I also spent my "age 70 SS" and a mini-pension about the same size as my RMDs. I left my dividends and capital gains in my portfolio, invested, as I have every year since 2017.

I have a paid off house, no debts, no dependents, and no other big expenses this year so I didn't need anything more. I'll need a new roof probably in 2023 or 2024 so I can spend some of my excess then.

 

[FLSUnFIRE]

2022 Expenses were 1.98% of my 12/31/2021 portfolio and equaled 2.42% of my 12/31/2022 balance. Actual cashflow out was around 1/2% lower since I include auto depreciation and count the full unsubsidized cost of my HI. I'll close out my "books" in a few weeks but this is pretty close to final.

 

[COcheesehead]

2022 Expenses were 1.98% of my 12/31/2021 portfolio and equaled 2.42% of my 12/31/2022 balance. Actual cashflow out was around 1/2% lower since I include auto depreciation and count the full unsubsidized cost of my HI. I'll close out my "books" in a few weeks but this is pretty close to final.

I “bank” 25% of future auto purchases in my withdrawals. So true out of pocket costs are less than what I posted above.

 

[2017ish]

...One thing I am a little fuzzy on is how to view additional taxes due to Roth conversions? Should I consider that part of my WR or treat it differently?

Different folks treat this differently. I personally figure that taxes on Roth conversions are accelerated future expenses. I wouldn't do conversions if I didn't think they were saving us money on future taxes; therefore, I don't count them as current spending. (We convert a lot, even though we are living on IRA withdrawals. The taxes are a substantial amount compared to what we actually spend each year.)

Alternatively, if we counted them as present spending, we wouldn't do much in the way of conversions....

 

[fosterscik]

Seems like I'm an outlier. My 2022 WR was 4.9 % (by design). It will be at least as large next year. I'm 65 and will delay SS until I'm 70. I'm "overspending" in anticipation of a much lower WR when 70+ (projected to be ~2% then).
My spending model involves notionally setting aside 5 years of SS now (my age 65 to 70 years), taking 4% of my fund balance minus the set-aside and adding back in the amount of SS I will get at 70. This procedure has been discussed many times on this forum.
I believe it's best to spend the money now rather than spending more later when my SS officially starts.

 

[retire2020]

4%

 

[pb4uski]

I finished 2022 with a 3.79% withdrawal rate. Still have two kids in college and we bought a hot tub in 2022 so I feel OK with this.

2021 I was at 2.71%
2020 I was at 2.22%

A large part of the bump was certainly due to an 11% drop in investible asset value thanks to Mr. Market.

I am 60 so follow this closely!

2022 = 3.36% WR
2021 = 3.94% WR (bought travel trailer, 2.98% excluding travel trailer)
2020 = 1.83% WR (covid, laid low)
2019 = 9.22% WR (paid off mortgage, 4.29% excluding mortgage payoff)

Calculation is withdrawals for the year divided by beginning of year retirement accounts value. Spending would roughly be withdrawals plus our only two sources of income, my small pension and DW's SS.

Once I start SS in about 4 years our WR will drop dramatically to 1-2%.

 

[Whisper66]

Seems like I'm an outlier. My 2022 WR was 4.9 % (by design). ....

Guess we are outliers also. 2022 spend was 6.6% of 12/31/21 portfolio value. Averaged 5.4% each year from retirement in 2015 thru 2021. Majority of expenses are discretionary (taxes on large Roth conversions, donations/gifts to kids, travel). Our general philosophy is to keep yearly spend to less than I-ORP would suggest as allowable disposable income. With average annual portfolio returns exceeding average annual spend rate by several percentage points, our portfolio keeps growing. I guess the kids will just have more to inherit.

 

[pb4uski]

Seems like I'm an outlier. My 2022 WR was 4.9 % (by design). It will be at least as large next year. I'm 65 and will delay SS until I'm 70. I'm "overspending" in anticipation of a much lower WR when 70+ (projected to be ~2% then).
My spending model involves notionally setting aside 5 years of SS now (my age 65 to 70 years), taking 4% of my fund balance minus the set-aside and adding back in the amount of SS I will get at 70. This procedure has been discussed many times on this forum.
I believe it's best to spend the money now rather than spending more later when my SS officially starts.

+1 Our WR will be 1-2% once I start my SS and DW's SS gets a spousal bump... in the meantime we are ~3-4% WR. I view the difference as premium payments to buy COLA adjusted joint life annuity issued by the SSA at age 70.

 

[NW-Bound]

I finished 2022 with a 3.79% withdrawal rate. Still have two kids in college and we bought a hot tub in 2022 so I feel OK with this.

2021 I was at 2.71%
2020 I was at 2.22%

A large part of the bump was certainly due to an 11% drop in investible asset value thanks to Mr. Market.

I am 60 so follow this closely!

When your kids fly the nest, your WR may be like mine: less than 2%.

And that was because I pay mucho taxes this year for a 6-figure Roth conversion. Else, it would be less than 1%.

 

[TheWizard]

Again for 2022, my net withdrawal rate from savings and investments was negative for the year. This means my income from lifetime annuities plus SS exceeded my expenses each months by a few thousand dollars, on average.
This excess gets transferred to my taxable account settlement fund and eventually into stock index funds.
I haven't bothered to determine the exact percentage of my negative withdrawal rate.

I do hope to order and buy a new car later this year, replacing my 2008 one. The amount of money going into my taxable account this year was a bit less than double what I expect the new car to cost...

 

[53anddone]

What was your WR vs. your beginning portfolio value?

That would be 3.4%

 

[53anddone]

Kids are the bogey. I am sure we will be helping with some kind of house, apartment etc. in the future but hopefully not to the tune of a full college payment.

I was very pleased to be less than 4% given what we spent in 2022 and how poorly investments did.