Honey, I shorted the retirement account draws!

[Out of Steam]

I've posted several times before on my foibles with managing retirement account draws. Despite my wife starting to get Social Security in April, we've seemed kind of broke lately. So, I went over our retirement account statements for the year so far.

What I found is that I arranged to let several draws from my wife's main retirement account lapse in June, assuming that they would be no longer needed after we started receiving her Social Security payment. Problem with that is that we spent at least 2/3 of her 2023 Social Security payments on a trip to Alaska and paid for it out of an oversized tax refund (see first sentence) and current income.

Even by a definition that includes the payments from a five year annuity meant to help bridge me to Social Security in 2025 or 2026, we're on a pace for only 3.8% in withdrawals this year. I see no reason not to catch that up to the 4 to 4.5% we've used in 2021 and 2022 before the end of the year.

NOTE: I will be camping for the next couple of days, so my ability to come back and respond will be spotty.

 

[jebmke]

It isn't clear to me what the issue is. I only withdraw enough money to pay the bills.

 

[Exchme]

Speaking of foibles, I think you forgot to ask a question or give us enough background to answer one if you had one. I think that means you are spending your mental energy in the right place though - Alaska trips, campouts, etc.

If you are asking if it is OK to take money from an IRA and put it in taxable - sure - though you obviously will owe tax on it and will have to think about the impact on anything like ACA.

 

[audreyh1]

I don’t see any shorting going on.

But it sounds like maybe you need to get up to speed with managing your cash flows. Yes, sometimes paying for big trips up front takes more cash flow planning and management. Experience is a good teacher.

 

[disneysteve]

we're on a pace for only 3.8% in withdrawals this year. I see no reason not to catch that up to the 4 to 4.5% we've used in 2021 and 2022 before the end of the year..

I don’t understand this comment. What do you mean about catching up? Do you need to pull more money to cover spending? Don’t pull it out just to hit a certain WR if you don’t need it.

 

[Aerides]

I don't get it either. It's all just a matter of shifting from one account to the other, no? We just do that on demand, as needed when paying bills and such.

 

[Ready-4-ER-at-14]

I think "shorting an account" may be a regional colloquialism. I might say that to my spouse after selling an asset that got less than expected. example I shorted the vacation account by 1k with that sale from what we expected. Perhaps the poster never directly sells stocks short. He underfunded checking by not moving money so the money was shorter than expected.

Because we do options, i would only do hedging by buying puts or buying put spreads and not sell stock to short a stock position. Usually if I think the stock is a proven long term loser I just sell and lick my wounds.

 

[Out of Steam]

But it sounds like maybe you need to get up to speed with managing your cash flows. Yes, sometimes paying for big trips up front takes more cash flow planning and management. Experience is a good teacher.

The issue is that we were at times flirting with a checking account balance of zero and pulling from taxable savings while we easily could have drawn enough money from retirement funds to prevent it.

It definitely was a lesson in not trying to manage a large expense without planning.

 

[ivinsfan]

Why not go to the blow that dough thread? I have no idea what you are trying to say.

 

[SecondCor521]

^ I think it's more about OP messing up their short term cash flows, and that maybe their advice is to pay attention to cash flows so you don't end up overdrawing a checking account.

Separately, they also seem to want to spend more. I do just-in-time billpay like several others on this thread, but one way to force more spending is to withdraw the money into a spending account and then not allow oneself to re-invest it. Having $40K in the checking account might induce one to go on a vacation, for example.

I also agree that "shorting" here is used as a colloquial phrasing. OP isn't shorting stocks by selling now and covering later. They just didn't get as much cash into their accounts on the timing they wanted. I've heard the phrase used around here for all sorts of things. Jumping across a gap and not reaching the other side is sometimes called "shorting it".

 

[The Cosmic Avenger]

This is good to hear, I wonder about exactly this kind of thing about budgeting in retirement. (I'm still w*rking.)

Right now, we pay ourselves first to keep ourselves LBOM; we contribute the max to retirement accounts, and we have savings accounts with automatic transfers for big expenses. After that I have a pretty good handle on our spending money each month. I'm still not sure how I'd handle just having a big portfolio (although this forum has given me plenty of great ideas). I'm thinking I'll take my WR and divide it by 24, then withdraw that 2x a month, so it would be a lot like our cash flow now. Maybe put 10% of the withdrawals aside for bigger or unexpected expenses, or maybe just spend what we need and put the excess in a savings account for later. I'll probably have to experiment a bit.

 

[SecondCor521]

I'm thinking I'll take my WR and divide it by 24, then withdraw that 2x a month, so it would be a lot like our cash flow now. Maybe put 10% of the withdrawals aside for bigger or unexpected expenses, or maybe just spend what we need and put the excess in a savings account for later. I'll probably have to experiment a bit.

I had fancy and detailed plans such as the one you describe. What I actually ended up doing was different from and simpler than what I planned. It has also morphed over the years. There are different ways to do things, and you'll figure out what works for you.

Living off the portfolio does take getting used to emotionally and practically. One thing that helped me was to pre-game: What if X happens, what will I do? What if Y happens? Once I did that mental game and wrote down the results, then I felt like I could handle anything that came my way. Mostly in my case it was listing out all the things I could do to bring in money or cut expenses if the market crashed. I was fortunate in that the market has done well since my FIRE date, so I've not needed any of those contingency plans.

Oh, the other thing was if I got bored. I made a list of things I wanted to do. I've done very few of those, but many other things. But it's nice to have the list and plans and contingencies to fall back on.