Indexing SWR to inflation

[davidfin]

I’m curious if folks are planning to index their withdrawal rate to the current rate of inflation. Given the past several years where low inflation did not require much adjustment to individual withdrawal rates, now we’re experiencing ’80s levels of high inflation. So, are you increasing your withdrawal rate or just cutting back your life style commensurate with the now higher cost of living?

 

[jazz4cash]

This should be interesting! I tend to only withdraw for major expenses like property taxes and my withdrawals are ~2%. I may increase them a bit but my own rate of inflation is maybe half or less of the headline rate.

 

[FLSUnFIRE]

Most "Safe Withdrawal" calculations account for inflation so if following the plan, then yes. Although, to be consistent with the model, the withdrawal should be for the inflation as defined by the model to be "safe" and not your personal inflation rate.


End of the day, I'm withdrawing what I need to pay my bills (Actually, to optimize taxes while paying my bills). If that amount exceeded SWR then I'd make adjustments. My spending has been pretty low so far as I don't have much appetite to spend more than I have to in the current environment but I'm not skimping...just not splurging.

 

[audreyh1]

I’m curious if folks are planning to index their withdrawal rate to the current rate of inflation. Given the past several years where low inflation did not require much adjustment to individual withdrawal rates, now we’re experiencing ’80s levels of high inflation. So, are you increasing your withdrawal rate or just cutting back your life style commensurate with the now higher cost of living?

The SWR models take inflation into account. We don’t change our withdrawal rate based on inflation.

 

[Gumby]

FIRECalc, at least the base case ("Constant Spending Power" model), assumes that you will increase your withdrawal amount by the rate of inflation every year.

 

[braumeister]

Nothing I have to worry about. I think I can fund my lavish lifestyle for decades on the profits from selling my mother's collection of Hummel figurines. Haven't checked their values lately, but I'm sure there must still be huge demand for them.

 

[Helen]

Nothing I have to worry about. I think I can fund my lavish lifestyle for decades on the profits from selling my mother's collection of Hummel figurines. Haven't checked their values lately, but I'm sure there must still be huge demand for them.

Hopefully they don't take as much space as all the depression glass I have stored in the basement.