MasterBlaster
Thinks s/he gets paid by the post
- Joined
- Jun 23, 2005
- Messages
- 4,391
Forgive me if this has already been discussed here.
I saw a link to this SWR approach over on the Bogleheads website and thought it was a pretty nifty idea. Basically it uses a formula based on the RMD withdrawal rates for nestegg depletion.
A retiree is often faced with the problem of deciding how much income to withdraw from a nestegg. The retiree will face a tradeoff between wanting as much income as possible over his lifetime and the certainty of never running out of money while he is alive.
As you may know, the RMD rules use a withdrawal scheme based on people who could live a very long (perhaps unrealistically long) lifetime. Specifically it uses the so called uniform lifetime table which we would be so lucky to live to.
The approach that the author specifies takes SWR withdrawals from your nestegg based on your RMD expected lifetime plus any "real" income that the nestegg throws off (ie dividends etc.).
The big advantage of a SWR scheme such as this is that the nesteg does indeed get depleted but with minimal probability of ever running out of money. Other approaches (like the 4% rule) often leave large unspent nesteggs when you go. Therefore a RMD approach has what they call much better utilization of the nestegg. An approach like this just may provide much more income to a retiree while he is alive than a traditional approach yet with much the same safety of outliving your money.
The other advantage of such an approach is that it's simple to follow and doesn't require complex calculations and nestegg churning to satisfy the withdrwal scheme.
Can Retirees Base Wealth Withdrawals on the IRS
http://crr.bc.edu/wp-content/uploads/2012/04/wp_2012-10-508.pdf
I saw a link to this SWR approach over on the Bogleheads website and thought it was a pretty nifty idea. Basically it uses a formula based on the RMD withdrawal rates for nestegg depletion.
A retiree is often faced with the problem of deciding how much income to withdraw from a nestegg. The retiree will face a tradeoff between wanting as much income as possible over his lifetime and the certainty of never running out of money while he is alive.
As you may know, the RMD rules use a withdrawal scheme based on people who could live a very long (perhaps unrealistically long) lifetime. Specifically it uses the so called uniform lifetime table which we would be so lucky to live to.
The approach that the author specifies takes SWR withdrawals from your nestegg based on your RMD expected lifetime plus any "real" income that the nestegg throws off (ie dividends etc.).
The big advantage of a SWR scheme such as this is that the nesteg does indeed get depleted but with minimal probability of ever running out of money. Other approaches (like the 4% rule) often leave large unspent nesteggs when you go. Therefore a RMD approach has what they call much better utilization of the nestegg. An approach like this just may provide much more income to a retiree while he is alive than a traditional approach yet with much the same safety of outliving your money.
The other advantage of such an approach is that it's simple to follow and doesn't require complex calculations and nestegg churning to satisfy the withdrwal scheme.
Can Retirees Base Wealth Withdrawals on the IRS
http://crr.bc.edu/wp-content/uploads/2012/04/wp_2012-10-508.pdf
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