David1961
Thinks s/he gets paid by the post
- Joined
- Jul 26, 2007
- Messages
- 1,085
There's a lot of talk about withdrawal rates (WR) and to my knowledge, there is no agreed-upon definition. Let me give a hypothetical example and I'll give my calculation of what the WR would be.
Investment portfolio (current value) = $1.6 mil
Investment portfolio (12 months ago) = $1.5 mil
Value of house, is primary residence, no mortgage = $300k
Pensions and/or SS received during past yr = $30k
Dividends and other distributions from portfolio during past yr = $50k
Expenses for last 12 months (includes all taxes and healthcare) = $65k
Assume all distributions from the portfolio ($50k) are all taken as cash.
Assume there is no income from rental property.
The question is what is this person's WR for the past year
I'd calculate it as ($65k - $30k)/ $1.5 mil = 2.3%
Note that I do not add the value of the house in the denominator. And also, since I'm looking at the WR for the past year, I use the portfolio value of a year ago instead of the value today in the denominator. Although income exceeds expenses, and he/she did not have to sell any of the portfolio during the past year, but still had to take $35 k from the portfolio.
How would others calculate the WR?
Investment portfolio (current value) = $1.6 mil
Investment portfolio (12 months ago) = $1.5 mil
Value of house, is primary residence, no mortgage = $300k
Pensions and/or SS received during past yr = $30k
Dividends and other distributions from portfolio during past yr = $50k
Expenses for last 12 months (includes all taxes and healthcare) = $65k
Assume all distributions from the portfolio ($50k) are all taken as cash.
Assume there is no income from rental property.
The question is what is this person's WR for the past year
I'd calculate it as ($65k - $30k)/ $1.5 mil = 2.3%
Note that I do not add the value of the house in the denominator. And also, since I'm looking at the WR for the past year, I use the portfolio value of a year ago instead of the value today in the denominator. Although income exceeds expenses, and he/she did not have to sell any of the portfolio during the past year, but still had to take $35 k from the portfolio.
How would others calculate the WR?