Actual Withdraw Rates

[Dd852]

For me (spending as a percentage of net liquid assets)
3.3
3.02
2.97
2.86
Current 2.83 (12 months to date spend as %of current liquid assets)

So although the market is frothy I feel ok to withstand a bit of stress



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[Alan]

What I want to know is how much I'm spending from the stocks/bonds/cash portfolio to make it last.

Exactly.

I don't see rental income as anything other than just that: income. Like money from SS or a pension, rental income reduces the amount you have to withdraw from your invested assets each year to achieve your desired level of spending.

This is also the way I see it.

The last 3 years my pensions have covered about 50% of our spending, and the rest comes from our invested assets. The WR I calculate is from those liquid assets.

 

[Danmar]

Exactly.

I don't see rental income as anything other than just that: income. Like money from SS or a pension, rental income reduces the amount you have to withdraw from your invested assets each year to achieve your desired level of spending.

Agree. This seems self evident to me. Our pensions also cover about 50% of our spending with the rest coming from portfolio. WR relates solely to the draw from the portfolio. Just divs in my case.

 

[jabbahop]

3.5% for first year


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[ERD50]

several people noting they are withdrawing very little or 0. Just curious what you are living on.

Is this cash on the side that you don't see as part of your investments?
Is this rental income?
Is this SS or pension? (some noted this)
Is this dividend or interest?
Is this an annuity purchased with your investments/retirement $?

Just curious how 0 is obtained.

Dividends, interest, and capital gains harvested all count as money withdrawn from a portfolio.

As is cash. As bingybear points out, other than other income streams from outside the portfolio, how can someone not withdraw anything?

If a person says they are spending from a cash stash, so therefore are making zero withdraws they are using extremely fuzzy accounting. Magic money?

I also don't think one can get much useful info from this sort of a question. Most of us will have different WR over our retirement. I'm not collecting pension or SS yet, so I may have a higher WR now, and lower later. Others will have different timing.

I report my WR (to myself mostly) as the number that FIRECalc reports as a 100% success rate for the term I enter, then I use my fluctuating numbers (pension & SS) and find the spending that hits 100% success. That's like an average WR %. A more general number for comparison.

PS - woops, l see there were a bunch of posts since I first started writing, oh well...

 

[treypar]

My withdrawal rate is 1% in my first year of retirement. I hope to increase it next year.

 

[audreyh1]

It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

 

[Sunset]

It sounds like most folks don't target a particular withdrawal number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

We are even worse than that.
We don't even count the withdrawal rate, and after reading posts I can see initially I counted a rental as part of assets for computing withdrawal.

Good news is we are not heading into the poor house as we are cheap, and the benefit of some life events has been we cannot take expensive trips right now.

But I do have some homework to do to get a clear picture of our spending limits/ability vs actual.

 

[W2R]

It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

In effect I withdraw what I need for the given year. I withdraw my entire annual withdrawal the first week in January, and most years I withdraw a little more than I expect to need. Then once the year has passed and is behind me, I return the excess. Actually I just subtract the excess from the amount to be withdrawn the next year.

Even though I allow myself up to 3.5%, normally I try to spend less than my dividends and save the rest. As you can see from my post #28 on this thread, that worked out well for me when I bought my Dream House because my WR for 2015 was over 8%.

Had I withdrawn the entire 3.5% each year, and saved the excess in savings outside of my portfolio until needed for my Dream House (which I believe is what you do, IIRC?), I would have only $11K left of that excess. Does this make sense?

I did not *know* that I would ever find my Dream House and spend that money, but when I did find it I didn't feel like I had to pause for even a second before offering the full price in cash. I knew for a fact that I could afford it and would not be endangering my retirement, KWIM?

In the future I plan to continue spending around 2% even though 3.5% is allowable. I don't need another house, so I'm not sure if I will spend the difference. Maybe someday I will need it for entry fees for a continual care facility, although I am hoping to age in place and not go to a facility. Or, it might come in handy in case the bottom drops out of the market, or in case of Katrina II, or some such unexpected event. Meanwhile, my portfolio is not as large as that of some other members here so it is nice to pad it a bit.

 

[RE2Boys]

I really don't track my withdrawal rate as day to day expenses are largely covered by my pension and the net worth seems to increase most years. Most years our withdrawal is under 2%. Retired in 2000.
However, this year I'll be setting a new record as been hit with multiple unusual expenses. I've had to replace the washer, dryer, deep freeze, and both eleven year old minivans (of course, I'm the guy who never spends over $20K for any vehicle) and should get the first college bill as the older son starts college this Fall. Probably push 4% for 2016 and run at that level for next five years as my two sons work through the college years. Intend for them to graduate with no student loans.

 

[W2R]

several people noting they are withdrawing very little or 0. Just curious what you are living on.
Is this cash on the side that you don't see as part of your investments?
Is this rental income?
Is this SS or pension? (some noted this)
Is this dividend or interest?
Is this an annuity purchased with your investments/retirement $?

Just curious how 0 is obtained.

So far in 6.5 years of retirement, I have been living on SS, pension, and 2% of my portfolio on average. No rental or annuity.

My SS is just divorced spousal SS, which is half of what he is getting. In two years I will switch to my own SS, that has been growing meanwhile, so I will get a nice raise.

My pension is a tiny FERS pension, that I jokingly refer to as my "itsy bitsy teeny weeny [-]yellow polka-dot bikini[/-] federal retiree pension". Mid 3 figures/month and I am grateful to have it.

2% of my portfolio is less than my dividends and has been perfectly fine for me to fund my desired lifestyle.

Last year I bought my Dream House in cash so spent 8.64% total (see post #28). My non-house spending was only 1.72% but the house was 6.92%. Don't really know how to account for this. I could say that I got the house money from the accumulated difference between the 2% that I spend on average, and the 3.5% that would have been fine for me to spend. It is a one time major reduction in my portfolio. The important thing is that I know I could afford it and I am living my dream.

 

[tmm99]

In effect I withdraw what I need for the given year. I withdraw my entire annual withdrawal the first week in January, and most years I withdraw a little more than I expect to need. Then once the year has passed and is behind me, I return the excess. Actually I just subtract the excess from the amount to be withdrawn the next year.

I like what you are doing.

 

[Done]

It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

I don't target a particular withdrawal nor do I budget, but I do check Quicken rather obsessively to review spending. I'm only withdrawing 1.1% but if I were approaching 3.5% I'd be more apt to budget. My Fido advisor keeps telling me to spend more, and three years into retirement I'm starting to think about it.

 

[ERD50]

It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

I doubt that many here would withdraw for the year, and then check that it isn't 'too high'. I think they know the numbers upfront.

Also, be aware that the traditional 'Trinity Study' that FIRECalc is based on, uses an initial WR%, based on the starting portfolio amount. For future years, the withdraw amount is adjusted for inflation, but a WR% is not recalculated based on the current portfolio amount.

In the many historical cycles, the actual current WR% would vary significantly - going high during downturns, and getting lower in boom times. For example, a historically 100% WR of 3.5% for 30 years, would more than double (even after adjusting for inflation) in year 5 in the worst case, but still succeed over 30 years. And the WR% would be cut in half if you follow the best case line.

-ERD50

 

[Meadbh]

It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

I begin by analyzing my expenses for the past year and estimating expenses for the coming year, including taxes. That's the minimum withdrawal. Maximum withdrawal is 3.5% of my original portfolio. Next step is to take a dividend from my holding company that will minimize corporate taxes (my accountant provides the desired number) and take the withdrawal that I have prescribed from one of my tax sheltered accounts (the goal being to minimize taxes after RMDs kick in). Generally, these withdrawals, which I consider mandatory, will approximate expenses. All this happens in January. As the year progresses I can adjust by taking an additional withdrawal, if necessary, from my taxable account. If there is a surplus at the end of the year, I invest it in my TFSA, or include it in the pot for the next year.

 

[Meadbh]

I don't target a particular withdrawal nor do I budget, but I do check Quicken rather obsessively to review spending. I'm only withdrawing 1.1% but if I were approaching 3.5% I'd be more apt to budget. My Fido advisor keeps telling me to spend more, and three years into retirement I'm starting to think about it.

You need a boat.

 

[W2R]

I doubt that many here would withdraw for the year, and then check that it isn't 'too high'. I think they know the numbers upfront.

Also, be aware that the traditional 'Trinity Study' that FIRECalc is based on, uses an initial WR%, based on the starting portfolio amount. For future years, the withdraw amount is adjusted for inflation, but a WR% is not recalculated based on the current portfolio amount.

In the many historical cycles, the actual current WR% would vary significantly - going high during downturns, and getting lower in boom times. For example, a historically 100% WR of 3.5% for 30 years, would more than double (even after adjusting for inflation) in year 5 in the worst case, but still succeed over 30 years. And the WR% would be cut in half if you follow the best case line.

-ERD50

Good point! Personally I am not following the Trinity Study's methods of sticking to one WR and adjusting for inflation each year. Instead I am using the method of taking a percentage of my 12/31 portfolio value each year.

While my percentages average 2% during these boom times, I also compute them relative to my lowest portfolio value on 3/9/2009 just so that I know. My WR with a lower portfolio value like that averages a full percentage point higher.

 

[W2R]

I don't target a particular withdrawal nor do I budget, but I do check Quicken rather obsessively to review spending. I'm only withdrawing 1.1% but if I were approaching 3.5% I'd be more apt to budget. My Fido advisor keeps telling me to spend more, and three years into retirement I'm starting to think about it.

You need a boat.

Or, I can definitely attest to the fact that buying a Dream House in cash will take care of that little problem for you!

 

[Ally]

It's been zero so far. With my husband's pension and two social securities, we don't need it now.


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[scrabbler1]

It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

That's a good description of what I do. My goal is to have my dividend income, mostly from one large bond fund holding, but also some smaller amounts from 2 other bond funds and 1 stock fund, cover my expenses. Even last year with the spike in medical expenses due to my hospital stay, I still had a surplus, albeit a smaller one than in most other years. This year, that surplus will be a little higher although I have had some smaller spikes in health expenses.

I don't expect this surplus to appear every year going forward. If I have to dip into principal a little bit between now and when I turn ~59.5 in 6 years, that's fine.

 

[ERD50]

....

I wonder if anyone 'banks' the difference for later use. For example, if your SWR is 4% and one year you only take 1%, does anyone view that additional 3% as banked so that one year you might withdraw 7% and still be 'safe'?

I think some here are really mangling the terminology.

If your "SWR" (Safe Withdraw Rate) is 4%, but you only take 1%, then your actual withdraw rate (the topic of this thread) was 1%. Period.

All else being equal, and sticking strictly to the arithmetic and the historical data, sure, if you withdraw less than the X% inflation adjusted amount, there will be more $ available to WD later, at the same level of historical safety. How could it be otherwise? But depending on how the portfolio performed in those intervening years, the % number might not be a simple add-on.

But this brings to mind an interesting view I've read about - the concept of "Retire Again and Again". Mathematically and historically, you could recalculate your "SWR" each year using your new portfolio balance, and one less year for the time frame. It's valid, and solves the paradox of the two retirees exiting the workforce a few years apart and finding that their spending amount is different even though their time frame and portfolios are the same. It is the absolute best system for maximizing spending, minimizing money 'left on the table', and still assuring a historically safe portfolio. Though it is a case of 'curve fitting', but I think it could be followed a bit more conservatively, and still work very well and provide a margin of safety.

-ERD50

 

[imoldernu]

Just looked back at my original post on ER, in 2012, to see if my memory was correct on calculating our retirement safety margin. We still use this exact same plan, 27 years later. Just pulling it up for newer members who haven't been there.

There are hundreds of financial planners on line where you put in your estimates of assets, and return and inflation, and come up with the amount you need to retire. In our case it doesn't work... All of the planners make the assumption that you will want to maintain your asset capital until you die... In our case, had we followed their plan, we NEVER would have retired.
We just decided to die at age 85... dead broke. Made our planning much easier. Personal decision of course, but if you plan to spend down capital assets, it makes planning easier.

Our plan is extremely simple... On the spending side, we have three different budgets that we can adjust as circumstances warrant. Best case... Nominal... and Austerity.

On the Asset/Nest Egg side, We boil our assets down into three categories.
1. Fixed assets... house, auto, and other valuable non cash items... real property, jewelry, . We do not count household goods... (experience tells us that this is not realistic)
2. Non Income producing assets... bank accounts, cash, cash value life insurance policies.
3. Income producing assets... stocks, bonds, annuity.

All of these items are kept on a spread sheet and periodically updated. It's easy to come up with a total value... and then to average the income from the total...

To calculate where we stand in our retirement plan, we add
a. Social security amount.
b. Amount of interest earned on income producing assets.
c. ... and add the Total Assets divided by the number of years between now and age 85.

That establishes how much we can spend, which we then adjust to our best/nominal/austerity budget.

Sounds funky, but it works,and it takes about 2 minutes to tell if we're on budget or not.

Not suggesting that anyone do this, but just to point out another way to check on asset viability. We do a revaluation of every variable asset for increase or decrease.
Just did a recheck on our current situation, and it looks to be clear for living to age 95. Our initial net worth, though meager, is within one percent of what we had back in 1989, and right or not, we never worry about money.
..........................................................................................
Don't know how to reverse calculate the withdrawal rate, but out of curiosity, did a current Vanguard calculator analysis, using net worth as our "portfolio " amount, and it shows 100 success rate for the next 15 years.

 

[ShokWaveRider]

I don't target a particular withdrawal nor do I budget, but I do check Quicken rather obsessively to review spending. I'm only withdrawing 1.1% but if I were approaching 3.5% I'd be more apt to budget.

Me neither, we just take what we need, if we need less we take less, if we need more we take more, and the number still increases or stays at par. The stash seems to mostly increase though and we are VERY conservative "Non" investors (All our assets in Fixed income and have been for 25 years).

We spend way too much as it is in our opinion, we do not have a mortgage or any other debt. We pay cash for everything big, like cars, etc. and never finance everything. We consider that investing in ourselves.

We are not gazzilionaires and have far less than some I read about here.

I wonder sometimes what all the fuss is about, and we retired the first time at 48 (DW was 43) to go sailing. After a few years bumming around on a boat we both went back to work for a few years. We fully retired at 59 & 56 respectively.

 

[GravitySucks]

It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

I left enough in the 401k to get me to 59.5 at a 4.5 WR and pull what I need every quarter.

I'm happy to see REWahoo's post and REWahoo vs. FireCalc is the most reassuring thread on this board.

Reran RIP when I verified I will be getting Survivors Benefits from SS at 60 and between that and full SS at 70 I bump up discretionary spending by a large amount and it says I'm good at an almost 6% withdraw. Maybe bumping spending up when I reach 59.5.

 

[Mulligan]

I don't know about others, but spending more money just isn't as fun as it was when we were younger.

Same here...Maybe that is why I have more leftover money from my pension each year than what I had left over yearly when I worked. Plus the expenses have dwindled and I am so routine driven, that spending money just to spend doesn't register with me. Possibly also its just because I like saving more now than I used too.


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