Are you starting retirement with a high starting WR?

[daylatedollarshort]

We've always thought more in needing X dollars from our ER date to 62, then we can live mainly off pensions, SS and a little side income. Initially we lived off my hobby business income, pensions and portfolio withdrawals. My hobby business income when I put in more hours was more than our current total expenses, though I've slacked off on that quite a bit over the years. Our focus has been more of trying to live well on a low overhead budget than maximizing potential withdrawal rates.

 

[MooreBonds]

The first 8-9 years of retirement will require a range of 6-8% withdrawals per year IF I delay SS to 70 and DW files at 62. After 70, our WR drops to 2-3.5% for the remainder of our lives.

We could both file at 62 but I hate the thought of DW having a reduced benefit if/when I pass.

You can always approach retirement with that plan - and if for some reason the crap hits the fan, you could bail and start claiming SS earlier at, say, 66/67/68 if the portfolio gets clobbered, and/or sell a rental and consume the proceeds.

Remember that the first 10 years of withdrawals are the critical part of the end result 30-40 years later: start around year 11 with so much, and you'll most likely have smooth sailing even with stagnation (a la 1960s/70s ) in years 15-30+.

 

[ShokWaveRider]

We basically have one main pile of funds, Cash, My IRA and DW's IRA. The IRAs are about the same, the Cash is about 130% of both IRAs combined. ALL of that pile is invested in 3% Fixed income. We have not touched the Principle or the Interest for the last 4 years as we keep reinvesting dividends. The secondary small pile is in Money Market Making Zilch, but it is not so small by general standards and will cover 4 - 7 years of expenses.

I am planning on taking SS at 65 when Medicare Kicks in, DW will take hers at 62. If our current Fixed investments can be renewed at 3% or better in 20 months or so, we will be fine.

So the answer to the question is so far we have not taken anywhere near 4%. I retired 5 years ago and DW 2 years ago.

The House is paid for and we have no debt. The exception is the car, I like to lease and pay the whole 3 years in one go. So we will need between $16 - $20k every 3 years for that. We used to lease 2 cars but found one sat in the garage, I had a fun Jeep and in 3 years it had 4000 miles on it. So we decided to try having just one car. That has worked out well for the last 2.5 years. So we do not plan on getting 2 daily driving cars............. I may get a toy car to play with and drive on Sundays but even that seems rather pointless now.

 

[Independent]

Our plan was definitely to withdraw more money during the years before SS started.

I didn't see any purpose in calculating a "withdrawal percent" for that money.

It was just a bucket of dollars that I mentally carved out of our long term funds.

 

[Katsmeow]

Someone's reply in another thread hit so close to home that it prompted me to post this question as a separate topic: Are you starting retirement with a high WR? And when I say "high", I'm talking about 6%+ percentages - even up to 15-20%.

Other questions:

1. Do you have backup plans in place should the sequence of returns get ugly?

2. Are you planning on taking SS at 62 to smooth out the withdrawal percentages?

3. What will be your WR range after SS starts?

Yes, we started with a high withdrawal rate. We had one child just starting college when DH retired. Another was in high school so we knew we would have additional expenses for her schooling.

When DH retired I semi-retired, going from full-time work to very part-time. But that part-time income was not enough income to pay for everything. It was a relatively small amount. It is now 7 years later.

To answer your questions.

1. I was very worried about sequence of returns. It turned out to be an issue because there hasn't been a really bad year in that 7 years. What we did was that I calculated the amount we would need to withdraw each year beyond the 4%. We set aside that amount of money either CDs or short term bond funds. This was separate from our "regular" asset allocation. Basically, we figured that we wouldn't have much risk with those assets and we could spend those down if the market was bad. As it turned out the market was never really bad, but we eventually did spend done that money.

2. DH took social security early because we had minor children under 18 and benefits would be received for them if he was retired. It made a lot of sense for him to take it then. I personally took benefits this year (I just turned 63).

3. We are in our last year of higher withdrawals due to kids. I expect we will be at 4% until I get to Medicare age and until we move from our current house. After that time, I expect a withdrawal rate about 3%.

 

[Fedup]

It all depends on when DW hands in her pass. She likes her j*b, so she's not as eager to FIRE as I am.

If she keeps w*rking for a couple of years, then we'll never get up to WR as high as 5%.

If she were to hang up her gloves this year, we'll have a few years in the >5% range, but ultimately drop to ~1.2% upon starting SS.

My friend's husband also not too keen to retire so she retired alone. Her husband is still working, he likes his job. I think if your spouse likes to work, that's a good thing. It's good for her health, liking something.

 

[Scuba]

Exactly! That nagging feeling is what I'm hoping to get comfortable with. I think the only way to get there will be to have 2-3 backup plans. That's what I am working on as I approach 'freedom day'.

I know for many on this forum, DIY is the preferred approach but another way to build your confidence is to hire a fee-only financial advisor to review your situation and give you his/her professional opinion about your financial readiness and options to meet your cash flow needs. This can be done for a one-time fee; no need to turn your portfolio over to professional management unless you see value in that.

 

[Dwhit]

I am 3 and 1/2 years in, with about a 5 to 6% withdraw rate. Most All of our retirement funds are in IRA 401k accounts, no pensions. We have a 60-40 stock/bond asset allocation. Over the last three years, our accounts have out-grown our expenditures such that we are better off now than when we first retired. We have a kid in college and still paying on the mortgage. I can take SS in two more years when I hit 62. Not sure we will, but that is what I put in the Firecalc model that tells me we should be ok. I kind of play it year by year, recalculating in Firecalc based on current values and expected expenditures. I hope I can adjust as necessary on expenditures as required.

 

[SonofCohoes]

Someone's reply in another thread hit so close to home that it prompted me to post this question as a separate topic: Are you starting retirement with a high WR? And when I say "high", I'm talking about 6%+ percentages - even up to 15-20%.

Other questions:

1. Do you have backup plans in place should the sequence of returns get ugly?

2. Are you planning on taking SS at 62 to smooth out the withdrawal percentages?

3. What will be your WR range after SS starts?

For us, our pensions will only be about $3500 *per year* (and no retiree medical) and we have rental income of around $10k/year. The first 8-9 years of retirement will require a range of 6-8% withdrawals per year IF I delay SS to 70 and DW files at 62. After 70, our WR drops to 2-3.5% for the remainder of our lives. (Note: This is based on calculations using constant spending amount.)

We could both file at 62 but I hate the thought of DW having a reduced benefit if/when I pass.

Yes, my DW will retire in 12/17 and I will go 5/18 when I turn 59.5.

The first 3 years is coming directly from my 401k and that will be moved to an IRA CD ladder so that market fluctuations have no bearing on the amount.

We're planning on a 6% WR for 3 years until SS kicks in for me at 62. At that time the WR will drop to 1%.

DW will take SS at full retirement age.

 

[pb4uski]

We started ER with a 4% WR based on our living expenses at the time... but that WR would go down modestly once I started my pension and would go down dramatically once we start SS.

5 years later.... we have increased our discretionary expenses so our living expenses have increased about 25% but that is offset by starting my modest pension. Our portfolio withdrawals are now about 4.5% of our retirement date nestegg and 3.5% of our current nestegg, which has grown nicely despite withdrawals for living expenses, building a new two-car garage, buying a winter condo and a new truck.

Starting my pension and/or early SS has always been a possible way to mitigate adverse investment results... but since we have not yet had any adverse investment results we continue to delay SS. I started my pension more because the annual benefit increases were becoming smaller and smaller so it made sense to start it rather than because we needed it.

 

[ShokWaveRider]

How to you enter fixed income into firecalc? All our nest egg is invested in laddered CDs averaging now 3% Both taxed and deferred (Say 50% of each). Do I use this section?

"Portfolio with consistent annual market growth of 3%, fixed income returns of 3%, and an inflation rate of xyz%"

 

[StuckinCT]

I think a lot depends on how your are invested. If you have an adequate equity weighting, say at least 65%, have reserves to fall back on to avoid selling in an adverse market and can stomach volatility, then the 4% rule still works in a 6.5% return 2% inflation world. If you are older than 65 the math works up to a 5% withdrawal rate unless you are planning to live to 100, but you should be aware that you are in spend down mode. 3.4% is probably the safe rate...

 

[pb4uski]

While your CDs currently average 3%, I'll bet that a portfolio with those term weightings in CDs ave had rates of return that have been much lower and higher in periods in the past.

I would think that the first box with 5 yr Treasuries or commerical paper and 0% equities would probably be appropriate.

 

[ShokWaveRider]

While your CDs currently average 3%, I'll bet that a portfolio with those term weightings in CDs ave had rates of return that have been much lower and higher in periods in the past.

I would think that the first box with 5 yr Treasuries or commerical paper and 0% equities would probably be appropriate.

They are all 3year long term CDs but I will try your recommendation. Thanks Expire in 2 years.

 

[Carpediem]

The first 3 years is coming directly from my 401k and that will be moved to an IRA CD ladder so that market fluctuations have no bearing on the amount.

I'm a CD ladder newbie so apologies if this is a dumb question. If you move all your 401k to a 3 year ladder, wouldn't you be without income for year 1 (i.e., until your first CD matured)? Or would you hold out enough money from your 401k for year 1 before moving it to a 3 year ladder?

 

[ShokWaveRider]

I'm a CD ladder newbie so apologies if this is a dumb question. If you move all your 401k to a 3 year ladder, wouldn't you be without income for year 1 (i.e., until your first CD matured)? Or would you hold out enough money from your 401k for year 1 before moving it to a 3 year ladder?

Yes and no. You could hold back some living cash and reinvest the CD dividends, OR you could have dividends put into a separate account if you need to use them.

 

[REWahoo]

No, we already did. Almost hit 10% our second year.

http://www.early-retirement.org/for...-personal-comfort-zone-86319.html#post1866979

 

[imoldernu]

Apologies for not referencing the WR, 'cuz we didn't know about that at the time, and never used a calculator. Truth is, we made out a year by year budget from our retirement age of 53, to the the year when we'd receive Social Security @62 and Medicare @65. Looking back, we most assuredly withdrew at a much higher rate.

That was about 28 years ago, and we've made it so far, with very little pain. My first post in this thread more or less details our planning logic.

http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251.html