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Old 10-09-2020, 08:23 AM   #21
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I track expenses and forecast lumpy expenses based on prior experience. That way I know my FORECAST withdrawal rate is reasonable.

But my ACTUAL withdrawal rate is based on my plans for the coming year. I do not pull out funds for major purchases before they are needed. I simply keep funds invested until needed in accord with my AA.

And I'm under-running that mainly due to a large unspent option of the travel budget.
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Old 10-09-2020, 09:58 AM   #22
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My situation may be too singular to be relevant, but I've been taking out to the top of the 12% bracket and dumping the funds into a Schwab brokerage account. The account retains what we don't spend so has doubled over the last 3 years.

I've invested it in Vanguard Total World ETF and a few income and stock closed-end funds, with 20% in a short-term muni CEF (It's up about 10% in 2.5 years but did take a short-term hit in March) that I can cash out in an emergency and 20% in cash, so I've got about 40k in available cash for emergencies/large purchases.

The CEF distributions dump into cash, so the cash pile will grow, to the point I'll eventually start putting cash into another short-term bond or floating fund and then the ETF and a few more CEFs. This allowed me to do tax-loss harvesting in March where I sold several CEFs I had bought in previous year (at a loss) and immediately bought somewhat similar CEFs on my list. When I estimate taxes in December, I'll probably pull more money out of the 403b since the tax loss will allow me more withdrawal room up to the 12% tax line.

After I begin drawing SS in 4 years, I intend to contribute some excess funds to the grandson's college fund and increase charitable contributions.
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Old 10-09-2020, 10:22 AM   #23
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I keep over $50K in my bricks'n'mortar bank to cover lumpy expenses. I live a fairly modest lifestyle so that is way more than enough. The interest rate is pitiful and it doesn't get the return that the rest of my portfolio gets. My attitude is "so what". Any reduction of worry and aggravation when facing lumpy expenses is money well spent, IMO.

For example, recently I had a roof leak and thought I might need a new roof. No worries! I knew that I had enough to cover it, in the bank and just knowing that lessened my fears and was worth a lot to me. (Turned out all it needed was some minor repairs.) A few years ago I thought I might want a new SUV. Again, "so what". No worries. I could just write a check for it. I never did buy it, though. I really haven't used that lumpy expense money in the bank but it is there if I need or want it.

I could consider that $50K+ as either part of my portfolio, or as spent money, I suppose. Thanks to SS and mini-pension, the amount that I withdraw and spend in order to live my preferred lifestyle averages only about 1.4% either way. Gone are the days of living on the edge, paycheck to paycheck, thank heavens and I truly appreciate the peace of mind that this brings to me.
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Old 10-09-2020, 10:34 AM   #24
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Quote:
Originally Posted by W2R View Post
I keep over $50K in my bricks'n'mortar bank to cover lumpy expenses. I live a fairly modest lifestyle so that is way more than enough. The interest rate is pitiful and it doesn't get the return that the rest of my portfolio gets. My attitude is "so what". Any reduction of worry and aggravation when facing lumpy expenses is money well spent, IMO.

.... Gone are the days of living on the edge, paycheck to paycheck, thank heavens and I truly appreciate the peace of mind that this brings to me.
I keep the majority of cash in Ally bank, and about $10K at a brick & mortar bank.
I do this to earn some interest (few hundred per year), knowing I can transfer it in 1->3 days should I need it.
I cannot think of an emergency where I need to spend more than $10K in less than 3 days.
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Old 10-09-2020, 10:40 AM   #25
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I keep the majority of cash in Ally bank, and about $10K at a brick & mortar bank.
I do this to earn some interest (few hundred per year), knowing I can transfer it in 1->3 days should I need it.
I cannot think of an emergency where I need to spend more than $10K in less than 3 days.
Honestly I don't need the interest, and I'd much rather just have it at the bank down the street. Different strokes for different folks! IMO the difference in interest between Ally and my regular bricks and mortar bank is utterly trivial on this small emergency fund and would not affect my annual spending in any way whatsoever. I still have an extra 2.1% of my portfolio that I could spend, but that I am not spending, each year.

If it helps you, just consider the $50K as money that I spent years ago and is no longer part of my portfolio. It doesn't change my WR if I consider it that way.
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My attitude is "so what".
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Old 10-09-2020, 10:45 AM   #26
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Quote:
Originally Posted by RobLJ View Post
My situation may be too singular to be relevant, but I've been taking out to the top of the 12% bracket and dumping the funds into a Schwab brokerage account. The account retains what we don't spend so has doubled over the last 3 years.

I've invested it in Vanguard Total World ETF and a few income and stock closed-end funds, with 20% in a short-term muni CEF (It's up about 10% in 2.5 years but did take a short-term hit in March) that I can cash out in an emergency and 20% in cash, so I've got about 40k in available cash for emergencies/large purchases.

The CEF distributions dump into cash, so the cash pile will grow, to the point I'll eventually start putting cash into another short-term bond or floating fund and then the ETF and a few more CEFs. This allowed me to do tax-loss harvesting in March where I sold several CEFs I had bought in previous year (at a loss) and immediately bought somewhat similar CEFs on my list. When I estimate taxes in December, I'll probably pull more money out of the 403b since the tax loss will allow me more withdrawal room up to the 12% tax line.

After I begin drawing SS in 4 years, I intend to contribute some excess funds to the grandson's college fund and increase charitable contributions.
Unless you have a need for those taxable funds or want more money in that pot, you might be better served by doing Roth conversions to the 12% bracket instead of withdrawals to the 12% bracket. You'd get tax-free growth but would of course lose the tax loss harvesting. Something to think about anyway; maybe you already have.
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Old 10-09-2020, 11:21 AM   #27
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We don't have a budget. We have budget estimates. Not by expense item but by monthly/annual after tax spend. Less than five minutes a month to take a take on our bank statement.

We don't consciously budget an amount for capital items or repairs that occur on an intermittent basis. We see no point in either. We know they will happen, we use our savings to cover them when necessary. Fridge packed in in this month. Just paid for it as normal. No separate bank account, notional or otherwise.

We cannot imagine having a spreadsheet broken down by every category of our spend patterns. No point for us. We monitor our expenses, adjust when necessary, and move on. Don't care if we spend 8 percent more YOY on gas, food, etc. Even if we did it would not impact our future consumption decisions.
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Old 10-10-2020, 12:23 AM   #28
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I certainly have no criticism of bucketing for "lumpy expenses" or doing "buckets" in general for all of investing. I looked at doing something like that prior to FIRE. I rejected that method as being more "w*rk" than just investing and keeping a significant cash/checking account (as W2R described.) If I need a car, I'll write a check for it. Yes, I'll lose some investment results, but I'm not likely to need to withdraw at an inopportune time.

Whatever works is great as long as it promotes FIRE so YMMV.
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Old 10-21-2020, 07:57 AM   #29
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We built a new home to retire into. Therefore, I have a pretty good idea as to the expense of things that would need replacement. I spreadsheeted those expenses and and others, boiled them down to a number that would need to go into savings for replacements. That has goes into a money market. It has worked well. A roof got replaced by insurance, but other expenses are close to on schedule. Therefore, I have moved additional funds into the market, and now keep enough in the MM to cover the largest expense plus a fudge factor.
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Old 10-21-2020, 09:00 AM   #30
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For about a dozen reasons I won’t rehash, we prefer having a dedicated Vanguard advisor. One reason is anticipated lumpy expenses, which he simply drops into the software in whatever future year we expect to spend. I then do the same to double check it in the free Personal Capital retirement planner, which has an elegant interface that I like.
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Old 10-22-2020, 10:46 AM   #31
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One of the best things about living here in our CCRC is that after paying the monthly bill most of our big stuff is paid for. We only have to go grocery shopping (online) once or twice a month and pay the Visa bill as it comes in (automatic).

We generally have enough from SS,VA dis and pensions to pay for all of the above. When we start traveling again (hopefully soon) we will have a rather large cash-stash to bring into play.

Life is good.
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