Capital expenditures vs. safe WR

[Retired Expat]

I think W2R and Youbet covered this well above. The addition is a wash or even an potential increase to your net worth. But from an SWR perspective it is a hit to your portfolio. How you "account" for it depends on what you are accounting for, If you are trying to keep track of how much you can spend, absent a home equity loan or home sale, it is a hit.

I am just saying that if those funds or a large percentage will be returning to your portfolio at some point in the future and you need to account for that.

We recently purchased a 2nd home. On paper that withdrawal of investment funds skews the whole annual withdrawal percentage. As my Financial Advisor showed me, that investment (which will also pay its own carrying costs via AirBnB rentals) and assuming avg 3.4% appreciation less alternate travel expenses will barely effect my Firecalcs but afford me a much nicer life. I also don’t see having it until God takes me so I know that money will be there for my “older still age”

When younger and working and making good money I barely had time to get up to my country house. Now is the time to enjoy I think

 

[mickeyd]

Since my annual expenses are less than my annual retirement income, I do not track expenses other than comparing quarterly spending with spending from prior years. When I compare the actual expenses of say, quarter #3 in 2018 with quarter #3 in 2017, 2016 and 2015 I can easily look back and see that I am not spending much more than recent years. W/R is what the W/R is. We have a huge upcoming expense that we have been stashing cash for on a regular basis. When we make that big-spend in 2019 it really will not affect much other than lower our cash position a bunch one month.

 

[FinancialDave]

How do folks track one-time withdrawals to support capital expenses like a major home remodeling project vs. their planned safe withdrawal rates?
I’ve been retired for 3.5 years and our WR seemed high at 8-9% until I backed out large chunks for a home remodel one year and a new car this year. Want to see how others account for the lump sum expenses that occasionally come up.

As others have said you have to count it all.

I track all withdrawals in one column and monthly totals in the other, at year end I just divide the total withdrawals by the Jan. 1 starting value and that is how much you "drained" from your account for the year.

At 8-9% that won't last forever, unless of course your forever is short.

 

[FinancialDave]

Since my annual expenses are less than my annual retirement income, I do not track expenses other than comparing quarterly spending with spending from prior years. When I compare the actual expenses of say, quarter #3 in 2018 with quarter #3 in 2017, 2016 and 2015 I can easily look back and see that I am not spending much more than recent years. W/R is what the W/R is. We have a huge upcoming expense that we have been stashing cash for on a regular basis. When we make that big-spend in 2019 it really will not affect much other than lower our cash position a bunch one month.

As always, if your expenses are less than your income that is a good thing.

I am however hearing conflicting information here - unless of course the excess money going into the "sinking fund" for 2019 is counted as an expense.


As I said elsewhere, withdrawals are withdrawals no matter where they come from. It's good that you are funding this 2019 withdrawal by building up your cash bucket from your income, but in the end if your total outflow is much above 4-5% of your average balance every year then it is quite possible you will have a problem over a very long retirement of 35+ years, no matter where that income comes from.

Dave