Decumulation experiences

[RobLJ]

IMO you're good.
We're planning to eat into "capital" (over interest) in 2-3 years when my half-time online contract runs out and DW retires (I'm 58; DW is 54). The SWR then will be 5.5-6% but only until I reach full retirement age/SS, when it will decrease to 3.5-4% and then lower when DW hits full retirement age. I can claim SS early in the event of a huge market event.
I'm planning to draw a similar amount 80-90k but off a current portfolio of 1.9 million.

And see pb4uski's post above on your SWR for explanation.
I'm skating on far thinner ice, but it seems fine, since we can cut back considerably if needed. (DW just paid off the remaining--rather small--housenote since a 3.25% return seems better than .1% in savings and there is still considerable savings/cash.)

I'm not sure if decumulate is a word or if there's another word I should use!

Anyway, I am interested to know if there are early retirees who are consciously planning to eat into their capital or who are already eating into their capital. Does that make you feel nervous? How have you set your portfolio up to deal with that?

Our situation is that we are early 50's (52 & 54) and about to stop work (three months). We will have around $2.5 million of invest-able funds and once we hit 60 should have enough income from pension schemes to meet the vast majority of our needs. However, until then the savings are pretty much all we have.

I've set up the portfolio so that it should throw off around $50,000 per year in income (dividends and interest) which means are remaining expenses will need to be met from capital (we estimate our annual expenses around $80-90k per annum).

We will be keeping around $500k in cash or secured funds (i.e. 6 years) means the rest we will not need to touch.....

....but after year of saving it still makes me nervous to start digging into those hard earned pennies.

What's your setup and how do your deal with the psychology of spening your stash?

 

[Ronstar]

I had not had a car loan for 25 years until we bought in late 2015... I just couldn't resist 1.9% for 60 months so I did the loan and set up an autopay for the payments... easy peasy... doesn't bother me one bit. According to Quicken, from when I took the loan out until today our portfolio has earned 10.2% per annum, so it looks like a good decision so far.

I had the same deal 1.9% 60 months. But I made the payments manually to embed the debt in my memory.

In my opinion, financing a car at a low rate should be more palatable for retirees than paying cash. Financing doesn't reduce net worth. Doesn't effect WR adversely if the payment is already budgeted.

And certainly makes sense if return on the portfolio exceeds the financing pct rate.

 

[REWahoo]

I had the same deal 1.9% 60 months. But I made the payments manually to embed the debt in my memory.

In my opinion, financing a car at a low rate should be more palatable for retirees than paying cash. Financing doesn't reduce net worth. Doesn't effect WR adversely if the payment is already budgeted.

And certainly makes sense if return on the portfolio exceeds the financing pct rate.

+1

18 months ago I financed a new car for 36 mos at 0.99%. So far the return on my portfolio has exceeded that rate nicely.

 

[Meadbh]

+1

18 months ago I financed a new car for 36 mos at 0.99%. So far the return on my portfolio has exceeded that rate nicely.

That's the deal I got in 2012. In retrospect, it was a great financial decision. But it was still nice to see the monthly payments come to an end.

 

[REWahoo]

But it was still nice to see the monthly payments come to an end.

+1

Even though I know it was the right financial decision, I too am looking forward to paying it off. I don't like debt, not even 'good debt'.

 

[Out of Steam]

I've struggled a little with this as well and concluded it just is not worth it. We will however fly premium which is slightly less than double the cost of coach and feels an acceptable trade!

We were upgraded to premium on the return of our last trip to Europe. It's pretty much what longhaul economy class should be.

 

[NoiseBoy]

We plan to travel a good bit, and I am trying to decide if we should fly business class. We have the $, but for the cost of international business class, we could pay for another whole trip somewhere, so it seems a waste. Still, we have the $ . . . . . .

Look at premium economy. From the US to Europe it runs about double the price of a coach seat, but you get more room, better service, and on LOT I boarded with the business class ticket holders. Business class may still be worth it on flights to Asia, but for the 8 - 9 hour flights to the continent, premium economy is the way to go.

 

[GTFan]

18 months ago I financed a new car for 36 mos at 0.99%. So far the return on my portfolio has exceeded that rate nicely.

Of course if you're paying with cash that's sitting in the average savings account you're not earning anywhere near that return, so to me it's better to pay cash than have the debt. Assuming you have a decent cash buffer from prior withdrawals like audrey does, or you've kept it out of the market for these type of expenses etc.

But at your finance rate it's not much of an issue. I just hate debt no matter what it is, and I wonder how we'd get a prime loan with no verifiable income other than my wife's PT work anyway (even with an 800+ FICO).

 

[Gotadimple]

But at your finance rate it's not much of an issue. I just hate debt no matter what it is, and I wonder how we'd get a prime loan with no verifiable income other than my wife's PT work anyway (even with an 800+ FICO).

Show them your portfolio of investments, tell them how much you pull from the portfolio each year to support your budget. Just because you aren't working anymore doesn't mean you aren't a good loan candidate. Start with your local bank or credit union just to get a feel for their process.

- Rita

 

[Scuba]

I'm in the total return camp and retired less than 6 months ago at age 56. Thought I would be more nervous about spending but have not been. I'm sure the positive market performance has helped. I have been monitoring our spending and so far it's been right where I expected even though we aren't consciously managing to a budget. I expected our spending to increase by about 10% overall vs pre FIRE due to higher healthcare, travel, and entertainment partly offset by lower gas and car-related costs, dry cleaning, and clothing. So far, so good!

 

[Hdhead]

Started taking 401k withdrawals in 1999, after ending employment with the company, at age 46 at a rate of 56k per year with a balance of 800k (I know, young and aggressive). Amazingly after 17 years of withdrawals 56k x 17yrs = $952,000, the 401k now has a balance of 1.6 million. Truly amazing when you think about it.

 

[lem1955]

I'm also in the total return camp, 60/40 asset allocation almost all invested at Vanguard in a few index funds. I was pretty scared in late 2015 despite all indications of success being in place. I told my mother I had created a budget and intended to live by it. She advised I be less controlling of our household expenses. Relax and be happy. It was great advice. We spent a little more than I had planned but it was a very happy year. Portfolio at 1/1/17 was 100.32% of 1/1/16. For 2017 I decided to focus on a withdrawal plan rather than a budget. What I found is that I could spend down my current portfolio by $300,000 and still be fine at age 70 when I plan to take SS and will probably inherit a private REIT. Despite that I don't think I'll need to take more than 5% of portfolio assets for the next 8 years. In 2016 I took 3.9%. This year, 2017, 4.4%. Relax. Be happy. Good advice.

 

[Trawler]

Retired Oct 2012 at 51 and 54 with almost 5 years of expenses in cash. It was hard to switch from taking out savings instead of adding but our investments and our net investible assets and cash are 24% higher than when we retired. We used cash the first 1.5 years then have replenished cash each year selling investments when the investments hit a new all time high plus one years expenses approx. $70K here until we have topped back to 4.5 to 5 years expenses in cash. Example investments start at $1.7mil expenses $70K so when investments hit $1.770 Million I take $70K or less if cash bucket fills back up to 5 year level. Then New base is $1.770 mil plus $70K equals $1.84 mil and then cash out again and top of the cash tank. I believe the market should drive when to take cash not a calendar and with this kind of cushion it has worked so far. This way when market heads south we don't need to sell to pay bills. One thing I did was map out cash needs till 65 and where it would come from to minimize tax and maximize ACA Subsidy and efficient Roth conversions that help ease mindset of selling investments. Hope this helps.