Do you have a zero withdrawal rate?

[Old Microbiologist]

Rob, that is an excellent point about what to do with the excess. We built up over $1M prior to retirement which is a mix of roughly 50% brokerage account, 30% in IRA's and the rest in cash which is just sitting unused as a liquid reserve. Before we decided to retire to Hungary our assumption was we needed a huge reserve for potential catastrophic medical expenses. Here medical is so cheap it is not actually a factor. We pay cash and refuse to pay the US Medicare Part B required to retain the "free" military health care. Tricare Overseas (the military health care plan we are under) sucks horribly and isn't worth the money, time and effort just to get 60% back. The care here is excellent and not a burden despite several major problems none of which cost more than $1.5K. So, that left us with the problem of what to do with the money. Our house is filled to capacity with luxurious antiques so that is maxxed out. We have all the electrical gadgets we can possibly ever use and an excellent car we rarely drive. We splurged on some expensive art work although I am a painter myself so have my stuff all over the house. The garden is maxxed out and I have an excellent yacht I sail nearly every day. So, that only leaves travel and our burn rate is still within reason and we still haven't touched our equities or IRA's. My wife Day Trades for fun and generally earns $700 a day (on the days she plays which are becoming fewer) and I always laugh at this as we will never touch it so I ask her who this is all for? The cash is slowly depleting but not significantly as we only spend 1/2 of the pensions on living expenses including emergencies. We had my 90 y/o mother living with us which limited travel but she is now back in the US in an assisted living covered by her teacher's pensions and social security. I suppose my kids will end up inheriting most of this (my wife's 2 sons are deceased) but I know they don't want to deal with selling a house in Europe and certainly don't want any of our antiques nor art or even jewelry. That is not what the millenials are about. So, I suppose we will end up donating the lion's share to a local advanced STEM high school. It is a real dilemma and one we never thought would occur. So, it is a pleasant surprise. It does; however, cause minor friction between us as to what to do with it all.

I know quite a few military retirees who went over to the postal service after retirement. Generally, they are very happy people and enjoy the more relaxed pace of the postal system. Many, like myself stayed in civil service. I know quite a few enlisted who opted to not collect their military pensions but rolled it over into the CSRS and many got high ranked civil service positions so ended up with way more than if they had taken just the military pension. The new military retirement plan, which I do not understand at all, is relatively inadequate. Probably, it saves a lot on the military budget at the expense of the soldiers. It's not like the military is short of cash as they receive more than 50% of the Federal Budget but they always screw the soldiers first. One thing you learn quick in the military is the government never gives you anything for free but will take it from you as often as they can.

[Lewis Clark]

Quote:

Originally Posted by SecondCor521 On a serious note, my understanding (and I'm no expert) is that a wealth tax is considered by many to be unconstitutional in the US. So to implement one here might require an amendment, which is no easy thing to do.

Are you sure about this?

Florida used to have a tax on intangible personal property. Essentially, this was a wealth tax. Fortunately, it was repealed a number of years ago.
https://www.cga.ct.gov/2007/rpt/2007-r-0197.htm

I don't remember all the reasons it was repealed, but I'm pretty sure constitutionality wasn't one of the reasons.

[53anddone]

I am close to a zero withdrawl rate - for sure less than 1%. I am early in my retirement journey (just 56) so I am curious about what the next few years will bring in terms of net worth and withdrawals. All my calculations say my net worth will continue to increase even with modest returns.

Our biggest question is how to generate decent income without a large equity exposure. Right now we are 55% in equities and 45% fixed income and with that i can keep a withdrawal rate quite low. Will probably stay at this ratio for the next 3- 5 years or so anyway.

[ncbill]

Quote:

Originally Posted by Old Microbiologist Rob, that is an excellent point about what to do with the excess. We built up over $1M prior to retirement which is a mix of roughly 50% brokerage account, 30% in IRA's and the rest in cash which is just sitting unused as a liquid reserve. Before we decided to retire to Hungary our assumption was we needed a huge reserve for potential catastrophic medical expenses. Here medical is so cheap it is not actually a factor. We pay cash and refuse to pay the US Medicare Part B required to retain the "free" military health care. Tricare Overseas (the military health care plan we are under) sucks horribly and isn't worth the money, time and effort just to get 60% back. The care here is excellent and not a burden despite several major problems none of which cost more than $1.5K. So, that left us with the problem of what to do with the money. Our house is filled to capacity with luxurious antiques so that is maxxed out. We have all the electrical gadgets we can possibly ever use and an excellent car we rarely drive. We splurged on some expensive art work although I am a painter myself so have my stuff all over the house. The garden is maxxed out and I have an excellent yacht I sail nearly every day. So, that only leaves travel and our burn rate is still within reason and we still haven't touched our equities or IRA's. My wife Day Trades for fun and generally earns $700 a day (on the days she plays which are becoming fewer) and I always laugh at this as we will never touch it so I ask her who this is all for? The cash is slowly depleting but not significantly as we only spend 1/2 of the pensions on living expenses including emergencies. We had my 90 y/o mother living with us which limited travel but she is now back in the US in an assisted living covered by her teacher's pensions and social security. I suppose my kids will end up inheriting most of this (my wife's 2 sons are deceased) but I know they don't want to deal with selling a house in Europe and certainly don't want any of our antiques nor art or even jewelry. That is not what the millenials are about. So, I suppose we will end up donating the lion's share to a local advanced STEM high school. It is a real dilemma and one we never thought would occur. So, it is a pleasant surprise. It does; however, cause minor friction between us as to what to do with it all. I know quite a few military retirees who went over to the postal service after retirement. Generally, they are very happy people and enjoy the more relaxed pace of the postal system. Many, like myself stayed in civil service. I know quite a few enlisted who opted to not collect their military pensions but rolled it over into the CSRS and many got high ranked civil service positions so ended up with way more than if they had taken just the military pension. The new military retirement plan, which I do not understand at all, is relatively inadequate. Probably, it saves a lot on the military budget at the expense of the soldiers. It's not like the military is short of cash as they receive more than 50% of the Federal Budget but they always screw the soldiers first. One thing you learn quick in the military is the government never gives you anything for free but will take it from you as often as they can.

The CSRS ended for new employees January 1, 1987...nice while it lasted, though.

New military retirement (BRS) reduces pension to 2% (instead of 2.5%) but offers 5% TSP match...since few military members stay long enough for the pension they'll at least get something if they meet the match.

[Old Microbiologist]

ncbill, You are right. It is similar to what they did to the CSRS with FERS although FERS is 1% not 2% and the matching isn't as good. The fly in the ointment is the performance of the TSP which has been pretty awful for most. I cashed out when I retired and rolled it over and didn't do any matching during my civil service as I wasn't actually planning on staying long. I would have been fine as a contractor except those in power at our Major Command changed the rules and contractors couldn't be Principal Investigators and I had something like 6 grants I was in charge of at the time so being civil service was the only way to stay in charge of my own projects. Everything shifted to entrepreneurial management (meaning you go find your own money) in the late 90's and I was very successful at finding money. Of course then you have to actually do the work which is the harder part. But, success brings more money and partnerships. So, I ended up staying until they finally assigned a complete incompetent and aggressively awful colonel as my director so I retired after working for this god-awful person for a year. He closed my entire research program as revenge after I left. The good news is he was courts martialed later for a lot of heinous things but was permitted to retire (1 grade lower as he didn't make the high 3 as colonel) as he was politically connected to Bush through family.

[NW-Bound]

Quote:

Originally Posted by Lewis Clark Are you sure about this? Florida used to have a tax on intangible personal property. Essentially, this was a wealth tax. Fortunately, it was repealed a number of years ago. https://www.cga.ct.gov/2007/rpt/2007-r-0197.htm I don't remember all the reasons it was repealed, but I'm pretty sure constitutionality wasn't one of the reasons.

Thanks for sharing.

I search the Web for the history of this tax, and this is what I find:

Quote:

Taxation of Florida’s intangible personal property dates back to 1924 when local municipalities began imposing taxes on it. However, the state took over administering the tax in 1972. Each year, Florida taxpayers were required to determine the market value of items like certificates of deposits, trusts, retirement plans, franchises and real estate mortgage investment conduits, then pay a tax based on that value. At the time the tax was repealed, it had reached 50 cents per $1,000 of valuation, which was actually a reduction from the $1 per $1,000 taxpayers had paid before. Single filers could claim an exemption of up to $250,000, while the exemption rose to $500,000 for married filing jointly.

Note that the above paragraph includes "retirement plans". Yet, another Web site specifically stated that retirement accounts were excluded.

In any case, the tax was levied from 1924 to 2006, and nobody contested its constitutionality. Or perhaps some did, and lost the case.

[ncbill]

Our intangibles tax was repealed after a successful lawsuit...that argued the tax was unconstitutional based on the fact that the state didn't tax stock of businesses domiciled in our state, just those outside it.

[RetMD21]

Quote:

Originally Posted by audreyh1 If income from pension, SS, part-time job covers expenses such that no withdrawals are made from the portfolio and all investment income reinvested, then of course it’s a zero withdrawal rate.

Do I qualify? Zero wd but the job is full-time

[bolt]

Quote:

Originally Posted by ncbill Our intangibles tax was repealed after a successful lawsuit...that argued the tax was unconstitutional based on the fact that the state didn't tax stock of businesses domiciled in our state, just those outside it.

That is valuable president in todays state/township/federal taxation schemes current proliferation.

A Ma township came around to a registered business I frequent attempting to tax its tools used to operate. Do you believe that?
One item was its broken lathe' used for resurfacing auto parts that cost XK 25yrs ago. (drums/rotors/etc.). It's now broken, outdated, and only good for scrap. The town backed down. But had it been paid then that $ is GONE!
Tax,Tax,Tax....

Best wishes....

[NW-Bound]

Quote:

Originally Posted by ncbill Our intangibles tax was repealed after a successful lawsuit...that argued the tax was unconstitutional based on the fact that the state didn't tax stock of businesses domiciled in our state, just those outside it.

I wonder if the above means that if Florida had decided to tax everyone, then it would have been decreed constitutional.

Nice! More tax makes it legal. What taxman does not like that?

[pb4uski]

There is an argument to be made that if your WR is zero that you might have worked far longer than you needed to. Just sayin'.

[Kwirk]

Quote:

Originally Posted by pb4uski There is an argument to be made that if your WR is zero that you might have worked far longer than you needed to. Just sayin'.

Nope. One day earlier and there would have been no pension.

[pb4uski]

Quote:

Originally Posted by Kwirk Nope. One day earlier and there would have been no pension.

Note that I said might.... I agree there may be rare cases like yours where it isn't the true, but in many cases it is true.

[Floridatennisplayer]

Quote:

Originally Posted by pb4uski Note that I said might.... I agree there may be rare cases like yours where it isn't the true, but in many cases it is true.

Yes. I agree. Now that I am retired. I realize I could have gone earlier. But, no regrets.

[scrabbler1]

Quote:

Originally Posted by Kwirk Nope. One day earlier and there would have been no pension.

While one day being the difference between getting a pension and no pension seems pretty extreme, one day can surely make a difference between a few months of pension checks and losing them. I know 2 people who changed their original retirement dates by one day in order to preserve a few extra pension checks. The first was my dad, who moved his retirement date from July 1st to June 30th so he would be able to collect 3 months of pension checks from July through September. Same thing with a coworker who moved his from October 1st to September 30th, so he could collect 3 extra months of pension checks. If they were employed for even a single day in a quarter, they were ineligible to receive a pension, even if they didn't actually work on that day.

[street]

^ and one of those exception is loving your job or the love of a business that you own. You may have won but enjoying what you are doing, is more important.

[audreyh1]

Quote:

Originally Posted by RetMD21 Do I qualify? Zero wd but the job is full-time

If you are still contributing to your retirement funds then you have a negative withdrawal rate!

[RobbieB]

I would sure hope so while you are still on the job.

[jollystomper]

Quote:

Originally Posted by RobLJ Again, for those a generation earlier where pensions is the whole thing (or Federal employees or teachers without much alternatives), this should be the norm. If you have huge 401ks plus pensions that pay everything, what is your additional money intended for? This sounds I suppose like an attack, but it's a philosophical question that plagues me.

That is a very good question. I cannot speak for others, but for me it can be summed up in the phrase "self-insurance".

First, though I have pension, will receive the maximum SS, and have savings/investments, my planning involvement looking at "if I lose any one of those streams, can I still afford to retire... or even live?".

My Megacorp is in good shape, but we have seen lots of Megacorps in good shape goo bad quickly, and with resulting impact on pension obligations. And though it is insured by the government, the current government financial situation is not something I want to rely upon heavily.

Along those lines, all the talk of SS running out of money, and the current legislation that will cut benefits if nothing is done, does not have me feeling all rosy about this income stream either.

While I am benefiting from the market, part of me does not trust the overall financial outlook. All the interest rate shenanigans, government debt levels, world financial picture, and the next "bubble" - whatever it is - has me wondering if all of this can be sustained. How would people feel and react to a 50% drop in the DOW/S&P 500/NASDAQ indices. We already see how just words and rumors can cause market gyrations, what happens when the next financial crisis hits?

So... I prefer to be an optimist, but I also try to prepare as much as possible. While any "excess stash" I am happy to leave to my kids, I also want to minimize the situation of having to be dependent on anyone else. So if that makes me error on the side of having "too much"... so be it.

[DrRoy]

I have a zero WR if you mean not touching principle. WR after small pension this year was 1.6%. I am not sure because I took all our spending from the taxable account and I do not track "income" from the sheltered accounts, only total return. Looking to up the WR to 2.4% next year so probably will touch some principle.