Do you have a zero withdrawal rate?

[Floridatennisplayer]

Curious who else has a zero withdrawal rate. Income that meets or exceeds expenses.

 

[Midpack]

Do you mean zero draw of principal (dividends only), or zero draw from portfolio at all - aka 100% SIRE? Presumably the latter would mean you have pensions and Soc Sec that exceeds spending. Buying an annuity would be a gray area. There have been several FIRE vs SIRE polls if you want to do a search.

 

[Floridatennisplayer]

Do you mean zero draw of principal (dividends only), or zero draw from portfolio at all - aka 100% SIRE? Presumably the latter would mean you have pensions and Soc Sec that exceeds spending. Buying an annuity would be a gray area. There have been several FIRE vs SIRE polls if you want to do a search.

Yes, sorry. Zero draw from principal, savings. I’ll search , never heard of SIRE before.

I see all the time people posting about their 3,4,5 percent withdrawal rates. Just unsure what this actually means and where they are withdrawing from.

 

[RetireAge50]

I’m not sure what you mean but over the last 2 years my portfolio has gone up more than I have taken out so I guess so.

 

[Floridatennisplayer]

I’m not sure what you mean but over the last 2 years my portfolio has gone up more than I have taken out so I guess so.

You have been withdrawing from your portfolio. I’m talking about zero portfolio withdraws. Where your income (SS, pensions, part time job, annuity) covers your annual expenses.

 

[Midpack]

Yes, sorry. Zero draw from principal, savings. I’ll search , never heard of SIRE before.

I see all the time people posting about their 3,4,5 percent withdrawal rates. Just unsure what this actually means and where they are withdrawing from.

You have been withdrawing from your portfolio. I’m talking about zero portfolio withdraws. Where your income (SS, pensions, part time job, annuity) covers your annual expenses.

So you are taking all/some dividends and interest from your portfolio along with pension and Soc Sec? If yes, that’s not actually a 0% WR. That’s the old ‘Norwegian widow’ method, taking investment income while leaving principal untouched.

And if you buy/bought an annuity, that’s not a 0% WR, it’s just a one time front loaded withdrawal.

 

[NW-Bound]

I am spending only 2.7% from my stash for the last 12 months.

And yes, it it less than the usual portfolio gain meaning dividend+interest+capital gain, but it is not zero.

 

[Floridatennisplayer]

So you are taking all/some dividends and interest from your portfolio along with pension and Soc Sec? If yes, that’s not actually a 0% WR. That’s the old ‘Norwegian widow’ method, taking investment income while leaving principal untouched.

And if you buy/bought an annuity, that’s not a 0% WR, it’s just a one time front loaded withdrawal.

I’m talking Zero from your portfolio. No interest, no dividends. No withdrawals.

Just Soc. Sec., pensions, and yes annuity payouts as they are a grey area but are really like a pension that cover your annual expenses.

 

[pb4uski]

I get it... he is saying where pensions and SS (and other "income") exceed spending so there is no need to use any retirement portfolio money.

Not here... my pension is small and we have not yet started SS... even once we start SS, pension and SS will only cover 63% of our spending so we will be using some money from our portfolio.... but only about 2% or so.... so I expect our portfolio will keep growing since it will earn more than the 2% we withdraw.

 

[ivinsfan]

Why do you care? It's not one size fits all.

 

[audreyh1]

The opposite here. No income streams at all yet, and only SS expected in the far future. So all living expenses are supplied by the portfolio.

 

[audreyh1]

Yes, sorry. Zero draw from principal, savings. I’ll search , never heard of SIRE before.

I see all the time people posting about their 3,4,5 percent withdrawal rates. Just unsure what this actually means and where they are withdrawing from.

I'm pretty sure most are talking about withdrawing that percent annually from a portfolio of investments independently of any other income streams such as pension or SS.

 

[LOL!]

My wife is working, so no withdrawals here. That's like getting a pension and SS, isn't it?

I haven't worked in ages.

 

[Another Reader]

I have a negative withdrawal rate. I have to take RMD's from the inherited IRA's. Those are the only "withdrawals" I make from the paper asset portfolio. 44 percent of that total dollar amount goes directly into taxable stock investments. 52 percent of that total dollar amount goes directly into money market accounts and savings. So 96 percent goes right back into paper assets. 65 percent of that total dollar amount goes to additional principal payment on a rental mortgage. So 161 percent of the RMD's are automatically invested. That's in addition to the principal payments made in ordinary mortgage payments and some excess cash that periodically gets invested.

Income from pensions, Social Security, and the rentals exceeds expenses. RMD's are required, but have no effect on the paper portfolio.

 

[street]

Like others have said with your scenario it wouldn't be zero WR but you can look at it how you want.

Our WR last year was .4% but had one SS check for the year and a low cash flow for a few months.

Of course as your portfolio continues to grow, and your WR stays the same, your WR% will continue to go down, because of the growth of the portfolio.

 

[FlaGator]

Curious who else has a zero withdrawal rate. Income that meets or exceeds expenses.

Not here, didn't structure my life that way. Hope you feel lucky you did.

Drawing it down as planned after my wife died and I decided it was best to tend to our kids rather than keep putting points on the board.

Post your question as a poll, then you can see how thin the air is where you breathe.

 

[NW-Bound]

I am spending only 2.7% from my stash for the last 12 months.

And yes, it it less than the usual portfolio gain meaning dividend+interest+capital gain, but it is not zero.

Uh, just remember that my wife started her SS a few months ago. That 2.7% number is spending, and the WR has to be less, now that we have some "income".

Lemme see... Quicken, Quicken on the screen, what's my "income" for the last 12 months?

Take that away from the spending, and the WR is ... (drum roll) ... 2.3%. Next year it will be less when we have a full 12 months of SS, plus I had some non-recurrent expenses that will go away, hopefully not replaced by something else.

PS. My checking account is with B of A. Their computer periodically sends me a message about my "financial status". It reminds me that my "income" is just a fraction of my spending, and offers some tools for budgeting.

Obviously, it does not count the IRA transfer as "income", hence worries about me depleting the checking account and ending up broke.

Funny thing is that I have plenty of money in an roll-over IRA account at Merrill Edge, which is part of B of A now. Their programmer should know to write a program to look at the WR to see that it is within the 4% WR. And I have money at other brokerages too.

PPS. Yes, next year the WR will be less than 2%, using the last 12-month expense as the baseline. How much less than 2%? It does not matter, does it?

PPS. I forgot one thing. If the market crashes by 50%, that will drive my WR back up.

 

[jimnjana]

Not taking any withdrawals currently. We have taken funds from DW ira previously. But stopped after I realized we were essentially just moving funds to a taxable investment account. Pensions and rental income cover expenses.

 

[Dtail]

There have definitely been some posts on this forum about 0% WR, but definitely not us currently or ever in the future.

 

[audreyh1]

Like others have said with your scenario it wouldn't be zero WR but you can look at it how you want.

Our WR last year was .4% but had one SS check for the year and a low cash flow for a few months.

Of course as your portfolio continues to grow and you WR stays the same your WR% will continue to go down because of the growth of the portfolio.

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.

 

[street]

^ Yes, that is true. Thanks

 

[NW-Bound]

Not taking any withdrawals currently. We have taken funds from DW ira previously. But stopped after I realized we were essentially just moving funds to a taxable investment account. Pensions and rental income cover expenses.

Quicken considers an IRA or 401k withdrawal as just a fund transfer, where you move money from the right pocket to the left pocket, and rightly so. It's not an expense until you actually spend it, and it is certainly not an income like an interest or dividend payment. Same with a Roth conversion.

What I discovered just recently is that it does not classify the tax withholding as a tax expense. That's wrong. It just does not show up anywhere, and is just a phantom loss from my portfolio. I had to make a manual entry to get that properly registered.

Other than that, I just look at the total expenses which Quicken downloads from my checking account, and subtract out my wife SS, the only "income" we have. That's my WR, and that money has to be covered by transfers from other accounts, whether taxable or before-tax, else my checks will bounce.

 

[Floridatennisplayer]

Sorry, Ivansfan, not sure why this seemed to anger you.

I only asked, because today at lunch with some newly retired buddies they asked what kind of withdrawal rates each other was dealing with. I asked what they meant. They said withdrawing from your portfolio to cover your expenses. And I see people here talking about their withdrawal rates and quoting financial articles talking about average withdraw rates.

I told them right now we aren’t needing to withdraw from our portfolio or anything as our income covers our expenses.

Thus, I was curious about this as I am newly retired. Nothing I planned for, it just has ended up this way. So, I was curious about this.

 

[Ronstar]

You have been withdrawing from your portfolio. I’m talking about zero portfolio withdraws. Where your income (SS, pensions, part time job, annuity) covers your annual expenses.

I’m sure that there are several folks here that have 0% or negative withdrawal rates given your criteria. My last few working years were spent working just enough part time hours to meet my expenses.

 

[Mdlerth]

Adding to the stash, not to the discussion

Since I'm still drawing a paycheck, I don't have to make any PF withdrawals. But since that also means I'm still contributing to a 401k, technically my WR rate isn't zero, it's negative.

However, assuming lots of assumptions such as I will live long enough to start SS at age 70, that my patience isn't punished by a severe haircut, that megacorp's pension doesn't go bust, that inflation remains tame, that we don't take up yacht racing, etc... then at some future point we should have sufficient passive income to get along with zero withdrawals. Ask me again in 10 years.

Question for OP: Do RMDs count if you reinvest them all?