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Old 07-30-2017, 01:12 PM   #21
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i-ORP can be re-run every year and the year 1 withdrawal taken each time. That brings reality into the process.
i-ORP is great but I can figure out how to save the file so that I can use it later....seems I hit save and than if I close the window I have to start over....anyone know how to save it?
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Old 07-30-2017, 01:25 PM   #22
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Because I have large unrealized gains in my portfolio, I calculate my net worth in after tax dollars. For WR I add up all my expenses except income tax and divide by the net worth. I my opinion, $1,000,000 in cash has a different value than $1,000,000 of stock that I bought for $500,000.
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Old 07-30-2017, 01:28 PM   #23
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Since my cash flow from SS and pensions pays all of our bills and we generally reinvest our net RMD annually rather than spending it (after tax payment), my WR may be only the amount that I send to the IRS after RMD.


So, it can vary quite a bit from year to year.
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Old 07-30-2017, 10:22 PM   #24
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I always have the same response to this question:

Why do you want to calculate a withdrawal rate?

I think once you can explain that, you're well on your way to answering the question.


I'd like to calculate our WR to make sure we aren't spending down our assets too fast. So far we have been spending what we want, which has been close to what we budgeted. And since the market has done well, our portfolio value is up despite living off our assets for 9 months.

I don't intend to withdraw a certain amount at the beginning of each year or month. I'm planning to just move assets from taxable accounts since we are below 59.5 to cover our spending as it happens. Once we hit 59.5, we may decide to source funds differently depending on tax consequences. Also at some point we'll have income from a pension and a deferred comp plan, neither of which we're tapping yet.

Bottom line - I just want to do a high level "sanity check" to make sure our WR isn't above 5% in the early years of our retirement (pre-pension, deferred comp payouts, and SS).

It isn't fully logical to me that in the WR calculation, taxable portions of the portfolio count the same as tax-deferred portions. Clearly the net after-tax realizable value of an IRA or 401K is significantly less than a portfolio where tax was already paid on all but the unrealized gains. So I was thinking the portfolio value denominator should account for this, but maybe since taxes are included in the numerator, it's ok to include them in the denominator as well.
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Old 07-31-2017, 05:30 AM   #25
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Boy my method must be FBAR. OK, I calculated a SSWR (somewhat SWR) using online calculators, but I don't pull an annual amount. I just keep paying my bills thru a bill pay system that pulls from one of our taxable brokerage accounts. When the cash in that brokerage account gets low I replenish it from another account. This replenishment amount is amount is not really tied to our planned WR or SWR.
I do track spending that effects taxes.. things like tax payments, roth conversion, healthcare/dental, vision, health insurance, etc... anything I will need for filling out my taxes. General spending is not really tracked other than I notice it when I pay the credit cards. This really is not much different than pre-RE... I think the difference is I now pay estimated taxes instead of adjusting our withholding.

I do think I will run a retirement planner every so often. But a quick peek at our brokerage balance gives me a idea how we are doing to our plan. I guess when we get in a down market again I will need to check the planners.
I guess I've never been much for rote processing.
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Old 07-31-2017, 06:40 AM   #26
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Calendar 2017 my Withdrawal rate will be something around 3.7% of the beginning balance. My plan is to really take out what I need each year ( usually on a quarterly basis) as opposed to adhearing to a fixed % amount. Does it make sense to do that?
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Old 07-31-2017, 11:59 AM   #27
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Calendar 2017 my Withdrawal rate will be something around 3.7% of the beginning balance. My plan is to really take out what I need each year ( usually on a quarterly basis) as opposed to adhearing to a fixed % amount. Does it make sense to do that?
Sure, but if you find yourself taking out 9% the first year, you might want to reconsider (unless you have a sizable pension + SS still to come).
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Old 07-31-2017, 12:06 PM   #28
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Boy my method must be FBAR. OK, I calculated a SSWR (somewhat SWR) using online calculators, but I don't pull an annual amount. I just keep paying my bills ....
That's all I do.

I DO keep track of expenses, so, after the fact, maybe every six or twelve months, I go back and sum the expenses and compare to the SSWR. I compare against historical spending, say "gee whiz" and move on. Maybe occasionally I'll take action, but lately, more often than not, I conclude I should be spending more (in order to enjoy life more).
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Old 07-31-2017, 12:17 PM   #29
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i-ORP is great but I can figure out how to save the file so that I can use it later....seems I hit save and than if I close the window I have to start over....anyone know how to save it?
Saving the results window or your inputs?

There's a "Save Form" button that will save your input parameters, but I think you've probably got that figured out already. In order for that to work the next time you open your browser, you need to assure that you're not deleting cookies for i-orp.com. I'll tell you what I do...not that you want to do it, but I use LastPass, and it just happens to have a function to save all inputs: Sites > Save All Entered Data. This way, my data is not sitting in a plain text cookie.

On the results window, there's a "Download Spreadsheet Summary", but that doesn't have the nice graphs and stuff. It also doesn't save the inputs.

What I do is select the entire results window and paste it into a spreadsheet. At the bottom of the results window, all of your input parameters are shown. So if your "Save Form" cookie gets lost, you at least could re-enter the exact same inputs.
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Old 07-31-2017, 12:17 PM   #30
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Sure, but if you find yourself taking out 9% the first year, you might want to reconsider (unless you have a sizable pension + SS still to come).
Ha Gotcha....thanks...yeah..it shouldn't be that high, but lets say we have a 40% correction that 3.7% could go up to 5-6%
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Old 07-31-2017, 01:14 PM   #31
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Ha Gotcha....thanks...yeah..it shouldn't be that high, but lets say we have a 40% correction that 3.7% could go up to 5-6%
I haven't done the math, but is that based on 100% equities? I don't think many would recommend that. But still, a big drop will have an impact.

Hopefully it would bounce back over the next few years, so most would just ride it out. I use VPW, so it's recalculated each year based on the start of the year balance so I'd target spending less the next year, but probably wouldn't be too strict about it.
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Old 07-31-2017, 01:20 PM   #32
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Calendar 2017 my Withdrawal rate will be something around 3.7% of the beginning balance. My plan is to really take out what I need each year ( usually on a quarterly basis) as opposed to adhearing to a fixed % amount. Does it make sense to do that?
Yeah I like it. Thats the whole flexible withdrawal rate thing people talk about when faced with heavy drops in the market. BTW FBAR, hahahahaha
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Old 07-31-2017, 01:46 PM   #33
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I haven't done the math, but is that based on 100% equities? I don't think many would recommend that. But still, a big drop will have an impact.

Hopefully it would bounce back over the next few years, so most would just ride it out. I use VPW, so it's recalculated each year based on the start of the year balance so I'd target spending less the next year, but probably wouldn't be too strict about it.
~94% equities
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Old 07-31-2017, 02:11 PM   #34
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There are lots of valid withdrawal strategies, but this is the first time I can recall someone asking how to calculate the WR? It's the amount you take out of the portfolio divided by the value (usually beginning of year) of that portfolio. The only issue I can think of is whether you include dividends and interest. You do include them if you take them out.
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Old 07-31-2017, 06:19 PM   #35
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Because I have large unrealized gains in my portfolio, I calculate my net worth in after tax dollars. For WR I add up all my expenses except income tax and divide by the net worth. I my opinion, $1,000,000 in cash has a different value than $1,000,000 of stock that I bought for $500,000.
yes they may be different... or not. If you can cash out your appreciated stock in the 15% bracket and the gains are LT, then there would be no tax. In fact if you don't need to withdraw, you can LTCG harvest to the top of the 15% bracket.

I agree with needing to deal with taxes. It is difficult for me to determine after tax amounts without sorting through a plan for sequence of withdraws to really understand the after tax values. You may be much better than I am.
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Old 07-31-2017, 06:37 PM   #36
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Saving the results window or your inputs?

There's a "Save Form" button that will save your input parameters, but I think you've probably got that figured out already. In order for that to work the next time you open your browser, you need to assure that you're not deleting cookies for i-orp.com. I'll tell you what I do...not that you want to do it, but I use LastPass, and it just happens to have a function to save all inputs: Sites > Save All Entered Data. This way, my data is not sitting in a plain text cookie.

On the results window, there's a "Download Spreadsheet Summary", but that doesn't have the nice graphs and stuff. It also doesn't save the inputs.

What I do is select the entire results window and paste it into a spreadsheet. At the bottom of the results window, all of your input parameters are shown. So if your "Save Form" cookie gets lost, you at least could re-enter the exact same inputs.
Thanks, I have a MAC and use numbers spreadsheet which apparently i-orp does not like. will try the paste into excel on my old PC
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Old 07-31-2017, 06:38 PM   #37
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yes they may be different... or not. If you can cash out your appreciated stock in the 15% bracket and the gains are LT, then there would be no tax. In fact if you don't need to withdraw, you can LTCG harvest to the top of the 15% bracket.

I agree with needing to deal with taxes. It is difficult for me to determine after tax amounts without sorting through a plan for sequence of withdraws to really understand the after tax values. You may be much better than I am.
Wouldn't you have the exact same issue trying to budget taxes as an expense in your future budgets?

Seems like you have 3 choices wrt to taxes on deferred income or capital gains:
1) Treat them as a liability with your best estimate on future taxes
2) Treat them as an expense in your budget with your best estimate on future taxes
3) Don't worry about it

#3 can work if your taxes are low or zero, or you have enough buffer to absorb taxes or reduce non-essentials, or if investment returns are good enough for your plan to work.
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Old 07-31-2017, 07:44 PM   #38
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Wouldn't you have the exact same issue trying to budget taxes as an expense in your future budgets?

Seems like you have 3 choices wrt to taxes on deferred income or capital gains:
1) Treat them as a liability with your best estimate on future taxes
2) Treat them as an expense in your budget with your best estimate on future taxes
3) Don't worry about it
yes one really does have to make a guess. But I like #3, but I do worry about it. I've been RE for 2 years and have been Roth converting up to the top of the 15% bracket. Not sure that will be enough in the long run. But I'm pealing away at the higher marginal rate at RMD time.

But now taxes are low.
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Old 07-31-2017, 10:17 PM   #39
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I'd like to calculate our WR to make sure we aren't spending down our assets too fast. So far we have been spending what we want, which has been close to what we budgeted. And since the market has done well, our portfolio value is up despite living off our assets for 9 months.

I don't intend to withdraw a certain amount at the beginning of each year or month. I'm planning to just move assets from taxable accounts since we are below 59.5 to cover our spending as it happens. Once we hit 59.5, we may decide to source funds differently depending on tax consequences. Also at some point we'll have income from a pension and a deferred comp plan, neither of which we're tapping yet.

Bottom line - I just want to do a high level "sanity check" to make sure our WR isn't above 5% in the early years of our retirement (pre-pension, deferred comp payouts, and SS).

It isn't fully logical to me that in the WR calculation, taxable portions of the portfolio count the same as tax-deferred portions. Clearly the net after-tax realizable value of an IRA or 401K is significantly less than a portfolio where tax was already paid on all but the unrealized gains. So I was thinking the portfolio value denominator should account for this, but maybe since taxes are included in the numerator, it's ok to include them in the denominator as well.
Okay, you'd like to calculate the WR so you can compare it to a standard of 5%. The obvious question is "How did you calculate the 5%?"

Whatever method you used to arrive at the 5% target is the same method you should use for calculating the actual.

Now, it might be that you didn't think much about taxes. Your plan seemed to generate enough money to live on, and that was good enough. Maybe you implicitly assumed that all your withdrawals would be taxable - now that you're thinking more about it you realize that you've got more spendable cash than you expected because you don't have to pay taxes on your after tax withdrawals.

That could be some good news that doesn't require any action on your part, or it might prompt you to go back and modify your plan with explicit assumptions about taxes. For example you might want to spend down the after tax assets first, but vary your gross withdrawals to result in level after-tax spending. If you do that, you'll have targets for both before and after tax assets that you can read off the plan and then measure your actuals accordingly.
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Old 07-31-2017, 10:21 PM   #40
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Perhaps the reason for not accounting differently for tax deferred vs after tax portions of the portfolio is the complexity of trying to project after tax account balances. Also many seem to be able to keep taxes very low so in that case, it doesn't matter much.

I suppose I'll just keep following my current approach, which sounds like a hybrid of what bingybear and sengsational are doing. Spend what we want, account for it after the fact, review portfolio balance and if it's up or about the same, all is good. If not, perhaps spending adjustments will be in order.
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