Planning to RE at the end of 2019 (age 55) and will be totally dependent on investments for RE income (no pension, no working spouse). Plan on using total return/rebalance approach once a year effectively funding a full year's (coming year's) expenses at the time of rebalance. While working under the basic 4% SWR, I have underwritten effectively 3 budgets which will give me flexibility to ratchet down my SWR should the market not cooperate. For those of you who may be in a similar situation where you are 100% dependent upon your investments for your RE income, I would be curious to know how you weave and bob with market fluctuations? Some specific questions...
- Are you blindly taking your set SWR % every year despite market performance to fill your annual expense budget and ignoring previous years returns or current portfolio balance, or do these variables change what you withdrawal from year to year?
- Say like 2017 you had a strong market performance and you fill your 2018 annual budget to cover expenses, but then 2018 begins to tank say 10%+... are you pulling back on 2018 expenses based on the current market movements, or do you figure you will just cross that bridge at the end of 2018 and access the final market returns/portfolio balance at that time to plan for 2019 expenses? I suppose asked another way, what factors/sensitivities/frequency drive you to get more conservative with your withdrawals/expenses?
While I am sure the more margin you have in your RE budget, the less concern you may have for making any reductions from year to year, it would seem logical that many in RE have some "if this happens, then I do this" formulas they implement to steady the ship during the storms. Conversely, I suppose many of you have formulas that say spend more during the good times. Much of this gets back to what helps you sleep at night, but I suspect many of you 10 yr plus RE veterans out there have lived this and can share their wisdom.
- Are you blindly taking your set SWR % every year despite market performance to fill your annual expense budget and ignoring previous years returns or current portfolio balance, or do these variables change what you withdrawal from year to year?
- Say like 2017 you had a strong market performance and you fill your 2018 annual budget to cover expenses, but then 2018 begins to tank say 10%+... are you pulling back on 2018 expenses based on the current market movements, or do you figure you will just cross that bridge at the end of 2018 and access the final market returns/portfolio balance at that time to plan for 2019 expenses? I suppose asked another way, what factors/sensitivities/frequency drive you to get more conservative with your withdrawals/expenses?
While I am sure the more margin you have in your RE budget, the less concern you may have for making any reductions from year to year, it would seem logical that many in RE have some "if this happens, then I do this" formulas they implement to steady the ship during the storms. Conversely, I suppose many of you have formulas that say spend more during the good times. Much of this gets back to what helps you sleep at night, but I suspect many of you 10 yr plus RE veterans out there have lived this and can share their wisdom.