Need Advice On Withdrawal Strategy

[sengsational]

What to do with a windfall is not what most people think of when they think of dollar cost averaging; it's more like applying your fixed dollar monthly savings every month, whether the market is up, down or sideways. This way, you're guaranteed to "buy low", at least sometimes, building up the share balance more when the market is low.


As to how to reverse the process when you're in decumulation mode, it would seem to me you'd need to sell a fixed number of shares every month. So you'd always sell 10 shares. If the price was $10/share, you'd be able to spend $100. But if the price fell to $6, you'd only be able to spend $60 that month.

[RunningBum]

Quote:

Originally Posted by sengsational What to do with a windfall is not what most people think of when they think of dollar cost averaging; it's more like applying your fixed dollar monthly savings every month, whether the market is up, down or sideways. This way, you're guaranteed to "buy low", at least sometimes, building up the share balance more when the market is low.

And if you DCA, you're also guaranteed to "buy high", at least sometimes. Right?

Quote:

As to how to reverse the process when you're in decumulation mode, it would seem to me you'd need to sell a fixed number of shares every month. So you'd always sell 10 shares. If the price was $10/share, you'd be able to spend $100. But if the price fell to $6, you'd only be able to spend $60 that month.

I don't see any reason why you'd have to do this. Sure, if you're decumulating a steadily falling asset, you might have to make some adjustments, but hopefully you're diversified and not all of your investments are dropping like a rock. How can you know whether it will keep dropping? And if somehow you do, you should dump it all at once before it drops any more.

[novaman]

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Originally Posted by SecondCor521 I withdraw about a quarter's worth of expected expenses and then see how long it lasts. I have some non-portfolio income which can make it last longer. But like audreyh1, I park it in a HYSA and then have a monthly transfer to checking.

Thanks to everyone for all the responses. I really like this approach mentioned here because a quarterly approach will not be as tedious as a monthly approach but you are still taking a smaller periodic withdrawal. Also the idea of withdrawing a quarter's worth of expenses and seeing how long it lasts lights up the frugality part of the brain and will help to keep expenses more in line with the budget.

[Cut-Throat]

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Originally Posted by Lewis Clark For withdrawals, the opposite logic would seem to apply. It would usually be better to take the withdrawals a little bit at a time. The later withdrawals would come from stocks with higher valuations. Of course, if you think the value of the investments is falling instead of rising, the opposite actions would be better.

This is only if You believe that you can time the market............
Also, I like a 'Cash Cushion' of at least 2 years of fairly non-discretionary expenses. (which happens to be about 1 year of my VPW withdrawal)....


And finally making my withdrawal many times during the year, would add a level of complication to my taxes that I don't currently have... So, that is why I withdraw a Full year on Jan. 1

[Sunset]

For my dividends that get paid to my accounts, I simply withdraw those whenever I want more cash, or they build up too much and move them to a High yield bank account (maybe a cashable CD).

[DEC-1982]

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Originally Posted by RunningBum That doesn't make sense because you don't know whether stock prices will be down or up in the future. And the general trend over time is up, not down, over time. The instructor is off in both the buying and selling scenario. In 25 of the last 30 years the stock market finished higher at the end of the year than when it started. That favors buying early while it's low, and spreading out selling over the year.

What one needs to do is run though a couple of hundred scenarios, doing withdrawals at the beginning of the year, and the compare them to another couple of hundred scenarios doing monthly withdrawals, and see which one comes out better. I haven't done that, and I look forward to somebody doing that and posting their results.

I'll investigate a bit and see if this has already been done in the past.

[NW-Bound]

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Originally Posted by novaman ... I'm thinking that I could either liquidate my estimated needs for the year and have it in cash to draw from, or I could sell as needed in small amounts going forward. I'm new to all this so I'm just curious- what do you all do?

I have always had a lot of cash in my accounts, good for 8 years of living expenses without taking SS. It's because I have very little bonds.

And so, I withdraw as needed. I also use some of that cash to do fortuitous market timing as I see fit. Because of the large cash buffer, my withdrawals have nothing to do with my decisions to buy or sell. My withdrawals are also irregular due to discretionary spending.

[DrRoy]

I build my next year's spending $ over the course of the previous year and then transfer it to a MM fund.

[Chuckanut]

I use a variable withdrawal spreadsheet to figure out this year's withdrawal amount. I use it as a guideline, not a line in the sand I must stand on. So far I have not had a good reason to withdraw a different amount.

https://www.bogleheads.org/wiki/Vari...ing_retirement

I withdraw the money (usually as part of balancing) and deposit it into my spending MM account. There it stays until I need it. If I don't spend all of it, it remains in the account just in case next year's withdrawal is on the low side, or some unexpected big expensive hits me. So far so good.