Poll:To those who retired or retiring very soon - what is your comfy withdrawal rate?

[Toocold]

Our comfortable spending level has been the same for decades, so that's what I plan to spend. It's about 1% but it really doesn't matter to me as long as it's lower than 4%.

[TheWizard]

Quote:

Originally Posted by cyber888 Interesting - To those with 0% withdrawal or negative withdrawal and you're above 60 - 65 .. are you planning to leave your nest egg to your kids ? and I guess you'll pay big taxes to make huge withdraws when you hit 72 years old with mandatory withdrawals hitting bigger withdrawal laters.

I'm one of those.
I didn't have a really negative withdrawal rate until I started age 70 SS two years ago, combined with paying off my HELOC the year before.

Now it's certainly true that starting March, 2020, my travel expenses went to zero for a while, but travel has returned this year.

Nonetheless, I foresee having some excess retirement income from TIAA annuities + SS for the foreseeable future. I invest that excess in stock index funds and right now is a decent time to be buying.

Yes, most people leave their estate to some combo of offspring, other relatives, and charities, nothing strange there.

And being 72 this year, I've started monthly RMDs from my tax-deferred 403(b) account. But the last several years, I did Roth conversions of approximately the same size as my RMD, so my AGI and taxes for this year won't be much different from last year...

[Gumby]

Quote:

Originally Posted by cyber888 Interesting - To those with 0% withdrawal or negative withdrawal and you're above 60 - 65 .. are you planning to leave your nest egg to your kids ?

Don't have any kids. Aside from the young wife being provided for, I don't care where my money goes after I'm gone.

Quote:

and I guess you'll pay big taxes to make huge withdraws when you hit 72 years old with mandatory withdrawals hitting bigger withdrawal laters.

And? I always knew it would be taxed eventually, and I don't mind paying taxes to support my country.



The answer to the question you hint at but don't ask directly is that I have everything I need and most of what I have ever wanted. I'd like to travel more, but money has not been the limiting factor over the past couple years and won't be in the future. I can't see spending money on things I don't need or want just for the sake of spending money, and in the likely event I leave a bundle on the table, it won't bother me a bit.

[tb001]

We semi-retired end of last year. Our rate is 3.5%. It would be lower without a fixed rate mortgage that accounts for about 10% of our spend. I think I calculated 3.28%. This is on a 45 year retirement assuming no downsizing.

[ER2B]

Quote:

Originally Posted by FI_RElater Gonna have to seriously disagree with you there While the amount that is actually transferred INTO a Roth won't change your ability to use it (with the caveat that it allows you to use those funds without increasing your AGI and thus may have a slight tax benefit relative to normal taxable account).... the taxes that are paid are a cost that should be reflected in the year that they are paid for that particular conversion and thus included in the respective WR for that year.

[emoji106]

[gauss]

Well I answered the 2.5% choice -- but that is with significant Roth conversions every year. It might be closer to 0.5% - 1% without the Roth conversions.

* Note we are currently drawing one pension form a Megacorp that subsidizes ER fairly heavily facilitating the low WR.

[Tom52]

We have been retired over 8 years now and have taken nothing out of any tax deferred accounts. That will be forced on me in a couple years. Over all of our investments we have probably averaged about 1% withdrawals per year taking only dividends on non tax deferred investments plus an inherited annuitized IRA. Later this year when I start SS at age 70 I might be able to start spending more and up our lifestyle.

[Out-to-Lunch]

Okay, lots of you disagree with me on whether paying taxes on Roth conversions should "count." Fine, we can disagree. I have two comments/questions:

-Not all of the money in your tax-deferred account is yours. Some of it belongs to your Uncle in DC. Why do you care if he takes his share out early?

-Presumably, one is doing a Roth conversion because it is financially advantageous to do so. (Otherwise, you wouldn't do it, right?) Sooo, if this is financially a good move for you, why would you feel constrained against doing it because it increases your withdrawal rate?

Edited to add: I am NOT suggesting that taxes are not rightly considered part of your withdrawal. I am saying that I feel free to temporarily increase my withdrawal rate (above what I would be comfortable with in the long run) in order to make financially advantageous Roth conversions.

[Gumby]

Quote:

Originally Posted by Out-to-Lunch .... Edited to add: I am NOT suggesting that taxes are not rightly considered part of your withdrawal. I am saying that I feel free to temporarily increase my withdrawal rate (above what I would be comfortable with in the long run) in order to make financially advantageous Roth conversions.

Now that I better understand your point, perhaps we actually are in agreement after all. I have never viewed the Trinity Study as setting forth a hard and fast spending rule every year. Rather, it is a guideline for how much one should accumulate in assets up-front to support a 30 year retirement. As you note, the balance in my tIRA is not all mine; some belongs to the tax man. In preparation for retirement, I tried to take that into account. In my view, there are two main ways to do so: 1) discount the starting balance in the tIRA by some marginal tax rate or 2) gross up annual spending for taxes.

But that merely helps me determine when I have enough in my war chest to pull the plug . Once said plug has been pulled and I am engaged in the hurly burly of actually going through retirement, I will of course try to maximize the net value of my assets after taxes. So if I can Roth convert now and pay 12% tax, it would be better to do that than take an RMD of the same amount in a few years and pay 22% tax. And that would be true even if doing so results in a withdrawal rate greater than 4% this year, because the tax arbitrage is increasing my net assets and should, therefore, be improving my position vis-a-vis the base case from the Trinity Study (assuming I used 22% as the base case tax rate in my planning).

[Alan]

Quote:

Originally Posted by cyber888 Interesting - To those with 0% withdrawal or negative withdrawal and you're above 60 - 65 .. are you planning to leave your nest egg to your kids ? and I guess you'll pay big taxes to make huge withdraws when you hit 72 years old with mandatory withdrawals hitting bigger withdrawal laters.

As soon as we retired 12 years ago we started Roth conversions and this year we completed them so we won’t have mandatory withdrawals at age 72. This last 5 years we have been gifting money to our children and we plan on leaving the residue of our estate to them.

[Cobra9777]

Quote:

Originally Posted by Out-to-Lunch Okay, lots of you disagree with me on whether paying taxes on Roth conversions should "count." Fine, we can disagree. I have two comments/questions: -Not all of the money in your tax-deferred account is yours. Some of it belongs to your Uncle in DC. Why do you care if he takes his share out early? -Presumably, one is doing a Roth conversion because it is financially advantageous to do so. (Otherwise, you wouldn't do it, right?) Sooo, if this is financially a good move for you, why would you feel constrained against doing it because it increases your withdrawal rate? Edited to add: I am NOT suggesting that taxes are not rightly considered part of your withdrawal. I am saying that I feel free to temporarily increase my withdrawal rate (above what I would be comfortable with in the long run) in order to make financially advantageous Roth conversions.

I agree with you, but (as suggested by Gumby in post #69), only if your denominator for the WR is NET of taxes owed on your tIRAs. That is, your portion only. The lower denominator would make your WR slightly higher during the conversion years, which is IMO a more realistic portrayal of your WR.

But as a practical matter, almost nobody does that. They count the whole value of their tIRAs for net worth, withdrawal rates, etc. So there's nothing wrong with counting the tax on conversions as an expense against gross assets in the denominator. People who do that are just exchanging a really high WR during the conversion years for a lower one during RMD years. IMHO, that's just a more complicated portrayal of what's actually happening.

[tmm99]

I retired in 2016, so I calculated the average WR from 2016 to 2021 and it's around 3.5%. This number will decrease, probably significantly, after our mortgage is paid off or when I start SS in a few years. (Those two events will most likely happen around the same time...)

[cyber888]

That's a great attitude. I think the US can get some of your $ to lower its budget deficit

Quote:

Originally Posted by Gumby Don't have any kids. Aside from the young wife being provided for, I don't care where my money goes after I'm gone. And? I always knew it would be taxed eventually, and I don't mind paying taxes to support my country. The answer to the question you hint at but don't ask directly is that I have everything I need and most of what I have ever wanted. I'd like to travel more, but money has not been the limiting factor over the past couple years and won't be in the future. I can't see spending money on things I don't need or want just for the sake of spending money, and in the likely event I leave a bundle on the table, it won't bother me a bit.

[old woman]

I don't have one. I take RMD from IRA but usually nothing from ROTH or Taxable, sometimes convert to ROTH if I take more. RMD and social security is more than I could ever spend and I still have lots of money in ROTH and taxable. I also inhertited a bunch and have a lot in the estate account I could live on for years.

[Cobra9777]

I don't really think in terms of withdrawal rates. I think it's a poor indicator of retirement readiness or ongoing survivability.

For one, it changes significantly over time as various income streams come online, like pensions and SS. So there is no one figure for most early retirees. Couples of different ages will have multiple different figures at various times.

Also, our spending varies pretty drastically... +/- 30% some years. We both also have side-hustles that vary dramatically. Then, as discussed previously, there's tax on Roth conversions... If you count that as an expense, you're just creating more WR volatility that isn't really there.

What denominator to use? Today? End of last year? The day I retired? People seem to use all of the above, which makes the results un-comparable.

Instead, I have a deterministic model in Excel that I use for planning purposes and decision support. From time to time, I stress-test the model with FireCalc and similar tools. The number I key-in on is future spending level at 95%. That number comprehends all the timing noise and provides a figure that is readily understandable and actionable.

Another interesting approach... There's a member here (I think it might be RunningBum, not sure) who gets around a lot of this confusion by counting ALL retirement resources in the denominator, including the NPV of pensions, SS, and the like. Then for the numerator, you don't count WITHDRAWALS. You count total expenses.

His method ignores the timing complications associated with various income streams coming online at various times. This gives a true reading of retirement readiness on Day One (in the form of a WR). None of this... "Well it's high now, but it'll come down when SS starts, so I think everything is cool." Just compare your expenses to ALL the resources that will support your retirement.

I like it, but I still relate better to "future spending level at 95%."

[Out-to-Lunch]

Quote:

Originally Posted by Gumby Now that I better understand your point, perhaps we actually are in agreement after all. I have never viewed the Trinity Study as setting forth a hard and fast spending rule every year. Rather, it is a guideline for how much one should accumulate in assets up-front to support a 30 year retirement. As you note, the balance in my tIRA is not all mine; some belongs to the tax man. In preparation for retirement, I tried to take that into account. In my view, there are two main ways to do so: 1) discount the starting balance in the tIRA by some marginal tax rate or 2) gross up annual spending for taxes. But that merely helps me determine when I have enough in my war chest to pull the plug . Once said plug has been pulled and I am engaged in the hurly burly of actually going through retirement, I will of course try to maximize the net value of my assets after taxes. So if I can Roth convert now and pay 12% tax, it would be better to do that than take an RMD of the same amount in a few years and pay 22% tax. And that would be true even if doing so results in a withdrawal rate greater than 4% this year, because the tax arbitrage is increasing my net assets and should, therefore, be improving my position vis-a-vis the base case from the Trinity Study (assuming I used 22% as the base case tax rate in my planning).

Yup, yup, I agree. This is pretty much how I thought/think about it.

In practice, in my case, I accumulated assets until I could have a WR of ~3%, including taxes for any withdrawals from tax-deferred. Then, I separately make a determination on whether or not to make Roth conversions, and pretty much ignore what that does to my WR in the year of conversion.

[TheWizard]

Quote:

Originally Posted by Cobra9777 I don't really think in terms of withdrawal rates. I think it's a poor indicator of retirement readiness or ongoing survivability. For one, it changes significantly over time as various income streams come online, like pensions and SS. So there is no one figure for most early retirees. Couples of different ages will have multiple different figures at various times...

I completely agree about the various income streams evolving over time. It can still make sense to figure your net withdrawal rate in your current retirement income phase.

Having said that, I never focused on withdrawal rate. My focus, especially through my late 60s and now early 70s has been on my AGI, which impacts both my income tax and my IRMAA tier.
Fortunately, only a portion of my AGI gets *spent* each year in retirement; the remaining portion gets invested.

I have three parts of my portfolio from which money can either be withdrawn or invested into:
1) my tax-deferred 403(b) - withdraw only, can't contribute anymore.
2) my Roth IRA
3) my taxable account

Later on, I'll go through my records upstairs for last year and determine the dollar amounts in/out of these three accounts as step one in determining my withdrawal rate for 2021...

[SecondCor521]

Quote:

Originally Posted by Cobra9777 Another interesting approach... There's a member here (I think it might be RunningBum, not sure) who gets around a lot of this confusion by counting ALL retirement resources in the denominator, including the NPV of pensions, SS, and the like. Then for the numerator, you don't count WITHDRAWALS. You count total expenses. His method ignores the timing complications associated with various income streams coming online at various times. This gives a true reading of retirement readiness on Day One (in the form of a WR). None of this... "Well it's high now, but it'll come down when SS starts, so I think everything is cool." Just compare your expenses to ALL the resources that will support your retirement.

I do it that way, but I don't have a pension. And it does help me get around the confusion that you mention.

The approach has been mentioned by multiple members here, including me.

[Time2]

This year I'm looking at about 2.5% of my portfolio, but the last 4 years I have been closer to 5.5% because of my daughter's school tuition and rent. That is finally over, in fact today was her last day of clinic, two days ago, my wife, my son, and I, went to see her, as her last three patients for her dental schooling. She replaced a filing in a wisdom tooth for my wife, it was a big filing and a difficult restoration, she said if my wife was younger, she would just pull it out to prevent future repairs, but since she's older, it won't need to much more attention over her lifetime.

This wisdom tooth repair took a while and made my appointment late, so I kept complaining about these dentists are always over booking not caring about their patients time. I also mentioned she looked at that molar and saw a Mercedes payment. (note: she didn't get paid for the school clinic work, in fact it cost about $100 a day for her to work at the school clinic, even though the school clinic did charge customers patients, although at a reduced rate.) Ya, I can be sarcastic dad, $300,000+ in tuition, I think I earned the right! But it's over now, graduation ceremony is in a couple weeks and she has a job lined up a few days after graduation. Congratulations to my baby!

[rodi]

Our withdrawal rate has ranged between 2.6% and 4.1% in the 8 years of retirement... mostly just under 3%. This is based on the original nest egg value, adjusted for cpi - which is the basis for the 4% rule/trinity study.

Non cpi adjusted, but based on original portfolio, between 2.7% and 4.6... again, mostly under 3%.

When I look at percentage of the portfolio at the beginning of the year, it is between 2.7 and 3.4. That's because the high spend year was last year - high value portfolio, but significant medical expenses for our 21 year old son's ameloblastoma surgery. Looking at another high withdrawal when his jaw is recovered enough to get dental implants to replace his removed teeth from the surgery.

I don't do a set amount - just try to stay within reason and live pretty frugally.