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12-09-2021, 09:45 AM
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#41
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Thinks s/he gets paid by the post
Join Date: Oct 2019
Posts: 3,657
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Quote:
Originally Posted by COcheesehead
I use a spending based system. My current “cushy” spend level equates to a 2.3% withdrawal rate so I don’t worry much about it.
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I just figured my WR at 2.33% for our living expenses! But with 21 days left this year, I still have 17% of my spend left.
In reality I spent much more, on the kids, mostly tuition, health insurance, cellphone, etc. But if all goes right, this year will be the end of almost all of that.
Lesson, need to learn to BTD!
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12-09-2021, 09:59 AM
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#42
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Administrator
Join Date: Apr 2006
Posts: 22,971
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Our withdrawal rate this year has been negative (we saved money). I expect it will be negative next year too. We may finally withdraw something when we can travel more extensively, but who really knows?
__________________
Living an analog life in the Digital Age.
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12-09-2021, 10:47 AM
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#43
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Thinks s/he gets paid by the post
Join Date: Oct 2019
Posts: 3,657
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Quote:
Originally Posted by Gumby
Our withdrawal rate this year has been negative (we saved money). I expect it will be negative next year too. We may finally withdraw something when we can travel more extensively, but who really knows?
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Not sure if you are talking about growth of assets? But I'm pretty sure most of us saved if that's where you are headed. My growth is 6 times what I spent this year. So I saved too! I have a negative WR!
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12-09-2021, 10:57 AM
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#44
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gone traveling
Join Date: Aug 2020
Posts: 682
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Quote:
Originally Posted by Packman
At retirement about 6 years ago, I budgeted a withdrawal rate of 3.5% of an investment portfolio of $2.3 M. Since then, our portfolio has grown by about a million, courtesy of the running bull market. Conventional wisdom states that you maintain your withdrawal rate with only inflationary increases. I've read about adjusting your withdrawal rate downward in bad times, but what about the other way? If I increase it, when? How much and for how long?
I'm quite conservative since we have only investment income to live on, until SS. On the other hand, no kids so I want to enjoy our savings and not die with it. And, if it makes any difference, a full 30% of our expense budget goes to pay for health insurance for six more years, providing we can get it. Thoughts?
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You can live on 3.5% of $2.3m, or something around $80k per year. You now have more than $2.3m.
Spend as much as you like with the knowledge that you may need to take a break from spending if conditions warrant.
In other words do whatever feels good to you. Your base budget is sound.
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12-09-2021, 12:02 PM
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#45
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2013
Posts: 11,078
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Good thread to bring back to life. Timely for me anyway. We both turn 65 next year and will be on Medicare and not having to control our income. Been retired for 8 years now but never came close to 4%, except last year.
My SS at age 70 is half our monthly expenses and DW gets hers now. I think we'll do 4% or more from our current assets and treat 2022 as the first year of a 30 year plan. I feel OK going to 5% for the next 5 years until my SS kicks in.
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12-09-2021, 12:17 PM
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#46
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,202
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Quote:
Originally Posted by ERD50
Why would you do this?
Spend what you need/want to spend. If your plans exceed the CPI over the long run, then you might need to re-evaluate your spending. But you make it sound as if you will just blindly w/d an amount based on CPI? Maybe I misunderstood?
-ERD50
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Isn't this what the 4% "rule" has you do? 4%+inflation?
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12-09-2021, 12:20 PM
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#47
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
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Quote:
Originally Posted by Time2
I just figured my WR at 2.33% for our living expenses! But with 21 days left this year, I still have 17% of my spend left.
In reality I spent much more, on the kids, mostly tuition, health insurance, cellphone, etc. But if all goes right, this year will be the end of almost all of that.
Lesson, need to learn to BTD!
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We’re similar. We have 14% left which in all likelihood will get rolled into 2022. We bought a car, stuff for the house, did 3-4 trips all on our 2.3% rate.
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12-09-2021, 12:54 PM
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#48
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Administrator
Join Date: Apr 2006
Posts: 22,971
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No, growth of assets is a separate issue. I meant exactly what I said - we did not take from our portfolio this year. We added to it. Specifically, our two pensions plus my social security exceeded our spending this year, so our checking account is larger now than it was last December. Separately, the invested assets in our portfolio, none of which were withdrawn, have grown by 13% (the dollar amount of the gain was more than 3 times our annual spending).
__________________
Living an analog life in the Digital Age.
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12-09-2021, 01:16 PM
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#49
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Recycles dryer sheets
Join Date: Jul 2020
Posts: 283
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Quote:
Originally Posted by ERD50
Why would you do this?
Spend what you need/want to spend. If your plans exceed the CPI over the long run, then you might need to re-evaluate your spending. But you make it sound as if you will just blindly w/d an amount based on CPI? Maybe I misunderstood?
-ERD50
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Yes I think you basically understand it. I use my yearly spend allocation to create a monthly budget.
I used FIRECalc assuming my spending will rise by the inflation rate each year, and got a 100% rating before deciding to retire, based on a certain spend rate. I want to stick to that assumption, especially in the early part of my retirement. And no, I don't want to spend any less, I want to spend as much as possible, especially while still relatively young, but not feel like I'm dooming myself to an old age of serfdom.
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12-09-2021, 01:18 PM
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#50
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Recycles dryer sheets
Join Date: Jul 2020
Posts: 283
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Quote:
Originally Posted by Gumby
No, growth of assets is a separate issue. I meant exactly what I said - we did not take from our portfolio this year. We added to it. Specifically, our two pensions plus my social security exceeded our spending this year, so our checking account is larger now than it was last December. Separately, the invested assets in our portfolio, none of which were withdrawn, have grown by 13%
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That's certainly not me. I'm still "young" (57) I want to spend now as much as possible without breaking the bank 20-30-40 years down the line. That's the goal anyway.
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12-09-2021, 01:28 PM
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#51
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Administrator
Join Date: Apr 2006
Posts: 22,971
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Quote:
Originally Posted by cat4ever
That's certainly not me. I'm still "young" (57) I want to spend now as much as possible without breaking the bank 20-30-40 years down the line. That's the goal anyway.
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Except for more travel, which is currently constrained by factors other than money, there is nothing else we want or need.
__________________
Living an analog life in the Digital Age.
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12-09-2021, 04:25 PM
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#52
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,200
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I plan to rerun FIRECALC and other calculators to determine an updated SWR every 5 years and adjust withdrawals then, stole the idea from someone else here (audreyh1 IIRC). Adjusting more often, like annually, could introduce too much variation IMO, spending shouldn’t fluctuate like that - so I wouldn’t do that. That said, we haven’t withdrawn anywhere near our calculated SWRs despite much higher taxes (large Roth conversions from 2019 until 2024-26), and I don’t intend to spend just to spend, we’re perfectly comfortable with lower withdrawals so far. With no kids, we should probably figure out productive ways to spend more, but I’ll at least wait for the next major downturn to reassess.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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12-09-2021, 04:53 PM
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#53
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
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cat4ever - I use the official SS inflation rate. It's well publicized so I run into it all the time without even trying.
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12-10-2021, 04:58 AM
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#54
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Michigan
Posts: 4,960
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I go with the current value every year, but I have never needed more than 3% anyway. This coming year around 2%.
__________________
"The mountains are calling, and I must go." John Muir
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12-10-2021, 06:01 AM
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#55
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2014
Posts: 7,322
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Someone once mentioned a weight of 70% of (SWR X initial portfolio adjusted for inflation) and 30% of SWR X portfolio value at prior year end. I like that- it allows for some adjustment for very good or bad investment results.
Having said that, I've never needed to withdraw that much. In the 7 years since retirement I've withdrawn about $43,000 less than this formula would allow using a 3.5% SWR, even after replacing my car last year. I loosened the purse strings and gave DS and DDIL $18,000 this year. You can't take it with you.
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12-10-2021, 07:02 AM
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#56
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Full time employment: Posting here.
Join Date: Oct 2020
Posts: 937
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No one mentioned the actuarial based withdrawal method. You can get a spreadsheet for it at Bogleheads.org, this is the page with links to the basic file and links to historical and Monte Carlo types.
https://www.bogleheads.org/wiki/Amor...ABW_calculator
Unlike historical SWR methods that use an implicit assumption about future rates of returns, in ABW, you have to make an explicit assumption. Also, you give it the number of years to plan for as it is going to use that life expectancy and rate of return assumption to blow all the dough.
On a different tack, Kitces demonstrated that once your portfolio had grown by 50% over the initial value (inflation adjusted), you could safely up your spending by 10% and never have to cut back.
https://www.kitces.com/blog/the-ratc...of-the-4-rule/
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12-10-2021, 12:52 PM
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#57
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 17,793
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Mentioned before: I used the so-called 4% rule or FIRECalc ONLY to decide when/if I had enough money to retire (i.e., when I COULD live on about 4% or less - I was probably okay financially to FIRE.) Actually "implementing" the 4% rule (i.e., spending 4% or whatever and adjusting for inflation, etc.) has never been part of my retirement plan. I do a back-of-the-envelope calculation occasionally to see what my WD has been the past year. Other than that, I don't even think about it until I find such a thread as this.
One more time: Measure with a micrometer and cut with an ax. It's a good plan though YMMV.
__________________
Ko'olau's Law -
Anything which can be used can be misused. Anything which can be misused will be.
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12-10-2021, 04:23 PM
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#58
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,200
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Quote:
Originally Posted by Koolau
Mentioned before: I used the so-called 4% rule or FIRECalc ONLY to decide when/if I had enough money to retire (i.e., when I COULD live on about 4% or less - I was probably okay financially to FIRE.) Actually "implementing" the 4% rule (i.e., spending 4% or whatever and adjusting for inflation, etc.) has never been part of my retirement plan. I do a back-of-the-envelope calculation occasionally to see what my WD has been the past year. Other than that, I don't even think about it until I find such a thread as this.
One more time: Measure with a micrometer and cut with an ax. It's a good plan though YMMV.
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So you’ve used SWR exactly as intended. The studies were only meant to provide guidance on how much to accumulate based on past history. None of the different academics associated with the 4% SWR never intended for anyone to “implement” the underlying withdrawal methodology in actual practice. In fact they specifically said otherwise. It was just a basis for the studies, not a withdrawal recommendation. I’m not why SWR is misinterpreted here over and over, year after year…
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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12-10-2021, 04:39 PM
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#59
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,202
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Quote:
Originally Posted by Midpack
So you’ve used SWR exactly as intended. The studies were only meant to provide guidance on how much to accumulate based on past history. None of the different academics associated with the 4% SWR never intended for anyone to “implement” the underlying withdrawal methodology in actual practice. In fact they specifically said otherwise. It was just a basis for the studies, not a withdrawal recommendation. I’m not why SWR is misinterpreted here over and over, year after year…
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So let me get this straight. The 4% SWR studies show that you would succeed 9x% of the time with 4%+inflation withdrawals. FIRECALC shows the same thing, and the default is to include inflation. But using 4% plus inflation is not recommended, it's better to wing it with back of the envelope calculations? In fact, mock people who think using this historically proven withdrawal method.
For the record, I don't use 4%+ inflation, I use VPW because it makes immediate but gradual adjustments up or down based on how my investments do and how much I actually spend.
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12-10-2021, 06:13 PM
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#60
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,001
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Quote:
Originally Posted by cat4ever
I think it's that time of year, so thought I'd bump this thread to the top. btw, if I go the route of doing an inflation rate adjustment what do folks usually use, the government annual CPI for December?
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I decided before retiring that I wasn’t comfortable adjusting withdrawal amount for inflation. I decided I was much more comfortable basing it on the Dec31 value of my portfolio each year.
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Retired since summer 1999.
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