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Old 08-01-2021, 10:01 AM   #1
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I am 43 and I was just gifted part of my inheritance early. I now have 2.7M not counting house or efund. My grandmothers lived until about 90, my mother 86 and my father is almost 90. Given all of this data what would you consider a safe withdrawal rate if I were to leave the workforce and never plan to return? 2% 2.5% or 3%? Thanks.
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Old 08-01-2021, 10:13 AM   #2
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At 43, and with your family history, you'll be planning on a 45 - 50 year retirement. If I were in your shoes, I'd want to err on the (slightly) conservative side, and would probably go for around 2.5%. This assumes that your stash is invested in stock and bond funds with an AA of somewhere between 40/60 and 70/30, at a very rough guess, depending on your tolerance for market volatility. Is $73K/yr enough for you to live on? If you can live on $54K/yr, then the 2% WR that would require, would help me to feel very safe. I wouldn't feel nervous at 2.5% however.

Remember to pay attention to the tax efficiency of the instruments you are invested in, as I assume all the 2.7M will be in a taxable account. Oh - and give FIRECalc a spin.
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Old 08-01-2021, 11:21 AM   #3
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I think with a 40/60, or 70/30 AA, anything 3 or under should be golden, even at 43. The key is to be really confident in that spending, including taxes and healthcare.

Don't try to back into a spending number, but have data that shows that's totally normal.
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Old 08-01-2021, 11:37 AM   #4
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It partly depends on what you want to DO in retirement, given all that free time you're looking at.
So the question is more: will a 3% WR fund the enhanced lifestyle you're looking at going forward...
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Old 08-01-2021, 11:39 AM   #5
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FIRECALC is your friend. Give it a whirl.

Have you tracked your spending over a year or two or more?

I ER'd at 47 with a NW of $1.6M at the time (including my home) and that's been fine for me, but my spending isn't your spending.
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Old 08-01-2021, 11:48 AM   #6
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FIRECALC is your friend. Give it a whirl.

Have you tracked your spending over a year or two or more?

I ER'd at 47 with a NW of $1.6M at the time (including my home) and that's been fine for me, but my spending isn't your spending.
That might only be the starting point.
I spend a LOT more in retirement than when working, mostly for travel, both foreign and domestic...
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Old 08-01-2021, 12:00 PM   #7
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Agreeing with Major Tom that a 2.5% rate is pretty much golden. 3% is probably ok, but getting closer to the edge. And that assumes the asset allocations mentioned.

Now you have to figure out what your spending needs are. As others have said firecalc is your friend for this. But the caveat is that firecalc assumes a GROSS spend - inclusive of taxes, healthcare, misc spending... EVERYTHING in that spending number. So make sure you include that when figuring out what your spending needs are...
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Old 08-01-2021, 12:37 PM   #8
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Originally Posted by AreWeThereYet0 View Post
I am 43 and I was just gifted part of my inheritance early. I now have 2.7M not counting house or efund.
Not sure what “early” means, gift vs inheritance. So you’ve checked into what if any taxes may be due?
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Old 08-01-2021, 03:51 PM   #9
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It was a gift free of tax.

I have:
401K 1M. (Small amount is Roth 401K)
Roth IRA 330K
Brokerage 771
HSA 6K
New gift/cash 610K

Currently everything that was not part of the gift/cash chunk is in mutual funds. I am not sure what I am going to do now that I have the $.
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Old 08-01-2021, 03:54 PM   #10
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What are your projected expenses/Social Security, other income?
Like others have stated, try the attached retirement calculator called Firecalc, which will give you insight as to where you stand.
Many folks on this forum can assist with any questions on Firecalc.
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Old 08-01-2021, 03:59 PM   #11
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Sounds like time to hit the spreadsheets. Create, review, update as things come to you (such as comments here). While still working for income.
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Old 08-01-2021, 07:56 PM   #12
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All good advice. Keep in mind that you can always cut back on your spending should you pick too high a withdrawal rate. I've always added "back ups" to my plan. If THIS happens, then I will cut back on THAT. Have it planned out ahead of time, so there are no misunderstandings - especially if there are wife/husband/kids involved. YMMV
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Old 08-01-2021, 08:38 PM   #13
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4% will do nicely. Use the portfoliovisualizer "Financial Goals" tool. It is outstanding, and free.
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Old 08-01-2021, 08:56 PM   #14
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Historically speaking, a 3.18% SWR has held up over a 50 year period 100% of the time. So I would be comfortable with a 3% SWR for a 43 year old with a 60/40 AA.
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Old 08-02-2021, 06:11 AM   #15
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4% will do nicely. Use the portfoliovisualizer "Financial Goals" tool. It is outstanding, and free.
Not for 50 years.
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Old 08-02-2021, 06:16 AM   #16
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All good advice. Keep in mind that you can always cut back on your spending should you pick too high a withdrawal rate. I've always added "back ups" to my plan. If THIS happens, then I will cut back on THAT. Have it planned out ahead of time, so there are no misunderstandings - especially if there are wife/husband/kids involved. YMMV
This is my approach. Based on my family history and medical advances, I'm planning for at least 40-50 years of retirement. (Hope for the best, plan for the worst, financially speaking...) I know we could survive comfortably on a fairly low number, but we do want to travel and donate to charity, so I've been adding those to my retirement budget as we hit FI and our numbers continue to grow. But we're prepared to cut back if we retire into a recession in order to reduce SORR.
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Old 08-02-2021, 10:11 AM   #17
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Historically speaking, a 3.18% SWR has held up over a 50 year period 100% of the time. So I would be comfortable with a 3% SWR for a 43 year old with a 60/40 AA.
Based on historical results, a 3% WR would most likely be survivable. At the higher WR's though, your portfolio stands a greater chance of falling to gut-wrenchingly low levels before recovering. Are you prepared for that? It is one thing to have a portfolio that survives, but quite another to be able to sleep at night through the worst periods in the market.

I mention this because I often see folk, when using FIRECalc, considering the chance that their portfolio will survive, but not seeming to take into account how low it might fall in that process, and whether they could handle that.
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Old 08-02-2021, 10:58 AM   #18
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Not for 50 years.
@mrfeh Thanks for the reply. What is your reasoning for this?
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Old 08-02-2021, 11:40 AM   #19
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@mrfeh Thanks for the reply. What is your reasoning for this?
Not @mrfeh, but 4% in the US for typical mid-range allocations can fail before 50 years. Start years in the late 1960s typically fail, so a 1966 retiree following the strict letter of the 4% rule / of thumb / law would have run out of money (well) before 2016. In fact the 4% rule as embodied in FIREcalc is only about 95% successful for a (mere) 30 year timeframe with default inputs IIRC.

There are of course the usual caveats: nobody actually follows the 4% rule / it's a guideline not a rule, Social Security / pensions, investment fees, asset allocation, changing spending in response, Bernicke / "smile" / no-go spending reductions, non-portfolio income, dying before the 50 years is up, asteroid strike / Retirement Hell Part 3 or Part 4, and probably others I can't recall offhand.
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Old 08-02-2021, 12:05 PM   #20
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When I retired at 51, my views on SWR were as follows:

4%: Not comfortable
3.5%: Maximum
3%: Mostly comfortable
2.5%: Very comfortable
2%: Absolutely golden

These were just feelings and not Fireclac results.
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