SWR -I thought I had all my answers

[bigla]

from my last post but oops.
(Last post)
"I thought I knew how to handle the 4% SWR but after reading a few threads and many posts I am confused. I am math dumb so please bear with me.
Here's my hypothetical example. I start retirement with a 60/40 portfolio worth 800k. My first year's withdrawal is 32k.
In year 2, say the portfolio is worth 840k. Do I:
a) take out 4% of 840k, or
b) 32k plus adjusted for inflation.

Now I believe the answer is b) so now my question is:
In year 2, if the CPI is 2.5%, do I take 2.5% of the 32k, or 800K or 840K?"
Your answer was take the CPI on the 32K.

If my initial SWR was 32k. Second year, CPI is 2.5% so 2nd year I take 32800. In the third year do I take the CPI of 32800 or do I go back to base of 32k. I think it is the former but just want to get this straight.
Thanks again to all who help.
Larry

 

[Spanky]

Your withdrawal will be inflation adjusted from the initial 4%. This is based on the assumption that your investment returns at least 4% + inflation rate.

 

[bots2019]

Compound each year's SWR by the appropriate inflation rate - if it's 2.5% then increase 32,800 to 33,620 and 34,460 the following year.

As noted in the post you referenced, there are alternative SWR approaches you can use. Taking 4% of each years' balance is a bit more conservative - for example, if your portfolio decreases by 10% then you'll be taking just 28,800 (720,000 x 0.04) in year two as opposed to 32,800 under the most common method. Using the 'account balance' method is likely to result in significantly varying withdrawls over time.

 

[Gearhead Jim]

We are only 2 years into retirement, but each year I plug our current information into FIRECALC, adjusting for our one-year-less life expectancy, and run the numbers. at different asset allocations and success percentages.

That technique can produce some large swings in acceptable withdrawals if your portfolio is erratic, but ours is relatively stable; if it does take a dump then we can do a little less traveling until it recovers.

Aside from the fluctuations in annual income, does anyone see a problem with this? (Assuming that FIRECALC remains available)

 

[REWahoo]

Aside from the fluctuations in annual income, does anyone see a problem with this? (Assuming that FIRECALC remains available)

Aside from the fluctuations in annual income....no problem.