Windfall

[mrc758]

Retired about two years ago and am drawing down about 2% from the initial liquid net worth. It looks like I'm getting a windfall as a biotech company that I own stock in is getting bought out. It pretty much doubles my net worth from two years ago. I know. First world problems. Would you increase the withdrawals to adjust for the new amount? By how much if so. Already funded a generous DAF and will splurge on a couple of things. Thanks
MRC

 

[REWahoo]

Would you increase the withdrawals to adjust for the new amount? By how much if so.

First, congratulations on your windfall. Well played.

As to what we would do, that's a completely irrelevant question. You should do whatever the heck you want to do - and enjoy!

 

[pacergal]

Congratulations!
Try Firecalc and investigate the spending amount. See if you are comfortable with that.
Then continue to enjoy your retirement, blow the dough for yourself, and donate to charities as you wish.

 

[Sunset]

I would make sure to do a couple of those experiences dreamed about but not done simply because they are so expensive.

You never know how much time is left, and plans could change suddenly to things outside your control. Example getting hit by a car.

For me, I would splurge on a World cruise, one of those approximately 4+ month trips, which are really expensive at $100K -> $150K for a couple depending upon which cruiseline is used.

 

[Peter]

For sure, blow some dough, on something that's well beyond what you would normally choose to spend.

 

[Souschef]

Absolutely! I got to fly a P-51 and a MiG-15 for about $2K each. They were adventures of a lifetime.

 

[mrc758]

Thanks everyone. I need to learn how to feel comfortable spending. Years of being relatively frugal is hard to overcome.

 

[Dash man]

Maybe share a bit with a charity of your choice. A lot of them are hurting these days.

 

[Walt34]

Simple - buy an airplane, a boat, a horse, or get divorced. That'll take care of any excess money you might have.

 

[luckydude]

Retired about two years ago and am drawing down about 2% from the initial liquid net worth. It looks like I'm getting a windfall as a biotech company that I own stock in is getting bought out. It pretty much doubles my net worth from two years ago. I know. First world problems. Would you increase the withdrawals to adjust for the new amount? By how much if so. Already funded a generous DAF and will splurge on a couple of things. Thanks
MRC

You are already FI so this windfall is just icing on the cake, so my advice is to do the splurging first (and do it quickly) and put whatever is left into your retirement pile. The reason is that if you wait and then get used to seeing the bigger number on your balance sheet as the "new normal", eventually you won't want to do the splurging anymore because you don't want to see the new number go down.

I was in the same situation a few years ago: became FI and then got a windfall. I had a big splurge that I wanted to do, but I waited six months, but by then I had gotten used to seeing the new number and just didn't want to see it go down, so I ended up not doing it and missed out.

Lucky Dude

 

[audreyh1]

Retired about two years ago and am drawing down about 2% from the initial liquid net worth. It looks like I'm getting a windfall as a biotech company that I own stock in is getting bought out. It pretty much doubles my net worth from two years ago. I know. First world problems. Would you increase the withdrawals to adjust for the new amount? By how much if so. Already funded a generous DAF and will splurge on a couple of things. Thanks
MRC

Well, you certainly can put the after tax proceeds in your retirement fund and double your annual income/withdrawals. What else are you going to do with the money? If you don’t spend it, who else will?

 

[mrc758]

You are already FI so this windfall is just icing on the cake, so my advice is to do the splurging first (and do it quickly) and put whatever is left into your retirement pile. The reason is that if you wait and then get used to seeing the bigger number on your balance sheet as the "new normal", eventually you won't want to do the splurging anymore because you don't want to see the new number go down.

I was in the same situation a few years ago: became FI and then got a windfall. I had a big splurge that I wanted to do, but I waited six months, but by then I had gotten used to seeing the new number and just didn't want to see it go down, so I ended up not doing it and missed out.

Lucky Dude

I think that you and I are a lot alike. I'm already getting used to the amounts in the brokerage accounts even though a few weeks ago I was very content with that value. As Audreyh1 said I may as well increase the withdrawals. As far as who would spend it if I don't? DW, DS, and DD wouldn't have a problem.

 

[The Cosmic Avenger]

My personal rule was that I could spend around 10% of a windfall, the rest went towards my retirement savings....but I'm not retired yet!

But IMO that would give you a nice huge splurge, and still subsidize a much bigger 2% budget, which is a plenty conservative and safe withdrawal rate.

 

[Dtail]

Perhaps some blow some dough in conjunction with some gift giving.

 

[Aerides]

Thanks everyone. I need to learn how to feel comfortable spending. Years of being relatively frugal is hard to overcome.

When you have a windfall like you've described, imagine what 8-year-old you, or 15-year-old you, would have wanted - and get/do it. (assuming the idea still has appeal) - think back to before you ever even knew about saving and budgeting and being frugal and go for it.

 

[pb4uski]

Retired about two years ago and am drawing down about 2% from the initial liquid net worth. It looks like I'm getting a windfall as a biotech company that I own stock in is getting bought out. It pretty much doubles my net worth from two years ago. I know. First world problems. Would you increase the withdrawals to adjust for the new amount? By how much if so. Already funded a generous DAF and will splurge on a couple of things. Thanks
MRC

This is an interesting issue to me as our retirement is similarly overfunded and we will likely receive a couple windfalls from inheritances that combined will be high six-figures or low seven-figures.

But even with what we have now, I occasionally think of what I would do differently if a big windfall drop into our lap and I come up pretty empty. Sure, I might replace our pontoon boat with a newer one, perhaps get a little sports car to tool around in during the summer and a few other things... but add them all up and I barely get to six-figures.

In short, the glass is definitely half-full and I'm pretty satisfied with our lifestyle.

 

[MarieIG]

Wonderful news!

Me? I would let the dust settle; (deal with the taxes) and determine the final amount.

I would then set aside a certain amount for splurges which I would anticipate for the next few year (vacations and such); and

Add the remainder into my base amount off of which I would calculate my comfortable withdrawal rate.

I would leave my withdrawal rate remains the same; the increase in the base amount allows for a higher monthly income.

But - that is what I would do; YMMV.

 

[kjpliny]

Give big tips to people who deserve it. It will make you feel good, and will actually help people who probably need it.

 

[Koolau]

I have a good friend who retired at 50. In the 27 years since, he's gone through all his savings, 2 or 3 windfalls, (legally) defaulted on several credit cards and has borrowed half a million to keep up his spending. So my only advice (make that suggestion) would be not to get used to the spending your windfall allows now. Maybe splurge on something but simply include the windfall into your portfolio and figure your new SWR (safe withdrawal rate) and live accordingly. Not an expert on this subject, so YMMV.

 

[Unpaintedhuffhines]

Give big tips to people who deserve it. It will make you feel good, and will actually help people who probably need it.

What a great idea. To riff off of this, practice random acts of kindness.

• Leave an anonymous note on a car windshield saying something nice and leaving $20, $50 or even $100 inside. Imagine being that person receiving that.
• At an ice cream store, pay for your ice cream, give the person serving a $20 tip, then give them $100 to pay for the next people's ice cream until the $100 runs out. Ice cream is great, but free ice cream is outstanding!
• Just a note left for someone telling them that they are special
• I take coins that I find and hide them, but specifically I try and hide them at the eye level that a kid would find.

There are lots of other ideas. What surprised me is how good it made me feel to do this. When I tell people this, I always get "let me help you feel REALLY GOOD... give me $1000!"

 

[mrc758]

Thanks for all the replies. I funded a DAF with some of the appreciated shares and will let the kids pick a couple of charities as well as DW and I. The thought of that makes me feel good. I'm gonna let a RIA handle some of it and start a 4% drawdown from that. Will keep a 1-2% drawdown on the rest. Have plans to order a Macan GTS soon. I already increased the amount I tip with the whole covid thing.

 

[jollystomper]

Thanks for all the replies. I funded a DAF with some of the appreciated shares and will let the kids pick a couple of charities as well as DW and I. The thought of that makes me feel good. I'm gonna let a RIA handle some of it and start a 4% drawdown from that. Will keep a 1-2% drawdown on the rest. Have plans to order a Macan GTS soon. I already increased the amount I tip with the whole covid thing.

Sounds Great! Enjoy!

 

[tulak]

It’s a small gesture, but occasionally I’ll pay for the order of the car behind us in a Starbucks drive-thru. I usually do this around the Holidays. Random acts of kindness are fun.

 

[copyright1997reloaded]

OK, I will be the downer here.
1) Make sure you are aware of the tax ramifications - not just capital gains but also NIIT considerations.
2) If the closing isn't in cash (but rather stock), you don't need to realize the gain
3) if the closing is in cash, but isn't until next year, consider selling some stock this year to spread the capital gain across years.

Other than that, party on.