Thanks - how long was the "temporary" until pension/SS came online for you?
Withdrawal Rate in early retirement (pre-SS ++)
- Thread starter Yipper
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Thanks - how long was the "temporary" until pension/SS came online for you?
Glad to hear that has been your experience. Might I ask at what age you retired and how many years ago that was? Observing my parents and in-laws (and older siblings of DW) have seemed to mirror this pattern as well.
As a result - I like to use the "Constant" spending model in FireCalc and the equivalent in other tools but feel we have some buffer given the reality of actual spending patterns.
I would agree from a constant WR... but my models look more like:
~6% in pre-SS and investment property sales years
~2% in post years
Tiger8693
Full time employment: Posting here.
Not retired yet, and I think I will only have a couple of years that I WD from retirement funds before SS. That said, it looks like just over 6% for those first couple of years, and then between 4%-5% following start of SS.
Notably, it looks like once RMD's exceed my planned WD rate (about 79), it quickly climbs to 10% over the next 10 years....
Notably, it looks like once RMD's exceed my planned WD rate (about 79), it quickly climbs to 10% over the next 10 years....
I retired 3/1/2001 at 52 years old, 20 years ago.
A good test for the Go-Go, Slo-Go and No-Go categories is to notice the number of people who are not relatives you see/meet when you are out and about living your life. You should see lots of people who are in their 50's and 60's, fewer people in their 70's, almost nobody in their 80's or 90's and the 100's are as rare as unicorns. This helps explains why spending decreases, most older people can't/don't get out much and therefore can't/don't spend as much money as they did when younger. I do not live in Florida or Arizona so those states may be very different.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
About 5 years for the pension (~18% of spending), 10 years for her SS (~14% of spending... waiting for her first SS check on May 1 with fingers-crossed... seems they are backed up) and 14 years for my SS(~38% of spending).
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ElizabethT
Full time employment: Posting here.
We have used a set WR of first 2.5%, then 3% around Year Five, of our Year One portfolio (not including house value). We are now up a million and a half from our starting point after ten years of FIRE, but have not changed our withdrawal amount, preferring to let that money accumulate for now.
We are now getting raises to our annual budget as a result of approaching age 65. Medicare*, pensions and SS for us both will almost double our annual budget. Not sure what we will do with the ‘new’ money but can’t wait to give it our best shot.
In our early years we had tons of energy to expend on fairly low cost activities such as hiking, backpacking, trailer RV’ing, and active travel. I can see doing things more luxuriously, I.e., expensively, as we get older. So it worked out to sort of tow the line those first ten years and wait for the new money flows to arrive.
YMMV of course.
*ETA- Medicare will save us about $18,000 a year, so while not necessarily ‘new’’ money, it’s money we will happily reallocate to more pleasant endeavors.
We are now getting raises to our annual budget as a result of approaching age 65. Medicare*, pensions and SS for us both will almost double our annual budget. Not sure what we will do with the ‘new’ money but can’t wait to give it our best shot.
In our early years we had tons of energy to expend on fairly low cost activities such as hiking, backpacking, trailer RV’ing, and active travel. I can see doing things more luxuriously, I.e., expensively, as we get older. So it worked out to sort of tow the line those first ten years and wait for the new money flows to arrive.
YMMV of course.
*ETA- Medicare will save us about $18,000 a year, so while not necessarily ‘new’’ money, it’s money we will happily reallocate to more pleasant endeavors.
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Out of Steam
Thinks s/he gets paid by the post
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We will have stayed below 4% in our first two years of retirement, but will go to a 5% a year rate starting in the fall, until my wife files for SS late next year. We find ourselves short a car, and need the headroom to pay for it.
Discussions here seem to say that this sort of temporary increase is common.
Discussions here seem to say that this sort of temporary increase is common.
Out_the_Door
Recycles dryer sheets
I fall under this category as I retired in 2020 and will have a higher than 5% initial withdrawal rate until my pension starts in five years and SS at FRA two years after that. Currently SS and pension should cover 125% of my current expenses. So I expect my withdrawal rate to drop significantly for several years until RMDs kick in.
I like the VPW model at Bogleheads for figuring out a range of withdrawals based on current portfolio, asset allocation, future pensions and possible hit to withdrawal impact due to drop in market. The model and spreadsheet show the bridge amounts to the different pensions as well. I like that it allows changes to be made as changes occur in your financial status and provides a realistic floor if there is a 50% drop in the stock market and how that would affect your withdrawal amount. I intend to use the suggested withdrawal amount and the lower amount as the higher/lower limits to a range for me to be able to spend in that particular time period (you can choose monthly/quarterly or yearly).
ChicagoGal
Recycles dryer sheets
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Like many here, I'm anticipating a changing WR. Just retired earlier this month. Plan is ~6% WR for the first 12 years (more travel, 7 years left on my mortgage), then down to about 3% after SS. A bad sequence of returns early on can shift that, as there is quite a lot of discretionary built into that 6%.
Markola
Thinks s/he gets paid by the post
Same for Vanguard Personal Advisor Services, which they call Dynamic Spending. Regardless of markets, spending decreases will not fall below -2.5% or rise above +5% of the prior year’s “everyday” spending. And we also plug in known one-time major expenses, windfalls, and anticipated new income streams and expense changes, etc.
W2R
Moderator Emeritus
+1
I dealt with this issue in a somewhat similar way. I figured out how much SS would pay me, and set aside enough cash to "pay myself SS" from when I first retired until the date when I could actually get SS. Mentally I considered this cash to be outside my portfolio. Then I based my WR on the rest of my portfolio.
skyking1
Thinks s/he gets paid by the post
+2
That makes for easier math. I am liking the buckets approach. Big buckets for the long term calculations, and smaller ones for whatever else is needed short term.
It helps me think about risk differently too.
That makes for easier math. I am liking the buckets approach. Big buckets for the long term calculations, and smaller ones for whatever else is needed short term.
It helps me think about risk differently too.
I semi-retired 6 years ago and moved to Reno (taught online half-time until last May; I encouraged younger DW to fully retire 3 years ago).
4 years ago I modeled taking 5-6%/year from this year and for the next 4 years until FRA , when the withdrawal would decrease to 3.5-4.5% (depending on the market) and then 4 years later decrease to 3-4% when DW reached FRA.
Due to market increases, this year's withdrawal was only 4.5% and, assuming the market does not crash (big assumption), the withdrawal after my SS goes down to 2.9%. I now count in a 25% increase in withdrawal around DW FRA, which then makes the withdrawal rate about 2.8%.
I have put the unspent withdrawals from 2019, 2020 in a taxable brokerage account hich has doubled, despite putting in solar panels in late 2019, trading in the Forester for a Bolt in 2020, and trading the Silverado for a RAV4 plug-in hybrid two months ago. As a long term poster appears to do, this unspent withdrawal account is a slush fund for emergencies or BTD travel/etc. No travel in 2020 and probably this year except camping (which is dirt cheap, pun intended), so these purchases have come out of planned travel spending to drive down our on-going monthly base necessity expenses (electricity and gas) about $450/month, in perpetuity.
Our stock allocation is currently 51%, but if there is a major stock crash I will consider taking SS a year or two early; otherwise I've considered waiting until 70 to take SS. Edit: I did not expect the increases in our stock retirement accounts that we have seen over the last 6 years and particularly the last 3 years since I had reduced our allocation to avoid SOR risk.
4 years ago I modeled taking 5-6%/year from this year and for the next 4 years until FRA , when the withdrawal would decrease to 3.5-4.5% (depending on the market) and then 4 years later decrease to 3-4% when DW reached FRA.
Due to market increases, this year's withdrawal was only 4.5% and, assuming the market does not crash (big assumption), the withdrawal after my SS goes down to 2.9%. I now count in a 25% increase in withdrawal around DW FRA, which then makes the withdrawal rate about 2.8%.
I have put the unspent withdrawals from 2019, 2020 in a taxable brokerage account hich has doubled, despite putting in solar panels in late 2019, trading in the Forester for a Bolt in 2020, and trading the Silverado for a RAV4 plug-in hybrid two months ago. As a long term poster appears to do, this unspent withdrawal account is a slush fund for emergencies or BTD travel/etc. No travel in 2020 and probably this year except camping (which is dirt cheap, pun intended), so these purchases have come out of planned travel spending to drive down our on-going monthly base necessity expenses (electricity and gas) about $450/month, in perpetuity.
Our stock allocation is currently 51%, but if there is a major stock crash I will consider taking SS a year or two early; otherwise I've considered waiting until 70 to take SS. Edit: I did not expect the increases in our stock retirement accounts that we have seen over the last 6 years and particularly the last 3 years since I had reduced our allocation to avoid SOR risk.
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Certainly one of those, "it depends," kind of questions. Similar to investing in general, it is a mixture of each person's needs at that point, future desires, and ability to make changes.
The main factors are a person's age and spending desires. Lower age extends out the time period of pulling over 4%, so there isn't as much room make up for it, but if someone is pretty near to SS and/or a pension, there is much more room.
Personally, I'm on the edge of retirement and my time horizon is so long that there is absolutely no room for going over 4% early on, and preferably not over 3.5%, unless I want to risk going back to work, since it is multiple decades before I reach SS+pension, if the next decade ends up being another good one, I will certainly consider having several over 4% years.
The main factors are a person's age and spending desires. Lower age extends out the time period of pulling over 4%, so there isn't as much room make up for it, but if someone is pretty near to SS and/or a pension, there is much more room.
Personally, I'm on the edge of retirement and my time horizon is so long that there is absolutely no room for going over 4% early on, and preferably not over 3.5%, unless I want to risk going back to work, since it is multiple decades before I reach SS+pension, if the next decade ends up being another good one, I will certainly consider having several over 4% years.
Out_the_Door
Recycles dryer sheets
Much like everyone else...I'm taking out about 6% for the next five years until my pension kicks in and my WR drops down to 3%. Then I'll have to wait for three years after that for SS at FRA to kick in and then my withdrawal rate will drop down to 1% (mostly to pay taxes) and then no worries until RMDs five years after that.
We have been retired 2 years, I’m 59 and DW is 58, DW does have a pension which we have our health insurance deducted from. Our current WR is about 1.25% of our total investments. We do have a healthy cash reserve we pull from for home projects and travel. We had planned to travel a lot once retired, which we did for about 9 months then Covid hit. Right now we are good so won’t increase the WR, but we will look at it at the first of the year. I do not plan to reduce it once we start SS, I’m going to look at SS as a monthly bonus. Of course this is all contingent on the economy not taking a dump.
