Withdrawal Rate: your personal comfort zone.

[Blue Collar Guy]

this legacy thing?

so, someone else asked me this question when i said i took out a big insurance policy when i retired, im a nervous guy, i worry about everything, if the market decides to tank and set a down record for an extended time i have the resources to keep my mini empire going, so when they bury me and the bride if there is a something left yup the legacy was big, if things go sour ie no sec sec for us, market tanks, my pension dries up, huge sickness , then im covered

 

[nun]

Actual rates have been as follows:

2010 0.00% (unexpected 20% bonus from working in 2009 was nice)
2011 0.86%
2012 1.27%
2013 3.51%
2014 5.40%
2015 5.43%
2016 1.99%

The figure I use in the calculators is 3.5% but we have secure pensions and this year I started drawing a private pension (circa $10k/year), plus my wife will start drawing SS (also around $10k/year) so I can see us upping the withdrawal % from now on as we still have my US and UK SS to come plus my wife's UK SS to come.

Yes it's nice to have a couple of sources for SS checks for the extra inflation linked income. I've got 12 years before my UK SS starts at 67 and I'm just about to pay my last UK voluntary NI contribution......just got under the Class 2 deadline. I'm thinking of taking the US SS at age 62....we'll see.

 

[HillCountry]

If I stop working today, I will at 2.8%.

But I am comfortable with 5% when I retire in 6 years. Because my budget has plenty of extras.

Actually after budgeting for the retirement house, 2 private tuitions, a class A MH, my planned WR will be high 3.

So I voted 5.

 

[RobLJ]

I answered more than 5%, since that will be our rate in a few years before drawing SS. After SS it will be more like 3.5-4% at max.

 

[rodi]

I voted for what I'm comfortable with... 3- 3.5%.

I'm actually withdrawing between 2.5 and 3%.

But - with teenagers who manage to find expensive medical needs... who knows if I can keep this up. (2015 was the year of both kids having multiple broken bones and sports injuries, 2016 was the surprise ameloblastoma and jaw surgery for older son.) Plus older son is lobbying for use of a car (and to get his license)... so I may have to spring for a semi-decent used car for him to use... sometime in the future... So I may have to bump it up a bit.

I'm coming up on my 3 year anniversary of being retired... I haven't changed my $$ amount for withdrawal and my nest egg is bigger than when I retired... so my WR is actually going down. It helps that 1) my micro pensions started bringing in an extra $460/month and 2) DH started on medicare and we're spending $350ish less per month for much more comprehensive insurance.

 

[socca]

I think the concept of spending only/primarily passive income is actually quite popular on this board, if you have the savings to do it. BUT, it is still a withdrawal rate.

Nope. Defining means as gross income is quite different than defining means as a percentage of the current market value of assets. I produce profit & loss and balance sheet reports for my personal finances (essentially running them like a business), so naturally I gravitate to the former definition. Whatever works!

 

[Niuatoputapu]

I answered more than 5%, since that will be our rate in a few years before drawing SS. After SS it will be more like 3.5-4% at max.

Similar to us. I answered more than 5% because that is our plan for age 62-69. Then after I start SS at age 70, our withdrawal rates will be equal the RMDs of our tax-deferred pot. Enough flexibility to easily tighten the belt if the market tanks.

 

[Alan]

Actual rates have been as follows:

2010 0.00% (unexpected 20% bonus from working in 2009 was nice)
2011 0.86%
2012 1.27%
2013 3.51%
2014 5.40%
2015 5.43%
2016 1.99%

The figure I use in the calculators is 3.5% but we have secure pensions and this year I started drawing a private pension (circa $10k/year), plus my wife will start drawing SS (also around $10k/year) so I can see us upping the withdrawal % from now on as we still have my US and UK SS to come plus my wife's UK SS to come.

I just realized that the above figures are of the % of the starting figure each year but I also keep track of the % of the original starting value as per the Trinity Study. Having a fairly secure stream of pension income to cover the basics is a huge help.

2010 0.00%
2011 0.99%
2012 1.96%
2013 5.89%
2014 9.84%
2015 9.90%
2016 3.53%

 

[Alan]

Yes it's nice to have a couple of sources for SS checks for the extra inflation linked income. I've got 12 years before my UK SS starts at 67 and I'm just about to pay my last UK voluntary NI contribution......just got under the Class 2 deadline. I'm thinking of taking the US SS at age 62....we'll see.

Just a couple of days ago I discovered that my wife is entitled to UK SS (Old Age Pension - OAP) even though she is under the 10 year minimum of contributions. Stupid really, but I'd never re-visited the question after major changes to the scheme in the decades since we'd left. As you know each person gets an OAP based solely on their own contributions and a spouse does not inherit any OAP when their partner dies. But these days people in full time education get credits, and those who leave work to raise children get credits while the children are below school age. Turns out that she actually has 20 years credit, including 2 years working part time between age 16 and 18 at High School, 4 years at university, 7 years until the youngest started school and 7 years working. We plan on buying 6 years past credit (most you can buy) and then doing 4 more years of voluntary contributions until she reaches FRA making a total of 30 years.

It feels like opening a suitcase and finding ~$175k, which is what the pension will be worth if she lives 20 years after FRA.

 

[MichaelB]

Just a couple of days ago I discovered that my wife is entitled to UK SS (Old Age Pension - OAP) even though she is under the 10 year minimum of contributions. Stupid really, but I'd never re-visited the question after major changes to the scheme in the decades since we'd left. As you know each person gets an OAP based solely on their own contributions and a spouse does not inherit any OAP when their partner dies. But these days people in full time education get credits, and those who leave work to raise children get credits while the children are below school age. Turns out that she actually has 20 years credit, including 2 years working part time between age 16 and 18 at High School, 4 years at university, 7 years until the youngest started school and 7 years working. We plan on buying 6 years past credit (most you can buy) and then doing 4 more years of voluntary contributions until she reaches FRA making a total of 30 years.

It feels like opening a suitcase and finding ~$175k, which is what the pension will be worth if she lives 20 years after FRA.

That sure is good news.

 

[REWahoo]

It feels like opening a suitcase and finding ~$175k, which is what the pension will be worth if she lives 20 years after FRA.

Found money is always nice.

 

[Carpediem]

Similar to us. I answered more than 5% because that is our plan for age 62-69. Then after I start SS at age 70, our withdrawal rates will be equal the RMDs of our tax-deferred pot. Enough flexibility to easily tighten the belt if the market tanks.

ReWahoo, RobLJ, Niuatoputapu....you're my heroes because I'm in the same boat and often wondered if I was crazy taking a high WR early in retirement knowing it would dip to around 1-2% at 70. Thank you for sharing your info.

 

[Fedup]

Just a couple of days ago I discovered that my wife is entitled to UK SS (Old Age Pension - OAP) even though she is under the 10 year minimum of contributions. Stupid really, but I'd never re-visited the question after major changes to the scheme in the decades since we'd left. As you know each person gets an OAP based solely on their own contributions and a spouse does not inherit any OAP when their partner dies. But these days people in full time education get credits, and those who leave work to raise children get credits while the children are below school age. Turns out that she actually has 20 years credit, including 2 years working part time between age 16 and 18 at High School, 4 years at university, 7 years until the youngest started school and 7 years working. We plan on buying 6 years past credit (most you can buy) and then doing 4 more years of voluntary contributions until she reaches FRA making a total of 30 years.

It feels like opening a suitcase and finding ~$175k, which is what the pension will be worth if she lives 20 years after FRA.

I think a spouse will get something as long as that person is over 45 and under pension age, and NI contributions were paid by late husband or wife.

https://www.gov.uk/bereavement-allowance/eligibility

 

[Alan]

I think a spouse will get something as long as that person is over 45 and under pension age, and NI contributions were paid by late husband or wife.

https://www.gov.uk/bereavement-allowance/eligibility

It's not very much if anything at all and I hope I live another 4 years meaning she will be above pension age. (I expect it is means tested and she is not going to be hurting by losing my OAP)

 

[GravitySucks]

I started retirement thinking 4.5% using the Trinity info and other info that was in A Random Walk Down Wallstreet and set up my funds to provide that the first 5 years. Four years in and I'm a little lower than that percentage.
Next year I will have unfettered access to the IRA and may bump the spending a bit. I've not been depriving myself of anything, but I have a few things I'd like to do before I get too old.
I think a 5 to 5.5% withdraw will be very safe considering SS is now less than a dozen years away. Fidelitys planner says even higher has a good chance of lasting longer than I really believe I'll live.

 

[David1961]

I look at it this way. If my investments just kept up with inflation, I should be able to take out 3.33% yearly for a 30 yr time period.

 

[Fedup]

What's the Trinity info? And why it's important to withdrawal rate?

 

[nun]

But these days people in full time education get credits, and those who leave work to raise children get credits while the children are below school age. Turns out that she actually has 20 years credit, including 2 years working part time between age 16 and 18 at High School, 4 years at university, 7 years until the youngest started school and 7 years working. We plan on buying 6 years past credit (most you can buy) and then doing 4 more years of voluntary contributions until she reaches FRA making a total of 30 years.

It feels like opening a suitcase and finding ~$175k, which is what the pension will be worth if she lives 20 years after FRA.

I got 2 years of free contributions for being at sixth form college between ages 16 and 18 and HMRC sent me notices to make voluntary contributions at university because I was in full time education. But I didn't have much money so I ignored them. I now have almost 35 years and calculate that my total lifetime contributions has been 7000 pounds....and for that I'll get an index linked pension that might be 10000 pound a year by there time I claim it in 2028.

 

[Alan]

What's the Trinity info? And why it's important to withdrawal rate?

https://en.m.wikipedia.org/wiki/Trinity_study

Withdraw 4% from your starting portfolio and each year increase that $ amount by inflation. The % each year is measured from that initial sum, not the starting value of your ongoing portfolio each year.

 

[imoldernu]

Curious. When you say you add SS to your spendable assets how are you calculating this? Are you capitalizing the flow over your "planned life expectancy"?

From my original post:

We don't use SWR's but just check our solvency once a year and adjust as necessary.
Our formula...
Add Social Security to our spendable assets divided by 12 (current planned life expectancy)
If we spent more than that last year, we cut back, if we spent less we're ok. So far, for the past twenty years, we've been okay.

Basically at age 80, it's easier to look ahead... basing the "lasting power" on a finite number.

To over simplify... an example... (not our numbers but just to put a $$$ value on the plan.)
Spendable assets... $500,000 divided by 10 years = $50,000/yr. plus SS of $25,000/yr = $75,000 yr.

Since we actually spend a small faction fraction of that, we take another look every year to see if we're still safe. In fact, at our current rate, we'd be safe well into our mid to late 90's. Included in our planning is some nursing home insurance, as well as the value of our house, as a Medicaid "safe" shelter.

 

[H2ODude]

I understand. So you will have a larger legacy?

Yeah, don't really see any way around it. Will also do more charitable as it grows. Have 6 grandchildren and it would be nice to help them avoid college debt. Both DS and DD are doing well, don't really need the inheritance but I'm sure they'd make good use of it. We are trying to whittle away at it though.

 

[Fedup]

I got 2 years of free contributions for being at sixth form college between ages 16 and 18 and HMRC sent me notices to make voluntary contributions at university because I was in full time education. But I didn't have much money so I ignored them. I now have almost 35 years and calculate that my total lifetime contributions has been 7000 pounds....and for that I'll get an index linked pension that might be 10000 pound a year by there time I claim it in 2028.

I think max benefit is now 30. My husband gets roughly GBP 160 per week, about $800 per month. Not quite $10k per year. But we stopped contributing last year by April 2016.

 

[nun]

I think max benefit is now 30. My husband gets roughly GBP 160 per week, about $800 per month. Not quite $10k per year. But we stopped contributing last year by April 2016.

To get the full UK flat rate pension you now need 35 years of contributions and it's currently £8k/year.

 

[Fedup]

To get the full UK flat rate pension you now need 35 years of contributions and it's currently £8k/year.

You are correct on the 35 years. I'm surprised my husband got above the max pension rate this year of GBP 159.5, I think his protected pension or whatever it's called is only GBP 1.45 over his U.K. State pension, so that means he must have gotten the max UK state pension. But I thought they did send a letter to say he has 30 years.

 

[nun]

You are correct on the 35 years. I'm surprised my husband got above the max pension rate this year of GBP 159.5, I think his protected pension or whatever it's called is only GBP 1.45 over his U.K. State pension, so that means he must have gotten the max UK state pension. But I thought they did send a letter to say he has 30 years.

The flat rate only applies to men born after 1951 and there are a number of factors that go into the calculation. Anyone retiring now with at least 35 years of contributions will get £155 per week. It's really a pretty poor benefit. My US SS will get WEPed as I only have 18 years of FICA payments, but it will still be considerably more than the UK state pension.