Withdrawal rates for 2017, and planned for 2018

[Christine]

I'm using the spreadsheet from https://www.bogleheads.org/wiki/Variable_percentage_withdrawal to suggest how much to withdraw.

Year|Suggested WR|Actual WR|Comments
2014|4.9%| 0.0%|Managed well on my pension
2015|4.9%|4.0%| Upped my holiday game
2016|5.0%|14.0%|Bought a car + holidays
2017|5.1%|3.7%|It's a struggle to use it all...
2018|5.1%|5.1%|Determined to spend more!

The 14% looks hairy but I have a good pension and my modest investments all go to fincance optionals luxuries like holidays and the car.

 

[street]

If there was some shots fired I do understand and naturally there would be some questions. I don't know if they were taken at me or the many others here with low WR but it really doesn't matter. This thread has been a fun one to read and follow and always interesting because we are not all the same so there isn't a right or a wrong.

We have no pension just money invested and we live very nicely. As time goes on we will need to spend more but I don't know what the future and what our health will be and what that will cost etc.

Not exactly trying to leave a legacy but I see that happening and will need a good plan going forward. I only have one heir and have just a few relatives so we don't have many to give too if we wanted too.

We spend and we don't have a budget if we need it we buy it and we give a lot away each year to charity. I'm on the board of directors for a Foundation and very proud of their work and 10% of my .5% WR goes to that charity.

The one thing I want people to know I'm not bragging about the WR but it is what it is. I could go out and buy 3 new trucks today just to blow money but why. If we don't need it then it wouldn't please us any way. We have been very blessed in life and I give thanks each day for that.

Each one of us here on this site have a few things in common. One is we are a minority but still not all created equal but we represent a very small % of people in the world with what we have.

 

[Nature Lover]

Given the very strong market results for the last 8 years or so, I am a little surprised how low many of the WR’s people quote here. In many (most?) cases your heirs will thank you. Maybe just a cautious bunch? Concerned about health care maybe? Or really don’t have anything else they want? Or early in retirement? Or portfolio is relatively small in relation to other sources of retirement income? Could be lots of reasons I think. But, at least in this thread, nobody’s taking Robbie’s advice?

This is a good question/comment - Thanks for posting it. Maybe it's a good subject for a poll. For me, and I'm in the category of having a low WR, here are my responses regarding the potential reasons mentioned:

Cautious: Yes.

Concerned about Future HC costs: Yes.

Early in Retirement: Yes (just completed second yr of retirement; this is probably the #1 reason for me).

Other Sources of Income Sufficient: Yes (pensions and other passive income, and this helps 100%).

Really don't have anything else they want: Probably are some things I'd like to upgrade eventually. Just not worth it at this time from a value proposition.

Taking Robbie's advice/approach: Even with a lower WR, I'm just like Robbie, spending more on things that matter. It just doesn't add up to much at the present time.

And, yes, I'll likely make my heirs or some charities very happy when I'm gone. But they'll have to be very patient. I'm planning on being here for another 35-40 years.

 

[DFA]

2014 WR 0% - Company payouts and DW working
2015 WR 0% - Cash work and DW working
2016 WR 0% - DW worked 1/2 year
2017 WR 0% - Pensions cover expenses, taxes, and HC, sold house, moved, renting now
2018 WR 0% planned - Pensions cover expenses, taxes, and HC, may have to add to investments or spend more, looking at purchase of house.

 

[PatrickA5]

Can you help me understand this exchange? If I withdraw 4% but ultimately only spend 3% and keep the remaining 1% in cash or reinvest it into a CD, I'd consider my withdrawal rate for the year to be 3%. From this exchange, I'm getting that you folks would consider your withdrawal rate to be 4%. Is that correct? I guess in my thinking Withdrawal Rate and Spending Rate are somewhat synonymous..

I figure all of my expenses for the year. Then subtract out any income from jobs, rents, SS, etc. What's left is money I had to come up with out of savings (retirement accounts, checking, Money Market, etc).

This year I had to "come up with" an additional 2.95% worth of money. In other words, I withdrew (from somewhere) 2.95% of my total liquid savings in order to fund expenses that weren't covered by other sources of income. My actual withdrawal rate from retirement savings was 5.65%, but some of that money was never spent. Just stating my WD rate as 5.65% would be rather meaningless unless I actually spent that much.

 

[shortstop14]

Interesting point. While our 2018 projected WR is 2.7% for our normal living expenses (excluding planned 2018 kitchen renovation), now that we are both 62, IF we started our SS now it would drop to 1.2%. I'm not inclined to do that but is it nice to have it in our hip pocket in case the SHTF.

Exactly the way I feel. We're right around 4% withdrawal while maintaining fairly high discretionary travel expense. We're keeping income low for ACA subsidy (as long as that lasts), and plan to use the years between Medicare and SS at 70 to do higher Roth conversions. But if things go sideways, SS is a nice tool to have to mitigate impact on the portfolio.

 

[jabbahop]

We are planning on 2.8%. Last year we had huge on-time (hopefully) costs with kids all in college and beginning our relocation/snowbird existence. Hoping to establish our new steady state this year.

 

[Live And Learn]

I have two calculated WRs. The "real" rate (which is total annual spending / initial portfolio) and a "proforma" rate (which is real spending plus $40k / year for medical). Right now DH continues to work only because we both have pre-exisiting conditions and the HI arena is too uncertain. If I were sure that we could get "reasonably affordable" HI with no limits / exclusions then he could retire also, if I use our current (and not initial) portfolio. My denominator is my initial portfolio of invested assets less a 10% contingency for annual overruns for big ticket items. My target WR when I retired was 3%, so the only way I make it is with HI subsidized through DH's work.

Anyway, here are the numbers:

	Real rate (% of initial portfolio)	Proforma rate (% of initial portfolio)
2015	2.1%	3.6%
2016	2.7%	4.2%
2017	1.8%	3.4%

 

[Bikechuck]

2018 is our first full year of retirement. Planning on a 3.1% withdrawl rate without taking social security. It can drop once we begin our SS benefits.

Planning to have the spousal unit begin taking her SS in the summer of 2019 when I turn 66 and can file a restricted application for half of her benefit. I will the hold off until 70 unless the markets drop like a rock.

 

[NW-Bound]

People with low WR, whether they have additional income or not, are definitely living below their means, if we consider 3.5% to 4% WR being the means.

It does not signify that they are suffering or have a low quality of life, if we think of the possibility that their stash is an outsize one. At the extreme, I don't think Bill Gates spends 0.5% WR a year, his charity donation not included. That's $450M/year! What would he "blow some dough" on? An aircraft carrier each year?

Interesting point. While our 2018 projected WR is 2.7% for our normal living expenses (excluding planned 2018 kitchen renovation), now that we are both 62, IF we started our SS now it would drop to 1.2%. I'm not inclined to do that but is it nice to have it in our hip pocket in case the SHTF.

My wife already said she wanted her SS at 62, which is next year. I want to delay mine because I do not need the money, plus several SS calculators say that it is better for the higher SS recipient of a couple to delay it till 70, due to loss of an SS when one of the couple dies.

Maybe my wife will think of something to spend this money on, but I doubt it. I am a bigger spender than she is, and I have not found stuff to spend money on. So, most likely our WR will drop. We shall see.


PS. Correction: At 4%WR, Bill Gates could only afford an aircraft carrier once every 3 years. Each costs $10B, and it is not clear if that includes the cost of the aircraft that it carries. And then, there's operating cost and personnel cost.

 

[daylatedollarshort]

We have a low long term withdrawal rate because we used to be like the rats in this video and now we're trying to declutter and enjoy simple living instead of buying more stuff:

 

[gayl]

2017 was an unusual year for me. I retired for the first time in 2004 at 50 because I was eligible for Lifetime Health Care and was getting tired of working for the government. Went back to work in 2008 because I was bored at home. Retired again in 2017 and this time I'm staying retired. Last year I withdrew 100% of the dividends in my IRA. I am not at RMD yet but I will be there in a few years. In 2018 I'm hoping to only withdraw my SPY January dividend. I used to put aside 40% of my pension and dividends for future plans but I plan on only putting aside maybe 25% this next year. It'll be interesting.

I am discovering that retirement is not nearly as expensive as I thought it would be

Anyone else discover that?

 

[rodi]

Given the very strong market results for the last 8 years or so, I am a little surprised how low many of the WR’s people quote here. In many (most?) cases your heirs will thank you. Maybe just a cautious bunch? Concerned about health care maybe? Or really don’t have anything else they want? Or early in retirement? Or portfolio is relatively small in relation to other sources of retirement income? Could be lots of reasons I think. But, at least in this thread, nobody’s taking Robbie’s advice?

I'll play. We have two reasons to keep our taxable income low - premium tax credits (aka obamacare), FAFSA (older son has only a year and half till college.) And I didn't plan well enough, ahead of time, so most of my stash is in tax deferred accounts. I'm currently pulling withdrawals from an inherited IRA... when that is used up we'll switch to DH and my IRAs. I'm still younger than 59.5 - so we won't touch mine prior to 59.5yo. DH is an old fart - so we can touch his ira's anytime now without penalty.

That said - we also have other income contributions outside of our investment withdrawals. DH is collecting SS. I have 2 micro pensions (<$500/month), and we have rental income. Only half of our spend comes from withdrawals.

I would love to spend more but can't justify the expensive cliffs of ACA and FAFSA... Once the kids are launched we'll look at spending more.

 

[Brett_Cameron]

Here are my actuals and planned. % of 401k balance at retirement.
W/R Age Year
2.1% 55 2011 Retired at end of July, Started 401k Withdrawals and DB Pension
6.9% 56 2012
7.8% 57 2013
8.7% 58 2014
14.2% 59 2015 Rolled 401k to IRA at 59 1/2. Vanguard Wellington 65/35
14.6% 60 2016
20.4% 61 2017 Started SS in Dec. Pension + SS covers all normal expenses plus
0.0% 62 2018
0.0% 63 2019
0.0% 64 2020
0.0% 65 2021
1.9% 66 2022 DS14 starts college
4.0% 67 2023
4.4% 68 2024
4.7% 69 2025
5.4% 70 2026 RMDs begin.
2.9% 71 2027
3.1% 72 2028
3.3% 73 2029
3.5% 74 2030
3.7% 75 2031
3.9% 76 2032
4.1% 77 2033
4.4% 78 2034
4.6% 79 2035
4.9% 80 2036
5.2% 81 2037
5.5% 82 2038
5.8% 83 2039
6.1% 84 2040
6.5% 85 2041
6.8% 86 2042

2017 had large off normal expenses.
Firecalc shows 100% to age 85 then 98%.

 

[scrabbler1]

I use end-of-year balances to determine my WR for the simple reason that some of my accumulated wealth throughout the year becomes cap gain distributions which boosts my income taxes due which increases my expenses for the year. Using start-year balances versus year-end expenses would, IMHO, needlessly overstate my WR.


I have two WRs. One uses only my taxable accounts in the denominator because today, at age 54, I don't yet have unfettered access to my IRA for another ~5 years. The IRA is sitting out there, growing nicely, and is one of my "reinforcements" I can begin tapping into starting a age ~59. This WR was between 3.5% and 3.9% in my first few years of ER (2009-2011), before the big market gains took hold, and when my HI premiums were rising quickly.


Then, in mid-2011, I switched to a cheap, bare-bones HI policy for a few years until the ACA exchanges began in 2014. The WR dropped to just under 3% from 2012-2014. In 2015, I had my hospital stay which spiked my med expenses so my WR rose to its former levels. In 2016 and 2017, the med expenses fell so the WR dropped back to 3%. Market gains kept the WR down but higher income taxes offset some of that.


My overall WR, including the IRA in the denominator, follows the same general pattern as the one using the taxable-only accounts. But it was around 2.5% in 2009-2011 before dropping to 1.8% in 2012-2014. It spiked back up to 2.3% in 2015 before dropping back to 1.8% the last 2 years. The IRA's market gains have been bigger than the rest of the portfolio, and without any added taxes.


In short, my expenses are rising as fast as my portfolio, hence the WR has been pretty stable since 2012.

 

[Winemaker]

Pensions cover 2/3 of our "basic" budget. Withdrawals from 401k for past 3.5 years covered missing paycheck with no inflation factor; approximately $72,000 net. Rental income was gravy, always cash flow positive, but provided the gravy, the sugar, the topping, the whatever you call it. Life is good; 3.5 years in we are upping the withdrawal from 1.7 to 2.08%. Don't know where we'll spend the money but DW will figure it out. Hardwood floors in dining room and living room are on the first things to do in 2018.

 

[audreyh1]

I use end-of-year balances to determine my WR for the simple reason that some of my accumulated wealth throughout the year becomes cap gain distributions which boosts my income taxes due which increases my expenses for the year. Using start-year balances versus year-end expenses would, IMHO, needlessly overstate my WR.

Taxes owed on my investments gets taken out of my withdrawal. It is understood that in higher cap gain distribution years I will be paying higher taxes and that what is left over is available for spending.

But my Jan withdrawal is a fixed % of the prior Dec 31 portfolio value regardless of how high my taxable investment income is. So I am using start year balances for current year withdrawal rate. I don't base it on my actual spending for the year but rather what I am "allowed" to take out and spend.

Ironically, after poor market years my taxes drop so much that my after-tax available income isn't hit nearly as hard as my portfolio.

 

[Cayman]

2017:
DH and I retired midyear, both of us are 50.

2018:
Planning a withdrawal rate under 2.7% based on initial portfolio (no increase for inflation).
Sequence of returns risk is the biggest reason we plan to keep withdrawals around 2.7% for the next decade. Our annual spend has not changed much for years (we had approx. the same annual spend pre-retirement). Life is good and we have fun at this withdrawal rate.

 

[GoodWishes]

2017: 2.6% of beginning of the year portfolio value
2018: probably similar


We would spend more if we know what to spend it on. We have everything we need and want.

 

[garyt]

Thanks Rewahoo you gave me the courage to do a 6% withdrawal this year and not freak out .

I agree, it's good to see people taking more out without a problem.