Withdrawal rates for 2017, and planned for 2018

[sengsational]

Although I went back and calculated WR for past retirement years, and it was 3.5%, I don't have one in advance. If I did, it would have to factor in the fact that I'm not getting SS or pension yet, and I will be getting those later (if I last that long, hehe!) in 6 years.

Before I retired, I ran the i-orp simulation and I've never been able to spend that much, so figured I was fine. I know the i-orp results ignores sequence of returns risk, my asset allocation should manage that risk. i-orp, "knowing" SS and pension are in the future is allowing a 4.7% WR, but I'll probably be more in the 3.5% range.

I have a simple cash flow spreadsheet that subtracts the usual "burn rate" every month, and it has rows for pre-tax account withdrawals, Roth withdrawals, and "off the burn rate" values, like income tax and big one-time expenditures. The pre-tax comes out in December and Roth "whenever" to keep the after-tax from going below a comfortable level (my after-tax essentially goes to "zero" in November). So it's a saw-tooth pattern.

 

[rodi]

What do you all use for the denominator in your withdrawal rate calculations?

Good question. I use all brokerage and tax preferred accounts. I also include the treasury direct bond account.

I do not include savings/checking accounts, 529 accounts, nor the value of our rental property. (That would be challenging since it's on the same lot as our primary home since it's a granny flat cottage and can not be sold separately.).

 

[Surewhitey]

Since we're still w*rking, we're not really relevant. However, we're at 3.6% of NW at the moment. Working on building after tax accounts to pay for retirement prior to tapping the tax deferred accounts at 59.5...only 47 & 53 at the moment...

 

[Plantman]

We've been in the 2.25-2.75 range over the last few years. However, now that I am fully retired and we have an extended European trip planned for this year, I expect that number to go up!

 

[Alan]

year|percent|comments
2010|0.0%| First full year of ER but unexpected bonus in June that year
2011|0.86%|
2012|1.27%|
2013|3.51%|
2014|5.4%|
2015|5.43%|
2016|5.44%|
2017|25.3%| Bought a house and a new car with no trade in. It is what it is

Figures are based on portfolio value at the start of each year. This year’s withdrawal was 38.9% of the initial portfolio value. I expect this year’s withdrawal to be back in the 5-6% range. Between us we have 4 private pensions and will both be receiving SS from the USA and UK so have no worries about running out of money. I have also been aggressively doing Roth conversions to avoid an HMRC tax torpedo at age 70.5 so that 43% of our portfolio is now tax free and 29% is tax deferred, so taxes will continue to be a major component of our expenses for the next 4 or 5 years then drop off dramatically. (At least that is the plan).

 

[audreyh1]

+1 for the extra.

I put it into some relatively short term CDs (1-3 years) or a short term bond fund. I figure if we get another Bear market like 73-74, it will provide a useful buffer.

Yep - high yield savings, short-term CDs, a little bit of short-term bond funds. I really am not interested in withdrawing less or exposing excess to the vagaries of equities or intermediate-term bonds. I don’t think I ever expected to say the retirement fund was big enough, but here we are! (Knock on wood).

We have enough built-up in short-term investments for some serious splurges. It’s nice to have that flexibility.

 

[RunningBum]

I use VPW, a slowly rising WR rate on the start of the year portfolio balance, including all investment/banking accounts + a value of my pension and 75% of SS based on what I'd have to pay for an annuity of those benefits. I think I did the latter part right, but it's under 10% of the entire portfolio so not critical if it's off some.


Last year my target was 3.1%, and my outflows were actually 2.2%. As mentioned in W2R's spending thread, I had no big unusual expenses this year so this is the most I've been under.


This year my target is 3.15%. Since I spent less last year and investment returns were great, I seriously doubt I'll come close. That's fine.


"Target" probably isn't the right word. I make no effort to spend at a certain level, nor do I limit myself to that amount because I could have a lot of extra expenses in a year and I'm not going to skip eating in December to come in at that number. It's not a withdrawal rate because I withdraw from my investment account as needed. I'm just looking for a number that I'd be concerned about if I was going over it every year.

 

[W2R]

[...]

year|percent|comments
2010|2.61%| First full year of ER. Small FERS pension too, nice.
2011|1.98%|
2012|2.12%|
2013|2.40%|
2014|1.70%| Social Security began
2015|8.64%| 6.92% (house) + 1.72% (all other) = 8.64%
2016|1.75%|
2017|1.58%|
2018|3.78%| 2.04% (car) +1.74% (all other) = 3.78%

[...]
2018: I always withdraw more than I [...] spend, and then return the excess at the end of the year. [...] So anyway, tomorrow I plan to withdraw 3.78% for 2018, [...]

I rebalanced this morning, although Vanguard cannot put the transactions through until tomorrow. But it's done, and for me, 3.78% is now a fact.

One more year wrapped up and put away - - on to 2018!

 

[Tallman4123]

I’ve been withdrawing 3.5% of our taxable retirement account Dec 31 value each year for several years now. I withdraw it around Jan 2 and rebalance.

That’s actually ~3% of our total retirement accounts including the IRAs. We’re not withdrawing from our IRAs yet.

It’s way more than we spend but I withdraw it anyway.

+1 for the extra.

I put it into some relatively short term CDs (1-3 years) or a short term bond fund. I figure if we get another Bear market like 73-74, it will provide a useful buffer.

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..

 

[audreyh1]

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..

For some people that might be true - if they are withdrawing from all their assets.

But Chuckanut and I withdraw from a subset of our assets labeled “retirement assets” and invested for the long term and thus subject to market volatility. As long as we don’t reinvest that excess in the retirement assets, our withdrawal rate holds regardless of how much we spend in the current year.

Many folks like to use all their investments (except perhaps for checking, some savings, 529s, HSAs, current year or quarter money, set asides for certain major purchases, etc., etc.) to calculate their withdrawal rate. I don’t. I only withdraw from and rebalance the retirement assets. Other assets outside the retirement fund are treated independently.

Clearly in our case withdrawal rate and annual spending rate are not synonymous, although withdrawn funds could be spent at any time in the future, just not necessarily in the same year as withdrawn.

I’m not interested in rebalancing across all my assets - just the retirement assets. Many people do prefer to treat it all as one big pot. I prefer to distinguish between retirement assets which are invested in long-term investments and non-retirement assets which cover a variety of shorter term goals and are generally invested in short-term instruments and can be spent at anytime without impacting the retirement assets or withdrawal rate.

 

[Meadbh]

2017 25.3% Bought a house and a new car with no trade in. It is what it is

Wow, that was brave. IIRC, you had sold your US home several years ago and were renting. So I suppose you could rationalize that your investment portfolio was “inflated” by the proceeds of that home for a number of years. Having several pensions also helps.

 

[Tallman4123]

For some people that might be true - if they are withdrawing from all their assets.

But Chuckanut and I withdraw from a subset of our assets labeled “retirement assets” and invested for the long term and thus subject to market volatility. As long as we don’t reinvest that excess in the retirement assets, our withdrawal rate holds regardless of how much we spend in the current year.

Many folks like to use all their investments (except perhaps for checking, some savings, 529s, HSAs, current year or quarter money, set asides for certain major purchases, etc., etc.) to calculate their withdrawal rate. I don’t. I only withdraw from and rebalance the retirement assets. Other assets outside the retirement fund are treated independently.

Clearly in our case withdrawal rate and annual spending rate are not synonymous, although withdrawn funds could be spent at any time in the future, just not necessarily in the same year as withdrawn.

I’m not interested in rebalancing across all my assets - just the retirement assets. Many people do prefer to treat it all as one big pot. I prefer to distinguish between retirement assets which are invested in long-term investments and non-retirement assets which cover a variety of shorter term goals and are generally invested in short-term instruments and can be spent at anytime without impacting the retirement assets or withdrawal rate.

Got it. Thanks!

 

[Moemg]

I do pretty similar to Audrey .I set the amount I can spend at 4% but many years I spent less . The excess goes to a slush fund which I could have used to pay for my car with but I chose to just make my amount spent at 6% and keep the slush fund for future use.

 

[Alan]

Wow, that was brave. IIRC, you had sold your US home several years ago and were renting. So I suppose you could rationalize that your investment portfolio was “inflated” by the proceeds of that home for a number of years. Having several pensions also helps.

That’s right, we sold our house in 2004 and just put those funds into our portfolio. It had nothing to do with costs but with having the flexibility to lock and leave. Now that we have curtailed vacations lasting many months and we wanted to live in a particular small market town in N Yorkshire owning became the obvious thing to do.

With no rent, low property taxes, reduced travel and much lower healthcare costs our reduced expenses have not affected our SWR. Our net worth hasn’t changed much just our investable assets.

Life is good.

 

[Chuckanut]

I do pretty similar to Audrey .I set the amount I can spend at 4% but many years I spent less . The excess goes to a slush fund which I could have used to pay for my car with but I chose to just make my amount spent at 6% and keep the slush fund for future use.

In my case, As I long as the Bear does not take a big chunk out of this market it’s a slush fund. If/When the Bear shows up, it becomes a survival fund.

 

[Beldar]

2.1% 2016

1.7% 2017

Essentially the same dollar amount each year, however the portfolio has grown substantially therefore the lower percentage.

I could easily double the WR but no Medicare yet so we have to play the ACA subsidy game. Plenty of after tax vehicles to fill in any holes along the way.

Thank you ER forum for showing me the way! Happy New Year.


_B

 

[Danmar]

Retired 11 years. Up until 2017, generally just spent divs. Current yield would average in the range of 3.25-3.75%. In 2017 I finally broke down and liquidated some stock. Around 2%. Plan to do the same in 2018 if market cooperates. Large gift to daughter and other big somewhat unusual expenses. Portfolio has returned double digits CAGR for 11 years. Sequence of return risk fading for me I think.

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?

 

[mpeirce]

I use a variable withdrawal of 4.5% of the average of the last three years financial assets (this excludes our home's value).

This year the averaging means we're withdrawing 3.9% of our financial assets as of last Friday.

Last year it worked out to 4.4%, but looking at actual spending we only really spent 4.1%

Even though the percentage this year is lower, the actual dollar amount is up over 7% - 13% more than what we actually spent. We'll see if we spend it all...

 

[NW-Bound]

...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...

There may be high-WR people, but they are out busy spending and do not post. The ones staying home counting their beans are the one who post?

 

[Meadbh]

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?

No pension!

 

[Moemg]

In my case, As I long as the Bear does not take a big chunk out of this market it’s a slush fund. If/When the Bear shows up, it becomes a survival fund.

Absolutely !

 

[Danmar]

No pension!

Well I think you do have Canada Pension Plan? That is a pension. I can see that having a relatively small pension like CPP might make one a little more conservative. But eventually, if these results continue?? Could always annuitize some of your gains?

 

[NW-Bound]

Seriously, even without pension I can spend a lot more when I consider future SS. But I do not crave anything.

The one thing I care to have and covet for a long time is a waterfront home on Bainbridge Island across Seattle, but that is way out of reach for me. Despite our love for travel, we cannot be perpetually in motion, and value our time at home too. Not caring about cars or anything else, there's no reason to get stuff that I do not care about.

Just the other day, my wife was told about someone getting robbed of a smartphone in broad daylight in a shopping mall. Don't know what phone it was, but good grief! I don't want a latest smartphone that bad, and that turns me off more.

They have these curved gigantic TVs for not that much money, but my existing 50" has not been turned on for a while. Why do I care for another one?

 

[Meadbh]

Well I think you do have Canada Pension Plan? That is a pension. I can see that having a relatively small pension like CPP might make one a little more conservative. But eventually, if these results continue?? Could always annuitize some of your gains?

I’m just 60 and plan to take CPP at age 65. I will not be entitled to full CPP. If I took it now I would get ~$458 per month. If I wait till 65 I will get ~$639 per month in today’s dollars. Woo hoo!

If I apply for OAS it will almost certainly be 100% clawed back.

Annuities would have to be significantly more attractive than they are now to make sense for me. I will evaluate them again at age 70.

One thing I have to look forward to is a stream of real estate income, once my remaining mortgages have been paid off.

As I have now been ER for 5 years and the sky has not fallen, I may loosen the purse strings a little. Maybe by 0.5%.

 

[ranchoparque]

Semi-retired at 63 now with pension and DW starting SS a few months ago.

In 2016 and 2017 I actually saved about .8% of year end savings in each of those years. A lot of part time work in those years helped.

After doing a lot of number crunching I am prepared to spend up to 2.8% of my 12/31/17 balance.

I am going with Wade Pfau's conservative SWR recommendation .

Also Vanguard's Nest Egg Calculator gives me a 99% success rate at a 40/50/10 asset allocation for a 30 year period