Originally Posted by OverThinkMuch
When the market has a great year, I deliberately withdraw an extra 0.5% that I don't need. When times are rough, I skip a 0.5% withdrawal.
I do something similar, and it's about as close as I will get to trying to 'time the market'.
This year, with the market indexes bumping up against new highs, I took out more than I will need. It goes into my pile of spendable cash, but it won't be spent (I hope) this year. So, if the market decides to drop by 20% before I do my next annual withdrawal, I will have it there to buffer my spending decrease. I lived through the 73-74 crash (a whopping 45% drop for those of you who have forgotten). It took 20 years for the market to recover
on an inflation adjusted basis. A few years later, we saw a 20% drop in one day. Are we having fun yet?
On important factor that many models don't consider is that I am not getting any younger or healthier
. If the market decides to take a huge haircut for the next 2-6 years, I don't want to stop doing the things that I may not be able to do when the market recovers
. So, I keep a big buffer. That may be a drag on returns, but it also insures that I can do many things I want to do while I have the health and vigor to do them.