2022 Withdrawal Rates?

[Midpack]

2022	2021	2020	2019	2018	2017	2016	2015	2014	2013	2012	2011
2.8%	2.4%	2.2%	1.7%	0%	0.5%	0.5%	1.3%	1.3%	1.1%	1.2%	1.2%

Bumped up in 2019 due to

• started large Roth conversions,
• DW didn't retire until 2019, and
• we moved and bought a bigger house in a slightly higher COL area.

And we won't start taking SS until 2024 and 2026 DW. We're spending more than ever in retirement, but we probably need to spend more while we can enjoy it. We've been very fortunate.

 

[audreyh1]

My bad.

Like that "objects may be closer than they appear" statement on your side mirror, I may claim to be more of a purist than I actually am.

Good one!

 

[NW-Bound]

Suppose one uses FIRECalc in this manner:

1) each year, retire over again by running FIRECalc anew with the often higher portfolio balance due to the recent bull market

2) reduce the retirement period as his remaining time is not constant at 30 years.

What would he then get to spend? Oohh la la. Mucho mucho $ to BTD.

 

[COcheesehead]

Yes, I agree.

However, it is always possible we might spend the 5%, as we did when we installed solar back in 2019 (well, even then we didn't spend 5.5%). It is a sleight of hand.

i originally planned withdrawing 5.5-7% until SS FWA, but then the stock market did better than I planned, as well as spending was less. I was a lot more tense back in 2015 though when I semiretired at 57.

I set aside funds for lumpy expenses like a new car, but I include it in the year I set it aside. So I guess it’s just two ways to accommodate spending spikes.

 

[W2R]

2022	2021	2020	2019	2018	2017	2016	2015	2014	2013	2012	2011
2.8%	2.4%	2.2%	1.7%	0%	0.5%	0.5%	1.3%	1.3%	1.1%	1.2%	1.2%

Bumped up in 2019 due to

• started large Roth conversions,
• DW didn't retire until 2019, and
• we moved and bought a bigger house in a slightly higher COL area.

(bolding mine)

Moving, buying a bigger house, and a higher COL area will do that! But hopefully it made you considerably happier, which is the point of that particular exercise. Most of us feel like there's nothing wrong with a WR of 1.7%-2.8% anyway. So I guess what I am saying is, "Congratulations!"

 

[Whisper66]

Suppose one uses FIRECalc in this manner:

1) each year, retire over again by running FIRECalc anew with the often higher portfolio balance due to the recent bull market

2) reduce the retirement period as his remaining time is not constant at 30 years.

What would he then get to spend? Oohh la la. Mucho mucho $ to BTD.

That’s the process I use, except I use I-ORP with Firecalc as a sanity check. Seems more appropriate to me than generating an acceptable spend rate at retirement that is just adjusted for inflation for the rest of one’s life. To each their own.

 

[FLSUnFIRE]

Suppose one uses FIRECalc in this manner:

1) each year, retire over again by running FIRECalc anew with the often higher portfolio balance due to the recent bull market

2) reduce the retirement period as his remaining time is not constant at 30 years.

What would he then get to spend? Oohh la la. Mucho mucho $ to BTD.

Well, I FIREd in 2021 and I don't like this game! Back to the Cheapwad Finds thread....


Seriously, this method is a valid strategy but I'd prefer to be a bit more conservative in this economy and with a pretty long draw period (I plan for 100 though late 80s is more likely). Statistically, I should see an inflation adjusted rise in NW long term and am somewhat counting on it to self-insure for my care in the future so staying invested even in the good times makes sense to me. Realistically, I'm not spending much at the moment (much less than planned) and don't feel deprived at all... having a ton of fun without and managing MAGI keeps my cash to spend fairly low.

 

[NW-Bound]

^^^ I was joking about that.

Just now tried it, and used 20 years instead of the 30 years because I have been retired for 10 years.

FIRECalc says I can spend 4x what I actually do now.

Nice to know, but I am not that big a spender.

 

[FLSUnFIRE]

^^^ I was joking about that.

Just now tried it, and used 20 years instead of the 30 years because I have been retired for 10 years.

FIRECalc says I can spend 4x what I actually do now.

Nice to know, but I am not that big a spender.

It is valid, there were long discussions on TMF before it jumped the shark as well as a few here IIRC. As long as you are trusting the past to be a reasonable guide to the future it as if you are retiring anew. Of course, when you hit year 30 and are still kicking it might get awkward adjusting the draw period to zero!



I view calculated SWR as a ceiling, I'm just going to spend what I need to live a happy life and right now, I'm apparently easy to keep happy (as long as I don't "have" to do anything -I love that almost everything is now optional!).

 

[NW-Bound]

It is valid, there were long discussions on TMF before it jumped the shark as well as a few here IIRC. As long as you are trusting the past to be a reasonable guide to the future it as if you are retiring anew. Of course, when you hit year 30 and are still kicking it might get awkward adjusting the draw period to zero!

I view calculated SWR as a ceiling, I'm just going to spend what I need to live a happy life and right now, I'm apparently easy to keep happy (as long as I don't "have" to do anything -I love that almost everything is now optional!).

One way to avoid that singular point of 0 after 30 years, in case one is lucky to last that long (many posters here did not make it), is to use the IRS longevity table for RMD.

A 72-year-old will use 27 years, an 80-year-old will use 20 years.

This will not give you as big a bump up, but you have to be a really optimistic individual to use 30 years for FIRECalc when you are 80. In fact, when I get to 72 for RMD (not long now), I will not expect to live another 27 years.

Yes, I use the FIRECalc number, even at 30 years as a ceiling. Lots of headroom there, and I like it. I spend more time thinking about what to spend money on that's worthwhile for me, instead of how much to spend.

 

[audreyh1]

One way to avoid that singular point of 0 after 30 years, in case one is lucky to last that long (many posters here did not make it), is to use the IRS longevity table for RMD.

A 72-year-old will use 27 years, an 80-year-old will use 20 years.

This will not give you as big a bump up, but you have to be a really optimistic individual to use 30 years for FIRECalc when you are 80. In fact, when I get to 72 for RMD (not long now), I will not expect to live another 27 years.

Yes, I use the FIRECalc number, even at 30 years as a ceiling. Lots of headroom there, and I like it. I spend more time thinking about what to spend money on that's worthwhile for me, instead of how much to spend.

Since you didn’t turn 72 last year, your RMD age is now 73.

 

[NW-Bound]

Since you didn’t turn 72 last year, your RMD age is now 73.

Thanks for the reminder. One more year to stuff some money into Roth.

 

[GravitySucks]

Many Folks here are going to leave some happy heirs and grateful charities.

 

[audreyh1]

Many Folks here are going to leave some happy heirs and grateful charities.

Yes.

I know our withdrawal rate at 3% (of year end portfolio value) is still quite low, but our spending/gifting is even less, and so we keep building a surplus (from which we occasionally gift/donate larger amounts and/or buy large ticket items).

We hope to gift/donate a lot more as we age, and will be more aggressive as we get older because we’d like to do it while we are alive.

 

[thepalmersinking]

Regarding withdrawal rates, once you decide the percentage, do you take equal amounts out of each holding in your accounts?

 

[SecondCor521]

Regarding withdrawal rates, once you decide the percentage, do you take equal amounts out of each holding in your accounts?

You could, but I don't.

I think most people essentially sell something then rebalance to their AA. The selling and the rebalancing might happen at the same time, or may be asynchronous.

 

[COcheesehead]

Regarding withdrawal rates, once you decide the percentage, do you take equal amounts out of each holding in your accounts?

I take mine from fixed income interest and let equities ride. I likely won’t touch equities for 10+ years, probably longer. Fixed income covers all our withdrawals.

 

[flyingaway]

^^^ I was joking about that.

Just now tried it, and used 20 years instead of the 30 years because I have been retired for 10 years.

FIRECalc says I can spend 4x what I actually do now.

Nice to know, but I am not that big a spender.

Do you regret that you did not set that x bigger 10 years ago?

 

[HI Bill]

Regarding withdrawal rates, once you decide the percentage, do you take equal amounts out of each holding in your accounts?

No. I take from my accounts that are most highly valued (buy low, sell high), and take a mix from an inherited IRA, 401K (rule of 55), brokerage accounts, and/or cash, depending on the market's valuation. I also look at improving my AA without incurring additional taxes. For my first few years of ER (55-60), I'm both spending down my brokerage accounts and taking from my tax-deferred accounts, maximizing the MFJ $89,250 (2023) 0% LTCGs tax bracket as well as 'using up' the standard deduction of $27.7K to take tax-deferred withdrawals tax-free. Once I start RMDs and heavy withdrawals from tax-deferred accounts, I'll never again be able to have most of my Federal income taxed at 0%! It's more of an art, than a science. I also try to make withdrawals when my holdings are at an all-time high, and if not, take some from my cash bucket.

For 2023, since the market's still down for me, I'm spending cash, at least for the first half of the year. I will sell about $27.7K in tax-deferred holdings to 'reset' the basis, and will sell about $178.5K in brokerage shares that will reset the basis (~50% of these are LTCGs), and then will reinvest the funds. Even if I spend 100% cash this year, I will have effectively 'freed up' about $117K towards next year's spending, all tax free.

 

[audreyh1]

Regarding withdrawal rates, once you decide the percentage, do you take equal amounts out of each holding in your accounts?

We’re not pulling any funds from IRAs yet. So all the withdrawal comes out of our taxable brokerage account.

Once we are required to do RMDs then we will probably just pull the required amount from the IRAs and the rest from the taxable brokerage account.

We do maintain an AA across those accounts and rebalance after withdrawal and move assets around as warranted for tax efficiency.

 

[Out-to-Lunch]

and will sell about $178.5K in brokerage shares that will reset the basis (~50% of these are LTCGs), and then will reinvest the funds in a similar fund to avoid the wash rule.

You know that there is no wash rule on gains, right? You can repurchase the identical ticker the next day (or same day, for that matter) after realizing the gain.

 

[HI Bill]

You know that there is no wash rule on gains, right? You can repurchase the identical ticker the next day (or same day, for that matter) after realizing the gain.

Sorry, yes, you are correct.

 

[Martlet]

I'm late to the party but our 2022 WR was ~3.4%. Will be much higher this year due to valuation decline in 2022, some projects we want to do on the house and because we want to limit 2024 income recognition that will count towards Medicare premium determination in 2026. I am pretty sure it will be over 5%, maybe over 6%. In '24 and beyond it should be less scary.

I am motivated by this discussion to go back and calculate our WR for '20 and '21. I know I should know...

 

[flyingaway]

You know that there is no wash rule on gains, right? You can repurchase the identical ticker the next day (or same day, for that matter) after realizing the gain.

The financial company may not allow you to sell and buy the same fund within a month, I think, frequent trading.

 

[pb4uski]

Regarding withdrawal rates, once you decide the percentage, do you take equal amounts out of each holding in your accounts?

I usually keep a year of withdrawals + $25k emergency fund in an online svings account (currently yielding 3.4%). I actually have an automated monthly transfer from that savings account to a credit union checking account that we use to pay our bills. If I have any lumpy expenses, then I do special withdrawals.

I expect our 2023 WR to be about 2%. It will be about 3% if the Ford Maverick that I have on order is ever delivered.