Comfortable withdrawal rate in ER

[anothercog]

I’m inching closer to RE. If I retired now, I’d have a withdrawal rate of 3.3-3.5% to maintain my current standard of living plus private health insurance. However when factoring the travel/spending I expect, it would be around 4-4.2% withdrawal rate.

I’m 54 now. While my withdrawal rate would be initially high, it will like start decreasing as the kids stand up on their own and at 65 I can take Medicare and my mortgage will be paid off. By the time I start taking social security at 69/70, my withdrawal rate would be around 2.5-2.7%.

If we end up moving out of CA those rates could come down more but that is not currently in the plans.

Curious what the withdrawal rates of others were in ER and how it changed over time. Firecalc and Fidelity give my 100% but still not sure when I should pull the plug.

 

[Al18]

I would continue working to age 55 and then retire. Many companies will let you withdraw penalty free from a 401K at age 55 if you continue working until then.

Also many of us plan to have the mortgage paid off by the time you retire.

 

[punkinhead]

I retired at 54 with a 4.2% withdrawal rate. I'm 3 years in. All the calculators said I'd be fine since it will drop to about 1.7% once Social Security and a very small pension kick in. It's very situation dependent so my numbers don't necessarily mean anything to anyone else.

 

[Surewhitey]

54 & similar %'s here. I'd be right there with you if DW was on board. Seems very doable with the eventual <3% @ SS age.

Geo arbitrage is a good option to have. We relocated from LA to DFW and there is a considerable savings. Even more if you go to a low property / sales tax region.

Watch out for RMD's @ 75 though.

 

[Ronstar]

Started retirement at around 2%. Now 10 years in on ss and a fixed term annuity. Haven't withdrawn anything yet this year, so at 0%. Last year I withdrew some, so WR was 0.5%. When annuity pays off in 2027, I'll have to withdraw $ about equal to what the annuity was, so I anticipate being at 0.6% then with ss. RMD's happen in 2028.

 

[Midpack]

There is no right answer, so not sure what comparing with others does for anyone. Depends on your risk tolerance, how much secure income you have if any, longevity, and a host of other factors. And even then you can't know if you chose wisely until you reach the end of your plan. None of us will know if we're going to come up short, or end with a surplus until the end. I've been retired for 13 years, annual WR ranged from 0.5-3.2%, average of 1.5%. But I've been doing large Roth conversions since 2019 so withdrawals were largely to pay (avoidable) taxes. And I didn't start Soc Sec until this May, DW starts in 2016. So our withdrawals will come down considerably starting this year. Not helpful to anyone else.

 

[Flyfish1]

If you have a 401K , then the Rule of 55 would apply. So retiring at 55 might more sense, but it depends on your situation, other retirement savings, etc.. Of course 4% or lower is the ideal, but I doubt 4.2% is a deal breaker. Carrying a mortgage into retirement is less than ideal , but if that is factored into your budget , so be it.

 

[FREE866]

I’m inching closer to RE. If I retired now, I’d have a withdrawal rate of 3.3-3.5% to maintain my current standard of living plus private health insurance. However when factoring the travel/spending I expect, it would be around 4-4.2% withdrawal rate.

I’m 54 now. While my withdrawal rate would be initially high, it will like start decreasing as the kids stand up on their own and at 65 I can take Medicare and my mortgage will be paid off. By the time I start taking social security at 69/70, my withdrawal rate would be around 2.5-2.7%.

If we end up moving out of CA those rates could come down more but that is not currently in the plans.

Curious what the withdrawal rates of others were in ER and how it changed over time. Firecalc and Fidelity give my 100% but still not sure when I should pull the plug.

You're in great shape. I've found that people on this board tend to be super super conservative when it comes to withdrawal rates. A 4.2% WR is certainly not "high" especially given you will be taking SS, at the latest , in 16 years! Also a factor is your equity % , and as long as you are at 60% + , barring something cataclysmic happening, you're golden. Congratulations!

 

[skyking1]

yours is a typical situation.
We are by no means ER, but our 5 year WD is closer to 7% before SS just knocks it down. This is due to planning lots of travel, and having fixed pension income so we are not riding on portfolio alone. Gotta go while the going is good!

 

[karen1972]

I think your situation is pretty common, we will go up to 4.4% next year at 55 when my honey retires with me. He's slightly older, made less so he will take at 62 and I will likely wait to take mine.

To me your risk depends on what else you have as options, like moving to another state.
I personally did a 25% haircut on social security, there is potential for inheritance, it doesn't obviously count equity in the home, and if I take SS early all those things would improve our odds even more so there is a lot of options to mitigate some unforeseen downfall.

Its really all about buffers and making sure you didn't make any huge mistakes in calculation your long term budget needs as one-offs happen way to often.

 

[Perryinva]

Yea, others situations are so varied as to be almost useless. COL, location, other sources etc. We withdrew 2% until I filed for SS@66, this year, now its 0%. But we have pensions that are larger than our SSs.

 

[Fermion]

Our budget is fairly low so when SS kicks in, even at 62, it will drop us from current 3.7% SWR to less than 2% if we maintain current spending (inflation adjusted). Kind of makes you think you could be spending more now...

 

[anothercog]

I would continue working to age 55 and then retire. Many companies will let you withdraw penalty free from a 401K at age 55 if you continue working until then.

Also many of us plan to have the mortgage paid off by the time you retire.

I’m likely in it for at least one more year but if I hit my breaking point I’d still be close to 55 by the time I actually exit. Don’t really plan on touching my 401k, IRA until 70 unless it makes sense to do Roth conversions.

My mortgage is currently at 2.5%. That rate will adjust in 7 years at which point I’ll pay it off if I can’t refi to a low rate.

 

[imjustawarrior]

OP, if the calculators show you are good to go and you have some wiggle room to cut back on expenses, then you are good to go.

I retired last year at 55 with kids in the house. Our initial burn rate is very high. 1 in college. 1 starting college in a couple weeks. 1 in HS. Once the kids are launched, the burn rate drops a lot. It will drop more when SS kicks in. That is life. There is no flat spending for a lot of people.

This is why the retirement calculators are valuable. They can model more complicated situations.

 

[anothercog]

OP, if the calculators show you are good to go and you have some wiggle room to cut back on expenses, then you are good to go.

I retired last year at 55 with kids in the house. Our initial burn rate is very high. 1 in college. 1 starting college in a couple weeks. 1 in HS. Once the kids are launched, the burn rate drops a lot. It will drop more when SS kicks in. That is life. There is no flat spending for a lot of people.

This is why the retirement calculators are valuable. They can model more complicated situations.

Same boat. 3 kids, a sophomore in college, senior in high school and sophomore in high school.

I did not include tuition or 529s in my numbers above. All my kids will go to UC so I can get some value from my CA taxes and they will be fully covered by the 529 plans except for some incidentals I cover out of my pocket.

 

[Koolau]

With the back-up that you can cut expenses at some point if need be, I'd not worry about a current WDR in your ball park. You've got SS and MC coming, so should not be an issue IMHO but YMMV.

I do like the advantage of being 55 for the possibility of 401(k) withdrawal, but that should not be your primary concern. Good luck!

 

[Dtail]

Many folks go over the 4% before they take SS and it could be for many years. Firecalc and Fidelity work through this concept in their retirement calculators and usually with great results.
I have been retired for 7 years and the last 3 years will be over 4%WR. I use the concept of reretiring each year from scratch and have trust in the calculators for effectively guiding my future WR%'s.

 

[SecondCor521]

I’m likely in it for at least one more year but if I hit my breaking point I’d still be close to 55 by the time I actually exit. Don’t really plan on touching my 401k, IRA until 70 unless it makes sense to do Roth conversions.

My mortgage is currently at 2.5%. That rate will adjust in 7 years at which point I’ll pay it off if I can’t refi to a low rate.

Although it sounds like your plan doesn't require it, the rule of 55 is a bit unusual - it can be used if you retire in the year in which you attain age 55. You're not required to be 55 when you retire. So if your 55th birthday is next summer, you could still leave work on January 2, 2025 and use the rule of 55. Most other rules require you to have attained the actual age (such as 59.5, 70.5, and the various SS ages).

Several people have mentioned SS in their replies and alluded to the WR% dropping quite a bit at that time. In order to smooth things out, in my Excel spreadsheets I calculate and include the NPV of my SS in my FIRE stash and then take 4% of that result as my upper bound. Another way to do it - which is better because it takes into account the timing of it all - is to put SS into Firecalc as a separate input.

 

[RetiredHappy]

We managed our retirement expenses as separate buckets. We set aside the first $1M in checking account/short term funds to be used in the first 7 years, but actually blew through in 5. When all income streams are in place 12 years after my retirement, our withdrawal rate will drop to about 2%. We just ignore the withdrawal rates and withdraw/sell whatever we need to pay for lumpy expenses.

 

[ziggy29]

If you have a substantial 401K plan, you can get out in the year you turn 55 and tap your 401K as income without penalty -- and do that until age 59.5 when IRAs are available, and not even need to deal with SEPP/72t and all that stuff.

As far as the 4% rule goes, Bill Bengen (who did much of the original research on it in the 1990s) intended it for a 30 year period, but also mentioned that using history as a guide, you could probably withdraw close to 3.5% in perpetuity. That said, it can be lumpy. You may need to have a higher rate until SS and pensions (if any) kick in, and until you can get on Medicare if you have to pay the full freight for health insurance until then.

If you have a lot in traditional IRA balances, it might also be worth looking at Roth conversions to avoid massive RMDs into high tax brackets at age 75. I just started doing that to the top of the 12% bracket and plan to for the next few years.

 

[ShokWaveRider]

Ours is 2%.

 

[Koolau]

When we first started out, we went well over 4% for a while and it was back in the great unpleasantness of 2008 time frame so YMMV.

 

[anothercog]

If you have a substantial 401K plan, you can get out in the year you turn 55 and tap your 401K as income without penalty -- and do that until age 59.5 when IRAs are available, and not even need to deal with SEPP/72t and all that stuff.

As far as the 4% rule goes, Bill Bengen (who did much of the original research on it in the 1990s) intended it for a 30 year period, but also mentioned that using history as a guide, you could probably withdraw close to 3.5% in perpetuity. That said, it can be lumpy. You may need to have a higher rate until SS and pensions (if any) kick in, and until you can get on Medicare if you have to pay the full freight for health insurance until then.

If you have a lot in traditional IRA balances, it might also be worth looking at Roth conversions to avoid massive RMDs into high tax brackets at age 75. I just started doing that to the top of the 12% bracket and plan to for the next few years.

I have a lot more in taxable accounts than retirement accounts. Because I think I can go if I need to, I’ll be getting more agressive with pushing off some of my responsibilities to others. Worst comes to worse they push me out the door but if it goes well it will make my job significantly better for a few more years.

Regardless I’m not likely to go before I turn 55.

 

[big-papa]

I would never consider a fixed rate nor even a range of rates. I'm using an amortization based withdrawal method instead which results in withdrawals that are variable in terms of real dollars. One easy version of such a method is VPW described over on the bogleheads forum. I'm using a bit more complex version myself because I believe it will smooth out my withdrawals a bit more in the long run.

Cheers.

 

[youbet]

How are people calculating their WR? Withdrawals / original portfolio value? Or Withdrawals / current portfolio value? Or?