Die With "Close To" Zero withdrawal rates. (Estimated)

[ShokWaveRider]

This post does not apply to those who have heirs or those who want to leave a legacy for whatever reason. We have no heirs and plan on leaving a minimal legacy (which may still be quite substantial) to our favorite charities when we cark it.

This is our variant on Nest Egg withdrawal rates so that we die with "Close To" Zero. In reality it will never depletes to zero in our lifetime. The numbers for various life expectancy are taken from tables I found in various places as well as the IRS RMD rates and may not be completely accurate actuarial numbers. Please see the notes for clarification.

Our DWZ rate (in Green) is a combination of Single, Joint and IRS RMD rates divided by 3. (This is just our method of calculating it, yours may vary) This is a maximum, in reality we may not need to take that much at all as with SS & Pensions, like others here our expenses and then some are completely covered. It does not differentiate between Qualified and Non Qualified funds, it lumps the complete Nest Egg into one grand total. Nest Egg is defined as Cash and Cash equivalents like; CDs, MYGAs, Treasuries, Brokerage Accounts, MM Accounts etc. In other words all investable assets.

In addition the size of one's Nest Egg will of course change the withdrawal numbers.

Similar to RMDs the formular is: Nest Egg divided by the Number in green (Our DWZ Number) for an given age of the younger spouse/partner, in our case DW's age, giving a total maximum annual safe withdrawal rate.

 

[Out-to-Lunch]

Offhand.... I like it!

 

[stepford]

It looks like for DW less than 70 you re-create the 4% rule.

 

[Sojourner]

Our DWZ rate (in Green) is a combination of Single, Joint and IRS RMD rates divided by 3. (This is just our method of calculating it, yours may vary)

How did you come up with this formula? Is it based on something in Die With Zero (the book) or some app/website/podcast/paper that was inspired by DWZ? Or is it your own methodology? Some further explanation of this would be helpful.

One other question: How would one extend this table to lower ages? DW and I are younger than the ages listed on the first line, so being able to see or calculate those numbers would be of interest. FWIW, we are using FIRECalc to determine our SWR by using its "manual entry of spending changes" feature to substantially boost our spending during the go-go years and scale back during our no-go years.

 

[ShokWaveRider]

How did you come up with this formula? Is it based on something in Die With Zero (the book) or some app/website/podcast/paper that was inspired by DWZ? Or is it your own methodology? Some further explanation of this would be helpful.

Just my own guestimate that made sense to me for our situation. I have not read the book.

One other question: How would one extend this table to lower ages? DW and I are younger than the ages listed on the first line, so being able to see or calculate those numbers would be of interest. FWIW, we are using FIRECalc to determine our SWR by using its "manual entry of spending changes" feature to substantially boost our spending during the go-go years and scale back during our no-go years.

I just added 1 year for every age under 73 for the IRS RMD number. The other number can be got from existing actuary table for singe and joint life expectancies.

 

[Koolau]

I like that it goes to at least age 100 for each member of the couple. I've known a couple of men and now several women who have reached or exceeded age 100. The DWZ concept has always bothered me a bit in concept - but not so much if it's bounded by some very practical limits of age.

 

[JackJester]

I like the idea, but I want make sure I understand your approach better.
1) It looks like you pulled your #s from this IRS pub, correct?

Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) | Internal Revenue Service

www.irs.gov

2) If we take a nest egg example (say $3 mil), are you saying that for the 1st year of withdrawing (i.e., row 1 where DWs age is 67), then you would/could withdrawal $3,000,000/26.0 = $115,384 ?
3) Are you then assuming a growth value for the remaining portfolio? So in this example the remaining portfolio is $2,884,616, but it might grow say 4% over the next year (so your basically back to your $3mil starting point). So for row 2 (DW age 68), you withdrawal $3,000,000/25.1 = $119,521? hmmm, I'll have to play with this in my spreadsheet to see how close I get to $0 over X years.

 

[ShokWaveRider]

I like the idea, but I want make sure I understand your approach better.
1) It looks like you pulled your #s from this IRS pub, correct?

Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) | Internal Revenue Service

www.irs.gov

Yes, definitely for the RMD numbers. For the Single and joint I looked at various actuarial tables and compared them, taking the best average of all that I looked at. Probably a little too anal but hey, that is what I did.

2) If we take a nest egg example (say $3 mil), are you saying that for the 1st year of withdrawing (i.e., row 1 where DWs age is 67), then you would/could withdrawal $3,000,000/26.0 = $115,384 ?

Yes, that is the MAX one can take to be safe. Meaning that one would not HAVE to take that much if one did not need or want to.

3) Are you then assuming a growth value for the remaining portfolio? So in this example the remaining portfolio is $2,884,616, but it might grow say 4% over the next year (so your basically back to your $3mil starting point). So for row 2 (DW age 68), you withdrawal $3,000,000/25.1 = $119,521? hmmm, I'll have to play with this in my spreadsheet to see how close I get to $0 over X years.

Yes, each year takes the Nest Egg as it sits on December 31st of the previous year and bases the following years estimate on that number.

In our case we are NOT in the stock market so our average annual gain is ~5.5% based on MM, MYGA and CD returns.

 

[Ronstar]

Thanks for posting. I need to make something similar.

 

[ShokWaveRider]

Update Spreadsheet to include estimated Nest Egg of $1m as an example and estimated Safe Annual Withdrawal (Draw) Rate. Both Nest Egg and Draw are in Thousands with no decimal point. E.G.: $1,000,000. Some fields may not reflect this yet as I am still updating it. But you all can get the idea.

Annual Safe Withdrawal AKA Draw for Current Year = Nest Egg (Stash) on 12-31-(Previous Year) / Our DWZ Rate

Each Nest Egg Entry is one's "Stash" available for withdrawal on December 31st of previous year and would be updated annually.

 

[USGrant1962]

Have you looked at Bogleheads' Variable Percentage Withdrawal (VPW) spreadsheet? It is an amortization-based DWZ tool that incorporates Asset Allocation and historical data. You have to enter your "last withdrawal" AKA "death" age but you could update with that joint life expectancy as you go along. When I play with it, I just use 99 years.

 

[audreyh1]

My % remaining portfolio withdrawal method is designed to never go to zero, and on average should end where it started, inflation adjusted even, if I go as high as 4.35% annual withdrawal rate. I’m not withdrawing nearly that much.

 

[ShokWaveRider]

Have you looked at Bogleheads' Variable Percentage Withdrawal (VPW) spreadsheet? It is an amortization-based DWZ tool that incorporates Asset Allocation and historical data. You have to enter your "last withdrawal" AKA "death" age but you could update with that joint life expectancy as you go along. When I play with it, I just use 99 years.

No. I wanted something simple that was easy to interpret. In actuality we really will not take all our allotted safe draw rate as we will probably never need to. We do have substantial unqualified moneys to draw from so we can avoid IRMAA in case we have some lumpy expenses.

 

[USGrant1962]

VPW is extremely simple to use. You enter 6 numbers and done. Start Year, Start Age, Death Age, Domestic Stock %, International Stock %. It then assumes the rest of you portfolio is Domestic Bonds. And then your portfolio balance once a year.

 

[ShokWaveRider]

VPW is extremely simple to use. You enter 6 numbers and done. Start Year, Start Age, Death Age, Domestic Stock %, International Stock %. It then assumes the rest of you portfolio is Domestic Bonds. And then your portfolio balance once a year.

That would not work for us. As mentioned in the OP, we have no stock market exposure. Just MYGA, CD & MM

 

[HI Bill]

...we have no stock market exposure. Just MYGA, CD & MM

It appears to me that you've addressed only the longevity portion of the equation, not the investment performance and inflation portions. If MYGA is an annuity, and CD and MM investments make up the rest of your invested assets, your earnings will likely be below inflation rates. If this is the case, then your VPW-like scheme doesn't account for inflation. If your essentials budget is a small % of your withdrawals, then you may be okay. I'd suggest modeling with a calculator that considers your AA, SORR, and inflation.

 

[ShokWaveRider]

It appears to me that you've addressed only the longevity portion of the equation, not the investment performance and inflation portions. If MYGA is an annuity, and CD and MM investments make up the rest of your invested assets, your earnings will likely be below inflation rates. If this is the case, then your VPW-like scheme doesn't account for inflation. If your essentials budget is a small % of your withdrawals, then you may be okay. I'd suggest modeling with a calculator that considers your AA, SORR, and inflation.

Thanks but you reading to much into it. It is purely a nest egg longevity thing. We are members of the "If y ou have won the game, why keep playing" crowd. We have more than enough to take care of perceived inflation.