FIRECalc Success Rate & RE

[Dtail]

Our FA does not believe in the 3-4% withdrawal strategy at all. He said it is more complicated than that and has to do with your expenses.



He has us just withdrawing from our IRA's and Taxable account once hubby stops working, until age 70 1/2 (for hubby that will be in 4 years) at which time he will start SS and mandatory RMD's and I will be behind hi 2 years later to collect mine.


We would withdraw what we need to live on to meet our expenses. That is what we have to do period. And pay the taxes on it.



He wants us to do some Roth conversions in the meantime also and stay under a certain income to minimize taxes.



I must admit I am nervous as all hell and when the time comes I am going to need a bit of hand holding by the FA until I can feel comfortable with this. If I ever do!

Curious what is his strategy with expenses?

 

[meleana]

Meleana - IMHO, either you're misrepresenting what your FA said, or he should be fired. Many FAs who are paid a % of assets under management want you to take the smallest distribution possible, so that their fees remain as high as possible, as long as possible. If you 'only' take enough out to pay expenses, you will likely die with a lot of $ left over....or if you're under-funded, then you may run out of $. The purpose of the 3-4% 'rule' is to help ensure that you know how much you can safely spend without a significant likelihood of running out of $. Assuming your investments and asset allocation are reasonable, a 3.5% withdrawal rate is not out of line, and is a good place to start. But it also depends on your final goal. Are you trying to leave a large bequest? If so, then by all means, spend as little as possible. But by no means should you plant to spend more than 5% of assets indefinitely, as you'll likely run out of money.

The FA does not hold any of our assets. He is a Fee Only Garret Network planner who has drawn up a plan- period. Has met with us a couple of times already. Also phone calls and emails.



He knows what our budget is and has estimated- with his software- what it will be going forward accounting for inflation. He calculated what we could withdraw comfortably to meet our expenses and still have a 99% success rate bringing us into our 90's.



What he was saying is he does not believe in just a blanket 3-4% rate. It all depends on people's assets vs. expenses. At least that is what I understood.