Katsmeow
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 11, 2009
- Messages
- 5,308
Has anyone calculated or thought about varying withdrawal rates based upon how long you need a certain amount of money.
The obvious example is someone who retires before social security and plans to have a steady income of $X before and after SS. This necessarily means that there is a higher withdrawal rate before SS. I know that on my firecalc and financial engines calculations I put in a steady income but don't show my own SS starting for 6 years after retirement. They both come out as being 100% on firecalc and above 95% on financial engines.
I do wonder if this can be finetuned somewhat and if anyone has done that.
Looking at my own situation.
Let's say I want $90,000 income in retirement, and DH will have $21,000 SS from the time of retirement but I won't have SS for 6 years (assume mine is $22,000).
Also assume that say, $25,000 of the $90,000 is discretionary spending. You are willing to vary that quite a bit based upon overall conditions.
I could give other slices of the pie, such as college expenses for X number of years but for simplicity will ignore those for now.
So $90,000 less $21,000 = $69,000 needed from withdrawals. Now with a 4% SWR that requires 1.725 million.
Of course after my SS comes then it is $90,000 less 43,000 = $47,000 and only requires $1.175 million.
So the person who retires with $21k in SS but expecting $22k 6 years later clearly needs something between those 2 numbers? But how much?
Can you back into it? That is
$90,000-$25,000 = $65,000 base amount
Ultimately that is $65,000 less $43,000 or $22,000. It seems that $22,000 needs to be rock solid. That would be the part I might put at a 3% withdrawal rate.
Then there is $22,000 for the six years between retiring and my SS. It seems you need way less than $550k for this and can have a withdrawal rate for this way above 4%. The money to generate the $22,000 only has to last for 6 years. Would it be reasonable to calculate what the safe withdrawal rate is for a 6 year period for this amount?
Then there is $25k in discretionary spending. Do you really need $625k for this? If that money is really discretionary so you are perfectly fine with withdrawing say $10k in down years can't you come up with a SWR for this that doesn't require $625k?
Any thoughts?
The obvious example is someone who retires before social security and plans to have a steady income of $X before and after SS. This necessarily means that there is a higher withdrawal rate before SS. I know that on my firecalc and financial engines calculations I put in a steady income but don't show my own SS starting for 6 years after retirement. They both come out as being 100% on firecalc and above 95% on financial engines.
I do wonder if this can be finetuned somewhat and if anyone has done that.
Looking at my own situation.
Let's say I want $90,000 income in retirement, and DH will have $21,000 SS from the time of retirement but I won't have SS for 6 years (assume mine is $22,000).
Also assume that say, $25,000 of the $90,000 is discretionary spending. You are willing to vary that quite a bit based upon overall conditions.
I could give other slices of the pie, such as college expenses for X number of years but for simplicity will ignore those for now.
So $90,000 less $21,000 = $69,000 needed from withdrawals. Now with a 4% SWR that requires 1.725 million.
Of course after my SS comes then it is $90,000 less 43,000 = $47,000 and only requires $1.175 million.
So the person who retires with $21k in SS but expecting $22k 6 years later clearly needs something between those 2 numbers? But how much?
Can you back into it? That is
$90,000-$25,000 = $65,000 base amount
Ultimately that is $65,000 less $43,000 or $22,000. It seems that $22,000 needs to be rock solid. That would be the part I might put at a 3% withdrawal rate.
Then there is $22,000 for the six years between retiring and my SS. It seems you need way less than $550k for this and can have a withdrawal rate for this way above 4%. The money to generate the $22,000 only has to last for 6 years. Would it be reasonable to calculate what the safe withdrawal rate is for a 6 year period for this amount?
Then there is $25k in discretionary spending. Do you really need $625k for this? If that money is really discretionary so you are perfectly fine with withdrawing say $10k in down years can't you come up with a SWR for this that doesn't require $625k?
Any thoughts?