Withdrawal confusion

[audreyh1]

That’s what I do, every year. If my portfolio grows faster, so does my income. If my portfolio shrinks, so does my income.

I have a lot of spending flexibility, so variable income is not a problem for me.

 

[mpeirce]

That’s what I do, every year. If my portfolio grows faster, so does my income. If my portfolio shrinks, so does my income.

I have a lot of spending flexibility, so variable income is not a problem for me.

Similar here too. I average the last three years to smooth things out a bit.

Basically, it just tells me how much we can spend on travel this year, since that’s a large part of our spending and can easily grow or shrink depending.

 

[Nords]

But lets say by 2022 my assets have grown to $2M. If I had retired in 2022 instead then I would use $80K/year plus inflation each year as my 4%. Why should I live on 50% income every year for the rest of my life just because I retired one year earlier? In 2022 why not pretend to myself that I just retired that year instead and take the $80K + inflation each year? So, I prefer to adjust what I can withdraw based on how my assets change over time (maybe not every year but you get the idea...).

Technically you could consider excess annual portfolio growth (beyond the CPI) as free money to spend during the following year.

Or you could reset your 4% SWR every year as Year #1 and restart the 30-year portfolio survival calendar.

In most cases when you start your FI at the 4% SWR, then after the first decade or so (sequence of returns risk) your annual spending would have dropped to the equivalent of a 3%-3.5% SWR. Most simulations consider that to have a high survival rate over 50-60 years instead of "only" 30 years.

At that point you'd have to decide whether to spend the excess to upgrade to private jets and yachts with the 4% SWR, or to simply settle for first-class seats and luxury cruises at a 3% SWR.

 

[ncbill]

While the fact is that most in US don’t have a defined benefit pension, no need to be bitter, it is a choice wevall made. After 8 years in the Army I made a choice to reup and stay for 20. Many factors, but pension was certainly one of them. Mom went back to work after kids were grown for local county because they had a pension. My point is there are jobs where pay may not be up to private sector but include a pension. If you want a pension apply for one of them. It is a choice we all make.

One of my kids plans to use the military & law enforcement after graduation for two COLA pensions...I said go for it!