Withdrawal Rate: your personal comfort zone.

[MichaelB]

Not accounting for inflation, we're about 10% above where we started. Using CPI numbers and adjusting for inflation, we're down roughly 15%.

If you don't mind my asking, has your withdrawal amount kept up with inflation? I find ours has not.

 

[socca]

Zero, zip, nada, zilch.

Ditto. I subscribe to the old-fashioned definition of FI: (passive) income > expenses (including allocation to reserves for large aperiodic expenses). This POV is not popular on this board.

 

[REWahoo]

If you don't mind my asking, has your withdrawal amount kept up with inflation? I find ours has not.

As you can see, our withdrawal rate has fluctuated quite a bit so I don't have solid measurements to confirm, but I'd say no to your question.

Our withdrawal fluctuations have far more to do with starting SS, buying new (mostly almost new) cars and RV's and doing improvements to the house than anything else. I really can't see where the 20% + increase in CPI numbers since we retired has had much of an impact on what we withdraw, although I'm sure it has to some degree.

 

[Danmar]

I started at about 3% using an income approach, ie just spend divs. Kept this approach for first ten years then realized I was very likely underspending. WR during this period generally fluctuated between 3.5-4%. Now at 66 I'm starting to gradually increase spend by small liquidations of .5-1%. Once you have been retired for a while, seems to me that your WR will start to depend on your actual results, rather than a "rule of thumb". My portfolio is much higher than when I started so need to increase spend if I don't want to leave a big pile on demise. 100% equities,

 

[CardsFan]

Ditto. I subscribe to the old-fashioned definition of FI: (passive) income > expenses (including allocation to reserves for large aperiodic expenses). This POV is not popular on this board.

I think the concept of spending only/primarily passive income is actually quite popular on this board, if you have the savings to do it. BUT, it is still a withdrawal rate.

 

[H2ODude]

Started out at 2% 6 years ago and ramped it up to 3% now. Attempting to "force" ourselves to spend more because the portfolio has grown about 30% in that time and when you are honest about how much safety factor there is in all the calculators, you see that in markets like we've had anything less than 4 is likely going to accumulate. On top of all that, it looks like pension that has had no COLA in 6 years may get one. More gravy.

In addition to increasing what we take from the portfolio, we went on Medicare last year (saved about $800 a month) and in last month started taking DW and my half of her SS; that's another ~$1,300 or so. Still pulling the 3% a month and frankly don't know what we'll do with it. Yeah, it's a nice "problem" to have, but in spite of ample travel and pretty much adopting a "don't care what it costs if we want it" attitude our life long value of what a dollar is worth pretty much says some day our kids will inherit a bundle. And that's OK.

I have never paid anyone to paint in or outside except high ladder work in last few years. As an example of our new philosophy currently have a crew of three going through whole interior of house; ceilings and walls. I gotta admit this is fun. They've spent 18 man hours doing just prep work and aren't finished yet, haven't opened up a can of paint yet. Have retaped joints, nail pops, and done stuff I didn't even notice. May throw away my brushes and rollers. Completely opposite my experiences in trying to find other help for landscape, wood repair, etc.

Kinda got off track there. I picked 3-3.5% but as long as markets hold up I'd see no problem taking a chunk out. What always makes me scratch my head is why should "Bob" who retires in a year when markets are way up set his WR at a considerably higher rate than "Tom" who retires the next year when the market has taken a dive? In other words, I don't get the adoption of a fixed withdrawal. It seems to me you need to be flexible and adjust as necessary. Which I get is pretty difficult if you are desperate to get out and and can barely make the numbers work. For example if I had to get out NOW with markets pretty frothy and would have to be taking 4% of the portfolio to meet bare needs, I'd be pretty uncomfortable pulling that exit.

 

[racy]

For 5 years between w*rk cessation and Social Security at age 70, I project around 5%, thereafter around 2.6%. I voted for 3.5 - 3.99%

 

[hesperus]

We're only at about 1.4% WR, which still gives us a low six figure amount to spend, so I suppose we are definitely underspending.
I guess we need to bump that up. But spending more just for the sake of spending is an anathema for me.

 

[Danmar]

For those retired and using low WR's has your portfolio increased since retirement? If so will you continue with a low WR and leave a bigger legacy, or will you ramp up spending at some point?

 

[braumeister]

It's good to see a modest increase because the biggest concern I have is the potential cost of years of LTC. We opted to self-insure for that.

 

[H2ODude]

For those retired and using low WR's has your portfolio increased since retirement? If so will you continue with a low WR and leave a bigger legacy, or will you ramp up spending at some point?

We've tried but you don't get to FI by spending just for the sake of spending. Paying someone to cut the grass would have no impact on overall finances - but I can't see paying someone $40 to do what it takes me 20 minutes to do. Hence I cut the grass. Have been known to rarely pay to have car washed, but that's not often. We never felt like we denied ourselves what we wanted before retirement, so now that we have probably the ability to spend about 50% more than we did when employed, it's sort of hard to be comfortable changing your lifestyle just because you can. Heck, we're happy doing what we do when we want to so why try harder to spend money that it took a long time to grow?

 

[Fedup]

We buy what we want now. It's hard to see how we can spend more. We always enjoy to be DIYers for years. It was not my intention to leave big inheritance either.

 

[LARS]

We don't use SWR's but just check our solvency once a year and adjust as necessary.



Our formula...

Add Social Security to our spendable assets divided by 12 (current planned life expectancy)



If we spent more than that last year, we cut back, if we spent less we're ok. So far, for the past twenty years, we've been okay.

Curious. When you say you add SS to your spendable assets how are you calculating this? Are you capitalizing the flow over your "planned life expectancy"?

 

[Hermit]

I voted 2.5% to 3.0%. Currently at 2.3%. After 70 that 2.3% will be covered by SS on my account. At that time I will start doing Qualified Charitable Distributions to take care of RMDs which will kick me over 2.5% and eventually higher.

Will my portfolio grow? I don't know. My allocation is 55/45 which I consider very conservative with non-COLA pension and SS covering my living expenses. I use low cost index funds. With the QCDs, inflation, and assuming 4% return, I my projections say I will stay about even.

 

[hesperus]

For those retired and using low WR's has your portfolio increased since retirement? If so will you continue with a low WR and leave a bigger legacy, or will you ramp up spending at some point?

Our portfolio has increased in the 6 years since I ER'd, as we've plowed most dividends back into the portfolio. We do plan on ramping the spending up, since we have no children, although we plan on leaving some to a charitable cause. I think we've just been stuck in the mindset of growing the portfolio since I'm still only 58, and DW 9 years younger. It was kind of a knee jerk response we've had, since retiring relatively 'young'. I just want to ramp it up before we find ourselves too old to really fully enjoy it.

 

[kcowan]

We have grown our outsourcing budget. Part of this was driven by our great experience in Mexico. 200 pesos to clean the house, 9700 pesos to scrape and paint the outside (2 coats).

So now if I do not enjoy the work, I hire someone to do it. Being 6'2", I upgrade airline seats with little regard to the extra costs.

We have stepped up family and charitable giving each year.

But still the plie keeps growing!

 

[Another Reader]

I think the concept of spending only/primarily passive income is actually quite popular on this board, if you have the savings to do it. BUT, it is still a withdrawal rate.

I don't think I agree with that. Every dollar that I take out of the inherited IRA is replaced (and then some) with mortgage principal paydown, cash savings, and taxable investments. The net effect is addition to the underlying assets, not subtraction.

 

[MichaelB]

As you can see, our withdrawal rate has fluctuated quite a bit so I don't have solid measurements to confirm, but I'd say no to your question.

Our withdrawal fluctuations have far more to do with starting SS, buying new (mostly almost new) cars and RV's and doing improvements to the house than anything else. I really can't see where the 20% + increase in CPI numbers since we retired has had much of an impact on what we withdraw, although I'm sure it has to some degree.

Thanks. Our withdrawals have fluctuated as well. Our spending breakdown is so much different now that I've concluded that chronic inflation is not the major portfolio concern I feared, as long as it remains low - for people that live in the US. The economy is so well diversified, it allows us to contain the impact of consumer inflation and still enjoy an improving standard of living over the retirement period, which I thought would be a significant challenge.

Health care and LTC are another matter entirely.

 

[Rambler]

For those retired and using low WR's has your portfolio increased since retirement? If so will you continue with a low WR and leave a bigger legacy, or will you ramp up spending at some point?

Well, we bought a second home, and pay for those utilities and taxes, added a lawn maintenance guy to the main home (prefer to do it myself but since we are away fro it so often...) and will start a lawn guy at the Nevada home soon, but will still be under 3%. We are both still 55, and eventually one or both of the homes will be sold or exchanged which will add to the income producing portfolio, but I'm comfortable at the 2.7-2.8% spot we are at right now. When my deferred comp kicks in, from 2019 to 2028, our WR will go up to about 3.6-3.8 because of the taxes that will kick in on the deferred comp. After that, they'll go back down to probably around 3% unless we can figure out what to spend more money on. Late in life, we will boost our charitable donations from the current 10-12% of income.

 

[W2R]

For those retired and using low WR's has your portfolio increased since retirement? If so will you continue with a low WR and leave a bigger legacy, or will you ramp up spending at some point?

Since I bought my Dream house, and since my AA is extremely conservative, what I have now is only 126% of what I started out with in November, 2009 despite the market surge since that time.

One never knows what life will bring. Later on, I may have much higher medical and/or dental expenses, who knows. Or maybe I would need the entry fee and other costs for a good CCRC, or someone to assist me here at home. I refuse to become a burden on my daughter and son-in-law. So, I expect my expenses will go up instead of down as I age.

As long as I have everything I want and need, if I don't spend the last dime before I expire, I won't care. I'll be dead.

 

[ExFlyBoy5]

For those retired and using low WR's has your portfolio increased since retirement? If so will you continue with a low WR and leave a bigger legacy, or will you ramp up spending at some point?

Going into year 3 of retirement, I am still saving a decent amount and the DW is also saving a very large chunk of her income (pension/dividend/rental income). We have discussed her retirement goals and well...she isn't sure *when* she wants to stop w*rking (another discussion topic, for sure). I am not really sure as to when we would even start to dip into the portfolio but I would guess once the rental property is sold. *IF* we had to use portfolio spending, I wouldn't be comfortable with anything more than about 2.5% until the age of 60...and then ramp up accordingly depending on other factors.

Another complication is the fact that we have no children, so not real sure about leaving a "legacy". If anything, I think if we needed to go into a long-term care situation, we would be able to afford something quite nice.

 

[nun]

For those retired and using low WR's has your portfolio increased since retirement? If so will you continue with a low WR and leave a bigger legacy, or will you ramp up spending at some point?

I'd be comfortable with a 3% withdrawal, but my actual WR is 0% and I'm reinvesting dividends.....so yes, my portfolio is still increasing in retirement. The income I get from my pension and rental is 4% of my current portfolio value and I'm comfortable on that. I don't plan to make regular withdrawals for income, but will probably cash some in to buy big ticket items like a new car. I don't see the need to spend money from my portfolio just for the sake of spending and I hope to leave money to various charities and my nieces.

 

[Alan]

Actual rates have been as follows:

2010 0.00% (unexpected 20% bonus from working in 2009 was nice)
2011 0.86%
2012 1.27%
2013 3.51%
2014 5.40%
2015 5.43%
2016 1.99%

The figure I use in the calculators is 3.5% but we have secure pensions and this year I started drawing a private pension (circa $10k/year), plus my wife will start drawing SS (also around $10k/year) so I can see us upping the withdrawal % from now on as we still have my US and UK SS to come plus my wife's UK SS to come.

 

[Blue Collar Guy]

for us i ran the numbers in our 80/20 stock bond portfolio, they said we could withdraw 3.15 % for 50 years and 100 % success, at the time it would have been about 35000 a year before taxes, i ran the numbers the beginning of January of this year, and now its 118,299, these numbers do not include my current pension or any social security( if there will be any by the time i turn 62), last year we came close to withdrawing some money as my tax bill at april 15th was almost 29 thousand, we spend anout 55k my pension is 84k after taxes, we have an imaginary budget but spend what we want upgraded to buying better quality stuff, i have a 13 year old car with 38000 miles no need to replace it, and we bought a brand new suv for 36 thousand in may of 2014, paid cash from the checkbook, so my advice to the bride if i drop dead is to try to stick to 3 % withdrawal but dont deny herself anything,i didnt know things were going to go in this positive direction, thats why i worked 5 extra years,i always ran the numbers with a 100 % success rate, in my next life i would have ran them for a more realistic 95 % success, tighten my belt if things go south financially, and not set the time line for 50 years.

 

[Danmar]

We've tried but you don't get to FI by spending just for the sake of spending. Paying someone to cut the grass would have no impact on overall finances - but I can't see paying someone $40 to do what it takes me 20 minutes to do. Hence I cut the grass. Have been known to rarely pay to have car washed, but that's not often. We never felt like we denied ourselves what we wanted before retirement, so now that we have probably the ability to spend about 50% more than we did when employed, it's sort of hard to be comfortable changing your lifestyle just because you can. Heck, we're happy doing what we do when we want to so why try harder to spend money that it took a long time to grow?

I understand. So you will have a larger legacy?