Withdrawal rates for 2017, and planned for 2018

[tennisplyr]

So call me weird, I have no idea what % I've withdrawn or plans for 2018. I've been retired for 7 years and we basically take out what we need. I don't do a lot of analysis or record-keeping. Granted I retired in a good market. When things get tight, so will we with regards to expenses. No, I don't have millions.

 

[FlaGator]

Good exercise. I spent more money last year than any of my peak earning years. That ended up being 5.66%. A few periodic/"one time" expenses (new car, GF who is no longer in the picture) boosted it up that high.

With a break on health insurance this year, I expect to come in around 3% when 2018 is done.

 

[RunningBum]

So call me weird, I have no idea what % I've withdrawn or plans for 2018. I've been retired for 7 years and we basically take out what we need. I don't do a lot of analysis or record-keeping. Granted I retired in a good market. When things get tight, so will we with regards to expenses. No, I don't have millions.

How will you tell if things get tight?

 

[tennisplyr]

How will you tell if things get tight?

I will cut my expenses if my spending/market conditions are making me feel uncomfortable. There are 2 major components to success for me, the physical and the emotional. As I said, I'm not into analysis-paralysis, my life has been great, I believe no matter what life deals me I will figure it out.

 

[RunningBum]

I will cut my expenses if my spending/market conditions are making me feel uncomfortable. There are 2 major components to success for me, the physical and the emotional. As I said, I'm not into analysis-paralysis, my life has been great, I believe no matter what life deals me I will figure it out.

OK, to each their own. If I did it by feel, I'd probably be cutting back when I don't need to. And if I didn't pay much attention to it, I might wait too long to cut back, and have to make more severe cuts after spoiling myself. Fortunately with the market in the last few years, it's hard to fail.

 

[Looking4Ward]

I just got done closing out 2017, my third full year of RE.

2015: 2.8%
2016: 2.8%
2017: 2.2%

I plan on 2018 being somewhat similar.

 

[coveredbridge]

Projected WD rate 2.26% of beginning of 2017 balance.
Actual WD rate 2.12% for 2017.
Projected WD rate 2.12% of beginning of 2018 balance, includes 5% increase in spending and higher beginning balance due to investment gains and miscellaneous income in 2017.

 

[Danmar]

There may be high-WR people, but they are out busy spending and do not post. The ones staying home counting their beans are the one who post?

Could be. I also think there may be some degree of pride in posting a low WR? Maybe a prize for the lowest, most conservative WR?

 

[audreyh1]

Could be. I also think there may be some degree of pride in posting a low WR? Maybe a prize for the lowest, most conservative WR?

Definitely there are quite a few that seem to instinctively feel the lower the better.

To me that just means they prefer to let the nest egg grow as much as possible. Great for heirs and/or covering high expenses nearer to end of life.

But since there are many who have shared >4% draws during some years, I don’t think it’s that biased towards the sub-3% withdrawal rates.

We needed a poll!

 

[kcowan]

Yes VPW suggests w/d rates from 4.2% at age 40 to 5.9% at age 70 depending on investment mix. No prizes awarded for under shooting!

Variable percentage withdrawal - finiki, the Canadian financial wiki

 

[RobLJ]

Plan to withdraw 3% for the first time in a couple of weeks (DW is hanging it up, so I'll start withdrawals this year.) It will go up to 5.5%-6% in a few years when I stop working parttime and before my SS kicks in, then go back down to 4% range. It's that 2020-2022 period with high withdrawal rate that worries me in terms of SOR risk.

 

[NW-Bound]

Could be. I also think there may be some degree of pride in posting a low WR? Maybe a prize for the lowest, most conservative WR?

I thought my WR was quite low at 2.7%, but some have lower numbers, perhaps because they already claim SS. I know that if I claim SS early, I will likely draw less because the additional income is still not enough for me to splurge on what I want. So, SS or not, my lifestyle is somewhat static.

I think the pride in having a low WR is in telling people that, comes another amargeddon like 2008-2009, the low-WR people will not go hungry and can carry on without losing sleep.

PS. My 2.66% number for 2017 was computed after the fact. I have no plan for next year, as I usually don't. The WR for 2018 may be higher or lower depending on what happens, or what I decide to do on a whim.

 

[FUEGO]

I start with a budget with plenty of fat in it. That's $40k for us. I semi-jokingly say we live a $100k/yr lifestyle on 40k/yr because we pay almost no taxes, live in a moderate COL city, and have no mortgage. Travel hacking provides a free $8-10k/yr in travel.

Our "problem" is we rarely spend the full $40k. Typical years are $30k (including this year). We just spend whatever throughout the year. We track spending but don't try to limit spending on reasonable expenditures (and actively seek out new ways to get rid of money in exchange for value).

So it's not exactly a "percent of portfolio" or "4% of starting portfolio plus annual inflation".

Numerically we have about $1.9 million in investments+cash. I'd like to have $200k of that as a set aside for kids' college and random big costs of transitioning them to adulthood. So let's call it 1.7 million.

Spending $40,000 = 2.35% withdrawal rate.
Spending $30,000 = 1.76% withdrawal rate.

To further "complicate" matters I'm making about $35-40k/yr from a very very part time side hustle of mine that's enjoyable and provides social interaction and intellectual stimulation. Income from this venture roughly covers our expenses most months and usually leaves a tiny surplus. The net effect is that our withdrawal rate is approximately zero.

As a result of having more than enough financially, I don't worry about withdrawal rates other than trying to increase spending when we see valuable opportunities (while still seeking to spend in an efficient manner).

 

[kcowan]

To further "complicate" matters I'm making about $35-40k/yr from a very very part time side hustle of mine that's enjoyable and provides social interaction and intellectual stimulation. Income from this venture roughly covers our expenses most months and usually leaves a tiny surplus. The net effect is that our withdrawal rate is approximately zero.

You will not be retired until you have no side sources of income from w*rking.

 

[FUEGO]

You will not be retired until you have no side sources of income from w*rking.

Ruh roh! You just unretired me!

I guess I'll never be able to retire then. Does signing up for credit cards for the thousands or tens of thousands in free travel or cash each year count as working?

 

[Mo Money]

2017:

2.39% of initial portfolio value.

2.25% of portfolio value at 1/1/17.

 

[Scuba]

The following has been my modus operandi.

I withdraw as needed to pay for necessities. If there's something extra we like to spend money on, we do that too even if it costs $10K-20K.

And then, every so often, I look at Quicken expense summary for 12-trailing months, and see where we are. If the percentage is low with respect to the current portfolio value, I will say "Cool", and carry on.

If somehow I went overboard, then I dig into the big items to see what they are. If it is a one-time expense, like my daughter's wedding, or a large cash gift, I will say "OK, that is no cause for concern as it will not repeat". And I also carry on.

Seems to work so far, but then I stopped working only 5 years ago. Time will tell if my cavalier attitude can work.

This has been my method with only 14 months of ER. Working well so far!

 

[street]

I see where there are some posts that are taking cheap shots at people that have low WR. It almost seems like they are hitting on me. LOL I know they are.
Well mine is low we spend a lot of money but it might be we have a lot of money and we spend and have all we need in life and more. IF we need it we buy it I spend a lot and we give away a lot but I still have a low withdraw rate. I'm not waiting for the grand prize for the lowest I can tell you that. LOL

 

[NW-Bound]

I see where there are some posts that are taking cheap shots at people that have low WR. It almost seems like they are hitting on me. LOL I know they are.
Well mine is low we spend a lot of money but it might be we have a lot of money and we spend and have all we need in life and more. IF we need it we buy it I spend a lot and we give away a lot but I still have a low withdraw rate. I'm not waiting for the grand prize for the lowest I can tell you that. LOL

You made me go look. Too many posts, and I lost track.

0.5%! You said no SS, but then no pension either?

You must be really rich. I look at my expenses, and I could cut it to the bones, and no way I could live on 0.5% with the size of my stash.

Well, I think perhaps I could, but then my wife would leave me and take her share so she could withdraw more.

 

[FUEGO]

I see where there are some posts that are taking cheap shots at people that have low WR. It almost seems like they are hitting on me. LOL I know they are.
Well mine is low we spend a lot of money but it might be we have a lot of money and we spend and have all we need in life and more. IF we need it we buy it I spend a lot and we give away a lot but I still have a low withdraw rate. I'm not waiting for the grand prize for the lowest I can tell you that. LOL

The other thing we are seeing now with withdrawal rates around 2% is the wealth effect. Those that retired 5 years ago are potentially sitting on 50-75% more money than they were at the time of retirement due to strong market returns. That effect alone would push a 4% withdrawal rate down below 3%. Couple that with the fact that spending often slows down after the first few years of retirement (Guyton et al) and you might have a combo effect of significantly more money in the denominator and a smaller spending amount in the numerator.

 

[FUEGO]

Well, I think perhaps I could, but then my wife would leave me and take her share so she could withdraw more.

0.5% of your whole stash is the same as 1.0% of half your stash.

 

[NW-Bound]

She would withdraw a whole lot more than 1% out of her piece, and she would not share that with me.

She knows that

"Two can live as cheaply as one, but for half as long" -- Anon

 

[NW-Bound]

The other thing we are seeing now with withdrawal rates around 2% is the wealth effect. Those that retired 5 years ago are potentially sitting on 50-75% more money than they were at the time of retirement due to strong market returns. That effect alone would push a 4% withdrawal rate down below 3%. Couple that with the fact that spending often slows down after the first few years of retirement (Guyton et al) and you might have a combo effect of significantly more money in the denominator and a smaller spending amount in the numerator.

And couple that with people having fewer and fewer remaining years, and you have some posters wondering why some will not "blow more dough".

As I said, I want to spend more money, but what I care to spend on I don't have enough for.

 

[Danmar]

I see where there are some posts that are taking cheap shots at people that have low WR. It almost seems like they are hitting on me. LOL I know they are.

If you were referring to me, it wasn’t a “cheap shot” or “hitting on you” at all. I just wonder what “the rest of the plan is” for people with low WR’s. Ie big legacy, end of life spending, etc. Also, why take equity risk if you dont plan on spending the upside? Really makes no difference to me how low you WR is. Just trying to understand how others plan/think.

 

[pb4uski]

I thought my WR was quite low at 2.7%, but some have lower numbers, perhaps because they already claim SS. I know that if I claim SS early, I will likely draw less because the additional income is still not enough for me to splurge on what I want. So, SS or not, my lifestyle is somewhat static.

I think the pride in having a low WR is in telling people that, comes another amargeddon like 2008-2009, the low-WR people will not go hungry and can carry on without losing sleep.

PS. My 2.66% number for 2017 was computed after the fact. I have no plan for next year, as I usually don't. The WR for 2018 may be higher or lower depending on what happens, or what I decide to do on a whim.

Interesting point. While our 2018 projected WR is 2.7% for our normal living expenses (excluding planned 2018 kitchen renovation), now that we are both 62, IF we started our SS now it would drop to 1.2%. I'm not inclined to do that but is it nice to have it in our hip pocket in case the SHTF.