Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

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Ckprocker
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Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Ckprocker »

I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by livesoft »

Ad Hoc. We just sell shares when we need money without regard to budgets, SORR, and whatever. We maintain about a 60/40 AA for the entire portfolio. We have not started SS benefits yet, but those will not be insignificant when we do. We are not worried about running out of money at all.
Last edited by livesoft on Mon Jul 04, 2022 6:26 pm, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by marcopolo »

livesoft wrote: Mon Jul 04, 2022 6:24 pm Ad Hoc. We just sell shares when we need money without regard to budgets, SORR, and whatever. We maintain about a 60/40 AA for the entire portfolio.
Same here.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by HeavyChevy »

Also as needed. Current annual spend would be of the order of 65-85% of 4% of assets. Only retired 20 months.

Will start SS in ~ 3 years, at which time percent-of-assets spending will drop significantly (maybe 45-60% of 4%).
Last edited by HeavyChevy on Mon Jul 04, 2022 6:35 pm, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by bengal22 »

With our SSA and my pension we are covered. Before SSA we would pull monies from mutual funds as needed. I always thought the 4% rule was a way to calculate if one could retire not an actual withdrawal strategy.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Will do good »

marcopolo wrote: Mon Jul 04, 2022 6:26 pm
livesoft wrote: Mon Jul 04, 2022 6:24 pm Ad Hoc. We just sell shares when we need money without regard to budgets, SORR, and whatever. We maintain about a 60/40 AA for the entire portfolio.
Same here.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Zanmar »

Age 65
Pension 2k per month
Dividends 1k per month
Unsheltered 6-7+ years
SS at 68+
Roth Conversions starting in 2022
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by AnnetteLouisan »

55, retiring in fewer than five years, with pension and SS expected to cover around 80 percent of my expenses. Will probably use a SWR of 3 percent, using pension and cash savings first so my investments can continue to grow, then Roth IRA and/or t401k, then taxable, then SS (delaying that to 70 if I’m around and in good health).

But who really knows. That’s the tentative plan.

Thanks to Bogleheads I have a Roth IRA and taxable to draw from.
Last edited by AnnetteLouisan on Wed Jul 06, 2022 11:22 am, edited 5 times in total.
quietseas
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by quietseas »

Ad hoc cash flow based, so first place is income from SS, part time job, etc.
Then cash flow from taxable dividends and RMD.

Some will want a formulaic/spreadsheet driven approach but we don't find that to be necessary.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Jack FFR1846 »

I'll be retiring within a year. We have more than enough already in cash so I'll be converting tIRA money up to the top of a bracket into Roth. I expect this will continue for a while as this will also reduce future RMDs.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by willthrill81 »

Ckprocker wrote: Mon Jul 04, 2022 6:15 pmThere are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds.
We really need a single thread that compares and contrasts the most prominent withdrawal methods, including their operation, pros and cons, etc. in a digestible manner. It would be a lot of work to put it together though.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by smitcat »

Ad Hoc with a rising equity AA.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by retired@50 »

Retired. No Social Security yet.
I direct the dividends from my taxable account to my checking account.
So far, this has usually been enough, but I did sell some shares a few years ago.

Regards,
Last edited by retired@50 on Mon Jul 04, 2022 7:20 pm, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Zeno »

deleted
Last edited by Zeno on Mon Jul 11, 2022 9:02 pm, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by DSBH »

In our 5th year of retirement, delay SS for 6 more years till 70 so 8 more years till RMD. Between now and RMD we try to keep a buffer worth roughly 3 years of budgeted expenses in cash/Munis, and refill the buffer by basically withdrawing a constant number of shares 4 times a year around 1040-ES timeline from a 60/40 portfolio. When market goes up the buffer may get bigger than intended, and we can skip withdrawal when market does not do well - yes like this year - and the buffer may get smaller than intended.
Last edited by DSBH on Mon Jul 04, 2022 7:42 pm, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by jebmke »

I withdraw an amount needed to pay for the expected bills in the next month.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by fposte »

Retired. Ad hoc. I retired last year, and the pandemic meant I’ve spent under budget both pre and post retirement.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by DetroitRick »

Retired for quite a while - I basically just take withdrawals, and buy/sell investments, as needed. No formal method. But I do maintain an asset allocation.

I have min/max withdrawal targets in mind to keep me from going too far astray, and will typically start each year with a plan as to where and when I draw for that year. It includes some degree of flexibility for the unknowns, of course.

I also have a general series of steps that I will/would take to reel in or defer expenses during steep or prolonged downturns.

This year I've also resurrected a 10-yr rolling income plan to facilitate tax planning and, to a much lesser extent a few more years of ACA income management. I had dropped the process because I didn't feel it necessary anymore, but started again because income sources changed radically enough to warrant for a while longer. Whatever it takes....
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by curmudgeon »

smitcat wrote: Mon Jul 04, 2022 7:05 pm Ad Hoc with a rising equity AA.
That would apply to us as well. It's made easier by the fact that we've "over-saved" in traditional retirement terms. Retired 5 years ago in late 50's. Planning to delay my SS until age 70. No pensions. Using ACA subsidies to reduce health insurance costs by managing taxable income and limiting Roth conversions until age 65.

I do have some rough guardrails in the back of my mind relative to potential scenarios. They aren't something that I actively evaluate, but if I'm feeling uncomfortable about the situation, it's what I would pull out for guidance. When we hit SS, I'll probably reformulate. It goes something like this:

1. If the 12-month rolling average value of our investments drops down to $X, we will go to a 4% WR, and stay there for at least 5 years. That's a perfectly comfortable income level for us with paid-off house, and still gives a chunk for extras, but would probably limit some of the travel we currently do. With SS down the road, it's still pretty conservative.

2. If the average is between $X and $1.5X, we limit ourselves to 5% of current balance for next years spending.

3. Between $1.5X and $2X, we spend whatever we feel like (we aren't extravagant by nature, so this tends to be more like #2)

4. Above $2X, we actively look to move funds to the next generations or charitable causes.

None of this is set into a formal plan, but it gives me some mental anchor points when I do my quarterly summing up of account values.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Zeno »

willthrill81 wrote: Mon Jul 04, 2022 7:03 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pmThere are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds.
We really need a single thread that compares and contrasts the most prominent withdrawal methods, including their operation, pros and cons, etc. in a digestible manner. It would be a lot of work to put it together though.
Interesting
Last edited by Zeno on Mon Jul 11, 2022 9:04 pm, edited 2 times in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dbr »

If the thread keeps gathering posters who just withdraw something or another sometime or another there won't be much need to compare methods.

I am another count in the ad hoc camp. I can't imagine trying to live life while chained to some algorithm that tells us what we will spend. It doesn't work that way.

As a data point our annual withdrawals over the last fifteen years have ranged from half to twice the average. That does not count as a withdrawal giving a chunk of stock to someone.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by livesoft »

willthrill81 wrote: Mon Jul 04, 2022 7:03 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pmThere are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds.
We really need a single thread that compares and contrasts the most prominent withdrawal methods, including their operation, pros and cons, etc. in a digestible manner. It would be a lot of work to put it together though.
I thought this was done already by ERN: https://earlyretirementnow.com/safe-wit ... te-series/
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dbr »

PS I did come up with one method advised here that does pertain to withdrawals. That was to delay Social Security to the appropriate max for the two of us. This means we withdrew more until SS started and then we have the maximum inflation indexed income from SS. A condition on that is that when one of us passes the other will see their income from SS drop.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by smectym »

Ckprocker wrote: Mon Jul 04, 2022 6:15 pm I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
Default is the Bogleheads Variable Percentage Withdrawal matrix, which for us suggests a withdrawal rate of about 5.1%.

https://www.bogleheads.org/wiki/Variabl ... withdrawal

However, we impose an overlay: if the trailing 12 month return of the S&P is negative, we dial back withdrawals to 3%.
Why? Abundance of caution.

Of course, we’re currently languishing in the 3% withdrawal regime.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Zeno »

smectym wrote: Mon Jul 04, 2022 9:00 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pm I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
Default is the Bogleheads Variable Percentage Withdrawal matrix, which for us suggests a withdrawal rate of about 5.1%.

https://www.bogleheads.org/wiki/Variabl ... withdrawal

However, we impose an overlay: if the trailing 12 month return of the S&P is negative, we dial back withdrawals to 3%.
Why? Abundance of caution.

Of course, we’re currently languishing in the 3% withdrawal regime.
Thank you
Last edited by Zeno on Mon Jul 11, 2022 8:57 pm, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by smectym »

Zeno wrote: Mon Jul 04, 2022 9:12 pm
smectym wrote: Mon Jul 04, 2022 9:00 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pm I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
Default is the Bogleheads Variable Percentage Withdrawal matrix, which for us suggests a withdrawal rate of about 5.1%.

https://www.bogleheads.org/wiki/Variabl ... withdrawal

However, we impose an overlay: if the trailing 12 month return of the S&P is negative, we dial back withdrawals to 3%.
Why? Abundance of caution.

Of course, we’re currently languishing in the 3% withdrawal regime.
That is pretty much our plan: VPW then go lower (but we would do that whether the markets were up or down).

VPW, of course, is an approach for withdrawal, not spend. What I remain confused about VPW is this: is the suggested (or lower in a down market) amount to be withdrawn in fact to be withdrawn as a risk reduction measure in that said amount removes those dollars from the market, even in a down market? I recall livesoft saying somewhere in his terrific thread that that was the idea of VPW — it takes dollars off the table, if you will, thus allowing them to be put in a safer place where, of course, some amount therein would be spent in the current year/month.

This aspect of VPW remains uncertain to me. I need to revisit the wonderful VPW thread.
Zeno, excellent question. And it is a fact that the withdrawal “crystallizes” the then-current NAV of the withdrawn shares—whatever happens to them afterward, spent or saved.

But I doubt that that is a conscious tenet of the VPW protocol or at least I haven’t seen that stated in so many words.

Another wildcard re VPW is taxation. To the extent a retiree household may not precisely “need” every penny of the VPW-suggested withdrawal, should the household punt and try to save on taxes by trimming the withdrawal? Intuitively I’d say yes. But again, interested to hear of reasons why that’s not valid reasoning,
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by KlangFool »

OP,

1) 2 years of expense as buffer.

2) Withdraw as per VPW.

3) Take (1) + (2) and divide by 3 as expense for the year.

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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by HIinvestor »

So far, we are living below our means on H’s pension. We also have to take RMDs, since he’s now >70. We mainly are trying to figure out where to invest. With covid forced hibernation, our spending has really dropped, as we haven’t traveled since 2019 and rarely dine out.

H retired over a decade ago and life is good.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Zeno »

Update
Last edited by Zeno on Mon Jul 11, 2022 9:06 pm, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by perez99 »

Just retired in January. Not fully decided yet. Got a spreadsheet with the VPW, ABW, 4% (and 3.3%) and percent portfolio reminder recommendations.
Pensions 4 years out, and SS@ 70 12 years out. Started with 2 years cash and 70/30 portfolio.
The bad start this year give me pause on the models recommendation. For now doing ~2% withdrawal this year from cash, but likely to do 3.5% next year.
Will see...
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by smectym »

Zeno wrote: Mon Jul 04, 2022 9:53 pm
Zeno wrote: Mon Jul 04, 2022 9:12 pm
smectym wrote: Mon Jul 04, 2022 9:00 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pm I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
Default is the Bogleheads Variable Percentage Withdrawal matrix, which for us suggests a withdrawal rate of about 5.1%.

https://www.bogleheads.org/wiki/Variabl ... withdrawal

However, we impose an overlay: if the trailing 12 month return of the S&P is negative, we dial back withdrawals to 3%.
Why? Abundance of caution.

Of course, we’re currently languishing in the 3% withdrawal regime.
That is pretty much our plan: VPW then go lower (but we would do that whether the markets were up or down).

VPW, of course, is an approach for withdrawal, not spend. What I remain confused about VPW is this: is the suggested (or lower in a down market) amount to be withdrawn in fact to be withdrawn as a risk reduction measure in that said amount removes those dollars from the market, even in a down market? I recall longinvest saying somewhere in his terrific thread that that was the idea of VPW — it takes dollars off the table, if you will, thus allowing them to be put in a safer place where, of course, some amount therein would be spent in the current year/month.

This aspect of VPW remains uncertain to me. I need to revisit the wonderful VPW thread.

Edit: correcting reference to longinvest
I found the quote from the VPW thread I was thinking of above: viewtopic.php?p=2750258#p2750258. Apologies if I have messed up linking to the specific post. There (on Fri Jan 08, 2016 11:28 am) in the VPW thread longinvest posted the following:

"Personally, I would take the full VPW withdrawal and transfer any excess money into a high-interest savings account, instead. Otherwise, the unwithdrawn amount will melt along with the rest of my portfolio during a market downturn, if I leave it invested."

VPW suggests we withdraw 4.6% in Year 1. If we can, instead we only intend to "spend" 2.5% or 3% in Year 1. So if the above thinking is still current (and I don't know if it is) it suggests we go ahead and withdraw 4.6% (unless the lower amount is triggered), put that sum in something like a HYSA, then only withdraw between 2.5% to 3% from the HYSA, thereby "shielding" the remainder from further market volatility.

I'll stop posting in this thread as I don't want to detour it into a discussion of VPW. At the appropriate moment I may post my inquiry in the VPW thread. Apologies for my inadvertent detour of this thread.
Zeno, thanks for this. And longinvest does make his point.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by mmse »

Not retired, but interested in the topic. Sequence risk becomes important during decumulation phase, that is, which assets to withdraw first and when.
livesoft wrote: Mon Jul 04, 2022 8:29 pm I thought this was done already by ERN: https://earlyretirementnow.com/safe-wit ... te-series/
This reminded me of two previous threads on Prime Harvesting by M. McClung:
[WIthdrawal strategy: Living off Your Money (Prime Harvesting), Variable Percentage Withdrawal]
[Book: Living off Your Money, by M. McClung (Prime Harvesting)]

What is valuable, ERN also critically reviewed and double-checked PH in one of the posts:
The Ultimate Guide to Safe Withdrawal Rates – Part 13: Dynamic Stock-Bond Allocation through Prime Harvesting
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by willthrill81 »

Zeno wrote: Mon Jul 04, 2022 8:23 pm
willthrill81 wrote: Mon Jul 04, 2022 7:03 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pmThere are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds.
We really need a single thread that compares and contrasts the most prominent withdrawal methods, including their operation, pros and cons, etc. in a digestible manner. It would be a lot of work to put it together though.
The wiki does a great job (although arguably it could be updated with more specifics on more detailed approaches): https://www.bogleheads.org/wiki/Withdrawal_methods. The wiki’s discussion of dividends is also interesting given all the battles here about what dividends are or are not. The wiki describes living off of dividends as “keep[ing] your principal investment amount intact.”

I also really like the following app because it allows one to sort by withdrawal method (while also sorting them into categories): https://ficalc.app/. I believe that the developer is active here, but I don’t recall the user name.
The Wiki does a pretty good job of describing the various methods, but I don't personally think that it adequately addresses the pros and cons. For instance, I'm a firm believer that rigidly following the constant-real-dollar approach (i.e., SWR) would be incredibly awful in nearly all instances for various reasons.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by willthrill81 »

livesoft wrote: Mon Jul 04, 2022 8:29 pm
willthrill81 wrote: Mon Jul 04, 2022 7:03 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pmThere are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds.
We really need a single thread that compares and contrasts the most prominent withdrawal methods, including their operation, pros and cons, etc. in a digestible manner. It would be a lot of work to put it together though.
I thought this was done already by ERN: https://earlyretirementnow.com/safe-wit ... te-series/
Karsten's done great work to be sure, but it would take many hours to read his series, a great deal of which is just describing why the '4% rule' is not good for early retirees.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dknightd »

I use several tools. VPW, ABW, back of the envelope. I also know what I spent last year, and what the inflation rate was. This creates a range of potentially reasonable withdrawals. As long as what I want to withdraw is in the range I feel pretty comfortable. As long as what I "need" is less than that I feel pretty comfortable.
So at the beginning of the year, I pick our "reasonable" number for the year. Essentially I pick our "salary".
Most of the tools have various assumptions you can change. So any given tool can create a pretty wide range just by itself. I make sure what we "need" to spend is less than what any tool would predict we could spend. What we "want" to spend is usually somewhere in the middle.

I guess I'm doing an "ad hoc" method, guided by various tools ;)

I just did a quick look at what next year might bring. I've never done this before, but this is our first downmarket year. It did not take too long to do. We might have to forgo an inflation adjustment next year. Even in a bad inflation year we can afford that. But unless things go really wrong for the rest of the year, we could probably give ourselves an inflation adjustment if we wanted to.

When I'm subject to RMD I'll probably withdraw what I'm required to. If we don't spend it all, fine, we'll put it in the bank for future years, or invest it, or give it away. If we need a little more than the RMD we'll probably just take it, then expect to spend less in the future.

We've lived our whole lives on salary. It does seem a little strange to be able to choose our salary (within reason).

edit: fixed typo. Also we have had to go without inflation adjustments in the past while working. So we'll be fine. Our "need" to spend has some flexibility if absolutely required. I hope our "want" to spend is never less than our "need" to spend.
Last edited by dknightd on Tue Jul 05, 2022 6:17 am, edited 1 time in total.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by TomatoTomahto »

smitcat wrote: Mon Jul 04, 2022 7:05 pm Ad Hoc with a rising equity AA.
I guess that’s us also (retirement deferred again :oops: ).

I wonder whether there’s a high correlation of those who budgeted while working and those with fancy-pants withdrawal plans. We just spent what we didn’t save. In retirement the plan is the same.
I get the FI part but not the RE part of FIRE.
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JoeRetire
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by JoeRetire »

Ckprocker wrote: Mon Jul 04, 2022 6:15 pm I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
I use the JoeRetire Method, also known as the "I withdraw what I need, when I need it" method.

The math is probably too complex to explain here - it involves subtraction! :shock:
Last edited by JoeRetire on Tue Jul 05, 2022 3:43 pm, edited 1 time in total.
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dknightd
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dknightd »

TomatoTomahto wrote: Tue Jul 05, 2022 6:05 am
smitcat wrote: Mon Jul 04, 2022 7:05 pm Ad Hoc with a rising equity AA.
I guess that’s us also (retirement deferred again :oops: ).

I wonder whether there’s a high correlation of those who budgeted while working and those with fancy-pants withdrawal plans. We just spent what we didn’t save. In retirement the plan is the same.
We did not have a budget while I was working. Except for retirement savings, and required expenses. We just spent or saved what was left over. But now we have to essentially figure out what our salary will be. It is strange!
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
dcabler
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dcabler »

My own verson of ABW but I consider the calculated withdrawal to be a "max". So ad-hoc-ish with a ceiling.

Cheers.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dcabler »

TomatoTomahto wrote: Tue Jul 05, 2022 6:05 am
smitcat wrote: Mon Jul 04, 2022 7:05 pm Ad Hoc with a rising equity AA.
I guess that’s us also (retirement deferred again :oops: ).

I wonder whether there’s a high correlation of those who budgeted while working and those with fancy-pants withdrawal plans. We just spent what we didn’t save. In retirement the plan is the same.
I guess I can say that my own retirement is sorta deferred as well, even though I've given notice to retire. I agreed to stay as long as needed, within reason, to help find and train my replacement. As such I really have no idea when this will happen, but I hope it's within the next couple of months. I would really hate for it to linger so long that we're approach 2023 RSU vesting, corporate bonus, etc and have my last day happen just before those events. Better to either get agreement that I'll be there through those events (mostly in Q1) or so far away from them that I won't miss them. :D

We don't budget but will use a fancy-pants withdrawal plan as a guide (my own verson of ABW). What I have done, though, is a tops-down calculation of what our spending actually has been by starting with my gross paycheck and removing everything associated with w*rk such as SS withholdings, 401K withholdings, regular deposits into my taxable account, etc. Whatever is left must be what we actually spent. A couple of adjustments for the retirement life (like work related healthcare premiums removed and ACA based premiums added in). Then back-calculate for taxes to see what an effective withdrawal rate to cover that would be for the year. I've done for several years leading up to retirement and it's told me for quite a while now that we're good to go with decent margin. I prefer doing that to budgeting and calculating some multiplier for "do I have enough savings?"

Real retirement life will no doubt be different especially since I'll need to look at Roth conversions and we plan to downsize which, if we do what I think we will do, will result in some additional cash added back into our savings. But good to know we're where we think we need to be, and then some.

Cheers.
Last edited by dcabler on Tue Jul 05, 2022 6:42 am, edited 1 time in total.
dknightd
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dknightd »

JoeRetire wrote: Tue Jul 05, 2022 6:06 am I use the "I withdraw what I need, when I need it" method.

The math is probably too complex to explain here - it involves subtraction.
I recently took out a car loan. They asked what my income was. I told them "whatever I need". They said "that is common with most retirees". I used the number we withdrew last year. I guess people with the ability to buy a new car have the ability to pay for it. Hopefully.
The calculation required subtraction, multiplication, and division! I don't think I've used calculus since I've been retired. But I still have those skills if they are required. Maybe.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Ron »

We let the government dictate my/wife's withdrawals, using the RMD tables.

Roth accounts are not touched and all dividends/cap gains are reinvested. We have no intention of touching our respective Roth accounts during our lifetimes.

TIRA RMD withdrawals are taken on the first business day of the year, from cash held in our respective FIDO/VG accounts. We don't reinvest dividends/cap gains but retain them in our respective cash settlement accounts. Most dividends are received in the last three months of the year (mostly December) and they are used to satisfy next year's RMD withdrawals. Some years we need to sell a few shares to meet our RMD's (like 2020); other years our distributions more than cover our RMD's (like 2021). In those years, we take the excess cash out of our settlement accounts and reinvest into our TIRA's

The RMD's are used to pay our income taxes on all our income (RMD's, SS, pensions, SPIA) with the remaining going to savings to meet expenses beyond our normal income sources. We don't reinvest any of the excess; no need to since our TIRA's are the major source of our retirement excess expense funding via RMD's and we rather be cash rich rather than take on the additional investment risk at this time of our lives (mid-70's). In other words, we use the KISS method for withdrawals.

- Ron
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by smitcat »

curmudgeon wrote: Mon Jul 04, 2022 8:12 pm
smitcat wrote: Mon Jul 04, 2022 7:05 pm Ad Hoc with a rising equity AA.
That would apply to us as well. It's made easier by the fact that we've "over-saved" in traditional retirement terms. Retired 5 years ago in late 50's. Planning to delay my SS until age 70. No pensions. Using ACA subsidies to reduce health insurance costs by managing taxable income and limiting Roth conversions until age 65.

I do have some rough guardrails in the back of my mind relative to potential scenarios. They aren't something that I actively evaluate, but if I'm feeling uncomfortable about the situation, it's what I would pull out for guidance. When we hit SS, I'll probably reformulate. It goes something like this:

1. If the 12-month rolling average value of our investments drops down to $X, we will go to a 4% WR, and stay there for at least 5 years. That's a perfectly comfortable income level for us with paid-off house, and still gives a chunk for extras, but would probably limit some of the travel we currently do. With SS down the road, it's still pretty conservative.

2. If the average is between $X and $1.5X, we limit ourselves to 5% of current balance for next years spending.

3. Between $1.5X and $2X, we spend whatever we feel like (we aren't extravagant by nature, so this tends to be more like #2)

4. Above $2X, we actively look to move funds to the next generations or charitable causes.

None of this is set into a formal plan, but it gives me some mental anchor points when I do my quarterly summing up of account values.
Interestingly we also do a couple of formal 'checks' to our plan each year - we have this written up as a couple of simple rules to check.
No complications with ACA subsidies but the actions for Roth conversions and fund movements do make it a bit complicated at times.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dknightd »

Ckprocker wrote: Mon Jul 04, 2022 6:15 pm I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
I do not like surveys. do what makes you happy.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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fishandgolf
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by fishandgolf »

Zeno wrote: Mon Jul 04, 2022 9:12 pm
smectym wrote: Mon Jul 04, 2022 9:00 pm
Ckprocker wrote: Mon Jul 04, 2022 6:15 pm I like surveys and data, and thought it might be interesting to get feedback on what type of methods retirees use here.
There’s the 4% Rule, VPW, Dynamic Withdrawals with Guardrails, Amortization based withdrawals (ABW) etc, etc. There are so many methods, it’s a bit hard to keep up with so many ways to spend retirement funds. :happy
Default is the Bogleheads Variable Percentage Withdrawal matrix, which for us suggests a withdrawal rate of about 5.1%.

https://www.bogleheads.org/wiki/Variabl ... withdrawal

However, we impose an overlay: if the trailing 12 month return of the S&P is negative, we dial back withdrawals to 3%.
Why? Abundance of caution.

Of course, we’re currently languishing in the 3% withdrawal regime.
That is pretty much our plan: VPW then go lower (but we would do that whether the markets were up or down).

VPW, of course, is an approach for withdrawal, not spend. What I remain confused about VPW is this: is the suggested (or lower in a down market) amount to be withdrawn in fact to be withdrawn as a risk reduction measure in that said amount removes those dollars from the market, even in a down market? I recall longinvest saying somewhere in his terrific thread that that was the idea of VPW — it takes dollars off the table, if you will, thus allowing them to be put in a safer place where, of course, some amount therein would be spent in the current year/month.

This aspect of VPW remains uncertain to me. I need to revisit the wonderful VPW thread.

Edit: correcting reference to longinvest
+1

The entire VPW strategy has never resonated with me. Withdraw more during an up market, dial back during a down market, but never run out of money...hummm. Never really got the warm and fuzzies from this. In a way, kind of a sound like a modified version of the 4% Rule.

I retired in 2009 at age 55. DW retired 2 years ago. SS covers ~ 60% of our expenses. I withdraw another 3.2% from TIRA at Vanguard and have been doing so since retirement. When additional $ is needed, we sell additional shares. Last year we purchased some property, a new vehicle, new golf clubs, etc. Now, facing a down market, we should be OK with same withdrawal patten..... but can dial back if the markets get real crappy.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by AlohaBill »

Before full retirement, we lived on $33,000 to about $45,000 per year. We figured on $55,000 as a good sum to live on. We would use 4% and VPW.
However, we have ended up following Taylor Larimore’s advice: take out what we need when we need it. Pension and social security cover more than 100% of our expenses. We are only withdrawing from our portfolio to pay for taxes on Roth conversions. We spent $75,000 last year after buying a car so I guess our range now is $33000 to $75,000 per year. We could easily double that if we had to.
There is no need for voodoo math formulas. There is definitely no worries about running out of money. If anything, my wife will be able to fund our grandchildren’s college educations with ease. Life is good.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by dbr »

AlohaBill wrote: Tue Jul 05, 2022 9:28 am Before full retirement, we lived on $33,000 to about $45,000 per year. We figured on $55,000 as a good sum to live on. We would use 4% and VPW.
However, we have ended up following Taylor Larimore’s advice: take out what we need when we need it. Pension and social security cover more than 100% of our expenses. We are only withdrawing from our portfolio to pay for taxes on Roth conversions. We spent $75,000 last year after buying a car so I guess our range now is $33000 to $75,000 per year. We could easily double that if we had to.
There is no need for voodoo math formulas. There is definitely no worries about running out of money. If anything, my wife will be able to fund our grandchildren’s college educations with ease. Life is good.
I am not sure no or only highly voluntary withdrawals is in the list of withdrawal methods either though it is not uncommon for people who post here to be in that method.
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by jebmke »

dbr wrote: Tue Jul 05, 2022 9:44 am
AlohaBill wrote: Tue Jul 05, 2022 9:28 am Before full retirement, we lived on $33,000 to about $45,000 per year. We figured on $55,000 as a good sum to live on. We would use 4% and VPW.
However, we have ended up following Taylor Larimore’s advice: take out what we need when we need it. Pension and social security cover more than 100% of our expenses. We are only withdrawing from our portfolio to pay for taxes on Roth conversions. We spent $75,000 last year after buying a car so I guess our range now is $33000 to $75,000 per year. We could easily double that if we had to.
There is no need for voodoo math formulas. There is definitely no worries about running out of money. If anything, my wife will be able to fund our grandchildren’s college educations with ease. Life is good.
I am not sure no or only highly voluntary withdrawals is in the list of withdrawal methods either though it is not uncommon for people who post here to be in that method.
and among older retirees (at least in my area) it isn't that uncommon, even for retirees with modest wealth. Quite a few retired military and public employees (teachers, cops, state employees) who have significant pensions and social security. Especially the retired military and law enforcement also had "second careers" which earned them a private pension.

Of course, now, db pensions are not very prevalent in the private sector
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by quantAndHold »

Retired 5 years. Wife is collecting SS, I’m still a ways from that.

Ad hoc. At the end of each year, I check our actuals for the previous year against what we would get if we were strictly adhering to VPW, to make sure we’re not overspending. At this point, it seems likely that we’ll leave a large legacy.
Zeno
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Re: Survey Question: For Retired or Those Close to Retirement, What Withdrawal Method are You Using?

Post by Zeno »

AlohaBill wrote: Tue Jul 05, 2022 9:28 am Before full retirement, we lived on $33,000 to about $45,000 per year. We figured on $55,000 as a good sum to live on. We would use 4% and VPW.
However, we have ended up following Taylor Larimore’s advice: take out what we need when we need it. Pension and social security cover more than 100% of our expenses. We are only withdrawing from our portfolio to pay for taxes on Roth conversions. We spent $75,000 last year after buying a car so I guess our range now is $33000 to $75,000 per year. We could easily double that if we had to.
There is no need for voodoo math formulas. There is definitely no worries about running out of money. If anything, my wife will be able to fund our grandchildren’s college educations with ease. Life is good.
Interesting
Last edited by Zeno on Mon Jul 11, 2022 8:19 pm, edited 2 times in total.
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