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

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

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

Post by retiredjg »

I don't really have a plan at this point. When I retired, I stayed under a 4% withdrawal through the Great Financial Crisis. After my portfolio recovered (which took forever), I have not needed to have much of a plan because my needs are pretty limited (so far).

Rebalancing - when I do take money out, I take it from the side that has too much. Have only needed to do a real rebalance a few times (such as during the COVID downturn). I take mostly from tax-deferred and do Roth conversions up to a buffer zone under IRMAA. If I need more than that, I take from Roth.

I keep it pretty simple.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

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

Post by dbr »

retiredjg wrote: Tue Jul 05, 2022 9:59 am I don't really have a plan at this point. When I retired, I stayed under a 4% withdrawal through the Great Financial Crisis. After my portfolio recovered (which took forever), I have not needed to have much of a plan because my needs are pretty limited (so far).

Rebalancing - when I do take money out, I take it from the side that has too much. Have only needed to do a real rebalance a few times (such as during the COVID downturn). I take mostly from tax-deferred and do Roth conversions up to a buffer zone under IRMAA. If I need more than that, I take from Roth.

I keep it pretty simple.
This also brings up that in cases where withdrawals are not zero but just far away from the bounds of any withdrawal method that withdrawal method is irrelevant.

The real question is to what extent a withdrawal method saves someone's bacon when they are flirting with disaster and also how does one even know they are flirting with disaster.
Big Dog
Posts: 4608
Joined: Mon Sep 07, 2015 4:12 pm

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

Post by Big Dog »

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.
Ditto.
HootingSloth
Posts: 1050
Joined: Mon Jan 28, 2019 2:38 pm

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

Post by HootingSloth »

Zeno wrote: Tue Jul 05, 2022 9:58 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 don't believe that is Mr. Larimore's advice.

Clearly, those who can live on a pension and SS have no worries about withdrawal methods. And you likely are outside your personal SORR window in any event.

I think these issues are more "real" and thus potentially challenging for those of us: (1) on the cusp of retirement or in the early years of it (e.g., SORR); (2) no pensions; and (3) years away from SS.

I'm somewhat surprised that the returns from OP's survey so far are largely "ad hoc" and moderately disparaging of withdrawal approaches (e.g., "voodoo math," "just subtraction," etc.). If that's the case, I'm not sure what all of the angst is in nearly all of the other threads regarding financial planning for retirement. For those reading at home, I guess the answer of the cohort responding here is "don't worry about this stuff"; unfortunately, I'm not certain that is the message we want to be sending.
It does seem telling that lots of Bogleheads who are not yet retired (yours truly included) spend a lot of time thinking about and debating the pros and cons of different formulaic withdrawal methods, but the vast majority of actually retired Bogleheads seem to just make ad hoc withdrawals as needed. That is probably what most of us nonretired folks will end up doing as well, in practice, but I don't mind planning and thinking in the meantime. Part of the point of planning now is so that the "don't worry about this stuff" will work out later.

It seems especially likely that many non-retirees are going to end up making ad hoc withdrawals, in practice, when they say that they will be using some withdrawal method as "a ceiling." Using a method as a ceiling mostly amounts to the same thing as "withdraw what you need when you need it within reason," while trying to put a little meat on the bones of the "within reason" part. And many of the "ceiling" folks may be sufficiently conservative and/or lucky that they just never run into the ceiling at all. Or, if they do run into what they thought was their "ceiling" because of some lumpy expense, they will (justifiably) blow past it on a one-time basis because they will still have enough anyway and the concrete benefits of whatever the expense sitting in front of them is will be much more obvious than the abstract benefits of rigidly following the plan.

For me, one of the benefits of using some kind of formula is to make sure that, if I end up being lucky (or "not unlucky"), I will actually spend (or, at least, give away) a reasonable amount of what I have accumulated during my lifetime and not let inertia keep my portfolio growing until it is too late to make the best use of the funds. Maybe many retirees do not see spending down their portfolio during their lives as an important goal, or maybe it is just easy enough for them to balance this goal with their other goals while making ad hoc withdrawals.
Last edited by HootingSloth on Tue Jul 05, 2022 10:36 am, edited 1 time in total.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
User avatar
9-5 Suited
Posts: 1307
Joined: Thu Jun 23, 2016 12:14 pm

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

Post by 9-5 Suited »

Not sure my plan has a specific name since it's a variant of a few plans, but here's what I'm planning:

- Initial withdrawal rate of 3.75% (up from 3.5% recently, as valuations / expected returns have improved)

- We track how much monthly 'side income' we would need to earn to retire today and withdraw 3.75%. Right now that's around $2,250. So we may wait until that figure is $0, or at some point just decide it's such a trivial amount to earn that we can pull the trigger.

- We will not use any rigidly fixed models (either $+CPI, % withdrawal, or VPW/ABW), but rather will use something more akin to the Taylor Larimore method of using our strong intuitive skills and discipline to take out what's needed and adjust a bit up or down as we go - I'm not afraid of maintaining some agency of choice rather than relying on a fixed model

- If withdrawals ever go above 5% due to poor returns, that will be a trigger to re-think our situation (perhaps not taking action, but taking stock of our current comfort level and seeing if any type of paid work feels appealing again)
User avatar
martincmartin
Posts: 900
Joined: Wed Jul 02, 2014 3:04 pm
Location: Boston, MA USA

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

Post by martincmartin »

AnnetteLouisan wrote: Mon Jul 04, 2022 6:53 pm 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).
Why use Roth IRA before taxable? Since there are no taxes on gains in a Roth, you should want it to accumulate longest, and therefore tap it last, after exhausting your taxable, no?
Broken Man 1999
Posts: 8626
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

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

Post by Broken Man 1999 »

Big Dog wrote: Tue Jul 05, 2022 10:15 am
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.
Ditto.
Same.

Though, our AA is 55% equity/45% bond, I'm planning for AA 60/40 in a couple of years.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
User avatar
Candor
Posts: 1287
Joined: Sat May 28, 2011 4:25 pm

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

Post by Candor »

Add me to the ad hoc crowd while I also keep the 100% FireCalc WR in the back of my mind as a general upper limit.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
User avatar
Garco
Posts: 1078
Joined: Wed Jan 23, 2013 1:04 am
Location: U.S.A.

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

Post by Garco »

I retired at age 70. At that time my largest investments were in a 403b plan. Since my retirement I've relied mainly on two sources: RMD's from my retirement plan plus Social Security. This covers our ordinary expenses. We also received bequests shortly before my retirement; that money has mainly been reinvested in a brokerage account, from which we take some cash for special purchases or other expenditures, sometimes major ones such supporting our (grown) children's financial needs.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

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

Post by Marseille07 »

Might walk next year. 3% constant-% withdrawal method (not to confuse with 3% SWR).
mrb09
Posts: 899
Joined: Wed Aug 03, 2016 9:02 am

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

Post by mrb09 »

Planning on retiring next year.

Plan is withdraw a "salary" from my 60/40 IRA, which combined with some other income exactly matches my take-home now. That's still less than 4% even with the current market drops. I use YNAB "envelopes", so the "salary" includes things like a house maintenance fund. I have some cash and taxable equities that I'm mostly planning on spending down for extra travel expenses in early retirement. Not sure that's the most efficient thing, but as they say, it will let me sleep at night.

Influenced by VPW, if my self-modified VPW table says I can take out more than I need, then do a Roth conversion. Last year I was worried about future RMDs being too high, this year I'm worried about staying under 4% for my early withdrawals. We'll see what next year is like.

I have an HSA which I'll likely just spend down.
Broken Man 1999
Posts: 8626
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

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

Post by Broken Man 1999 »

HootingSloth wrote: Tue Jul 05, 2022 10:36 am
Zeno wrote: Tue Jul 05, 2022 9:58 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 don't believe that is Mr. Larimore's advice.

Clearly, those who can live on a pension and SS have no worries about withdrawal methods. And you likely are outside your personal SORR window in any event.

I think these issues are more "real" and thus potentially challenging for those of us: (1) on the cusp of retirement or in the early years of it (e.g., SORR); (2) no pensions; and (3) years away from SS.

I'm somewhat surprised that the returns from OP's survey so far are largely "ad hoc" and moderately disparaging of withdrawal approaches (e.g., "voodoo math," "just subtraction," etc.). If that's the case, I'm not sure what all of the angst is in nearly all of the other threads regarding financial planning for retirement. For those reading at home, I guess the answer of the cohort responding here is "don't worry about this stuff"; unfortunately, I'm not certain that is the message we want to be sending.
[snip] Maybe many retirees do not see spending down their portfolio during their lives as an important goal, or maybe it is just easy enough for them to balance this goal with their other goals while making ad hoc withdrawals.
Enjoying a comfortable retirement supported by our retirement portfolio is my most important goal, and that requirement conflicts with spending down our portfolio.

If I only knew our expiration dates, our health as we age, etc. I might be able to safely spend down our portfolio. Alas, I do not.

Each year of retirement completed means one less year to fund retirement expenses. But expenses of the year just ended can be a poor expense predictor unless the expenses of the following year(s) of retirement remained similar to the previous year(s).

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
User avatar
TomatoTomahto
Posts: 17158
Joined: Mon Apr 11, 2011 1:48 pm

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

Post by TomatoTomahto »

HootingSloth wrote: Tue Jul 05, 2022 10:36 am [snip…]

For me, one of the benefits of using some kind of formula is to make sure that, if I end up being lucky (or "not unlucky"), I will actually spend (or, at least, give away) a reasonable amount of what I have accumulated during my lifetime and not let inertia keep my portfolio growing until it is too late to make the best use of the funds. Maybe many retirees do not see spending down their portfolio during their lives as an important goal, or maybe it is just easy enough for them to balance this goal with their other goals while making ad hoc withdrawals.
We are making annual gifts to the exclusion amount for 4 offspring. We have promised them to give advance notification of a few years before ending that. My wife is working now, and barring catastrophic markets or massive tax changes, I expect that we could continue doing so indefinitely even after she (finally :D ) retires. We did not plan traditional balances well, so SS, deferred compensation, and RMDs should more than meet our needs.

Like the definition of pornography, I don’t define when we we should stop the annual gifts, but I think I’ll know it when I see it.
I get the FI part but not the RE part of FIRE.
CloseEnough
Posts: 1290
Joined: Sun Feb 14, 2021 7:34 am

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

Post by CloseEnough »

Zeno wrote: Tue Jul 05, 2022 9:58 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 don't believe that is Mr. Larimore's advice.

Clearly, those who can live on a pension and SS have no worries about withdrawal methods. And you likely are outside your personal SORR window in any event.

I think these issues are more "real" and thus potentially challenging for those of us: (1) on the cusp of retirement or in the early years of it (e.g., SORR); (2) no pensions; and (3) years away from SS.

I'm somewhat surprised that the returns from OP's survey so far are largely "ad hoc" and moderately disparaging of withdrawal approaches (e.g., "voodoo math," "just subtraction," etc.). If that's the case, I'm not sure what all of the angst is in nearly all of the other threads regarding financial planning for retirement. For those reading at home, I guess the answer of the cohort responding here is "don't worry about this stuff"; unfortunately, I'm not certain that is the message we want to be sending.
I had a similar reaction, reading through the responses to the OP's survey. I suspect the reason for the ad hoc approach by so many is because the wealth they've accumulated is so large as to create a substantial buffer so the angst is not needed. Except in cases of truly extreme wealth relative to expenses, I'm sure most are still reevaluating and considering overall financial picture to determine that the ad hoc approach, without the angst, is still ok. So the angst reflected in financial planning for retirement is to get there, and once there if you have enough you just wing it. Those with less buffer may use more analytical methods for withdrawal.
Wanderingwheelz
Posts: 3145
Joined: Mon Mar 04, 2019 8:52 am

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

Post by Wanderingwheelz »

:greedy
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.
We’re not withdrawing but when we do we’ll do the same.

We reached FI pretty quickly without ever keeping a budget, so I can’t see a scenario where we’d regret withdrawing whatever we want. (We’ve never wanted more than we can afford, and that won’t suddenly change due to retirement.)
Being wrong compounds forever.
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

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

Post by TheTimeLord »

smitcat wrote: Mon Jul 04, 2022 7:05 pm Ad Hoc with a rising equity AA.
Pretty much my plan. I am implementing a Liability Matched TIPS ladder to bridge to SS.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

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

Post by Da5id »

Big Dog wrote: Tue Jul 05, 2022 10:15 am
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.
Ditto.
Yeah same (though I'm 50/50). I do keep track of my outflows (easy, all is through my main checking account) and know what my spending is as a percentage of assets. It hovers around 2% so I feel no need for a specific plan as I have no desire to spend more. If it were pushing 4% I'd think about VPW or something I guess as I'm in my 50s.
Last edited by Da5id on Tue Jul 05, 2022 12:13 pm, edited 1 time in total.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

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

Post by dbr »

The ad hoc approach is based on two facts:

1. In real life spending is highly variable so it is irrational to follow a practice that computes what you can withdraw from an algorithm that either keeps withdrawals very constant or lets them jump around in arbitrary ways that don't match needs and wants.

2. The success or failure of the portfolio is an exercise in long term averages and does not require exact adherence to a schedule. What one does do is pay some attention to how the portfolio is doing and what the average rate of withdrawals are relative to any model for success. I admit my annual withdrawals over fifteen years have ranged from -0.4% of initial assets to +4.8% of initial assets with an average of 2.7% withdrawal rate. So the wealthy enough not to worry about it might apply. We also retired with significant Social Security and some pension income, not COLA'd and we have lucked out that inflation has been low and stock returns have been good. Failing the last year we have more money now than we have ever had. But also don't forget our accumulation years included the lost decade 2000-2010, the dotcom crash, and starting our financial life with an excursion into 15% inflation and a 10% mortgage.

But I get it when people are worrying how to arrange things in the future. Perhaps the one word of wisdom is that you will know when you get there. Just for starters, while a person is worrying about what withdrawal rates to implement one might also contemplate how uncertain is the value of the portfolio you will have to apply that rate against and also how flexible people can be with what they spend. Annual income is just not high on the list of life priorities, taken all in all.

Another comment is that in real life I doubt very many people choose to retire based on getting a number. There are many, many life factors that determine that. I certainly did not retire based on anything having to do with a number. For those curious the factors that mattered were a long list of personal considerations of our own.

There is a whole lot more to life than how big is my portfolio and what is my withdrawal rate. It is natural that an investment forum dives deep into all sorts of financial matters, but as soon as you log off the forum, put away the spreadsheets and do the other things you do it all goes away really fast.
formerlybroke
Posts: 117
Joined: Mon Dec 07, 2020 11:56 am

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

Post by formerlybroke »

Will do good wrote: Mon Jul 04, 2022 6:33 pm
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.
+2
+3 (AA = 40/50/5 alts/5 cash)
Mike Scott
Posts: 3579
Joined: Fri Jul 19, 2013 2:45 pm

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

Post by Mike Scott »

Over planning and optimizing seems to be very common for accumulation stages of life. And then, when you "get there" a continuation of a similar and ingrained lifestyle and budget will likely keep you on track without too much analysis. I will also speculate that many of those "ad hoc" replies are more aware of their budgets than they imply and that they are probably staying within their long term SWR. You may not get many replies from the lean fire and/or low resource individuals who do not have as much financial buffer. It's a biased survey however you slice it.

I am not retired but I hope to retire in a few years after I get a health insurance plan to age 65 and a "social security bridge" to age 70 worked out and funded. My withdrawal plan after age 70 is to use a perpetual withdrawal rate as a maximum rate (but that is a long way off in the future).
Barsoom
Posts: 728
Joined: Thu Dec 06, 2018 8:40 am

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

Post by Barsoom »

I'm retired for three years now. I looked at the 4% rule, backtesting in FireCalc, i-ORP, and the Retiree Portfolio Model with my Monte Carlo analysis to determine risk boundaries.

In the end, I take a monthly withdrawal to match the net deposit from my paycheck from before I retired. I call that Lifestyle Matching. I budgeted for increased travel (to be withdrawn as needed), but with the COVID-19 shutdown my traveling has been postponed.

My portfolio was seeded with enough of a cash buffer that, with dividend replenishment I could go for about five years before having to sell to refill it.

-B
GAAP
Posts: 2556
Joined: Fri Apr 08, 2016 12:41 pm

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

Post by GAAP »

I'm going to define "withdrawal" as the amount of money used to support daily spending. This keeps things like Roth conversions and SS bridging out my discussion -- even though I am also doing them.

I have a portion of my portfolio dedicated to that type of variable spending. I use a roll-your-own approach to calculate a number that is really an annual estimated budget. I make actual withdrawals sufficient to refill my checking account to a predetermined level every month. Actual spending has never exactly matched the budget and has generally come in below that level.

The calculation that I use is based upon a perpetuity with a targeted growth rate. That in turn leads to fairly/very conservative withdrawal rate calculations.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
User avatar
AerialWombat
Posts: 3107
Joined: Tue May 29, 2018 1:07 pm
Location: Cashtown, Cashylvania

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

Post by AerialWombat »

deleted
Last edited by AerialWombat on Thu Aug 25, 2022 7:14 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
User avatar
AnnetteLouisan
Posts: 7263
Joined: Sat Sep 18, 2021 10:16 pm
Location: New York, NY

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

Post by AnnetteLouisan »

martincmartin wrote: Tue Jul 05, 2022 10:45 am
AnnetteLouisan wrote: Mon Jul 04, 2022 6:53 pm 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).
Why use Roth IRA before taxable? Since there are no taxes on gains in a Roth, you should want it to accumulate longest, and therefore tap it last, after exhausting your taxable, no?
Oh good point yes. I wasn’t sure, so I put and/or so I’ll tap the Roth IRA last. Thanks!
So it would be:
1. Pension and cash
2. T401k
3. taxable brokerage
4. SS
5. Roth IRA

(Wouldn’t I want to defer taxes as long as possible by taking my 401k RMDs last? Or would I address this by doing Roth conversions of my T 401k before RMDs to avoid the IRMAA cliff?)
Last edited by AnnetteLouisan on Tue Jul 05, 2022 3:07 pm, edited 1 time in total.
User avatar
Midpack
Posts: 778
Joined: Fri Mar 14, 2008 9:34 am
Location: NC

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

Post by Midpack »

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. 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.
Retired 11 years. We withdraw funds as needed, but our WR has worked out to less than 2%, much less some years. We track spending closely, and variance from budget, but the budget is just to keep us near a plan. We did LBYM all our working years, oversaved and invested well so fortunately --- if we run out of funds, almost everyone will be in financial trouble...
You only live once...
MathWizard
Posts: 6561
Joined: Tue Jul 26, 2011 1:35 pm

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

Post by MathWizard »

Changes due to RMDs, SS stating at 70 and reducing upon first spouse's death, filing single after that, differences in health insurance for a single, all argue against a fixed inflation adjusted withdrawal, and instead, an adjustable withdrawal meant to keep discretionary income in real dollars .


My plan is to delay SS benefits for myself until 70, and either withdraw or Roth convert up to the top of the 12 then 15% bracket until the tax deferred is low enough that RMDs and filing single will not cause undue taxes on whichever of us survives the longest.

The idea is a fixed inflation adjusted net income after taxes and health insurance. This amount is about what our net is now
except that we also contribute $14K to Roth out of that net.
That $14K will be out travel fund.

The amounts that I convert to Roth rather than use every year will pay for lumpy expenses, like house maintenance and car replacement.

I also plan with
about 1 yr of minimum expenses in cash as a buffer
an extra $30K for deferred travel upon retirement when we are the most able.
withdraw $80K around age 80 for done unspecified large medical expense which would be deductible
Withdraw $100K from Roth for selling the house and moving to a place more elder friendly .

This all would in all likelihood leave well over one million for the kids, all but $75K in Roth. All in today's dollars .

We will ratchet up spending from Roth if the portfolio is doing extremely well as suggested by Kitches.
John Z
Posts: 521
Joined: Sun Nov 14, 2010 4:42 pm

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

Post by John Z »

In McClung's book, Living Off Your Money, he dedicates Chapter 3, Surveying and Selecting an Income-Harvesting Strategy to about a dozen income harvesting strategies with detailed backtesting of each.

Income-Harvesting Strategies:
Bonds-First Strategy
Age-Based Strategies: 100-Age, 120-Age, and Glidepath
The Guyton PMR Strategy
The Parker Strategy
The Weiss Strategy
The OmegaNot Strategy
The Three-Bucket Strategy
The Enhanced Two-Bucket Strategy
The Rational Strategy
The Prime Harvesting Strategy— A New Strategy

I have been using the Prime Harvesting Strategy for exactly 10 years with an approximate <4% per year withdrawal rate and am confident and satisfied with it.

You can download the TofC and the first 3 chapters at livingoffyourmoney.com
User avatar
Kenkat
Posts: 9553
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

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

Post by Kenkat »

I am planning to use a portfolio to bridge my time between now (I retire this month) and social security and a second portfolio that will continue to be more growth oriented. The bridge portfolio will be more bonds / TIPS / stable value than equities and is intended to cover the 11 years or so until I reach 70. It is somewhat using the liability matching concept but not in the strictest sense. I will start at 50/50 or so overall and let that drift back up to around 70/30 by age 70.

Overall, I will be drawing 4-5% from my portfolio for the 6 years until my spouse claims social security at 62, 3-4% until I reach 70 (5 years after that) and 1-2% after 70 when my spouse will switch to a spousal benefit under my work record.

I plan to take a monthly draw from my bridge portfolio and manage cash flow from there.
PhoebeCoco
Posts: 209
Joined: Tue Mar 26, 2019 6:33 pm

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

Post by PhoebeCoco »

My monthly pension covers my housing costs and health insurance, with about $1000 a month left over.

On top of that, I withdraw from my investments as needed. Yes, I am another "ad hoc". I should not run out of money in my lifetime, unless I develop a bad habit like doing drugs or gambling (which I'm not planning on).

I have not started taking SS yet.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

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

Post by Marseille07 »

AerialWombat wrote: Tue Jul 05, 2022 12:57 pm "Ad hoc" seems to be the popular answer, and I'm probably in that bucket, too. I base my retirement plan modeling on a 5% withdrawal rate ceiling, but my model also shows that I never actually hit that ceiling.

Over the next few months, I'm determining what my actual portfolio will look like in the decumulation phase. It will have some cash, some more cash, lots of cash-equivalent, and lots of fixed income that's easily converted to cash. I'll probably do some type of duration-matching. Based on my projections, I'll never actually need to draw from the equity side of my 30/70 portfolio, and plan to live on just rental income, dividends, interest, and fixed income drawdown until Social Security.
Why do you think you won't hit the 5% ceiling? Imo one could easily hit that if they want to, such as traveling to Europe flying first class. This is why I don't like to set the ceiling that high assuming you won't hit it.
User avatar
tadamsmar
Posts: 9972
Joined: Mon May 07, 2007 12:33 pm

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

Post by tadamsmar »

I think of the 4% rule as something you in the planning process before retirement.

Like many Bogleheads, my nest egg exceeded the minimum requirement at retirement. That was partly due to conservative estimation of portfolio growth, but also due to getting a bit of a windfall from selling my inherited farmland.

So far, we just withdraw as needed and I am not tracking it closely. But I would consider exceeding the 4% to be kind of a warning limit.

Note the the yearly withdrawal amount would be 4% of your nest egg value at retirement inflation adjusted. But I am not even sure that I have the records to figure out what my retirement nest egg value was.
Last edited by tadamsmar on Tue Jul 05, 2022 3:33 pm, edited 2 times in total.
Dregob
Posts: 858
Joined: Wed Sep 26, 2018 9:45 pm

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

Post by Dregob »

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
Very personal question. Oh wait, I was thinking about the other withdrawal method.
User avatar
steve roy
Posts: 1855
Joined: Thu May 13, 2010 5:16 pm

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

Post by steve roy »

From pension accounts we use RMDs, taken in late November. We withdraw from assets that are above our asset allocation targets, though our 401(k)s are in VG Target Date funds, so we just pull from those for the 401(k) RMD withdrawals.
Exchme
Posts: 1335
Joined: Sun Sep 06, 2020 3:00 pm

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

Post by Exchme »

I think the question is way oversimplified and only exists in the idealized world of spreadsheets. In the real world, folks' cash flow can be very uneven due to a variety of factors - Social security, pensions, Roth Conversions, need to limit income for ACA premium credits, major planned expenses or income (e.g. buying or selling a home), surprise expenses like medical problems, inheritances coming in or gifts going out, etc.

Or to put it as the great philosopher Mike Tyson did, "Everybody has a plan until they get punched in the mouth".
JayB
Posts: 673
Joined: Sat May 28, 2022 9:57 am

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

Post by JayB »

Spouse and I retired 9 years ago. Starting about 20 years prior to that, we built a loosely-structured zero-coupon bond ladder -- mostly muni's, the rest Agency bonds -- in our taxable account.

Rungs maturing each year have provided more than enough $ to not need to withdraw anything from our 403(b) or Roth IRA holdings. Additional maturing rungs, on top of SS starting in 2 years and RMDs in 4, are expected to leave us with reinvestable funds each year.
User avatar
AerialWombat
Posts: 3107
Joined: Tue May 29, 2018 1:07 pm
Location: Cashtown, Cashylvania

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

Post by AerialWombat »

deleted
Last edited by AerialWombat on Thu Aug 25, 2022 7:14 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

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

Post by Marseille07 »

AerialWombat wrote: Tue Jul 05, 2022 4:06 pm I'm not one of the people that generally wants to. Almost 40% of my current spending is already discretionary, mostly travel and adventure experiences, boating, other hobbies. I've allowed myself significant lifestyle creep over the last two years in particular, and I've effectively run out of new things I want to start spending money on. In fact, by the end of the year I'll have reduced my monthly spending by about 15%, by eliminating my marina slip and a couple other things.

Basically, I just don't live the kind of lifestyle that the typical American does. I spend too much money to appease the leanFIRE or Mr. Money Mustache crowd, and spend too little money to appease many vocal Bogleheads, and I'm OK with that.
I'm actually like you. I won't fly first class even if I could.

That said, I'd rather hit my 3% WR every month than have something like 5% that I almost never hit, but I might - not because I spend a lot, but because of big purchases such as a car.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

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

Post by retiredjg »

dbr wrote: Tue Jul 05, 2022 10:05 am
retiredjg wrote: Tue Jul 05, 2022 9:59 am I don't really have a plan at this point. When I retired, I stayed under a 4% withdrawal through the Great Financial Crisis. After my portfolio recovered (which took forever), I have not needed to have much of a plan because my needs are pretty limited (so far).

Rebalancing - when I do take money out, I take it from the side that has too much. Have only needed to do a real rebalance a few times (such as during the COVID downturn). I take mostly from tax-deferred and do Roth conversions up to a buffer zone under IRMAA. If I need more than that, I take from Roth.

I keep it pretty simple.
This also brings up that in cases where withdrawals are not zero but just far away from the bounds of any withdrawal method that withdrawal method is irrelevant.

The real question is to what extent a withdrawal method saves someone's bacon when they are flirting with disaster and also how does one even know they are flirting with disaster.
I agree with this in some ways. But, I think the withdrawal method did matter for me early on. And it may have mattered a lot.

I retired just a few months before the debacle that started in 2007. I had no idea what I was doing and did not have a large savings. I had a modest pension and chose to take SS at the first possible date. (I'm single. The benefits of waiting are not so clear as for couples.)

I believe that paying close attention to having under a 4% withdrawal for many years was probably an important component leading to my current portfolio success. But staying under that 4% meant not doing some things I wanted to do - like travel.

Being in withdrawal and needing money from my portfolio every year, it took forever for my portfolio to regain its balance after theGreat Financial Crisis. I think it was close to 7 or 8 years. I believe it is only the long raging bull market since 2009, combined with a modest reduction in expenses, that has allowed me to move into an "ad hoc" sort of withdrawal method now.

Had the market done something less or if another bear had occurred in that time, I could have been one of those people who absolutely had to depend on staying under the 4% "rule" to avoid a bad outcome.

Long story short, I agree with you that withdrawal method may not matter when a person retires with more than enough money. That did not describe me back then and I took the 4% withdrawal guideline very seriously for many years. Then I got lucky. :happy

I don't know if it "saved my bacon" or not, but I do think it made a big difference.
User avatar
AerialWombat
Posts: 3107
Joined: Tue May 29, 2018 1:07 pm
Location: Cashtown, Cashylvania

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

Post by AerialWombat »

deleted
Last edited by AerialWombat on Thu Aug 25, 2022 7:13 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
TN_Boy
Posts: 4135
Joined: Sat Jan 17, 2009 11:51 am

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

Post by TN_Boy »

retiredjg wrote: Tue Jul 05, 2022 4:15 pm
dbr wrote: Tue Jul 05, 2022 10:05 am
retiredjg wrote: Tue Jul 05, 2022 9:59 am I don't really have a plan at this point. When I retired, I stayed under a 4% withdrawal through the Great Financial Crisis. After my portfolio recovered (which took forever), I have not needed to have much of a plan because my needs are pretty limited (so far).

Rebalancing - when I do take money out, I take it from the side that has too much. Have only needed to do a real rebalance a few times (such as during the COVID downturn). I take mostly from tax-deferred and do Roth conversions up to a buffer zone under IRMAA. If I need more than that, I take from Roth.

I keep it pretty simple.
This also brings up that in cases where withdrawals are not zero but just far away from the bounds of any withdrawal method that withdrawal method is irrelevant.

The real question is to what extent a withdrawal method saves someone's bacon when they are flirting with disaster and also how does one even know they are flirting with disaster.
I agree with this in some ways. But, I think the withdrawal method did matter for me early on. And it may have mattered a lot.

I retired just a few months before the debacle that started in 2007. I had no idea what I was doing and did not have a large savings. I had a modest pension and chose to take SS at the first possible date. (I'm single. The benefits of waiting are not so clear as for couples.)

I believe that paying close attention to having under a 4% withdrawal for many years was probably an important component leading to my current portfolio success. But staying under that 4% meant not doing some things I wanted to do - like travel.

Being in withdrawal and needing money from my portfolio every year, it took forever for my portfolio to regain its balance after theGreat Financial Crisis. I think it was close to 7 or 8 years. I believe it is only the long raging bull market since 2009, combined with a modest reduction in expenses, that has allowed me to move into an "ad hoc" sort of withdrawal method now.

Had the market done something less or if another bear had occurred in that time, I could have been one of those people who absolutely had to depend on staying under the 4% "rule" to avoid a bad outcome.

Long story short, I agree with you that withdrawal method may not matter when a person retires with more than enough money. That did not describe me back then and I took the 4% withdrawal guideline very seriously for many years. Then I got lucky. :happy

I don't know if it "saved my bacon" or not, but I do think it made a big difference.
Several good points wrapped up in dbrs and retiredjgs comments ....

1) A large number of people posting about their retirement income/spending/withdrawal method are drawing a low enough percentage that it just doesn't matter. It's great they are doing well, but you can't learn a lot about withdrawal methods from them because, well, anything would work.

2) Another large set are pulling a closer to a 4%ish rule amount, but are not yet taking SS ... at which point their withdrawal will shrink to a rather modest amount. I.e. they will become the people in 1)

3) The markets have been quite good since 2009, and a lot of people forgot until recently that markets actually decline (!) and that inflation can spike (!). Like, risks actually showed up.

So retiredjg's observation that retiring into a bear market made thinking about withdrawals a lot more interesting is well taken and shows how having some research and methods to use is handy when the going gets less fun.

(For the record we are doing more of a 'bonds first' withdrawal method right now, entering retirement a few years ago with a fairly conservative portfolio. We tend to fall into kind of a 2) category above, with the ability to cut spending fairly sharply now if needed for some reason).
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

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

Post by Marseille07 »

AerialWombat wrote: Tue Jul 05, 2022 4:32 pm Domestically, I only fly first class. I haven't flown cattle class in over five years. I haven't flown international lately, because of the pandemic, but when I do, I'll fly "Premium Economy" or similar.

I fail to understand the desire to hit a minimum WR. I'm not going to create "manufactured spending" just to burn through my portfolio at some pre-determined rate. If I need to replace my car, then sure, I'll take the money out of the portfolio to buy a car, but that kind of lumpy spending should already be baked into the long-term calculations.
Well here is the problem right...my WR includes car maint / replacement $. But it's not like I set aside $200/mo for a decade in preparation to buy a car a decade later.

So, when the time finally comes, the money isn't readily available even though it was accounted for. I'd pay for the car using cash, but the cash would need to be replenished. This is when I'd hit my WR% every month.
User avatar
AerialWombat
Posts: 3107
Joined: Tue May 29, 2018 1:07 pm
Location: Cashtown, Cashylvania

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

Post by AerialWombat »

deleted
Last edited by AerialWombat on Thu Aug 25, 2022 7:13 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

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

Post by dbr »

Marseille07 wrote: Tue Jul 05, 2022 4:39 pm
AerialWombat wrote: Tue Jul 05, 2022 4:32 pm Domestically, I only fly first class. I haven't flown cattle class in over five years. I haven't flown international lately, because of the pandemic, but when I do, I'll fly "Premium Economy" or similar.

I fail to understand the desire to hit a minimum WR. I'm not going to create "manufactured spending" just to burn through my portfolio at some pre-determined rate. If I need to replace my car, then sure, I'll take the money out of the portfolio to buy a car, but that kind of lumpy spending should already be baked into the long-term calculations.
Well here is the problem right...my WR includes car maint / replacement $. But it's not like I set aside $200/mo for a decade in preparation to buy a car a decade later.

So, when the time finally comes, the money isn't readily available even though it was accounted for. I'd pay for the car using cash, but the cash would need to be replenished. This is when I'd hit my WR% every month.
So one month I spent $44,000. Annualized that is a rate of $525,000/year. I did that by withdrawing $44,000 from somewhere and moving on. That was probably an extreme. Looking back it appears that money might have come from selling some shares of stock. It looks like that transaction might have put the asset allocation back in balance a little too. The portfolio withdrawal % of initial portfolio was 3.7% that year.
Zeno
Posts: 1042
Joined: Wed Sep 12, 2018 10:44 am

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

Post by Zeno »

TN_Boy wrote: Tue Jul 05, 2022 4:35 pm So retiredjg's observation that retiring into a bear market made thinking about withdrawals a lot more interesting is well taken and shows how having some research and methods to use is handy when the going gets less fun.
Thank you
Last edited by Zeno on Mon Jul 11, 2022 8:24 pm, edited 1 time in total.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

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

Post by Marseille07 »

dbr wrote: Tue Jul 05, 2022 4:55 pm So one month I spent $44,000. Annualized that is a rate of $525,000/year. I did that by withdrawing $44,000 from somewhere and moving on. That was probably an extreme. Looking back it appears that money might have come from selling some shares of stock. It looks like that transaction might have put the asset allocation back in balance a little too. The portfolio withdrawal % of initial portfolio was 3.7% that year.
Imo the key is to control the pace of selling equities. If I have a 44K purchase, I'd pay cash; no foul no harm. But I don't immediately sell 44K worth of stocks to replenish that. This is where the WR% thing comes into play for the next several months.
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

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

Post by marcopolo »

Marseille07 wrote: Tue Jul 05, 2022 5:03 pm
dbr wrote: Tue Jul 05, 2022 4:55 pm So one month I spent $44,000. Annualized that is a rate of $525,000/year. I did that by withdrawing $44,000 from somewhere and moving on. That was probably an extreme. Looking back it appears that money might have come from selling some shares of stock. It looks like that transaction might have put the asset allocation back in balance a little too. The portfolio withdrawal % of initial portfolio was 3.7% that year.
Imo the key is to control the pace of selling equities. If I have a 44K purchase, I'd pay cash; no foul no harm. But I don't immediately sell 44K worth of stocks to replenish that. This is where the WR% thing comes into play for the next several months.
You seem to keep implying that spending from a cash stock pile is not a withdrawal from your portfolio. Where does all this cash come from, some magic fountain?
Once in a while you get shown the light, in the strangest of places if you look at it right.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

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

Post by Marseille07 »

marcopolo wrote: Tue Jul 05, 2022 5:06 pm You seem to keep implying that spending from a cash stock pile is not a withdrawal from your portfolio. Where does all this cash come from, some magic fountain?
Cash is part of my AA, I thought I made this clear multiple times.
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

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

Post by marcopolo »

Marseille07 wrote: Tue Jul 05, 2022 4:39 pm
AerialWombat wrote: Tue Jul 05, 2022 4:32 pm Domestically, I only fly first class. I haven't flown cattle class in over five years. I haven't flown international lately, because of the pandemic, but when I do, I'll fly "Premium Economy" or similar.

I fail to understand the desire to hit a minimum WR. I'm not going to create "manufactured spending" just to burn through my portfolio at some pre-determined rate. If I need to replace my car, then sure, I'll take the money out of the portfolio to buy a car, but that kind of lumpy spending should already be baked into the long-term calculations.
Well here is the problem right...my WR includes car maint / replacement $. But it's not like I set aside $200/mo for a decade in preparation to buy a car a decade later.

So, when the time finally comes, the money isn't readily available even though it was accounted for. I'd pay for the car using cash, but the cash would need to be replenished. This is when I'd hit my WR% every month.
How can the money be "not readily available", and you "pay for the car using cash" simultaneously?

Isn't having the cash to pay for it, pretty much the definition of "readily available"?
Once in a while you get shown the light, in the strangest of places if you look at it right.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

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

Post by Marseille07 »

marcopolo wrote: Tue Jul 05, 2022 5:13 pm How can the money be "not readily available", and you "pay for the car using cash" simultaneously?

Isn't having the cash to pay for it, pretty much the definition of "readily available"?
You're mixing up two things here.
"Readily available" in this context means you've set aside money for a very long time to finance a car, so that when you pay for one, your AA doesn't get distorted. This is why I discussed setting aside $200/mo for a decade, if you read what I wrote.

"Paying for the car using cash" means I already have enough cash, as part of AA, to finance the car. But paying for the car with cash out of my AA would distort my AA, thus I would have to restore my AA over the course of 6 months or however long it takes.
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

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

Post by marcopolo »

Marseille07 wrote: Tue Jul 05, 2022 5:09 pm
marcopolo wrote: Tue Jul 05, 2022 5:06 pm You seem to keep implying that spending from a cash stock pile is not a withdrawal from your portfolio. Where does all this cash come from, some magic fountain?
Cash is part of my AA, I thought I made this clear multiple times.
Then what does your WR have to do with replenishing your cash portion? Once you have spent the money, you have affected your WR. How you choose to balance your AA within in your portfolio does not affect your WR.

You have repeatedly made statements that imply you believe only selling equities counts towards your WR. So, maybe that is the misunderstanding I am having.

Perhaps you could clear that up. Do you consider cash as part of your portfolio? Does spending the cash count as a withdrawal from your portfolio that contributes to your WR?

Let say you have $900k in equities and $100k in cash.

1) What is your AA?

You spend $50k on living expenses from equities.
You spend $40k on a new car from the cash, and do not replenish it from equities.

So, you now have $850K in equities and $60k in cash

2) What is your AA now?

3) What was your WR?


Let's say instead you did replenish half the money spent fir the car, selling $20k of equities to partially refill cash.

So, now you have $830k in equities and $80k in cash

4) What is your AA?

5) What was your WR?
Once in a while you get shown the light, in the strangest of places if you look at it right.
Post Reply