kaudrey wrote:Tarkus wrote:So… I guess I am wondering if we are crazy to be withdrawing from our portfolio to fund our lifestyle. There’s simply not a lot of advice available on people who are drawing down their investments even prior to retirement.
Are we on the right track or misplaying our hand? What would you do in my shoes?
I am glad you are thinking that you are spending too much. I think if my portfolio shrank that much in 3 years I'd be addicted to sleeping pills because there would be no way I could sleep at night. One problem with living a higher lifestyle when you are working is that it is hard to reduce that lifestyle in retirement, so it becomes a cycle of perpetually needing more money.
If I were you:
1) put your kids in public school
2) vacation budget = $10K
3) shopping budget = $10K (what are you buying for $57K???)
4) keep that car for 10 years at least, next car should be under $30K
5) find other ways to cut expenses
Because your income situation is questionable in 2 years, at the MOST, I would live on the $250K (ALL expenses, including taxes). I would save the $80K rental income, and stop withdrawing any money from your portfolio. If you want any hope of being able to spend anything near that in retirement, you have to be building up your portfolio, not reducing it. Or are you thinking that when you turn 65, suddenly you will be OK living on $50K or even $100K?
This might be overreacting. The portfolio really isn't shrinking (granted I don't know what it was before he sold the company). Remember the portfolio didn't start with the 6 million and the 1.4 million donation to the company really isn't a spending problem. That is an investing one. Lets say he takes 4% out for the next 20 years of his working life. Odds are he will have ~6 million real when he retires. That isn't going to be enough by any means to replace a 400k lifestyle but it is a heck of a lot more than 50 or 100k. Now obviously there are all sort of investments risks along the way (i.e. he might only have 500k or he could have 10 million) but to some extend you can adapt along the way. In 15 years when schooling ends you can adapt by not replacing that spending, cut trips down for a couple of years during a bad run, and so on. The 4% rule is a guideline more than an absolute plan. When you have a lot of time and ability to cut expenses you can be optimistic about life.
It really comes down to that job. If it pays out 250k/yr for the next 20 years, go ahead and live the 400k lifestyle. You will be fine. If it goes down to 100k though you need to be able to adapt to living on 250k. Cut that vacation budget down, shoot the horse (I am afraid to ask how you spend 11k on pets), no more house renos, and so on. But I definitely wouldn't look at a 1 year budget. You need to look at 5+ year ones so you can see what your total expenses are (i.e. last year for me expenses were up almost 75k due to one time things needing to replace a heating system, 10+ year old car, unexpected medical, moving costs. You need to budget for costs like that but project out that I am buying a new car and HVAC every year is not useful).