Psychologically adverse to start drawing down in retirement

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robindbee
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Psychologically adverse to start drawing down in retirement

Post by robindbee » Sun Oct 06, 2019 1:28 pm

Does anyone have this issue? My retirement portfolio is at a certain "number" which is very pleasing and reassuring to me. I'm good to draw down from my portfolio at 3.5-4% for next 30 years. I retired a year ago and have been using other money to live until my SS kicks in next month. I'm FRA 66 years old.
I have to start 'paying myself' next month. I don't want my "number" to change! I know this is ridiculous, and that I have to psychologically think about this "number" a different way. I need a system to "pay myself" monthly. If left to my own devices I would nickel and dime withdrawals as I need it but this doesn't work with forecasting, budget planning, etc. What 'systems' do people use? I'm not hiring anyone but I'm curious how other people 'pay' themselves on a monthly basis (or quarterly, etc)
Even though I know I'm ok financially I have such a block beginning draw down and diminishing my "number" that took me so long to save !! Help??

RadAudit
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Re: Psychologically adverse to start drawing down in retirement

Post by RadAudit » Sun Oct 06, 2019 1:42 pm

robindbee wrote:
Sun Oct 06, 2019 1:28 pm
Does anyone have this issue?
I'm beginning to think we all have issues. Read this thread. viewtopic.php?f=10&t=291980&newpost=4781520 Take a look at the beginning and ending AA charts. Doesn't seem to make much difference considering the time I've spent pushing numbers around the page.

BTW, I pay myself from RMDs (actually SWR x portfolio balance), pensions and SS. The SWR amount is deposited in to a MM at the beginning of the year and I take what I need. So far, nine years, the portfolio balance has been up. Don't know how I'll feel after a big downturn.

Could be wrong. YMMV
Last edited by RadAudit on Sun Oct 06, 2019 3:57 pm, edited 1 time in total.
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ruralavalon
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Re: Psychologically adverse to start drawing down in retirement

Post by ruralavalon » Sun Oct 06, 2019 2:03 pm

We pay ourselves with Social Security and Required Minimum Distributions (RMDs) automatically paid monthly from my rollover IRA.

Before starting RMDs, it was Social Security plus sale of stock index fund shares in our joint taxable account.
Last edited by ruralavalon on Sun Oct 06, 2019 2:06 pm, edited 1 time in total.
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jebmke
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Re: Psychologically adverse to start drawing down in retirement

Post by jebmke » Sun Oct 06, 2019 2:05 pm

I didn't have this issue when I retired over 10 years ago. All my money was in the portfolio - there was no "other money" until I started my pension in year 10.

As far as cash management, I hold no cash and sell something to raise cash every month if I need it for the next month.
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Sandtrap
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Re: Psychologically adverse to start drawing down in retirement

Post by Sandtrap » Sun Oct 06, 2019 2:26 pm

Unlike many here, DW and I have no pensions, no 401k's, no IRA's, no RMD's, etc.
So, our "portfolio" is our pension.
We feel the same way.
We understand the concepts and theory and have a long term plan.
But, nonetheless, the "feeling" is the same.

You are not alone.
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jebmke
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Re: Psychologically adverse to start drawing down in retirement

Post by jebmke » Sun Oct 06, 2019 2:30 pm

I should have added. Retired in December 2007. The withdrawal for expenses was minuscule compared to the drawdown by the market in 2008-09.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Broken Man 1999
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Re: Psychologically adverse to start drawing down in retirement

Post by Broken Man 1999 » Sun Oct 06, 2019 2:35 pm

I didn't like starting to pull expenses from our retirement portfolio, but our portfolio growth has softened the regrets a great deal.

Still, who wants to really see a smaller portfolio balance? Not something I like to see, even though I know at some point it will happen, maybe even this year.

Broken Man 1999
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bradinsky
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Re: Psychologically adverse to start drawing down in retirement

Post by bradinsky » Sun Oct 06, 2019 2:40 pm

I just turned 67. DW& I are both on social security without any additional pensions. All my life I have worked hard & saved as much as possible. Now we need to withdraw from savings / investments. Although this has been planned for & is necessary, I find this to be difficult to do. Very much contrary to the way I have always strived to be. Decumulation,for me is hard to do!

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Re: Psychologically adverse to start drawing down in retirement

Post by sport » Sun Oct 06, 2019 2:45 pm

If you have a taxable account, you should discontinue any reinvestments of distributions. Having such distributions sent to your checking account (or MM fund) will provide some "painless" withdrawals for living expenses.

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Re: Psychologically adverse to start drawing down in retirement

Post by rossington » Sun Oct 06, 2019 2:47 pm

Sandtrap wrote:
Sun Oct 06, 2019 2:26 pm
Unlike many here, DW and I have no pensions, no 401k's, no IRA's, no RMD's, etc.
So, our "portfolio" is our pension.
We feel the same way.
We understand the concepts and theory and have a long term plan.
But, nonetheless, the "feeling" is the same.

You are not alone.
j
YOU have no IRA's?
Very interesting.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

rossington
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Re: Psychologically adverse to start drawing down in retirement

Post by rossington » Sun Oct 06, 2019 2:51 pm

sport wrote:
Sun Oct 06, 2019 2:45 pm
If you have a taxable account, you should discontinue any reinvestments of distributions. Having such distributions sent to your checking account (or MM fund) will provide some "painless" withdrawals for living expenses.
Or...just do a 50/50 mix.
Ideally if you have Roth's that are generating enough you can take the earnings only tax free.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

Shallowpockets
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Re: Psychologically adverse to start drawing down in retirement

Post by Shallowpockets » Sun Oct 06, 2019 2:57 pm

OP, what is this other money you are referring to that you have lived on this past year? Can't you keep that up?

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Stinky
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Re: Psychologically adverse to start drawing down in retirement

Post by Stinky » Sun Oct 06, 2019 3:04 pm

sport wrote:
Sun Oct 06, 2019 2:45 pm
If you have a taxable account, you should discontinue any reinvestments of distributions. Having such distributions sent to your checking account (or MM fund) will provide some "painless" withdrawals for living expenses.
+1

When I retired, I changed the dividends and capital gains distributions of the taxable accounts to cash, rather than reinvesting.

Having this cash flow, plus pension and (soon) SS, means that little principal is being drawn down from taxable accounts. And nothing from IRAs yet.
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Re: Psychologically adverse to start drawing down in retirement

Post by MikeG62 » Sun Oct 06, 2019 3:11 pm

robindbee wrote:
Sun Oct 06, 2019 1:28 pm
Does anyone have this issue? My retirement portfolio is at a certain "number" which is very pleasing and reassuring to me. I'm good to draw down from my portfolio at 3.5-4% for next 30 years. I retired a year ago and have been using other money to live until my SS kicks in next month. I'm FRA 66 years old.
I have to start 'paying myself' next month. I don't want my "number" to change! I know this is ridiculous, and that I have to psychologically think about this "number" a different way. I need a system to "pay myself" monthly. If left to my own devices I would nickel and dime withdrawals as I need it but this doesn't work with forecasting, budget planning, etc. What 'systems' do people use? I'm not hiring anyone but I'm curious how other people 'pay' themselves on a monthly basis (or quarterly, etc)
Even though I know I'm ok financially I have such a block beginning draw down and diminishing my "number" that took me so long to save !! Help??
While you might be withdrawing 3.5%-4% annually, you are at the same time earning dividends on the equity side and interest on the fixed income (and cash) side. That interest and dividends could offset more than half of your withdrawals. Keep in mind too that markets “tend to” go up over time. These gains may more than offset the rest of your net withdrawals. Long way of saying your portfolio may well not be declining each year. For example, I retired in 2016 and our portfolio is larger now than when I retired and we withdraw more each year than the total of our annual dividends and interest.

As others have said, turn off auto-reinvestment of your dividends in your taxable accounts. Use these dividends (which should hit quarterly) along with the interest on your fixed income (and cash) in your taxable to fund a good deal of your spending needs.

There was a recent thread on people afraid to use their savings. It is here (including my comment on that thread as well).

viewtopic.php?f=2&t=291289&p=4767147&hi ... e#p4767147
Last edited by MikeG62 on Sun Oct 06, 2019 4:47 pm, edited 1 time in total.
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Wiggums
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Re: Psychologically adverse to start drawing down in retirement

Post by Wiggums » Sun Oct 06, 2019 3:12 pm

Spending is always harder when you’ve been a saver all your life. Once you stop working, your portfolio is what you have to work with. You’re not alone in your feelings.

My DW grew up on a farm and they did not have much in terms of money. She says, “you can never have too much savings” because she doesn’t want to run out of money. No matter how big our portfolio is, the fact that you need to make assumptions, makes her ask if we have enough.

Good luck to you.

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Wiggums
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Re: Psychologically adverse to start drawing down in retirement

Post by Wiggums » Sun Oct 06, 2019 3:13 pm

Stinky wrote:
Sun Oct 06, 2019 3:04 pm
sport wrote:
Sun Oct 06, 2019 2:45 pm
If you have a taxable account, you should discontinue any reinvestments of distributions. Having such distributions sent to your checking account (or MM fund) will provide some "painless" withdrawals for living expenses.
+1

When I retired, I changed the dividends and capital gains distributions of the taxable accounts to cash, rather than reinvesting.

Having this cash flow, plus pension and (soon) SS, means that little principal is being drawn down from taxable accounts. And nothing from IRAs yet.
We did the same thing.

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Brianmcg321
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Re: Psychologically adverse to start drawing down in retirement

Post by Brianmcg321 » Sun Oct 06, 2019 3:16 pm

This is a pretty common issues.

For 40+ years you've been building this nest egg up to whatever number you get to. You've spent years pouring over prospectuses, playing with investment calculators, watching financial news etc.

Now 40 years later, you just flip the switch and start drawing out the money. Ugh. Just thinking about that gives me a weird feeling. (I'm 46). For so long this was the DONT TOUCH, money. Its like the room in your parents house that you weren't allowed to go into as a kid because the furniture was too nice. Now that your an adult, it still feels weird to go into that room and sit on the furniture. LOL.
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aristotelian
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Re: Psychologically adverse to start drawing down in retirement

Post by aristotelian » Sun Oct 06, 2019 3:18 pm

Just remember, with 4% SWR, your portfolio will continue growing with average returns.

livesoft
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Re: Psychologically adverse to start drawing down in retirement

Post by livesoft » Sun Oct 06, 2019 3:21 pm

If you look at your portfolio value every single day, then you will see that if varies quite a lot. In all that noise from daily market movement your portfolio won't even notice that you took money out. Just don't take it all out at once. Instead, take a little here and a little there when you need to pay expenses.

And you're off and running! Good luck!
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Re: Psychologically adverse to start drawing down in retirement

Post by BarbBrooklyn » Sun Oct 06, 2019 3:28 pm

Stinky wrote:
Sun Oct 06, 2019 3:04 pm
sport wrote:
Sun Oct 06, 2019 2:45 pm
If you have a taxable account, you should discontinue any reinvestments of distributions. Having such distributions sent to your checking account (or MM fund) will provide some "painless" withdrawals for living expenses.
+1

When I retired, I changed the dividends and capital gains distributions of the taxable accounts to cash, rather than reinvesting.

Having this cash flow, plus pension and (soon) SS, means that little principal is being drawn down from taxable accounts. And nothing from IRAs yet.
+1
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Broken Man 1999
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Re: Psychologically adverse to start drawing down in retirement

Post by Broken Man 1999 » Sun Oct 06, 2019 3:33 pm

Sadly, based on some posts here, draw downs seem to be nearly impossible for some.

Some of those having good amounts are living very sparse retirements. I suppose their beneficiaries will take up the slack for them.

We are not spending recklessly, but we want a nice lifestyle. We did our sacrificing already, now it is time to enjoy our good fortune.

Broken Man 1999
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Re: Psychologically adverse to start drawing down in retirement

Post by willthrill81 » Sun Oct 06, 2019 3:34 pm

livesoft wrote:
Sun Oct 06, 2019 3:21 pm
If you look at your portfolio value every single day, then you will see that if varies quite a lot. In all that noise from daily market movement your portfolio won't even notice that you took money out. Just don't take it all out at once. Instead, take a little here and a little there when you need to pay expenses.
I wonder whether a system that would slowly siphon off one's desired withdrawals every trading day, like an expense ratio, would make those in the withdrawal phase feel better about it rather than seeing their account drop in one fail swoop every month, quarter, year, etc. The amount could be deposited weekly into one's bank account.

Major strides have been made with regard to automating contributions. The industry seems ripe for such strides to be made with regard to withdrawals.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Psychologically adverse to start drawing down in retirement

Post by jebmke » Sun Oct 06, 2019 3:41 pm

willthrill81 wrote:
Sun Oct 06, 2019 3:34 pm
livesoft wrote:
Sun Oct 06, 2019 3:21 pm
If you look at your portfolio value every single day, then you will see that if varies quite a lot. In all that noise from daily market movement your portfolio won't even notice that you took money out. Just don't take it all out at once. Instead, take a little here and a little there when you need to pay expenses.
I wonder whether a system that would slowly siphon off one's desired withdrawals every trading day, like an expense ratio, would make those in the withdrawal phase feel better about it rather than seeing their account drop in one fail swoop every month, quarter, year, etc. The amount could be deposited weekly into one's bank account.

Major strides have been made with regard to automating contributions. The industry seems ripe for such strides to be made with regard to withdrawals.
Tricks like this can work, or, you can just end up with a pile of money in the checking account unspent. The issue may be whether the resistance is related to the portfolio balance or the actual spend. One thing we did was ramp up charitable gifts. When I was working we tended to do many of these toward the end of the year. I shifted to making monthly donations -- various different places each month. Very gratifying way to spend.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Psychologically adverse to start drawing down in retirement

Post by sport » Sun Oct 06, 2019 4:01 pm

jebmke wrote:
Sun Oct 06, 2019 3:41 pm
willthrill81 wrote:
Sun Oct 06, 2019 3:34 pm
livesoft wrote:
Sun Oct 06, 2019 3:21 pm
If you look at your portfolio value every single day, then you will see that if varies quite a lot. In all that noise from daily market movement your portfolio won't even notice that you took money out. Just don't take it all out at once. Instead, take a little here and a little there when you need to pay expenses.
I wonder whether a system that would slowly siphon off one's desired withdrawals every trading day, like an expense ratio, would make those in the withdrawal phase feel better about it rather than seeing their account drop in one fail swoop every month, quarter, year, etc. The amount could be deposited weekly into one's bank account.

Major strides have been made with regard to automating contributions. The industry seems ripe for such strides to be made with regard to withdrawals.
Tricks like this can work, or, you can just end up with a pile of money in the checking account unspent. The issue may be whether the resistance is related to the portfolio balance or the actual spend. One thing we did was ramp up charitable gifts. When I was working we tended to do many of these toward the end of the year. I shifted to making monthly donations -- various different places each month. Very gratifying way to spend.
If you are old enough, be sure to make use of QCDs for this giving.

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robindbee
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Re: Psychologically adverse to start drawing down in retirement

Post by robindbee » Sun Oct 06, 2019 4:23 pm

sport wrote: ↑Sun Oct 06, 2019 3:45 pm
If you have a taxable account, you should discontinue any reinvestments of distributions. Having such distributions sent to your checking account (or MM fund) will provide some "painless" withdrawals for living expenses."
+1

When I retired, I changed the dividends and capital gains distributions of the taxable accounts to cash, rather than reinvesting."

Having this cash flow, plus pension and (soon) SS, means that little principal is being drawn down from taxable accounts. And nothing from IRAs yet.
Thanks for responses: That is one thing I was thinking. I have a fair amount of dividend funds reinvesting and with my SS starting next month it should help. By 'other' money, I meant I sold some taxable money that hadn't been doing great (plan to harvest losses) and my adult daughter is living with me for time being so expenses are split and low. I really haven't had to dip into savings too much yet, and what I have drawn out has been profit. My expenses are pretty low. Another fear I have is that when I start paying myself, instead of using money (and travel is factored in, something I want to do more of) I will just begin penny pinching and trying to save again, which i know is crazy, but I am so used to saving and watching funds grow! It's a real shift from accumulating, to drawing down, isn't it?

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Re: Psychologically adverse to start drawing down in retirement

Post by jebmke » Sun Oct 06, 2019 4:26 pm

robindbee wrote:
Sun Oct 06, 2019 4:23 pm
and what I have drawn out has been profit.
I always try to draw out losses - it is typically more tax efficient.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Psychologically adverse to start drawing down in retirement

Post by willthrill81 » Sun Oct 06, 2019 4:29 pm

jebmke wrote:
Sun Oct 06, 2019 3:41 pm
willthrill81 wrote:
Sun Oct 06, 2019 3:34 pm
livesoft wrote:
Sun Oct 06, 2019 3:21 pm
If you look at your portfolio value every single day, then you will see that if varies quite a lot. In all that noise from daily market movement your portfolio won't even notice that you took money out. Just don't take it all out at once. Instead, take a little here and a little there when you need to pay expenses.
I wonder whether a system that would slowly siphon off one's desired withdrawals every trading day, like an expense ratio, would make those in the withdrawal phase feel better about it rather than seeing their account drop in one fail swoop every month, quarter, year, etc. The amount could be deposited weekly into one's bank account.

Major strides have been made with regard to automating contributions. The industry seems ripe for such strides to be made with regard to withdrawals.
Tricks like this can work, or, you can just end up with a pile of money in the checking account unspent. The issue may be whether the resistance is related to the portfolio balance or the actual spend.
Considering that the OP doesn't want the portfolio balance to go down and needs a system to "pay myself," it does not appear to be a spending problem.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Psychologically adverse to start drawing down in retirement

Post by Lalamimi » Sun Oct 06, 2019 4:37 pm

You do not mention a spouse/ex spouse, but is it possible to draw spousal SS for the next 4 years rather than your own? With your turning 66 just before the cutoff Jan 2, 1954 birthday, (mine too, which is why I am thinking of it) to restrict your SS and do so, just wanted to mention.

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Re: Psychologically adverse to start drawing down in retirement

Post by celia » Sun Oct 06, 2019 4:43 pm

robindbee wrote:
Sun Oct 06, 2019 1:28 pm
I have to start 'paying myself' next month. I don't want my "number" to change! I know this is ridiculous, and that I have to psychologically think about this "number" a different way.
For those under age 70, see if this exercise changes your mindset. Many Bogleheads have found this to be beneficial to their mindset, although their original intent was different than “how to make a psychological change”:

Have you projected your Income Taxes for after Age 70?
Many Bogleheads have noticed that their post-age-70 taxes will spike after they start SS and RMDs on top of other income they may have at that age. And it only gets worse as they age!

Often the solution is to start doing Roth conversions before that in order to bring down their future RMDs. With Roth’s instead, the money in those accounts doesn’t have to be spent. They look at it as “leveling” their taxable income, and thus taxes, from now through the rest of their lives instead of having a few years of low income taxes followed by higher taxes for the rest of their life!

The sooner you do the projection on your taxes, the sooner you can adjust the course of your taxes (and tax-free growth in the Roth)!
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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Re: Psychologically adverse to start drawing down in retirement

Post by GuyInFL » Sun Oct 06, 2019 5:12 pm

willthrill81 wrote:
Sun Oct 06, 2019 3:34 pm
I wonder whether a system that would slowly siphon off one's desired withdrawals every trading day, like an expense ratio, would make those in the withdrawal phase feel better about it rather than seeing their account drop in one fail swoop every month, quarter, year, etc. The amount could be deposited weekly into one's bank account.

Major strides have been made with regard to automating contributions. The industry seems ripe for such strides to be made with regard to withdrawals.
Interesting concept, particularly now that many firms are going to zero commissions.

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Re: Psychologically adverse to start drawing down in retirement

Post by littlebird » Sun Oct 06, 2019 5:14 pm

After 27 years of living on s.s. and pension, not needing to invade our assets except for a major expenditure, my spouse started to need $4000/month care. There was no way I could cash flow that. I knew I would be constantly calculating and recalculating the advantages and disadvantages of taking the needed monthly sum from the various accounts we had, and I didn’t want to spend my pre-sleep time doing that. I decided to annuitize a Vanguard Variable Annuity, which I had built up over several years to eventually serve as a pension for me. It did the job of filling the gap left by our RMDs, dividends and interest, and left my mind free to concentrate on my spouse’s care.

Now that he’s gone -after three years of care - my income is a little higher than I need,but I’ve never regretted having an annuity check deposited into my account each month. And as I grow older, it offers even more of what I strive for now: not more income, but more simplification, automation and independence.

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robindbee
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Re: Psychologically adverse to start drawing down in retirement

Post by robindbee » Sun Oct 06, 2019 5:24 pm

Littlebird, I have been thinking a lot about that too. If I annutized my Tia Trad it would pretty much meet the gap between SS and what I need annually; but again, another psychological dilemma, giving up that large of a sum of money! I think I overthink and am pretty neurotic in general LOL

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robindbee
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Re: Psychologically adverse to start drawing down in retirement

Post by robindbee » Sun Oct 06, 2019 5:54 pm

Btw, MikeG7, that was a great thread for me to read, thanks!

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Re: Psychologically adverse to start drawing down in retirement

Post by Northern Flicker » Sun Oct 06, 2019 6:02 pm

robindbee wrote:
Sun Oct 06, 2019 1:28 pm
Does anyone have this issue? My retirement portfolio is at a certain "number" which is very pleasing and reassuring to me. I'm good to draw down from my portfolio at 3.5-4% for next 30 years. I retired a year ago and have been using other money to live until my SS kicks in next month. I'm FRA 66 years old.
I have to start 'paying myself' next month. I don't want my "number" to change! I know this is ridiculous, and that I have to psychologically think about this "number" a different way. I need a system to "pay myself" monthly. If left to my own devices I would nickel and dime withdrawals as I need it but this doesn't work with forecasting, budget planning, etc. What 'systems' do people use? I'm not hiring anyone but I'm curious how other people 'pay' themselves on a monthly basis (or quarterly, etc)
Even though I know I'm ok financially I have such a block beginning draw down and diminishing my "number" that took me so long to save !! Help??
It is a very common issue. It can cause people who are more savers than spenders to have a more austere retirement than they could otherwise afford comfortably. It even may lead some to start SS too soon. Have you carefully considered the benefits of delaying the start of SS?
Risk is not a guarantor of return.

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Watty
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Re: Psychologically adverse to start drawing down in retirement

Post by Watty » Sun Oct 06, 2019 6:10 pm

In one of the investing books I read it said something like;

"Your money WILL be spent there is no getting around that. Either you will spend it, your heirs will spend it, or the government will tax and spend it.

Even with extremely large estate the money is typically spent within about two generations.

Assuming that your numbers are sound then doing something like being real frugal and not going on a trip that you want really justs means that someone will eventually take that trip instead.

Finding the right balance is important but having the money to spend in your retirement is why you saved it.

dbr
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Re: Psychologically adverse to start drawing down in retirement

Post by dbr » Sun Oct 06, 2019 6:22 pm

The purpose of saving the money was to spend it in retirement. If you don't start spending it you wasted your life accumulating it. But you can fix that problem starting now.

If you are worried about spending it too fast you can baseline a simple estimate such as spending 4% of the initial retirement asset each year, adjusted up for inflation each year. Since spending is likely to be variable you want to keep a rough tab that on average you are staying at this level and you want to keep rough tabs on porfolio value and consider spending less when/if the portfolio declines too much. If you want an engineering model of the process you can try Variable Percentage Withdrawal, though I think VPW is overengineered and that real spending is going to be more changeable than than that from year to year: https://www.bogleheads.org/wiki/Variabl ... withdrawal.

Depending on how much income already comes from pensions and annuities (such a Social Security) you could eventually annuitize more income for certainty, though it is not wise to give up too large a fraction of assets and not necessary if one already has large income streams.

If you want you money to be a large stash going to someone else after you die, you would spend less or none.

longinvest
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Re: Psychologically adverse to start drawing down in retirement

Post by longinvest » Sun Oct 06, 2019 7:18 pm

dbr wrote:
Sun Oct 06, 2019 6:22 pm
The purpose of saving the money was to spend it in retirement. If you don't start spending it you wasted your life accumulating it. But you can fix that problem starting now.

If you are worried about spending it too fast you can baseline a simple estimate such as spending 4% of the initial retirement asset each year, adjusted up for inflation each year. Since spending is likely to be variable you want to keep a rough tab that on average you are staying at this level and you want to keep rough tabs on porfolio value and consider spending less when/if the portfolio declines too much. If you want an engineering model of the process you can try Variable Percentage Withdrawal, though I think VPW is overengineered and that real spending is going to be more changeable than than that from year to year: https://www.bogleheads.org/wiki/Variabl ... withdrawal.

Depending on how much income already comes from pensions and annuities (such a Social Security) you could eventually annuitize more income for certainty, though it is not wise to give up too large a fraction of assets and not necessary if one already has large income streams.

If you want you money to be a large stash going to someone else after you die, you would spend less or none.
Very insightful.

But, I can't resist commenting about the "overengineered" qualifier.

My employer doesn't vary my salary with my spending needs. He doesn't increase my pay in the year I buy a new car (cash) and reduce it the next. Despite this, I don't consider my relatively stable salary as "overengineered". :wink: To handle the mismatch between my take-home pay and my variable expenses, I simply use budgeting techniques (e.g. I save in advance for lumpy expenses using a savings account).

During retirement, I will combine stable non-portfolio income (Social Security, pension, etc.) with monthly VPW portfolio withdrawals as illustrated in this thread. I'll simply use budgeting techniques to handle the mismatch between my net (after-tax) retirement income and my variable retirement expenses.

I am aware that some investors prefer to let the money for future expenses sit in their portfolio, instead of a savings account. Personally, I prefer the simplicity and the safety of a savings account for accumulating money in small increments for a known upcoming expense.
Last edited by longinvest on Sun Oct 06, 2019 9:33 pm, edited 2 times in total.
Bogleheads investment philosophy | single-ETF balanced portfolio (VBAL) | VPW accumulation

Dave55
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Re: Psychologically adverse to start drawing down in retirement

Post by Dave55 » Sun Oct 06, 2019 7:32 pm

Watty wrote:
Sun Oct 06, 2019 6:10 pm
In one of the investing books I read it said something like;

"Your money WILL be spent there is no getting around that. Either you will spend it, your heirs will spend it, or the government will tax and spend it.

Even with extremely large estate the money is typically spent within about two generations.

Assuming that your numbers are sound then doing something like being real frugal and not going on a trip that you want really justs means that someone will eventually take that trip instead.

Finding the right balance is important but having the money to spend in your retirement is why you saved it.
Excellent advice. The right balance is key too, as Watty notes.

Dave

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Re: Psychologically adverse to start drawing down in retirement

Post by Dave55 » Sun Oct 06, 2019 7:33 pm

dbr wrote:
Sun Oct 06, 2019 6:22 pm
The purpose of saving the money was to spend it in retirement. If you don't start spending it you wasted your life accumulating it. But you can fix that problem starting now.

If you are worried about spending it too fast you can baseline a simple estimate such as spending 4% of the initial retirement asset each year, adjusted up for inflation each year. Since spending is likely to be variable you want to keep a rough tab that on average you are staying at this level and you want to keep rough tabs on porfolio value and consider spending less when/if the portfolio declines too much. If you want an engineering model of the process you can try Variable Percentage Withdrawal, though I think VPW is overengineered and that real spending is going to be more changeable than than that from year to year: https://www.bogleheads.org/wiki/Variabl ... withdrawal.

Depending on how much income already comes from pensions and annuities (such a Social Security) you could eventually annuitize more income for certainty, though it is not wise to give up too large a fraction of assets and not necessary if one already has large income streams.

If you want you money to be a large stash going to someone else after you die, you would spend less or none.
Outstanding advice.

Dave

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robindbee
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Re: Psychologically adverse to start drawing down in retirement

Post by robindbee » Sun Oct 06, 2019 10:14 pm

Thank you all for your thoughtful responses, much appreciated, and for directing me to other helpful threads.

Robin

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Tamarind
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Re: Psychologically adverse to start drawing down in retirement

Post by Tamarind » Sun Oct 06, 2019 10:22 pm

I'm not a big fan of the "turn off auto-reinvest" solution because it still invites you to fiddle with it.

Ideally you are holding your retirement accounts at a custodian that enables automatic withdrawals. Set it to withdraw the amount you planned, in proportion to your investments, and forget about it for a year. Don't look, just like when you were accumulating.

Failing that, remember that if you have any pre-tax accounts, you can withdraw it starting now, or withdraw it starting at 70.5, but it's coming out whether you like it it not. You don't have to spend it, but you may as well.

If that's not persuasive, consider that you did all this saving precisely so you could have your needs taken care of in retirement. If you are eating rice and beans now to avoid decumulating, then you might owe 35 year old you an apology.

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Re: Psychologically adverse to start drawing down in retirement

Post by SevenBridgesRoad » Sun Oct 06, 2019 10:58 pm

longinvest wrote:
Sun Oct 06, 2019 7:18 pm
dbr wrote:
Sun Oct 06, 2019 6:22 pm
The purpose of saving the money was to spend it in retirement. If you don't start spending it you wasted your life accumulating it. But you can fix that problem starting now.

If you are worried about spending it too fast you can baseline a simple estimate such as spending 4% of the initial retirement asset each year, adjusted up for inflation each year. Since spending is likely to be variable you want to keep a rough tab that on average you are staying at this level and you want to keep rough tabs on porfolio value and consider spending less when/if the portfolio declines too much. If you want an engineering model of the process you can try Variable Percentage Withdrawal, though I think VPW is overengineered and that real spending is going to be more changeable than than that from year to year: https://www.bogleheads.org/wiki/Variabl ... withdrawal.

Depending on how much income already comes from pensions and annuities (such a Social Security) you could eventually annuitize more income for certainty, though it is not wise to give up too large a fraction of assets and not necessary if one already has large income streams.

If you want you money to be a large stash going to someone else after you die, you would spend less or none.
Very insightful.

But, I can't resist commenting about the "overengineered" qualifier.

My employer doesn't vary my salary with my spending needs. He doesn't increase my pay in the year I buy a new car (cash) and reduce it the next. Despite this, I don't consider my relatively stable salary as "overengineered". :wink: To handle the mismatch between my take-home pay and my variable expenses, I simply use budgeting techniques (e.g. I save in advance for lumpy expenses using a savings account).

During retirement, I will combine stable non-portfolio income (Social Security, pension, etc.) with monthly VPW portfolio withdrawals as illustrated in this thread. I'll simply use budgeting techniques to handle the mismatch between my net (after-tax) retirement income and my variable retirement expenses.

I am aware that some investors prefer to let the money for future expenses sit in their portfolio, instead of a savings account. Personally, I prefer the simplicity and the safety of a savings account for accumulating money in small increments for a known upcoming expense.
Admittedly I'm just starting my second year of retirement, but I'm using the VPW method as designed and find it to be pretty darn straightforward. I don't find it overengineered at all. The Retirement Worksheet does most of the work and even accounts for delayed SS and deferred income annuities. VPW gives one the confidence to withdraw the dollars one accumulated over a career. As dbr says, this is precisely why we saved all these years: to create a retirement paycheck, not to continue to watch the portfolio's grand total. That's boring and you should have better things to do now!
Retired 2018 age 61 | "Not using an alarm is one of the great glories of my life." Robert Greene

rossington
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Re: Psychologically adverse to start drawing down in retirement

Post by rossington » Mon Oct 07, 2019 2:37 am

Ok, but what about the unknown expense of long term care? Do we possibly burden our heirs (children) with these expenses because we have drawn our portfolios down too much for whatever reasons? The OP gives us reason for concern for this too.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

smectym
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Re: Psychologically adverse to start drawing down in retirement

Post by smectym » Mon Oct 07, 2019 4:09 am

OK, with due respect, and only because no one else was courteous enough to point this out: it’s not “psychologically ADverse. The English version is “psychologically AVerse.” Please look up the two similar yet distinct words and note the difference.

dbr
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Re: Psychologically adverse to start drawing down in retirement

Post by dbr » Mon Oct 07, 2019 8:20 am

rossington wrote:
Mon Oct 07, 2019 2:37 am
Ok, but what about the unknown expense of long term care? Do we possibly burden our heirs (children) with these expenses because we have drawn our portfolios down too much for whatever reasons? The OP gives us reason for concern for this too.
Your plan should have a contingency for this. As with all else in living a life there is uncertainty so you have to decide to work with an overestimate, an underestimate or with best guess of a middle ground. One might try a retirement estimate with different guesses for things like this and see how big the difference really is. Most models, FireCalc included, allow one to enter possible future expenses at a starting date to see what happens.

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Re: Psychologically adverse to start drawing down in retirement

Post by MikeG62 » Mon Oct 07, 2019 9:00 am

dbr wrote:
Mon Oct 07, 2019 8:20 am
rossington wrote:
Mon Oct 07, 2019 2:37 am
Ok, but what about the unknown expense of long term care? Do we possibly burden our heirs (children) with these expenses because we have drawn our portfolios down too much for whatever reasons? The OP gives us reason for concern for this too.
Your plan should have a contingency for this. As with all else in living a life there is uncertainty so you have to decide to work with an overestimate, an underestimate or with best guess of a middle ground. One might try a retirement estimate with different guesses for things like this and see how big the difference really is. Most models, FireCalc included, allow one to enter possible future expenses at a starting date to see what happens.
Agree with this.

Should either or both of us require LTC, then our large travel budget would go to zero. Other discretionary spending in our budget would shrink dramatically - not necessarily because we need to slam the brakes on spending, but simply because our priorities would have changed. These two things combined would cover a very large share of any LTC costs. We could also sell our current home and move into a much smaller place (for the one who does not need LTC) ridding us of significant additional monthly expenses. Excess cash from the downsizing would provide an additional source of funds.

Consider as well that the average length of stay in a LTC facility is under a few years. Generally speaking, this is not something that should completely derail a properly planned retirement plan.
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barnaclebob
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Re: Psychologically adverse to start drawing down in retirement

Post by barnaclebob » Mon Oct 07, 2019 9:37 am

robindbee wrote:
Sun Oct 06, 2019 1:28 pm
Does anyone have this issue? My retirement portfolio is at a certain "number" which is very pleasing and reassuring to me. I'm good to draw down from my portfolio at 3.5-4% for next 30 years. I retired a year ago and have been using other money to live until my SS kicks in next month. I'm FRA 66 years old.
I have to start 'paying myself' next month. I don't want my "number" to change! I know this is ridiculous, and that I have to psychologically think about this "number" a different way. I need a system to "pay myself" monthly. If left to my own devices I would nickel and dime withdrawals as I need it but this doesn't work with forecasting, budget planning, etc. What 'systems' do people use? I'm not hiring anyone but I'm curious how other people 'pay' themselves on a monthly basis (or quarterly, etc)
Even though I know I'm ok financially I have such a block beginning draw down and diminishing my "number" that took me so long to save !! Help??
If you are retired, then all of your assets are your retirement portfolio. You are already using it. The money is fungible.

rixer
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Re: Psychologically adverse to start drawing down in retirement

Post by rixer » Mon Oct 07, 2019 9:53 am

Retired, no pension, drawing SS. I take my rmd from my ira once a year. I take the balance of what I need for income from the taxable account once a year. I draw dividends and Cap Gains from taxable as they are issued.
The total amount of withdrawal is about 4%.
I put the annual draw into Ally and have them transfer a certain amount to my bank along with my electronically deposited SS check each month. It leaves me with a slush fund in Ally for unexpected bills. If I run out of money before the year ends, I've been spending too much. I haven't so far.

NotWhoYouThink
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Re: Psychologically adverse to start drawing down in retirement

Post by NotWhoYouThink » Mon Oct 07, 2019 10:20 am

MikeG62 wrote:
Mon Oct 07, 2019 9:00 am
dbr wrote:
Mon Oct 07, 2019 8:20 am
rossington wrote:
Mon Oct 07, 2019 2:37 am
Ok, but what about the unknown expense of long term care? Do we possibly burden our heirs (children) with these expenses because we have drawn our portfolios down too much for whatever reasons? The OP gives us reason for concern for this too.
Your plan should have a contingency for this. As with all else in living a life there is uncertainty so you have to decide to work with an overestimate, an underestimate or with best guess of a middle ground. One might try a retirement estimate with different guesses for things like this and see how big the difference really is. Most models, FireCalc included, allow one to enter possible future expenses at a starting date to see what happens.
Agree with this.

Should either or both of us require LTC, then our large travel budget would go to zero. Other discretionary spending in our budget would shrink dramatically - not necessarily because we need to slam the brakes on spending, but simply because our priorities would have changed. These two things combined would cover a very large share of any LTC costs. We could also sell our current home and move into a much smaller place (for the one who does not need LTC) ridding us of significant additional monthly expenses. Excess cash from the downsizing would provide an additional source of funds.

Consider as well that the average length of stay in a LTC facility is under a few years. Generally speaking, this is not something that should completely derail a properly planned retirement plan.
Exactly right.

AverageInvestor1982
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Re: Psychologically adverse to start drawing down in retirement

Post by AverageInvestor1982 » Mon Oct 07, 2019 10:44 am

Great topic, thanks for starting.

As a 37 year old net-saver, I've already started thinking about this. The idea that one day the balance of my portfolio/net worth go down is a terrible thought to me. I intellectually understand the idea that the point of saving up money now is so that I have independence and enjoyment later, but emotionally, "going backwards" in net worth is very hard to stomach. I love the idea of retiring and buying cars I've always wanted and/or taking more(expensive) vacations, giving more money away, whatever - but I doubt my ability to actually choose those things over a positive net worth when presented with the decision.

I realize under a well budgeted plan that covers contingencies it's "just a number" but I think for a lot of people, we choose the emotional satisfaction of an increasing net worth over a more lavish (comfortable?) life style.

I saw a post somewhere in here (might have been in a sub thread) that talked about a person with similar apprehension who spent a year planning and budgeting that helped them get more comfortable with spending some of their retirement savings. I like that idea, plus the idea of regular transfers out of my portfolio and into savings/checking accounts. I think that will help avoid the "I'll just save as much as I can this year, and maybe next year I will spend a little more when my portfolio is a little bigger" that I bet is a pretty common thought process.

At the end of the day, I think it's just a personality type. Tuesday night: Bob: "You want to go out to dinner at that nice restaurant we both like?" Alice: "Nah, seems like waste. We always drop $200 when we go there and we have those leftovers we both like in the fridge. We're going out with the Miller's for dinner on Friday anyway." Bob: "Good point. Plus we can watch the new Poldark on Prime!" - Meanwhile they have $4.0m in retirement funds and are both drawing SS and pensions.

Expecting those people to spend down their portfolio it took them 40 years to build in retirement? Leopards don't change their spots...

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