What's your strategy for withdrawing funds in Retirement ?

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Almost there
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Location: Arizona USA

Re: What's your strategy for withdrawing funds in Retirement ?

Post by Almost there »

Toons I hope you know RMDs have nothing to do whether you want to do it or not, but the IRS requires it.
Malinois000
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Joined: Sun Feb 26, 2017 6:08 pm

Re: What's your strategy for withdrawing funds in Retirement ?

Post by Malinois000 »

- Retire at yearend 2020 (I'll be 60 and my wife 58)
- At ages 60 to 70 live off of pension and deferred compensation savings
- At age 70 live from RMDs or myself and wife and pension and begin SS payments at age 70 (both him and her)
- Plan to provide Roth IRA to kids as a tax free gift
- Maintain Schwab Stock Taxable and Emergency fund if needed
- Life insurance to wife if I predecease her and kids if I don't
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oldcomputerguy
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by oldcomputerguy »

Almost there wrote:Toons I hope you know RMDs have nothing to do whether you want to do it or not, but the IRS requires it.
I think someone misinterpreted Toons' math. The way I read it, he's age 66 now, and has been retired since age 60. So RMD's are not yet required.
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tinscale
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Location: North Carolina

Re: What's your strategy for withdrawing funds in Retirement ?

Post by tinscale »

I'm 7 years away from RMDs but current plan is take only the RMD, and that's also what my written instructions to my wife are. I have a pension that pays current expenses, and she will get survivor benefit.
Fundhunter
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Joined: Sun Mar 11, 2007 9:11 pm
Location: Atlanta

Re: What's your strategy for withdrawing funds in Retirement ?

Post by Fundhunter »

A few years back, this book was recommended to me on this site: "Unveiling the Retirement Myth" by James C. Otar. I really recommend this book. A lot in there about the withdrawal stage in retirement, including what to do if you are borderline on having enough. Great discussion on annuities and when they should be considered and when not.

I am rereading it now and I had set up my wife's withdrawals (she has been retired for a few years) according to his recommendations, including his recommendation that in the withdrawal stage, you should only rebalance at the end of each Presidential term, every 4 years. I will be 100% retired and taking required IRA distributions at age 70.5 (next year). Safe withdrawal rate for us now is 3.5%. I took SS at 66- no pension. Wife (5 years younger) has more taxable from an inheritance and she will cash that in every year and she will wait on taking SS and IRA distributions (capital gains taxes are relatively low compared with taxes on SS and IRA distributions). Her taxable is in equity mutual funds, so to insulate from "portfolio-busting" reverse dollar-cost-averaging, when we sell for living expenses, we buy an equivalent amount of the same or a similar mutual fund in her IRA simultaneously.

However, once withdrawing from the retirement account, you should only withdraw from the most conservative fixed income portion of the portfolio- cash or short bonds. I think all the books agree on that!

Nothing wrong with getting a few of the recommended books and reading them all- cheaper than hiring an advisor.
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galeno
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by galeno »

I like a mechanical approach.

Annual port expenses = 0.5%. Subtract them from SWR = 4.0%.

START AWR = 3.5%. FLOOR = 2.5%. ROOF = 5.5%.

When AWR hits FLOOR = 3.5% give self a raise to START AWR = 3.5%.

When AWR hits ROOF = 5.5% cut expenses.

Current AWR = 2.7%. Almost ready for a raise!
KISS & STC.
John Z
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by John Z »

noupdjm wrote:Living Off Your Money by M McClung. Search this forum for previous thread on the book. If you're an engineer (or play one on TV), this book is a great find. I am part way through the book (and still 3 years or so from retirement), but it is very thorough and the website provides an accompanying spreadsheet (with examples) to implement the strategy.
Absolutely +1

Some info:
http://livingoffyourmoney.com/

The real website:
https://gumroad.com/l/wJoW

The first 3 chapters are free (and they are the best chapters in my opinion). Download cheaper than hard bound. Identifies among many retirement topics, fixed withdrawal strategies and which one works best, variable withdrawal strategies and which ones work best. Don't need to be an engineer. Hardly more than a couple of easy formulas.
cjking
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by cjking »

Ideally I would like to spend only the returns on my portfolio, and leave the portfolio to my heirs.

A strategy that directly tries to do that, bearing in mind I intend to nearly always be 100% allocated to equities, would be to withdraw balance * 75% / PE10. While I believe that would work perfectly well, it is open to the objection that in very adverse circumstances, it will not realistically prioritise income, which is the more important of the two goals.

I now take a sideways approach to the problem. My baseline withdrawal calculation in Excel is:-

PMT(anticipated_return_pct,life_expectancy,-balance,0,1)

Anticipated_return_pct is not expected return. In fact I would say a reasonable guideline is to make it half of expected return, though I use a slightly lower value, a fixed value of 2%. If I based my projected income stream on expected return, there would be equal probability of declining or increasing income, depending in which direction my estimate turned out to be wrong. I dislike declining income more than I like increasing income, so I plan on the basis of a lower rate.

I also set a cap on my income level, an amount that happens to be less than expected return at the outset. So if I get my expected return, or even slightly less, the portfolio will be bigger at the end than at the start. If my returns are less than that, but more than 2%, I will get a good income stream, but the portfolio will decline, with a random amount left over. If returns are less than 2%, income will decline with time, and there will definitely be no legacy.

(Once life-expectancy has fallen to about 15 years, if portfolio balance is on a declining path, to the extent that there is a risk it may not fund excess longevity, I will annuitise.)
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