What's your strategy for withdrawing funds in Retirement ?

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sixtyforty
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What's your strategy for withdrawing funds in Retirement ?

Post by sixtyforty » Tue Mar 21, 2017 10:13 am

I'm still trying to figure out a good strategy for withdrawal in retirement (not there yet, but getting close).

Can I ask what strategy are you following for withdrawing funds in retirement ? Also, was there any particular book you found beneficial in helping form your withdrawal strategy ?
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

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

Post by David Jay » Tue Mar 21, 2017 10:38 am

Put everything in LifeStrategy Moderate (tIRA and Roth).
1. Withdraw from tIRA (i.e. by selling mutual fund shares) RMD amount every year (distribute as a QCD).
2. Withdraw from tIRA (i.e. by selling mutual fund shares) one year's living expenses every year.
3. Make a small conversion from tIRA to Roth each year, to the top of the zero percent tax bracket.
4. Continue until tIRA is consumed, then live out of Roth, with balance of Roth going to the estate.
Last edited by David Jay on Tue Mar 21, 2017 10:45 am, edited 2 times in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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

Post by David Jay » Tue Mar 21, 2017 10:42 am

Books: Boglehead's Guide to Retirement, Jane Bryant Quinn "Making Your Money Last"
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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

Post by CyberBob » Tue Mar 21, 2017 10:43 am

I've always been partial to the RMD method where the withdrawal percentage is essentially 1/life expectancy. It has the disadvantage that withdrawals are a lower percentage early on (especially if you retire very early), but at the same time, taking less early on is psychologically comforting that you won't spend all your money too quickly. See the Kiplinger's Personal Finance magazine article Don't Run Out of Money in Retirement.

But, since my fixed costs in retirement are low and my spending flexible, I tend to default to Taylor's very zen 'no-method' method:
Taylor Larimore wrote:One of the great mysteries to me are the Great Debates over Safe Withdrawal Rates (SWR).

I put Safe Withdrawal Rates into Google and it came up with more than 15 million hits. One wonders how people managed to retire without knowing their "SWR."

Mathematicians love numbers. Fortunately for them, the stock and bond markets spew-out millions of numbers every day which are carefully preserved and available for them to analyze. Unfortunately, past performance numbers do not predict future performance.

I retired in June of 1982 at the age of 57. We had about a $1 million dollar portfolio to last us the rest of our lives. I didn't know about safe withdrawal rates (the Trinity Study wasn't published until 1998). We had no computers, Internet, Monte Carlo, or sophisticated calculators. We only knew that we had to be careful to make our money last ($1M at 4% = $40,000/year before tax).

So what happened? We simply withdrew what we needed and kept an eye on our portfolio balance. Most years our balance went up and we spent the money on vacations, luxuries and charity. When our balance went down we tightened our belt and economized.

This is what most people do and it works.

"There seems to be some perverse human characteristic that likes to make easy things difficult."--Warren Buffet

Best wishes.
Taylor

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

Post by S&L1940 » Tue Mar 21, 2017 11:05 am

like CyberBob, following Taylor's guidance is a plus.
Taylor has been one of our BH heroes since we got here and nurturing withdrawals from our nest egg on an as need basis has worked just fine. It is a matter of balancing your spend within your limits.
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by Snowjob » Tue Mar 21, 2017 11:14 am

Heavily withdraw my 401k between 5x->70.

At the age of 70, convert what is left in the 401k to an inflation indexed SPIA.

Taxable account will be left to the kids for step up basis, If I don't have kids then it will be given to charity.

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

Post by Sheepdog » Tue Mar 21, 2017 11:32 am

My basic strategy for withdrawal (no pension) at age 65. I set a goal of 4.5% average withdrawal and not adjust for inflation...(have more, I can spend more. have less, try to spend less.)
1. From taxable first and until RMD
2. Started converting a small percentage IRAs to Roth at the beginning of retirement. Purchased I bonds for more tax friendly investments.
3. Kept taxes low by taking from tIRAs until taxes were due then from Roths.
4. At age 80, I bought SPIAs which along with SS provides all normal spending needs
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by Fclevz » Tue Mar 21, 2017 11:44 am

Only one rule: be flexible.

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

Post by Kevin M » Tue Mar 21, 2017 11:54 am

Retired at 55 and have no need to tap tax-advantaged accounts, so will continue to tap only taxable accounts until forced to start taking RMDs after age 70, which now is about five years away.

I keep enough in cash to cover foreseeable expenses several months into the future. When I have a taxable CD mature, I'll keep enough of it in cash to cover a few months expenses, add to any stock funds that are below target (and possibly bond funds in the future), then use the rest to buy another CD. If I need to raise cash at some other time, I just sell shares from whichever funds are over target, which has been mostly stock funds in recent years. I could also do an early withdrawal from a CD if necessary, but haven't had to do that yet.

I am lucky not to have to worry much about a safe withdrawal rate, since I'm spending from my portfolio at less than 2%/year. The guidance I provide to my mom and stepdad, in their mid-80s, is to keep their annual portfolio spending to 1/life-expectancy, and they usually spend about 2/3 of that. They never have had to take more than their RMDs to support this, and probably never will. For them (and me), this does not include real estate, which provides an extra buffer for unexpectedly high expenses in future years.

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

Post by JohnFiscal » Tue Mar 21, 2017 12:22 pm

I had posted my strategy a week or two ago here at bogleheads viewtopic.php?f=2&t=213621&p=3279466#p3279466

I am still continuing to crunch numbers in a complex spreadsheet. Sometimes I get counter-intuitive results. But the investigation goes on.

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

Post by Peter Foley » Tue Mar 21, 2017 12:33 pm

Strategies can be quite varied because individual circumstances vary.

Is the bulk of your retirement savings in taxable, tax deferred, or Roth?
Do you plan on delaying SS benefits and withdrawing a little more early on and a little less later?

There are lots of questions and lots of circumstances. You might try the Firecalc calculator to get an idea tailored to your circumstance.

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

Post by akblizzard » Tue Mar 21, 2017 12:45 pm

David Jay wrote:Books: Boglehead's Guide to Retirement, Jane Bryant Quinn "Making Your Money Last"
Yes to these. :beer

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

Post by kolea » Tue Mar 21, 2017 1:07 pm

I am 65, retired.

I withdraw quarterly from my taxable account. Withdraw amount is 0.75%. If I need more, I take more. If I don't spend it, it gets rolled back into investments. If 0.75% of total assets is less than my floor (which is an inflation adjusted dollar amount), I will take out the floor.

I will start on SS at age 70. The quarterly withdrawal percentage will drop to 0.6% at that time. A good fraction of the withdrawal after age 70 will be RMDs from my IRA.

The percent of the withdrawal was determined by budgeting rather than an SWR approach. So far we are under-budget but I think that is because we have not hit any big-ticket expenses that are built in (like house repairs).
Kolea (pron. ko-lay-uh). Golden plover.

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

Post by artthomp » Tue Mar 21, 2017 2:09 pm

I am 77 and retired. We receive Social Security and a company pension. Because of my age, I'm required to take an IRS Required Minimum Distribution each year. Since this is greater amount than required for our living expenses, I withhold our entire federal and state taxes from it and take any extra funds required from it for normal living expenses. I am still able to reinvest a portion into taxable investments at Vanguard.
Art

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

Post by SGM » Tue Mar 21, 2017 3:06 pm

We have enough in several income streams that we will only take a little from taxable. We are delaying SS until age 70. DW has a spousal benefit currently. We annuitized the TIAA-CREF account so that is being taxed at the same rates as RMDs would be taxed. All the other tax deferred accounts were converted to Roth accounts. After age 70 when both of us receive our own SS payments even less will need to be taken from taxable accounts. Probably the Roth accounts will not be touched for a long time if ever. I used Quinn's book and the BHs guide to retirement as well as James Lange's books on retirement and Roth accounts.

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

Post by smitcat » Wed Mar 22, 2017 9:38 am

kolea,

"I am 65, retired.

I withdraw quarterly from my taxable account. Withdraw amount is 0.75%. If I need more, I take more. If I don't spend it, it gets rolled back into investments. If 0.75% of total assets is less than my floor (which is an inflation adjusted dollar amount), I will take out the floor.

I will start on SS at age 70. The quarterly withdrawal percentage will drop to 0.6% at that time. A good fraction of the withdrawal after age 70 will
be RMDs from my IRA.
The percent of the withdrawal was determined by budgeting rather than an SWR approach. So far we are under-budget but I think that is because we have not hit any big-ticket expenses that are built in (like house repairs)."

This strategy has me confused from a tax perspective. Before starting SS is it not better to pull from IRA/401K to pull down the account while your tax rate is lower? Then switch to partial taxable accounts withdrawals when the SS kicks in and affects your overall tax situation?

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

Post by noupdjm » Wed Mar 22, 2017 10:28 am

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.

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

Post by AndrewXnn » Wed Mar 22, 2017 11:07 am

Taxable accounts are of course not all the same.
There are taxable funds which generate taxable interests and dividends and then
there are taxable funds which contain capital gains (short and long).

If you have no income from a job and no pension or SS, then you are left with deciding
to withdraw funds from 5 different sources that I can think of:

1. Interest/Dividend generating funds
2. Funds which distribute Short/Long term capital gains
3. IRAs
4. Stocks without taxable distributions (such as BRK) but which contain embedded long term gains
5. Roth IRAs

When you start collecting SS, your marginal tax rate on each of the above will go up.
Likewise for starting RMDs from IRAs. These occur at/near age 70.
So, it makes sense to start before age 70 by drawing down 1 and 2 from above before moving on towards the later.
Also, it makes sense to convert some of your IRA funds to Roths provided it does not increase your marginal tax rate.

Keeping the marginal tax rate roughly the same from before to after age 70, is the general strategy.

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

Post by kolea » Wed Mar 22, 2017 12:56 pm

smitcat wrote:kolea,

This strategy has me confused from a tax perspective. Before starting SS is it not better to pull from IRA/401K to pull down the account while your tax rate is lower? Then switch to partial taxable accounts withdrawals when the SS kicks in and affects your overall tax situation?
I asked that question 3 years ago when I retired. The answers I got varied but mostly were that it is better to pull from taxable first.

We are in the 15% bracket for the first time in our lives for 2016 and our effective tax was only 6% (due to LTCG making up a lot of the income). If I were to replace that LTCG income with IRA distributions I am pretty sure our tax bracket will be 25%. And it will likely be 25% when I start SS. So it seems I may as well enjoy a few years of 15% bracket now.

I actually got curious about this recently and started work on a spread sheet to more accurately model the two options.
Kolea (pron. ko-lay-uh). Golden plover.

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

Post by JPH » Wed Mar 22, 2017 1:07 pm

My plan was to spend from taxable first, then tIRA, then Roth IRA. However, I defeated that plan by working to age 70. Now my RMD seems to be enough.
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Kevin M
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by Kevin M » Wed Mar 22, 2017 1:25 pm

kolea wrote:
smitcat wrote: This strategy has me confused from a tax perspective. Before starting SS is it not better to pull from IRA/401K to pull down the account while your tax rate is lower?
I asked that question 3 years ago when I retired. The answers I got varied but mostly were that it is better to pull from taxable first.
Better to do Roth conversions and spend from taxable than just take distributions to spend from traditional IRA and 401k/403b. This accomplishes the same thing in terms of reducing tax-deferred account balances, but has the additional benefit of getting more of your portfolio into a pure, tax-free account. This gives you another dial to turn in addition to reducing RMDs.

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

Post by galeno » Wed Mar 22, 2017 1:39 pm

See my signature.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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

Post by GerryL » Wed Mar 22, 2017 2:07 pm

I worried about this a lot in the years just before retirement. Looked high and low for books that addressed the problem, but everything I found was just about building savings, not drawing down. (Of course, now that I am on Bogleheads, I can look for and find answers and references.)

Anyway, I now find I am in the happy space where I don't really need much of my RMDs much less the funds in Roths or taxable to support my modest lifestyle, so it is a simpler matter of how to take my RMDs when the time comes in less than 2 years and how to use them as I keep an eye on tax implications.

So I have started building a simple spreadsheet (although paper and pencil would probably suffice) to log my RMD for the year, the amount I intend to take (i.e., RMD+?) and then the size of the 3 portions into which I will divide it: QCD, Expenses, Reinvest. I figure that in the first half of each year I will direct Vanguard to take my target amount from my IRA holdings proportionally (if I'm not way out of balance) and put it into my IRA cash account. Then, before the end of the year, I will execute the QCD(s) and transfers to the appropriate taxable accounts.

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

Post by dkturner » Wed Mar 22, 2017 3:32 pm

With respect to withdrawal AMOUNT we, like most retirees, spend what we actually need (as we see it, of course). Since we are now both subject to RMD requirements we make our required withdrawals at the end of the year, and spend what we need during the following year. Withdrawing a lump sum at the end of the year lets us postpone our income tax payments until December (income taxes withheld from RMDs are treated as though they were paid ratebly throughout the year) giving us the use of our tax payments for 11 months. What we don't actually spend we ultimately reinvest. The only time "strategy" really comes into play is determining which assets we sell to fund the RMDs, and where to reinvest any year-end surplus. If stocks are up, and bonds are down, we lean to selling stocks and reinvesting any surplus in bonds. If bonds are up, and stocks are down, we lean to selling bonds and reinvesting any surplus in stocks.

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

Post by ralph124cf » Wed Mar 22, 2017 8:19 pm

In retirement I am trying to keep our income relatively constant. This helps with taxes versus large swings in income. We are firmly in the 33% Fed bracket, and will remain there even after one of us dies, so there is no advantage to Roth conversions.

We have an expected base from SS (age 70), pension (age 70 start), and annuity (DW life only) that is sufficient, so the variable is withdrawal from retirement accounts. I have calculated the total sum of our age 70.5 RMDs, plus the pension, SS, and TIAA-CREF annuity. I take this sum from our tax deferred retirement accounts each year. My withdrawals started out at 6% of tax deferred assets per year, but after 3 years of retirement are at 5.5%, although actual dollar withdrawal amounts are about 10% higher. I do recalculate each year. We spend what we want, and invest the rest in taxable.

Ralph

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

Post by itstoomuch » Wed Mar 22, 2017 9:09 pm

We knowing bought deferred income annuities that are RMD friendly, among other options.
Our IRA withdrawals are already going into taxable discretionary acct s.
Our real question is managing the Income taxes and risks within the Discretionary bucket.
Work-in-progress. Will consult.
YMMV
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by ruralavalon » Thu Mar 23, 2017 8:33 am

sixtyforty wrote:I'm still trying to figure out a good strategy for withdrawal in retirement (not there yet, but getting close).

Can I ask what strategy are you following for withdrawing funds in retirement ? Also, was there any particular book you found beneficial in helping form your withdrawal strategy ?
We have a modest lifestyle. We have a joint taxable account, 2 Roth IRAs, and my rollover IRA.

I retired the year I turned 66, full retirement age for Social Security, and we lived on Social Security plus withdrawals from our taxable account. Now at age 71 we live on Social Security plus the Required Minimum Distributions from my rollover traditional IRA.

The withdrawal rate has always been under 4%. Due to the luck of the long bull market our investment portfolio is now significantly larger than when I retired :) .
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by technovelist » Thu Mar 23, 2017 8:52 am

I've been mostly retired for a couple of years. One of my investments is being taken over by a company I don't approve of. This was the incentive for me to rearrange my finances.

The result is that I have just converted enough of my assets to cash to pay off my mortgage (next week) and leave about 5 years of expenses beyond our SS payments in cash.
In theory, theory and practice are identical. In practice, they often differ.

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

Post by oldcomputerguy » Thu Mar 23, 2017 9:04 am

My strategy is not a rule-of-thumb plan, nor a fixed-withdrawal one. It is based on projected needs over the next three to ten years, with an eye to bridging the gap from retirement to Social Security. I built it by straining my spreadsheet skills to the max. (The spreadsheet contains a separate tab showing monthly income and expenses for each year from now until 2050, taking into account inflation adjustments, hoped-for SS COLA adjustments, hoped-for investment gains, discretionary spending, and start of Medicare for each of us, plus another tab for projected taxes, and it links to another spreadsheet containing data on our retirement and taxable investment accounts. The filename of this thing is "Frankensheet". :twisted: )

I just retired in January, but DW is still working, hopefully for another three-and-a-half years (unless [mumble mumble redacted speculation re government funding of her job mumble mumble :wink: ]). Assuming she continues to work as planned and punches out on her planned date, at that point we'll draw most of our living expenses from my IRA for about a year and a half, for which I have the appropriate amount set aside in a short-term Treasury bond fund. The rest should be covered by her pension.

Once that phase is passed, we'll both be on Social Security (her at 62, me at FRA), which combined with her pension is projected to cover all essential expenses, leaving our retirement savings for discretionary and emergency expenses. RMDs should kick in for me roughly four years after that point, then hers kick in another three-and-a-half years later.

Of course, you know what they say about "best laid plans" :| . But then, we all also know what Item # 1 of the Bogleheads Philosophy is...
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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

Post by MnD » Thu Mar 23, 2017 7:47 pm

Plan for 2019 and beyond is 70/30 for life with a 5% of annual portfolio balance (with a 3% of starting balance inflation-adjusted floor) AWR starting at age 56 for both of us. Have 1 pension and almost all our retirement savings are in tax-sheltered accounts so we will be in the middle of the 25% bracket for many years I estimate. If years in a great stock market and RMD's push us up to a little bit of income being taxed at 28% (the lowest bracket we tax-deferred everything at for decades) I will not be bothered one bit by that.

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

Post by willthrill81 » Thu Mar 23, 2017 8:22 pm

The two most basic choices are either a fixed or a flexible withdrawal strategy. While most people prefer a steady income stream (i.e. fixed plus inflation), in reality very few people are comfortable continuing to withdraw the same amount when equities are down 30-50% in one year.

Of all the methods I've seen, the one that makes the most overall sense to me is a flexible 4.5% of whatever is in the portfolio (assuming a 'typical' portfolio with an AA of 50/50 to 60/40) at the end of the year (or one-fourth of that every quarter, or one-twelfth every month) OR 95% of whatever was withdrawn last year, whichever is greater. This doesn't give you direct inflation adjustment, but a reasonable (at least 40%) equity allocation seems to provide that just fine over the medium term or longer. The "95% rule" helps to both protect your portfolio somewhat during down years without causing you to have large income drops from one year to the next. You could apply this same rule with a flexible 4% withdrawal rate, but historically that would be a very conservative withdrawal strategy, unnecessarily so IMHO.

There are several advantages to this strategy. For one, you're extremely unlikely to ever run out of money since the 'worst case' would result in a 5% income reduction every year. Granted, your inflation-adjusted income could decline over time if you ran into an extended bear market, but since retirees' spending declines on average as time goes on anyway (until about age 85 and onward when there is an uptick due to medical costs, though still lower than at 65 or even 75 on average), this isn't likely to be a huge problem. And in the historically likely event that your portfolio does very well as time goes on, you'll automatically receive a higher income (a major criticism of the fixed 4% strategy is that it usually leaves too much money on the table).

At any rate, I think that a fixed 4% plus inflation is safe, but I just don't see many people continuing to use this blindly (nor do I think that they really should) when equities are in the toilet. That's why I think that a flexible strategy combined with limits on the downside is a good idea. Some find it prudent to combine this with 'ceilings' to their year-to-year raises (i.e. no more than 10% increase from one year to the next), though I haven't seen any software that allows you to test the impact of this strategy.
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by chuckb84 » Thu Mar 23, 2017 9:00 pm

"I retired in June of 1982 at the age of 57. We had about a $1 million dollar portfolio to last us the rest of our lives. I didn't know about safe withdrawal rates (the Trinity Study wasn't published until 1998). We had no computers, Internet, Monte Carlo, or sophisticated calculators. We only knew that we had to be careful to make our money last ($1M at 4% = $40,000/year before tax).

So what happened? We simply withdrew what we needed and kept an eye on our portfolio balance. Most years our balance went up and we spent the money on vacations, luxuries and charity. When our balance went down we tightened our belt and economized.

This is what most people do and it works.

"There seems to be some perverse human characteristic that likes to make easy things difficult."--Warren Buffet

Best wishes.
Taylor"

Yep. I've used online calculators and done extensive Monte Carlo simulations. After all that:

1. Withdrawals are calibrated to hold our principal 401k account at a fixed balance, +-5-10%.
2. I allow -some- drawdown now in anticipation of SS starting at which time 401K withdrawals will decline to let 401K balance go back up.


I love the fancy math and have a lot of fun playing with the simulators, but in the end, what they do is validate the range of variability I can expect using the two principals above.

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

Post by Greg in Idaho » Sat Mar 25, 2017 10:21 am

CyberBob wrote:
Taylor Larimore wrote:One of the great mysteries to me are the Great Debates over Safe Withdrawal Rates (SWR).

I put Safe Withdrawal Rates into Google and it came up with more than 15 million hits. One wonders how people managed to retire without knowing their "SWR."

Mathematicians love numbers. Fortunately for them, the stock and bond markets spew-out millions of numbers every day which are carefully preserved and available for them to analyze. Unfortunately, past performance numbers do not predict future performance.

I retired in June of 1982 at the age of 57. We had about a $1 million dollar portfolio to last us the rest of our lives. I didn't know about safe withdrawal rates (the Trinity Study wasn't published until 1998). We had no computers, Internet, Monte Carlo, or sophisticated calculators. We only knew that we had to be careful to make our money last ($1M at 4% = $40,000/year before tax).

So what happened? We simply withdrew what we needed and kept an eye on our portfolio balance. Most years our balance went up and we spent the money on vacations, luxuries and charity. When our balance went down we tightened our belt and economized.

This is what most people do and it works.

"There seems to be some perverse human characteristic that likes to make easy things difficult."--Warren Buffet

Best wishes.
Taylor
This is basically where I'm headed...using simulations and keeping up on the markets and economy as a backdrop for monitoring, planning, and making withdrawals...all without precise determinations of what exactly we will do in any year.

Going beyond that seems to rest on either a love of the process (good for you if you like to do that), and/or a false sense of certainty/accuracy that numbers allow as we try to use them to deal with a very messy reality.

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

Post by TBillT » Sat Mar 25, 2017 10:42 am

Strategy depends on age and many things, but we are early 60s married.
We have IRAs some 401Ks for money.

> Deferring Social Security letting the value build ...maybe at 66 one will take SS
> Looking ahead to age 70 mandated RMD, taking some money out IRA retirements funds now when there is opportunity at low tax rates
> Doing some convert to Roth IRA when possible
> Actually what we are doing is selling some NUA company stock from the 401K conversion at low LT tax rates, but the overall concept is not being afraid to take money out of retirement IRA's when the opportunity presents lower tax rates. I try to minimize income below Medicare jumps in premiums and excess Medicare taxes - the Medicare jumps are a pain for retirees as far as making withdrawals which are too big.
> We have some 401K but I will probably convert to tIRA before age 70 to simplify RMD calcs

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Sandtrap
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Location: Hawaii😀 Northern AZ.😳 Retired.

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

Post by Sandtrap » Sat Mar 25, 2017 11:00 am

DW and I . . Approaching 65, retired.
No Debt.
50-60X
LMP Liability Matching Portfolio, est. 30/70 AA.
Frugal and flexible ave. 2% withdrawal rate depending on our needs.

We would not be able to do this if not for moving from extreme HCOL (Hawaii/Kamuela) to very LCOL area.

hoops777
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by hoops777 » Sat Mar 25, 2017 12:25 pm

My wife and I are 67 and 65 and I have been obsessed with this lately.Our combined SS would cover our basic day to day expenses minus our taxes,unless something changes.
I really like the RMD covering expenses method.Our combined RMD should begin at around 35,000 which should cover all taxes with something decent leftover for vacations and stuff.We live in Ca.so stuck with high state tax.
In addition we have about 63,000 in our HSA accounts and my plan is to use that to pay Medicare related premiums only until it runs out.So it is like fixed monthly income for about 10 to 12 years.
My wife also has a small pension and if she waits until 70,can annuitize it for almost 600 month or take about 82,000 cash and roll it into her IRA.Not yet decided on that but will be posting for recommendations in a couple years :happy
K.I.S.S........so easy to say so difficult to do.

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

Post by Devil's Advocate » Sat Mar 25, 2017 12:29 pm

I didn't think one could use HSA to pay for insurance premiums?

DA

hoops777
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by hoops777 » Sat Mar 25, 2017 1:18 pm

Yes you can.
K.I.S.S........so easy to say so difficult to do.

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willthrill81
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Location: USA

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

Post by willthrill81 » Sat Mar 25, 2017 9:02 pm

Devil's Advocate wrote:I didn't think one could use HSA to pay for insurance premiums?

DA
hoops777 wrote:Yes you can.
"Generally, you cannot treat insurance premiums as qualified medical expenses unless the premiums are for:

a. Long-term care insurance, subject to IRS mandated limits based on age and adjusted annually (see IRS Publication 502: Long-Term Care).

b. Healthcare continuation coverage (such as coverage under COBRA – see IRS Publication 502: COBRA Premium Assistance.

c. Healthcare coverage while receiving unemployment compensation under federal or state law.

d. Medicare and other healthcare coverage if you are 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).

For (b) and (c) above, your HSA can be used for your spouse or a dependent meeting the requirement for that type of coverage. For (d) above, if you, the account beneficiary, are not 65 years of age or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) generally are not considered a qualified medical expenses."
- See more at: https://www.wageworks.com/employees/sup ... tISbJ.dpuf
“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

hoops777
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by hoops777 » Sat Mar 25, 2017 10:16 pm

In other words,if you are 65 you can use your HSA to pay for Medicare premiums.
K.I.S.S........so easy to say so difficult to do.

Almost there
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Location: Arizona USA

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

Post by Almost there » Sun Mar 26, 2017 12:35 pm

deleted. Started my own posting.
Last edited by Almost there on Sun Mar 26, 2017 9:52 pm, edited 1 time in total.

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patrick013
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Re: What's your strategy for withdrawing funds in Retirement ?

Post by patrick013 » Sun Mar 26, 2017 12:53 pm

The spreadsheet I'm looking at tells me to take a 401k with matching,
retire, and take equal withdrawals for 20 years. The account will
equal zero after 20 years. Beats a 401k-Roth arrangement by over
2% after tax. Would live like a king for 20 years especially when SS and any
pension would be added. Just have to be careful estimating the retire-
ment tax rate.
age in bonds, buy-and-hold, 10 year business cycle

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

Post by TravelforFun » Sun Mar 26, 2017 1:34 pm

Taylor Larimore wrote:One of the great mysteries to me ar4e the Great Debates over Safe Withdrawal Rates (SWR).

I put Safe Withdrawal Rates into Google and it came up with more than 15 million hits. One wonders how people managed to retire without knowing their "SWR."

Mathematicians love numbers. Fortunately for them, the stock and bond markets spew-out millions of numbers every day which are carefully preserved and available for them to analyze. Unfortunately, past performance numbers do not predict future performance.

I retired in June of 1982 at the age of 57. We had about a $1 million dollar portfolio to last us the rest of our lives. I didn't know about safe withdrawal rates (the Trinity Study wasn't published until 1998). We had no computers, Internet, Monte Carlo, or sophisticated calculators. We only knew that we had to be careful to make our money last ($1M at 4% = $40,000/year before tax).

So what happened? We simply withdrew what we needed and kept an eye on our portfolio balance. Most years our balance went up and we spent the money on vacations, luxuries and charity. When our balance went down we tightened our belt and economized.

This is what most people do and it works.

"There seems to be some perverse human characteristic that likes to make easy things difficult."--Warren Buffet

Best wishes.
Taylor
Just wondering whether Mr. Larimore's portfolio has increased, decreased, or stayed relatively the same over the past 34 years. I'll be using this method as well.

larsm
Posts: 58
Joined: Thu Sep 23, 2010 8:04 pm

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

Post by larsm » Sun Mar 26, 2017 1:41 pm

"Can I ask what strategy are you following for withdrawing funds in retirement ?"

You want to know my strategy? Easy. Don't runout.

Which while tongue in cheek holds a kernel of wisdom: the process of spending in retirement is an ongoing, active affair.

Scotttheking
Posts: 188
Joined: Wed Apr 09, 2008 7:58 pm

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

Post by Scotttheking » Sun Mar 26, 2017 1:54 pm

TravelforFun wrote:
Taylor Larimore wrote:One of the great mysteries to me ar4e the Great Debates over Safe Withdrawal Rates (SWR).

I put Safe Withdrawal Rates into Google and it came up with more than 15 million hits. One wonders how people managed to retire without knowing their "SWR."

Mathematicians love numbers. Fortunately for them, the stock and bond markets spew-out millions of numbers every day which are carefully preserved and available for them to analyze. Unfortunately, past performance numbers do not predict future performance.

I retired in June of 1982 at the age of 57. We had about a $1 million dollar portfolio to last us the rest of our lives. I didn't know about safe withdrawal rates (the Trinity Study wasn't published until 1998). We had no computers, Internet, Monte Carlo, or sophisticated calculators. We only knew that we had to be careful to make our money last ($1M at 4% = $40,000/year before tax).

So what happened? We simply withdrew what we needed and kept an eye on our portfolio balance. Most years our balance went up and we spent the money on vacations, luxuries and charity. When our balance went down we tightened our belt and economized.

This is what most people do and it works.

"There seems to be some perverse human characteristic that likes to make easy things difficult."--Warren Buffet

Best wishes.
Taylor
Just wondering whether Mr. Larimore's portfolio has increased, decreased, or stayed relatively the same over the past 34 years. I'll be using this method as well.
This quote from Taylor comes up a lot. But Taylor has also mentioned retiring from federal service, which implies he also has a pension; perhaps which is covering his fixed expenses. That would be a significant factor in being less concerned about withdrawal rates. Anyone able to verify this?

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

Post by LeeMKE » Sun Mar 26, 2017 2:30 pm

We have just started draw downs and will be seriously withdrawing when DH retires within 2 years. Like many, we have just a small pension that is not COLA'd, and expect to have Social Security payments. Our portfolio from savings is the majority of our retirement funding and will be sufficient so long as I make no serious mistakes.

I've done a few things to get ready:

Set up a CD ladder of approximately 2 years of maximum estimated expenses. If the market tanks during our early years of retirement, we'll use these funds to avoid selling on a downturn. (this is part of our "bond" allocation)

Converted tIRA to ROTH a bit each year while we are in a lower tax bracket than I expect during retirement. Used the Fidelity Retirement Income Planner to discover "The Hump", and then tuned our conversions with I-ORP so we both erase The Hump and optimize our balances to smooth out taxes during retirement.

Puzzled over how to implement a variable withdrawal strategy based on market returns as outlined in a paper by Wells Fargo. I had a spreadsheet set up, but it, and some other tools available weren't quite confidence building.

Then I-ORP added two things that really help me:
-- They published a white paper about the 3-peat Retirement Withdrawal Strategy, which is pretty close to the variable withdrawal strategy from the Well Fargo paper, but can be implemented by running I-ORP, instead of my own questionable spreadsheet calculations.
-- They added a feature to create a variety of withdrawal strategies. Several of these (all academic tested approaches, and more sophisticated than I can create on my own) make sense to me in our circumstances.
And I now have a range of projected spending that I can confirm by repeating the I-ORP model each year until we level out about 10 years into retirement.

I think I'm all set, but always keeping an eye out for more tools to try out! We are good test cases because we plan to spend our entire portfolio in retirement, were greatly impacted by The Hump, and straddle tax brackets now and for the foreseeable future.
The mightiest Oak is just a nut who stayed the course.

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

Post by Dandy » Mon Mar 27, 2017 4:29 pm

I tend to look at my overall portfolio as "safe" assets and "risk" assets a la Dr. Bernstein. My RMDs from my TIRA will be taken, in general, mostly from fixed income as the account is fixed income heavy. If the equity market has had a good run I may alter that to take more from appreciated equities.

If I need to withdrawal from my taxable account,beyond divs and cap gains which are sent to a money market, I will sell equites.

During this process I just need to make sure my "safe" assets are sufficient to fully fund my retirement up to my goal.

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

Post by Toons » Mon Mar 27, 2017 5:20 pm

66- Retired about 6 years.
So far
Pensions,SS,Dividends ,Cap gains From Stocks and Mutual funds in taxable account are sufficient.
Have not needed to touch Iras.
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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

Post by ruralavalon » Tue Mar 28, 2017 12:12 pm

Toons wrote:66- Retired about 6 years.
So far
Pensions,SS,Dividends ,Cap gains From Stocks and Mutual funds in taxable account are sufficient.
Have not needed to touch Iras.
:happy
66 +6 = 72.

Are you not taking Required Minimum Distributions?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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

Post by Toons » Tue Mar 28, 2017 12:30 pm

ruralavalon wrote:
Toons wrote:66- Retired about 6 years.
So far
Pensions,SS,Dividends ,Cap gains From Stocks and Mutual funds in taxable account are sufficient.
Have not needed to touch Iras.
:happy
66 +6 = 72.

Are you not taking Required Minimum Distributions?

No need for RMDs as of yet,,,
Will take it when I find it necessary,,,
The tax man cometh :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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