[Moved into a new thread from: [Book: Living off Your Money, by M. McClung (Prime Harvesting)] --admin LadyGeek]
I am due to retire in about 2 years time and I am researching withdrawl strategies. I have read Living off your Money and done as much research as possible. I like to keep things as simple and uncomplicated as possible, always works out best in my opinion (my entire retirement portfolio has only 3 etfs). Mr McClung prime harvesting makes a lot of sense to me and is simple to apply to my portfolio. Bogleheads Variable Percentage Withdrawal is a very simple and easy to use (using the VPW table) method to determine annual withdrawls. Therefore my plan is to combine Prime Harvesting and Bogleheads VPW to produce a good enough simple method of deacumulation. What do the contributors to Bogleheads think of my plan.
[WIthdrawal strategy: Living off Your Money (Prime Harvesting), Variable Percentage Withdrawal]
- willthrill81
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Re: [WIthdrawal strategy: Living off Your Money (Prime Harvesting), Variable Percentage Withdrawal]
Welcome to the forum!JF12 wrote: ↑Tue Oct 26, 2021 9:47 am [Moved into a new thread from: [Book: Living off Your Money, by M. McClung (Prime Harvesting)] --admin LadyGeek]
I am due to retire in about 2 years time and I am researching withdrawl strategies. I have read Living off your Money and done as much research as possible. I like to keep things as simple and uncomplicated as possible, always works out best in my opinion (my entire retirement portfolio has only 3 etfs). Mr McClung prime harvesting makes a lot of sense to me and is simple to apply to my portfolio. Bogleheads Variable Percentage Withdrawal is a very simple and easy to use (using the VPW table) method to determine annual withdrawls. Therefore my plan is to combine Prime Harvesting and Bogleheads VPW to produce a good enough simple method of deacumulation. What do the contributors to Bogleheads think of my plan.
McClung's Prime Harvesting approach is a fine means of allocating your assets in retirement, though I like the slight improvements that Karsten Jeske provides at his site. However, this strategy may be overly dependent on bonds' performance, and bonds are expected by the market to lag inflation over the next decade.
VPW is not a bad withdrawal method, but it results in your withdrawals being as volatile as your portfolio. If your portfolio drops by 20% in a single year, so will your withdrawals. That's precisely what some retirees want to happen, but not everyone desires that. If you want to smooth your withdrawals while still eliminating the possibility of premature portfolio depletion, you should consider using the amortization-based withdrawal method discussed in this thread. It is far more flexible than VPW and can incorporate multiple income streams coming in at different points in time.
The Sensible Steward
Re: [WIthdrawal strategy: Living off Your Money (Prime Harvesting), Variable Percentage Withdrawal]
I am glad to see that you understood that Prime Harvesting and a variable withdrawal method (VPW or else) are two orthogonal things and therefore can be combined. Withdrawal methods are about establishing a budget (how much to withdraw, how much to spend), while harvesting is about the mechanics of what to withdraw (e.g. stocks vs. bonds). Unfortunately, in the thread reviewing McClung's book, numerous people confused the two things.
Prime Harvesting has some issues (as was discussed in the McClung thread), VPW has some issues (as pointed out by willthrill81 in his previous post), but then, EVERY harvesting and EVERY withdrawal method has pros and cons. Nothing is perfect!
I think your primary question is: can I combine those two things without creating unwieldy side-effects between them? And the answer, I believe, is YES. Because those are orthogonal concepts.
Re: [WIthdrawal strategy: Living off Your Money (Prime Harvesting), Variable Percentage Withdrawal]
I am in Year 3 or 4 of retirement, and did the same deep dive to work up my withdrawal strategy.
For annual withdrawals, I have three tools I like. I run each of them each year and then pick a number after considering those results. So far, all my tools have moved in the same direction. If one diverges, I have to investigate to understand why and make a decision about what to do. And I use three, because one (or two) might stop being maintained and I want to keep some guardrails for another 4 years or more.
I'm using McClung's Prime Harvesting, I-ORP extended calculator and Fidelity Retirement Income Planner (my legacy tool).
For annual withdrawals, I have three tools I like. I run each of them each year and then pick a number after considering those results. So far, all my tools have moved in the same direction. If one diverges, I have to investigate to understand why and make a decision about what to do. And I use three, because one (or two) might stop being maintained and I want to keep some guardrails for another 4 years or more.
I'm using McClung's Prime Harvesting, I-ORP extended calculator and Fidelity Retirement Income Planner (my legacy tool).
The mightiest Oak is just a nut who stayed the course.
Re: [WIthdrawal strategy: Living off Your Money (Prime Harvesting), Variable Percentage Withdrawal]
Plot out how this scheme would have worked for the 2000 retiree and decide if you would have been happy with it in 2008 or 2011. It would have taken like 15 years for you to hit the first prime harvesting opportunity (up 20% real) so you would have hit those periods with high stock allocations for most withdrawal levels. In a lot of past cases things worked out but you might not enjoy the ride. It is easy to write 100% stocks in 2010 was optimal. It would have been a bit harder to live it.
And when you combine it with VPW, then decide if you were happy spending the amount of money the scheme throws off?
And when you combine it with VPW, then decide if you were happy spending the amount of money the scheme throws off?
Re: [WIthdrawal strategy: Living off Your Money (Prime Harvesting), Variable Percentage Withdrawal]
Thanks to everyone for your comments. I am going to research the suggestions provided.