Do you plan to actually spend down your portfolio?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
DetroitRick
Posts: 839
Joined: Wed Mar 23, 2016 9:28 am
Location: SE Michigan

Re: Do you plan to actually spend down your portfolio?

Post by DetroitRick »

Retired here. No, we don't intend to entirely spend down the portfolio (too risky since I don't know our death dates, thankfully). But I have no problem if the balance goes down later in retirement. It would take a lot of long, bad markets for that to happen, but we'll deal with whatever. We probably have less concern with leaving a legacy than most, but have charitable arrangements for whatever is left. Still, I refuse to worry about exactly how much is left over.

On your other question - spending variation. Yes, we have and will spend a little more when market is up - and a little less when down. We don't live life by formula and can handle the ambiguity. Never been an issue before. We've certainly flexed our spending for lots of periods over the years, and became well-practiced at this by having a highly variable income throughout life (bonuses, incentive pay, etc.). We don't use a fixed withdrawal percentage. But I do have a reasonable range that I will never go below or above. To me, this money is simply a means to an end. I don't find it necessary to remove all ambiguity from life in retirement - but I have always done enough detailed planning to know what is reasonable and likely. I do suspect that if we had children we would then take a somewhat different approach.
User avatar
One Ping
Posts: 939
Joined: Thu Sep 24, 2015 4:53 pm

Re: Do you plan to actually spend down your portfolio?

Post by One Ping »

To answer the OP ...

After we make it to SS @ 70, I suspect we will never draw on the portfolio again. The exception might be for an entry fee to a CCRC in 15 or 20 years or so, ... but maybe not even then depending on how much the house sells for.

... so, no, we do not plan to spend down our portfolio.
"Re-verify our range to target ... one ping only."
3504PIR
Posts: 975
Joined: Mon Jul 26, 2010 2:46 am

Re: Do you plan to actually spend down your portfolio?

Post by 3504PIR »

We are also retired military and retired civil service and do not intend to touch our portfolio beyond dividends here and there unless our world begins to radically change. If needed, we will use dividends for things like a new car or perhaps travel, although we are taking a break from travel for a while as we’ve travelled a LOT the past decade or so and are happy to be home for a while. Plan on giving some to charity or good causes and the rest will go to to heirs.
MikeG62
Posts: 3101
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Do you plan to actually spend down your portfolio?

Post by MikeG62 »

randomguy wrote: Wed Oct 23, 2019 5:36 pm
MikeG62 wrote: Wed Oct 23, 2019 5:30 pm We are spending around 3.0% of our portfolio. I believe that covers us for the reasonable worst case outcome. By covers us, I mean our money would last for our lifetimes (but most of it would be spent by the end).

Seems very unlikely if you are spending 3% of your portfolio that it will not be growing constantly throughout retirement even with pretty low stock allocations.
Yup I agree.
Real Knowledge Comes Only From Experience
User avatar
JoeRetire
Posts: 5765
Joined: Tue Jan 16, 2018 2:44 pm

Re: Do you plan to actually spend down your portfolio?

Post by JoeRetire »

flyingaway wrote: Wed Oct 23, 2019 11:12 am Many retirement calculators or rules usually assume that a retiree will spend down their money at end of the presumed life.
They do?
A success is that you have more than zero dollar at the end of your modeling years, be it 30 years or 40 years.
Of course you can typically find out how much is left at the end of your modeling year and decide for yourself if that looks like "success".
My question is: Do (did) you REALLY intend to spend down your portfolio and ACTUALLY increase the spending when the market is good?
I plan to spend what I want to spend. No more, no matter what the market conditions.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
michaeljc70
Posts: 7092
Joined: Thu Oct 15, 2015 3:53 pm

Re: Do you plan to actually spend down your portfolio?

Post by michaeljc70 »

It is hard to know how long you will live, if your health (and therefore expenses) will change, and how your portfolio will perform. I will have no problem spending down some of it or gifting it if I get to the point where clearly it will outlast me though.
User avatar
MrBobcat
Posts: 458
Joined: Fri Jan 11, 2019 5:19 pm

Re: Do you plan to actually spend down your portfolio?

Post by MrBobcat »

flyingaway wrote: Wed Oct 23, 2019 11:12 am Many retirement calculators or rules usually assume that a retiree will spend down their money at end of the presumed life. A success is that you have more than zero dollar at the end of your modeling years, be it 30 years or 40 years.

Yet we see here again and again statements (from retirees) like:
(1) I have more money now than I had at the retirement;
(2) My portfolio has doubled, thanks to the bull market;
(3) I have more money than I know how to spend it;
(4) My pension and social security cover all my expenses;
(5) How do I do with the money from RMD when I don't need it?

We see discussions about strategies (or advices) about tightening belts (adjusting spending down) when the market is down. Yet the other way is rarely discussed. OK, you spend more when the market is up. Will you or did you?

My question is: Do (did) you REALLY intend to spend down your portfolio and ACTUALLY increase the spending when the market is good?
I plan to have enough till we both tip over... but I'm extremely conservative in my projections which probably means I probably will never be able to spend it all which means I will probably be saying 1 through 5 at some point.
RadAudit
Posts: 3915
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Do you plan to actually spend down your portfolio?

Post by RadAudit »

I plan to have enough left so DW can spend the remainder of it during her lifetime. If I guess wrong, and there is more left over, I'm sure the kids, grandkids and the US government will pick up the slack.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.
dreamrrr
Posts: 47
Joined: Thu Nov 12, 2015 6:47 pm

Re: Do you plan to actually spend down your portfolio?

Post by dreamrrr »

Trader Joe wrote: Wed Oct 23, 2019 4:50 pm
flyingaway wrote: Wed Oct 23, 2019 11:12 am Many retirement calculators or rules usually assume that a retiree will spend down their money at end of the presumed life. A success is that you have more than zero dollar at the end of your modeling years, be it 30 years or 40 years.

Yet we see here again and again statements (from retirees) like:
(1) I have more money now than I had at the retirement;
(2) My portfolio has doubled, thanks to the bull market;
(3) I have more money than I know how to spend it;
(4) My pension and social security cover all my expenses;
(5) How do I do with the money from RMD when I don't need it?

We see discussions about strategies (or advices) about tightening belts (adjusting spending down) when the market is down. Yet the other way is rarely discussed. OK, you spend more when the market is up. Will you or did you?

My question is: Do (did) you REALLY intend to spend down your portfolio and ACTUALLY increase the spending when the market is good?
No, I do not intend to spend any of my portfolio. 100% of my portfolio is intended for my heirs.
+1
jmk
Posts: 581
Joined: Tue Nov 01, 2011 7:48 pm

Re: Do you plan to actually spend down your portfolio?

Post by jmk »

flyingaway wrote: Wed Oct 23, 2019 11:12 am My question is: Do (did) you REALLY intend to spend down your portfolio and ACTUALLY increase the spending when the market is good?
Yes, since I intend use the PMT formula to withdraw from total discretionary income over the NPV of core living expenses. So it will go up when market goes up and vice versa. Of course if market is up, then the discount rate used in that equation goes down, so there is a self-regulating aspect to some degree. And this is just for discretionary money. But anything that I don't spend each year will be given to charity.
MathIsMyWayr
Posts: 2256
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Do you plan to actually spend down your portfolio?

Post by MathIsMyWayr »

The main goal of retirement planning is not to set how much to spend, but to meet the target/desired spend without nail biting throughout retirement. I use Fidelity Retirement Planning tool to get a feel about how it will play out. With the "Significantly Below Average" setting, our retirement account is expected to dip a little after 30 years' retirement. It appears there is some room for spending more, but I am not sure whether spending more may make us happier consistently.
StealthRabbit
Posts: 528
Joined: Sat Jun 13, 2009 1:25 am

Re: Do you plan to actually spend down your portfolio?

Post by StealthRabbit »

IDK, but I have been looking for and not found a Retirement planning tool that allows you to Spend to Zero. (Tho you can 'tweak' to get there in various forms, no options for what I desire to end up with.)

Would love to have a tool that you could input EoL amount *~50k), and get an annual spend # based on your recent 5 - 10yr performance. Of course knowing exactly when you are gonna croak would be required. That info is pending (but coming soon.)

Our residual all goes to DAF, or direct distribution to charity.

Kids need to make their own way (as they have since about age 14 - 16. (When ever they first exclaimed; "Hey, I didn't want those clothes, shoes, socks, underwear". OK fine... go buy your own. see ya.
User avatar
Johnsson
Posts: 338
Joined: Mon Jul 17, 2017 2:28 pm

Re: Do you plan to actually spend down your portfolio?

Post by Johnsson »

Silk McCue wrote: Wed Oct 23, 2019 11:49 am
RickBoglehead wrote: Wed Oct 23, 2019 11:35 am We do not intend to spend down our portfolio, but we're 1.67 years from retirement. Who knows what will happen?
We are 1.19 years from retirement (when just shy of 60/62) and we do not intend to spend down but certainly plan to enjoy ourselves and do a good amount of things that we may be less likely to do a decade plus later. One of us can likely live into our 90s and our goal is not to die with nothing in the bank.

Cheers
We are also 1.19 years away... at least that's the plan.

Aside from added travel I don't see spending it all. How to best 'gift' will hopefully become the issue. Also had thoughts of a family trust... still thinking about that one.
'In theory there is no difference between theory and practice. In practice there is.' Yogi Berra
arsenalfan
Posts: 908
Joined: Mon Dec 09, 2013 12:26 am

Re: Do you plan to actually spend down your portfolio?

Post by arsenalfan »

I was forced to think about this by a good friend when I was explaining the mega Backdoor Roth IRA, and that one Roth IRA benefit is no RMDs.

She asked "uh...don't you think you'll need the money at 70.5, and otherwise what is is there for?"

Like the other replies, I don't expect to touch it much. Been reading you don't spend much on average in your 80s and 90s, even if healthy.

I guess porfolio will be a big emergency fund for end of life care, and then heirs/DAF.
User avatar
midareff
Posts: 7139
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Do you plan to actually spend down your portfolio?

Post by midareff »

flyingaway wrote: Wed Oct 23, 2019 11:12 am Many retirement calculators or rules usually assume that a retiree will spend down their money at end of the presumed life. A success is that you have more than zero dollar at the end of your modeling years, be it 30 years or 40 years.

Yet we see here again and again statements (from retirees) like:
(1) I have more money now than I had at the retirement;

Yes, thank you Uncle Jack and the Bull.

(2) My portfolio has doubled, thanks to the bull market;

I wish but not going to happen, spending much more than planned on travel.

(3) I have more money than I know how to spend it;

I know how, and am, new luxo ride, very nice international travel, but thanks.

(4) My pension and social security cover all my expenses;

Yes, we live quite modestly as far as committed and recurring expenses, that's just years and years of frugality and Boglehead living. Have lots of friends with nice big houses and stuff who are my age and still working with no "out" in sight. I send them pictures from Europe, Brazil, etc., regularly.

(5) How do I do with the money from RMD when I don't need it?

I need it, I use it... LOL, it goes to the cruise companies.

We see discussions about strategies (or advices) about tightening belts (adjusting spending down) when the market is down. Yet the other way is rarely discussed. OK, you spend more when the market is up. Will you or did you?

My question is: Do (did) you REALLY intend to spend down your portfolio and ACTUALLY increase the spending when the market is good?

I intended too but then came the Bull and the greatest economic expansion. It made a good problem a great problem.
Ron
Posts: 6690
Joined: Fri Feb 23, 2007 7:46 pm
Location: NY-NJ-PA Metropolitan Statistical Area

Re: Do you plan to actually spend down your portfolio?

Post by Ron »

Tell me the date on which I will pass along with end of life (medical, et al.) costs and I'll tell you if I will spend down my retirement portfolio.

That's an impossibility for most folks; the closest you can get is to spend all your $$$ and then take the .38 special route to immortality :twisted: ...

- Ron
Last edited by Ron on Thu Oct 24, 2019 11:25 am, edited 1 time in total.
Shallowpockets
Posts: 1681
Joined: Fri Nov 20, 2015 10:26 am

Re: Do you plan to actually spend down your portfolio?

Post by Shallowpockets »

Ards wrote: Wed Oct 23, 2019 3:23 pm
Old Guy wrote: Wed Oct 23, 2019 11:25 am First world problem.

These forums almost exclusively only discuss first world problems.
First world, a la, Bogleheads. Because there is a huge group of people geographically living in this first world who have so very little. In fact, close to third world living.
User avatar
Phineas J. Whoopee
Posts: 9675
Joined: Sun Dec 18, 2011 6:18 pm

Re: Do you plan to actually spend down your portfolio?

Post by Phineas J. Whoopee »

Is is not is. Is is was.

My answer to OP's question: I am willing to spend any amount, up to and including all the the portfolio's value, to meet my own needs. Anything left over, likely to be a lot, is set to go to charity.

PJW
User avatar
FrugalInvestor
Posts: 5648
Joined: Fri Nov 07, 2008 12:20 am

Re: Do you plan to actually spend down your portfolio?

Post by FrugalInvestor »

Humorously our goal is to spend it down to zero but realistically that is impossible. There are too many unknowns, one of the most significant being long-term care for which we self-insure.
Last edited by FrugalInvestor on Thu Oct 24, 2019 10:42 pm, edited 1 time in total.
Have a plan, stay the course and simplify, but most importantly....Ignore the Noise!
User avatar
Meg77
Posts: 2636
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: Do you plan to actually spend down your portfolio?

Post by Meg77 »

flyingaway wrote: Wed Oct 23, 2019 11:12 am Many retirement calculators or rules usually assume that a retiree will spend down their money at end of the presumed life.
Actually this is not true. Most online retirement calculators and Monte Carlo simulations assume some version of the 4% SWR, and adhering to that rule all but ensures you will never run out of money. Depending on the assumed variables (inflation, asset allocation, fees), 80-90% of portfolios will rise over time, and another 5-15% may decrease over time but will never run dry.
flyingaway wrote: Wed Oct 23, 2019 11:12 amA success is that you have more than zero dollar at the end of your modeling years, be it 30 years or 40 years.
Exactly. Only a tiny fraction - or, ideally, zero - portfolios will fail, or run out of money if you are modeling a "successful" retirement spending plan. By definition though, in order to ensure against the worst market scenarios for the small fraction of people who will retire at the worst possible time, the vast majority of people (who retire at other times) will end up with much more than they need if they follow standard withdrawal rate guidance or anything close to it.
flyingaway wrote: Wed Oct 23, 2019 11:12 am
Yet we see here again and again statements (from retirees) like:
(1) I have more money now than I had at the retirement;
(2) My portfolio has doubled, thanks to the bull market;
(3) I have more money than I know how to spend it;
(4) My pension and social security cover all my expenses;
(5) How do I do with the money from RMD when I don't need it?
Yep, this is very normal and should be expected for most retirees. Studies show even those who retire with "only" $100K or $200K (and live off social security or pensions, etc.) rarely actually spend down their assets.
flyingaway wrote: Wed Oct 23, 2019 11:12 am
We see discussions about strategies (or advices) about tightening belts (adjusting spending down) when the market is down. Yet the other way is rarely discussed. OK, you spend more when the market is up. Will you or did you?
I don't think this is prudent or recommended. You can't know that you aren't about to hit a 15 year down market, so you shouldn't spend more when times are good - you should spend according to your planned withdrawal pattern and stick to it. Sure, in the last 10 years that may mean your portfolio doubled. If you're 85 or 90 and have chronic health issues then sure, bump up your spending - triple it if you want. But if you've got decades left to live, you still need to protect against the downside of ending up with a failure rate if you veer too far off course and end up in a long bad market cycle.
"An investment in knowledge pays the best interest." - Benjamin Franklin
JGoneRiding
Posts: 1970
Joined: Tue Jul 15, 2014 3:26 pm

Re: Do you plan to actually spend down your portfolio?

Post by JGoneRiding »

tadamsmar wrote: Wed Oct 23, 2019 11:40 am My goal is to not run out of money.

If you fund from a portfolio (rather than an annuity) then you need a buffer to deal with the uncertainties. So you are likely to have some funds left at death.
Depends on if you hit life expectancy or not. My grandma entered a nursing home 6 years ago with 400k. We thought it would be fine. Well.she is 99.5 yr old and now on Medicaid. She doesn't know the difference so all good.
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: Do you plan to actually spend down your portfolio?

Post by dbr »

It would be impossible to implement a plan to spend down the portfolio with a couple of exceptions:

1. Spend the money so fast that it is almost a certainty that one would still be alive when the money is gone. That is probably not what most people would do though I know some people who have done exactly that. Doing it without being a drug addict or having major life reversals would not happen.

2. On a technicality use all the money to buy an annuity, which allows one to say the portfolio has been spent down but it isn't really the same thing.

Retirement calculators are not plans to spend down portfolios. They are estimators of what one can count on being able to spend in retirement based on worst case limits of just exactly not outliving the assets. Sometimes there are variations on how that problem is approached. Options include variable spending plans, Liability Matching Portfolios, and so on. One can also run a retirement calculator on the condition that the value of the portfolio not be diminished. It is just a question of applying the worst case scenario to a lower limit that is not zero.
oldfatguy
Posts: 649
Joined: Tue Feb 27, 2018 1:38 pm

Re: Do you plan to actually spend down your portfolio?

Post by oldfatguy »

The majority of my assets will be annuitized, so I guess that means it will be zeroed out when I die.
User avatar
tadamsmar
Posts: 9078
Joined: Mon May 07, 2007 12:33 pm

Re: Do you plan to actually spend down your portfolio?

Post by tadamsmar »

JGoneRiding wrote: Fri Oct 25, 2019 9:02 am
tadamsmar wrote: Wed Oct 23, 2019 11:40 am My goal is to not run out of money.

If you fund from a portfolio (rather than an annuity) then you need a buffer to deal with the uncertainties. So you are likely to have some funds left at death.
Depends on if you hit life expectancy or not. My grandma entered a nursing home 6 years ago with 400k. We thought it would be fine. Well.she is 99.5 yr old and now on Medicaid. She doesn't know the difference so all good.
I guess I should have said that the goal is to make it unlikely that you will run out of money.
Topic Author
flyingaway
Posts: 2972
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

dbr wrote: Fri Oct 25, 2019 9:14 am Retirement calculators are not plans to spend down portfolios. They are estimators of what one can count on being able to spend in retirement based on worst case limits of just exactly not outliving the assets. Sometimes there are variations on how that problem is approached. Options include variable spending plans, Liability Matching Portfolios, and so on. One can also run a retirement calculator on the condition that the value of the portfolio not be diminished. It is just a question of applying the worst case scenario to a lower limit that is not zero.
I think I will be happy to see the portfolio number does not decrease as the year goes (a flat line with inflation actually decreasing the value of the portfolio).
User avatar
Clever_Username
Posts: 1748
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Do you plan to actually spend down your portfolio?

Post by Clever_Username »

I am quite a bit away from retirement, but no, I don't plan to. It isn't a concrete plan, it's more of an estimate: by the time I retire, I anticipate having far more than 25X of my expected expenses. I don't mean something like 50X, but I don't think I'm hitting 25X and stopping that day.

And since even using 4% as a planning number often results in ending up with significantly more money 30 years post-retirement than day-of... I'd say there's a very good chance I never spend down my portfolio.

This doesn't worry me in the least.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
User avatar
praxis
Posts: 558
Joined: Sun Sep 06, 2009 1:51 pm

Re: Do you plan to actually spend down your portfolio?

Post by praxis »

We've been retired for 15 years. Our annual cash flow ($100K) is the same now as it was 10 years ago. We tallied up our spending during a recent long drive and were surprised that even with a very different profile of expenses (eg. former kids' college costs now spent on travel) we spend the same. Our homes are modest and our cars are 5, 14 and 19 years old. We both began to receive SS payments last June. This was my first RMD year.

With no mortgages or car payments, our big regular bills are groceries, taxes and insurances. So we are gifting more to our two children and their new families. We are supporting charities and candidates that share our values. We have added a lot more more travel. We finished some changes and maintenance on our homes. We both volunteer (a lot) for social outreach programs in our communities and donate to various scholarships.

I have always wrestled with spending more money than I do. At this rate, even if we're saddled with some unexpectedly large medical bills someday, it's doubtful we will ever reach the bottom of our well. This year I turned 70 and lost some friends and family younger than me. I believe I am finally seeing the value in putting our money into a wider variety of places that can enhance our quality of life. We will have money left when we die, whether a little or a lot, it will go to give our two sons the problem of plenty of money.

I spent my 30 year career in 3rd world countries. It's given me a fear and appreciation of poverty. And a practice of gratitude.
lomarica01
Posts: 183
Joined: Sun Jul 05, 2015 10:57 am

Re: Do you plan to actually spend down your portfolio?

Post by lomarica01 »

yes but even with two pensions will not be spending down all of it maybe spend down 75% of it and that would include charity and gifting to son

yes I spend more when the market is up but am taking a monthly withdraws from the 457/401k every month per for the next 20 years or so
User avatar
1210sda
Posts: 1665
Joined: Wed Feb 28, 2007 8:31 am

Re: Do you plan to actually spend down your portfolio?

Post by 1210sda »

Other than surprise extra ordinary expenditures, I have not (and do not plan to in the future) spent more when the markets are up and less when they are down.

Throughout my working career, I accustomed myself to a steady income flow from my wages. We knew how much we could spend. There was never a great inflow of additional monies nor the reverse. It was just my salary.

In retirement, I wanted the same experience. So we spend according to our needs and wants. However, our needs and wants are tempered by our budget. :).

1210
nguy44
Posts: 308
Joined: Sun Jul 09, 2017 1:52 pm

Re: Do you plan to actually spend down your portfolio?

Post by nguy44 »

flyingaway wrote: Wed Oct 23, 2019 11:12 am My question is: Do (did) you REALLY intend to spend down your portfolio and ACTUALLY increase the spending when the market is good?
I retired with a cash cushion to support our spending until we choose to take SS, so that we would not be forced to spend from out investment portfolio. So regardless of how the market has been in the last 16 months, our spending has been based on what we need or want, vs. what the market is doing.

In almost 18 months we have spent slightly more than we projected, but with pension and we have drawn down our cash less than 1/2 of what we expected. In addition, though we have a conservative AA it still up well over what we have spend from cash. We will increase our spending - we will assess where the portfolio is at the end of the year - but just not for the sake of spending more. More "stuff" can also mean more problems and time wasted maintaining more stuff. I will likely accelerate greatly paying off our mortgage, and starting gifts to our kids earlier than planned. But it seems likely that our portfolio will actually not change very much, even with our increased spending.
reisner
Posts: 466
Joined: Fri Jun 20, 2008 12:34 pm

Re: Do you plan to actually spend down your portfolio?

Post by reisner »

74 here, but my wife is 59, and that complicates the issue. On the other hand, I have a DBP, great medical care, and no mortgage. No kids, but I am concerned about one relative's finances, and we want to leave money to environmental causes. All that said, I can't imagine our spending more than our dividends and some of our bonds, which are 40% of our portfolio, before my wife collects an additional 14K of SS and our medical copays go down with her taking Medicare. A wild hair might make us upgrade to some expensive first class plane tickets, but otherwise the VG portfolio exists in large part to set us free of financial worries rather than to turn us into spendthrifts. It is a pure pleasure, for the first time in a life that started out financially very insecure, to simply not break a sweat at an unexpected expense. For example, I started a small claims suit recently over an illegal towing of my car--for the justice of it, not because I need the money back.
capran
Posts: 123
Joined: Thu Feb 18, 2016 10:45 am

Re: Do you plan to actually spend down your portfolio?

Post by capran »

That was a very interesting read as I scanned the replies. First, and most important, is to be doing the things you want to do. Whether your portfolio grows or declines is moot if you have enough to enjoy your life, as there are no guarantees. Since I retired in 2013 (and spouse in 2014) we have focused on determining what our stable income will be the further we get into retirement, and seeing how RMD's will influence that. We hope to keep our income under the $170k MAGI in order to avoid the Medicare Premium surcharge. ((We have thought about getting a different boat, and we have the money if we wanted to spend down, but haven't done so. Our little 34 sailboat(paid for) gives us two months of summer travels, and the boat we might want would be about 450k, and that doesn't seem worth it.)) It's hard to get beyond the feeling that we should live as frugally as we did while we were in the building phase.
User avatar
celia
Posts: 11400
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Do you plan to actually spend down your portfolio?

Post by celia »

I plan to live to 100. There’s a lot of unknowns between now and then. But barring the most catastrophic events that could happen, there should be at least the value of our retirement net worth left over for our heirs and a few charities.

Besides that, both of our families have a history of leaving inheritances and we expect to do the same. And some of our elders are still living and are self-supporting, so we probably will have more come our way. (My first inheritance was in my 20s from a grandfather who died at 95 and since my mom predeceased him, her share was divided up leaving only $100 for me. The amount was immaterial but the memories of them are priceless.)
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.
MnD
Posts: 4608
Joined: Mon Jan 14, 2008 12:41 pm

Re: Do you plan to actually spend down your portfolio?

Post by MnD »

Maybe, maybe not as that depends on what Mr. Market has in store.
One year into retirement we are spending right on plan which is 5% of annual portfolio balance with a 3% inflation adjusted SWR floor. On the basis of historical sequences this plan left retirees (starting with $1M after 35 years) with a low of about $250K real (the dreaded 1966 retiree sequence) and a high of around $2.5M real. Average and median sequences were around $1M real after 35 years. The plan is conservative if poor sequences actually occur, but provides significantly higher levels of retirement income in all but poor sequences versus a fixed inflation-adjusted low % SWR. We are relatively young, with lots of energy, interests and activities and have a high utility for retirement income at this point in life.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
Topic Author
flyingaway
Posts: 2972
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

MnD wrote: Sun Oct 27, 2019 8:41 am Maybe, maybe not as that depends on what Mr. Market has in store.
One year into retirement we are spending right on plan which is 5% of annual portfolio balance with a 3% inflation adjusted SWR floor. On the basis of historical sequences this plan left retirees (starting with $1M after 35 years) with a low of about $250K real (the dreaded 1966 retiree sequence) and a high of around $2.5M real. Average and median sequences were around $1M real after 35 years. The plan is conservative if poor sequences actually occur, but provides significantly higher levels of retirement income in all but poor sequences versus a fixed inflation-adjusted low % SWR. We are relatively young, with lots of energy, interests and activities and have a high utility for retirement income at this point in life.
Do you plan to lower the withdrawal rate if the market looks not encouraging?
Topic Author
flyingaway
Posts: 2972
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

capran wrote: Sat Oct 26, 2019 9:39 pm That was a very interesting read as I scanned the replies. First, and most important, is to be doing the things you want to do. Whether your portfolio grows or declines is moot if you have enough to enjoy your life, as there are no guarantees. Since I retired in 2013 (and spouse in 2014) we have focused on determining what our stable income will be the further we get into retirement, and seeing how RMD's will influence that. We hope to keep our income under the $170k MAGI in order to avoid the Medicare Premium surcharge. ((We have thought about getting a different boat, and we have the money if we wanted to spend down, but haven't done so. Our little 34 sailboat(paid for) gives us two months of summer travels, and the boat we might want would be about 450k, and that doesn't seem worth it.)) It's hard to get beyond the feeling that we should live as frugally as we did while we were in the building phase.
Do you NOT adjust the spending when the market changes? I see that you have a large income of about $170K, which is larger than many people's budgets.
Topic Author
flyingaway
Posts: 2972
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

1210sda wrote: Sat Oct 26, 2019 4:10 pm Other than surprise extra ordinary expenditures, I have not (and do not plan to in the future) spent more when the markets are up and less when they are down.

Throughout my working career, I accustomed myself to a steady income flow from my wages. We knew how much we could spend. There was never a great inflow of additional monies nor the reverse. It was just my salary.

In retirement, I wanted the same experience. So we spend according to our needs and wants. However, our needs and wants are tempered by our budget. :).

1210
Did you (or will you) retire when your portfolio reaches a certain amount, or your age reaches a certain number?
Broken Man 1999
Posts: 5027
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, inland on high ground!

Re: Do you plan to actually spend down your portfolio?

Post by Broken Man 1999 »

I notice there are some posts concerning a legacy left to one's children being wasted.

On other threads a worry is sometimes mentioned that paying for education for the children, or maybe giving an amount for a first-time home buyer can lead to an entitlement issue, and perhaps lead to less initiative and drive from the children.

But, in each case, launching your offspring via college being paid for and planning a legacy for them, the parents should know what type children they have raised.

In the case of college expense help, the parents have had 18 years or so to instill
the values to make them productive/successful, so I have trouble understanding the angst some parents have about their investment in the children.

When kept comes to legacy, there very well could be 30 years of observation of the children's initiative and life skills.

Our daughters are 40+ years old, and are deep into great careers. I can't see how a legacy would radically change them. They might be able to retire earlier, or perhaps assist their children to become launched, just like they were via DW and myself. Hopefully they would pay it forward like I did with the legacy I received.

Has anyone had personal experience where an early legacy (that is the legacy given before death) is provided and the recipient going off the rails?I

I am curious....

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
phxjcc
Posts: 529
Joined: Thu Aug 23, 2018 3:47 pm

Re: Do you plan to actually spend down your portfolio?

Post by phxjcc »

Broken Man 1999 wrote: Sun Oct 27, 2019 4:40 pm I notice there are some posts concerning a legacy left to one's children being wasted.

On other threads a worry is sometimes mentioned that paying for education for the children, or maybe giving an amount for a first-time home buyer can lead to an entitlement issue, and perhaps lead to less initiative and drive from the children.

But, in each case, launching your offspring via college being paid for and planning a legacy for them, the parents should know what type children they have raised.

In the case of college expense help, the parents have had 18 years or so to instill
the values to make them productive/successful, so I have trouble understanding the angst some parents have about their investment in the children.

When kept comes to legacy, there very well could be 30 years of observation of the children's initiative and life skills.

Our daughters are 40+ years old, and are deep into great careers. I can't see how a legacy would radically change them. They might be able to retire earlier, or perhaps assist their children to become launched, just like they were via DW and myself. Hopefully they would pay it forward like I did with the legacy I received.

Has anyone had personal experience where an early legacy (that is the legacy given before death) is provided and the recipient going off the rails?I

I am curious....

Broken Man 1999
Friends ex-wife.

590k at 47.
50 k on cars
40 k on down payment on house for her kid pre-crash, gave house back to bank after crash because it went down 40% in value.
40 k for furniture for above house
60 k down on vacation house that (thankfully) appreciated 140 k in two years.
15 k furnishing for above
40 k on lavish cruise vacation
50 k on other vacations
Other crap.
Net: after 7 years it was all gone.

It happens.
User avatar
burt
Posts: 803
Joined: Sun Feb 17, 2008 7:47 am

Re: Do you plan to actually spend down your portfolio?

Post by burt »

4 years into retirement. Portfolio is larger now than when I retired.
I know that stuff could hit the fan at any time... so I live modestly and don't mind leaving money on the table.
Money left on the table hurts far less than running out of money.
Topic Author
flyingaway
Posts: 2972
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

phxjcc wrote: Sun Oct 27, 2019 5:20 pm
Broken Man 1999 wrote: Sun Oct 27, 2019 4:40 pm I notice there are some posts concerning a legacy left to one's children being wasted.

On other threads a worry is sometimes mentioned that paying for education for the children, or maybe giving an amount for a first-time home buyer can lead to an entitlement issue, and perhaps lead to less initiative and drive from the children.

But, in each case, launching your offspring via college being paid for and planning a legacy for them, the parents should know what type children they have raised.

In the case of college expense help, the parents have had 18 years or so to instill
the values to make them productive/successful, so I have trouble understanding the angst some parents have about their investment in the children.

When kept comes to legacy, there very well could be 30 years of observation of the children's initiative and life skills.

Our daughters are 40+ years old, and are deep into great careers. I can't see how a legacy would radically change them. They might be able to retire earlier, or perhaps assist their children to become launched, just like they were via DW and myself. Hopefully they would pay it forward like I did with the legacy I received.

Has anyone had personal experience where an early legacy (that is the legacy given before death) is provided and the recipient going off the rails?I

I am curious....

Broken Man 1999
Friends ex-wife.

590k at 47.
50 k on cars
40 k on down payment on house for her kid pre-crash, gave house back to bank after crash because it went down 40% in value.
40 k for furniture for above house
60 k down on vacation house that (thankfully) appreciated 140 k in two years.
15 k furnishing for above
40 k on lavish cruise vacation
50 k on other vacations
Other crap.
Net: after 7 years it was all gone.

It happens.
At least, the money brought her happiness.

Would the charity organization do a better job if the money were donated to? I doubt it.
BuddyJet
Posts: 609
Joined: Mon Jun 24, 2019 8:56 pm

Re: Do you plan to actually spend down your portfolio?

Post by BuddyJet »

Ten years ago, We gifted our adult daughters a substantial sum each. Our thought was to see what happened with the funds. They both did well with the money and it opened ongoing discussions about money.

If the money had been squandered, it would have also been a good learning for us. Seeing how the money was handled, we could plan our estate since we had a clear idea how a larger sum at our passing would be handled.
People say nothing is impossible. I do nothing all day.
smectym
Posts: 845
Joined: Thu May 26, 2011 5:07 pm

Re: Do you plan to actually spend down your portfolio?

Post by smectym »

We are using “variable percentage withdrawal (“VPW”)” which is designed to NOT completely spend down the portfolio—at least until age 100, when VPW suddenly goes nuts and starts recommending 50% annual withdrawals, then just STOPS. So, the implicit VPW strategy at the age 100 inflection point is...

https://www.bogleheads.org/wiki/Variabl ... withdrawal
Topic Author
flyingaway
Posts: 2972
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

smectym wrote: Sun Oct 27, 2019 10:56 pm We are using “variable percentage withdrawal (“VPW”)” which is designed to NOT completely spend down the portfolio—at least until age 100, when VPW suddenly goes nuts and starts recommending 50% annual withdrawals, then just STOPS. So, the implicit VPW strategy at the age 100 inflection point is...

https://www.bogleheads.org/wiki/Variabl ... withdrawal
Do you actually spend all the money that is suggested by VPW to spend each year? If not, do you put the money back into your portfolio and let VPW do the calculation based on the new balance?
andypanda
Posts: 516
Joined: Sun Nov 12, 2017 9:11 pm
Location: Richmond, Virginia

Re: Do you plan to actually spend down your portfolio?

Post by andypanda »

"Do (did) you REALLY intend to spend down your portfolio "

Did I intend to? Yes.
Will I? Yes. I hope.
Have I? No.

I'm 69 and retired the day before I turned 62. Having made the mistake of working much too long at one job I have a pension based on 38.5 years. Then I waited until 66 to take SSA retirement. I paid my house off in 1997 and have paid cash for new cars since 1986, so I don't have debt and I haven't been tempted to begin taking money from my old 403b(from the '70s), and newer 457 and 401. Now I see why they make you start taking RMDs. My new wife wondered why I'm not in a hurry to touch my taxable investment account and buy an oceanfront beach cottage. I told her that money is going to provide a decade or two of nursing home care for us in a nice joint with decent food. And beer for me and wine for her. ;)

My father lived to 89.5 and my mother to 3 weeks short of 92, so you just never know how much you will need.
MnD
Posts: 4608
Joined: Mon Jan 14, 2008 12:41 pm

Re: Do you plan to actually spend down your portfolio?

Post by MnD »

flyingaway wrote: Sun Oct 27, 2019 12:03 pm
MnD wrote: Sun Oct 27, 2019 8:41 am Maybe, maybe not as that depends on what Mr. Market has in store.
One year into retirement we are spending right on plan which is 5% of annual portfolio balance with a 3% inflation adjusted SWR floor. On the basis of historical sequences this plan left retirees (starting with $1M after 35 years) with a low of about $250K real (the dreaded 1966 retiree sequence) and a high of around $2.5M real. Average and median sequences were around $1M real after 35 years. The plan is conservative if poor sequences actually occur, but provides significantly higher levels of retirement income in all but poor sequences versus a fixed inflation-adjusted low % SWR. We are relatively young, with lots of energy, interests and activities and have a high utility for retirement income at this point in life.
Do you plan to lower the withdrawal rate if the market looks not encouraging?
By definition a % of annual portfolio withdrawal plan increases and reduces reduces spending proportionally with portfolio value.
There are no arbitrary decisions about retirement income from portfolio "if the market looks not encouraging" or whatever. Also no ad-hoc decisions to "loosen up" on spending later in retirement, as many here claim they will if their ultra-low SWR plan results in a runaway portfolio to the upside. Given the reluctance to spend from portfolio many exhibit and the documented typical declines in spending as one ages in retirement, I'm very skeptical many will be loosening up, regardless of how much their portfolio grows.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
User avatar
snackdog
Posts: 913
Joined: Wed Nov 12, 2014 4:57 am

Re: Do you plan to actually spend down your portfolio?

Post by snackdog »

I guess someone could create a google sheet and ask members to include a note in their will that it be populated with their age and estate balance so we can collect some data.
TheDDC
Posts: 1123
Joined: Mon Jan 08, 2018 11:11 am

Re: Do you plan to actually spend down your portfolio?

Post by TheDDC »

3504PIR wrote: Wed Oct 23, 2019 6:40 pm We are also retired military and retired civil service and do not intend to touch our portfolio beyond dividends here and there unless our world begins to radically change. If needed, we will use dividends for things like a new car or perhaps travel, although we are taking a break from travel for a while as we’ve travelled a LOT the past decade or so and are happy to be home for a while. Plan on giving some to charity or good causes and the rest will go to to heirs.
Good plan. Creating generational wealth is the best medicine. This is also my plan as well. Spending well under "replacement rate" is really the only way to fly. I also advocate passive income strategies as well to preserve principal as much as possible in retirement. Of course this strategy does not necessarily preclude working at the type of place where you say, "what can they do, fire me?" because you like the work. Me personally, I like Costco for instance. I could see myself working there as an old timer not because I need the money but because it is some structure and a place where I have given much of my money already. :D

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
Topic Author
flyingaway
Posts: 2972
Joined: Fri Jan 17, 2014 10:19 am

Re: Do you plan to actually spend down your portfolio?

Post by flyingaway »

OP here again.
Thank you for all contributed, which has been very helpful.
My take-away is that the 4% rule is a good indicator of financial independence. However, in actual life, many people intend to use something that is more close of 3% rule for their retirement withdrawal. Many people prefer to see a large balance in their portfolio no matter which stage of their life is.
For me, I prefer to see my portfolio balance to be flat throughout my retirement life, i.e., it always maintains the same nominal level.
longinvest
Posts: 4428
Joined: Sat Aug 11, 2012 8:44 am

Re: Do you plan to actually spend down your portfolio?

Post by longinvest »

smectym wrote: Sun Oct 27, 2019 10:56 pm We are using “variable percentage withdrawal (“VPW”)” which is designed to NOT completely spend down the portfolio—at least until age 100, when VPW suddenly goes nuts and starts recommending 50% annual withdrawals, then just STOPS. So, the implicit VPW strategy at the age 100 inflection point is...

https://www.bogleheads.org/wiki/Variabl ... withdrawal
Smectym, the linked page suggests "Around age 80, if you're still alive, it is important to consider using part (but not all) of your remaining portfolio to buy an inflation-indexed Single Premium Immediate Annuity (SPIA), so that total non-portfolio income (including Social Security, pension, and other lifelong income) is sufficient to live comfortably, independently of future portfolio withdrawals. This aims to reduce the financial risks associated with living past age 100." It also suggests "to limit the withdrawal percentage to no more than 10%, after buying the inflation-indexed SPIA".

My understanding is that there's no inflection point or any weird behavior after age 100 when following these suggestions.
Last edited by longinvest on Mon Oct 28, 2019 9:15 pm, edited 1 time in total.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW
Post Reply