Retirees: Which safe withdrawal rate allowed you to grow your portfolio?

[cbox]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

[dbr]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

Experience for retirees starting in 1871 to today is tabulated here: https://engaging-data.com/visualizing-4-rule/

You can enter a starting portfolio value, asset allocation, amount of annual spending and number of years you want to look forward. The output will be the course of portfolio value and endpoint wealth for whatever length of retirement you enter. You can choose results in nominal or real dollars.

For example for a 30 year retirement at 60/40 and a 2.5% withdrawal rate almost all the tabulated experiences end up with the same or more assets after inflation. At 4% withdrawal rate about half the outcomes leave less money than you started with after inflation. 3.4% of the histories run out of money before 30 years. 10% of the histories support the withdrawal rate and also grow a $1M portfolio to over $2.8M.

If you put in a duration of one year you can bring the experience up to starting in 2018 and find that half the retirees lost money in the first year after inflation and half gained money. The worst loss was the 1917 cycle losing about 30% after inflation. At 30 years that same starting year survives and ends 30 years at a net 30% down. In at least this instance a big loss the first year does not predict retirement failure. A retirement failure year such as 1966 loses only about 10% the first year but continues to accumulate bad results with the fatal losses in the period 1972-1974, six to eight years into retirement with inflation hitting 12%-14% during 1972-1982 and the S&P 500 nearly flat in that time.

[Exchme]

This is mostly dependent on when you retire. Retired folks that are still participating here mostly retired after the GFC of 2008, so have had a much more pleasant ride than folks that retired in 1929 or 1966, meaning you won't learn anything from this question.

A couple other resources to check out:
Go to EarlyRetirementNow and download the SWR toolbox, which is a Google sheet with historical series and SWR calculations on a monthly basis back to 1871.
Or check out FireCalc, which is an online calculator that is quick way to see how your starting values would fare if various historical returns played out in the future.

[dbr]

This is mostly dependent on when you retire. Retired folks that are still participating here mostly retired after the GFC of 2008, so have had a much more pleasant ride than folks that retired in 1929 or 1966, meaning you won't learn anything from this question.

A couple other resources to check out:
Go to EarlyRetirementNow and download the SWR toolbox, which is a Google sheet with historical series and SWR calculations on a monthly basis back to 1871.
Or check out FireCalc, which is an online calculator that is quick way to see how your starting values would fare if various historical returns played out in the future.

Good data sources. Note those approaches like the original work by Bengen and the Trinity study are all tabulations of actual return and inflation data which means the results are exact as history. The "if returns played out in the future" means one is using the historical experience as a sample set to estimate future probabilities. This is a reasonable set of data that does not require guessing future returns or inflation but is somewhat limited by the fact that successive years in the data set are overlapping experience. It is in fact astonishing that SWR can change as fast as it does with only a couple of years ratcheted forward or backward. Unfortunately the outcome tends to be buried somewhere in a long future that is not known on the day one decides to retire.

[peteyboy]

You may want to check out the VPW approach. Below is a forward looking example started by longinvest on July 2019 that’s been kept up to date.

viewtopic.php?t=284519

[dcabler]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

I don't use SWR as a withdrawal method. I use a form of ABW (info on this forum). For a particular age you can target the final portfolio value to be anything you want.

Regarding RMD's somebody has probably already said it but just because you are forced to withdraw, doesn't mean you have to spend it (after taxes, of course).

Cheers.

[retired@50]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

This response will make me sound like a simpleton compared to the entries above, but all I did was review my spending for the 2 years prior to retirement to get a sense of what I'd need. Then, I set all the dividends in my taxable portfolio to go to my settlement fund. I've been using that money ever since. Every once in a blue moon I have to sell something, but it's rare.

This has allowed my tax-deferred and Roth accounts to continue to grow. Even my taxable account has grown, but at a slower rate than it would have, had I not been taking the dividends.

Regards,

[dbr]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

A quibble is that you mean your withdrawal rate. SWR, the withdrawal rate that is safe, is a calculation you don't choose.

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

I guess I'll repeat that an RMD is a distribution of money from one account to another and is not a portfolio withdrawal. The effect it does have is to increase tax cost, which does have to be taken into account.

In general a constant spending model is a simplification for discussion purposes. In real life spending is variable with or without a trend over age. I am not sure a portfolio withdrawal model that dictates how much to spend each year is a happy straightjacket to live in, but to each their own.

Thanks.

[dbr]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

This response will make me sound like a simpleton compared to the entries above, but all I did was review my spending for the 2 years prior to retirement to get a sense of what I'd need. Then, I set all the dividends in my taxable portfolio to go to my settlement fund. I've been using that money ever since. Every once in a blue moon I have to sell something, but it's rare.

This has allowed my tax-deferred and Roth accounts to continue to grow. Even my taxable account has grown, but at a slower rate than it would have, had I not been taking the dividends.

Regards,

On the contrary there is a difference between models for discussion of the universe of hypothetical outcomes and practical experience.

In fifteen years of retirement I have spent a high of twice the annual average in the high year and half the annual average in the low year. Along that path has been the starting of SS at different ages for myself and my wife. SS plus pensions means that we take only half or less our spending from the portfolio. When RMDs started our extra tax costs had to be taken into account. Retirement spending models are helpful information about how the system works but are very different from a specific plan and process. The huge bull market in stocks from 2010 and low inflation have resulted in a favorable retirement for people around my cohort. No one knows what might be the outcome for someone today.

[Mr. Rumples]

The permitted spending is 3.3% of the portfolio, not including cash reserves for a new vehicle, HVAC and so forth. I can handle the fluctuations. Monies above the 3.3% required by RMD's will be saved for when I need in home care. I reassess every five years. I only hold one bond fund at 10% - PONAX which I have had for over 10 years. "Income funds" and I use that term loosely are FMSDX (Fidelity Multi-Asset Income) 10%; GLFOX (Lazard Infrastructure) 10%; held since its inception and FSUTX (Fidelity Utility) at 8%. In a year like 2022, I am not spending any of the 3.3%; the only fund which was up in 2022 was FSUTX; GLFOX held up fairly well with a loss of 1.5%.

[jebmke]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

This response will make me sound like a simpleton compared to the entries above, but all I did was review my spending for the 2 years prior to retirement to get a sense of what I'd need. Then, I set all the dividends in my taxable portfolio to go to my settlement fund. I've been using that money ever since. Every once in a blue moon I have to sell something, but it's rare.

This has allowed my tax-deferred and Roth accounts to continue to grow. Even my taxable account has grown, but at a slower rate than it would have, had I not been taking the dividends.

Regards,

On the contrary there is a difference between models for discussion of the universe of hypothetical outcomes and practical experience.

In fifteen years of retirement I have spent a high of twice the annual average in the high year and half the annual average in the low year. Along that path has been the starting of SS at different ages for myself and my wife. SS plus pensions means that we take only half or less our spending from the portfolio. When RMDs started our extra tax costs had to be taken into account. Retirement spending models are helpful information about how the system works but are very different from a specific plan and process. The huge bull market in stocks from 2010 and low inflation have resulted in a favorable retirement for people around my cohort. No one knows what might be the outcome for someone today.

I expected some volatility (year to year) but I was surprised at the year to year range we have experienced. On average, we are pretty close to what I expected. The high/low spread was much wider than I expected -- even when I look at spending excluding income taxes.

[WoodSpinner]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

Question ….

Why would you want to grow your Nest Egg in Retirement? For our Retirement, this is considered a Red Flag that means we might be able to spend more consistent with our Plans and Goals.

WoodSpinner

[sperry8]

Retired 2007. Withdrawal rate has averaged 3.24% since retirement with 4.67% as the high and 2.42% as the low. This withdrawal rate has resulted in me having more money than I retired with in 2007. I could've easily spent >4%. E A S I L Y. This is with my nest egg dropping 50% almost immediately after retirement. Was probably 80/20 in early years... with most years being more like 75/25 and as time went on 70/30. Currently sitting at 67/33 (mostly due to recent equity drop).

I too got all the advice you're getting. Simulators, calculators, etc. Real world was different than all that (well intended) advice. The 4% rule is too low if your intention is to die with nada. And yes, yes, yes, I understand sequence of return risks. I had them. 50% drop right after retiring. Yes, yes, and, yes... if US stocks ever become like Japan's 25 year L... then the 4% wouldn't have worked. Blah blah blah. Real world retiree with real stats here. Ask retirees from a decade prior to me ('97)... and two decades prior to me (87)... and then 3 (77) if you can find them. And compare their real world stories to yours.

[Golf maniac]

You can do your own calculations on a simple spreadsheet. Fidelity also has a good calculator. I put in my income and expenses, an inflation rate and a investment growth rate and it shows how long my retirement assets will last. I am not taking SS until 70 so once I take SS my withdrawal rate will fall dramatically. My belief is I worked hard for my retirement and I plan to enjoy myself and not try to grow my portfolio for my kids to spend. But I always have a worse case scenario that my essential expenses can be paid by the income I receive annually and not depend on investments.

[augryphon]

4%, we are 61/60 with a pension and 55/45 stocks to bonds. DW will take SS in November, and when I take mine at 70, we’ll have guaranteed income to cover all our expenses.

One big caveat, I only started my withdrawals in January 2023. But still, we’re up since 1-1-23.

One discovery I made was that my Fidelity 401k and my wife’s TIAA 403b don’t make it convenient to adjust the withdrawal, which after further thought is probably a good thing. One requires a monthly withdrawal percentage and the other requires an annual percentage. Either will do a fixed dollar amount but with the market whipsaws of late I prefer the percentage. I don’t want a big drop to leave me taking 5%. So it’s basically .33% from each account on the 15th.

Another big driver on my choosing percentage is that I am the investor in the family and I want to leave DW in as near an automatic position as possible. I believe our financial position allows her to continue this rate throughout her lifetime.

[aristotelian]

FYI there is only one Safe Withdrawal Rate which has worked with a given allocation over a given timeframe. The question of "which" SWR has worked is nonsensical because it's not something subject to choice.

There are an infinite number of withdrawal rates and systems that individuals may be using successfully.

[dbr]

And yes, yes, yes, I understand sequence of return risks. I had them. 50% drop right after retiring.

That is an interesting example. 2007 had one of the worst two year starts exceeded only by 1973 and 1930. Yet by 10 years in 2007 was above the worst 25% We have yet to see what is next for that retirement year. It is true that if one had skipped up to 2008, then in the first ten years one would be above the 75th percentile in outcome, even though 2008 had one of the worst first years. One should realize though, that this is not a matter of choosing to delay retirement to a better year. A person picking 2009 instead of 2007 will now have seen the money he has to retire on destroyed as much by 2008-2009 whether retired or not. It does say there is a huge dependence on when you are born, when you work and save, and when you die.

[Johm221122]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

Your asking this question after the 2009 to 2018 bull run in stocks, your experience may not match the experience of people you are asking. Especially if you want to "grow" your portfolio on top of withdrawals

[bertilak]

My safe withdrawal rate is determined by whatever dividends my portfolio pays.

A dividend is a withdrawal from a company's NAV. I believe, even if imperfect, the dividend payers are better at determining what is safe than I am.

If I had to spend more than the available dividends, I think it would be difficult to come up with a SWR, but I would subtract out the dividends from whatever I needed to cover expenses. That might make the calculation easier in that there was less at stake.

[delamer]

Is your goal to grow your retirement portfolio?

Because then the simple answer is to keep your withdrawals as low as possible and your stock allocation as high as possible, over the long term.

And, as someone already pointed out, a RMD doesn’t reduce your portfolio unless you spend it (taxes excluded).

[Hacksawdave]

Retirement drawdown is unique to each person based upon needs and different account types available to maintain cash flow. If the concern is that there is not enough to last the expected retirement duration, then the SWR is zero as its not time to retire.

I don’t use a SWR factor. I use forward budgeting and cashflows to position multiple “buckets” to move funds to and draw income from. I already have 2024’s draw positioned regardless of what stocks or bonds do this year.

As far as inflation, I still have an auto-exchange buying funds in both taxable and Roth. I also hold STAR (VGSTX) in my taxable account and take the dividends in cash but reinvest the CGs to increase the share count. That is how I maintain purchasing power by accumulating more income producing shares without making additional external purchases.

Keep in mind we don’t always get to choose our retirement date. I wanted July of 2022 but was outsourced at the end of 2019. Be prepared ahead of time with a plan. I started mine in 2017 before my 2022 anticipated date.

[Arboecars]

Excluding Social Security and any pension, a 2 1/2% annual withdrawal at beginning of the calendar year (based on 60/40 allocation) appears to be the best bet.

Prudence may warrant keeping 2 or 3 years of living expenses liquidand readily accessible in an income producing account.

Good luck and best wishes on your retirement.

[Mike Scott]

If you can figure out the future perpetual withdrawal rate (to your own satisfaction) then you only need to withdraw less than that. The idea of growing your portfolio in retirement sort of implies that you have a portfolio larger than needed to maintain your future budget. Most of the anxiety about future modeling around here is about how to avoid the portfolio going to 0 before you die. Most models plan and reality is that most people will have a declining portfolio in retirement.

[tibbitts]

Prudence may warrant keeping 2 or 3 years of living expenses liquid and readily accessible in an income producing account.

In fairness "prudence" in terms of 2 or 3 years in cash in an "income producing account" has only been heard of frequently around here recently, really during the last year or so. An emergency fund as always been popular, but more in the sub-year range, even for retirees. And of course in the CFG we had all kinds of discussions about low-percentages of equities, but it was almost always bonds that were on the other side of that. If we see a few more consecutive years like 2022 your post would probably read 5 or 6 years of cash-like investments, and I'm not being critical at all, I'm just saying that we all blow around a lot in the wind despite the whole "stay the course" thing.

[dbr]

Prudence may warrant keeping 2 or 3 years of living expenses liquid and readily accessible in an income producing account.

In fairness "prudence" in terms of 2 or 3 years in cash in an "income producing account" has only been heard of frequently around here recently, really during the last year or so. An emergency fund as always been popular, but more in the sub-year range, even for retirees. And of course in the CFG we had all kinds of discussions about low-percentages of equities, but it was almost always bonds that were on the other side of that. If we see a few more consecutive years like 2022 your post would probably read 5 or 6 years of cash-like investments, and I'm not being critical at all, I'm just saying that we all blow around a lot in the wind despite the whole "stay the course" thing.

Well, a portfolio of stocks and bonds is liquid and income producing, so more needs to be done to show why the 2-3 years needs to be in cash, whatever that is. Presumably cash means an asset that is fixed in nominal (or real for I bonds) value not subject to variation on the market as stocks and bonds are. The income still gets jerked around by the market for rates. But that is where why that is prudent takes some discussion. I don't dispute that a person might be more comfortable and less stressed having an asset that does not get jerked around on the market. There is also the issue of being
jerked around by inflation.

I admit that for myself these things do not seem so pressing given the presence of a fixed nominal stipend monthly from a pension and a fixed real stipend monthly from Social Security, so one can acknowledge that life might be more stressful absent those things.

[delamer]

Prudence may warrant keeping 2 or 3 years of living expenses liquid and readily accessible in an income producing account.

In fairness "prudence" in terms of 2 or 3 years in cash in an "income producing account" has only been heard of frequently around here recently, really during the last year or so. An emergency fund as always been popular, but more in the sub-year range, even for retirees.

That’s not correct. In my time on the forum, there has always been a significant group of posters who advocated for keeping several years of net expenses (total expenses minus Social Security & pensions) in cash equivalents during retirement.

And Bill Bernstein, amomg other financial notables, have recommended even more years (20+) in cash equivalents with the remainder of the portfolio in stocks.

[aristotelian]

My safe withdrawal rate is determined by whatever dividends my portfolio pays.

A dividend is a withdrawal from a company's NAV. I believe, even if imperfect, the dividend payers are better at determining what is safe than I am.

If I had to spend more than the available dividends, I think it would be difficult to come up with a SWR, but I would subtract out the dividends from whatever I needed to cover expenses. That might make the calculation easier in that there was less at stake.

The amount of your dividends has nothing to do with Safe Withdrawal Rate. SWR is the constant dollar number you can safely withdraw inflation adjusted based on historical data. If you are withdrawing dividends, you are using a variable method which may be safer or less safe than SWR depending on what stocks you happen to own. It is a valid method but not to be confused with SWR.

https://earlyretirementnow.com/2019/02/ ... nt-page-1/

[bertilak]

My safe withdrawal rate is determined by whatever dividends my portfolio pays.

A dividend is a withdrawal from a company's NAV. I believe, even if imperfect, the dividend payers are better at determining what is safe than I am.

If I had to spend more than the available dividends, I think it would be difficult to come up with a SWR, but I would subtract out the dividends from whatever I needed to cover expenses. That might make the calculation easier in that there was less at stake.

The amount of your dividends has nothing to do with Safe Withdrawal Rate. SWR is the constant dollar number you can safely withdraw inflation adjusted based on historical data. If you are withdrawing dividends, you are using a variable method which may be safer or less safe than SWR depending on what stocks you happen to own. It is a valid method but not to be confused with SWR.

https://earlyretirementnow.com/2019/02/ ... nt-page-1/

If you want a rigidly constant rate, then dividends may not be appropriate. For me, they are constant enough. Dividends determine my nearly constant, normal, withdrawal rate. The non-normal exceptions include:

1. Gifting to relatives. I consider this as part of my legacy as opposed to "normal" expenses.
2. Purchase of real estate. I consider this more like a re-adjustment of my AA.
3. Major, occasional, expenses, like purchase of a new car or major maintenance of my home.

The above require evaluating the size of my nest egg to see if I can afford it. This is a safe way to withdraw at a rate that covers expenses.

[cbox]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

Experience for retirees starting in 1871 to today is tabulated here: https://engaging-data.com/visualizing-4-rule/

You can enter a starting portfolio value, asset allocation, amount of annual spending and number of years you want to look forward. The output will be the course of portfolio value and endpoint wealth for whatever length of retirement you enter. You can choose results in nominal or real dollars.

For example for a 30 year retirement at 60/40 and a 2.5% withdrawal rate almost all the tabulated experiences end up with the same or more assets after inflation. At 4% withdrawal rate about half the outcomes leave less money than you started with after inflation. 3.4% of the histories run out of money before 30 years. 10% of the histories support the withdrawal rate and also grow a $1M portfolio to over $2.8M.

If you put in a duration of one year you can bring the experience up to starting in 2018 and find that half the retirees lost money in the first year after inflation and half gained money. The worst loss was the 1917 cycle losing about 30% after inflation. At 30 years that same starting year survives and ends 30 years at a net 30% down. In at least this instance a big loss the first year does not predict retirement failure. A retirement failure year such as 1966 loses only about 10% the first year but continues to accumulate bad results with the fatal losses in the period 1972-1974, six to eight years into retirement with inflation hitting 12%-14% during 1972-1982 and the S&P 500 nearly flat in that time.

This is great information. Thank you very much for summarizing the results.

[cbox]

Regarding RMD's somebody has probably already said it but just because you are forced to withdraw, doesn't mean you have to spend it (after taxes, of course).

Cheers.

Good point. I keep forgetting this.

[9-5 Suited]

A dividend is a withdrawal from a company's NAV. I believe, even if imperfect, the dividend payers are better at determining what is safe than I am.

Seems like your approach works well for you, which is the most important thing. Especially because withdrawing only dividends is a reasonably conversative strategy with current yields on a balanced portfolio.

One big reason it has no appeal to me is that corporate directors selecting dividend payouts have different motivations completely unrelated to an individual's retirement income needs or strategy. Some keep them to zero or very low because they believe in their own capital projects. Some keep them artificially low because they prize consistency of dividend payout over maximizing dividend payout. Some may prefer buybacks in lieu of divedends.

If someone has way more than enough assets it may be fine, but it doesn't help people closer to the edges (e.g. those with 25x spending) because they would have to reach for yield to get 4% dividends. It also may lead to significant underspending relative to what could have been possible, especially important for folks who would have preferred to take that cruise before the sickness or injury sets in.

[cbox]

In fairness "prudence" in terms of 2 or 3 years in cash in an "income producing account" has only been heard of frequently around here recently, really during the last year or so. An emergency fund as always been popular, but more in the sub-year range, even for retirees. And of course in the CFG we had all kinds of discussions about low-percentages of equities, but it was almost always bonds that were on the other side of that. If we see a few more consecutive years like 2022 your post would probably read 5 or 6 years of cash-like investments, and I'm not being critical at all, I'm just saying that we all blow around a lot in the wind despite the whole "stay the course" thing.

Excellent points.

[randomguy]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

You are paying taxes on the RMDs but you don't have to spend them. Unless you were planning on donating them on death, the difference between paying taxes now versus later tends to pretty small unless the person spending them ends up in a much different tax situation.

In the end if you retire into a bull market with a reasonable SWR (3.5-5%), your money is going to grow. Retire into a long bear (decade of 0% real), you need a pretty low SWR AND to live a while to see the portfolio grow. If you took out 3% out of a 60/40 AA in 2000, it took 15 years to get back to break even. And you have only grown like 10% after 20 years. Retire in 1995, and you are up 3.5x..

[Wiggums]

We are 5 1/2 years into retirement. Last year we withdrew 2.5% from the portfolio. Big ticket items in 2022 included taxes on a large Roth conversion, new vehicle for DW, and HVAC replacement times 2.

Our portfolio is down $210k from the market highs and our AA is 65/35. Right now, we are prepaying some taxes to get a nice split between Roth, traditional, and taxable accounts.

Hope this helps.

[Marseille07]

If growing is your goal then SWR is not a good method to use. It increases spending according to CPI, doesn't cut back during a downturn; both are bad ideas if you are trying to grow your portfolio.

Rather than surveying SWR, I'd suggest finding a withdrawal method that is more likely to grow your portfolio such as a low FWR method.

[bertilak]

A dividend is a withdrawal from a company's NAV. I believe, even if imperfect, the dividend payers are better at determining what is safe than I am.

Seems like your approach works well for you, which is the most important thing. Especially because withdrawing only dividends is a reasonably conversative strategy with current yields on a balanced portfolio.

One big reason it has no appeal to me is that corporate directors selecting dividend payouts have different motivations completely unrelated to an individual's retirement income needs or strategy. Some keep them to zero or very low because they believe in their own capital projects. Some keep them artificially low because they prize consistency of dividend payout over maximizing dividend payout. Some may prefer buybacks in lieu of divedends.

Index funds with hundreds (or more) stocks tend to average all that out.

If someone has way more than enough assets it may be fine, but it doesn't help people closer to the edges (e.g. those with 25x spending) because they would have to reach for yield to get 4% dividends. It also may lead to significant underspending relative to what could have been possible, especially important for folks who would have preferred to take that cruise before the sickness or injury sets in.

If one has minimal assets, things will require careful planning, accepting more risk, and perhaps having a plan B (say putting off retirement).

[9-5 Suited]

Index funds with hundreds (or more) stocks tend to average all that out.

I don't think they really do. For a while, VTI has yielded under 2%. US companies aren't paying out a large share of their earnings as dividends. So being too laser-focus on dividends while ignoring all other forms of corporate earnings is too myopic IMO. A 3.25% withdrawal or so is considered virtually perpetual, meaning the principal after 30 years would be expected to be maintained in all historical cases. Dividends are FAR below that historical perpetual rate.

And it makes sense - dividends aren't linked to shareholder retirement planning. They are decided upon for a multitide of unrelated reasons, and therefore not the best available yardstick.

Again, no issue with people who use that method. It's simple and clean. I just don't think it's anywhere close to optimal.

[placeholder]

My withdrawal rate is "as needed" which so far has been zero due to my pension so I've had about 30% increase since retirement.

[cbox]

If growing is your goal then SWR is not a good method to use. It increases spending according to CPI, doesn't cut back during a downturn; both are bad ideas if you are trying to grow your portfolio.

Rather than surveying SWR, I'd suggest finding a withdrawal method that is more likely to grow your portfolio such as a low FWR method.

Thanks. I've gathered that. Wanted to collect some experiences w/ individual withdrawal rates. It's sounding like a withdrawal rate of 2.5 to 3.5 percent will be reasonable under most market circumstances. I have actually positioned myself with enough cash reserves to make my withdrawal rate variable, depending upon actual returns in a given year, at least until RMDs kick in.

Absent market conditions that require me to change, my spreadsheet has me starting out at a 3 percent withdrawal rate and gradually moving up to a rate that roughly equals what will be required of me at 73 when RMDs kick in (~4.6 percent?). I figure that way I can keep the tax burden roughly equal over the years and not be hit with a big burden at RMD time if I took no withdrawals over the next 9 years or so before RMDs.

My original plan was to take an annual distribution that was roughly a percentage point or two lower than what the market returned so that my portfolio has a change to grow in nominal terms. I was figuring the growth might help me to keep pace with inflation.

[cbox]

My withdrawal rate is "as needed" which so far has been zero due to my pension so I've had about 30% increase since retirement.

I looked at this approach, too, and could do it, for a while at least, but then I realized that RMDs would kick in, early 70s, that would likely result in a larger tax bill than if I had started withdrawals earlier in order to keep the size and therefore the RMDs to a reasonable levels.

Are you forgetting about RMDs or not concerned about the tax hit if you simply let the portfolio grow until you're required to take money?

[enad]

I take the RMD each year (no more, no less) and invest it in an after tax account and rarely touch the money so for me it means having other income streams and living below those streams

[AlohaBill]

We have been fortunate that social security plus pension more than cover our expenses of about $45,000 to $ 75,000 each year. Over our retirement years, we have withdrawn no more than 1% each year
to pay so far for $800,000 in Roth conversions.
We had planned to withdraw up to 4% (with no adjustment for inflation). However, our total savings and final pension payments were much higher than expected. Also, our medical insurance has proven to be tremendous in covering hospital stays of which there have been more than a few. I’m still here!
We may spend a little more in the future as we plan on a trip to the San Diego zoo and fried clams, a 10 day to 2 week first class trip to Hawaii (my wife opposes first class), a week trip with my youngest son’s family to Disneyland and legoland next February, and a trip to Massachusetts and fried clams next summer.

[Marseille07]

Thanks. I've gathered that. Wanted to collect some experiences w/ individual withdrawal rates. It's sounding like a withdrawal rate of 2.5 to 3.5 percent will be reasonable under most market circumstances. I have actually positioned myself with enough cash reserves to make my withdrawal rate variable, depending upon actual returns in a given year, at least until RMDs kick in.

Absent market conditions that require me to change, my spreadsheet has me starting out at a 3 percent withdrawal rate and gradually moving up to a rate that roughly equals what will be required of me at 73 when RMDs kick in (~4.6 percent?). I figure that way I can keep the tax burden roughly equal over the years and not be hit with a big burden at RMD time if I took no withdrawals over the next 9 years or so before RMDs.

My original plan was to take an annual distribution that was roughly a percentage point or two lower than what the market returned so that my portfolio has a change to grow in nominal terms. I was figuring the growth might help me to keep pace with inflation.

Well, the math is actually very simple - the less you spend, the better for the portfolio. How low is low enough we don't know, but I would think 3.5% or lower should be safe. I personally do not recommend 4.6% if you have legacy goals. It seems best to just fixate it at 3.5% or lower, but make it constant-% so that "3.5%" can increase if your portfolio appreciates.

[ruralavalon]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

I am age 77, retired, no pension or annuity. I don't withdraw a set percentage, and have always withdrawn the amount needed for my living expenses. This has usually turned out to be less than 4%.

I have been retired for 12 years, initially our asset allocation was 50/50 but is now 60/40. My portfolio is currently significantly larger than the day I retired.

My Social Security benefits and Required Minimum Distributions (RMDs) automatically taken monthly more than cover my monthly living expenses, with a little extra.

[OldSport]

I plan to retire with a 4% SWR for "Fat Fire" that includes international travel, but it's dynamic spending. So only 2% SWR to cover "needs". The other half is discretionary. So if we're in a bear market, I sure as heck wouldn't sell 4% of the portfolio at a loss to go live it up.

[OldSport]

Isn't somewhere between 70/30 and 65/35 statistically the best AA for long term portfolio success?

[TheTimeLord]

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted?

And how about the future? Do you have any plans to change your SWR?

Asset allocation?

I'd like to compare your experience with my plans for an SWR. Of course, in my planning, the withdrawal rate has to be adjusted upwards when required minimum distributions kick in, and that makes portfolio growth particularly difficult, as it is supposed to, I suppose.

Thanks.

So one of your goals in retirement is to have your portfolio grow consistently? Why do RMDs increase your WR, I get they may increase your expenses because of taxes but beyond that what is the effect you are seeing on your WR?

[Marseille07]

Isn't somewhere between 70/30 and 65/35 statistically the best AA for long term portfolio success?

"Best" for 30-year periods studied using historical data + Safe WR, yes. Not necessarily the best in terms of your final portfolio balance & using other withdrawal methods.

[exodusing]

Isn't somewhere between 70/30 and 65/35 statistically the best AA for long term portfolio success?

"Best" for 30-year periods studied using historical data + Safe WR, yes. Not necessarily the best in terms of your final portfolio balance & using other withdrawal methods.

Expanding on that point, best based on a specific historical period for, usually, a specific country and no way of knowing if that historical data will have any useful implications for the future beyond hope and anchoring.

[aristotelian]

Isn't somewhere between 70/30 and 65/35 statistically the best AA for long term portfolio success?

Not exactly. The longer your retirement and higher the withdrawal rate, the higher percentage you generally need in stocks. 100% stocks generally has the highest success rates when you get over 30 years. There are only a few combinations where 75% has higher success rate. Once you get under 30 years I would guess that the higher bond allocation comes into play. https://earlyretirementnow.com/2016/12/ ... t-1-intro/