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At the beginning of each year one simply takes 4% of the current balance, that's all. I like this for quick illustrations, as I can just generate one set of data. Then I can look at any year in the data set as a starting point and the withdrawal policy is the same. If I did the usual 4% of the balance at time zero, plus inflation, then I'd need to generate a set of data for each starting year. That's all fine and good, but too much text to put in a forum thread.
I'm not promoting it as something I've looked at or tried to optimize. It's just a simple and convenient thing to do. I think sometimes it's instructive to see the dollars for each year, instead of just saying a strategy had some success rate over thirty years, or whatever.
if you did not account for sequence of the returns than it is way off as spending down in down years is not the same as spending down in up years .
in fact between the best and worst sequence there is a 15 year span in how long the money can last
Back on topic... Interesting day in market as U.S. markets rise...the overseas markets got hammered. Will be interesting tonight to see if overseas recovers off of the U.S. performance.
that does not mean you spend 7% . that means you have to shift some of it to the same or other investments but with a taxable status . rmds's are not to be spent , they are only to shift money out and in to taxable accounts .
also the 4% is only first year . year after year the inflation adjustment actually has your draw rate way higher based on the initial draw rate day1 .
It does mean you spend the 7% because that and social security is your income. That is our case.
No ,when we talk about withdrawal rates it only refers to the amount your portfolio has to supply. No other income sources need to be stress tested so it is just the portfolio draw we are concerned about
Now, because of my husbands age, we are forced to withdraw 7% from our IRA. The market has been kind since the crash, but if we hadn't had to draw out of it, we'd be very happy. However, each year he ages, the amount we are forced to withdraw increases. I hope we both live forever, but if we do, we won't have enough money to survive.
Think of your spouse if there is a big age difference. How will they fare if the market tanks and you are too old to return to work?
From what I've read, the RMDs are not designed to be a safe withdrawal rate and instead I believe the RMDs are designed to deplete the IRA account by the time the person is 115, so there should be enough money in the account for another 30 years if your husband is 85 now at the 7% withdrawal rate. So yes I would agree that it may be psychologically uncomfortable to see the RMDs result in declining IRA account balance but that is actually what is meant to happen.
if you did not account for sequence of the returns than it is way off as spending down in down years is not the same as spending down in up years
I'm not sure what you mean. I used the historical returns of the mentioned investments, with annual rebalance back to 50/50 at the beginning of each year. The withdrawal is what it is... you can see the actual dollar amounts in the table. Of course the draw does not go up every year, since I'm not doing the usual 4%+COLA draw like Trinity Study and others used.
Rmd’s are not based on a safe withdrawal. Rate . It is the opposite. A safe withdrawal rate needs to be consistent in good and bad times. An red can vary greatly since it is different every year. Plus the older you get the greater the draw. Just the opposite of what makes sense.
I'm not sure what you mean. I used the historical returns of the mentioned investments, with annual rebalance back to 50/50 at the beginning of each year. The withdrawal is what it is... you can see the actual dollar amounts in the table. Of course the draw does not go up every year, since I'm not doing the usual 4%+COLA draw like Trinity Study and others used.
Okay, if you used each years actual performance in order then yes you did it right.. I think it is close to kites numbers for 60/40.. 2000-2015 came in right in the same range as the other bad periods balance wise which were 1907,1929,1937. It was not as bad as the worst period 1965/1966 which failed
Okay, if you used each years actual performance in order then yes you did it right.. I think it is close to kites numbers for 60/40.. 2000-2015 came in right in the same range as the other bad periods balance wise which were 1907,1929,1937. It was not as bad as the worst period 1965/1966 which failed
Well, I'm not using the same withdrawal method as Kitces. I'm not saying either one is right or wrong, they're just different.
Also, the sequence risk manifests itself differently with the method I used. The end balance will be exactly the same, regardless of the return order. It's because every operation in the math is a multiplication, and the order of multiplication does not affect the final outcome. Instead, the sequence risk shows up in the withdrawal amounts.
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