Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I know a good rule of thumb is to not withdraw more than 4% of your portfolio per year once retired for it to last 30-40 years. Is that 4% before or after tax?
thanks
And the 4% withdrawal rate is recommended for those with 30 year retirements. If your retirement is for 40 years (e.g., age 55 to 95), a 3% or 3 1/2% withdrawal rate is recommended. Age 95 is a standard conservative assumption for age of demise assuming that you have no reason to believe that you will die early or late (e.g., family history of longevity).
The safe withdrawal rate (SWR) also assumes you consume the entire withdrawal. So if other sources allow saving the withdrawal as a cash bucket to use for no withdrawal during poor performing years, the rate can be higher for the better performing years.
What I didn't know until my husband was 70 years old is that there is a minimum amount you have to withdraw at 70.5 years. I just took my first minimum distribution from my 401K and deposited it in a CD. My husband does the same except he has his own money market to deposit it in. We live off our SS, pension and investments. The interest from my CD's goes into a savings account so we have the interest to spend if we need it. If we don't use it, usually for purchases of cars, etc. we add it to the next CD that matures. What you lose from your distribution are the state and federal taxes you have to pay.
Like you I like to use the 4% rule for general discussions. But as you get closer to retirement you have to refine the rule.
Remember it is aimed at surviving the worst market. If you are looking at 40 years and think the market is price on the high end today you might be in the 2% to 3% withdrawal range (remember worst market).
You want to do some reading on sequence of returns risk. If the market goes down in the first few years of retirement and you are selling assets you can be in poor shape quickly. If the market is going up you are probably fine.
For retirement planning you should work out an income and spending budget and then start to work on a withdrawal strategy.
Again, it all depends on how long from retirement to SS, and how many years total. As mentioned before, Firecalc is a strong tool to use. For "normal" early retirement (62ish), spending down your savings to replace SS only has to last 8 years. If one lives on what they "would" have gotten claiming at 62, then one only needs an extra $24k a year tops for those 8. Then one is rewarded with an ~$50k/yr SS income, so thats a roughly $25k reduction in needed income from the savings, just to match what one WAS getting the previous 8 years. As it is, the RMDs start at that same time, so for many there are zero additional withdrawals over what is forced by the RMDs to have the same or even higher income for the next 10 years or so. As long as one has adequate savings and other income (pension, rental, part time, whatever) to live their lifestyle during those 8 years, plus adequate savings left after living those 8, then the income stream from 70 to 80+ is effortless, allowing the savings to grow unencumbered during that period.
Of course it all depends on what is adequate and enough for you..if $50k/yr is more than you could ever use, then very little savings beyond 70 is needed if you have maxed out SS. Or if you need $100k/yr and have a $50k/yr pension, little savings beyond 70 again is needed. Of course LTC has to be accounted for, a whole different discussion.
Last edited by Perryinva; 08-10-2016 at 02:46 PM..
Again, it all depends on how long from retirement to SS, and how many years total. As mentioned before, Firecalc is a strong tool to use. For "normal" early retirement (62ish), spending down your savings to replace SS only has to last 8 years. If one lives on what they "would" have gotten claiming at 62, then one only needs an extra $24k a year tops for those 8. Then one is rewarded with an ~$50k/yr SS income, so thats a roughly $25k reduction in needed income from the savings, just to match what one WAS getting the previous 8 years. As it is, the RMDs start at that same time, so for many there are zero additional withdrawals over what is forced by the RMDs to have the same or even higher income for the next 10 years or so. As long as one has adequate savings and other income (pension, rental, part time, whatever) to live their lifestyle during those 8 years, plus adequate savings left after living those 8, then the income stream from 70 to 80+ is effortless, allowing the savings to grow unencumbered during that period.
Of course it all depends on what is adequate and enough for you..if $50k/yr is more than you could ever use, then very little savings beyond 70 is needed if you have maxed out SS. Or if you need $100k/yr and have a $50k/yr pension, little savings beyond 70 again is needed. Of course LTC has to be accounted for, a whole different discussion.
Exactly....thats kind of how I'm thinking and Firecalc puts me at a 95 % success ratio....
Assuming having 1.3 million at retirement at 55 that leaves me with 15 years to draw down till I get $$ at 70 from SS that would essentially cover all my needs....
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
