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.
At 70.5 my required distribution from my IRA and 401K is a tad below 4% but the next few years after exceeds 4% and then up from there. My Uncle Sam won't let me keep to the 4% withdrawal rate. I hope he is there at the end to cover me.
At 70.5 my required distribution from my IRA and 401K is a tad below 4% but the next few years after exceeds 4% and then up from there. My Uncle Sam won't let me keep to the 4% withdrawal rate. I hope he is there at the end to cover me.
RMDs do not need to be spent each year.
Also at age 70.5, the safe withdrawal rate is higher than 4%. At age 70, life expectancy is down to about 14 years for a male and 16 for a female.
While I think TIPS are an interesting idea and a good place to put a portion of your money I would not feel comfortable putting it all in such a guaranteed low return investment.
I totally get that and feel the same way, but the numbers don't lie - if your withdrawal rate is 3.3% or less and your longevity is 30 years, then you do not need any more return than simply to keep your portfolio at pace with inflation, and putting all your money into TIPS bonds will do that. You will drain every last penny if you live 30 years, but it will last that long.
Our withdrawal rate is under 3.3% but I won't/can't put all our money into TIPS. The reason why is uncertainty about our withdrawal rate. Black swans scare me, and a big black swan could disrupt the best laid plans. So I want a cushion.
that is not going to be true .the cpi index is not the same thing as your personal cost of living . the cpi is only a price change index not a cost of living index .it can vary by a lot from a cost of living index . your own personal life does not track a basket of goods and service much of which you may not use or use in more or less quantity .
my neighbor rents in a rent stabilized apartment and being over 62 she is exempt from future rent increases . her rent includes heat and she owns no car so energy costs for her are quite low .
I live right next door and we are not exempt , we tend to buy higher end products which tend to have higher mark ups and because of my limited diabetic diet I buy the same items over and over many more times than she does . she is on medicare and I am not . if those products go up our cost of living increase is very different .
The 4% rule assumes you spend all income every year, and that you require that inflation adjusted amount every year until you die. It is simply a guideline, not an actual budget plan! Kitces Ratcheting scenario makes much more sense as it adds the common sense of needed income to what the market is actually doing. Anyone that blindly follows a 4% rule without common sense review is probably doomed to either run out of money or die with too much unused. It would be a heck of a coincidence if it worked out exactlymor even nearly correct.
Also at age 70.5, the safe withdrawal rate is higher than 4%. At age 70, life expectancy is down to about 14 years for a male and 16 for a female.
That is an interesting concept, to recalculate a SWR every year as if you were just starting out in retirement. I will have to dust off my home made RIP tool and see if that is a good strategy for a withdrawal model.
One thing about SWR - it is not based on life expectancy. It is only based on a period of time (30 years usually) over which the person will make withdrawals. Life expectancy is defined as the average number of years someone will have left to live, so 50% will live longer and 50% will live less. Most of us want a confidence level of 2 standard deviations beyond the mean for an SWR (or about 95%). I would think the same would be true for the life expectancy we are assuming we need to fund with those safe withdrawals.
The only standard deviation data I could find for life expectancy is 8 years at age 65 with a mean of 19 years. That seems rather high as it is saying that for 2 standard deviations beyond the mean, there is a 5% likelihood of living 35 years at age 65, or to a ripe age of 100.
Anyone that blindly follows a 4% rule without common sense review is probably doomed to either run out of money or die with too much unused. It would be a heck of a coincidence if it worked out exactlymor even nearly correct.
What's wrong with dying with money? Who says we have to use all our money? I have some charities in the will that I really hope will get a nice chunk of money from me when I die.
The 4% rule is not a retirement plan. A retirement plan should start with a budget and then modify as necessary to get a withdrawal rate that gives you peace of mind. Personally, I don't get peace of mind from a 4% withdrawal rate but our budget has our withdrawal rate close to 3% which I am happy with. And hopefully my charities will be happy too when I am gone.
That is an interesting concept, to recalculate a SWR every year as if you were just starting out in retirement. I will have to dust off my home made RIP tool and see if that is a good strategy for a withdrawal model.
One thing about SWR - it is not based on life expectancy. It is only based on a period of time (30 years usually) over which the person will make withdrawals. Life expectancy is defined as the average number of years someone will have left to live, so 50% will live longer and 50% will live less. Most of us want a confidence level of 2 standard deviations beyond the mean for an SWR (or about 95%). I would think the same would be true for the life expectancy we are assuming we need to fund with those safe withdrawals.
The only standard deviation data I could find for life expectancy is 8 years at age 65 with a mean of 19 years. That seems rather high as it is saying that for 2 standard deviations beyond the mean, there is a 5% likelihood of living 35 years at age 65, or to a ripe age of 100.
we set goal posts every year based on our balance . it does not mean that is what we spend ,it just sets boundary's . we use bob clyatt's method .
each dec 31 we look at our balance . we take 4% of the balance or if markets are down , we take which ever is higher , the 4% of the balance or 5% less . that keeps us from taking a big income hit if we are down 20% . all inflation adjusting is built in because it is dynamic .
it always increases our available spending over time if the balance grows .
The 4% rule assumes you spend all income every year, and that you require that inflation adjusted amount every year until you die. It is simply a guideline, not an actual budget plan! Kitces Ratcheting scenario makes much more sense as it adds the common sense of needed income to what the market is actually doing. Anyone that blindly follows a 4% rule without common sense review is probably doomed to either run out of money or die with too much unused. It would be a heck of a coincidence if it worked out exactlymor even nearly correct.
a ratchetting or variable method is much more human like rather than lab experiment ..
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.
