Have you increased your "4% rule" distributions due to the stock market boom? (55, spouse)
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I retired at age 61 in 2009 right at the bottom of the stock market crash. My investment portfolio of an even mix of stock and bond funds had dropped around 25% but I decided to retire anyway and strictly follow the 4% rule. (I withdrew 4% of my starting portfolio number- about one million dollars- and increased it 2-3% each year to cover inflation.)
I carefully watched my income and expenses and have lived a pleasant but financially conservative life since then.
Now it is July 2019 and the stock market crash from 2007-to early 2009 is a distant memory. Even with my annual 4% withdrawals, I now have determined my investment accounts are twice as large as they were on my retirement date of 2009. (I now have about 2 Million Dollars)
I am in good health and I want to increase my standard of living. Now that I am 10 years older and have twice as much money as I did in 2009, can't I start the 4% rule distributions all over again and start pulling out $80,000 a year from my investment accounts? What are the rules about this?
Indeed you can. And you probably should do that, or something similar. I would.
As you know, the 4% rule is designed for your money to last 30 years. Restarting now will get you to age 100.
If you want to take a slightly more conservative approach since markets at at all time highs, just go with a 3.5% annual withdrawal, with annual inflation adjustments.
Congrats. You did a wonderful job building your portfolio and managing withdrawals in retirement.
i use a variable draw sytsem so i get rewarded by design ,
kitces rule of thumb is if your balance is 50% ahead of where you started take a 10% raise plus inflation raises ..repeat every 3 years ... your draw will more than double over a typical 30 year 4% draw rate. 90% of the time you ended with 50/50 or 60/40 with more than you started with so raises should be taken if allowed .
Since you have not made any adjustments in several years of portfolio growth, the variable approach is only something to consider for the future. For now you should be able to reset your 4% SWR. In theory it would seem that, if the 4% rule is valid, you should be able to reset and recalculate at any time. There is an problem with this. The 4% rule is set with approximately a 95% chance of success and is based on retirement and withdrawals starting at a random time. If you try to reset only after the markets have done well, then you have altered the conditions used in establishing the rule. So at this time backing off a bit from totally resetting might make sense. Frank suggested 3.5% instead of 4%.
Of course there is another factor, you are now 71. Do you really need to plan for another 30 years in retirement? I am in a similar situation at age 73. I have used the Firecalc webpage to calculate a 95% safe withdrawal amount based on about 25 years of additional retirement for myself and/or spouse. According to firecalc, I should be able to safely pull about 4.5% at this time. Backing that off to about 4% seems reasonable.
Mathjak, maybe you can explain/clarify the kitces guideline. Using the OP, it seems that his portfolio has grown to the point where he is effectively pulling about a 2% withdrawal rate. So the way I understand it kitces would recommend a 20% increase to 2.4% inflation adjusted. Then after another 3 years does he automatically add another 20% to bring him to 2.9%? At that point he would still be way short of a 4% amount in addition to being 74 years old.
Base on your other thread, I would throw any rule under the bus and be like Bond, live and let live.
You can spend everything you have in a short around the world trip. Instead, many of us want to be able to support ourselves and a reasonable lifestyle throughout our lives. We want to have guidelines for how much we can spend to achieve without running out of money.
Mathjak, maybe you can explain/clarify the kitces guideline. Using the OP, it seems that his portfolio has grown to the point where he is effectively pulling about a 2% withdrawal rate. So the way I understand it kitces would recommend a 20% increase to 2.4% inflation adjusted. Then after another 3 years does he automatically add another 20% to bring him to 2.9%? At that point he would still be way short of a 4% amount in addition to being 74 years old.
the draw increase is in dollars not percentage. if i was drawing 60k i would then draw 66k plus inflation raise. so that would be 70k if inflation was 4%.
Yes, you can take the greater of: Your original constant dollar amount (4% of your starting assets, inflation adjusted every year), or a flat 4% of your current assets.
Actually the flat 4% goes up slightly every year. I have a curve of that somewhere and will post it if I can find it.
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