question about withdrawal rates

[mathjak107]

the last thing you ever want to do is use a credit line for cash . taking out anymore than you have to so you can make loan payments in a down market increases sequence risk and can burn excessive amounts of money up if you are spending down ..

if you are not spending down then trying to make loan payments too if you lost your job or can't work is not a great idea .

there is nothing like having your own cash for tough times .

the most efficiant mix in retirement is 2 years cash and 100% equity's . not something most retirees want to stomach .

[TwoByFour]

Originally Posted by borninsac

So my other thought has been (remember my retirement assets are not in the market) to use a line of credit to take draws when the market is down rather than sell.

I would not do it. I just paid off a 3% mortgage and I like being debt free and that was pretty low interest.

What's wrong with allocating some of your savings to fixed income and just selling those in a "down" market?

I say "down" market (in quotes) because it is not easy to identify when that is. Is that a certain amount of drop from a previous high, or is it against a trend line, or is it so many months of negative growth?

[borninsac]

Originally Posted by TwoByFour

I would not do it. I just paid off a 3% mortgage and I like being debt free and that was pretty low interest.

What's wrong with allocating some of your savings to fixed income and just selling those in a "down" market?

I say "down" market (in quotes) because it is not easy to identify when that is. Is that a certain amount of drop from a previous high, or is it against a trend line, or is it so many months of negative growth?

Well I'm newly debt-free, again, like you and you're absolutely correct, it's a great feeling. But over many years I've had good experiences using an equity line of credit as a cash management tool. Your suggestion is a good one. Again, remember my retirement assets are not market-based so I was just adding to continue this good discussion. If you have no experience using an equity line of credit like I have, then it may seem uncomfortable to you. For success, it takes someone who has a proven ability to draw it down and then pay it back as quickly as possible and to be able to assume some interest rate risk. In almost 15 years of using a $300K line of credit and getting it to as high as about $160K, I never had a regret any time I took a draw and was amazed at how swiftly I worked it down.

But things could be different in retirement with a lower income than working years. I don't anticipate I'll take any draws on my LOC moving forward. Debt free is wonderful. Now trying what to do with excess cash is another story particularly when spouse doesn't want in the market.