As well as SWR, you also need to consider cash flow.
If you were born in 1966, then the earliest you can withdraw from super is age 60. There is a minimum withdrawal rate from super which is age based - at 60 you must withdraw at least 4%. And rises as you get older. You can find rates and calculators at Moneysmart (Or ATO)https://www.moneysmart.gov.au/superannuation-and-retirement
So you need to have a strategy to get you from 50 to 60 - i.e. enough dividends or sell some shares, or have another income source to fund all your needs. I wasn't quite sure how you were going to do this from your post. Once you hit 60 you can access your super and cover some or all of your expenses.
Is 4% a SWD for Australia? - maybe , but Wade Pfaus research indicated it was a bit lower http://wpfau.blogspot.com.au/search?q=australia+safe+withdrawal+rate - 3.5%.
Thanks Happy for your reply.
Good question - for money until I am 60 we will be drawing down from my partner's super (who is some 10 years older) and using directly held share dividends. When my partner's super account runs dry, I will be in my 60s and will then access my super.
Thanks for the Wade Pfau reference -- I've read some of his stuff and find it very interesting, but hadn't read that one. Sounds like from his research an Australian 50% stock / 50% bond portfolio having a withdrawal rate of 3.5% works - it will be interesting to see what the SAFEMAX will be for retirees after 1981 (given that he couldn't go any further as writing in 2011). That's very encouraging given that I will retire in Australia.
I am aiming for a higher stock weighting, a75% stock/infrastructure through direct stocks and super and 25% fixed interest through a diversified fixed interest through Australian Super. Thinking about it, 1/3 of the stocks/infrastructure are international shares, so I'm holding more shares but not as much in Australia as compared to Pfau's article. So not sure if on balance that still lands me, based on Pfau's research, at about the 3.5%.
Lynn52, there are minimums that you must take out of super each year - until 65 it is 4%, then it goes up to 5%... ending at about 13% when you are rather old and decrepit. These are the minimums from your super that is in pension phase. You can leave some of your super in accumulation phase if you want (you can't take anything out until it is converted to pension phase) but that has 15% tax on earnings, whereas money in pension phase doesn't. And you probably won't be able to put anything into super after you are 65. The government wants your superannuation to run out while you are living - but not quickly enough for you to need a pension.
See the following (only a few posts back) for Australian SWR.
Not sure how many of you have seen/read this but it is brilliant!
Long and short of it - the 4% 'heuristic' is not too bad for Aus. Interesting data re asset allocation results vs portfolio failure over time.
Got it off the Whirlpool forum which I know some of you check out from time-to-time
Thanks for your reply Deborah. Okay, sounds like keeping my partner's accumulation account open will be a good idea so that if we withdraw more than our target spend we can put it back into accumulation as long as my partner is still under 65, or into mine once my partner is over 65. I will have to check on contributions to super from a U.S. tax perspective when I am not working as I'm not sure I will be able to defer tax on earnings on that portion if the contribution didn't come from earned income. The whole US-tax-on-Australian-super is just so complex that so I find it hard to plan tax effectively for my super, but I do have a good Aust-US tax preparer, which helps somewhat.
And thanks for bringing up the "How Safe are Safe Withdrawal Rates in Retirement? An Australian Perspective". It is interesting that over 40 years in Australia 75% stocks/25% bonds etc has gotten an 88% success rate at 4%. And a 95% SAFEMAX is 4% over 30 years. Based on this research, if I could just bring myself to go 100% Australian stocks, in theory I would have a better chance of having my funds last as long as they need to. I'm not sure I'm quite that brave. Is any one else that brave.
George Cochrane's latest post http://www.canberratimes.com.au/money/super-and-funds/whats-my-best-tax-move-before-i-go-20150211-13ax1z.html includes some interesting stuff on a dual citizen going back to the US, and changing an SMSF to company rather than individual ownership
I read that article in The Age this morning and it immediately made me feel faint and stressed --I've been through the "getting right with Uncle Sam" process and found it really really stressful -- I feel really sorry for the individual writing in if they aren't already working with a good US-Australia tax consultant. For U.S. tax reasons, I am more grateful than I can describe that I have not married my partner, do not have an SMSF, am not running a business overseas, do not have capital gains on my residence of more than USD$250k, and do not own Passive Foreign Investment Company shares (LICs, trust companies listed on ASX, or companies that have not paid a dividend for a year or two). Expat US Tax is a great service for US citizens in Australia.
Thanks Marty998. I hadn't realised a couple could earn $40k per year outside of super and not have to pay tax. I will have to research that more as next financial year my partner will start selling some stocks that are outside of super and purchasing them inside super -- but have to manage it to avoid paying too much tax -- sounds like I'll need to do more research there.
Based on Pfau and the Australian Perspective report, seems like 3.5% is pretty much safe for Australia, and 4% may also work but I will need to be very vigilant in keeping track of how I'm going at 4%. I think I need to formalise some of my thinking about rules to to use in adjusting drawdown amount each year when market returns are poor.
Thanks again for all the replies and suggestions - all of them really got me thinking more. Great to get Australian perspectives since I am Australian.