Author Topic: Question for the post-fire group  (Read 2703 times)

mistymoney

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Question for the post-fire group
« on: May 12, 2019, 08:45:37 AM »
How do you draw down you money?

Do you cash out a monthly amount of shares? Are you able to auto-set a fixed money amount via vanguard or other brokerage?

Wondering what that might look like, and what do you do when you need more or less in a particular month.


FIREstache

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Re: Question for the post-fire group
« Reply #1 on: May 12, 2019, 09:31:15 AM »

I plan to have enough in a cash buffer to account for some variations in regular spending.

There's another recent thread about withdrawing during FIRE:

https://forum.mrmoneymustache.com/post-fire/withdrawals-during-fire/

secondcor521

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Re: Question for the post-fire group
« Reply #2 on: May 12, 2019, 10:44:36 AM »
I've been FIRED a bit over 3 years now.

What I do now is sell 3 months worth of expenses in my taxable brokerage account and put the proceeds into an online savings account.  I have an automatic monthly transfer from my savings to my checking that approximates my monthly spending.  I then spend from my checking.

I also take and spend my taxable account dividends, which seems to be standard procedure.  In my case, I have Vanguard just dump that money into my checking account.

I use Quicken to project my checking account balance forward into the future, and if my checking account gets too flush or too lean due to variations in spending, I'll make additional manual transfers to or from my savings account.

I then see how long that "3 months worth of expenses" lasts.  My last transaction was on 11/13/18 and I'm running low but I can probably make it another month or two.

The reason my money lasts about twice as long as it should is that I have irregular outside income that I don't want to count on but so far has been averaging about half of my expenses.

...

Most FIREd people I know do some variation of the above.  The more common variation is to do 12 months of expenses, often in January to match up with a calendar year.  A less common variation is to do monthly.  Almost everyone does portfolio -> savings -> checking.  Often the 12 months people will rebalance their portfolios in January right after their annual draw.  At least one person I know treats any excess at the end of the year as going into a separate cash bucket, but I think the more common approach is to virtually return it to the portfolio by reducing the next draw by an equal amount.

...

I believe Vanguard has auto-sell and auto-transfer facilities if you want to use those.  I know they have my Dad's RMDs set up to auto-calculate, auto-sell, and auto-transfer on a monthly basis on the 15th.  I haven't bothered because for right now I prefer to be hands on with it and doing it manually takes five minutes every six months.

Financial.Velociraptor

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Re: Question for the post-fire group
« Reply #3 on: May 12, 2019, 11:36:41 AM »
I'm about 6.5 years into FIRE.  I'm one of the heretics that picks stocks and has a high yield portfolio and options income that covers my annual budget.  The income from the brokerage is lumpy but I take a 2,000 monthly transfer to checking.  Occassionaly, my cash balance in the brokerage account dips a few thousand negative.  Margin loan rate at IB is under 2% so I don't sweat it. 

If you are indexing, you will need a different withdrawal strategy than mine.

smoghat

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Re: Question for the post-fire group
« Reply #4 on: May 24, 2019, 09:24:05 PM »
FIRE’d for three years too.

I do it by feel, pulling out $20k from my investments when I sense that the market is doing well to ensure I have enough cash to last a year or so during a major market downturn before I hit the bonds. I did that recently and then Donald Dumpster opened his trap and drove the market down. I swear that guy must have owe options traders some serious dough

A small portion of my investments were learning mistakes, notably ^VOX (in which the sector changed from high dividend, low growth telecoms firms like AT&T to crappy, failing Internet firms then at their highs, like Facebook) so as those went down, I “harvested” those losses to balance out my withdrawals from index funds that were doing very well. 

 

FIREstache

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Re: Question for the post-fire group
« Reply #5 on: May 25, 2019, 06:24:04 AM »
I do it by feel, pulling out $20k from my investments when I sense that the market is doing well

That sounds like market timing to me.

Dicey

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Re: Question for the post-fire group
« Reply #6 on: May 25, 2019, 06:31:00 AM »
I do it by feel, pulling out $20k from my investments when I sense that the market is doing well

That sounds like market timing to me.
Seriously? We're talking about withdrawals from one's nest egg. It sounds like a bit of fun to me. Why the hell not?

Oh yeah, tone/internet and all that. You're making a joke, right?

FIREstache

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Re: Question for the post-fire group
« Reply #7 on: May 25, 2019, 06:40:25 AM »
I do it by feel, pulling out $20k from my investments when I sense that the market is doing well

That sounds like market timing to me.
Seriously? We're talking about withdrawals from one's nest egg. It sounds like a bit of fun to me. Why the hell not?

Market timing can be fun, but if you're making withdraw/contribution/allocation decisions based on what you sense the market is going to do as previous poster mentioned, that's still market timing, regardless of which pot of money you're referring to.  It's generally discouraged.

Dicey

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Re: Question for the post-fire group
« Reply #8 on: May 25, 2019, 11:24:24 AM »
I do it by feel, pulling out $20k from my investments when I sense that the market is doing well

That sounds like market timing to me.
Seriously? We're talking about withdrawals from one's nest egg. It sounds like a bit of fun to me. Why the hell not?

Market timing can be fun, but if you're making withdraw/contribution/allocation decisions based on what you sense the market is going to do as previous poster mentioned, that's still market timing, regardless of which pot of money you're referring to.  It's generally discouraged.
By whom?

Here's a small example. I have a charitable trust. I made a large-ish donation to a favorite charity right before the stock market dumped at the end of last year. I spoke to the exec. director of the organization. She said that I could send the money any time before their fiscal year ends this June. I waited until the market recovered, then ordered the check. Market timing? Hell yes. Anything wrong with it under the right circumstances? Nope.

Another example is If you see something on a significant sale that you weren't planning on buying until the end of summer. Do you turn up your nose because the sale timing doesn't match your plan despite the fact that you have the money? Hell no!

Trying to time the stock market when buying for the purpose of making a profit is one thing. Being prudent about when you withdraw money is a whole different kettle of fish, especially for mustachians who have mad frugal skills.

That's another point to consider: it's recommended that you have a nice bucket of cash when you pull the RE trigger. That way, if the market slides, you don't have to sell equities to live on at the beginning, when withdrawals in a down market could hurt more. That allows you to delay your withdrawals. Not really the same as the market timing you're tsk-tsking now, is it?

dandarc

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Re: Question for the post-fire group
« Reply #9 on: May 25, 2019, 11:33:08 AM »
Glad the market rebounded for you Dicey - it could have stayed flat or gone even further down, albeit those are less likely than the "market goes up" case.

Although I'd say you weren't timing the market by delaying in December - the market goes up on average, the withdrawal was fixed, so waiting as long as possible to make that withdrawal is just playing the odds.

Market timing on a purchase = waiting because you think the market will go down.
Market timing on withdrawal = taking it early because you think the market will go down.

Fishindude

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Re: Question for the post-fire group
« Reply #10 on: May 29, 2019, 04:11:41 PM »
I'm a 1-1/2 years into FIRE, age 59-1/2.      I sit on the board of a company which I own fairly significant stock in so get directors fees and quarterly stock dividends for some income.   Also own a couple farms which generate income.   Wife also has a part time job that makes a little income.      These items cover a bit more than half of our annual spending.

We have cash in savings accounts, a 401K, CD's, and some mutual funds that can be drawn on if / when needed.    Also own quite a bit of paid for real estate, farms, vacation homes, etc.   We are paying expensive ACA health insurance now to the tune of $14,000 per year and will be doing so for several more years until we both reach medicare age.   So far, we are just using the savings account to make up what our income doesn't cover and have the ability to do that for quite a while.   Think I will wait till about 65 or 67 -vs- 62.5 to draw social security so we get a little more.

At some point in the next few years we will start taking from the 401K, so the cash savings doesn't get too far depleted.   We could take $40-50K out of it almost indefinitely if it's investments keep working decently.   Use of the mutual funds and taking social security will come after that.    If we have other needs beyond that we have the ability to sell that company stock mentioned above, tap into the CD's or sell off some real estate.    The real estate will probably be the last to go, would like to give most of that to family.

FIREstache

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Re: Question for the post-fire group
« Reply #11 on: May 29, 2019, 06:07:18 PM »
I do it by feel, pulling out $20k from my investments when I sense that the market is doing well

That sounds like market timing to me.
Seriously? We're talking about withdrawals from one's nest egg. It sounds like a bit of fun to me. Why the hell not?

Market timing can be fun, but if you're making withdraw/contribution/allocation decisions based on what you sense the market is going to do as previous poster mentioned, that's still market timing, regardless of which pot of money you're referring to.  It's generally discouraged.
By whom?

Most people around here and elsewhere where these matters are discussed.

Quote
Here's a small example. I have a charitable trust. I made a large-ish donation to a favorite charity right before the stock market dumped at the end of last year. I spoke to the exec. director of the organization. She said that I could send the money any time before their fiscal year ends this June. I waited until the market recovered, then ordered the check. Market timing? Hell yes. Anything wrong with it under the right circumstances? Nope.


The market went up, but it could have gone down and not recovered for years.  You took a risk, and it worked out this time.  But it's a form of market timing.  Yes, sometimes it works out well.

Quote
Another example is If you see something on a significant sale that you weren't planning on buying until the end of summer. Do you turn up your nose because the sale timing doesn't match your plan despite the fact that you have the money? Hell no!

Well, a summer sale is not the same as the unpredictability of timing the stock market.

Quote
Trying to time the stock market when buying for the purpose of making a profit is one thing. Being prudent about when you withdraw money is a whole different kettle of fish, especially for mustachians who have mad frugal skills.

Whether buying or selling, if you are making a move based on where the market is now vs. where you think it will move is still market timing.  Yes, it may work out in your favor, but it may not.

Quote
That's another point to consider: it's recommended that you have a nice bucket of cash when you pull the RE trigger. That way, if the market slides, you don't have to sell equities to live on at the beginning, when withdrawals in a down market could hurt more. That allows you to delay your withdrawals. Not really the same as the market timing you're tsk-tsking now, is it?

Actually, you should have an AA planned out, so based on the current AA, you would spend down on the appropriate bucket to bring your AA back toward to your planned ratio.  That's not market timing unless you make a change in your AA based on what you think the market is going to do.  I've never suggested that drawing down on one asset vs. another to correct an out of balance AA is market timing.
« Last Edit: May 29, 2019, 09:27:06 PM by FIREstache »

Woodshark

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Re: Question for the post-fire group
« Reply #12 on: June 01, 2019, 05:01:58 PM »
I'm four years into a mid 50's retirement. I keep three years of expenses in a money market account. It's replenished as needed. Every month (3.5% of investment porfolio /12) gets transfered into our checking account to pay the monthly bills and whatever. After a few months, if the checking account has over $10,000 (after the bills are paid) then I will transfer 70% of it into separate money market account. This second MMA is our travel/new car/emergency/etc. slush fund. As long as the slush fund has money, I feel we can spend it and not worry about spending.