Author Topic: Withdrawals during FIRE  (Read 4193 times)

markbike528CBX

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Withdrawals during FIRE
« on: April 01, 2019, 01:20:12 PM »
As most of the post-FIREees know, Dollar Cost Averaging is the great way to get to FIRE.
You're taking advantage of volatility to occasionally get more assets (shares etc) for a lower price, and not have to worry about timing.

----------What do you use during the withdrawal phase, as volatility works against you?--------------

I have decided that whenever the S+P500 is above the level of  January 4th 2018 (my last pre-FIRE withdrawal for mortage payoff), then it is OK to withdraw from VTSAX.
If lower then I wait till OK ie like Oct-Dec 2018 drop, got more in Feb and late March.

Now that I have gotten to FIRE and have lower income, I will start withdrawing from VSIAX (small cap value).
VSIAX has a lower cost basis and therefore throws off bigger gains, which I can absorb without tax consequences now that the income is lower.

The SP500 value will be ratcheted up (maybe to the value at the last withdrawal), unless I REALLY need the money, then I'll just have to bite the bullet and withdraw.

Current withdrawal rate of ~2.7% so it really makes no difference, but I  have committed to help fund nephews college education, so WR will be higher in the future.

Also does anyone have an opinion (sorry silly question) on if I should start a SEPP 72(t) to replace my wife's salary and fill up the taxable deduction Married Filing Jointly?

Links to prior threads welcome.

secondcor521

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Re: Withdrawals during FIRE
« Reply #1 on: April 01, 2019, 02:55:31 PM »
I am in the withdrawal phase.

Because I assume the market goes up over the long term, I always wait to withdraw as long as possible.

Because I prefer less frequent withdrawals rather than more frequent withdrawals, and somewhat as an arbitrary compromise between yearly and monthly withdrawals, I withdraw 3 months worth of expenses at a time.

Because I receive income from outside my portfolio, these withdrawals look like they will happen about every six months.

...

Whether to start an SEPP is a complicated question.  The closer you are to age 54.5 (SEPP's have a 5 year minimum, so 59.5 - 5 = 54.5) the better.  The more stable your spending needs, the better.  The less willing or able you are to do one of the other options (401(k) rule of 55, Roth conversion ladder), the better.  The more you and your spouse agree on the plan, the better.  The smaller proportion of your IRA you would need to split off and start an SEPP on, the better.

In general it is smart to fill up the MFJ standard deduction of $24K because that will produce very-low-to-zero cost withdrawals (zero federal income taxes plus maybe modest state income taxes plus possible small effect on ACA subsidies).

soccerluvof4

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Re: Withdrawals during FIRE
« Reply #2 on: April 03, 2019, 12:39:54 PM »
For me its been pretty simple but I know it wont last forever. With the market going up I only withdraw when it goes up. When it dropped from its highs I used cash leftover from my withdrawals and also bought the dip.

Threshkin

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Re: Withdrawals during FIRE
« Reply #3 on: April 03, 2019, 02:42:57 PM »
At our current expense rate we will me living off our 'cash' reserves for another couple of years.  Then we will start drawing from our taxable investments, followed by SS & RMD income.  The tax deferred accounts stay pretty much untouched (except for RMD) and act as a emergency and LTC reserve.  During this time we are converting Trad to Roth annually to reduce eventual RMDs and to keep us in the ACA subsidy range.

We run a pretty conservative financial ship so market changes don't really affect us.  We monitor them of course and we take steps to reduce the tax bite (like the T to R conversion) but even if we didn't we would be in pretty good shape.

Budgeted WR is >3% actual WR is below that.

I am very much a pessimist when it comes to finances.  I also like to stay happy.  So I plan and prepare for the worst reasonable outcome.  Then when things turn out better than planned I am happy.

Acastus

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Re: Withdrawals during FIRE
« Reply #4 on: April 04, 2019, 04:02:35 PM »
I FIRE'd 9 months ago with the basic 4% SWR plan. I am 11 years til full social security, so I think I can safely draw 4.5 or even 5%, but so far I do not need it. I still feel like there is a better optimization than the 4% from Trinity. The real take away from the Trinity study is that 4% was the low point of the 75 year curve of safe withdrawals. Most starting years, a retiree could successfully draw more. Up to 7% over their lifetime. The question is, how do you know which year you were dealt?

I found this book, and I started reading the free chapters:  http://livingoffyourmoney.com/

There is a short thread here from 3 years ago, but other than most people saying Awesome!, there was no real analysis. I think the author may be part of the in crowd at Bogleheads. Has anyone read the book or a similar one?.

Goldielocks

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Re: Withdrawals during FIRE
« Reply #5 on: April 04, 2019, 04:41:05 PM »
I have trouble with withdrawing money.   I saved up a large emergency fund and we still have 1/3 our income coming in.  So far, I have chosen to cut our expenses and pull at the cash emergency fund... and I am about 2 years in.  Cutting expenses even lower than before is easier without a job.  (Can give up the car, double down on grocery costs, enjoy transit to get to mini vacations because an extra 2 hours on the bus is not a problem, I am learning to mend clothing, I am around when the library is open). 

The longer the money stays invested, the more I have for future.  Once a MMM, always an MMM.  It is hard to touch the stache before it grows obscenely large, when it needs to last another 45 years.

My current plan is to just earn a bit of money each year to pay for car insurance or a vacation if I choose those things.

Longer term, as income will decline, and I will need to pull cash to cover expenses,  I will set up automatic $'s each month to cover basic expenses, and pull from an after tax account in lumpy sums for the more expensive things. 

Deciding when to sell (for cash expenses) is very hard on me emotionally, I will need to automate that.

I do enjoy reading everyone else's approach, because I do NOT have this dialed in.  Money should not be emotional at this point, yet it still is, for me.

ETA:

My husband's grandmother had an interesting approach.  She gave family $$'s for a mortgage, and they paid her a rate that was higher than a CD or GIC rate that she could get, and a bit better than the best mortgage rate that they could get.   When we did this, we paid 6.5% mortgage rate, on a 25 year amortization with her (1990's).  She could only get 5% from the bank.

Her spend down plan was to use the mortgage payment and spend it all in the month as her income (spend principal and interest).   

We quickly got out of that arrangement, after ony 1.5years, as we when started to pay it off faster, we realized that she just spent whatever was received, and would be out of money in 12-15 years instead of 25 years.. Bingo addiction is a real thing.  (That reason plus other family interference reasons)

Anyway, if you have a secure investment / loan, this is an alternate way to spend down your account.

A third way is to set up a 10 year bond ladder, and just spend the bonds as they come due, 10% of the total each year.
« Last Edit: April 04, 2019, 04:48:14 PM by Goldielocks »

Mr. Green

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Re: Withdrawals during FIRE
« Reply #6 on: April 04, 2019, 07:29:11 PM »
I wanted the simplest, bulletproof withdrawal strategy possible to I could execute without thinking about it. Unless of course larger sequence of returns concerns would behoove me to adjust my withdrawals in general. Our planned spending is $40,000 a year. Our income comes entirely from drawing down our investments, and our portfolio is a simple 80/20 using VTSAX and VBTLX. Our bonds are all in tax-deferred accounts however so our current draws are all on VTSAX as that's the sole holding in our brokerage accounts.

Every quarter I top off our checking account to $10,000, then spend it down over the following three months. That starts with taking our dividends, since we're already going to pay taxes on them. We sell shares of VTSAX after dividends to fill out whatever amount gets our checking account back to $10,000.

I like this scenario because I only have to look at my investment accounts quarterly. It sets a routine process that keeps emotion out of the picture. The fact that I'm only pulling out up to $10,000 at a time means I don't really care if the withdrawal happens during a recession. This keeps me from trying to stretch my checking account balance when the market is down because I want to try and time the market and not make another withdrawal until stocks rebound. I trust the math behind safe withdrawal rates so I have no problem executing this plan without worry.

Now if there's an multi-year run of bad returns, then I will re-examine our withdrawals as part of a sequence of returns analysis but that's a whole different process.

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Re: Withdrawals during FIRE
« Reply #7 on: April 05, 2019, 12:46:41 PM »
I've been retired a bit over one year.   We have some income producing real estate, etc. that generates approx. 1/2 of our income need and to date we've just been living out of the bank account for the rest, could easily continue this for five or more years, I'm 59 wife is 56.   Don't really have it all figured out yet, but I'm thinking we will start tapping the 401K within the next few years.   If we took 4% of the 401K there would be plenty to go on for a long time.   I plan on delaying taking social security a few years to get larger payments when we do take it, as we can get by without it.   We've also got some mutual funds we could tap at any time as well, but I don't know when we will need it.

I've not got it all figured out, but my order of use will be:
1. Bank accounts till they hit a certain level.
2. 401K At a rate that hardly touches the principal.
3. Social security around 65-67 years old.
4. Mutual funds when / if needed.
5. Lastly, could unload some real estate or stock if necessary.

markbike528CBX

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Re: Withdrawals during FIRE
« Reply #8 on: April 05, 2019, 02:27:58 PM »
Thanks for all the feedback.   
I'm glad I'm not the only one who is still playing around to find the withdrawal method that works for each of us.

I'm pulling out 10K at a time, which should sustain us (with lots of slack) for 2+ months. I may pull out more at a time in the future.
Future stock withdrawals will go into a money market (VMMXX) or bond fund (not sure which yet) instead of the current savings account, which pays nothing.
Since it pays nothing, no taxes :-)

Dividends are every quarter, so that is about a months worth right there.

New But Related Question--------------
Does anyone have a preferred way of transferring money to pay a nephew's college education?  Values per year less than the gift tax threshold ($15K)*.  However, comments on larger gifts are welcome also.

     A) Withdraw from taxable stock to cash then write check to college on behalf of nephew? 
             I get taxed (at low rates due to lower income), but it is a not an administrative burden for me.
             --since my Vanguard account is in my name (wife has "custodian rights") might be iffy to combine our exclusions, even though it would be routed through our joint checking account.


     B) Transfer in kind to nephew (one has a Vanguard account already) for him/his mom to sell and use
               -- this might need some timing to avoid some financial aid reporting
               --- this seems kinda complicated for them.
               ---- since my Vanguard account is in my name (wife has "custodian rights") might be iffy to combine our exclusions.

     C) Am I just overthinking this?
   
* Reference gift tax threshold and exclusions including tuition gifts
https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
I notice only tuition is covered as tax excluded, not books, supplies, room and board.
So as I get it, since my wife and I are making these future gifts jointly we could give 2*15K = $30K, totally excluded.
OR $30K + tuition for a total larger sum.

Goldielocks

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Re: Withdrawals during FIRE
« Reply #9 on: April 05, 2019, 02:44:39 PM »
For giving money to a nephew... I would take a look at taxes if you were to give it directly to the school to pay for tuition.  I am not sure what you need to call it a scholarship, or how scholarships are taxed there versus gift taxes, but you may find a valid loophole.

Othewise, I would give up to the gift tax maximum,  every year and maybe for several years after graduation, until you have transferred the full amount you are choosing.  He can get student loans and pay them off after using with his annual gift from you.

Is that too simple?

My tax problem is that auntie wants to gift a condo, but the value has increased and we have no way to pay the capital gains tax on it right now without selling it and she doesn't want it sold yet (wants to rent it back from us for several years as a condition of sale).  This is not a primary residence.

Threshkin

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Re: Withdrawals during FIRE
« Reply #10 on: April 07, 2019, 06:22:18 PM »
You may (should) be able to set up a 529 account with your nephew as the beneficiary.  Earnings on a 529 are tax free as long as the money is spent on qualified education expenses.  This includes tuition, books and other education related expenses.  You are not "giving" your nephew the money.  The account remains in your control so there shoulden't be any issue with gift tax.

Talk to your friendly financial advisor and possibly your tax accountant first though!

mtnrider

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Re: Withdrawals during FIRE
« Reply #11 on: April 09, 2019, 08:08:21 PM »
I found this book, and I started reading the free chapters:  http://livingoffyourmoney.com/

There is a short thread here from 3 years ago, but other than most people saying Awesome!, there was no real analysis. I think the author may be part of the in crowd at Bogleheads. Has anyone read the book or a similar one?.

I started reading the pdf, it reads well, for the first 10 pages anyway.  Have you purchased it?

OzzieandHarriet

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Re: Withdrawals during FIRE
« Reply #12 on: April 10, 2019, 09:04:25 AM »
DH and I are trying to figure this out now that heís retired. Most of our money is in pretax retirement accounts, some in Roths, and a small amount (maybe 18 months-2 yearsí worth) in after tax accounts.

Plan is to leave the Roths alone and start pulling some out of the non-Roth retirement accounts now, to spread out the eventual taxes. But quarterly? Biannually? Yearly?

We both are earning a small amount - itíll probably be about $20k this year between us - and will need to use savings for the rest.

Iíd like to do a set-it-forget-it thing.

markbike528CBX

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Re: Withdrawals during FIRE
« Reply #13 on: April 10, 2019, 11:46:48 AM »
DH and I are trying to figure this out now that heís retired. Most of our money is in pretax retirement accounts, some in Roths, and a small amount (maybe 18 months-2 yearsí worth) in after tax accounts.

Plan is to leave the Roths alone and start pulling some out of the non-Roth retirement accounts now, to spread out the eventual taxes. But quarterly? Biannually? Yearly?

We both are earning a small amount - itíll probably be about $20k this year between us - and will need to use savings for the rest.

Iíd like to do a set-it-forget-it thing.

When my wife retires, I plan on doing SEPP 72(t) minimal withdrawals from my tIRA.
ALTHOUGH SEPP allows a assumed rate equal to 120% of a specified Treasury note (2-3%?), you don't HAVE to take the full rate.  I plan on using0.000001%, as the formula divides by zero if you use zero.
 I'm planning on taking the payment as one/year, then doing a monthly transfer to my wife's checking account.  This would simulate in timing and amount her working paycheck.

Complicated? But should run well once set up.
Wife gets a "paycheck ", we fill up the MFJ tax deduction, thus minimizing future RMD's.  And I don't have to split the SEPP into smaller chunks, with rounding errors.

We're near 54.5, so meeting the 5 year rule.

OzzieandHarriet

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Re: Withdrawals during FIRE
« Reply #14 on: April 10, 2019, 02:06:29 PM »
We're old (Iím 61 and heís 59-1/2); there is only one account DH canít draw from yet (has to watch till heís 62).

We decided to start by drawing approximately enough for the next quarter and see where we are in June.

Anette

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Re: Withdrawals during FIRE
« Reply #15 on: April 10, 2019, 03:12:48 PM »
Wouldn't it be possible for you to sell with a limit ( the price you would like to at least have)? Perhaps start 14 days before you need the money, then no need to worry. If your price wasn't reached and the order not fulfilled during the two weeks you could still cancel when the money is needed and sell for the offered price. Nothing lost ( other than a few minutes time) but a great possibility to well at a good price.

Boofinator

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Re: Withdrawals during FIRE
« Reply #16 on: April 10, 2019, 03:33:45 PM »
As most of the post-FIREees know, Dollar Cost Averaging is the great way to get to FIRE.
You're taking advantage of volatility to occasionally get more assets (shares etc) for a lower price, and not have to worry about timing.

----------What do you use during the withdrawal phase, as volatility works against you?--------------

Just as in the accumulation stage you're occasionally buying when cheap, in the retirement phase you're occasionally selling when expensive. Everything roughly evens out. Volatility is irrelevant (for the most part).

In general, just sell when you need the expenses. I imagine when I retire I will sell shares about once per month.

NaturallyHappier

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Re: Withdrawals during FIRE
« Reply #17 on: April 12, 2019, 12:30:38 PM »
I FIRE'd 9 months ago with the basic 4% SWR plan. I am 11 years til full social security, so I think I can safely draw 4.5 or even 5%, but so far I do not need it. I still feel like there is a better optimization than the 4% from Trinity. The real take away from the Trinity study is that 4% was the low point of the 75 year curve of safe withdrawals. Most starting years, a retiree could successfully draw more. Up to 7% over their lifetime. The question is, how do you know which year you were dealt?

I found this book, and I started reading the free chapters:  http://livingoffyourmoney.com/

There is a short thread here from 3 years ago, but other than most people saying Awesome!, there was no real analysis. I think the author may be part of the in crowd at Bogleheads. Has anyone read the book or a similar one?.

I purchased this book a little over a year ago.  It is a great book and you will get a lot more out of the complete book than you get with the sample online.  I have set up my withdraw strategy using the book and prime harvesting.

Shane

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Re: Withdrawals during FIRE
« Reply #18 on: April 13, 2019, 02:34:24 AM »
I found this book, and I started reading the free chapters:  http://livingoffyourmoney.com/

There is a short thread here from 3 years ago, but other than most people saying Awesome!, there was no real analysis. I think the author may be part of the in crowd at Bogleheads. Has anyone read the book or a similar one?.
I started reading the pdf, it reads well, for the first 10 pages anyway.  Have you purchased it?
Read the pdf, as well, but haven't purchased the book. My main takeaway from the author's preferred withdrawal strategy was: if the inflation adjusted share price of your stocks (in our case, VTI) is ≥ what you paid for it, sell shares of stock when you need to replenish spending money in your checking account. If the inflation adjusted share price of a share of stock is < what you paid for it, you should instead sell bonds (in our case, BND) to replenish your checking account. If a market downturn is long enough to cause you to use up all of your bonds, then you go back to selling stock again. It made sense to me. We've got an easy 5-10 years of living expenses in bonds. So far, we've just been living from the dividends from VTI and interest from BND, and selling shares of VTI when we need extra cash. The book seems to be recommending selling enough shares to fund twelve whole months of living expenses at the beginning of the year. That didn't make much sense to me, so we don't do that. We only sell shares a couple of times a year, when we need the money.

OzzieandHarriet

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Re: Withdrawals during FIRE
« Reply #19 on: April 15, 2019, 07:38:24 PM »
Our issue is most of our money is in balanced funds, so these strategies of selling particular stocks and so on isn't applicable.

This is what I think we need to do, in our case anyway:

We each have rollover tIRAs, and husband has a two-part 401k. One part he can't sell until he's 62 (because he's still working part time and making contributions to it); the other part he can access now with no penalty. So my thinking is we take money out of these three accounts first so that when we are forced to do RMDs when we're 70 we won't get hit with as much tax liability.

We also each have Roth IRAs (not a huge amount in either, total for both <$300k). Because we're both still working part time, we can contribute to those in addition to any Roth conversions we might be able to do.

We will also be getting SS at some point in the next few years. I could start taking it next year if I don't mind getting the reduced amount for age 62.

We have a smallish amount in after tax investments (<$100k). We're planning to sell those and move the money into a money market account so we'll have several years' cash available at all times. Haven't decided when to do that yet - we don't want to sell too much and get pushed to a higher bracket.

Does any of this look wrong to anyone?

mtnrider

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Re: Withdrawals during FIRE
« Reply #20 on: April 15, 2019, 08:10:19 PM »
I just saw this: https://www.physicianonfire.com/glide-path/ .  It's an easier read than the book mentioned above (which I haven't yet purchased).

Some interesting ideas that I hadn't encountered yet - get MORE aggressive after FIRE, make a big jump the day you FIRE, and so on.

I think some of this depends on how much you're withdrawing.  MMM suggests 100% stocks, which backtests moderately well.  But I've seen two FIRE-ees run out of funds early due to hitting the 2001 and 2008 dips early, and their inability to change their withdrawals and rebalance.  A third is is surviving on SS due to pulling out of the market in 2008, from the fear related to overexposure to stocks.

I think one's fortitude, flexibility, and ability to work again for a few years is an important to consider for these FIRE withdrawals.

markbike528CBX

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Re: Withdrawals during FIRE
« Reply #21 on: April 15, 2019, 10:39:09 PM »
On further reflection I realized that my pre-age-59.5 method is:
Find the linear regression line of my taxable investments versus time, and try to take withdrawals when the balance is above that line.

So far in my withdrawal history I'm about 50% on doing it by the plan above.

Reader

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Re: Withdrawals during FIRE
« Reply #22 on: April 18, 2019, 06:57:14 AM »
I FIRE'd 9 months ago with the basic 4% SWR plan. I am 11 years til full social security, so I think I can safely draw 4.5 or even 5%, but so far I do not need it. I still feel like there is a better optimization than the 4% from Trinity. The real take away from the Trinity study is that 4% was the low point of the 75 year curve of safe withdrawals. Most starting years, a retiree could successfully draw more. Up to 7% over their lifetime. The question is, how do you know which year you were dealt?

I found this book, and I started reading the free chapters:  http://livingoffyourmoney.com/

There is a short thread here from 3 years ago, but other than most people saying Awesome!, there was no real analysis. I think the author may be part of the in crowd at Bogleheads. Has anyone read the book or a similar one?.

I purchased this book a little over a year ago.  It is a great book and you will get a lot more out of the complete book than you get with the sample online.  I have set up my withdraw strategy using the book and prime harvesting.

which chapters do you find helpful? i have bought the book but have not gotten around to reading it yet..

bluebelle

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Re: Withdrawals during FIRE
« Reply #23 on: April 18, 2019, 11:20:23 AM »
I'm not there yet, either next year or the year after......I think I'll do monthly, and set it up automatically.....but I have a question for folks.   I will have three RRSPs to draw from (federally regulated Locked in RRSP, provincially regulated locked in RRSP and my personal RRSP), plus non registered funds, plus TFSA.    I can't combine the RRSPs because, well, nanny state, they have different rules, blah blah blah.   Each of these RRSPs has 3-4 different funds in them, for diversity......
Anyway, my question for folks - when you make your monthly/quarterly/yearly withdrawal, do you take a percentage from each fund to maintain the allocation percentages?   And if you have multiple sources, do you pull some from each or work on drawing down one of them?   I'm leaning toward working on drawing down the smallest locked in RRSP, although, because it's a 'locked in' fund, there is a maximum I can withdraw each year (did I mention, damn nanny state)

My plan is to start withdrawing from my RRSP at 57, withdrawing as much as possible while still keeping me at a lower tax rate.  I recognize I have the pleasant problem of having too much in my RRSP, such that by the time I'm 80ish, the minimum forced withdrawal will be more than I want to pull out and would probably trigger an OAS clawback (especially if my hubby doesn't get his shit together and take better care of his health, I may be inheriting his RRSP by then, so double whammy).....

edited to fix my grammar
« Last Edit: April 18, 2019, 03:04:26 PM by bluebelle »

Goldielocks

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Re: Withdrawals during FIRE
« Reply #24 on: April 18, 2019, 02:41:31 PM »
Blubelle.  That is an awesome question!  Wow,  I was faced with that question 18 months ago and it is a tough one, especially if you combine it with TFSA, RESP, and non-registered rules / advantages / accounts, too.

I don't have the ultimate answer, but I went for easy management.   
1) I figure out what asset allocations and investments I wanted, overall.
2) I put the conservative allocations into my Locked in RRSPs. / LIRA. I do want some of my money to be conservative %, and it won't grow much, so it is good in an RRSP (where taxes will be less than putting agressive allocations there.. I use TFSA for the more growth items).   
3) I developed a plan for early unlocking of the RRSP. (see below)
4) In each RRSP account, I choose only one or two funds. 

The primary investment is for the bulk of the money in the fund, and a secondary one to rebalance in/out of.  I use TDB eseries CDN for the secondary fund across all, because it has very low fee and no trading fees.  Other banks waive trading fees on some funds, too.  Note, I have the identical CDN fund across 4 of my accounts. As I withdraw, I pull from the CDN secondary fund, from whichever RRSP or TFSA makes the most tax sense, and can rebalance quickly across all the others, to keep my allocations, if needed.

The primary investment in the accounts
- one RRSP is US funds, US stock equities, Norbert's gambit ... plus TDB eseries CDN
-one RRSP is International equity... plus TDB eseries CDN
-The LIRA has the conservative bonds.   plus TDB eseries CDN
Non-registered has Cdn Dividend payers, for the vastly preferred tax rate at my income level.
TFSA has the more agressive funds - CDN small cap and growth oriented but not USA  (So many ways to use the TFSA effectively, each person has a different, valid strategy). 

Does that make sense?   I was going nuts trying to rebalance all the time with having too many types of investments across 7 accounts.  So I chose to reduce the number of investments to just 1 per account, and 1 to rebalance in/out of.

- Generally, you can unlock under certain conditions.. usually these are:
 50% after age 55 (some provinces it is time of creation/leaving employer, too)
if you have low income,
Medical emergency/ shortened lifespan,
Need $ for rent deposit, foreclosure or eviction avoidance,
Leave Canada for good.
When the total value is quite small.  The definition of "Small" increases after age 65.   BC it is $12k and doubles at age 65..Ontario it is $22k at age 55.

So, if you can get it down to $45k at age 55, unlock 50%, the remaining balance may be small enough (ontario) to collapse it completely.    This is the other reason I choose the LIRA for my conservative asset allocations... I don't want it to grow if I can get it small enough to collapse.

You can roll it into a personal RRSP when you unlock it, or pay taxes and take the cash.

bluebelle

  • Bristles
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  • Location: Toronto
Re: Withdrawals during FIRE
« Reply #25 on: April 18, 2019, 03:23:05 PM »
I don't have the ultimate answer, but I went for easy management.   
1) I figure out what asset allocations and investments I wanted, overall.
2) I put the conservative allocations into my Locked in RRSPs. / LIRA. I do want some of my money to be conservative %, and it won't grow much, so it is good in an RRSP (where taxes will be less than putting agressive allocations there.. I use TFSA for the more growth items).   
3) I developed a plan for early unlocking of the RRSP. (see below)
4) In each RRSP account, I choose only one or two funds. 

The primary investment is for the bulk of the money in the fund, and a secondary one to rebalance in/out of.  I use TDB eseries CDN for the secondary fund across all, because it has very low fee and no trading fees.  Other banks waive trading fees on some funds, too.  Note, I have the identical CDN fund across 4 of my accounts. As I withdraw, I pull from the CDN secondary fund, from whichever RRSP or TFSA makes the most tax sense, and can rebalance quickly across all the others, to keep my allocations, if needed.

The primary investment in the accounts
- one RRSP is US funds, US stock equities, Norbert's gambit ... plus TDB eseries CDN
-one RRSP is International equity... plus TDB eseries CDN
-The LIRA has the conservative bonds.   plus TDB eseries CDN
Non-registered has Cdn Dividend payers, for the vastly preferred tax rate at my income level.
TFSA has the more agressive funds - CDN small cap and growth oriented but not USA  (So many ways to use the TFSA effectively, each person has a different, valid strategy). 

Does that make sense?   I was going nuts trying to re-balance all the time with having too many types of investments across 7 accounts.  So I chose to reduce the number of investments to just 1 per account, and 1 to re-balance in/out of.

thanks Goldilocks....good insight as always....I guess I'll work at simplifying it over the next year and a half, plus simplifying hubby's.  I rolled his spousal into his personal a few years back (after waiting 3+ years after my last contribution to his spousal), so at least I have his a little more simplified.  All money management is on me, he doesn't get too involved.  He trusted me 20 years ago with the money, he knew his limitations.....in fact, when I first started investing as a couple, he told me not to tell him what was there, he knew he'd just want to spend it, it had to get over a certain amount, to where he could see the finish line before he could resist temptation.  Knowing there's $75K in an account would mean, hey a new car, knowing there's a million means, hey, she was right, we can retire early......

Acastus

  • Bristles
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  • Posts: 365
  • Age: 57
Re: Withdrawals during FIRE
« Reply #26 on: April 25, 2019, 01:47:36 PM »
I found this book, and I started reading the free chapters:  http://livingoffyourmoney.com/

There is a short thread here from 3 years ago, but other than most people saying Awesome!, there was no real analysis. I think the author may be part of the in crowd at Bogleheads. Has anyone read the book or a similar one?.
I started reading the pdf, it reads well, for the first 10 pages anyway.  Have you purchased it?
Read the pdf, as well, but haven't purchased the book. My main takeaway from the author's preferred withdrawal strategy was: if the inflation adjusted share price of your stocks (in our case, VTI) is ≥ what you paid for it, sell shares of stock when you need to replenish spending money in your checking account. If the inflation adjusted share price of a share of stock is < what you paid for it, you should instead sell bonds (in our case, BND) to replenish your checking account. If a market downturn is long enough to cause you to use up all of your bonds, then you go back to selling stock again. It made sense to me. We've got an easy 5-10 years of living expenses in bonds. So far, we've just been living from the dividends from VTI and interest from BND, and selling shares of VTI when we need extra cash. The book seems to be recommending selling enough shares to fund twelve whole months of living expenses at the beginning of the year. That didn't make much sense to me, so we don't do that. We only sell shares a couple of times a year, when we need the money.

I am part way through Ch. 3, the last chapter in the freebie. My main takeaway so far is the standard advice from fund companies does a relatively poor job of maximizing your retirement spending. Glide Path also does poorly. They usually advise less than 50% stock, rebalance yearly, and have even less stock as you get older. Having more stocks, spending bonds & cash first before ever touching stocks, and not rebalancing to an original asset allocation all increase the max safe withdrawal rate (SWR). Spend all your bonds, then spend all your stocks does almost as well as the preferred withdrawal schemes. The author thinks this is risky, because there is no safe haven from market fluctuations when your are down to spending your stocks. I agree, many people will panic and sell during bad times, thus ruining the strategy.

I am OK with using a more cumbersome methodology at the start, but ultimately I want a simplistic withdrawal scheme I can use when I get old and feeble. Or to give to my wife if I should die first. I think I can choose method A and B, but I probably need the whole book to pick them.

I would like to use a different source to get this info, as the author is somewhat pedantic. He has clearly suffered for his art, and he expects you to do the same. This is more pronounced in Ch. 1 & 2. Maybe he improves later in the book.

LiseE

  • Stubble
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  • Posts: 175
Re: Withdrawals during FIRE
« Reply #27 on: May 08, 2019, 12:05:09 PM »
following

Acastus

  • Bristles
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  • Posts: 365
  • Age: 57
Re: Withdrawals during FIRE
« Reply #28 on: May 08, 2019, 12:44:15 PM »
Final thoughts on Living Off Your Money

A good asset withdrawal strategy can net an additional 0.5% safe withdrawal. A good variable withdrawal strategy, where you change how much you take every year based on how your investments did last year, can net another 0.5% safe withdrawal. So you can spend an extra 25% compared to the 4% SWR if you do it correctly. This is definitely worth pursuing for me. I want to read a few more authors than "some guy I found on the internet." I will at least look for this book in the library and maybe buy a copy.