Author Topic: Questions about withdrawals  (Read 620 times)

myfirenow

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Questions about withdrawals
« on: July 16, 2019, 02:03:46 PM »
  • I'm 37 years old and I am ready for FIRE
    I'm worried about the 30 year length at 4% SWR, so I'm going with 3.5%
    I need 2k per month, and I have 700k saved.
    I also have another 40k in Roth/IRA that should grow to about 500k assuming a 10% return in EM (could be 7-8%, but just to use a round number). I will not take any withdrawals from this account and will not show it below.

My questions are:

1. How do I go about making withdrawals?  I am looking at a system where I just pay dividends to cash and sell shares to cover the full amt. Does this make sense and how should I go about this?

2. If we do experience a down equity market, should I have a backup plan like a job or a cash/savings account so I don't have to take any withdrawals? I understand the first 5-10 years are crucial and at some point we will have a recession. With this said, I don't want to time the market and I want to FIRE now. I can work for another year and save some cash and maybe even fund my expenses for a year before portfolio withdrawals.

3. Anything I'm missing here?

Dividends:
Account                              Div Yield   Total Invested     Yr Income    Mth Income
Vanguard Total Stock   Taxable   1.84%            350,000          6,440        537
Vanguard Total Bond   Taxable   2.54%            350,000         8,890                741
                               AVG: 2.19%            700,000        15,330              1,278
            
Withdrawals:
Vanguard Total Stock   Taxable   1.31%          350,000          3,930       328
Vanguard Total Bond   Taxable   1.31%          350,000          3,930       328
                                      1.31%          700,000          7,860       655
               
                                      3.50%      Total         2,041


« Last Edit: July 16, 2019, 02:08:13 PM by myfirenow »

terran

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Re: Questions about withdrawals
« Reply #1 on: July 16, 2019, 03:23:51 PM »
I would encourage you to look at this whole series, but especially this post: https://earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/

markbike528CBX

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Re: Questions about withdrawals
« Reply #2 on: July 16, 2019, 06:07:48 PM »
  • I'm 37 years old and I am ready for FIRE
    I'm worried about the 30 year length at 4% SWR, so I'm going with 3.5%
    I need 2k per month, and I have 700k saved.
    I also have another 40k in Roth/IRA that should grow to about 500k assuming a 10% return in EM (could be 7-8%, but just to use a round number). I will not take any withdrawals from this account and will not show it below.

My questions are:

1. How do I go about making withdrawals?  I am looking at a system where I just pay dividends to cash and sell shares to cover the full amt. Does this make sense and how should I go about this?

2. If we do experience a down equity market, should I have a backup plan like a job or a cash/savings account so I don't have to take any withdrawals? I understand the first 5-10 years are crucial and at some point we will have a recession. With this said, I don't want to time the market and I want to FIRE now. I can work for another year and save some cash and maybe even fund my expenses for a year before portfolio withdrawals.

3. Anything I'm missing here?

Dividends:
Account                              Div Yield   Total Invested     Yr Income    Mth Income
Vanguard Total Stock   Taxable   1.84%            350,000          6,440        537
Vanguard Total Bond   Taxable   2.54%            350,000         8,890                741
                               AVG: 2.19%            700,000        15,330              1,278
            
Withdrawals:
Vanguard Total Stock   Taxable   1.31%          350,000          3,930       328
Vanguard Total Bond   Taxable   1.31%          350,000          3,930       328
                                      1.31%          700,000          7,860       655
               
                                      3.50%      Total         2,041
Note that 4% rule implies/includes inflation adjusted constant withdrawals. So if you have flexibility in spending, and be near 4%, then you should be great.

dandarc

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Re: Questions about withdrawals
« Reply #3 on: July 16, 2019, 06:22:30 PM »
If I'm reading this right, basically all of your investments are in a taxable investment account and you will have no other income. If that's right, then yeah - stop dividend reinvestment and sell shares as needed. Be picky about which shares you sell - you can manage your capital gains / losses pretty tightly when you're in this situation.

You may want to read up on capital gains harvesting - you might find it useful to do that with all that 0% capital gain space you'll be leaving on the table if you don't. Of course there are ACA subsidies to account for as well.

myfirenow

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Re: Questions about withdrawals
« Reply #4 on: July 17, 2019, 02:05:52 PM »
Thanks all!