Author Topic: What's your withdrawal strategy?  (Read 6006 times)

Mrbeardedbigbucks

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What's your withdrawal strategy?
« on: March 02, 2018, 05:33:52 AM »
Hey everyone,

This is my first official post on the Post-Fire thread. I'll be leaving my full time job at the end of the month. The wife and I will officially start using our assets as part of our income in May.  We've done a good amount of planning and feel confident that we can pull this off but I'm still having a hard time wrapping my head around a withdrawal strategy. I'm not concerned about what accounts to withdraw from but more so the mechanics of actually taking withdrawals.

Here's our mini case study:

I'm 44 and my wife is 39. We have about 400k in cash/stock/ETF and 800k in retirement accounts. Asset allocation is roughly 70% stock/20% bonds/10% cash & CDs. Our expenses are about 49k annually but only 33k will come from our investments. Some part-time work will cover the remaining income. So our annual withdrawal rate will be around 2.8%.

We'll withdraw from our non-retirement cash/stock/ETF investments first but my question is, how do people go about taking withdrawals? Do you look at your account every month and just withdraw .23% (2.8/12=.23%) off your cash? Do you actually sell stock to free up cash when markets are high and use it as an opportunity to rebalance? Should I take all withdrawal needs from my cash for the first 2-3 years to mitigate sequence of returns risk?

I'm just trying to get a sense of how you post FIRE folks are withdrawing off your assets. There's a good chance this has already been covered somewhere on this great big forum so please link me to that discussion but I'd still like to hear about you personal withdrawal strategy too. Thanks for your comments!

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Re: What's your withdrawal strategy?
« Reply #1 on: March 02, 2018, 06:19:13 AM »
I just withdraw 2,000 in cash each month from my main (taxable) brokerage account.  I've set my investments up such that my dividends, distributions and interest cover 120% or so of my annual budget.  Easy Peasy.

I wouldn't take 0.23% as that would be a variable withdrawal.  Would take 33k/12 per month instead.  YMMV.

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Re: What's your withdrawal strategy?
« Reply #2 on: March 02, 2018, 12:53:24 PM »
Wow, I find this rather intriguing. I have a few questions...

1) It seems your combined total assets are circa 1.2 Million?

2) Do you have any debt, such as car payment or mortgage (or children)?

3) Do you have concerns that this wouldn't be enough if you both lived well past 80?

4) Have you and your wife been planning this since the beginning? I would assume so as you all have saved up a great deal rather quickly.

I have seen quite a few financial articles stating that 1 million in might not be enough when retiring at 62 so seeing someone pull it off at 44 is pretty neat. However, I do understand the $16,000 annual part time work helps.

Good luck and congratulations, this is an eye opener for me!




secondcor521

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Re: What's your withdrawal strategy?
« Reply #3 on: March 02, 2018, 01:42:24 PM »
Hey everyone,

This is my first official post on the Post-Fire thread. I'll be leaving my full time job at the end of the month. The wife and I will officially start using our assets as part of our income in May.  We've done a good amount of planning and feel confident that we can pull this off but I'm still having a hard time wrapping my head around a withdrawal strategy. I'm not concerned about what accounts to withdraw from but more so the mechanics of actually taking withdrawals.

Here's our mini case study:

I'm 44 and my wife is 39. We have about 400k in cash/stock/ETF and 800k in retirement accounts. Asset allocation is roughly 70% stock/20% bonds/10% cash & CDs. Our expenses are about 49k annually but only 33k will come from our investments. Some part-time work will cover the remaining income. So our annual withdrawal rate will be around 2.8%.

We'll withdraw from our non-retirement cash/stock/ETF investments first but my question is, how do people go about taking withdrawals? Do you look at your account every month and just withdraw .23% (2.8/12=.23%) off your cash? Do you actually sell stock to free up cash when markets are high and use it as an opportunity to rebalance? Should I take all withdrawal needs from my cash for the first 2-3 years to mitigate sequence of returns risk?

I'm just trying to get a sense of how you post FIRE folks are withdrawing off your assets. There's a good chance this has already been covered somewhere on this great big forum so please link me to that discussion but I'd still like to hear about you personal withdrawal strategy too. Thanks for your comments!

I've been FIREd about 2 years now.  For the past two years I've basically been spending down cash to, as you note, mitigate sequence of returns risk.  In my case, child support represents about 25% of my spending and ends in about 28 months.

In a few months, I will start selling about three months worth of expenses at a time from my taxable account and move that into my savings account.  I have a monthly "paycheck" transfer from my savings to my checking.

I have a Roth pipeline in progress and when my taxable account is depleted I will switch the withdrawals source from my taxable account to my Roth.

As far as the comment goes about selling stocks, it is easy to get confused about this when starting to look at the practicalities of FIRE.  What I do conceptually is maintain my chosen AA in my portfolio while I'm withdrawing from it.  So depending on the relative performance of stocks and bonds and on how my portfolio is out of whack one way or the other, I would sell from the overperforming and/or overweighted asset class to generate my withdrawal, then rebalance further if needed.  Since I tend to keep my portfolio very close to my chosen AA, what could easily happen is a proportional sell off.  So if my $X portfolio were 80/20 and I wanted to withdraw at a 2.8% rate every three months, I would sell 2.8%/4 * $X * 80% of stocks and 2.8%/4 * $X * 20% of bonds.

Within reasonable limits, I think you can keep your AA, rebalancing frequency, withdrawal rate, withdrawal frequency as relatively independent variables.  AA and withdrawal rate are the two that are most closely tied together, but that is discussed frequently here and on other blogs.  At a 2.8% withdrawal rate and being relatively young, choosing any reasonable set of values for these variables should work fine.

Good luck!

jeroly

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Re: What's your withdrawal strategy?
« Reply #4 on: March 02, 2018, 01:44:38 PM »
Wow, I find this rather intriguing. I have a few questions...

1) It seems your combined total assets are circa 1.2 Million?

2) Do you have any debt, such as car payment or mortgage (or children)?

3) Do you have concerns that this wouldn't be enough if you both lived well past 80?

4) Have you and your wife been planning this since the beginning? I would assume so as you all have saved up a great deal rather quickly.

I have seen quite a few financial articles stating that 1 million in might not be enough when retiring at 62 so seeing someone pull it off at 44 is pretty neat. However, I do understand the $16,000 annual part time work helps.

Good luck and congratulations, this is an eye opener for me!

1.  The "$1 million might not be enough" is certainly true if you require more than $40K/year.  If they OP only needs $33K including health insurance, they're spending considerably less than the target audience for the articles of that ilk.  Even those scare articles, though, tend to advocate for something like a 3% to 3.5% withdrawal rate, and the OP is being even more conservative than that.

2.  I'm somewhat concerned whether the OP is in fact taking into account the actual current cost of healthcare including copays, deductibles, etc - even if you get ACA subsidies, I would think you'd want to budget $5k/year.  If the OP doesn't get ACA subsidies for at least part of the pre-Medicare years (which one may want to consider a reasonable possibility given the way the current administration wants to dismantle the ACA system), you're looking at up to $25K/year for a couple in today's $$$ and that's assuming you don't have pre-existing conditions.


Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #5 on: March 02, 2018, 04:11:32 PM »
I just withdraw 2,000 in cash each month from my main (taxable) brokerage account.  I've set my investments up such that my dividends, distributions and interest cover 120% or so of my annual budget.  Easy Peasy.

I wouldn't take 0.23% as that would be a variable withdrawal.  Would take 33k/12 per month instead.  YMMV.

I was thinking about a fixed withdrawal of 33k annually but if we do .23% per month, this would be a variable dollar amount every month but a fixed 2.8% per year. Historically 2.8% seems to be a safe withdrawal rate. If our monthly income drops because our assets drops in value due to a market decline, we can easily pick up more hours with the type of part time work we do from home and increase our income. If we have a hard time picking up more work and/or just don't want to work more, I think your approach of a fixed 33k annually would still work out in the long run.

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #6 on: March 02, 2018, 04:13:08 PM »
Hey everyone,

This is my first official post on the Post-Fire thread. I'll be leaving my full time job at the end of the month. The wife and I will officially start using our assets as part of our income in May.  We've done a good amount of planning and feel confident that we can pull this off but I'm still having a hard time wrapping my head around a withdrawal strategy. I'm not concerned about what accounts to withdraw from but more so the mechanics of actually taking withdrawals.

Here's our mini case study:

I'm 44 and my wife is 39. We have about 400k in cash/stock/ETF and 800k in retirement accounts. Asset allocation is roughly 70% stock/20% bonds/10% cash & CDs. Our expenses are about 49k annually but only 33k will come from our investments. Some part-time work will cover the remaining income. So our annual withdrawal rate will be around 2.8%.

We'll withdraw from our non-retirement cash/stock/ETF investments first but my question is, how do people go about taking withdrawals? Do you look at your account every month and just withdraw .23% (2.8/12=.23%) off your cash? Do you actually sell stock to free up cash when markets are high and use it as an opportunity to rebalance? Should I take all withdrawal needs from my cash for the first 2-3 years to mitigate sequence of returns risk?

I'm just trying to get a sense of how you post FIRE folks are withdrawing off your assets. There's a good chance this has already been covered somewhere on this great big forum so please link me to that discussion but I'd still like to hear about you personal withdrawal strategy too. Thanks for your comments!

I've been FIREd about 2 years now.  For the past two years I've basically been spending down cash to, as you note, mitigate sequence of returns risk.  In my case, child support represents about 25% of my spending and ends in about 28 months.

In a few months, I will start selling about three months worth of expenses at a time from my taxable account and move that into my savings account.  I have a monthly "paycheck" transfer from my savings to my checking.

I have a Roth pipeline in progress and when my taxable account is depleted I will switch the withdrawals source from my taxable account to my Roth.

As far as the comment goes about selling stocks, it is easy to get confused about this when starting to look at the practicalities of FIRE.  What I do conceptually is maintain my chosen AA in my portfolio while I'm withdrawing from it.  So depending on the relative performance of stocks and bonds and on how my portfolio is out of whack one way or the other, I would sell from the overperforming and/or overweighted asset class to generate my withdrawal, then rebalance further if needed.  Since I tend to keep my portfolio very close to my chosen AA, what could easily happen is a proportional sell off.  So if my $X portfolio were 80/20 and I wanted to withdraw at a 2.8% rate every three months, I would sell 2.8%/4 * $X * 80% of stocks and 2.8%/4 * $X * 20% of bonds.

Within reasonable limits, I think you can keep your AA, rebalancing frequency, withdrawal rate, withdrawal frequency as relatively independent variables.  AA and withdrawal rate are the two that are most closely tied together, but that is discussed frequently here and on other blogs.  At a 2.8% withdrawal rate and being relatively young, choosing any reasonable set of values for these variables should work fine.

Good luck!

This was really helpful, thank you.

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #7 on: March 02, 2018, 04:33:20 PM »
Wow, I find this rather intriguing. I have a few questions...

1) It seems your combined total assets are circa 1.2 Million?

2) Do you have any debt, such as car payment or mortgage (or children)?

3) Do you have concerns that this wouldn't be enough if you both lived well past 80?

4) Have you and your wife been planning this since the beginning? I would assume so as you all have saved up a great deal rather quickly.

I have seen quite a few financial articles stating that 1 million in might not be enough when retiring at 62 so seeing someone pull it off at 44 is pretty neat. However, I do understand the $16,000 annual part time work helps.

Good luck and congratulations, this is an eye opener for me!

1. Roughly 1.2million, yes.

2. Only debt is our mortgage, about $800 per month. No other debt or children.

3. Sure, there's a lot of risk when you retire young but that's why we're being flexible. We can pick up more work and/or have no problem moving out of the U.S. for 1/2 the year or more to a country with a much lower cost of living. We've used the Fidelity retirement analysis which allows you to vary your spending as you get older, it also assumes higher inflation of 5.5% per year for healthcare and 2.5% for other expenses. The analysis gives us successful results through age 95. We also used CfireSim with 100% success rate. I know planning tools aren't full proof but again, that's why we will be flexible.

4. We haven't been planning our early escape from the work force until about 2 years ago but we've been unintentional mustachians for about 10 years. Opted to live in a relatively small house and drive used Subarus and of course not having kids helps a lot. I've also been lucky to have a really good income for the past 8 years and my wife has a state retirement pension at age 60. We're also not social security doomsdayers and believe we will have some social security income when we turn 62. I've calculated our social security income and reduce it by 25% assuming there is a reduction in benefits but it's highly likely there will still be some benefits when we turn 62.

I think there's a lot of people here and FIRE bloggers with similar situations that are retiring at this age. We've saved a lot and keep our expenses low although I believe 50k annual expenses might be on the higher end on these forums!
« Last Edit: March 10, 2018, 04:08:17 AM by Mrbeardedbigbucks »

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #8 on: March 02, 2018, 05:02:07 PM »
Wow, I find this rather intriguing. I have a few questions...

1) It seems your combined total assets are circa 1.2 Million?

2) Do you have any debt, such as car payment or mortgage (or children)?

3) Do you have concerns that this wouldn't be enough if you both lived well past 80?

4) Have you and your wife been planning this since the beginning? I would assume so as you all have saved up a great deal rather quickly.

I have seen quite a few financial articles stating that 1 million in might not be enough when retiring at 62 so seeing someone pull it off at 44 is pretty neat. However, I do understand the $16,000 annual part time work helps.

Good luck and congratulations, this is an eye opener for me!

1.  The "$1 million might not be enough" is certainly true if you require more than $40K/year.  If they OP only needs $33K including health insurance, they're spending considerably less than the target audience for the articles of that ilk.  Even those scare articles, though, tend to advocate for something like a 3% to 3.5% withdrawal rate, and the OP is being even more conservative than that.

2.  I'm somewhat concerned whether the OP is in fact taking into account the actual current cost of healthcare including copays, deductibles, etc - even if you get ACA subsidies, I would think you'd want to budget $5k/year.  If the OP doesn't get ACA subsidies for at least part of the pre-Medicare years (which one may want to consider a reasonable possibility given the way the current administration wants to dismantle the ACA system), you're looking at up to $25K/year for a couple in today's $$$ and that's assuming you don't have pre-existing conditions.

1. Yes, our goal it to keep our withdrawal rate below 3% indefinitely but there might be some years when we spend more. We actually spend about 49-50k per year but only 33k will come from our assets. We both work part-time, about 12-14 hours a week from home.

2. Our ACA silver plan is $130 per month with a $1400 deductible, the out of pocket max $2900 year.  Knock on wood but we've been pretty healthy. No medications other than the wifes birth control (don't want to take on any walking debt) and have only visited the doctor once in the last couple years for a broken finger (trying to dunk a basketball drunk of all things).

The fate of the ACA does concern us but we decided we're not going stay at work until it's sorted out. That could take years. If this conservative government takes away the ACA or the exchanges spiral out of control, we'll cut back on our travel budget or go back to work or increase our part time hours. If this is temporary early retirement or just a "downshift" then so be it. 
« Last Edit: March 02, 2018, 05:25:47 PM by Mrbeardedbigbucks »

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #9 on: March 05, 2018, 11:32:39 AM »
The other consideration is ACA subsidies. We’ll have much less than 75k in income so we won’t pay tax on the realized gains but any time I realize gains in our taxable account, our MAGI goes up and subsidies go down. For at least 2018 I’ll withdraw from cash but in the future I’ll want to rebalance or might be forced to realize gains if and when our cash runs out.

 Anyone else face this first world problem? Or do I not fully understand the relationship between MAGI and ACA subsidies?

secondcor521

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Re: What's your withdrawal strategy?
« Reply #10 on: March 05, 2018, 02:51:35 PM »
The other consideration is ACA subsidies. We’ll have much less than 75k in income so we won’t pay tax on the realized gains but any time I realize gains in our taxable account, our MAGI goes up and subsidies go down. For at least 2018 I’ll withdraw from cash but in the future I’ll want to rebalance or might be forced to realize gains if and when our cash runs out.

 Anyone else face this first world problem? Or do I not fully understand the relationship between MAGI and ACA subsidies?

Most early retirees face it, since the typical annual spending rate of most early retirees is in the ballpark of the ACA subsidy ranges, and over the very long run, annual spending and taxable income resemble each other.

I look at it as having five different tax schemes attached to my AGI:

1.  Federal income tax.
2.  State income tax.
3.  ACA premium tax/subsidy.
4.  ACA CSR subsidy.
5.  FAFSA tax/subsidy.

So even on a modest income, an increase in AGI of $1 may mean 12 cents to the feds, 8 cents to my state, another 6 cents in lost ACA subsidy, another 5? cents in lost CSR subsidy, and 30+ cents in lost financial aid.  The various entities have put into place a lot of incentive to be low income.

ACA subsidies are based on AGI, exist between 100% and 400% of the FPL, and there are several bend points in the subsidy curve to be aware of.  Also, there are three levels of CSR subsidy that have income breakpoints.

Padonak

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Re: What's your withdrawal strategy?
« Reply #11 on: March 05, 2018, 04:18:10 PM »
The other consideration is ACA subsidies. We’ll have much less than 75k in income so we won’t pay tax on the realized gains but any time I realize gains in our taxable account, our MAGI goes up and subsidies go down. For at least 2018 I’ll withdraw from cash but in the future I’ll want to rebalance or might be forced to realize gains if and when our cash runs out.

 Anyone else face this first world problem? Or do I not fully understand the relationship between MAGI and ACA subsidies?

Most early retirees face it, since the typical annual spending rate of most early retirees is in the ballpark of the ACA subsidy ranges, and over the very long run, annual spending and taxable income resemble each other.

I look at it as having five different tax schemes attached to my AGI:

1.  Federal income tax.
2.  State income tax.
3.  ACA premium tax/subsidy.
4.  ACA CSR subsidy.
5.  FAFSA tax/subsidy.

So even on a modest income, an increase in AGI of $1 may mean 12 cents to the feds, 8 cents to my state, another 6 cents in lost ACA subsidy, another 5? cents in lost CSR subsidy, and 30+ cents in lost financial aid.  The various entities have put into place a lot of incentive to be low income.

ACA subsidies are based on AGI, exist between 100% and 400% of the FPL, and there are several bend points in the subsidy curve to be aware of.  Also, there are three levels of CSR subsidy that have income breakpoints.

This is an excellent way to think about AGI vs actual income. I don't have anything to add right now, just posting to follow.

DreamFIRE

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Re: What's your withdrawal strategy?
« Reply #12 on: March 05, 2018, 05:43:00 PM »
ACA actually uses MAGI, not AGI.

https://www.healthcare.gov/glossary/modified-adjusted-gross-income-magi/

For some people, there can be a big difference.  The difference is significant enough for me that I had to change my original retirement plan because my MAGI was going to be significantly higher than my AGI using my original road map.

ol1970

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Re: What's your withdrawal strategy?
« Reply #13 on: March 07, 2018, 09:11:47 AM »
My withdraw strategy is a little different than most because I'm a wimp when it comes to taking big risk once I've got an abundance of wealth, but here is mine:

I own a % of an apartment complex that cash flows after taxes about $35,000 a year, this goes to towards my expenses
I have about 30% of my net worth (not including primary paid for residence of significant value) invested in preferred stocks and actual bonds (not a bond fund).  I give myself a paycheck quarterly that is enough when combined with my rental income to fund my expenses of about $12k + month.  The reality is I'm still saving money every year on this income level.  The other 70% of my net worth I keep invested in the market and various alternative investments, with the intention that I never will need to touch the principle (of either).  The math says I could spend significantly more but I don't see the need, I'm very happy as is.  I fully realize that I'll be able to be very generous throughout my lifetime and upon my demise, and I'm totally cool with that vs. inflating my already luxurious (to me) lifestyle, or continuing to take risk to earn more dollars I don't need.  I don't factor in SS down the road but maybe that will be my offset against inflation. 

MasterStache

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Re: What's your withdrawal strategy?
« Reply #14 on: March 08, 2018, 07:26:06 AM »
Pull and pray?

Sorry couldn't resist.

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #15 on: March 08, 2018, 09:07:18 AM »
Pull and pray?

Sorry couldn't resist.

That’s hilarious.

Come to think of it my wife asked me what my withdrawal strategy was when we first met.

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Re: What's your withdrawal strategy?
« Reply #16 on: March 09, 2018, 07:08:37 AM »
You've probably run across it, but I thought McClung's "Living Off Your Money" does a nice job of presenting a comparative analysis of a range of strategies.  I don't know of anything quite like is, as most books and other resources are so focused on investing and how much you need, rather than the mechanics of putting your money to use after retirement. 

And there are threads discussing it on Bogleheads and MMM fora

TheWifeHalf

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Re: What's your withdrawal strategy?
« Reply #17 on: March 09, 2018, 06:51:19 PM »
The plan:
TheHusbandHalf will retire Jan, 2019. He will be 62 1/2.  We will live on tIRA withdrawals and will start to convert tIRA to Roth.

We will do that for a few years, then in '22, Railroad Retirement (like Social Security) will begin. We will continue to convert to Roth, and live off withdrawals and RR. Tax on the tIRA with drawals will be from a stash. One of us is going to be a single, and pay higher taxes, so payiong taxes on converting now, at 22%, makes sense to us.

Then in '27, RMDs will start and we are thinking the converting will be finished.

Anyway, that's the plan.

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #18 on: March 10, 2018, 04:06:55 AM »
You've probably run across it, but I thought McClung's "Living Off Your Money" does a nice job of presenting a comparative analysis of a range of strategies.  I don't know of anything quite like is, as most books and other resources are so focused on investing and how much you need, rather than the mechanics of putting your money to use after retirement. 

And there are threads discussing it on Bogleheads and MMM fora

Thank you, I’ll check that book out.

 I haven’t come across any specific threads on actually taking withdrawals from assets. I’ve read plenty on which accounts to take withdrawals from but not how to free up the cash you need on a monthly basis. I’m probably over complicating this concept which I can do sometimes.

If someone lives off of dividend paying stocks or a ladder of fixed income investments then it’s pretty straight forward where your monthly income come from. In our situation in a taxable account  have cash/CD’s in one bucket and mainly ETF’s in another bucket. I guess what I need to know, does it make sense to immediately start taking withdrawals from cash/CD’s or sell a small amount of ETF shares or a combo of both.

I think secondcor521 response pointed me in the right direction.

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #19 on: March 10, 2018, 04:16:35 AM »
The plan:
TheHusbandHalf will retire Jan, 2019. He will be 62 1/2.  We will live on tIRA withdrawals and will start to convert tIRA to Roth.

We will do that for a few years, then in '22, Railroad Retirement (like Social Security) will begin. We will continue to convert to Roth, and live off withdrawals and RR. Tax on the tIRA with drawals will be from a stash. One of us is going to be a single, and pay higher taxes, so payiong taxes on converting now, at 22%, makes sense to us.

Then in '27, RMDs will start and we are thinking the converting will be finished.

Anyway, that's the plan.

Thank you for the response but I’m more looking for the mechanics of freeing up the cash you need for your withdrawals every month and not your various income sources  or account types you’re withdrawing from. See secondcor521 response. This is the kind of info I’m looking for but I appreciate your input.

Shane

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Re: What's your withdrawal strategy?
« Reply #20 on: March 10, 2018, 04:57:15 AM »
Wow, I find this rather intriguing. I have a few questions...

1) It seems your combined total assets are circa 1.2 Million?

2) Do you have any debt, such as car payment or mortgage (or children)?

3) Do you have concerns that this wouldn't be enough if you both lived well past 80?

4) Have you and your wife been planning this since the beginning? I would assume so as you all have saved up a great deal rather quickly.

I have seen quite a few financial articles stating that 1 million in might not be enough when retiring at 62 so seeing someone pull it off at 44 is pretty neat. However, I do understand the $16,000 annual part time work helps.

Good luck and congratulations, this is an eye opener for me!

1.  The "$1 million might not be enough" is certainly true if you require more than $40K/year.  If they OP only needs $33K including health insurance, they're spending considerably less than the target audience for the articles of that ilk.  Even those scare articles, though, tend to advocate for something like a 3% to 3.5% withdrawal rate, and the OP is being even more conservative than that.

2.  I'm somewhat concerned whether the OP is in fact taking into account the actual current cost of healthcare including copays, deductibles, etc - even if you get ACA subsidies, I would think you'd want to budget $5k/year.  If the OP doesn't get ACA subsidies for at least part of the pre-Medicare years (which one may want to consider a reasonable possibility given the way the current administration wants to dismantle the ACA system), you're looking at up to $25K/year for a couple in today's $$$ and that's assuming you don't have pre-existing conditions.

1. Yes, our goal it to keep our withdrawal rate below 3% indefinitely but there might be some years when we spend more. We actually spend about 49-50k per year but only 33k will come from our assets. We both work part-time, about 12-14 hours a week from home.

2. Our ACA silver plan is $130 per month with a $1400 deductible, the out of pocket max $2900 year.  Knock on wood but we've been pretty healthy. No medications other than the wifes birth control (don't want to take on any walking debt) and have only visited the doctor once in the last couple years for a broken finger (trying to dunk a basketball drunk of all things).

The fate of the ACA does concern us but we decided we're not going stay at work until it's sorted out. That could take years. If this conservative government takes away the ACA or the exchanges spiral out of control, we'll cut back on our travel budget or go back to work or increase our part time hours. If this is temporary early retirement or just a "downshift" then so be it.

@Mrbeardedbigbucks, Keep in mind, if the ACA goes away or for some other reason the cost of insuring your health in the US skyrockets, another strategy might be to just leave the country for awhile.

In many parts of the world it's still possible to pay out of pocket for medical expenses, even for major surgeries and long hospital stays, sometimes for far less than the premiums + deductible on a health insurance policy in the US. While we were in Kuala Lumpur a few months ago, my wife saw a doctor at a local clinic to get treated for a yeast infection. The cost of the exam plus the medication was ~US$6. A friend who lives in China recently had major surgery at a big city hospital. She spent some days in the ICU, then two weeks recovering in the hospital after her surgery. The doctor who operated on my friend spoke perfect English, as he had been educated at a US medical school. The total bill for the whole thing came out to ~US$4K. Last year my wife went to a dentist in Hoi An, Vietnam and got 3 crowns made and installed for ~US$600.

My point is just to get you to think about a possible ACA meltdown in a different way. Instead of *cutting back* on travel, another strategy might be to leave the US, at least temporarily, and actually travel more or relocate to a place(s) where COL is lower and health care is affordable enough that you can just pay out of pocket.

Since you guys work from home, maybe you could continue doing your part time jobs from somewhere overseas with a good internet connection? As we've been traveling for the past 14 months, we've met plenty of people who are working remotely at jobs in the US, UK, Australia, etc...

Just something to keep in mind.

Shane

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Re: What's your withdrawal strategy?
« Reply #21 on: March 10, 2018, 05:38:48 AM »
Our withdrawal strategy is pretty simple.

In May, 2016 we FIRED with about one year's living expenses ($40K) in cash and the rest invested in VTSAX/VTI. About 2/3 of our stash is in a taxable brokerage account which is linked to our online savings account. All dividends from our taxable brokerage account automatically get deposited into savings. Our credit cards are linked to the online savings account, so they automatically get paid in full on the due date each month.

In our second year of FIRE we sold 100 shares of VTI, twice, about six months apart, for a total of ~$27K. That plus dividends of about $13K was plenty for our family of three to travel around the world for the entire year. Right now, we're spending ~$40K/year, which is a WR of ~3.3%.

In early 2019, we'll start collecting my wife's SS benefits, which will be equal to about 2% of our yearly spending, at which time we'll be able to either cut back to only spending dividends from our taxable account or else increase our spending by ~$18K/year...

Our tIRAs and Roths are still set up to reinvest dividends. We're hoping to not have to touch the retirement accounts for at least 20 or 30 years, hopefully never. In 2017 we converted $11K in my wife's tIRA to Roth without paying any US taxes and only ~$1K in state tax.

As our income is low, we qualify for Medicaid in our home state in the US. Just in case one of us gets really sick or we get into an accident, we've also got a travel insurance policy through World Nomads that will cover any emergency medical costs and also to fly us back to the US in the event one of us is really sick and needs on going medical care. The World Nomads travel insurance costs us about $150/month. Luckily, we've all been healthy for the past year, so we've just paid out of pocket to see the dentist and for a couple of doctors visits.

2Birds1Stone

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Re: What's your withdrawal strategy?
« Reply #22 on: March 10, 2018, 06:22:56 AM »
McClungs "Living Off Your Money" was a great read.

There is an analysis done on his method with a few tweaks over on ERNow blog

https://earlyretirementnow.com/2017/04/19/the-ultimate-guide-to-safe-withdrawal-rates-part-13-dynamic-stock-bond-allocation-through-prime-harvesting/

Excellent read.

spokey doke

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Re: What's your withdrawal strategy?
« Reply #23 on: March 10, 2018, 08:16:59 AM »
McClungs "Living Off Your Money" was a great read.

There is an analysis done on his method with a few tweaks over on ERNow blog

https://earlyretirementnow.com/2017/04/19/the-ultimate-guide-to-safe-withdrawal-rates-part-13-dynamic-stock-bond-allocation-through-prime-harvesting/

Excellent read.

Yes, I appreciated the ERNow piece, and their work in general...although I'm not sure what to make of it in the end, as they (and McClung, and Kitces, etc.) all seem to put themselves out there as the ones who REALLY take into account the relevant data in the most sensible way.  Of course in this game you have enough unknowns that it creates a pretty big space for a range of equally sensible claims/interpretations.

ERNow strikes me as a bit conservative...

FYI:

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=192105

 
« Last Edit: March 10, 2018, 08:35:16 AM by spokey doke »

Shane

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Re: What's your withdrawal strategy?
« Reply #24 on: March 10, 2018, 11:03:09 PM »
McClungs "Living Off Your Money" was a great read.

There is an analysis done on his method with a few tweaks over on ERNow blog

https://earlyretirementnow.com/2017/04/19/the-ultimate-guide-to-safe-withdrawal-rates-part-13-dynamic-stock-bond-allocation-through-prime-harvesting/

Excellent read.

@2Birds1Stone, thanks for the link to the ERNow Blog. I had heard of it before, but never actually read it. Looks like they've got a bunch of interesting articles. Reading the SWR Series now.

Mrbeardedbigbucks

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Re: What's your withdrawal strategy?
« Reply #25 on: March 11, 2018, 06:29:27 AM »
Our withdrawal strategy is pretty simple.

In May, 2016 we FIRED with about one year's living expenses ($40K) in cash and the rest invested in VTSAX/VTI. About 2/3 of our stash is in a taxable brokerage account which is linked to our online savings account. All dividends from our taxable brokerage account automatically get deposited into savings. Our credit cards are linked to the online savings account, so they automatically get paid in full on the due date each month.

In our second year of FIRE we sold 100 shares of VTI, twice, about six months apart, for a total of ~$27K. That plus dividends of about $13K was plenty for our family of three to travel around the world for the entire year. Right now, we're spending ~$40K/year, which is a WR of ~3.3%.

In early 2019, we'll start collecting my wife's SS benefits, which will be equal to about 2% of our yearly spending, at which time we'll be able to either cut back to only spending dividends from our taxable account or else increase our spending by ~$18K/year...

Our tIRAs and Roths are still set up to reinvest dividends. We're hoping to not have to touch the retirement accounts for at least 20 or 30 years, hopefully never. In 2017 we converted $11K in my wife's tIRA to Roth without paying any US taxes and only ~$1K in state tax.

As our income is low, we qualify for Medicaid in our home state in the US. Just in case one of us gets really sick or we get into an accident, we've also got a travel insurance policy through World Nomads that will cover any emergency medical costs and also to fly us back to the US in the event one of us is really sick and needs on going medical care. The World Nomads travel insurance costs us about $150/month. Luckily, we've all been healthy for the past year, so we've just paid out of pocket to see the dentist and for a couple of doctors visits.

Thank you, this was really helpful and I need to look into the medical tourism side of health care as you previously mentioned.

I know this is way off the topic of this thread but now I’m more curious about your travels. The wife and I would like to travel at least 2-3 months a year. Do you mainly travel in LCOL countries? We were thinking of getting an AirBNB for 1 month at a time to get the monthly discount and keep our accommodation costs low.  It would be more like a “slow” travel experience. We have about 500k points/miles accumulated to keep airfare costs at a minimum. How are you managing your expenses? Where have you been? How long will you travel? Feel free to PM me.

Shane

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Re: What's your withdrawal strategy?
« Reply #26 on: March 11, 2018, 08:42:36 AM »
I know this is way off the topic of this thread but now I’m more curious about your travels. The wife and I would like to travel at least 2-3 months a year. Do you mainly travel in LCOL countries? We were thinking of getting an AirBNB for 1 month at a time to get the monthly discount and keep our accommodation costs low.  It would be more like a “slow” travel experience. We have about 500k points/miles accumulated to keep airfare costs at a minimum. How are you managing your expenses? Where have you been? How long will you travel? Feel free to PM me.

@Mrbeardedbigbucks , So far, in 14 months of travel we've been to Japan, Hong Kong, Mainland China, Vietnam, Malaysia, Cambodia, New Zealand, and now we're in Greece. Some of the countries we've been to more than once. For example, Malaysia, which we used as a base to travel around SE Asia. In each country we've stayed between 1 - 3 months.

Normally we do what you said, book Airbnb apartments for at least 28 days to get the monthly discount. Some hosts offer really attractive monthly discounts, others, not so much, so you have to search the site to find the good deals. Right now, we're staying in a beautiful two bedroom apartment in a nice, walkable neighborhood in Athens where we're paying only US$738 for 31 nights.

It's funny, we also started our travels in late 2016 with a few hundred thousand CC points. Before we left home, my wife and I each opened Chase Sapphire Reserve and Chase Sapphire Preferred cards to get the sign up bonuses. It was so cheap to fly all around SE Asia and even down to NZ from Kuala Lumpur on Air Asia, that it made more economic sense to pay cash for the tickets than to use our CC points. Since we left KL, though, we've been booking all of our flights for free through the Chase UR Portal. So far, we've gotten free flights from KL to Chengdu. From Chengdu to Beijing and Beijing to Athens. Next month, we'll fly for free from Athens to Paris. In May, we'll fly for free, again, from Paris to Norway and then from Norway to Croatia. In July, we'll fly using our Chase UR points from Belgrade to London, and then, at the end of July, we'll fly from London all the way back home to Hawaii, all using our CC points. As soon as we get home, one of the first things I'm going to do is start opening more CCs to start building our points back up again. :)

If you have any more questions, feel free to ask here or you can also PM me. Happy travels!