Author Topic: Rent to withdraw ratio?  (Read 1144 times)

vagavince

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Rent to withdraw ratio?
« on: September 26, 2020, 04:26:25 AM »
There is the typical recommendation to keep rent below 30% of income when you are working. My has been 20-30% take home in HCOL.

I was wondering what would be the recommendation after you retire and live on withdraw. Obviously lower the better. But what would be an appropriate guideline to follow? What % of your withdraw (4% or whatever your target is) should go towards rent?

Malcat

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Re: Rent to withdraw ratio?
« Reply #1 on: September 26, 2020, 05:20:24 AM »
The better you understand your own finances and personal risk, the more you will see that there all guidelines are extremely rough and have little to no bearing on what you should do as an individual.

Usually guidelines and rules of thumb are used to justify spending more than you really need to.

terran

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Re: Rent to withdraw ratio?
« Reply #2 on: September 26, 2020, 08:21:52 AM »
I'm not sure it matters. Spend as much or as little as you want given your withdrawal rate and other spending priorities. Everything is a trade off, so decide how much you can spend based on what else you want to pay for.

Mr. Green

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Re: Rent to withdraw ratio?
« Reply #3 on: September 26, 2020, 08:18:13 PM »
It can be as simple as "total planned spending - all other expenses = how much you can spend on rent".  As an example, we plan to spend 40k a year. Subtracting all our other expenses, we could spend 24k a year on rent without a problem. That comes out to 60% of our planned spending. We haven't applied for any housing run by big companies so I can't say whether that percentage would create problems getting approved for a lease.

spartana

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Re: Rent to withdraw ratio?
« Reply #4 on: September 26, 2020, 08:24:20 PM »
I currently own but if I we're renting I'd likely be in the 50% or even higher range of my FIRE budget. I spend very little on everything else so I wouldn't see the need to reduce rent expenses if I didn't want to. As long as I wasn't going over my total budget I don't think any catagory matters. However, landlords don't seem to agree with my logic and often won't rent to you if your rent amount will be over 30% of your income.
« Last Edit: September 26, 2020, 08:27:26 PM by spartana »

rmorris50

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Re: Rent to withdraw ratio?
« Reply #5 on: September 27, 2020, 06:47:22 AM »
I currently own but if I we're renting I'd likely be in the 50% or even higher range of my FIRE budget. I spend very little on everything else so I wouldn't see the need to reduce rent expenses if I didn't want to. As long as I wasn't going over my total budget I don't think any catagory matters. However, landlords don't seem to agree with my logic and often won't rent to you if your rent amount will be over 30% of your income.
When I was in between jobs and trying to rent a place most apartments wanted to see x times monthly rent in a bank account, I want to say 20x or something like that.

I hate rules of thumbs and withdrawal rates. Better to do a cash flow projection in a spreadsheet assuming you live to however long you think that might be. That was the most insightful thing Iíve ever done, much more than tracking NW or relying on rules of thumb.


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spartana

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Re: Rent to withdraw ratio?
« Reply #6 on: September 29, 2020, 08:00:23 AM »
I currently own but if I we're renting I'd likely be in the 50% or even higher range of my FIRE budget. I spend very little on everything else so I wouldn't see the need to reduce rent expenses if I didn't want to. As long as I wasn't going over my total budget I don't think any catagory matters. However, landlords don't seem to agree with my logic and often won't rent to you if your rent amount will be over 30% of your income.
When I was in between jobs and trying to rent a place most apartments wanted to see x times monthly rent in a bank account, I want to say 20x or something like that.

I hate rules of thumbs and withdrawal rates. Better to do a cash flow projection in a spreadsheet assuming you live to however long you think that might be. That was the most insightful thing I’ve ever done, much more than tracking NW or relying on rules of thumb.


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I had a similar problem when I tried to rent after FIRE and between houses. Even with a stash it seemed most landlords were unwilling to rent to someone much younger then tradition retirement age who was living off of investments without a job income.
« Last Edit: September 29, 2020, 08:02:05 AM by spartana »

soccerluvof4

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Re: Rent to withdraw ratio?
« Reply #7 on: October 01, 2020, 03:36:59 AM »
Yea i have to agree it comes down to first do you want to do a 4% withdrawal, do your budget and live off of whats left. If your budget is to liberal then reduce your withdrawal but if its to high then your at a crossroads of what gives to stay under 4%. Even 4% is just a guideline however.