withdrawals & nest egg depletion

[SparkyPeanut]

Do you (or would you) feel comfortable keeping your money invested (perhaps 60/40) if you are retired and withdrawing a percentage (perhaps 4%) each year? 

How is one supposed to relax and enjoy retirement when you see your nest egg deplete day after day while you are systematically withdrawing?

How would you withdraw - have the pension provider do it automatically? I feel like this would be the best way. Unemotionally.

I know some say to take withdrawals from cash bucket while market is down but that must be stressful as well. How do you know how long a down market will continue - and it may happen many times during your retirement. Can you imagine being 80+ trying to decide how to withdraw during market turbulence. Stressful.

[Villanelle]

I think one way you are supposed to relax and enjoy is understanding the basic 4% rule, and the statistical security that should provide.

The other big thing that I'm going to rely on is my flexibility.  I'm not going to blindly withdraw my 4% plus inflation.  If the market is shit, I will flex my choices.  Maybe a staycation this year instead of planned travel. Maybe we do meatless Mondays. Or put off buying a new sofa for another year or cut back on sparkling water consumption.   Maybe we even take on a small part time job or two.  Even bringing in a couple thousand a year is a couple thousand less I would need to withdraw.  An cutting costs by a couple thousand is another couple thousand I don't need to withdraw. 

And if you have concerns with your stress about that, then 60/40 may not be for you, and 4%  might not be either.  Maybe 3.5% or 3%.  You just have to decide how to balance working longer with that extra cushion.  I have enough faith in our ability to apply common sense and adapt that I don't feel it is necessary.  And it does help that we aren't planning a lean FIRE so there is fat to trim.

[cool7hand]

How is one supposed to relax and enjoy retirement when you see your nest egg deplete day after day while you are systematically withdrawing?

How would you withdraw - have the pension provider do it automatically? I feel like this would be the best way. Unemotionally.

[shureShote]

I think it’s good to be thinking about this, but I’d recommend asking it (to yourself) with a more positive spin. Not so much about the stress, but more data. What would your portfolio look like after a couple bad years with this or that withdrawal plan, and so on. Change your AA on paper and do it again.

Villanelle's post is great. You should find that you have a lot of options if you stay flexible, and a bunch of those options leave you in a good situation.

[Villanelle]

How is one supposed to relax and enjoy retirement when you see your nest egg deplete day after day while you are systematically withdrawing?

How would you withdraw - have the pension provider do it automatically? I feel like this would be the best way. Unemotionally.

I think this would be the worst way.  Because it takes out your ability to apply common sense.  Market is way down?  Evaluate your expenses and see what you can cut so you don't need to withdraw quite as much and "sell low". Then shift the planned withdraw down a bit.  If you have a provider do it automatically, you lose one of the easiest ways to increase your chances of success, IMO, which is applying your ability to flex things and adapt your plan to the market. 

(You mention a "pension provider", but it seems like are you talking about withdrawing from your own equities or other accounts, but maybe I'm misunderstanding.)

[terran]

If you're early retired and withdrawing 4% you HAVE to keep your money invested, otherwise you'll run out in 25 years (less if you take 4% the first year and then take that amount adjusted for inflation as the 4% "rule" suggests). The markets suddenly going down is the big in your face danger that might kill your retirement if its bad enough and poorly timed, but inflation and the march of time are slow and silent dangers that will without a doubt kill your retirement if you don't have the outsized returns that only investing and maybe real estate can deliver. 

[stoaX]

Do you (or would you) feel comfortable keeping your money invested (perhaps 60/40) if you are retired and withdrawing a percentage (perhaps 4%) each year? 

How is one supposed to relax and enjoy retirement when you see your nest egg deplete day after day while you are systematically withdrawing?

How would you withdraw - have the pension provider do it automatically? I feel like this would be the best way. Unemotionally.

I know some say to take withdrawals from cash bucket while market is down but that must be stressful as well. How do you know how long a down market will continue - and it may happen many times during your retirement. Can you imagine being 80+ trying to decide how to withdraw during market turbulence. Stressful.

The nest egg doesn't necessarily go down. If your portfolio earned more than what you withdraw your nest egg could increase.

My net worth is greater now than when I retired 3 years ago.

Managing your money in your old age... that's another topic.  But that problem exists whether you are FI or not.

[RWD]

https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/