FIREd just over 2 years now, early 40s with husband no kids.
1. How do you budget for major appliance replacement? I've been basically doing a simple amortization. Example: fridge + washer + dryer = ($1000/10 yrs) + ($750/10 yrs) + ($500/10 yrs) = $225/yr.
I don't. We have a basic budget for known expenses, and any surprise expenses (like the washer dies) will come out of our savings reserve if needed and replenished when we hit up the portfolio. We're talking under $1K on practically anything I could think of at this point so I literally don't even worry about it because it's such a small amount relative to our portfolio. If it's a larger expense like replacing a car or roof (which we just did last year) it just means we'll use more in that year. There is no set in stone spending any more other than just trying to keep our income below a certain threshold at the moment to meet the ACA subsidy limits.
And your estimates on how much appliances cost and how often you'll replace them - wow that is crazy! I buy basic stuff that hasn't got all the bells and whistles but they last for decades, and there's always good scratch and dent stuff out there for cheaper...
2. How do you budget for large or infrequent ticket items like a car, roof, medical emergency, nursing home, house remodel, etc? Amortize that similarly, just absorb in your annual budget, just absorb as a reduction in your large capital pool, etc?
See above. Short answer: we don't budget; it just gets added into the drawdown.
3. When you calculate your 4% withdrawal rate, is it based on what you have each year total or based on what you had when you FIRED, i.e. 4% of $1,000,000 fixed at all times (if that's your number) or 4% of $1,100,000 one year and $900,000 another year, as the market fluctuates?
We set our yearly spend based off of previous year spending. We've been tracking our expenses for years now, and I can look back at pretty much anything and figure out a comfortable yearly rate with plenty of fun stuff figured in. It is in no way linked to the 4% rule or anything (just know that it is well below a 4% draw), just set a basic budget and try to include what we know might need to be replaced/repaired coming up. In good market years, we'll be okay with following that number less strictly, in down years, we know we've got some fat to cut (or reallocate the extras to things necessary to repair/replace) without too much pain.
4. If I have $1,000,000 and 50% is in taxable accounts and 50% in retirement accounts, I assume it's still okay to withdrawal the 4% of the total from the taxable accounts only until I reach an age to begin withdrawing retirement? The taxable would get drawn down as if I was withdrawing 8%, but it should all equal out over 40 years, right?
Sounds good to me. That's the way I understood it.
5. How should I withdraw the money? Stop reinvesting dividends (2-3%) and then sell off the remainder as needed? Sell off equally among assets or do it basically to rebalance back to my % targets?
I take all dividends and LTCGs paid out of my taxable account (no more reinvesting) since they're being counted towards my income anyway. I have the rest covered from an inherited IRA - a small amount must be taken anyway due to required minimum distributions and then I pull a bit more to cover any gap. iIRAs require RMDs and are penalty free on any distributions but you may have to pay tax on them (and the distributions count towards income for tax purposes). The main reason I use the iIRA to fund the majority of my expenses is that right now, I'm in the sweet spot of paying zero taxes on everything anyway, and pulling out more money from there keeps its growth slower or even depletes it first (which will minimize the tax hit as I age and have to take my own IRA distributions).
6. If I have a chunk of cash coming back to me that I don't need as cash for the long-term, would you invest it all right now? Dollar cost average? Wait until a downtown?
If it was me, I'd likely throw it all in on any down day, but I could see the rationalization of doing some dollar cost averaging into the market over the rest of the year.
