Personal Finance (Not Investing) • 12% withdrawal rate?

Our plan in retirement is to end with less (but not zero). Over the next ten years the value of our retirement accounts is supposed to decrease by about half. By then, expenses will be lower and Social Security will cover essentials. However, after recent gains the portfolio is not only well above our decreasing target path but is more than when I retired. Consequently, our dynamic withdrawal formula now has us cashing out at an annual rate of about 12% (spread quarterly). (The formula is simply the planned withdrawal amount plus 25% of the difference between the current portfolio value and the target portfolio value.)

I'm not complaining. It's like getting a generous profit-sharing bonus I didn't expect. The extra income mostly goes toward (1) boosting cash reserves, (2) paying tax on Roth conversions, (3) spending on adventures and visiting distant relatives, and (4) donations to humanitarian organizations. We've also been shifting our allocation more towards preservation.

To be clear, we plan to reduce withdrawals later when Social Security begins. Also, when growth is lower, withdrawals and spending will be reduced accordingly. In a severe bear market we could cut back more and tap into cash reserves to protect retirement accounts.

But I wonder, is anyone else using a somewhat radical variable withdrawal scheme to make the most of retirement?

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Statistics: Posted by squonk2 — Sat Dec 30, 2023 11:43 am — Replies 0 — Views 176

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