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Explorer ○○○

Re: 4% withdrawls

I still have a couple years to go...but have previously posted about just going with allocation funds.  This would keep it simple in case my wife is left handling things, and as we get older.  Thinking about 25% each in FBALX (Fidelity), VWINX (Vanguard), ABALX (American), and PRWCX (TRowe), plus 2 years emergency in a money market.  Works out to about a 55/45 allocation.  Take a 5% initial withdrawal via fixed monthly paychecks with no inflation adjustment and end up with a 99.9% success rate (on Port Viz).  That would cover our budget with leftovers after SS.  Leftovers could be added to the money market for major purchases, etc.  Let the fund managers handle rebalancing.  Kitces and Pfau have also shown that spending actually declines after retirement offsetting inflation...until later years when it goes up due to medical expenses (the smile curve retirement you hear about).   I figure the COLA for SS would cover the reduced senior inflation/spending increase (lower spending offsets most of inflation).  Once we are past sequence of returns risk (5 yrs?) and see how the balance is holding up, we can adjust our withdrawls, plus in the later years we would move on to our Roths no longer have withholding taken out and cover the smile upward trend if it happens.  As long as you pay attention, and adjust if your balance it depleting too fast, most reasonable plans should work.  

 

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Frequent Contributor

Re: 4% withdrawls

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  

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Frequent Contributor

Re: 4% withdrawls


@youth wrote:

Regardless what method is used......many retirees do not spend enough and enjoy life.  SPEND!

Gabe


IMHO - It is wise to be a bit conservative in your  spending. I know it has been said that it would be no fun to be the richest person in the grave; however, methinks it would be  even absolutely painful to  be the  poorest person alive. 

Capital
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Frequent Contributor

Re: 4% withdrawls


@Lefty wrote:

I still have a couple years to go...but have previously posted about just going with allocation funds.  This would keep it simple in case my wife is left handling things, and as we get older.  Thinking about 25% each in FBALX (Fidelity), VWINX (Vanguard), ABALX (American), and PRWCX (TRowe), plus 2 years emergency in a money market.  Works out

to about a 55/45 allocation. ................................

 This seems to pat, the allocations would work out so precisely? I think you need to due diligence by looking into what stocks each of these have and what duplication, you find and if the summation is to your advantage.

I use TRP PRWCX with VWENX and then balance that with growth and dividend growth funds, along with bond funds to achieve my desired equity and income ratio. These other funds are fine, but you might want to look into how well they work together?

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Re: 4% withdrawls


@copie wrote:

Thanks to each and every one of you for your posts. At age 77 and looking long term will I be able to research and keep a eye on 40 to 50 stocks every year? I want to start working up a plan now that in a few years I can go to if I start to making more then normal mistakes.

....................

Copie 


Good thinking. I am about two years older than you and in 2017, I noticed a cognitive decline. I like what I have read here about CEFs, but never going to chance them because I put my learning into studying stocks and when i read about these CEFs, it does not make any sense to me. I just don't get it.

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Explorer ○○○

Re: 4% withdrawls

RE; FatKat, As another poster said before, having multiple allocation funds might seem like duplication, but it allows you to protect against manager or firm drift/change.  We had Target Funds before, but pulled out after seeing the international % increase and hold back performance.  If any of these funds drift like that, or key managers leave, or start to severely underperform, I know I have a backup.  They are all slightly different...FBALX has more MC and SC, ABALX has a large team so manager change won't impact it.  PRWCX goes anywhere but is keyed on one manager, so I want to have backups if he leaves.  VWINX is more value stock and bond oriented, but what if Vanguard and Wellington Management part ways.  Plus I am with Fidelity, and I wanted to get positions before anything changes, i.e. TRP just became NTF a couple years ago, same with American, and I created some lump sums to buy into Wellesley efficiently.  Now if the funds happen to close out or Fidelity ends the arrangements I still have positions.  I do have some funds in Total Stock Index and Total Bond Index to fill things out, but if Fidelity ever started a Index allocation fund that was 60/40, I could use that instead of the individual indexes so it would automatically rebalance.

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Re: 4% withdrawls


@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?

ElLobo, de la casa de la toro caca grande
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Explorer ○○○

Re: 4% withdrawls

Your: Good thinking. I am about two years older than you and in 2017, I noticed a cognitive decline. I like what I have read here about CEFs, but never going to chance them because I put my learning into studying stocks and when i read about these CEFs, it does not make any sense to me. I just don't get it.

 Many of us have been in CEF's since the last century and it would be wise to study this type of security. Morningstar used to have a dedicated staff to CEF's in the 1990's and we learned a lot. Studying them and understanding them could be very profitable going forward [IMHO]....

 Use CEF connect and try to understand the difference between "NAV" and "MktPrc" would be a good beginning [again IMHO]. Many years ago "GAB" was a good learning tool where we got free shares of spinoff's in GUT, GGT etc....

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Frequent Contributor

Re: 4% withdrawls

Hi Copie,

Right now, my allocation is 37% stocks and 63% bonds.  My stock position has flourished due to rebalancing and over-allocation to stocks during the week before and after March 23rd.

1/3 of my bond allocation is laddered which covers 100% of my 3% inflation-indexed withdrawals over the next 10 years.

It is pretty easy really; buy face value for each rung at today's withdrawal amount, and the compounding coupon pretty much makes up for the 2% inflation adjustment in the years ahead.

This means that the 87% remainder of my retirement portfolio is invested with a long-term horizon. Sequence of return risk is less important because my distributions are redeemed at par. No need to guess what market conditions might be. I did not feel any pressure to panic sell during this past rout.

My dividend income replaced about 80% of my planned distributions at the beginning of the year, so my 3% withdrawal rate is more like a net 0.6%. Since then, I have significantly increased my dividend cash flow, but I won't know exactly what that is until year's end.  I am too lazy to worry about predicting it; I would rather let Fidelity tell me what my dividend income is.

Yields are low which pushes duration even higher. Ladders do have some appeal if you think about allocating your present bond sleeve to it.  Check out the iShares line up you will need to scroll down.  Bulletshares have some targeted maturity ETFs also.  I mix the etf's with individual securities. Part of my emergency fund is in a CD ladder.

Holiday

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Explorer ○○○

Re: 4% withdrawls


@ElLobo wrote:

@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?


My take on FD's comment is that a 15% yield doesn't do you any good if the company paying it is likely to go bankrupt in the next year.  VET had a nice yield...until it didn't, and with only 20% of your capital left, (if you got in real late, far less if a long time holder) you don't have much left to invest in something else.

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Re: 4% withdrawls


@ElLobo wrote:

@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?


Are you the guy that invested in MLP and it did so much worse than SPY for the last 5 years...or...the guy that owned MORL and lost it all in 2020...mmm...because the only thing that matters is higher income.  

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Re: 4% withdrawls


@RJD1300 wrote:

@ElLobo wrote:

@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?


My take on FD's comment is that a 15% yield doesn't do you any good if the company paying it is likely to go bankrupt in the next year.  VET had a nice yield...until it didn't, and with only 20% of your capital left, (if you got in real late, far less if a long time holder) you don't have much left to invest in something else.


Why don't you let FD speak for himself?  At any rate, someone holding VET is much, MUCH better off than another retiree holding HTZ!  8-)

VET v HTZ

ElLobo, de la casa de la toro caca grande
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Re: 4% withdrawls


@FD1001 wrote:

@ElLobo wrote:

@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?


Are you the guy that invested in MLP and it did so much worse than SPY for the last 5 years...or...the guy that owned MORL and lost it all in 2020...mmm...because the only thing that matters is higher income.  


I'm the guy who invests in PFFL (14.7% distribution yield), PCI (11%), SDYL (7.9%) and AMLP (6.3%), all 4 of which did so much better than SPY (1.9%), especially whenever I want to withdraw and spend 5%!  8-)

BTW, I wish I HAD invested in Maui Land & Pineapple, MLP, over the last 5 years.  It beat the panties off of SPY! 

MLP v SPY

ElLobo, de la casa de la toro caca grande
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Explorer ○○○

Re: 4% withdrawls


@ElLobo wrote:

@FD1001 wrote:

@ElLobo wrote:

@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?


Are you the guy that invested in MLP and it did so much worse than SPY for the last 5 years...or...the guy that owned MORL and lost it all in 2020...mmm...because the only thing that matters is higher income.  


I'm the guy who invests in PFFL (14.7% distribution yield), PCI (11%), SDYL (7.9%) and AMLP (6.3%), all 4 of which did so much better than SPY (1.9%), especially whenever I want to withdraw and spend 5%!  8-)

BTW, I wish I HAD invested in Maui Land & Pineapple, MLP, over the last 5 years.  It beat the panties off of SPY! 

MLP v SPY


AMLP vs SPY with divy reinvested since Jan.2011.  (Portfolio Visualizer.)

AMLP CAGR -4.29%

SPY     CAGR 12.04%

 

Taking divy as cash.

AMLP CAGR -11.00%

SPY     CAGR  9.84%

AMLP quarterly dividend Feb, 2016 $1.495, Feb 2020 $0.95  (Seeking Alpha)

 

I owned AMLP for a while.  When I saw the share price continually declining combined with a steady reduction in dividend payout I decided it was time to get out.

I do invest in higher yielding stocks, CEFs and ETFs, along with growth, but I try to stick with stable or growing share price and dividends that don't get cut on a regular basis.

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Frequent Contributor

Re: 4% withdrawls


@RJD1300 wrote:

@ElLobo wrote:

@FD1001 wrote:

@ElLobo wrote:

@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?


Are you the guy that invested in MLP and it did so much worse than SPY for the last 5 years...or...the guy that owned MORL and lost it all in 2020...mmm...because the only thing that matters is higher income.  


I'm the guy who invests in PFFL (14.7% distribution yield), PCI (11%), SDYL (7.9%) and AMLP (6.3%), all 4 of which did so much better than SPY (1.9%), especially whenever I want to withdraw and spend 5%!  8-)

BTW, I wish I HAD invested in Maui Land & Pineapple, MLP, over the last 5 years.  It beat the panties off of SPY! 

MLP v SPY


AMLP vs SPY with divy reinvested since Jan.2011.  (Portfolio Visualizer.)

AMLP CAGR -4.29%

SPY     CAGR 12.04%

 

Taking divy as cash.

AMLP CAGR -11.00%

SPY     CAGR  9.84%

AMLP quarterly dividend Feb, 2016 $1.495, Feb 2020 $0.95  (Seeking Alpha)

 

I owned AMLP for a while.  When I saw the share price continually declining combined with a steady reduction in dividend payout I decided it was time to get out.

I do invest in higher yielding stocks, CEFs and ETFs, along with growth, but I try to stick with stable or growing share price and dividends that don't get cut on a regular basis.


AMLP vs SPY with divies taken as cash, supporting a 4% rate of retirement withdrawal.  From Portfolio Visualizer, with 10k invested in June 2012 through May 2020:

 AMLPSDYLSPY
Jun-12$323.00$396.00$189.00
2013$679.00$861.00$255.00
2014$718.00$1,014.00$292.00
2015$564.00$1,182.00$320.00
2016$648.00$1,352.00$345.00
2017$547.00$1,534.00$365.00
2018$516.00$1,824.00$388.00
2019$493.00$2,026.00$427.00
2020$216.00$865.00$107.00
Total$4,704.00$11,054.00$2,688.00

 

I took my first position in AMLP in years back in March, whenever the price of oil went negative.

SDYL is the 2X leveraged ETN, from UBS, that tracks SDY, the ETF that holds those divey aristrocrats within the S&P1500, above a minimum market cap, that have continuously raised their diveys for at least the last 20 years.

I'm still waiting for FD to explain what he means by his 'risk/reward' bloviation.  My risk/reward tradeoff is that I need $400/year, per $10k invested on June 2012.  Both AMLP and SDYL generated way more cash than what I needed to cover my withdrawal, so the excess cash went back into AMLP, or SDYL, or accumulated in a money market account.

SPY, on the other hand, never came close to generating $400/year, until 2019, so in order to cover FD's withdrawal, he had to sell shares each year.

ElLobo, de la casa de la toro caca grande
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Re: 4% withdrawls


@ElLobo wrote:

@RJD1300 wrote:

@ElLobo wrote:

@FD1001 wrote:

@ElLobo wrote:

@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions.  


Um, what do you mean by this nonsense?  The distribution IS the reward you are talking about in this context of a 4% rate of withdrawal during retirement.

The risk you are taking on is spending more cash than what's coming in as portfolio income!  If your portfolio has a 5% distribution yield, while you're taking out 4%, then you have a 25% safety factor to handle future cuts in that distribution cash.  On the other hand, if your withdrawing 4% but your portfolio has a 2% market average distribution yield, then you're spending down your capital base, not just the income it's throwing off.  You run the risk of depleting your portfolio before you die, of spending it down.

Again, what 'risk/reward' are you bloviating about, FD?


Are you the guy that invested in MLP and it did so much worse than SPY for the last 5 years...or...the guy that owned MORL and lost it all in 2020...mmm...because the only thing that matters is higher income.  


I'm the guy who invests in PFFL (14.7% distribution yield), PCI (11%), SDYL (7.9%) and AMLP (6.3%), all 4 of which did so much better than SPY (1.9%), especially whenever I want to withdraw and spend 5%!  8-)

BTW, I wish I HAD invested in Maui Land & Pineapple, MLP, over the last 5 years.  It beat the panties off of SPY! 

MLP v SPY


AMLP vs SPY with divy reinvested since Jan.2011.  (Portfolio Visualizer.)

AMLP CAGR -4.29%

SPY     CAGR 12.04%

 

Taking divy as cash.

AMLP CAGR -11.00%

SPY     CAGR  9.84%

AMLP quarterly dividend Feb, 2016 $1.495, Feb 2020 $0.95  (Seeking Alpha)

 

I owned AMLP for a while.  When I saw the share price continually declining combined with a steady reduction in dividend payout I decided it was time to get out.

I do invest in higher yielding stocks, CEFs and ETFs, along with growth, but I try to stick with stable or growing share price and dividends that don't get cut on a regular basis.


AMLP vs SPY with divies taken as cash, supporting a 4% rate of retirement withdrawal.  From Portfolio Visualizer, with 10k invested in June 2012 through May 2020:

 AMLPSDYLSPY
Jun-12$323.00$396.00$189.00
2013$679.00$861.00$255.00
2014$718.00$1,014.00$292.00
2015$564.00$1,182.00$320.00
2016$648.00$1,352.00$345.00
2017$547.00$1,534.00$365.00
2018$516.00$1,824.00$388.00
2019$493.00$2,026.00$427.00
2020$216.00$865.00$107.00
Total$4,704.00$11,054.00$2,688.00

 

I took my first position in AMLP in years back in March, whenever the price of oil went negative.

SDYL is the 2X leveraged ETN, from UBS, that tracks SDY, the ETF that holds those divey aristrocrats within the S&P1500, above a minimum market cap, that have continuously raised their diveys for at least the last 20 years.

I'm still waiting for FD to explain what he means by his 'risk/reward' bloviation.  My risk/reward tradeoff is that I need $400/year, per $10k invested on June 2012.  Both AMLP and SDYL generated way more cash than what I needed to cover my withdrawal, so the excess cash went back into AMLP, or SDYL, or accumulated in a money market account.

SPY, on the other hand, never came close to generating $400/year, until 2019, so in order to cover FD's withdrawal, he had to sell shares each year.


ElLobo, I don't need to do anything.  Anybody with a minimal common sense knows the above is wrong and meaningless. You couldn't even get MLP vs SPY right.  You used MLP=Maui Land & Pineapple Company.  The only thing that matters is total return. I can take the distributions and/or sell anytime I want.

This is a 5 year chart.  Even my 2.5-year grandson know that SP500 was a lot better than MLP.  The SP500 made 68.8% while MLPA lost over 40%.

There is a good reason none of the income guys defend you.

mlpa.PNG

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Participant ○○

Re: 4% withdrawls

I've been retired for 6 and a half years, and I've been taking RMD's from my 403b GRA plus an IRA account (recently converted from a 403b) since that time. I take the RMD's on a monthly basis directly into my family bank account. Of course these distributions are subject to federal and state income tax withholding each month (income from my GRA is, however, exempt from state income tax). Despite the annual withdrawals since my retirement, our account valuations have grown substantially.

In addition, we have a taxable brokerage investment account at Fidelity which was created from inheritances from both sides of the family -- the bequests arrived almost at the same time that I retired.. A chunk of that cash went into our purchase of a condominium. Another chunk went into paying off the graduate school federal loans that our daughter had. The remainder is maintained in the brokerage, which is fairly conservatively invested but also throws off some spending money that we may draw on for extraordinary expenses (e.g., new car).

We basically live on the 403b distributions without concern for saving them. Our "savings" are in the brokerage account and our credit union. And we expect the 403b's to continue to grow for many years even as we continue to take RMD's.

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Frequent Contributor

Re: 4% withdrawls

"ElLobo, I don't need to do anything."

Of course you don't FD.  Nobody around here pays any attention to what you bloviate about anyhow!

"@FD1001 wrote:

One thing you should never do, make investment decisions primarily based on how high is the distribution.  You must look at risk/reward then distributions."

I'm sure Copie found your advice quite helpful, short and to the point.  Acerbic.  Singularly unloquacious & diminutive linguistic expressions satisfactorily accomplish the necessity of commenting on Copie's question -  Look at risk/reward then distributions.  8-))

 

copie
copie
Participant ○○
4% withdrawls

As I get older I know that I slip a little every year. We can kid ourselves all day, but we are not as sharp as we use to be and never will be again. . . . . .Thank you for any help you can give me.

ElLobo, de la casa de la toro caca grande
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Contributor ○

Re: 4% withdrawls


I suggest having or establishing a Cash Management Account, Fidelity has one, and then set up automatic billpay, automatic RMDs, auto direct deposits, and instead of reinvesting distributions, have them directed  to the settlement/billpay fund. 

 

The schedule you choose for withdrawals depends on your cash flow needs, which normally vary from one person or household to another.

@copie wrote:

As I get older I know that I slip a little every year. We can kid ourselves all day, but we are not as sharp as we use to be and never will be again. For you that do the 3% or 4% each year how or when do you know to do it? Do you do it first of each year and leave rest of account on drip till next year. Do you take half every 6 months? Thank you for any help you can give me.

Copie


 

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Frequent Contributor

Re: 4% withdrawls

Recent update: 0.5%; are you serious, Financial Samurai?

https://www.financialsamurai.com/proper-safe-withdrawal-rate/#:~:text=The%200.5%20percent%20rule%20i....

Also look at all the replies.

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