Comments on: Your Withdrawal Rate Matters

By: BG

BG — Thu, 01 Oct 2009 18:50:38 +0000

I have one more comment about this: is it realistic that you would/could live on a fixed-percentage of your investments? If you need $40k per year, or the $50k per year (adjusted for inflation of course) when you started this in 2004, you still need the same amount, regardless of how the investments perform, in 2009.

Only withdraw the amount actually needed, instead of simply taking out 4% (or 5%) regardless.

I don’t know how realistic it would be for someone to withdraw $47k in 2008, and then only $38k in 2009 — a 20% reduction in living expenses would be a tough maneuver to pull off.

By: BG

BG — Thu, 01 Oct 2009 17:40:58 +0000

I hadn’t thought about managing money during retirement, but I think Tim is on to something. Wouldn’t you want some money in something conservative that would last you a few years or so? Specifically to deal with the situations like the one we are in now.

Perhaps that is what you are doing with the 50% bonds (I don’t know how well they held up). I guess the technique would be something like: every year, pull “income-living” money from the fund(s) that have become “overweight” before doing the yearly rebalance. In 2008, this would be a cash fund for sure (since everything else dropped) — cash would’ve been “overweight” in 2008.

But the technique would seem to make sense no matter what investment funds you had going on — all you want to look at is relative percentages.

By: Tim Hawkins

Tim Hawkins — Wed, 30 Sep 2009 17:05:21 +0000

I would suggest protecting yourself from the down years by taking out extra in the up years and storing it in a CD Ladder. That way you avoid some selling transaction costs and avoid selling when the market is down.

By: Mike

Mike — Tue, 29 Sep 2009 18:55:11 +0000

And why do you have 10 different ETFs based on sector? The VTI and IWV were in existence. Wouldn’t that save on expense fees and general management?

By: Mark

Mark — Tue, 29 Sep 2009 18:39:04 +0000

Either I’m missing something or there is an error in your numbers. If you take out either 4% or 5%, how do you start and end each year with the same balances and have the same dividend income?