I’m hoping I’m getting somewhat close but I wanted to ask the Pack a question. For those that have retired, or are getting close, how did the 4% withdrawal formula work for you guys? Dave Ramsey says take 8% but that seems way too aggressive, but the 4% certainly seems low. I want to leave family some money but I don’t want to pass on with a boatload of money while not enjoying my hard earned cash. Thanks in advance..
Retirement question
- Thread starter Jaxdog
- Start date
I’m not drawing 4% but I’m overly conservative. I’m still making considerably more than I’m spending but that’s subject to change. It’s difficult to transition from saving to spending or it least it is for me. Mentally I need to see an overall net gain. Figuring a 4% withdrawal I need to die somewhere between 87-88, my mom lived to 90 so I’m trying to gain a few more years just in case.
What’s a “ boatload “ today will likely be a McDonalds value meal by the time he dies.
8% seems crazy high. 4% is low and historically would leave you with more money than you start with in most scenarios. But there are times where it would have failed. If you figure out a way that allows you to safely draw 6%, you’ll be able to make a lot of money
You can easily model those scenarios based on target amount you want to leave to family using Gemini, GPT, etc. I have calculated this myself, but the AI models are good at that type of scenario planning now.
4% + annual inflation adjustment was to ensure you don’t run out of money in retirement and held up in almost all historical scenarios. That could always change if stuff in the future is worse than the past. I agree that 8% sounds too aggressive unless you’re assuming an old retirement age, though I haven’t modeled it.
I have used AI though to run a bunch of stuff about target retirement amount based on how much I want to leave to kids, inflation rate scenarios, return rate scenarios, etc
4% + annual inflation adjustment was to ensure you don’t run out of money in retirement and held up in almost all historical scenarios. That could always change if stuff in the future is worse than the past. I agree that 8% sounds too aggressive unless you’re assuming an old retirement age, though I haven’t modeled it.
I have used AI though to run a bunch of stuff about target retirement amount based on how much I want to leave to kids, inflation rate scenarios, return rate scenarios, etc
There's not a set answer here. Most of the point of the 4% is to plan on having enough to account for a market downturn right after you retire. That is the sequence of events to fear. We haven't experienced one in a awhile. Maybe we're due.
If you have room to earn more extra side income than planned, or cut spending for a few years, then there's less to fear and you can safely withdraw more.
Besides all that, medical expenses are the determining value for like 99% of people with that question. And we dont know what they will be. Nursing home care is redonk expensive. If you dont mind moving your assets and taking Medicaid facilities for that if needed, you can offload your biggest question mark.
I am planning on 5% and will take up to 6%.
Go to Chat GPT and give it this prompt:
I am XX years old. I have $XXX money. I want to retire and I want to leave my family some money. Run a Monte Carlo simulation on a 4%, 5%, 6% and 8% withdrawal rate for 30 years, given that I will remain invested in safe, conservative investments throughout. What are my chances of running out of money and/or being able to leave my family $XXX.
I put 60, $1,000,000 and want to leave family $500k. Not factoring in Social Security.
Go to Chat GPT and give it this prompt:
I am XX years old. I have $XXX money. I want to retire and I want to leave my family some money. Run a Monte Carlo simulation on a 4%, 5%, 6% and 8% withdrawal rate for 30 years, given that I will remain invested in safe, conservative investments throughout. What are my chances of running out of money and/or being able to leave my family $XXX.
I put 60, $1,000,000 and want to leave family $500k. Not factoring in Social Security.
| Initial Withdrawal Rate | First-Year Withdrawal | Chance of Not Running Out of Money | Chance of Leaving at Least $500,000 After 30 Years |
|---|---|---|---|
| 4% | $40,000 | 89.3% | 70.0% |
| 5% | $50,000 | 52.2% | 31.2% |
| 6% | $60,000 | 16.2% | 7.7% |
| 8% | $80,000 | 0.3% | 0.1% |
Interesting. I didn’t expect the success rate to go down so quickly. I assume in these scenarios you increase your withdrawals to match inflation. Otherwise they’d all last forever but you’d be drawing out less & less each year in real dollars. I think given this I’d draw down 5% & be ready to reduce that if market takes a big downturn. Also, I’d keep at least 1-year withdrawals in a safe money market fund to reduce having to sell during more normal downturns.
Yep. Here were my assumptions
- Starting portfolio: $1,000,000
- Retirement length: 30 years
- Portfolio return: 5.5% average annual return
- Volatility: 7% annual standard deviation (much lower than a stock-heavy portfolio)
- Inflation: 2%
- Withdrawals increase with inflation each year
- 200,000 Monte Carlo simulations
If it comes down to having to go in a NH, hit the self checkout line. Many are horrible places.
Although the market has been on fire for most of the past 15 years, we have idea if that will keep up, I'd stick in the 4-5% range and take out chunks when needed (big vacation, car, etc.).
As you hit age 62, make sure to do a deep read on IRMMA. Too much income can double your Medicare Part B premiums, but there are strategies to get around it.
As you hit age 62, make sure to do a deep read on IRMMA. Too much income can double your Medicare Part B premiums, but there are strategies to get around it.
Copilot(using Claude, OpenAI, and cowork is active...if that matters?) came back with significantly different numbers. It figured 2.5% inflation, for what thats worth.
Short version, you really want to keep your AGI below $109,000 if you're single, or $218,000 if you're married. And you have to do this beginning in the year you turn 63. Otherwise medicare premiums will increase. They can actually increase as high as 4 times what the poor ordinary people pay if your AGI is over $500,000/$1,000,000. But even if you go $1 over the threshholds, your medicare premiums will increase from about $200/mo to $300/mo. One caveat is, you can exclude your W-2 income from the year you turn 63 if you can show that you retired by age 65. It's a pain in the rear, as they assess the additional premium and then you have to file an appeal. I did it once for a client and it's not that hard. Just upload your retirement letter to your employer.
It's a little surprising to me that you'd say you plan on 5%, then pimp an LLM that is showing you only have a 52.2% chance of not running out of money if you initially withdraw 5%.
For what it's worth, the guy that did the Trinity study (I think it was him) has updated his numbers and now thinks you can withdraw just over 5%. It was based on a different portfolio than a 60/40 one. Can't remember what he added off hand.
I'm assuming that's from using "fixed income heavy portfolio" instead of a 60/40 or 70/30 portfolio.
63 is assuming you retire at 65, correct? The medicare thing is a 2yr lookback as I understand it...which may not be worth much...
Well, going from a 4% withdrawal to 5% withdrawal is increasing you spend by 25%. And that's also why it's so hard to just "cut spending for a few years". If you backtest a strategy where you withdraw more but cut back during downturns, there are times where you just have to cut back drastically to really make a difference. For the historical cohorts where a 4% withdrawal would have been at or near failure, starting off at 5% (i.e., 20% higher spending) and then getting hit with sequence of returns risk means you have to cut back not just 25% of your spending to get to what a 4% withdrawal rule would have given you, but to a much lower amount to account for the extra money you took out when you were started. Realistically it's just rolling the dice on whether you have to go back to work or not.
I mean, if you have a pretty lux lifestyle where you are spending say 25% of your budget on travel, and another 10% on high end dining and entertainment, then yea, you can probably go to 4.5% or 4.75% and just cut that out for a few years if you get hit with sequence of return risks.
If you're really ballsy and have a paid off home, you can always do a cash out refinance if the stock market dives. You're basically borrowing to stay in the stock market at that point, which is probably a pretty good deal at 4% or maybe 5% mortgage rates on 30 year loans. Wouldn't feel real good about that at today's mortgage rates. ,
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You are correct. It's a 2-year look-back from the time you first qualify for Medicare. For me, that will be 65. But some may stay on their employer plan until they retire.
Yeah, perhaps that is why the numbers are different.
I just copy and pasted what 615 said to copy and paste. It was more just an observation that a different platform spat out a different conclusion, despite using the same prompt.
If your in a market downturn that's threatening your retirement....then mortgage rates are very likely to be low. (Stagflation enters the chat.)
I tend to compartmentalize things too much but here’s my system. 60% of my savings is what I intend to live on using the 4% rule. 25% is my safety net. It’s what I intend to be left for an inheritance or to cover catastrophic illness expenses. 15% is big expense item money, cars, boats, travel, RVs, or whatever. If the 15% account won’t pay for it, I can’t afford it.
I trust our politicians on both sides of the aisle to help us avoid stagflation.***
The inventor of the 4% rule has revised his safe withdrawal rate to 4.7% based on updated research with a more diversified portfolio.
I’ve been retired less than a year, but I’ve used Boldin to estimate my chance of my money outlasting me. Projection Lab is another good tool.
I highly recommend Rob Berger’s YouTube channel for deep dives on all retirement topics, including the 4% rule.
I’ve been retired less than a year, but I’ve used Boldin to estimate my chance of my money outlasting me. Projection Lab is another good tool.
I highly recommend Rob Berger’s YouTube channel for deep dives on all retirement topics, including the 4% rule.
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5 year look back for Medicaid so if you are transferring assets and you go into a facility within 5 years of the transfer you will get penalized.
Give CoPilot your account numbers and it'll manage, budget, embezzle, or whatever else you might not want
17 it
Move to the beach…spend that ****. Have a big time..
Or y’all can continue to fret over .25 percent over the next pitiful years of your lives
we earned this ****
Move to the beach…spend that ****. Have a big time..
Or y’all can continue to fret over .25 percent over the next pitiful years of your lives
we earned this ****
That look back period is state by state with Medicaid. Five years seem common, but from what I have seen most facilities has a representative that will help you navigate through it. They know ways round it. Also, I would not transfer it. I go find one freaking smart lawyer and put it into an Intentionally Defective Grantors Trust (IDGT). One of the best things going and very few people know about it. It takes someone with a lot of knowledge to set it up. It's deeper than this but you get all the benefits of an Irrevocable Trust but keep the advantages of a revocable trust. I bring this up because an Irrevocable Trust is a good way to get assets out of your name. It's really to keep your estate from paying Estate Tax when you die but it has other uses.
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Right now, I live off the interest of my savings and I live pretty well! Side note for those who will rely on SS for a large part of retirement remember when you retire it takes almost 3 months to start receiving your first check and it isn't back paid! oh by the way i put 15% of my checks in a retirement fund for about 45 years.
Retirement?
I have conceded that I will work somewhere til the day the Lord calls me home.
Also, I have asked my wife if I can take a half day off from work on that day....she told me she would consider it.
Make the most of everyday because everyday is a gift.
I have conceded that I will work somewhere til the day the Lord calls me home.
Also, I have asked my wife if I can take a half day off from work on that day....she told me she would consider it.
Make the most of everyday because everyday is a gift.
I will never retire. Between divorces and some shitting jobs over the years, I'll die working or be replaced and go work at Walmart or Lowe's or some janitorial job somewhere.
I'm gonna be hard pressed to put my money in something literally titled "Intentionally Defective".
Yep you would think they would come up with a different name for that Trust.
I had never heard of this but just saw one the the other day. Trust had the intentional defect that caused it to be taxable to the grantor. One problem with this is the trust is still irrevocable, so once you put the assets in, you can't get them back out again. But heck, maybe there's some lawyers out there that could find a way.
I don't fully understand it, but I think the beauty of it is you can still use it and spend it as if it was still yours even though it's technically not yours anymore. You can use it while alive and avoid estate tax when you die. From my understanding there are not too many lawyers out there who know how to set it up. It has to be written perfectly defectively.
I don't know a lot about it, but I do know that's not right. Once you put assets in, you lose control over them. In some cases you do have a right of substitution, where you can take the assets out and substitute them with assets of equal value, but that nets you nothing. The would be in a case where you had put some private company stock into a trust and now you don't want your kid to own part of the company so you take it out and substitute cash or investments of equal value. Sounds like they'd definitely get out of your assets for Medicaid purposes. But you couldn't get into the assets yourself. Oh, and you'd still be stuck paying the income taxes on the income those assets generates. This is an estate planning tool for people who will be paying estate taxes. So if your net worth is less than $15,000,000 ($30,000,000 married), none of this will affect you.
I've always heard that you want to apply for Social Security 3 months before you want to start taking it. So yeah, good advice.
There's actually something to this. You can overthink this and pinch every penny till the day you die. Or you can relax and enjoy your retirement.
It's just a term of art. Grantor Lead Trusts are another type of "defective" trust that helps you avoid estate tax. If you have that problem, you're doing okay.
I think I'm moving to Europe after I sell my house. Can buy one there for nothing and have $500K in my pocket.