Graham - (1) How do you see this rule changing if you receive a higher RoR through Real Estate? (2) The missing piece for me is how to best withdraw money once retired, to avoid taxes and fees? I would love an article on this topic as you always do thorough research. It would also help us readers pre-plan our investing if there are withdrawal benefits in different areas of investments. Thanks!
Based on all my readings it seems like a variable approach might be more suitable i.e. take out more when you're younger (between 3.5-5.5%) and less (2.5-3.5%) as you get older if/when SS and/or pensions kick in. It might average out to around 4% but gives you flexibility over 20-30 years
1) What you describe naturally happens -- in your latter years you're more likely to be rocking on the front porch than travelling to far off lands / spending a lot.
2) RMDs will fight you on what you propose. As you get older more and more of your tax-deferred funds will have to be withdrawn whether you need them or not. That's not to say that you can't take what's left of those funds post-tax and re-invest them outside the IRA / 401(k) / 403(b) they were previously stored in.
Also, figure out things that you enjoy that you can be paid for adding/creating value. In today's world of internet access, there's no reason you can't monetize your passions in retirement.
I live in India where we largely need to fend for ourselves, and keeping costs low plus spending conservatively from the corpus are critical to successful financial management.
My view: people will need >$5 million in the USA given where social security and Medicare stand ...
I’ve always been shooting for 3 million invested by retirement, I figure if my investments can continue to average 10% + then that gets me $300k on average to spend with out touching the goose laying the eggs l, except in a down or bad year.
But it’s interesting to look at it from this perspective as a worst case scenario. Makes me want to shoot for 5-6 million.
It would be hard to pull $300k every year from a $3M portfolio unless you are taking high-risk bets. I would say worst case scenario you should be shooting for $10M ($300k at a 3% withdrawal rate)
I definitely understand that I wouldn’t be able to pull $300k every year, a side note, I follow the Dave Ramsey investing strategy, and have 4 mutual funds that have all, except one, done well over 10% on average for the life of the fund and the funds have been around 20-35 years.
So my thought there would be that as long as that continues then “on average” I could be pulling out 300k but wouldn’t each year, it would be higher or lower.
But This is helping me look at this more in depth to figure out the real number I should be shooting for.
I think another way I could look at this is that if I saved the 3 million I originally had in mind, and only ever pulled $150k out per year, so on good years the 3million would grow, on bad years that grown would cover my costs and over all my account should stay at or above 3 million. I’ll have to run the numbers on that though.
I have to say I’m surprised you are stating 10% + are likely “high risk bets”, after following you for the last few months pretty closely, i believe I’ve seen You talk about etfs following main market index’s doing 10% on average.
I’m loving this convo, please give me more into your thought process on this. You are just slightly younger then me but have done so well and seem to have a great understanding of finance, so I really value your thoughts and opinions.
While not a retirement funding problem per-se, some folks who learn how to be frugal learn this lesson *too* well, and cannot enjoy the fruits of their savings. Your Point #2 early in your presentation about spending too little.
In other words, they've taught themselves to be so frugal that they hoard the money that they worked so hard to save up -- rather than enjoying their well-earned retirement.
This thought is what concerns me when I read articles like this that talk about the 4% rule and how maybe it's now 3-1/2 % or even 3%. Sure, you don't want to overspend and get yourself in trouble, but unless the market flat out tanks for the next few decades 4% should be just fine.
I'm not trying to second guess the well-written article, it's just that I've been seeing a lot of talk like this recently and, while useful, it likely adds to the FUD that folks negotiating managing their retirement savings are already dealing with.
Graham - (1) How do you see this rule changing if you receive a higher RoR through Real Estate? (2) The missing piece for me is how to best withdraw money once retired, to avoid taxes and fees? I would love an article on this topic as you always do thorough research. It would also help us readers pre-plan our investing if there are withdrawal benefits in different areas of investments. Thanks!
Thanks for the suggestions - will look into it!
I like that you and Ben Felix are connected!
Based on all my readings it seems like a variable approach might be more suitable i.e. take out more when you're younger (between 3.5-5.5%) and less (2.5-3.5%) as you get older if/when SS and/or pensions kick in. It might average out to around 4% but gives you flexibility over 20-30 years
A couple of thoughts:
1) What you describe naturally happens -- in your latter years you're more likely to be rocking on the front porch than travelling to far off lands / spending a lot.
2) RMDs will fight you on what you propose. As you get older more and more of your tax-deferred funds will have to be withdrawn whether you need them or not. That's not to say that you can't take what's left of those funds post-tax and re-invest them outside the IRA / 401(k) / 403(b) they were previously stored in.
Also, figure out things that you enjoy that you can be paid for adding/creating value. In today's world of internet access, there's no reason you can't monetize your passions in retirement.
Excellent article. Thank you.
I live in India where we largely need to fend for ourselves, and keeping costs low plus spending conservatively from the corpus are critical to successful financial management.
My view: people will need >$5 million in the USA given where social security and Medicare stand ...
I’ve always been shooting for 3 million invested by retirement, I figure if my investments can continue to average 10% + then that gets me $300k on average to spend with out touching the goose laying the eggs l, except in a down or bad year.
But it’s interesting to look at it from this perspective as a worst case scenario. Makes me want to shoot for 5-6 million.
It would be hard to pull $300k every year from a $3M portfolio unless you are taking high-risk bets. I would say worst case scenario you should be shooting for $10M ($300k at a 3% withdrawal rate)
I definitely understand that I wouldn’t be able to pull $300k every year, a side note, I follow the Dave Ramsey investing strategy, and have 4 mutual funds that have all, except one, done well over 10% on average for the life of the fund and the funds have been around 20-35 years.
So my thought there would be that as long as that continues then “on average” I could be pulling out 300k but wouldn’t each year, it would be higher or lower.
But This is helping me look at this more in depth to figure out the real number I should be shooting for.
I think another way I could look at this is that if I saved the 3 million I originally had in mind, and only ever pulled $150k out per year, so on good years the 3million would grow, on bad years that grown would cover my costs and over all my account should stay at or above 3 million. I’ll have to run the numbers on that though.
I have to say I’m surprised you are stating 10% + are likely “high risk bets”, after following you for the last few months pretty closely, i believe I’ve seen You talk about etfs following main market index’s doing 10% on average.
I’m loving this convo, please give me more into your thought process on this. You are just slightly younger then me but have done so well and seem to have a great understanding of finance, so I really value your thoughts and opinions.
Excellent article Graham! Aplause
Thanks Guille.
While not a retirement funding problem per-se, some folks who learn how to be frugal learn this lesson *too* well, and cannot enjoy the fruits of their savings. Your Point #2 early in your presentation about spending too little.
In other words, they've taught themselves to be so frugal that they hoard the money that they worked so hard to save up -- rather than enjoying their well-earned retirement.
This thought is what concerns me when I read articles like this that talk about the 4% rule and how maybe it's now 3-1/2 % or even 3%. Sure, you don't want to overspend and get yourself in trouble, but unless the market flat out tanks for the next few decades 4% should be just fine.
I'm not trying to second guess the well-written article, it's just that I've been seeing a lot of talk like this recently and, while useful, it likely adds to the FUD that folks negotiating managing their retirement savings are already dealing with.
Please do a video on dividend investing bro!
There are some very interesting perspectives in this article. Thanks for sharing.