tag:blogger.com,1999:blog-5465015914589377788.post2986974490712760268..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: How a Retirement Plan Responds to Market VolatilityMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5465015914589377788.post-78531511963787515012023-11-08T12:54:21.967-05:002023-11-08T12:54:21.967-05:00Hi Dan,
I don't do full-year withdrawals from...Hi Dan,<br /><br />I don't do full-year withdrawals from my portfolio all at once. I just spend the appropriate amount each month from my fixed income. If that causes my fixed income allocation to get too low, I rebalance as necessary. So, instead of yearly big withdrawals, I have more of a continuous model that is managed by my spreadsheet.<br /><br />However, it's easier for most people to use the annual withdrawal method. In this case, you can think of the 25% drop in stocks as having happened just before the annual withdrawal date. So, the Carsons were running out of spending money just as their $760,000 / $240,000 portfolio turned into a $570,000 / $240,000 portfolio. They rebalanced, and then made their annual withdrawal. I didn't give enough information to tell what their portfolio was like a year earlier, so we don't know how large their annual withdrawal was the year before.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-21271500926980126312023-11-07T23:58:21.248-05:002023-11-07T23:58:21.248-05:00In your example, didn't the Carsons take $48K ...In your example, didn't the Carsons take $48K for their first year spending out of the original $240K? So after the stocks crashed by 25%, the portfolio is actually $570K + $192K = $762K. If they were to use the 4.8%, the withdrawal amount for the next year would be $36576. 5 years of $36,576 is $182,880, so they'd move $10K into the stock market and not $45K.Dannoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-32057920530813131742020-03-30T14:10:57.825-04:002020-03-30T14:10:57.825-04:00Hi Ferd,
I get the safe spending level by calcula...Hi Ferd,<br /><br />I get the safe spending level by calculating what withdrawal rate would deplete a portfolio by age 100, with stocks and fixed income getting known real returns. The following post has a link to a spreadsheet you can copy and modify to produce your own safe withdrawal rate:<br /><br />https://www.michaeljamesonmoney.com/2014/01/treating-your-entire-portfolio-like.html<br /><br />The key is to choose appropriately conservative figures for age at death, real investment returns, and years of fixed income savings.<br /><br />I've chosen my own figures that are fairly close to the ones in the spreadsheet I mentioned above.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-54152052930866428952020-03-30T10:44:00.539-04:002020-03-30T10:44:00.539-04:00Very informative writeup, as usual. It seems as th...Very informative writeup, as usual. It seems as though you use a moving safe spending rate (you're probably not at 4.8% at your age right now). How is this rate determined? If it comes from an official study, can you share it?Ferdnoreply@blogger.com