Personal Finance (Not Investing) • The Ultimate Safe Withdrawal Strategy

I humbly submit the ultimate safe withdrawal strategy. This is in response to:

• My mental fluctuations between "I have more than enough" and "But what if..."
• Reading way too many withdrawal posts and running way too many scenarios/models
• My worries after reading so many posts about "the new SWR" (2% is the new SWR, etc.)

This is an attempt to construct an actionable safe withdrawal strategy. Actually, it's more of a laundry list of concepts one can pick from to construct their own personalized and flexible safe withdrawal strategy. Without further ado, I present:

The Ultimate Safe Withdrawal Strategy
(In no particular order, likely incomplete, ideas welcome)

• Use a withdrawal model with math that "can't" fail such as VPW, ABW, or TPAW
• Control core expenses such as food and shelter
• Insure plenty of flexibility in spending for non core expenses such as entertainment and travel
• Work longer / over save
• Work part-time during retirement
• Maintain the ability to go back to work if needed
• Adjust asset mix to reduce chances of portfolio failure
• Consider annuities
• Use a TIPS ladder or similar
• Consider LTC insurance
• Maximize and use social security to mitigate longevity risk
• If planning to X age, use good actuary life expectancy calculators (and if a couple, enter as such to get the probability either survives till X age)
• Hold off on large donations until late in life or expired (or do in good years)
• Hold off gifting large amounts to others until late in life or expired (or do in good years)
• Use reasonable conservative assumptions in calculations
• Run worst reasonable case scenarios
• Know your numbers
• Recalculate yearly
• Have contingency plans (sell house for equity, move to LCOL area, etc.)

Disclosures: I'm using most but not all of the above. I'm trying to prioritize go-go year spending over slow-go and no-go years, and I'm trying to avoid a run-away portfolio balance. In other words, I plan to spend what we saved for retirement - yikes. Finally, I try (often unsuccessfully) not to worry myself into behavior that I believe is too conservative. My personal approach is to use flexibility and multiple tactics instead of, for example, a low withdrawal rate.

Edit to include links to the wiki for the referenced withdrawal models:
Variable percentage withdrawal (VPW)
https://www.bogleheads.org/wiki/Variabl ... withdrawal
Amortization based withdrawal (ABW)
https://www.bogleheads.org/wiki/Amortiz ... withdrawal
Total portfolio allocation and withdrawal (TPAW)
https://www.bogleheads.org/wiki/Total_p ... withdrawal

Statistics: Posted by CalPoppy — Sat Oct 26, 2024 5:34 pm — Replies 12 — Views 1007

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