[USER]

Draw down spending conundrum. “Retired” from 9-5 but keep myself busy with volunteer work
61 yo
Spend about 60-70k a year
$300k in high yield cash

$2.5mm 90% equities including dividend stocks outside of retirement funds

$2mm in 90% retirement equities (Roth and IRA).
How do I figure my draw down? I have invested and saved well but now want to enjoy it for 20 or 30 years.

No debt

Insured through the exchange

Will take SS at 70 or later if rules change.

RMDs will pop my income and not sure that rollovers to Roth are worth it at this point but still open to it
Any books, podcasts that people recommend.

[Frank]

What conundrum? Wrong word. Wrong concept. Does not compute. Does not apply.

You are grossly underspending your assets, as your withdrawal rate is about 1.3%.

This means that your withdrawal strategy is structured for dying at your highest net worth AS THE VERY HIGHEST AND MOST MEANINGFUL GOAL AND PRIORITY IN YOUR FINANCIAL LIFE.

You can easily be spending $200K annually. And still die at your highest net worth. Why aren’t you?

So, the first thing you need to get over is lying to yourself about having any financial issues whatsoever. You have hoarding issues.

Which is actually very common in this community, so you are not alone.

Your hoarding will naturally create RMD issues when you get over the age of 70. Hire a fee-only planner that specializes in taxes to help you deal with that.

Also hire an estates attorney, as you will likely have estate taxes to pay when your hoard hits $15-20M.

Your dividend stocks are undoubtedly creating more tax problems for you, so you need to get off the “dividend investor” train pronto.

Other than tax issues, there are no drawdowns to figure. Just take from whatever pot makes tax sense.

You don’t need to diversify in any particular way. If you want to do the Warren Buffett 90% S&P/10% t-bill thing, that will work just fine, because you are not spending enough money for any of this to matter.

But you know what I would REALLY do in your shoes? HIRE A THERAPIST TO FIND OUT WHY YOU CANNOT SPEND AND ENJOY YOUR MONEY. And schedule some high-end travel with private guides, nice hotels and first class plane tickets. Good luck!

[Rick]

What is your annual dividends from the 2.5m brokerage?
How much of retirement is pretax?

How do you feel about living on drawdown of the 5 years cash to something closer to 1 year?

This will result in low taxable income at maybe just dividends for about 4 years taking you to age 65.

Then Roth convert hard to at least 12% tax bucket and maybe into 22% (watching for aca subsidies from the start and irmaa issues after age 65).

[Steve]

Marry a spouse 10 years or more younger than you and your RMD’s will decrease. The younger the spouse, the less RMD’s.

It’s a Win-Win

[Bill]

You’ve got almost $5mil. A conservative drawn down plan would be $200k per year and would have a 95% chance of lasting over 30 years. And that’s not counting SS.

The most likely outcome of spending $200k from your portfolio each year is that you still die with $5mil.

So, if spending more would make you happier, start that asap. Otherwise find a good charity or start giving your heirs money each year.

[Adam]

You seem to have that common problem of not knowing how to flip the switch between accumulation and retirement. Your withdrawal rate is ridiculously low and your cash reserve is insanely high.

Do you always want to spend only 60-70k? Would spending more improve your life? Would gifting more improve someone else’s life that you care about?

Do you have charities that are near and dear to your heart? Or do you just want to die with the most money?

Reducing your cash, looking at potentially better asset location strategies, reviewing Roth conversion and /or tax gain harvesting options to fill up lower tax brackets before you collect SS would all be viable options.

You need to talk to someone to go through a comprehensive plan or you should read some books about creating your own, but your biggest risk is not running out of money.

It’s not using it to it’s full advantage to live your life to the fullest.

Die with zero by Bill Perkins touches on some of that. Give that a read. Then go talk to a fee only advisor (advice-only if you want to manage your assets, flat fee if you want someone to manage them for some reason)

[Carrie]

I think you need to meet with a fee only advisor and spend the 5k or whatever it is on a comprehensive plan.

Taxes & medicare premiums are probably your biggest hurdle to how much you should withdraw a year.

I would think the professional can help you with a plan for each decade…maybe also how to roll some of it to be able to give away without taxes if you wish.

Congratulations on making it to FIRE. If you haven’t also check out the book Die with Zero as it may help you with perspective

[Jill]

4% of your total accounts is a safe number to spend annually. You’ve got lots.

Spend and enjoy – you’ve earned it!!

[Travis]

This really isn’t going to matter one way or another for you since you have plenty, but have you looked at taking SS at 62 and investing that income from 62-70?

I feel that’s the better option considering we don’t know how many years we have.

That’s just one more slice of pie that you can leave for your loved ones. And I think you can end up with more vs taking SS at 70.

[Andrew]

If you took SS at the earliest possible, your dividends + SS will likely be more than you can spend.

I’d say spend blindly and stop traking your spending and your investments for one year (to give up some control)

[Peter]

I’m sorry but anyone drawing down 1.3% of their portfolio isn’t in much of a conundrum.

You can spend close to $192,000 and never worry about running out.

[Scott]

1) Christine Benz from Morningstar wrote a new book called How to Retire: 20 lessons (20 short essays from well known researchers) which has been well reviewed covers many of the quantitative and qualitative factors.

Struggling to spend is common.

2) You really do need to find a planner to work through the tax etc. You may not need a 1% AUM for life but adjusting to the de accumulation game is a challenge. See link below.

3) You can likely safely withdraw around 4% from a middle of the road retirement fund like Vanguard Wellington even if administratively you want a couple years of cash as well.

You can also safely increase that further if you are willing to consider some type of guardrail strategy (basically a pay cut when the market is down – which you can afford given your low ‘keep the lights on’ expenses).

Google the Morningstar Retirement report (also authored by Ms Benz) which outlines several of these. Most of those guardrail strategies do not require any great math skills.

[Jake]

3% of the total is $144k
2.8 million / $144k = 19 years
You’ll be well into no penalty withdrawal from retirement accounts by then.

I’m not sure what the worry is about.

If you wanted to enjoy these years more by traveling lots and spending more now and less later then you could be free to use everything outside retirement for that.

Reserving the $300k for expenses until you can withdraw from retirement accounts to cover expenses.

Then you have $2.5 million to spend and you should be at your spending requirement with everything else..

[Jeremy]

You’re going to die with a mountain of money. If that’s what you want, you’re on the right path.

If that’s not what you want, at your level of assets, hire a pro on a fee for service basis to help design a drawdown plan.

[Author]

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