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The Best Third... Learning "How to Spend" in Retirement

beebee
edited January 5 in Fund Discussions
Great interview by the author of a recent research paper that delves into an alternative to the 4% rule and his website that allows individuals to play around with their own numbers. The site is free (at this moment in time).

Interview with Stefan Sharkansky, author of the research paper “The Only Other Spending Rule Article You Will Ever Need.”





The Best Third Website:
The Best Third is completely free to use, and we don’t receive compensation of any kind—from users, advisors, or anyone else.

We’re still in the early stages, testing and refining the service based on real feedback from retirees and advisors. Our priority is to make The Best Third as helpful, accurate, and easy to use as possible before we think about charging for it.

In the future, we may explore different ways to support the service sustainably. But for now, our focus is simple: learn from users and keep improving.
https://thebestthird.com/

His Research paper:
This work makes novel contributions to the body of knowledge on
retirement asset decumulation. Our main contribution is a practical and
actionable framework for both construction of the retirement portfolio
and a strategy for spending down the portfolio during the retiree’s life-
time. We propose and justify a portfolio consisting solely of an equity
index fund and a ladder of inflation-indexed bonds, held to maturity,
along with rules for determining the allocation between the bond ladder
and equities
The Only Other Spending Rule Article You Will Ever Need

Comments

  • Observant1
    edited January 5
    Thanks, bee!
    By chance I stumbled upon this video yesterday.
    Stefan Sharkansky provides an interesting take on portfolio spending strategies.
    I've downloaded his research paper but have not read it yet.
  • DrVenture
    @bee

    Thanks. Timely, for me at least.
  • WABACWABAC
    We plan on spending as much of the IRAs as we need to. The taxables are intended for the heirs. Until the IRA distros kick in, we do enjoy some dividends and cap gains from the taxables; but nowhere near 4%.

    At the present time we aren't making mortgage payments, or paying for child care, so we're enjoying more cash flow than we ever experienced when we enjoyed much higher incomes.

    I understand that some folks need helpful advice. OTOH, I look around and it seems most Americans have no problems spending money, even if they have to borrow it.
  • DrVenture
    edited January 5
    @WABAC Because of step-up basis?

    I'm with you, no mortgage, no car payments, no educational expense, no paying FICA or funding a 401K, no child-related expenses, all adds up to higher cash flow. Here, we also pay no tax on retirement income.
  • WABACWABAC
    DrVenture said:

    @WABAC Because of step-up basis?

    I understand what step-up basis is, but I don't understand the question.
  • DrVenture
    edited January 6
    @WABAC My bad. I was wondering about the rationale of leaving "taxables" to heirs vs IRA.
    Is there any reason beside the advantages of step-up basis? Which is certainly reason enough.
  • WABACWABAC
    edited January 6
    DrVenture said:

    @WABAC My bad. I was wondering about the rationale of leaving "taxables" to heirs vs IRA.
    Is there any reason beside the advantages of step-up basis? Which is certainly reason enough.

    It's our version of a "bucket" strategy. The IRA is for spending entirely on us, if we need to. It is the result of whatever we have managed to save from the money we have earned by the sweat of our brows. If we don't spend it all, then the kids will get it.

    Our taxable accounts, such as they are, are the result of inheritances. So it seems fair to pass it on, if we can.

    When we switch to IRA withdrawals it will actually be more income than we are currently realizing from the taxable. So what is coming out of the taxable now will go back to reinvesting and compounding.
  • DrVenture
    edited January 6
    @WABAC

    "the result of inheritances" Ah, so there is a rationale beyond step-up basis. And quite a good one.

    Over the past 25 years, we have been the beneficiaries of a few small to moderate inheritances. I never really spent any of it on myself, feeling more like a caretaker of someone else's legacy. Though arguably, it lightened my load. Some went to college funding, some to paying off my wife's car in the 1990's, most was invested.

    Simply put, I get it.

  • WABACWABAC
    DrVenture said:

    @WABAC

    "the result of inheritances" Ah, so there is a rationale beyond step-up basis. And quite a good one.

    Over the past 25 years, we have been the beneficiaries of a few small to moderate inheritances. I never really spent any of it on myself, feeling more like a caretaker of someone else's legacy. Though arguably, it lightened my load. Some went to college funding, some to paying off my wife's car in the 1990's, most was simply invested.

    Simply put, I get it.

    Is your wife still driving that car? :-)

  • DrVenture
    Haha. No it was a 2001 Honda Accord, the more I think about it. So was the early 2000's actually. Probably, it still running somewhere!

  • WABACWABAC
    DrVenture said:

    Haha. No it was a 2001 Honda Accord, the more I think about it. So was the early 2000's actually. Probably, it still running somewhere!

    Number 1 child drives a 2003 Honda Accord base model we bought used for her to commute to State U. In the Phoenix metro we get people knocking on the door offering to buy it.
  • DrVenture
    !!!!
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