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Drawdown Plan in (Early) Retirement

edited September 2021 in Other Investing
We work, we earn, we save. We invest simply and sensibly. Perhaps we’ve accepted the challenge to live on half. Eventually, we have reached our magic number.

We’ve got 25, 30, or 33.33 years’ worth of anticipated annual expenses for a 4%, 3.33%, or 3% withdrawal rate spread across various tax-deferred, tax-advantaged, and taxable accounts.

We are experts in adding to them. But how do we best subtract from them? Today, I’d like to share our drawdown plan in early retirement.

Second Article:


  • beebee
    edited December 2021
    Additional links can be found in the link I included below:
    “The Chain”

    As you’ll see in the P.S., we’re trying something new in the blogosphere. We’re “Building A Chain” of blog articles, where different bloggers are sharing their detailed Drawdown Strategy. To help keep track, I’ll edit this post as new “links” are added in the chain. Eventually, we’re planning on compiling these into an e-book, and donating all proceeds to charity. Thanks to the following bloggers who have joined “The Chain Gang”!!

    Anchor: Physician On Fire: Our Drawdown Plan in Early Retirement
    Link 1: The Retirement Manifesto: Our Retirement Investment Drawdown Strategy
    Link 2: OthalaFehu: Retirement Master Plan
    Link 3: Freedom Is Groovy: The Groovy Drawdown Strategy
    Link 4: The Green Swan: The Nastiest, Hardest Problem In Finance: Decumulation
    Link 5: My Curiosity Lab: Show Me The Money: My Retirement Drawdown Plan
    Link 6: Cracking Retirement: Our Drawdown Strategy
    Link 7: The Financial Journeyman: Early Retirement Portfolio & Plan
    Link 8: Retire By 40: Our Unusual Early Retirement Withdrawal Strategy
    Link 10: Early Retirement Now: The ERN Family Early Retirement Captial Preservation Plan
    Link 11: 39 Months: Mr. 39 Months Drawdown Plan
    Link 12: 7 Circles: Drawdown Strategy – Joining The Chain Gang
    Link 13: Retirement Starts Today: What’s Your Retirement Withdrawal Strategy?
    Link 14: Ms. Liz Money Matters: How I’ll Fund My Retirement
    Link 15a: Dads Dollars Debts: DDD Drawdown Part 1: Living With A Pension
    Link 15b: Dads Dollars Debts: DDD Drawdown Plan Part 2: Retire at 48?
    Link 16: Penny & Rich: Rich’s Retirement Plan
    Link 17: Atypical Life: Our Retirement Drawdown Strategy
    Link 18: New Retirement: 5 Steps For Defining Your Retirement Drawdown Strategy
    Link 19: Maximize Your Money: Practical Retirement Withdrawal Strategies Are Important
    Link 20: ChooseFI: The Retirement Manifesto – Drawdown Strategy Podcast
    Link 21: CoachCarson: My Rental Retirement Strategy
    Link 22: Accidently Retired: How I Planned my Early Withdrawal Strategy
    Link 23: Playtirement: Playtirement Preservation Stage
    Find the above links within this link (found at the end of article):

  • Thanks @bee good timely links
  • For the love of Pete...I hope there are NOT any blog entries by any "FIRE" proponents who burnt out from the corporate world, stated they retired early, got a van to escape reality but in reality are still working writing a blog which contains "financial investment porn", securing eyeballs so they can post and monetize digital ads.

    Just like Elizabeth Warren, AOC, Bernie Sanders...just go away. Everyone is tired of your nonsense and general kookiness.

    It's kind of like when you put on a suit and tie and are a white one questions you or looks at you funny when you walk into a write an investment porn blog and just because you get a following that makes you an expert? Never take investment advice from anyone who doesn't have over $10MM. As Josh Brown refers to in is book, "How do you invest, show me your portfolio". Sheet.

    Apologies for the snark. Sincerely DO appreciate the post.

    In reality, all snark aside, I do truly believe the only safe retirement plans are for those who have a gov't pension and live in a "blue" state and will suckle off the teets of their fellow tax payers, come what may. The rest of us are all somewhat gambling in the casino and left to the whims of government monetary and fiscal policy.
    Maybe, just maybe, keep it simple, control your spending, stay healthy as much as possible, don't take on too much risk (meaning either too aggressive investments or too conservate (guilty as charged))


    Baseball Fan
  • Refer them to portfolio optimizer
  • ?

    yes, that is what I was referring to. Is ORP related to

    ah, I see that PoF thread has ref to Kitces and thence to ORP; is that what you are referring to?
  • Thanks Bee...these articles re the various strategies on drawing down a portfolio are much appreciated.
  • edited December 2021
    I won't be joining any blogging group. Thoughts, though: While still saving, it's all about the money. Because of what you can do with it, later. The bigger the pot, the more options you have. In "drawdown" phase, there are just too many variables possible to be able to make a withdrawal plan that you can religiously expect to stick to. "Late" kids still in school, maybe. Or a wayward ADULT child caught in addiction. Or maybe your own priorities have utterly morphed. And then there are the much greater medical expenses, in old age.....To say nothing of relations faraway who've just had everything destroyed in a super-typhoon.

    The "active ingredient" through all of the ups and downs must be prudence. How soon might you be able to replace what you've taken? Will the market make up the difference in the coming year? Should you instead SKIP a yearly withdrawal, as has been your habit? Maturity needs to be in the recipe: putting off gratification in order to make something good possible, down the line, in the future. "Successful" people make bargains with the future, to enable them to be able to do things they could not do, otherwise. (Jordan Peterson.) And of course, assisting others is a reward unto itself, which must never be forgotten.
  • @bee, as always thank you for the links. Took pre-retirement class at work, but there are many aspects of preparation for the drawdown and taxes.

    @crash, the natural disaster are very hard for many people, especially in countries where the government don't have much resources for their citizens.
  • Sven said:

    @bee, as always thank you for the links. Took pre-retirement class at work, but there are many aspects of preparation for the drawdown and taxes.

    @crash, the natural disaster are very hard for many people, especially in countries where the government don't have much resources for their citizens.

    Absolutely right. But then... If the people--- elected, appointed officials--- are supposed to serve the population, then it stands to reason that systemic corruption militates against that chief goal. Yet when EVERYONE buys into that (corrupt) mindset, everyone then fails to recognize it. Corruption becomes business as usual. People deserve MUCH better, but in the end, "we get the leaders we deserve." (Bill Maher.)
  • beebee
    edited December 2021
    The retirement drawdown “smile”:
    Retirement spending drops off over the first half…then picks up again in the second…half due to healthcare spending
  • What Type Of Retirement Spender Will You Be?

    One final study should be considered to help shed light on retirement spending patterns and which default assumptions could be appropriate for different types of retirees. In August 2015, J.P. Morgan Asset Management released a study about retirement spending by Katherine Roy and Sharon Carson.

    Their dataset provides a “big data” analysis of 613,000 U.S. households led by people fifty-five or older who were estimated by the researchers to have managed most of their household finances through banking services at Chase (debit and credit cards, pay mortgages through bank account, etc.).

    In analyzing the expenditures for their diverse consumer base, they identified four retirement spending profiles and an additional category of miscellaneous individuals. These are the profiles they found
  • It is complicated. I am not sure why there is so much focus on the "4%" rule when the IRS forces people over 75 to remove 4.07% of your retirement accounts. By 80 it is up to almost 5%.

    While I am irritated by a lot of the smugness at American Association for individual investors, one of their key points is "if the SP500 is within 5% of all time high, take money out of equities; if it is not, take money out of something else"
  • For what it’s worth, we are spending much less in retirement so far than 4% annually. COVID has made it difficult to meet our spending “goals” because it’s so difficult and risky to travel, eat out and participate in other forms of entertainment. In January, I will have been retired 5 years and my wife 7 years, and we have yet to spend one dime of our retirement savings. We’ve been getting by just fine from our pensions, my wife’s social security and modest withdrawals from taxable savings. I’m holding off drawing from my SS because so far we simply haven’t needed it.
  • Tarwheel +1
  • sma3 said:

    It is complicated. I am not sure why there is so much focus on the "4%" rule when the IRS forces people over 75 to remove 4.07% of your retirement accounts. By 80 it is up to almost 5%.

    This conflates 4% of starting amount (inflation adjusted) with 4% (or 5%) of remaining balance.

    The 4% rule is supposed to enable one to spend down savings so that they are not depleted for at least 30 years. But the savings are, or may be, depleted at some point past that.

    As one draws down one's savings, the 4% of the original value gradually evolves into 5%, 6% and more of the remaining balance. The RMD calculation is designed to automate this while adjusting for a gradually growing life expectancy.

    That is, as one grows older without dying, one's expected lifetime expands. So year by year, one needs to plan on living longer and draw down a bit slower (as a fraction of remaining assets).
  • msf, thanks for your thoughts. Seems no provision for a bad market cycle of a few years.
    They didn't require a withdrawal last year. & just maybe that is how they would handle a bad market of a few years ?!
    HNY , Derf
  • edited January 2022
    Love the Roth for that reason - No RMD! Yogi says, “And they give ya real money… ” (not cheapened by taxes).

    Maybe remotely related … I’ve had decent luck with some tax-deferred money I withdrew 2 & 3 years ago and put in PRIHX. It scores poorly on M*, as I think they’re comparing it to longer dated muni funds. So far, volatility seems more in keeping with a short term or ultra-short bond fund. But, of course that could change. A gain of nearly 4.8% in 2021 on such a liquid, stable (and largely tax exempt) asset wasn’t hard to take.*

    *Footnote : The fund invests in below investment grade (junk) bonds and is subject to market risk!

    @Tarwheel - I hear ya. Third year of mask mandates about to begin. Makes air travel, concerts, plays, museums, etc. less than enticing - especially, I think, for us older folks. Don’t even think about overseas travel!
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