Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
It is our goal to leave taxable investments to our heirs.
According to Section 1014 of the Internal Revenue Code, if a person holds property at death, it will receive a new basis equal to the fair market value of the property at the person's date of death. In the case of appreciated assets, the rule allows people to inherit the assets, such as stocks or real estate, without inheriting the tax burden that's triggered by capital gains. This is known as a step-up in basis. In states that recognize community property laws, married couples stand to benefit greatly.
It is our goal to leave taxable investments to our heirs.
According to Section 1014 of the Internal Revenue Code, if a person holds property at death, it will receive a new basis equal to the fair market value of the property at the person's date of death. In the case of appreciated assets, the rule allows people to inherit the assets, such as stocks or real estate, without inheriting the tax burden that's triggered by capital gains. This is known as a step-up in basis. In states that recognize community property laws, married couples stand to benefit greatly.
Don't buy the 4% rule, never have. I looked at it but it seemed to me not to take into account SS. My expense's for the last 16 years average 7.07% of last years year ending total. (including SS) -- maybe that is less than 4% without SS but why bother figuring that out. ADD: I have no idea why I track that but I do. I never use it for anything.
It's not necessary to follow Bengen's 4% w/COLA SWR for US moderate-allocations to appreciate its significance.
Before-Bengen, the thinking was to start with long-term stock returns, use 3-4% margin to account for return variability, and use the net as withdrawal rates. But the problem was that many of these strategies failed.
Even today, there is a widely followed radio personality who uses this as 12 - 4 = 8% withdrawal rate. But no need to go back to 1930s, this strategy would have failed if started in 2000.
So, Bengen found this 4% w/COLA that would have survived even the worst 30-yr stretches in the US. But one can use something higher and hope for the best. BTW, Bengen is still around, may be 75 or so, and is himself amused by how people got so stuck to his Rule.
The main point is that starting point should be the 4% w/COLA, not the long-term stock returns.
The 4% "rule" is not a rule at all. It is a guide. Adjust it as you may, but it is a starting point for decisions. Also, it has nothing to do with SS or pensions. It is independent of that. It has only to do with the life, or probability of the availability of your nest egg lasting over 30 years.
Comments
It is our goal to leave taxable investments to our heirs.
Before-Bengen, the thinking was to start with long-term stock returns, use 3-4% margin to account for return variability, and use the net as withdrawal rates. But the problem was that many of these strategies failed.
Even today, there is a widely followed radio personality who uses this as 12 - 4 = 8% withdrawal rate. But no need to go back to 1930s, this strategy would have failed if started in 2000.
So, Bengen found this 4% w/COLA that would have survived even the worst 30-yr stretches in the US. But one can use something higher and hope for the best. BTW, Bengen is still around, may be 75 or so, and is himself amused by how people got so stuck to his Rule.
The main point is that starting point should be the 4% w/COLA, not the long-term stock returns.