I’ve read a bunch about the subject and will probably do something like a fixed-percentage variable spending scheme, like Vanguard proposes. But I’m curious what people are actually doing in real life. Is anyone out there managing their retirement finances, and if so, how did you figure your SWR?
Edit: So here’s the system I’m thinking of using. The numbers are just an example.
First determine my SWR, which is what I’m having a problem with, but let’s say it’s $60,000/year. This comes out to $5000/month.
Initially, I’d fill up my bank account with $5000, and treat it like an allowance. Each month, I’d just top my account back up to $5000. On most months, I wouldn’t have spent the whole thing anyway. The next year, I’d make an adjustment for inflation, and that would be my new monthly allowance. Repeat until I’m dead.
Thoughts?
This is not answering your question (I can’t argue for my current SWR, it’s the trinity study minus a random fudge factor), but I’ve implemented an idea that I think others would benefit from.
I’ve been tracking my current withdrawal rate through time, based on my periodic calculation of baseline expenses. I suppose I could use actual expenses, but that’s remarkably volatile, so instead I take the 6 month average of recurring costs.
The benefit is a nice time series graph I can watch. I can plot a horizontal line for my current expected return on capital, and another for my safe withdrawal rate.
The net result is a lot of information condensed nicely. You can see at a glance if you’re trending towards safety, or away from it.