6 Withdrawal Strategies That Stretch Your Retirement Savings 📈 - (NEW Data)
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- Опубликовано: 13 июн 2024
- Does your retirement withdrawal strategy maximize the income you can take from your retirement portfolio? If you are following traditional methods (like the 4% rule), you could be leaving thousands per year on the table. You can schedule an appointment with one of our Retirement Experts to look at your situation and help you plan for your future. Call us at (920) 544-0576 or go to www.safeguardinvest.com/contact.
Timestamps:
0:00 NEW State of Retirement Income Report
1:24 Assumptions Used in this Research
2:26 Withdrawal Strategy #1
4:50 Withdrawal Strategy #2
6:35 Withdrawal Strategy #3
7:43 Withdrawal Strategy #4
10:26 Withdrawal Strategy #5
12:56 Withdrawal Strategy #6
14:35 Summary Data and Adjusting Variables
16:49 2 Ideas to Expand on Withdrawal Strategy Data
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I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for...
I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.
@@EdwardWells-bj4eh That's actually quite impressive,
@@DeborahDuggan932 My advisor is Victoria Carmen Santaella
You can look her up online...
@@EdwardWells-bj4eh The crazy part is that those advisors are probably outperforming the market and raising good returns but some are charging fees over fees that drain your portfolio. Is this the case with yours too?
I have to admit, your channel goes into much more detail and analysis than most. Very, very good information and knowledge on the topic. You mentioned some terms I never heard or considered (hence why I am subscribed). Excellent work.
Thanks, Safeguard Wealth Management, for the abundance of great content you have produced in 2023. Learning has never been so fun!
Love the detail, clarity and relevance of your content, thank you
Thank you for this clear presentation!!
Thanks Eric for another great video. I'll watch it a few times so I can digest it all. Thanks for sharing this informaiton and explanations. Larry, Central Valley, Ca.
Very Useful Content. Thank You.
very helful. very well done. congrats!
I think this the only youtube channel that has me taking notes. Thanks for all the thoughful info.
you write this on every channel. I can see your comment history.
@@ZelenoJabko ? Citation needed - do you have a url to another vid where I've said this?
Great Video!
I finally understand the 4% rule.......great video thanks
Same. I thought it was a straight 4% annually without adjustments.
Very. Valuable.
Great video! So many people are too rigid about the 4% rule as if that's the only way it works.
Need more videos on disconnecting Social Security from withdrawal. For example, retiring at 65 but not collecting SS until 70. This heavily front loads the withdrawals, but makes a lot of sense.
No, it really doesn't, for most people.
@@ItsEverythingElse Because you don't understand why? If you are married the higher earner should never take prior to full retirement age (FRA) because if you take it sooner, the survivor benefit will be locked in at the lower payment amount. It's ok to wait in that case. The lower earner can go ahead and take it at 62 without worrying about it.
@@ItsEverythingElseI don't know a single investor who would turn down *guaranteed* 8% *inflation adjusted* returns that are *tax advantaged* when you withdraw them as income. It's an investors wet-dream
The only reason to take it early is if you're dying or if your spouse had a higher income than you and taking spousal benefits makes you come out ahead
@@rayzerot I'm probably an exception, as I'm 100% stock with 63% in my Roth. It's somewhat of a close call, but the tax advantaged Roth tells me to draw SS at 65. My avoided tax rate on Roth withdrawals is 45%.
Never and always are poor words in discussing retirement strategies. Too many exceptions!
In general less wealthy people with no other income streams other than a portfolio benefit by at least one person delaying substantially. Wealthy people can do what they want, but with high life expectancy even they can wait a couple years.
We have a moderate portfolio, both retired, no debt, wife took at 63, I will wait till 70, when our combined SS income will be over $7000 in current dollars. Consequently starting at age 70, our portfolio is strictly for discretionary spending. We will spend down some to get there, but still have plenty. We plan to spend much of it by age 85(20 years) so can use a much higher withdrawal rate. We have our home to cover LTC. If market returns are poor we simply take cheaper vacations. Really no chance of running out of money with the SS. To protect the widowed spouse we have some longevity annuities kicking in at 83-85, so she would get an inflation adjusted $4500 survivor check, plus the equivalent of $1500 in annuities, for an inflation adjusted income of $6000.
That is the worst case financial outcome. Death and Health remain the wild cards for which we have minimal control!.
Don’t delay enjoying your years!
Great information, Eric - as usual. Thank you for sharing this!
Yes as several on here note, these wirhdrawal strategies are often not real world. If you retire before drawing SS, your needs will vary tremendously over time.
We are in that situation. Wife started her SS early at 63, I’m waiting till 70. We are using the portfolio to bridge to both payments. After that our “needed” portfolio income will drop to near zero. Before that it is much higher than 4%.
I would say the 30 year withdrawal strategies described, actually apply to a minority of retirees.
He says near end the numbers need to be run on individual basis to incl SS.
This is my fifth year after retirement. I’e been following the 4% rule thing I saw on a youTube channel, but this isn’t really how hard I expected things to be. After I cashed out a lump sum, I still have about $760k left, but at this rate, and with how the market is (we were putting money away in an index fund), I’m starting to get really worried.
It’s amazing you were able to save that much during your active years. Not a lot of people are able to save that much in a lifetime. But now you are retired and depend on your investment, it’s best you redistribute your capital, so you are not left devastated during a market crash or recovery. To simplify the process, you could allocate your resources with the help of a financial advisor.
Yeah, I’m also closing in on retirement, and I have benefitted much from using a financial advisor. I didn’t really start early, so I knew the compound interest of index fund investing would not work for me. Funny how I pulled in more profit than some of my peers who have been investing for many years.
@@ThomasChai05Hey, this caught my interest. I worry that I have a couple more months before retirement, and I want to switch to using a financial advisor, but I don’t really know how to find one.
Thank you for this tip. it was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
Great summary / update. Nice job contrasting the associated characteristics with each tactic.
Would have been good to have a link to the paper the video is based on
I found myself constantly reviewing how you came up with numbers on the rmd method, guardrail and actual spending. They weren't clear (I was not alone as you can tell by "most replayed"). I never could figure out the last, how 3.25 inflation minus 1.9 added to 50,000 equalled 50,650 etc...or the next year. Details were left out.
This video is one of my personal favourites in explaining the different strategies.
Personally I have decided to forgo positive inflation adjustments for now. I will be 66 soon and my government benefits plus a modest pension take care of all of my bills, not including vacations. I am Canadian and am trying to keep my withdrawals to an amount that will avoid clawbacks on my age amount deduction. I have the Canadian version of a Roth to draw from if I need extra cash for unforeseen costs. Furnace, car, etc….
When spending is adjusted for inflation or market conditions, how exactly are those conditions determined and how far forward is the spending adjustment for?
How does all this work if you retire at 61? MFJ have a large Roth account and pension at 65 and will take SS at 70. Planning on using my pre tax from 61 thru 70. Then I’m good with SS, Modest pension and use of Roth account to supplement our income.
You're absolutely right! You make a very valid point when you stated that the marginal utility factor needs to be adding to the calculations somehow.
If you plot out on a spreadsheet a fixed 8% return, a 10% bump doesn’t seem to be enough because the RoR is too high. I wonder if there’s a way to scale the bump to the RoR?
Excellent content. I have long believed that the guardrails method is the gold standard of withdrawal strategies. It is especially attractive for people like me who have a higher risk tolerance and plan to maintain a higher than average allocation to stocks throughout retirement. It allows for significantly higher spending throughout retirement and it can also provide a decent ending balance for legacy purposes, if that's your goal.
Great information. I was wondering how RMD were calculated.
He explains it in the video.
The 100% T.I.P.S. ladder strategy which you mention, saying that you would be left with NOTHING at the end of 30 yrs, is only valid if you CONSUME all of the proceeds from the 30yrs of withdrawls. Most people won't do that, however; since the generally have other income sources..Social Security and pensions, specifically.
I've chosen to do soft retirement, working 12 hours a week.
That's a neat term for that. Do you do 2 days working 6 hours?
I really appreciate all of your great videos, which are extremely well done. For this one in particular, I like your comments at the end about combining them into a variable strategy - such as Guardrails and the Smile Approach. I totally buy into the idea of spending more in our "Go Go" years and then slowing down as we get older in retirement.
My question for you - in the Smile approach, you show different reductions during each decade, but I challenge a reduction of spending during the first decade. I suggest that there should be no reduction until the 2nd decade and then reducing more during later decades.
Most of the smile research was done by David Blanchett, PhD, CFA, CFP. I believe compiled form a host of government data. My opinion is that it should be more of the default/baseline rather than used for every single plan. Preferences and personal situations will adjust the smile from person to person.
So depending on your situation, it may be completely logical to forgo reductions until the 2nd decade. Health, starting retirement age, composition of spending, etc. can all be a major factor here.
What would be the best strategy when you have an inflation adjusted pensions that covers all of your daily living costs that would not require a distribution during down markets. During up markets we could enjoy a fairly high w/d rate. As well as accounting for an early retirement of 50/49?
That's a fabulous position to be in. I would suggest a variable Time-Segmentation approach where you carve out specific amounts for later goals (legacy, Aging care, LTC maybe), and then spend the rest on "variable expenses, aka "Fun"
Sir you are certainly very knowledgeable. However, in my opinion, I wish your analysis contained more mights, maybes, coulds, and shoulds instead of wills. The Monte Carlo gamble scenarios should be presented with a caveat when explaining so many complicated strategies. This analysis is quite scientific but that should not mislead consumers into thinking the outcomes are certainties. Keep up the good work!
My strategy is to have everything in the S&P 500 low fee mutual fund minus 30 months of income which would be in an ultra safe money market fund.
The idea is to draw from the S&P 500 fund every month using the 4% rule unless the market goes down where the 30 months of cash comes in. I can survive 30 months of down returns. If I have an ultra bumper year in the S&P 500 then I would expend the savings up to 98 months. If I have a really bad set of years early on I could always return to work. Though I have not started it yet as I am not exactly ready to retire as I feel I'm to young to retire just yet even though I could financially do so if I cut some spending.
I suggest you consider using something other than the S&P 500 fund, or at least augment it with other funds. Note that the S&P 500 is large-cap companies only and heavily weighted by a few Technology companies. When it does well, that's nice. But when it does not do well, you would benefit from having other funds invested in small cap and International companies (maybe 15-20% in each).
I would love to see the 4% variation where you take 4% of the account value each year no matter the total account value.
I just withdraw 3.5% and stick to it. I don’t increase for inflation. I will just spend less when it starts getting tight. I don’t think that will happen for quite some time.
For the RMD Table Based strategy, why are you using the RMD SLE table for beneficiaries rather than the RMD ULE table that would apply to those who draw from their own IRA/401K ?
Single Life Expectancy was the approach cited in this specific Morningstar paper.
I've seen the RMD withdrawal method averaged over 3 yrs to reduce the volatility and it becomes a more reasonable approach.
3 year average of portfolio value? Interesting wrinkle to the approach
I have concluded that 4% is best & simplest method.
Simplest? Yes. Best? Doubtful. But if it makes sense to you, then it may be the best to you.
@@dforrest4503 Agreed. If anyone wants to follow the 4% rule, at least revisit it each year and probably adjust. Kind of like the Guardrails approach...
Am 58 retiring next year but the thought of retirement gives me weakness. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. It’s so difficult for people who are retired and have no savings or loved ones to fall back on.
True, It has never been easier to understand how to build your money after retirement than it is right now with the inflation, when you may study and experience a completely variegated market passively by employing a successful portfolio-advisor. The impacts of the U.S. dollar's gain or fall on investments, in my opinion, are complex.
Even if you’re not skilled, it is still possible to hire one. I was a project manager and my personal portfolio of approximately $850k of my retirement pension took a big hit in April due to the crash. I quickly got in touch with a financial-planner that devised a defensive strategy to protect my funds and make profit from my portfolio this red season. I’ve made over $250k since then.
That's fascinating. How can I contact your Asset-coach as my portfolio is dwindling?
My Financial adviser is ‘’'Natalie Lynn Fisk ’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
Question: I learned from your previous video that if I Roth convert in December, the IRS would want estimated taxes from that sum paid throughout that year (because they don't know when I converted) and penalize you if you didn't. But could the same rule benefit us? If we Roth convert in January instead, can I spread out paying taxes on that to four payments throughout that year, and not have to pay all of it lump sum in January?
Based on my experience (but I can't be certain), as long as we pay estimated taxes by January 15 of the following year, the IRS won't bother us. Thus, if you convert in January of 2024, you have until January 15 of 2025 to pay estimated taxes on that conversion. This assumes you've paid timely estimated taxes on other taxable income.
@@larryjones9773 Thank you.
For self employment income you need to make payments approximately quarterly throughput the year. In theory you can be penalized if not paying enough each quarter. Not sure how it pertains to unearned income.
or pay as you go. i have done conversions in feb '23 and paid 4/15. did conversions july '23 paid taxes 9/15, doing conversions Sept/ Nov/ December and i will pay the taxes on those on 1/15/24. why so many conversions instead of 1 or 2? i was spreading my tax burden over the year and i was deciding how much i can convert( initially up to 12% and then to max out 22% instead). during those quarterly payments i have been paying taxes on my LTCGs for the quarter as well and for the non qualified dividends i get from money markets. i am living on my taxable bucket at this time.
if you owed tax on the last tax return, i think you are required to have 110% of the total tax paid out in quarterly payments the next year.
You will be penalized if the amount earned/distributed in the Qtr. is not matched by Est Quarterly Tax Pmts. Peoples Democratic Republic of California requires greater pmts. in first few Qtrs. and has different deadlines.
Purchase a deferred annuity for guaranteed target income with no market risk. A joint lifetime annuity provided guaranteed income for both you and your spouse. No market risk exposure.
Correct. Keep in mind the inflation risk you open yourself up to, however. This inflation risk is mitigated somewhat in the 'actual spending' situation but still something worth noting.
Shouldn't you be able to combine the Real Spending method and Guard Rails? That should give you the best possible outcome?
Correct, this is generally our preferred method
Great- I just wanted to make sure I was understanding. I believe those two methods would be 100% additive in allowing for a greater withdrawal rate. So, maybe if we had another entry in your chart, it would a bit greater than a 6% withdrawal rate. This could be tested with MonteCarlo simulation but I've never seen any studies on that anywhere.
"The 4% rule is dead." Then a miracle occurs-passage of time. LOL.
What do you think about starting with the Guardrails for the "go go" years then switching to RMD method by the "slow go" or "no go" years? Perhaps the trigger would be when/if the RMD withdrawal exceeds the Guardrails withdrawal for the remaining balance. This way we could spend more when younger but also spend most of our savings (if our goal is not a high ending balance).
i am currently underspending my portfolio as i retired at 55 and now at 57 but even before retirement, the guyton klinger guardrails appealed to me with the initial draw rate of 5.2 so i will likely change later. your portfolio "doesn't know" when you retired so applying a different withdrawal strategy based on how the portfolio is doing at the time of the change (might be higher or lower) and a few years along retirement shouldn't affect the probabilites of success.
This is all when and good. I got a much simpler rule. Forget bonds, buy 10 Kings and aristocrat stocks, and live off the dividends. Companies such as Coke, J&J and PG have paid and raised their dividends for decades. If you can live off the dividends of such companies then you are good to go.
These methods are best used as a rule of thumb. In reality, every retiree needs to work with a financial planner and use financial planning software to actually model each year of their retirement income (all income streams including social security) and spending. It is critical to do this and have a detailed forecast and plan.
Great point, we did that, first on a spreadsheet and then with a retirement planning software. We will have drastically different needs as best as we can predict over the next 30 plus years.
My heavily researched spreadsheets were quite helpful, and when I plugged it all into a good software program it added a bit and confirmed a lot. We will end up using a dynamic and variable approach year to year due to multiple anticipated changes.
I agree. Our retirement spending will be very, very variable. Base expenses are mostly stable, but lots of large expenditures in different years (travel, replacement car, home improvement, gifts, etc). These need to be factored in and adjusted at least annually. For do-it-yourselfers, NewRetirement software is a very good option.
I live in Michigan and i am looking for a financial advisor. I left a message at your office. I would like to see if you can become both myself and fiancée financial advisor.
In fact, most people DO need more money.
I'm glad someone said this.
The biggest problem with all these withdrawal methods is that they don't take into account the income needs after social security is taken into account. I would like to see a plan that takes on the needed income after social security is taken out and includes guard rails as well.
It's actually not that complicated. All you have to do is think of starting SS as the start of a 'new retirement' and start with a new beginning withdrawal that takes SS into account. From that point the rules are the same as they were before SS.
Treat SS as a fixed income fund with CO LA.
He says near end the numbers need to be run on individual basis to incl SS.
use cfiresim. You can bake in SS, Pension, etc.
Not exactly true. The Withdrawal strategies are for the money you need "after" you account for income sources (like Social Security, pensions, and annuities). If you need to spend more, that is where these withdrawal strategies come into play.
At 11:37 when the million dollar portfolio in Year 1 increases 30% to 1.3M in Year 2?? I assume you would have to be totally invested in the stock market AND it was a banner year for a 30% portfolio increase. I must be missing something.
It's just an example. If you have 20% bands around the starting withdrawal rate, you'd need to see a big change in portfolio value from one year to the next to hit it. More likely they would hit that band over the span of multiple years but trying to show that in an illustration form would lead to more complexity than a 1 year example.
@@SafeguardWealthManagement Thank you for the explanation.
I'm struggling to get my spending to 3 percent. LOL.
same.
Seems like a video for people already familiar with these strategies. A comprehensive video explaining how each strategy works and how the numbers are derived might be more educational
4% rule: if you retired 25 years ago and withdrew according to the 4% rule, your money runs out this year.
If you had a 60/40 portfolio your money ran out in 2016.
Why is that? Because a 'monte carlo' simulation will produce a couple of circumstances in extreme end that never happens; all the negative years in the past 120 years occurring together followed by neutral years and all the positive years when the 4% is larger than the yield of the good years. The monte carlo simulation will over represent the value of non-risk and under represent the value of market recovery.
To make the funds last, reduce withdrawal when tbe market has declined and compensate when the market has gone up.
All of this is great, but everything depends on your expenses. Expenses drop dramatically over a 30yr at retirement. 60-70 strong spend…70-80 greatly reduced spend 80+ sharply reduced spend. If you have no debt, combined with SS income, most people don’t need anywhere near 8% return to live. 4%, which you can get in government bonds (no tax) out to 20 years pay more than that now. So you take your 4% and you lose nothing. But what about inflation!!! Doesnt matter as your SS is protected with COLA and your drop in expenses will erase almost any inflation rate. Besides, take a look at mortality charts. @ age 65, 50% of us will be gone by the time we hit 80 and 90% by 90.
Didn’t Morningstar say the 4% rule was died? Didn’t they say it was now the 3% rule? I think we give Morningstar to much credit.
That was when interest rates were near zero. It will vary from year to year.
@@markb1697 Which is really interesting because people online don't seem to adjust stuff in their models... but for real that makes no sense!!!! Why not adjust stuff and see how stuff works out?
Why not just build a portfolio of ETFs and stocks that have a history of increasing dividends over time at or above the rate of inflation (on average) that also pays out 5% first year base on initial balance. Then, take only 4% to 4.5% and reinvest the rest thereby slightly increasing the rate at which you income stream grows and making it so, less you pick a number of bad investments, that you never touch principal and that you will always be able to live a higher lifestyle every year going forward while never running out of money.
I don't ever see any channel talking about that type of approach.
Living on Dividend income is an idea from way back. There are videos and articles available to look at the Pros and Cons of this approach.
That said, I challenge why you do not want to dip into the Principal? You worked your entire career to save money for retirement and spending principal for travel, adventure, charity, etc. is why you saved it. If you agree, these methods help you spend down principal but not run out of money before you run out of life. If you want to leave a legacy, you can carve out an amount but you will likely die with a decent amount of principal.
This might seem like an odd request, but tired old eyes would really prefer white text on black background. Your slides are all black text on glaring white background. It hurts older eyes like those of retirees and potential retirees. You know, your target audience.
Interesting, all of the research I've read on the topic points to readability being far better with dark on white. I'll review and consider adjusting
@@SafeguardWealthManagement Thanks for replying. I read up a bit more myself on the topic. It seems there are people on both camps when it comes to this topic. Personally, I prefer a dark background with lighter text because it's easier on my eyes, but apparently that is not a universal preference. So please don't make any changes on my account, lol.
Watch in highest video resolution possible - click the gear next to CC. RUclips might be automatically showing you the video in a lower resolution.
Percentage based plans are simplified to the point of uselessness.
How can I go about investing in the crypto and stock market? Real estate sounds good too but it's all boils down to the right investment plan.
Investing in crypto is a good idea and a good trading system will put you through many days of success
IT ALL depends on your age, risk tollerance, and how your portfolio is allocated. Stock market and ETF’s yes! I’m 65% equities and ZERO IN CRYPTO!
First, you must understand that crypto is NOT investing. It is pure speculation. No advisor, no guru, no trading system will change that.
Crypto is fiat AF
I think it's BS that the day you retire sets your income for life. If your portfolio climbs 20% in one year, you would have lots more to spend for the rest of your life. Why can't the Monte Carlo analysis be run every December to determine how much money you can draw on Jan 1 to put in your 'life' account to put you into the 90% category?
Monte Carlo has a lot of flaws. I've seen it scare people and they move all their money to government bonds and end up with anemic returns. Very sad.
Agreed, which is why the 4% rule should not be followed without adjustments. A retirement plan cannot be considered a one and done -- it needs to be reevaluated every year and adjusted.
There is a better strategy. Invest in passive income so that when you retire, you still get an income stream. You're technically not "fully retired" and draining your savings with a passive income stream. If you couple that with social security and pension (if you have that), you will be fine. The more passive income you get, the better you will survive retirement. My goal is to take out 2% at most and I already reached that goal at 51. The passive income is the most important part of my investment portfolio. Some of these investments are in real estate, so the capital gains also help balance out any potential future inflation problems.
Why not add another one just for fun.. the 1/N distribution.. N=number of years left in the plan. So in year one you take 1/30th of the value, next yr 1/29th of account value and so on... If you want to leave a legacy.. then take a separate amount and don't touch it for 30 yrs... for example of 1 million to start.. you take 10% or 100,000 for the heirs.. put it in a separate account.. 100% stocks and never touch it, hopefully in a taxable account because gains will be tax free to them. Now take the balance of 900k and withdraw 1/30th the first yr.. 1/29th the second.. and so on... The 100k you left for the kids will grow to 1 million dollars at 8% for 30 years.. amazing.
Nice and easy, but what happens if you live for longer than 30 years. Will your Social Security be enough to live on?
Be carefull with your vocabulary....large growth and large cap are not the same.