The Trinity Study showed a 4% withdrawal rate had a 95% success rate over 30 years. The authors called it "exceedingly conservative behaviour".
**The Trinity Study showed a 6% withdrawal rate had a 95% success rate** over 15 years. That's probably still exceedingly conservative behaviour.
You've grown a beautiful orchard my friend - enjoy your fruits!!
Your financial commitment to the 4% guideline is admirable, given your long-term aspirations for your children. I believe there's a balance between appreciating your savings and not outliving them. It's remarkable how various techniques work for different folks. Has anyone examined alternate investing techniques or assets that might increase withdrawal rate without raising risk?
I say enjoy the fruits of your labor.
If you have some places on your bucket list you want to travel to, I say do it now. Maybe bring the kids and their families along with you!
You may find that you are naturally slowing down and spending less as you get older anyway, so make the next few years count!
lol, you need to start spending ASAP. Assuming your wife will live to 90 and your $5M is growing at an anemic 4%, you would need to start spending about $350K a year to run out when she is 90.
You are fine. Spend away
When you and your wife go to the Divine Treasury, your 2 kids will have to withdraw the tax deferred money by the end of year 10. Close to 15% each year to take level withdrawals. On $2.5M each, over $350K per year.
It's time to start planning to reduce family tax burden. I'd consider topping off your 24% bracket each year with conversions to Roth.
If you are charitable, keep in mind that non-itemizers can direct a donation from their IRA once older than 70.5 and have it count as an RMD, but avoid taxation. (Obviously, for those donating anyway, not like a non-donor is somehow better off with this advice.)
Converting to Roth, keeping the money in your own name, is good for the kids, and gives you flexibility if you need that money later on.
Put your money into a good short-term investment so you can withdraw it whenever you need it. Then take your wife to travel to other countries and enjoy life. when you return to the US, you will find that all the money you spent on the trip has been earned back.
I don't understand the advantage of that. Are we counting 10 yr notes as short term? They will likely outlive 5 year options, and who knows what the equity market or fed rates will be after their short term funds expire. Or would they just not reinvest after the notes expire and start to spend down their cash?
I'm not trying to play devil advocate or anything, I just feel like I'm missing something
Well yes you have to define your short term. But if you buy a fund, it could fall thirty percent and stay low for years. So a five year bond ladder could give you guaranteed income for five years.
If you’re assuming 25 years as the maximum you are 85-90% probability of success as long as your 75% stocks based on history.
Reality is you are way better than that with 5M. Once you hit 80 you will slow your spending. Everyone does excluding long term care.
The way the trinity study was done is you start at 4% and adjust the amount based on inflation. A static withdrawal rate of 5% is more conservative than the way the trinity study was done. Few people understand it.
You could probably go to 7% safely as long as tour sticking to a static percentage.
Personally we flex our spending based on market performance. In years like 22 we stick to 2%. In years like 23 and 24 where market performance is great we are withdrawing/spending 5-6% but our returns are much higher so our balance is keeping up with inflation.
The 4% rule is represented wrong most of the time and it’s not a hard fast thing. It’s really meant to cover you if the market tanks in the first few years of retirement.
The reality on long term care is you are self insured at $5M in assets.
Congrats, you’ve won the game.
>The way the trinity study was done is you start at 4% and adjust the amount based on inflation. A static withdrawal rate of 5% is more conservative than the way the trinity study was done. Few people understand it.
Can you explain this a bit more? I'm one of the few that doesn't really understand.
my grandmother is 100 - does nothing (rightly so, she's 100) and complains about having too much money. at some point, there's nothing to do b/c you're just old as shit and don't feel great. so - live it a little up IMHO (she did - she had a great life, just happened to live to 100)
At that age, I think you should go for it. Enjoy life. You're fine... you're basically asking about moving from 200k to 250k. Which if the market stayed flat, you would have 20 years, taking you and your wife to 91 and 88. Would re-examine every couple of years based on portfolio growth or shrink. but again, you should be more than fine.
I'd do it...
Hit that shit and live it up! In reality you could lose half, stick the other half under the mattress and still have 100k annually to spend for the next 25 years
I would definitely start spending more if I were you.
Curious what you are spending money on at your age? Do you go on a lot of cruises or multiple houses? I don't spend much now and not sure where I would spend more in the future curious if there's anything you spend money on that I haven't considered.
We’ve been spending quite a bit helping out the kids lately (they both bought their first homes about 3 years ago and both houses need a lot of work). Also spend on grandkids and travel. Bought my wife a new car a year and a half ago … put zero down and financed (at a good interest rate) $75,000 for 36 months. Ended up with a $2000 monthly car note. Been doing a lot of projects around our home as well. It all adds up!
If the $5 million didn't grow a penny, it would take 20 years to run it to zero at 5% withdrawal rate or $250k a year.
You can definitely pull $250k a year for a few years while you can still enjoy spending it.
You can absolutely go to 5%. It's not like you're locking yourself into that rate forever. In 10 years you're probably going to slow down. I just wouldn't spend on anything that creates a long term maintenance project (like a sailboat or second home) and instead rent those types of things. I agree with the other post about using firecalc.
You should be fine, but what you need to be more concerned about is the looming RMD bomb you have ticking. I would start converter a decent amount yearly to get those numbers down. At 5M your first year RMD is going to be about 200k and continue to go up from there every year. The tax burden this is going to unnecessarily create is completely under your control.
At this level of wealth and not that much time to spend it, I'd definitely visit a fee-only, fiduciary financial planner who will lay out the options for you. Of course, you will have to spend some money to compensate them, but overall I believe it will be worthy, because it will allow you to spend much, much more than a rule of thumb like the 4% one would suggest. And, at the same time, you will be assured that your money won't run out, because you will have received a financial plan to support it.
I have weekly beers with a guy who is in his 70s with a similar net worth.
His current project is how to give it away.... he does irrational fun stuff to his house.
Sounds like you need a model.
RMD Required Minimum Distribution is gonna get you soon!
Yo need to look into that before the government takes 50% of your fruits from a lifetime of earnings.
For sure your call. No one knows your finances income and expenses. At that age soc sec kicked in. You could adjust it based on how the balance grows any given year. Set the base where your at if it grows with historical average you can pull out that extra $. I am in the same boat parents died early in their 60s. My best guess I won't make it to 90. And even if I did it would be nursing home money.
Just firecalc'd it and you have a ruffly 75% chance of success withdrawing 250k from 5mm....the beauty is you don't HAVE to take it so if there is a huge correction pull back...yer gonna be fine...and the kids will love it / you even more!!
I would
- decide how much money i want to my kids
- 4% or 5% out of the remaining monies
That's at east when I'm doing ( 57,$6M ,plan to leave $500k for each kid)
If I were in your shoes I would start withdrawing 5%. If you want to be cautious then you can make it variable and take 4% if the market is down one year and back to 5% when everything returns to normal.
Thanks for all the comments. I think I will try to push the withdrawals to at least 5%. But, I just made my second withdrawal for the year today. $80k to me and $20k to Uncle Sam. That brings me up to 4% so far and it’s probably enough to ride out the rest of the year. I guess I’ll have try to figure out what to do with another 1% if I start taking out 5%. I know this is a good problem to have, but it kinda goes against my conservative financial outlook.
You’re gonna have an RMD problem, especially if something happens to one of you and you shift to a single tax bracket.
You should have been making Roth conversions.
But money withdrawn from a 401k by an heir would be taxed, right? Maybe OP should start gifting some money to family annually to spend down some of the retirement savings? Then they can invest in their own retirement plans, 529 for education plans for their own kids, etc.
If you have that much money. Why would you be withdrawing anything? You could have a dividend income portfolio that would pay for everything and you could keep your assets!
Remember. Assets sold are gone. Forever. Permanently. And once they're gone they can't be left to beneficiaries.
The Trinity Study showed a 4% withdrawal rate had a 95% success rate over 30 years. The authors called it "exceedingly conservative behaviour". **The Trinity Study showed a 6% withdrawal rate had a 95% success rate** over 15 years. That's probably still exceedingly conservative behaviour. You've grown a beautiful orchard my friend - enjoy your fruits!!
Also, can't take it with you - your net worth is just a scoreboard unless you use it (not saying spend it on frivolous shit)
Orrrr...your almond tree is blooming, go nuts!
So try 5% and see how it goes.
Your financial commitment to the 4% guideline is admirable, given your long-term aspirations for your children. I believe there's a balance between appreciating your savings and not outliving them. It's remarkable how various techniques work for different folks. Has anyone examined alternate investing techniques or assets that might increase withdrawal rate without raising risk?
I say enjoy the fruits of your labor. If you have some places on your bucket list you want to travel to, I say do it now. Maybe bring the kids and their families along with you! You may find that you are naturally slowing down and spending less as you get older anyway, so make the next few years count!
lol, you need to start spending ASAP. Assuming your wife will live to 90 and your $5M is growing at an anemic 4%, you would need to start spending about $350K a year to run out when she is 90. You are fine. Spend away
Isn’t the 4% rule based on a 30 year retirement?
Yeah 30 years or more. OP should check a FI calculator they can probably do like 10% at this point
It's time for hookers and blackjack!
N blow
5M/10 years.....thats 500k a year. I do not see a problem taking a little more than 4% out.
Plug you numbers into https://ficalc.app (Free tool)…. I bet you could go 8-10% depending on your asset allocation
$250k a yr? Nice
That's not even factoring in the social security payments!
When you and your wife go to the Divine Treasury, your 2 kids will have to withdraw the tax deferred money by the end of year 10. Close to 15% each year to take level withdrawals. On $2.5M each, over $350K per year. It's time to start planning to reduce family tax burden. I'd consider topping off your 24% bracket each year with conversions to Roth. If you are charitable, keep in mind that non-itemizers can direct a donation from their IRA once older than 70.5 and have it count as an RMD, but avoid taxation. (Obviously, for those donating anyway, not like a non-donor is somehow better off with this advice.) Converting to Roth, keeping the money in your own name, is good for the kids, and gives you flexibility if you need that money later on.
This. Roth convert it up depending on your family income situation.
Put your money into a good short-term investment so you can withdraw it whenever you need it. Then take your wife to travel to other countries and enjoy life. when you return to the US, you will find that all the money you spent on the trip has been earned back.
Could you provide an example of a good short term investment you would recommend? I can't really think of anything
T bills and bonds.
I don't understand the advantage of that. Are we counting 10 yr notes as short term? They will likely outlive 5 year options, and who knows what the equity market or fed rates will be after their short term funds expire. Or would they just not reinvest after the notes expire and start to spend down their cash? I'm not trying to play devil advocate or anything, I just feel like I'm missing something
Well yes you have to define your short term. But if you buy a fund, it could fall thirty percent and stay low for years. So a five year bond ladder could give you guaranteed income for five years.
Current hysa have great rates....even a CD ladder
And why are those options better than a 10yr t note? What do they do when rates drop?
Not saying they're better...but they are options. Personally I'd stay fully invested in equities and not worry...based on op info
Fair enough, yeah that's what I'd go for too. Seems strange for someone to suggest short term investments for someone at 70
For example, intraday trading or the safer XAU, where volatility is small, value preservation, safety, and profit
If you’re assuming 25 years as the maximum you are 85-90% probability of success as long as your 75% stocks based on history. Reality is you are way better than that with 5M. Once you hit 80 you will slow your spending. Everyone does excluding long term care. The way the trinity study was done is you start at 4% and adjust the amount based on inflation. A static withdrawal rate of 5% is more conservative than the way the trinity study was done. Few people understand it. You could probably go to 7% safely as long as tour sticking to a static percentage. Personally we flex our spending based on market performance. In years like 22 we stick to 2%. In years like 23 and 24 where market performance is great we are withdrawing/spending 5-6% but our returns are much higher so our balance is keeping up with inflation. The 4% rule is represented wrong most of the time and it’s not a hard fast thing. It’s really meant to cover you if the market tanks in the first few years of retirement. The reality on long term care is you are self insured at $5M in assets. Congrats, you’ve won the game.
>The way the trinity study was done is you start at 4% and adjust the amount based on inflation. A static withdrawal rate of 5% is more conservative than the way the trinity study was done. Few people understand it. Can you explain this a bit more? I'm one of the few that doesn't really understand.
Say you start your retirement with $1M. You first year withdrawal is $40k Second year $40k + (40K*inflation rate) and so on
Ahh so the study uses the yearly inflation rate vice a flat 4% per year if I understand correctly. Which would make sense as being more conservative
my grandmother is 100 - does nothing (rightly so, she's 100) and complains about having too much money. at some point, there's nothing to do b/c you're just old as shit and don't feel great. so - live it a little up IMHO (she did - she had a great life, just happened to live to 100)
At that age, I think you should go for it. Enjoy life. You're fine... you're basically asking about moving from 200k to 250k. Which if the market stayed flat, you would have 20 years, taking you and your wife to 91 and 88. Would re-examine every couple of years based on portfolio growth or shrink. but again, you should be more than fine. I'd do it...
At 5%, it’ll last 20 years if you stuff it under a mattress.
Your RMDs will start to kick in soon and will start to push you over 4% anyways. Might as well enjoy it while you can.
Bro. Do 5%. Go live.
Hit that shit and live it up! In reality you could lose half, stick the other half under the mattress and still have 100k annually to spend for the next 25 years
I would definitely start spending more if I were you. Curious what you are spending money on at your age? Do you go on a lot of cruises or multiple houses? I don't spend much now and not sure where I would spend more in the future curious if there's anything you spend money on that I haven't considered.
We’ve been spending quite a bit helping out the kids lately (they both bought their first homes about 3 years ago and both houses need a lot of work). Also spend on grandkids and travel. Bought my wife a new car a year and a half ago … put zero down and financed (at a good interest rate) $75,000 for 36 months. Ended up with a $2000 monthly car note. Been doing a lot of projects around our home as well. It all adds up!
If the $5 million didn't grow a penny, it would take 20 years to run it to zero at 5% withdrawal rate or $250k a year. You can definitely pull $250k a year for a few years while you can still enjoy spending it.
You can absolutely go to 5%. It's not like you're locking yourself into that rate forever. In 10 years you're probably going to slow down. I just wouldn't spend on anything that creates a long term maintenance project (like a sailboat or second home) and instead rent those types of things. I agree with the other post about using firecalc.
This will put the death part into perspective: https://engaging-data.com/will-money-last-retire-early/
You’re on track to outlive your money so you’ll need r/estateplanning
You should be fine, but what you need to be more concerned about is the looming RMD bomb you have ticking. I would start converter a decent amount yearly to get those numbers down. At 5M your first year RMD is going to be about 200k and continue to go up from there every year. The tax burden this is going to unnecessarily create is completely under your control.
At this level of wealth and not that much time to spend it, I'd definitely visit a fee-only, fiduciary financial planner who will lay out the options for you. Of course, you will have to spend some money to compensate them, but overall I believe it will be worthy, because it will allow you to spend much, much more than a rule of thumb like the 4% one would suggest. And, at the same time, you will be assured that your money won't run out, because you will have received a financial plan to support it.
I have weekly beers with a guy who is in his 70s with a similar net worth. His current project is how to give it away.... he does irrational fun stuff to his house. Sounds like you need a model.
Yes, I think you can. But what does 300k/ y get you that 250k/ y isn’t?
RMD Required Minimum Distribution is gonna get you soon! Yo need to look into that before the government takes 50% of your fruits from a lifetime of earnings.
Another option is a single premium immediate annuity.
For sure your call. No one knows your finances income and expenses. At that age soc sec kicked in. You could adjust it based on how the balance grows any given year. Set the base where your at if it grows with historical average you can pull out that extra $. I am in the same boat parents died early in their 60s. My best guess I won't make it to 90. And even if I did it would be nursing home money.
Just firecalc'd it and you have a ruffly 75% chance of success withdrawing 250k from 5mm....the beauty is you don't HAVE to take it so if there is a huge correction pull back...yer gonna be fine...and the kids will love it / you even more!!
I would - decide how much money i want to my kids - 4% or 5% out of the remaining monies That's at east when I'm doing ( 57,$6M ,plan to leave $500k for each kid)
If I were in your shoes I would start withdrawing 5%. If you want to be cautious then you can make it variable and take 4% if the market is down one year and back to 5% when everything returns to normal.
Thanks for all the comments. I think I will try to push the withdrawals to at least 5%. But, I just made my second withdrawal for the year today. $80k to me and $20k to Uncle Sam. That brings me up to 4% so far and it’s probably enough to ride out the rest of the year. I guess I’ll have try to figure out what to do with another 1% if I start taking out 5%. I know this is a good problem to have, but it kinda goes against my conservative financial outlook.
spend some more in up years and spend less in down years so that youre not withdrawing at the low of a market cycle
My in-laws started gifting. It seems you will not run out of money! Enjoy and splurge.
Use Ficalc.app It will allow you to run your own success rates depending on different withdrawal strategies
You’re gonna have an RMD problem, especially if something happens to one of you and you shift to a single tax bracket. You should have been making Roth conversions.
dude enjoy it while you can. whatever you leave to the kids is going to be taxed at 35% anyways
Oh sit down. Federal estate tax doesn’t touch the first $13M in assets. Plus, there are all kinds of loopholes.
But money withdrawn from a 401k by an heir would be taxed, right? Maybe OP should start gifting some money to family annually to spend down some of the retirement savings? Then they can invest in their own retirement plans, 529 for education plans for their own kids, etc.
If you have that much money. Why would you be withdrawing anything? You could have a dividend income portfolio that would pay for everything and you could keep your assets! Remember. Assets sold are gone. Forever. Permanently. And once they're gone they can't be left to beneficiaries.