Poll: How much are you planning to spend yearly in retirement?

[Hatton]

Does the Schwab RMD calculator take into consideration inflation? 400k sounds huge (and it is!) but not sure if it’ll be so crazy 20-30 years from now. Hopefully the tax brackets shift to account for inflation as well. Roth conversions don’t make sense for us now because we are in our peak earning years. I have a feeling when we are no longer in our peak earning years, Roth conversions will be off the table. Oh well.

I really wish I was a WCI follower right after finishing training. I would have done a Roth conversion for as much as I possible could have if I had understood how things worked back then. Glad to be informed now.

All of the retirement-type calculators that I have looked at will have a list of assumptions that detail things like rate of return, inflation, taxes.

[Hatton]

3.5% of 3.5 M is actually $122,500, so you’d “only” need $2.857 million at 3.5% to get $100,000.

What I’m wondering is what size of taxable account do people have where they’re getting six figure yearly dividend payments??? The current yield for VTSAX is 1.25%, so you’d have to have $8 million in VTSAX to get $100,000 in dividends. Even at 2% yield your taxable account would have to be $5 million. Those are crazy numbers.

My accounts at Vanguard paid $136k in 2020. I have actually been working to lower this number. In 2019 I got dividends and cap gains in December alone of $120k. This was interfering with Roth conversions and would result in IRMAA. I sold off an American fund ...Growth Fund of America and paid a big capital gain to lower these numbers. After you collect a bunch of investments optimally managing the income and taxes becomes increasingly complex. But in answer to your question plenty of MFs pay out hefty dividends and capital gains if you have a good position. The problem is they do it in late December making it hard to plan.

[CordMcNally]

Maybe we can get medscape or MGMA to do spending survey of physicians..

The accuracy would probably be suspect since I imagine most physicians can’t accurately tell you how much they spend.

[VagabondMD]

Every time I open this thread, my annual spend in retirement increases.

[GasFIRE]

But in answer to your question plenty of MFs pay out hefty dividends and capital gains if you have a good position. The problem is they do it in late December making it hard to plan.

This is why I got out of actively managed MFs years ago. No control over the fund turnover and in a down year for the market the CG distributions can be enormous as the manager(s) “adjust” their portfolio.

[VagabondMD]

This is why I got out of actively managed MFs years ago. No control over the fund turnover and in a down year for the market the CG distributions can be enormous as the manager(s) “adjust” their portfolio.

Ditto, but my unwind has been slow. My biggest culprits, over the years, has been Vanguard Primecap Core and the Bridgeway Tax-Managed Omni Small Cap Value Fund (BOTSX). The latter has been brutal. In retrospect, I could have pulled the plug in March, 2020, for minimal gain/loss but held on and it is up over 100% from that point.

For the record, when considering income from funds and calculating whether you can live off the income stream, I would not include capital gains as they are not truly income and not regular/periodic, in the way that dividends are, and if withdrawn and spent, they erode the value of the underlying investment in an unpredictable fashion.

[FIREshrink]

The problem seems like the same as the 4% issue. Are you more than likely going to end up with way more then you need if you follow it? yup, but its safe and maybe you get a really bad SOR.

If everything goes smoothly for the next 25 years will people have an RMD "problem"? Yep, but maybe it doesnt go so smoothly, so you have to accept that and save while you still can.

Just keep in mind that the 4% rule means 95% of the time you die with money not spent and 80-90% of the time you die with more than you started with, which is consumption smoothing failed writ large.

[MaxPower]

My accounts at Vanguard paid $136k in 2020. I have actually been working to lower this number. In 2019 I got dividends and cap gains in December alone of $120k. This was interfering with Roth conversions and would result in IRMAA. I sold off an American fund ...Growth Fund of America and paid a big capital gain to lower these numbers. After you collect a bunch of investments optimally managing the income and taxes becomes increasingly complex. But in answer to your question plenty of MFs pay out hefty dividends and capital gains if you have a good position. The problem is they do it in late December making it hard to plan.

So are most of your dividend producing funds index funds, or are they actively managed funds? I have VTSAX, VWIUX, and VTIAX in my taxable account, and the dividend yields range from 1.25-2.5%. Even at the higher end of that range you’d need $4M just to get to $100k in dividends. I thought those were optimal funds for a taxable account and am just trying to figure out if I’m wrong and need to change course. My “number” is somewhere between $5.5-6M (I think), and I guess I just don’t see a time when my taxable account gets to that point since right now I’m about 25% Roth, 25% taxable, and 50% tax deferred. My yearly taxable contributions now, however, are greater than tax deferred + Roth so the proportions will definitely change.

[Hatton]

The only active fund that I still have is ANCFX. American Fund Fundamental investors. It throws off dividends and occasional cap gains also. I am not reinvesting and selling down 100k per year. Everything else is indexed thru Vanguard and I have a nice Apple position. Major investments at Vanguard VFIAX (a tax loss harvest from VTSAX). VMGMX, VTEAX, VTIAX, VVIAX, QQQ, VBK, VBR, VNQ. Complicated portfolio.

[Hatton]

Ditto, but my unwind has been slow. My biggest culprits, over the years, has been Vanguard Primecap Core and the Bridgeway Tax-Managed Omni Small Cap Value Fund (BOTSX). The latter has been brutal. In retrospect, I could have pulled the plug in March, 2020, for minimal gain/loss but held on and it is up over 100% from that point.

For the record, when considering income from funds and calculating whether you can live off the income stream, I would not include capital gains as they are not truly income and not regular/periodic, in the way that dividends are, and if withdrawn and spent, they erode the value of the underlying investment in an unpredictable fashion.

I agree with you about capital gain payments from mutual funds. You cannot count on them and you have to pay the taxes. I also hate the timing of the distributions. It is hard as you know to predict how much these things appreciate over time.

[Kamban]

3.5% of 3.5 M is actually $122,500, so you’d “only” need $2.857 million at 3.5% to get $100,000.

What I’m wondering is what size of taxable account do people have where they’re getting six figure yearly dividend payments??? The current yield for VTSAX is 1.25%, so you’d have to have $8 million in VTSAX to get $100,000 in dividends. Even at 2% yield your taxable account would have to be $5 million. Those are crazy numbers.

I have a mishmash of individual stocks, very few active managed funds ( from early times) and a few Vanguard indexed funds. The stocks, especially companies like P & G, Home Depot, energy stocks and some other utilities, give good dividends 4 times a year that adds up quickly. I do not want to sell those stocks and pay CG. The dividends can easily make up >50% of my retirement income.

[FIREshrink]

We gave away all our individual positions to our DAF, that's how we closed those out.


You can't keep your low return safe assets in both pretax AND taxable; the equities gotta go somewhere! To avoid the RMD problem I try to keep bonds in pretax and equities in taxable, so taxable is growing quickly. Based on a modest real rate of return and ongoing contributions for a few more years we're looking at high seven figures real in taxable by the time RMDs kick in at age 72. But I'd rather be forced to take dividends 2% of $10,000,000 taxed at 15-23.8% than RMDs 4% of $10,000,000 taxed at 24-35%, there's a little higher tax drag in taxable but under normal economic circumstances that would be worse on bonds than equities so this setup makes the most sense to me.

[Turf Doc]

Just keep in mind that the 4% rule means 95% of the time you die with money not spent and 80-90% of the time you die with more than you started with, which is consumption smoothing failed writ large.

Right, right. and dont even get me started on how ridiculous it is how often we talk about the 4% rule considering 99% of people probably are never going to even follow it!

[JBME]

This is a rather meaty article but I love these articles because I think it's going to be a real struggle to shift from saver to spender. Good ideas in here:

https://esimoney.com/what-comes-afte...phase-of-fire/

[dennis]

Currently we're at $240K/yr for the last 4 yrs. 120K from IRA owned real estate and 120K from real estate outside of IRA. We're going to be transitioning to almost all from outside of IRA as we're trying to eliminate the IRAs to avoid RMD. Just came from tax planning with the CPA and we'll be able to take $450K from IRA real estate by reassigning ownership to me instead of the IRA and also convert $400K to ROTH this year and pay no taxes on any of it because of real estate generated losses, some carry over from last yr and some generated this yr. This will be the 3rd yr in a row we'll pay no income taxes due to real estate generated losses. Despite the income we've received since retiring our NW has increased by 40% in 4 yrs by a combo of the stock gains and the crazy gains in real estate value.