August 18, 2021
In my post two weeks ago I outlined my approach to retirement planning: In light of significant uncertainty in retirement, I like to do a more careful, robust, and scientific analysis. Not because I could ever undo any of the existing uncertainties but because I don’t want to add even more uncertainties through “winging it” in retirement.
But how much detail is really required? I can already hear objections like “you can never know your future spending month-by-month, so why go through all this careful analysis with a monthly withdrawal frequency?” To which I like to answer: Well, maybe that’s the part where you can indeed use the “wing it” approach! So, today I want to go through a few case studies and learn how much of a difference it would make in my safe withdrawal strategy simulations if we a) carefully model the whole shebang in great detail, or b) just wing it and use a rough average estimate for the spending path. For example…
- Does the intra-year distribution of withdrawals matter? In other words, how much of a difference does the withdrawal frequency make: monthly vs. quarterly vs. annual?
- What if there are fluctuations in my annual withdrawals around the baseline average budget, due to home repairs, health expenses, etc.?
- What if those fluctuations have an upward bias?
- What if there is a slow (upward) creep in withdrawals?
- What about nursing home expenses later in retirement?
Where can I safely wing it? And which are the ones I should worry about? Let’s take a look…
Continue reading “When to Worry, When to Wing It: Withdrawal Rate Case Studies – SWR Series Part 47”