Thursday, February 14, 2019

Ideal Retirement Budget

From what I have read about using the stock market to fund your retirement income is that you should budget to earn 8% per year and take out 4%. So, in my spreadsheet which includes my portfolio value at the end of each year and the amount I have taken out, I have a column that shows from the beginning year of retirement what would be my portfolio if I gain 8% and took out 4%.

Looking at my data, I have kept my withdrawals at or below 4%. The other part was hit and miss until year 13 of retirement. Currently my portfolio is higher than an 8% increase and 4% withdrawal would put it.

You hear a lot of about the withdrawal figure of 4% per year, but not as much about the fact that you need to earn 8% per year to take out 4% per year. I was taking out just under 4% when I retired, but I did stop working in 1999. My problem is that hit the 2001 bear market soon after and then, of course, the 2008 bear market.

By the logic of the earnings 8% and taking out 4%, a portfolio should be going up 4% per year. However, by the end of 2002, my portfolio was down 4.21% per year. After the 2008 bear market I was up 2% per year.

After the 2001 bear market I thought I would be better off if I only took out an amount equal to or less than my dividend income. At that time, my yield was around 3%. I decided to increase my portfolio yield to 3.5% and only take out 3.5% or less. I did some switching to higher yielding stock and tried to limit the increase in my spending. It took be a few years and it was mostly because of the increase in dividend income that I accomplished my goal.

On my other blog I wrote yesterday about ARC Resources Ltd. (TSX-ARX, OTC-AETUF) ... learn more. Next, I will write about IGM Financial (TSX-IGM, OTC-IGIFF) ... learn more on Friday, February 15, 2019 around 5 pm.

This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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