During retirement, how enter annual withdrawls from Regular Assets?

1. On the Assets & Saving > Current Saving tab, in the Net contribtuions to saving field do I enter a negative number if I'm withdrawing funds for living expenses or leave it at 0?
2. I've selected Cautious Spending under the Planning Method. So the Assets & Saving > Current Saving > Real asset income value is calculated for me as $256 (from a $520,000 Regular Asset balance). So my question is, if I intend to also withdraw the dividends & interest earned on my Regular assets, what do I enter in the Less amount of asset income not reinvested field? The $256 calculated by ESP or the amount of dividends & interest I'm likely to actually earn ($25,000)?

Comments

dan royer's picture

OK, there's a little complexity here in the question that I may not follow, but let try.
The current savings tab allows you to indicate what you are doing THIS YEAR with regard to saving or dissaving. What you put here in the top half the screen (saving) (btw, it won't allow you to indicate a negative number in the saving at top) or what you place down below in "Less amount of asset income not reinvested" will impact the report in the Current Year (a report I rarely look at). But I believe you will not see any impact on your annual saving or dissaving recommendations regardless of what you put in this screen. It will merely do the math to show you in the CURRENT YEAR whether you are saving or dissaving too much.

The Cautious Spending on Planning Method appears in the Monte Carlo, correct? That has nothing to do with this issue--that is really an assumption about spending behavior related to monte carlo analysis. Let's table that one since I think your question is about the Current Saving tab.

The program--one of the main purposes of the program--is to show you what you should be saving and dissaving each year. If you have special expenditures you should indicate those in the proper place. But don't try to indicate to the program how much you are withdrawing from regular assets each year. The program will suggest to you what you should withdraw (or save) to have the highest sustainable and smoothest discretionary spending.

I hope that helps.

Thanks for the response. I'm retired & currently withdrawing from my Regular Assets.
1. So you are suggesting I don't put any value in the Net Contributions to savings & Less amount not reinvested fields ?
2. I've been putting a negative value in the Net contribtuions field with no issue.
3. What is the meaning of the red message bar at the bottom of the tab which says 'Real asset income has been modified by choosing Cautious Spending'?
4. How do I send a screen print of this to you?

dan royer's picture

If you adjust net contributions to savings it will adjust the CURRENT YEAR report only in your reports. This may be useful to see. But for me, I just want to see the annual suggestions beginning in this year and beyond.

I see you are using Monte Carlo mode. OK. That then is reminding you that there is a setting in the MC setting about spending behavior. (aggressive, cautious, and conservative) that adjust the way you'd withdraw in practice. This impacts the way the MC reports appear. See page 67 in user guide for more information on spending behavior.

I don't want to say anything is "unimportant" because everything is interesting for one reason or another given the context or your interests. But for me, the value of the MC reports is to show the upside and downside were I to spend at the rate of return I receive. But I suppose in practice if you were in all stocks and it was a year that was up +30% you'd rerun ESPlanner and see that your discretionary spending just went from say 60K a year to 62K a year. Using the aggressive setting, the program assumes you'd go ahead and spend that 62K that year--and then might have the opposite experience the next year.

Monte Carlo is a model for looking at up- and down-side possibilities in your plan. I look at that, but most of the time I run the program in regular economics mode (it's faster that way :) ) and I can set my (conservative 5%) returns at nominal rates in the Assumptions area. I feel this gives me a better report for the the things I'm interested in. I have a 80/20 (bond/stock) asset allocation and this keeps my variance or volatility pretty darn low so that 5% is pretty close to what I see.

I have not added file attachments to this content type in the site, but that's a good idea. I'll do that.

I'll test my image upload here . . . .

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