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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: RM Retirement Expences Date: 11/29/1999 9:55 AM
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Greetings, Tom, and welcome. You wrote:

<<I'm a RM Beginner and will be in retirement in a year or two and am wondering what procedure a Rule Maker Investor would use to provide living expences when he or she has for example a total of $1,000,000 invested as follows:
$500,000 S & P 500
$500,000 RM Portfolio divided
300,000 RM Stocks
100,000 RP4 Stocks?

Should the investor sell (each month) equal amounts of the S & P 500, the RM Stocks and the RP4 Stocks such that he has the needed living expences of 1/12th of 6% of the total?

Instead, should the investor sell (each month) 1/12th of 6% of the total from only the S & P 500 (least risky investment)?

Given that the investor had his(her) portfolio at Fidelity, Schwab, etc, does anyone know whether or not these brokerage houses would provide a service where they would sell off and send to their clients 1/12th of 6% of the total invested holdings each month?

Does anyone know on what board I could find the answers to these questions?>>


You in as good a board as any to ask those questions. Just understand that there are many opinions as to how to handle that issue, so basically it will all come down to your personal comfort level. Around Fooldom we contend that everyone (but retirees in particular) should keep money they know they need within three to five years in investments other than stocks. The rest of the money, then, goes into the market. I personally take cash I need in annual installments, not monthly. That, then, goes into an interest bearing checking account that I use to pay my monthly bills. I keep another four years' expenses in short-to-mid-term bonds as a cushion to protect myself from having to sell stocks in a down market. If things go well, I take the next year's income from the stock portfolio. If not, then it comes from the bonds, which get replenished by sales from the stock portfolio in a subsequent year.

I'm sure others have different, and just as valid, approaches as to how to liquidate assets while taking income. As I said, it really will come down to a personal choice you will have to make. And that includes the 6% withdrawal you're contemplating. Be aware that as an inflation-adjusted withdrawal, that amount is on the high side. While not out of reach, you will have to watch the markets closely each year to ensure a succession of bad years won't cause you to run out of money before you do time. There's a lot of discussion on this board about that very issue. I suggest you peruse a few of those messages to gain an understanding of what's involved.

Regards..Pixy
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