So what’s your retirement withdrawal strategy going to be?

[JimNasium]

I’m still pretty far away from my retirement, but just for fun I’ve been looking at different retirement withdraw strategies. The 4% rule, buckets, fixed dollar (yen), etc.

What are you guys thinking? Personally I’m leaning towards the “bucket” strategy, but we’ll see once 65 (or earlier) rolls around.

Edit: Is there anything Japan specific we should be thinking about?

[RetireJapan]

I'm thinking buckets + maybe a fixed withdrawal rate (x% of the portfolio per year, not adjusting for inflation).

Have 2-3 years in cash and then add the withdrawn amount to that each year. Consider not withdrawing if there is a terrible stock crash, etc. Basically wing it.

I'm hoping to end up with more money than we are going to need.

[Roger Van Zant]

Will pay off my mortgage aged 57 or 58 (43 now).

I pay Class 2 NI contributions every month. Should have 33 out of 35 years by the time I reach retirement, maybe even a full 35 years.
I of course pay into the Japanese pension. Should have 35 or so years in that by the time I retire.

I max out my tsumitate-NISA each month (100% eMaxis Slim All Country)
I pay 12,000 per month (maximum for me) into an iDeCo (100% eMaxis Slim All Country)
I pay 10,000 per month into my company's DB scheme (awful interest rate, but I am stuck in it now, so just suck it up. Basically J-govt. bonds)

I am single, and have no plans to get married or have kids.
I think the two pensions above should bring in about 180,000 ~ 200,000 yen per month?
I can easily live on that once the mortgage is paid off.

Between the ages of 57/58 to retirement age, I plan to invest the money I would have been paying into my mortgage (about 65,000 per month).

All in all, should have enough to be comfortable in retirement, though in no way rich.

[captainspoke]

... Basically wing it.
...

I'll second that motion.


As a present-day retiree, buckets. But I tend to view this as two buckets, rather than the three that are commonly offered--first bucket is bigger (covers more years), second is for those years that are out there a ways.

I view the 4% rule (or whatever % you're comfortable with) as a guide or metric to see how things are going. When I read discussions of the 4% rule, my eyes glaze over when it goes to the adjustments to it--for inflation, or maybe having spent a little more or less. A luxury, I guess, but it's nice not to have to think of those details. Freedom.

While I'm very aware of money and investments--and cautious--I've never done the numbers to arrive at a 4% number that equals "this is my budget for the year, this is what I can/should spend". And then later looking again to see how I did. Now and then I divide my overall total by 25 or so, and if that looks like plenty, I then mentally close the door on it and just go on living how I want, and doing the things that I'd like to do.

We're financially set for an indefinite daily life--food, shelter, hobbies, etc. Anything routine, and that would include things like taxes, health insurance, even car insurance/maintenance/shaken. For something big/unusual--new car, overseas trip--I'd probably look at some numbers.

[TJKansai]

I'm thinking buckets + maybe a fixed withdrawal rate (x% of the portfolio per year, not adjusting for inflation).

Have 2-3 years in cash and then add the withdrawn amount to that each year. Consider not withdrawing if there is a terrible stock crash, etc. Basically wing it.

I'm hoping to end up with more money than we are going to need.

+1 for most of the above.

These last couple months have put a serious dent in the plans though... It was obvious the good times lasted longer than normal, but once you have a certain balance it is always painful to see a drop. This has been even worse, as it is not just one shot, but drop followed by drop.

Hoping to retire a few years early, in which case we'll need cash to cover all expenses until pensions kick in. There is a good chance we hit the road for 6-24 months. Best to do extended lower-budget travel while younger, IMHO.

Once pensions begin flowings, I am hopeful given our low-cost lifestyle we can live off those (mortgage is done) and splurge on future travel (and grandkids ). I think 3-4% plus pensions will allow us a pretty decent lifestyle (assuming we are in Japan). Expenses should be lower with kids out of the house.

[adamu]

it is always painful to see a drop. This has been even worse, as it is not just one shot, but drop followed by drop.

If you are still accumulating, you can view it as a chance to buy cheap (your regular investments now get you more stuff).

Now and then I divide my overall total by 25 or so, and if that looks like plenty, I then mentally close the door on it and just go on living how I want, and doing the things that I'd like to do.

This sounds like the ideal state of mind. I hope I have the assets and mental fortitude to do the same when the time comes!

[Tokyo]

I am happily retired with my own contrarian plan. 90% of my income is from fixed incomes - pensions, annuities, life insurance, & monthly dividend-paying funds. I don’t have to be concerned with the 4% rule, market movements, managing my funds etc. I can also spend whatever I receive, knowing more is coming. Perhaps I could get a little more by doing my own investing but my time is more precious to me. It’s why I pay people to do my returns!

Otherwise I definitely agree with RJ on having a few year’s of cash and too much income.

[Wales4rugbyWC23]

Anybody planning to live off rental income for retirement? I am planning on making it about 40-50% of my retirement income. For sure you get the sudden repairs- but good agents can easily sort out. On the whole I have found over the last 10 years it has provided a stable income and I haven't retired yet. All my UK tenants paid during the Covid lockdown.

[mighty58]

Anybody planning to live off rental income for retirement? I am planning on making it about 40-50% of my retirement income. For sure you get the sudden repairs- but good agents can easily sort out. On the whole I have found over the last 10 years it has provided a stable income and I haven't retired yet. All my UK tenants paid during the Covid lockdown.

Real estate has performed well over the last decade, so if you were lucky enough to get in early, I'm guessing you are now enjoying decent yields. However, if you want to just get started in the rental game today, yields are paltry (3-4%), and assuming you are financing, it doesn't leave a lot on the table in terms of cash flow after loan payments. If you add in cross-border issues (such as getting financing, currency risk, property management) into the mix, you're facing several potential risks at the same time... not to mention the lack of diversification/concentration of assets, and illiquidity.

But getting back to the yield, at 3% (net) yield you'd need 83m in assets (free and clear of loans) to generate 2.5m yen in cash per year, which would perhaps be the amount equivalent to half a year's expenditures for a retiree. Of course, the big advantage of real estate is that you can buy using other people's money, so then it comes down to time horizons... If you're young and have the time horizon to pay off your loans to have them free and clear by retirement time, it could be worthwhile. For most average investors, 83m would constitute a fairly large chunk of their net assets, so it's not a decision to be taken lightly.

[Wales4rugbyWC23]

Anybody planning to live off rental income for retirement? I am planning on making it about 40-50% of my retirement income. For sure you get the sudden repairs- but good agents can easily sort out. On the whole I have found over the last 10 years it has provided a stable income and I haven't retired yet. All my UK tenants paid during the Covid lockdown.

Real estate has performed well over the last decade, so if you were lucky enough to get in early, I'm guessing you are now enjoying decent yields. However, if you want to just get started in the rental game today, yields are paltry (3-4%), and assuming you are financing, it doesn't leave a lot on the table in terms of cash flow after loan payments. If you add in cross-border issues (such as getting financing, currency risk, property management) into the mix, you're facing several potential risks at the same time... not to mention the lack of diversification/concentration of assets, and illiquidity.

But getting back to the yield, at 3% (net) yield you'd need 83m in assets (free and clear of loans) to generate 2.5m yen in cash per year, which would perhaps be the amount equivalent to half a year's expenditures for a retiree. Of course, the big advantage of real estate is that you can buy using other people's money, so then it comes down to time horizons... If you're young and have the time horizon to pay off your loans to have them free and clear by retirement time, it could be worthwhile. For most average investors, 83m would constitute a fairly large chunk of their net assets, so it's not a decision to be taken lightly.

Certainly in the UK buying rentals has been made a lot more less favourable financially over the last last few years with the removal of the mortgage interest tax deductible and the almost quadrupling of stamp duty for second house purchases. However, for a retirement income they sometimes beat dividends especially in these uncertain times. During the first year of the pandemic a lot of big British companies suspended their dividend payments.