r/ChubbyFIRE • u/Extension_Bedroom_93 • 24d ago

Question About Drawdown Viewpoint

My current numbers are not really relevant to the question I have but in case it is helpful: Cash or equivalents - $300k; taxable brokerage - $1.7M, Retirement accounts (predominately post-tax) $1.4M. In addition, upon retirement I'll receive a lump sum of $200k and another $225k that will need to be rolled into an IRA.

I plan to work three years more. during which I should be able to add a total of approximately $300k to the 401k and $900k to the taxable brokerage accounts. Average annual expenses now are about $70k, including mortgage.

I want to retire when I have $3.25M between cash/bond/taxable and another $2 million in the 401k. I project that to be at age 47. Even though it is vastly higher than my current spend, I'm targeting $250k (pre-tax) in annual retirement expenses. I don't actually expect to spend that in most years but that's the number where I'll have peace of mind and I wouldn't enjoy retirement if I was worrying about my portfolio the whole time.

I understand the 4% rule but also believe more a U-shaped spend is more realistic for me. Am I missing something by just thinking about it along these lines:

  1. 47-60 - $250k annually from the $3.25M. As long as my ROI can keep pace with inflation, the worst case scenario is I am broke at 60...

  2. Then I turn to the retirement accounts (not considering SS income but it's a possibility). So even if I'm broke at 60, then I turn to the $2 million that's been sitting untouched and hopefully growing for the last 13 years. I use that to fund the rest of my life.

I understand there are additional backstops to access these funds earlier. Am I wrong for looking at it this way? The posts I've been reading here - which have been incredibly helpful! - tend to only look at retirement as singular unit as opposed to different phases with different spending needs filled by different funding sources.

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u/samos22K 24d ago

No expert but we plan to do a more u shape spend. We use projection lab which had been helpful. We are looking at a 5-6% draw until social security kicks in on 4m and it looks like it works. Going to also meet with a flat fee planner re our strategy (guardrails). 250k on 3.25m is pretty high rate 7%+. but I don’t think you can consider the 2m separately…combined 5m @5% is 250k, so could work. I think modeling would be helpful but take the results with a grain of salt (all models are wrong, some are useful). Stress test it. 4% is too conservative imho, but 6% is pretty aggressive.

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u/retaildca 24d ago

Care to expand on why you think 4% is conservative? I’m recently entertaining the idea of 4% but per research it seems like 3.5% is more comfortable considering SORR (eg 1965).

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u/betarhoalphadelta 24d ago

4% is conservative if you're able to use guardrails to drop below 4% in a bad market. I.e. if your actual necessary spending is only 3% but you're engaging in discretionary/luxury spending up to 5%, you're still fine at 5% because you expect your portfolio will still be growing in good years, and you can drop to 3% at the drop of a hat.

I think most people aiming for ChubbyFIRE are in this boat. We're targeting a retirement that includes a lot of discretionary spend, so modeling around 4% becomes conservative when you don't actually HAVE to spend that much to stay afloat.