No. of Recommendations: 9
I have considered another option. Divide my portfolio into two parts. 70/30 division. Spend down the 70 percent part over seventeen years starting at one seventeenth of the total, next year one sixteenth, etc.
That's just playing mind games about your money. Look up "mental accounting bias".
And it doesn't really work, you are assuming that the 70% you've carved out will continue to grow---which is not guaranteed. What happens if at year 5 the market takes a huge dump like it did in 2008/2009? In year 4 you took, say, 1 twelveth of $500,000 = $41,700. Then year 5 you would take 1 eleventh of the remaining $300,000 = $27,300.
That's a HUGE hit to spending. Kinda hard on your budget.
Where the declining percentage withdrawals do work out is in cases where you must empty the account in X years. For example an inherited IRA, which must be emptied in 10 years. 1/10 the first year, then 1/9, 1/8 ... 1/1 in year 10. The goal here is to stretch out the withdrawals while minimizing the tax hit in any one year.
After seventeen years the second part should grow into enough to repeat.
That word "should" is doing a lot of heavy lifting here.
