Drawing Down Living Expenses

Saul, since you’ve been retired for some time and living off your portfolio, do you have a method for drawing down your living expenses? For example, do you set aside a year’s worth of cash at the beginning of each year, or do you just pull out money each month? And do you always have enough cash on hand, or do you sell a little bit as you need cash? Do you keep a rainy-day cash buffer to help you ride out down markets?

Thanks!
Neil

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Saul, since you’ve been retired for some time and living off your portfolio, do you have a method for drawing down your living expenses?

Neil,

I usually keep a certain amount of cash in my brokerage account (usually 1% to maybe 5% of my total (it’s 1% now). I count this as part of my total portfolio. I also have enough for several months worth of expenses that I have withdrawn from my brokerage account and is now in my checking account. I don’t count this as part of my portfolio.

If I need more money and need to sell something it’s always a complicated decision. Sometimes I’ll trim a stock which I think has gotten way ahead of itself. Other times it’s a stock I’ve becomes disillusioned with and am tapering out of. It all depends.

When I am pulling out of a position, I’ll sometimes take a small part of that cash and instead of reinvesting it in another stock, I’ll take advantage of having the cash at hand, and transfer it to my checking account for future expenses, whether I need it now or not.

I know that this doesn’t give you a clear-cut answer but I don’t really have one.

Saul

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