My plan for Funding Early Retirement for the Long Haul is something of importance since I am living off of my portfolio now and it is very real to me. My early retirement is funded primarily by my SEPP 72t IRA. I started it with my first retirement at age 51. It deposits the same amount every month into my savings account until I reach age 59 ½. You can see more details on my site pages, How I Fund my Retirement and Using your 401K or IRA to fund early retirement without penalty. It funds two-thirds of my budget. The other third is funded by non-retirement accounts.

I somewhat follow the 4% withdrawal rate guideline. It is a systematic monthly withdrawal approach. This strategy provides income starting out at 4% of the my portfolio value for the first year. Then each year afterward my withdrawal amount is adjusted up to match inflation. This approach has been considered a safe withdrawal rate to sustain a retirement over 20 to 30 years. A longer retirement, who knows?

Key words here is it is considered safe but there are no guarantees in investing. Or with these kinds of withdrawal rate guidelines. Does that worry me? Heavens no. Because I think I have a solid plan. As I always say this is an adventure. What is the worst that can happen anyway? Ok a lot of “worst” can happen but life is risky. Just get on with living it. I have a diversified portfolio and have done what can be done to mitigate investment risks.

I’m not planning on just setting the initial 4% withdrawal rate with yearly cost of inflation increases. I am not letting it go without reassessment. Obviously that 4% + inflation is a guideline. If it was a horrible year for the markets and my investments I will try to make sure I am not withdrawing a portfolio killing percentage. That means I must have a cushion of cash and safe investments. The cash is primarily in CDs and a Money Market fund which I know sucks for interest now but that is the cost of my peace-of-mind insurance. My safe money covers one to two years of income. That way I wouldn’t have to tap my investments in a down market.

Funding Early Retirement for the Long Haul Through My Retirement Stages.

I see my retirement as being in 3 stages. The Early Retirement, Standard Retirement and Last Stage of retirement.

Stage #1- Early Retirement

Early Retirement is fully funded by my portfolio until my standard retirement stage which is when Medicare and Social Security is started. The SEPP 72t is only required until I turn 59 ½ but the same payment arrangement can continue. I will be continuing with the 4% guideline but if I need to I will go up to 5% during this period. That is because this is the most active stage or time of our retirement. That and I totally expect some amount of Social Security to eventually help with my retirement funding.

That said I won’t be recklessly withdrawing from the funds. I just recognize that I can go a little higher if I need to as long as the portfolio isn’t substantially reduced because of market conditions. At this time I am planning on starting Social Security at my full Social Security age of 67.7 years old which is what I call the standard stage of retirement. I see this a big aid and a reduction on total reliance of my portfolio to fund my retirement.

Stage #2-  Standard Retirement

Standard Retirement starts with my Social Security. Based on my Social Security estimate,  I see it covering 30% to 40%, maybe more of my budget in today’s dollars. That’s even when reducing it for years of early retirement. I know a lot can happen with Social Security. It is always a subject of political debate. But I really believe it will be there for all of us and we all should demand it is with our votes. It can and should be made whole with reasonable tweaks. Rather than staying with my original 4% withdrawal amount, this is when I will recalculate based on the current portfolio balance and what is needed based on the added Social Security.

Stage #3- Last Stage of Retirement

Last Stage of Retirement is when I turn 70 ½ and the RMD (Required Minimum Distribution) begins. Now money is being dictated withdrawn from IRA accounts. For this entire retirement my plan is to fund it from IRA and non-retirement accounts with eventual Social Security. My ROTH IRAs are for this last stage/time or later. I don’t plan on tapping them unless in any year we can see a tax advantage to mixing withdrawals from IRA and ROTH. Until we get there I am not that dialed-in on that part of the plan but aware I may have to consider it.

Other things that I know will come up is our home. It is paid off and I can see us selling it at some time. We may downsize to a smaller place and bank any of the savings. Another possibility is just renting an apartment in a Senior Citizens complex and banking all sales proceeds. All will be decided later when the picture is more clear.

In Conclusion

I think many people become paralyzed in fear of burning through their money. Maybe because I live a retire early and often lifestyle where more money comes in time to time I have a distorted feeling of comfort in my plan and the way I look at all of this. I do think the 4% guideline is a good plan to start with. Realizing that there may have to be adjustments to the withdrawal rate is also necessary for successfully Funding Early Retirement for the Long Haul.

What is your long haul retirement funding plan?

Do you see where I may be walking a tight rope without a net?