When people say they can withdraw 4% of their brokerage account in retirement, are they just selling down 4% of stock per year or no longer reinvesting the dividends and keep it’s cash? I ask because lots of people like VOO but their dividend is less than 2%. You’d have to sell 4% of the balance every year for cash flow.

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They would sell enough to live on. If 4% withdrawal qualifies for 0% tax bracket even better

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Sell

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Ok thanks. Makes sense

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FYI …. When this withdrawal strategy is most often mentioned you would increase the amount taken each year by the inflation % so that your spendable income is the same. Many current pendants say starting with a 3 or 3.5% amount is safer.

The S&P may increase 10% CAGR over long periods of time, but sequence of returns are really important and a 15-20% sell off (like the one we’re in right now) is particularly damaging in the first few years of drawdown.

Also not too many retirees who are 100% stock as it amplifies the above sequence of return risk. So even if it were, returns portfolio wide are going to be significantly lower than 10%.

Edit: S&P CAGR is really sensitive to where we are in the business cycle. It was close to 13% earlier this year. It was 8ish% if you looked in 2013/2014.

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