043 | Drawdown Strategy | The Retirement Manifesto

In this podcast we have a far-ranging conversation with Fritz from the Retirement Manifesto about retirement drawdown strategies, his ‘buckets' system, and his upcoming retirement.

In Today’s Podcast we cover:

  • Retirement drawdown strategies with Fritz from Retirement Manifesto
  • How Fritz focuses on what life is about after retirement such as how you’re going to spend your time
  • Fritz is 9 months away from retirement himself
  • A background on his story in corporate America and his path to FI and early retirement
  • The difference in perspectives between retirement dates and savings rates between the FI community and the population at large
  • What would Fritz’s path have looked like if he found the FI community decades earlier
  • Fritz stayed with the same company for 32 years and has a traditional pension
  • Where did his interest in retirement spreadsheets and the blog come from?
  • How writing a blog helps develop and formalize your own thoughts and plans
  • What to consider when building your own retirement drawdown strategy
  • The Three Bucket Strategy for retirement drawdowns and how Fritz separates his own holdings by these buckets
  • What a simplification strategy looks like and how to avoid taxation with this simplification
  • How you can create a net neutral taxable position by specifically identifying losses and gains to sell when trying to simplify
  • How Fritz plans to use Roth conversions while he is in a zero-income position for a 2 year period and pay $0 in tax on the conversions
  • Explanation of the Mega Backdoor Roth and how Fritz is utilizing it
  • The equity to bond split that Fritz uses plus how to consider asset allocation and risk
  • Why does Fritz use a 60/40 Stock to Bon split when he has a pension and social security coming?
  • Why Fritz believes you shouldn’t take more risk than you have to
  • Fritz’s thoughts on delaying a pension and social security to get a guaranteed return
  • A hypothetical early retiree example and how Fritz would think through this example and advise them
  • The uncertainty of health care in early retirement
  • How they can track their annual spending by putting money into “Bucket 1”
  • What annual tasks do they do with a ‘year in review’?
  • The variable approach to withdrawal rates and flexibility
  • The value of protecting your Roth accounts to let them grow as long as possible
  • Life insurance policy discussion
  • The flexibility to take fun seasonal jobs if you wanted an adventure
  • Health Insurance and long-term care insurance discussion
  • Hot Seat Questions

Links from the show:


We were able to join the Blog Chain and this is our joint venture contribution with Retirement Manifesto

Anchor: Physician On Fire: Our Drawdown Plan in Early Retirement
Link 1: The Retirement Manifesto: Our Retirement Investment Drawdown Strategy
Link 2: OthalaFehu: Retirement Master Plan
Link 3: Plan.Invest.Escape: Drawdown vs. Wealth Preservation in Early Retirement
Link 4: Freedom Is Groovy: The Groovy Drawdown Strategy
Link 5: The Green Swan:  The Nastiest, Hardest Problem In Finance:  Decumulation
Link 6: My Curiosity Lab:  Show Me The Money: My Retirement Drawdown Plan 
Link 7: Cracking Retirement: Our Drawdown Strategy
Link 8: The Financial Journeyman: Early Retirement Portfolio & Plan 
Link 9: Retire By 40:  Our Unusual Early Retirement Withdrawal Strategy
Link 10: Early Retirement Now:  The ERN Family Early Retirement Captial Preservation Plan
Link 11: 39 Months: Mr. 39 Months Drawdown Plan
Link 12:  7 Circles:  Drawdown Strategy – Joining The Chain Gang
Link 13:  Retirement Starts Today:  What’s Your Retirement Withdrawal Strategy?
Link 14:  Ms. Liz Money Matters:  How I’ll Fund My Retirement
Link 15:  Dads Dollars Debts:  DDD Drawdown Part 1: Living With A Pension
Link 16:  Penny & Rich:  Rich’s Retirement Plan 
Link 17:  Atypical Life:  Our Retirement Drawdown Strategy
Link 18:  New Retirement: 5 Steps For Defining Your Retirement Drawdown Strategy
Link 19:  Maximize Your Money: Practical Retirement Withdrawal Strategies Are Important
Link 20:  ChooseFI:  The Retirement Manifesto – Drawdown Strategy Podcast

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13 thoughts on “043 | Drawdown Strategy | The Retirement Manifesto”

  1. I enjoyed the Retirement Manifesto Podcast , some golden nuggets for sure.
    I have a different view with the case for delaying the income stream of Social Security – the reason being, “Once Your Gone, Soc Security is 100% Gone”. This is not true for 401k’s, savings accounts etc. … these can continue to grow and remain for the benefit of your spouse and family.
    Thank you for an another great informative Podcast. Much Appreciated

    • Hi guys – I hope you are both well. Enjoyed today’s chat with Fritz. Irishbornboy beat me to the punch as I too have a quibble regarding delaying taking social security for the extra “guaranteed growth”. As we know, nothing is guaranteed, and the actuaries have designed this choice to be statistically equal based on mortality tables. As such, I believe one’s decision should be based on an individual’s family history along with whether taking the money early gets you to FI earlier. And remember, you can always take the money early and invest it yourself potentially matching the annual return, but “guaranteeing” the money is in your own (or your heirs hands) vs. 100% Gone (as IBB so sagely put it). Obviously Fritz is in such great fiscal shape that his decision is the right one for him, but as with everything, it’s not black and white.

      Looking forward to catching up in Dallas. Keep up the great work!

    • On the other hand, SS is (hopefully) is a resource that will last as long as you do.
      I have heard of something referred to as “old age insurance”, it will pay out if you reach 85. I’m starting to think of SS as a type of old age insurance. If you wait to get the larger payout when you are 70, and you are lucky enough to live longer than average, then SS should keep paying for the rest of your life. If SS paid out a little more, you could think of it as living off “your” money until you are 70, and SS after that, and it easier to figure out what you need to live until you are 70 instead of trying to figure out what you need to live to a hopefully very long life. You probably don’t just want to live off SS after 70, but you can use it as insurance to help in the fortunate situation of a long life. If you are the larger breadwinner, your spouse can continue to get your benefits after you die, if that is more than the spouse would otherwise get.
      On the other hand, your other heirs would probably prefer that you use your plan of keeping more in your IRAs, etc!

  2. Thanks for the honor of being on your show, Jonathon. I’ll keep an eye here and on FB group to reply to comments/questions. I answered the “why delay” question on FB (bottom line, my goal is to maximize cash flow while we’re living vs maximize our legacy when I’m gone).

    It was a real honor to appear on your show!

  3. Guys, thanks for having Fritz on your program and creating this segment with me in mind:> I am 52 and retiring from teaching in 7 months! Woohoo! I knew that i wanted to retire at 50 so 9 years ago I started investing in real estate while teaching full time. Between teaching and real estate I have managed to fill my buckets “enough” so Fritz’s advice on a “Drawdown Strategy” to maximize my retirement was perfect timing. I could have retired earlier but international travel is an important part of my life too. After visiting 37 countries and counting, retiring at 52 is close enough.

    You don’t know how excited I am to connect with like minded people. I don’t have any relatives and very few friends in this state of Financial Independence. This makes me feel fortunate and sad for others because FI is so accessible.

    I agree too that it is very important to teach financial literacy to our children. My parents had millions of dollars pass through their fingers with nothing to show for it in their retirement years. Therefore I taught my son about how money works. He has been saving parts of his allowance since he was 5 years old and now at age 16 he is planning to invest his savings in the market.

    Those are my take aways from the program…Keep up the great work!

  4. Thank goodness! I found this community in general, but I also applied the principles regardless of my age and it’s paying of… I also have a similar retirement age of around 55 as well! I’m currently 49 and saving/investing significantly..

    I also agree there is little written, blogged or podcasted around ‘post fire’ experience which includes what they learn about draw down –

    I’m still listening, but can’t contain myself at this content! RIGHT ON ALL OF [email protected]

  5. Honestly some of the best advice I have received! I will be honest, I am a long way from being FI, but I have just begun! I am about a week in to listening to your podcasts and the material is fantastic. My wife is reluctant about saving that much money and missing out on enjoying our lives as we are 28 and have an 18 month old. We are currently saving roughly 20% into our Roths and 403(b). Curious what I should look for when selecting a fund for my 403(b) as I do not have the option of the Vanguard fund you always talk about.

    Also, what would be some good material/talking points when having the discussion with my wife around saving the majority of our money?

    Thank you for bring all of your material to all of us listeners! Keep it up!!

  6. This is my 3rd year of doing the Mega Roth (second year of maxing it out). Two important addendums about who all can benefit from the strategy. First, not only will in-service distributions get the money into a Roth structure, but if your 401k plan supports the Roth 401k option, it’s becoming increasingly common for the 401k plan to support a feature known as the Roth 401k conversion. Much like the Roth IRA conversion process, the 401k Roth Conversion takes money out of one subaccount and deposits the money into the Roth 401k, and come tax time, you’ll owe taxes on that converted amount. And similar to the standard Backdoor Roth IRA, if you do a conversion of the After-tax contributions to the Roth 401k, the tax liability will be strictly against the growth (earnings) from the aftertax 401k contributions. You’ll end up with Roth 401k funds, which will eventually be able to rolled to a Roth IRA. Secondly, the Mega Roth can actually be used and be beneficial even if you can’t immediately do a in-service rollover or a an in-plan Roth 401k conversion. Basically, the whole conversion to Roth funds can occur even with an out-service (e.g. after employment has terminated) rollover. The benefit of this is that you get up to $36,000 of additional Roth funds per year *eventually*. Even if you work for a company for 5 years or so, the growth from those funds (especially if you can designate any bond allocation you have to be held by the aftertax funds) that you’ll owe taxes on will be far outdwarfed by the size of the contributions. If you plan on a multi-decade career at a company, then the growth from these funds might become onerous, but with the way current trends of employees (at least in tech) hopping between employers every few years, pushing available savings into funds that will *eventually* be Roth, even if not immediately, can often be better than pushing the funds into a taxable.

  7. My wife and I have been following many of the principles of FI for decades – we just didn’t know the name for it or that a whole community existed. I have learned so much the past few weeks – and as our net worth approaches $2M – we will save and profit so much using some of these tips and ideas. Thank you so much!!!!

  8. Let me offer an alternative of taking a “Percentage Withdrawal of the current fund”. I believe that there’s another way to reduce sequence of risk. I propose the Accumulation-Dynamic Decumulation(ADD) method. The method can be used with either constant percentage withdrawal if you like the idea of keeping the principal intact OR used with the Variable Percentage Withdrawal which focus for a near 0$ fund at death by increase withdrawal each year (see Bogleheads). ADD goes for a conservative withdrawal at retirement through smoothing and capping of withdrawal. I would use a reserve(25% of the fund) approach to mitigate the negative impact of having a percentage withdrawal. Personnaly, I did not find avantageous to have the reserve in a conservative fund. The reserve protection is better if its at the same asset allocation than the rest. It will allow me to get about a 5% withdrawal instead of a 4% thus reducing my FIRE date by a few years.

    Also to go against the comment, enough is enough. Many of the earlier podcast focus on maximizing income prior retirement. Why not try to maximize post retirement income? Anyway, I fully respect the Need/Ability/Desire to take on risk theory. At the end of the day, you need to sleep at night.

    Finally Social Security, I don’t think it’s much discuss in the FIRE community, but the social security is heavily reduced due to early retirement if you don’t have income past FIRE. The Social Security is based on an average best earnings out of 35 years! Thus if you work from say 20 to 29 and retire at 30, you will get a Social security reduced by 9/35= 26%. It’s a 3% reduction for each year worked less than 35.

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