June Safe Withdrawal Rate – 34.39%

by Andy Hough on July 16, 2014

I didn’t put any money into savings in April and I did not take any money out of savings in April leaving me with a 0% savings rate for April. I could have made a token contribution to savings in April, but since my future income is uncertain I decided not to add to my long-term savings. It makes more sense to keep the money in my checking account now and I can transfer it over once I have a steady source of income again. I don’t want to transfer money to savings and then have to take it right back out again.

My SWR rate for June was 34.39% compared to 39.23% in April. I never got around to calculating my safe withdrawal rate in May. My goal is to get the SWR down to 4% so the lower my SWR is the better. That goal is probably many years from being met. The 4% SWR translates into having 25x your annual expenses in savings or 300 months of expenses in savings. Once I reach that point I will consider myself financially independent.

I have 34.89 months of living expenses saved which is a nice improvement from April. I calculate my safe withdrawal rate by dividing the average of my trailing twelve months of expenses by my total money saved. When I don’t add any money to my savings the only changes to my SWR and months of living expenses saved are from my investment performance and the average of my trailing twelve month’s of expenses going up or down. My expenses for May and June this year were a fair bit lower than last year which helped reduce the average of my trailing twelve months and contributed quite a bit to the improvement in months of living expenses saved and my SWR. Stock market returns helped my figures as well.

The improvement isn’t quite as good as it looks though. I am counting about $1700 in savings as part of my permanent savings although I have them earmarked towards getting dental implants later this year. When I do get the implants and take the money out my SWR will get a little bit worse. I decided to just count the money as part of my permanent savings for now to make things simpler though. I’m hoping that this month I can add some money to my savings in addition to the money that is earmarked for my implants. It has been a pretty good year for saving money so far and I’m hoping it continues.

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