February Safe Withdrawal Rate – 62.54%

by Andy Hough on March 11, 2013

February was a great month on my progress towards financial independence. My SWR went down to 62.54% from 80.47% the month down. My goal is to get my SWR down to 4% at which point I’ll consider myself financially independent. I’m seeing big declines in my SWR right now because I’m saving over half of my income and I’m reducing my monthly expenses. The way I am determining my SWR is by tracking my trailing 12 months expenses divided by the amount of my investments. Since I don’t think the preceding 12 months accurately reflect my expenses going forward I am using my monthly expenses starting in November 2012 to set the average so every low month of expenses makes a big change in the average right now. The big drops in my SWR will slow down once my trailing 12 months average is closer to my current monthly average.

My goal is to save 50% of my income each month and I managed to crush that goal in February. I made $4499.91 and managed to save $3400. That amounted to a 75.55% savings rate. I’m not going to be able to match that this month since I have a $1500 tax bill but I’m still aiming to save 50% of my income. My full-time job ends on April 15th which will make it much harder to maintain my 50% savings rate. I do have a three week job lined up to start as soon as my full-time job ends. It doesn’t pay as well as my current job but I should still have a chance at saving 50% if I manage to sell a few things from my apartment as well.

The 4% SWR translates into having 25x your annual expenses in savings or 300 months of expenses in savings. I have 19.18 months of living expenses saved now. I managed to save almost 5 months of living expenses last month. I won’t be able to do that again this month but I’m sure I’ll add at least another month of living expenses. Seeing my SWR go down every month and my months of living expenses saved go up every month is keeping me motivated.

{ 7 comments… read them below or add one }

Blogging Banks March 12, 2013 at 11:06 am

It looks like you need to keep working for a few more years, before you accumulate enough funds. If you can save 5 months worth of expenses, and have 20 months already saved up, you need to work for 4 – 5 more years. Of course, in a few years you should be able to claim social security benefits ( i thought you were 50, but I might be wrong).

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Andy Hough March 13, 2013 at 10:06 pm

It would be about 4-5 years at this rate. I don’t think I’ll be able to maintain this rate though. I’m 45 so it is a few more years until social security. I have to hurry if I want to retire early or I’ll just be retiring at a normal age.

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PipsToday March 14, 2013 at 1:04 am

Hi ANDY, I am impress with your saving goal plan “save 50% of my income each month”. I am also agree with Blogging Banks point “ keep working for a few more years, before you accumulate enough funds”.

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Andy Hough March 14, 2013 at 6:47 pm

Thanks, I’ve definitely got to keep working for a few more years. I’m just hoping I can retire somewhat early.

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PipsToday March 17, 2013 at 11:47 pm

Hi Andy, Thanks for reply. I hope you’re doing well and achieve your target soon.

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Isabella March 15, 2013 at 3:48 pm

Does a saving rate like that affect your law school loan? In other words, are the savings documented in some way so that the “powers that be” know you have assets to pay back those large loans? Just curious how this shakes down for those with student loans in forbearance.

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Andy Hough March 15, 2013 at 8:06 pm

I’m not in forbearance. I’m on income-based repayment which is based, as the name suggests, on income. My assets have no effect on my law school loan payment. Once my new tax return is processed I’m sure my loan payment will go up. Since the tax return is based on last year’s income though it shouldn’t go up. This year’s income won’t cause my payments to increase until next year.

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