My December 2012 safe withdrawal rate was 104.5%. That is obviously not a safe withdrawal rate at all and is quite a bit worse than my SWR in November of 86.22%. There were two reasons for SWR being much worse for December.
The first reason is that my expenses in December were too high at $1580.99 for the month. In order to reduce my SWR I need to reduce my living 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 just using November and December’s expenses to determine my average monthly expenses for now. With only two months making the average, one bad month throws off the average quite a bit. January should be a low expense month and skew the average downward.
The other reason my SWR is worse is because I saved very little money in December. I managed to put $65 into my IRA. In order to reduce my SWR I need to increase the amount I put in my investments. Starting this month I have a goal of saving 50% of my income. It looks like I will achieve that goal this month and that will help lower my SWR.
The common rule is that you need to get your safe withdrawal rate down to 4% in order to be able to safely retire. I am setting that as my goal. I have a long way to go, but starting this month I expect to see significant progress in reducing my safe withdrawal rate.