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- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 2
In a few years time, probably 2028, I will begin taking withdrawals from a retirement account.
The account is currently 100% Berkshire.
The withdrawals will be fixed (SEPP).
And because I can't control the price of Berkshire, I wanted to "work forward" and build a cash cushion.
For example, say the portfolio is $1m and the withdrawal $60k/yr.
The plan was to sell 5% of shares per year, spread across 4 quarters, starting now'ish in preparation for that initial $60k withdrawal in 2028.
But now that I'm typing this, maybe I should just sell $60k of Berkshire once per year starting in 2028 and be done with it?
That sounds the simplest.
P.S. I've studied Jim's annuitization model, and was originally planning to use that, but changed my mind to sell 5% of shares per year because it's a tad simpler and what Buffett recommends. I don't know.
No. of Recommendations: 4
In a few years time, probably 2028, I will begin taking withdrawals from a retirement account.
The account is currently 100% Berkshire.
The withdrawals will be fixed (SEPP).
And because I can't control the price of Berkshire, I wanted to "work forward" and build a cash cushion.
For example, say the portfolio is $1m and the withdrawal $60k/yr.
There is nothing special about having only BRK in a retirement account, other than it is very non-diversified and thus has more risk.
Taking 6% withdrawal is well above the "save" SWR of 4%. You may want to take this discussion over to the Retirement Investing board.
Two other comments:
1) You can't control the price of any investment, not Berkshire and not the S&P 500 whole market. BRK isn't anything different here.
2) Statistically a cash cushion, also called a cash bucket allocation, is worse than just keeping all the money invested.
No. of Recommendations: 3
So I used the tool Adrian mentioned at
https://testfol.io to backtest a $60,000 fixed annual withdrawal (not inflation adjusted) from a 100% Berkshire portfolio.
After 10 years (7/1/2015 - 7/1/2025) withdrew $600,000 end with $2,268,557.67.
After 20 years (7/1/2005 - 7/1/2025) withdrew $1,200,000 end with $3,863,737.32.
After 30 years (7/1/1995 - 7/1/2025) withdrew $1,800,000 end with $9,637,405.03.
I guess that makes sense. You're more likely to end up with way more money in the end.
No. of Recommendations: 2
I guess that makes sense. You're more likely to end up with way more money in the end.
That is true with the 4% safe withdrawal strategy as well. Of course that is true in the back tests and you unfortunately never know what will happen in the future.
I have a conservative portfolio but am happy to see after a couple of years of retirement to see my portfolio is larger (not by a lot) than when I retired despite relying on it for about 70+% of my expenses.
Rich
No. of Recommendations: 3
So I used the tool Adrian mentioned at https://testfol.io to backtest a $60,000 fixed annual withdrawal (not inflation adjusted) from a 100% Berkshire portfolio. This is interesting but not very useful. The purchasing power of a fixed dollar amount over even 10 years is much lower. Over 30 years, it's horrible. Assuming you need the funds to pay for living expenses, you have to make allowance for the effect of inflation.
No. of Recommendations: 6
I think the best withdrawal strategy is the RMD as required from retirement accounts by the IRS. Each year you withdraw a percentage of your account's latest balance, calculated based on your life expectancy. So you'd withdraw about 3.6% at age 70, gradually rising to 10% at age 92, and 20% at 104 if you should live so long.
Note that the IRS tables are more conservative than people's true life expectancy. Actuarial tables show a life expectancy of 17 years at age 65 for men and 20 years for women. So you'd be starting with 5%+ withdrawals at age 65. The IRS mandated RMD is only about half of the true life expectancy.
Elan
No. of Recommendations: 6
that is true in the back tests and you unfortunately never know what will happen in the future
A much better strategy for people selling a portion of BRK for living expenses is to sell slightly more than needed and build a cash buffer when the stock is selling at the higher end (or if you are lucky, more than) of intrinsic value as it had done in the first 4 months of 2025. And sell less or ideally none at all when the stock is very cheap. When the stock trades around 1.5 time books (or sort of a mid point of IV range), one can sell a "normal" amount.
No. of Recommendations: 2
Yes, I’d imagine $60K of current value goods & services in 20 years would cost one >$96K, likely More given threat of inflationary risks long term.
Warren’s net worth ($142B) appears up 210% vs. his net worth in 2006 ($46B when he announced the huge Gates Foundation gifting), despite his 4-5% annual giving.
Berkshire share prices have held up pretty well in their growth and purchasing power, however I doubt we will do as well over the next 20 years given our $>1T size. Inflation + 6-8% would be nice.
No. of Recommendations: 8
Note that the IRS tables are more conservative than people's true life expectancy. Actuarial tables show a life expectancy of 17 years at age 65 for men and 20 years for women. So you'd be starting with 5%+ withdrawals at age 65. The IRS mandated RMD is only about half of the true life expectancy.
Elan
It's even worse than that. Life tables look at the life expectancy of ALL people at a given age (say, all males 65 years old) and tell you how long they will live, on average. But this includes everyone, including people literally on their deathbeds, and should not be used to calculate the life expectancy of a 65 year-old who has no known serious risk factor or life-threatening illness.
For instance, in a group of 100,000 65 year old men living in the USA, life table calculations may tell us that they will live for an average of 17 more years. For the sake of illustration, let's say these 100,000 people include 1,000 people with a serious, advanced disease, like metastatic cancer, let's say with an average life expectancy of 2 years and 39,000 people without such a diagnosis but with a serious risk factor for death (diabetes, smoking, aortic aneurysm, emphysema, whatever), with an average life expectancy of 8 years. Then it is easy to calculate that in the 60,000 people without those serious risk factors, average life expectancy will be (100,000*17-1000*2-39,000*8)/60,000 = 23 years of remaining life.
Of course this is an oversimplification - there all all sorts of intermediate risk groups, not just these 3 broad groups. But the point is that if you are a relatively healthy 65 year old, your life expectancy will be much longer than the average for ALL 65 year-olds. When you are planning how much you can safely remove from your savings each year, this can make an important difference.
Regards, DTB
No. of Recommendations: 3
It's even worse than that.
65 year old men living in the USA, life table calculations may tell us that they will live for an average of 17 more years.
Then it is easy to calculate that in the 60,000 people without those serious risk factors, average life expectancy will be (100,000*17-1000*2-39,000*8)/60,000 = 23 years of remaining life.
Well, it's actually not worse than that. The IRS table starts at a 27 year life expectancy at age 72, while the statistical life expectancy at that age is 14 years for men and 16 for women.
Elan
