No. of Recommendations: 14
I'm not familiar with the intricacies of the SEPP rules, but I gather the key question is: given that you need to have sold a specific number of dollars of stock by a specific future date, when should you do that?
My answer would be "at any time that the most likely return from the stock until that future date is negative"
Make a few assumptions. They don't have to be perfect.
Let's say you use these:
* Assume inflation of 2.75%, a pretty typical MCT inflation figure for the last 2 years.
* Berkshire's value per share can be approximated as a multiple of book per share.
* Both will grow at around inflation + 7%/year in the next few years on trend. It has been inflation + 8% for ages, but one can assume a bit of moderation.
* Future price will average 1.43 times known book per share. That's just a hair higher than the 20 year average of 1.4.
* June 2025 book per share will come in around $465000, equating to $310 per B.
* Interest on cash will be just enough to cancel inflation.
That set of assumptions gives you a table something like this (real prices meaning in today's dollars, nominal meaning the apparent price at the future date shown):
real book real p nominal
2025 $ 2025 $ price
Mid 2025 310.00 443.30 443.30
Mid 2026 331.70 474.33 487.38
Mid 2027 354.92 507.53 535.83
Mid 2028 379.76 543.06 589.11
Mid 2029 406.35 581.08 647.68
So, round numbers, buy and hold might get you around $648 per B share in 2029. So, if you get an opportunity *any time before then* to sell for that much or more, feel free to sell then sit on cash till then, especially if it's materially more. You can revise the table as new book-per-share figures come in, but it probably won't make a huge difference.
This won't give an optimal solution, but it will give an eminently sensible solution. If the stock price is above what you might reasonably expect at your target future date, it's not crazy to sell then wait.
For bonus points: using a SEPP, I think you have this problem every year 2029 and later?
So you could have a separate table for each future year. Sell each year's "chunk" as soon as the reasonably expected return until that future time is negative. So, during a real price pop like we have just seen, before or after 2029, you might end up selling a few years' worth of withdrawals.
Jim
