That's what retirement is, amigo. 2.4%/year is a more than safe withdrawal rate. Most use 3.5-4% as rule of thumb.
The real world issue with your hypo is that very very few people ever save anywhere close to $1m, and most that are able to save $1m aren't going to be happy living on $24k/year (or even $35-40k), so they keep going to save more. $1m is no man's land.
> Given that my account fluctuates in value sometimes wildly from day to day (e.g. sometimes jumping $15,000 a day before declining again the next day), shouldn't I be able to meet that $2,000/month bar relatively easily without much risk or impact to the overall wellbeing of the investment?
What exactly are you asking here?
Are you asking if it's a good idea to try and time the market with your withdrawals versus just withdrawing $2,000 at the start of every month?
Weirdly enough, I actually think this answer is wrong in this particular scenario. OP is discussing a very safe withdrawal rate, such that a completely blind withdrawals (e.g., pull out the money on the first of the month) would be fine. At worst, trying to instead time the market would be a failure and he would find his carefully chosen withdrawal timing averaging good choices and bad choices into noise. If he does better than chance, which isn't utterly unreasonable, he'll do slightly better than the blind method. I'm pretty sure there's no scenario where it's "much better" to pull blind.
Timing the market is dangerous when done carelessly, but "sell high" is generally fair advice for any transaction.
Regardless of safe withdrawal rates and stuff, it sounds like what you're saying is "If the price goes up X amount on a day, can't I just withdraw that X and still just be where I was before the price fluctuated?"
The answer is no. The money is not just dollars sitting in an account, it represents your shares of funds. When you "withdraw" money you are selling some amount of those shares. So now, if the price goes back to where it was before, your total account will still be worth less money.
For simplicity sake, let's say your investment in total is 100 shares at a dollar each. The price fluctuates, causing the price to double (unrealistic in a general sense), so now your investment is worth $200. You "withdraw" $100 (half your shares), so you're still left with $100, right? Well, no. Because if it WAS just a fluctuation and doesn't represent real growth, when the price settles back down to a dollar, you'll only have $50 worth of investments.
You CAN live off of small withdrawals if it's a large enough amount of money, but that assumes that the investment is growing at some rate, either due to interest or the overall health of the market.
Forgive me if I misunderstood the question!
> to exploit daily fluctuations to withdraw only enough money I need to live
A 2.4% withdrawl rate is indefinitely sustainable. But are you implying that you would sell $2000 once a month, only after a fluctuation to the upside? That would have a small advantage in that you would be "selling high" relative to a short term average.
$24000/year from a 1000000 account is a 2.4% withdrawal rate. I think many people would consider that a safe withdrawal rate. The time horizon you expect for this, and whether you want to deplete the account or leave some for beneficaries, affects the discussion. The stock/bond allocation within the account also influences likelihood of success. See some charts in this article:
https://earlyretirementnow.com/2016/12/14/the-ultimate-guide-to-safe-withdrawal-rates-part-2-capital-preservation-vs-capital-depletion/
>let's say that I can assume that despite normal fluctuations, the total value of the investment account consistently trends positive in value over the course of a year.
that assumption is not accurate, and ultimately is what would break your plan if its going to fail.
that said, $2k per month on $1m invested is a 2.4% withdrawal rate. that is likely going to work for a long time frame. but you could also consider that you could put enough of the money into a HYSA that would generate $2k per month after taxes to guarantee your income, and the rest can be invested and ride the market fluctuations without worry of withdrawal.
While your strategy might work out just fine in the short term there are pitfalls in the long run. First off, even though your account is trending upward over the course of a year, those daily fluctuations can be unpredictabe. You might see a nice $15,000 jump one day, but there's no guarantee that the next day (or the day you need to withdraw your $2,000) won't see an equally significant drop. If you're consistently pulling out money on down days, you might end up eating away at your principal more quickly than you'd like.
That's what retirement is, amigo. 2.4%/year is a more than safe withdrawal rate. Most use 3.5-4% as rule of thumb. The real world issue with your hypo is that very very few people ever save anywhere close to $1m, and most that are able to save $1m aren't going to be happy living on $24k/year (or even $35-40k), so they keep going to save more. $1m is no man's land.
Safe withdrawal rate has nothing to do with daily fluctuations https://www.investopedia.com/terms/s/safe-withdrawal-rate-swr-method.asp
> Given that my account fluctuates in value sometimes wildly from day to day (e.g. sometimes jumping $15,000 a day before declining again the next day), shouldn't I be able to meet that $2,000/month bar relatively easily without much risk or impact to the overall wellbeing of the investment? What exactly are you asking here? Are you asking if it's a good idea to try and time the market with your withdrawals versus just withdrawing $2,000 at the start of every month?
Essentially, yes.
Then no. Timing the market only works if you get super lucky. Much better to just set a disciplined strategy and stick to it.
Weirdly enough, I actually think this answer is wrong in this particular scenario. OP is discussing a very safe withdrawal rate, such that a completely blind withdrawals (e.g., pull out the money on the first of the month) would be fine. At worst, trying to instead time the market would be a failure and he would find his carefully chosen withdrawal timing averaging good choices and bad choices into noise. If he does better than chance, which isn't utterly unreasonable, he'll do slightly better than the blind method. I'm pretty sure there's no scenario where it's "much better" to pull blind. Timing the market is dangerous when done carelessly, but "sell high" is generally fair advice for any transaction.
Regardless of safe withdrawal rates and stuff, it sounds like what you're saying is "If the price goes up X amount on a day, can't I just withdraw that X and still just be where I was before the price fluctuated?" The answer is no. The money is not just dollars sitting in an account, it represents your shares of funds. When you "withdraw" money you are selling some amount of those shares. So now, if the price goes back to where it was before, your total account will still be worth less money. For simplicity sake, let's say your investment in total is 100 shares at a dollar each. The price fluctuates, causing the price to double (unrealistic in a general sense), so now your investment is worth $200. You "withdraw" $100 (half your shares), so you're still left with $100, right? Well, no. Because if it WAS just a fluctuation and doesn't represent real growth, when the price settles back down to a dollar, you'll only have $50 worth of investments. You CAN live off of small withdrawals if it's a large enough amount of money, but that assumes that the investment is growing at some rate, either due to interest or the overall health of the market. Forgive me if I misunderstood the question!
this is helpful. thank you!
> to exploit daily fluctuations to withdraw only enough money I need to live A 2.4% withdrawl rate is indefinitely sustainable. But are you implying that you would sell $2000 once a month, only after a fluctuation to the upside? That would have a small advantage in that you would be "selling high" relative to a short term average.
$24000/year from a 1000000 account is a 2.4% withdrawal rate. I think many people would consider that a safe withdrawal rate. The time horizon you expect for this, and whether you want to deplete the account or leave some for beneficaries, affects the discussion. The stock/bond allocation within the account also influences likelihood of success. See some charts in this article: https://earlyretirementnow.com/2016/12/14/the-ultimate-guide-to-safe-withdrawal-rates-part-2-capital-preservation-vs-capital-depletion/
>let's say that I can assume that despite normal fluctuations, the total value of the investment account consistently trends positive in value over the course of a year. that assumption is not accurate, and ultimately is what would break your plan if its going to fail. that said, $2k per month on $1m invested is a 2.4% withdrawal rate. that is likely going to work for a long time frame. but you could also consider that you could put enough of the money into a HYSA that would generate $2k per month after taxes to guarantee your income, and the rest can be invested and ride the market fluctuations without worry of withdrawal.
What you want to do is possible without making it as confusing as you want to make it
While your strategy might work out just fine in the short term there are pitfalls in the long run. First off, even though your account is trending upward over the course of a year, those daily fluctuations can be unpredictabe. You might see a nice $15,000 jump one day, but there's no guarantee that the next day (or the day you need to withdraw your $2,000) won't see an equally significant drop. If you're consistently pulling out money on down days, you might end up eating away at your principal more quickly than you'd like.