White Coat Investor Podcast #436: Retirement and Decumulation

Host: Dr. Jim Dahle
Date: September 11, 2025

Episode Overview

In this episode, Dr. Jim Dahle explores the complexities of retirement and decumulation—the process of withdrawing funds during retirement, after years of accumulation. He answers listener questions on safe withdrawal rates, portfolio management in retirement, adjusting asset allocation, and practical tax considerations for retirees. Dr. Dahle emphasizes maintaining financial literacy, understanding your own risk tolerance, and making informed choices, whether you do it yourself or work with a financial professional.

Key Discussion Points & Insights

1. Can You Manage Decumulation Without a Financial Advisor? [03:30]

• Dr. Dahle breaks down three types of investors in relation to advisor use:
  • DIYers (Do-It-Yourself): Handle all planning themselves, enjoy finance as a hobby, and save on advisor fees.
    • “If you like this stuff, this is the best paid hobby there is.” [04:30]
  • Delegators: Prefer to outsource everything to a pro, expect to pay $7,500–$15,000 per year for quality advice.
  • Validators: Want occasional reassurance or help with specific tasks; may pay a few thousand dollars for episodic advice.
• Key Takeaway: Managing retirement withdrawals yourself is possible if you have the interest and commitment, but some people genuinely benefit from professional support.

2. Principles of Decumulation (Withdrawing in Retirement) [09:00]

• Safe Spending Rate:
  • The “4% Rule”: Spend ~4% of your portfolio (adjusted for inflation) to last 30+ years.
    • “You can spend more than just the dividend yield… but it can’t be 8% or 10% or 15% either, right? You gotta be in the neighborhood, 3, 4, 5%.” [13:00]
• Recognizing Mortality:
  • Don't plan for the money to last eternally—most retirees struggle more to spend than to avoid running out.
    • Reference to Bill Perkins’ book Die With Zero: “If you’re wealthy already, you ought to read Die With Zero.” [14:40]
• Portfolio Must Keep Growing:
  • Retirees still need growth to outpace inflation—don’t put everything in cash.
• Data Limitations & Uncertainty:
  • Withdrawal studies are based on limited, imperfect data. Expect uncertainty and embrace flexibility.
    • “The data sucks. … There aren’t that many independent 30-year periods.” [16:56]
• Avoid False Precision:
  • Don’t get hung up on hyper-precise rules (e.g., “3.84%”); broad ranges like “about 4%” are more realistic.
• Adjusting Plans as You Go:
  • Most robust plans are flexible; you’re not likely to “set and forget.”
• Most People Will Withdraw Less Than They Could:
  • “For a lot of white coat investors who do a really good job in the accumulation phase, this is all just academic. … You’re probably not even going to spend 1 or 2% of your portfolio.” [20:40]

3. Decumulation Strategies Explored [22:44]

• Flexible Withdrawal Approach:
  • Withdraw 4%, increase or decrease based on market performance.
• Floor-and-Upside Strategy:
  • Secure basic expenses with Social Security or annuities; use the portfolio for discretionary spending.
• Bucket Strategy:
  • Segment funds: cash for immediate years, bonds for next few years, stocks for long-term. Replenish buckets in strong years.
• RMD (Required Minimum Distribution) Method:
  • Withdraw per IRS distribution tables; percentage increases with age, ensuring you never run out.
• Rules-Based Variable Withdrawals:
  • Use more sophisticated formulas; “at least a dozen of them out there.” [26:44]
• Key Advice: Pick an approach that matches your psychology, finances, and flexibility needs.

4. Asset Allocation in Retirement – Listener Q&A [28:02]

Listener Question: Should I increase my bond allocation and decrease value tilts in retirement?

• Reducing Risk Near and Post-Retirement:
  • Most retirees decrease portfolio aggressiveness to reduce 'sequence of returns risk'—the danger of bad market returns early in retirement depleting the portfolio.
    • “You reduce the risk of that in lots of different ways. But the main one people do is they just invest less aggressively…” [32:20]
• Personalizing Asset Allocation:
  • “Your asset allocation remains just as personal as it was before retirement.” [34:14]
  • Dr. Dahle notes his own unique case (large estate, more focused on heirs/charity), but most people ease into higher bond and fixed income allocations.
• Small Value Tilts:
  • Whether to remove tilts (like small value stocks) is up to you. The data on factor premiums is long-term and sometimes underperforms for decades.

5. Inflation and Retirement Planning Multiples (25x/50x) [37:32]

• Listener Question: Should I inflate my retirement target (e.g. 25x expenses) over time?
• Indexing to Inflation:
  • “That 25x number? It needs to be a multiple of what you currently spend, adjusted for inflation.”
    • Dr. Dahle gives the example of his plan’s FI number climbing from $2.7M (2004) to $4.2M (today) due to inflation.
• Overconservatism and the “50x” Crowd:
  • “50x is nuts. … If you’re only spending 2% a year, there’s no scenario where you run out of money.” [41:24]
  • Being too conservative can steal years of enjoyable retirement and fulfillment.

6. Notable Quote of the Day [43:21]

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”
— Robert G. Allen

• Reinforces that building wealth requires exposure to “risky” assets like stocks and real estate.

7. Gift and Tax Considerations for Real Estate [44:16]

• Listener Dilemma: Gifting a rental property to a sibling; issues with appraisal, gift tax, and basis.
• Giving Property While Living:
  • No step-up in basis (the recipient gets the donor’s lower cost basis), which may mean a higher tax bill when sold.
  • “One of the dumbest things you can do is put your kid on your house title…” [47:20]
• Charitable Giving:
  • Gifting appreciated assets to charity avoids capital gains and recapture taxes.
• Family Transfers:
  • Sometimes smart if the recipient is in a lower tax bracket, but usually better to transfer at death for the step-up.

8. Spending from Different Accounts in Retirement [51:00]

• Where Should Retirees Withdraw From First?
  • Spend assets with required distributions (e.g., RMDs from tax-deferred accounts) first.
  • Then choose between further tax-deferred withdrawals (taxed as ordinary income), taxable accounts (capital gains tax), or Roth IRAs (tax-free, often saved for heirs).
• Be Strategic:
  • Factor in current and anticipated tax rates, as well as heirs' situations.

Notable Quotes & Memorable Moments (with Timestamps)

• “If you like this stuff, this is the best paid hobby there is.” – Dr. Dahle [04:30]
• “You can spend more than just the dividend yield… but it can’t be 8% or 10% or 15% either, right? You gotta be in the neighborhood, 3, 4, 5%.” [13:00]
• “The data sucks. … There aren’t that many independent 30-year periods.” [16:56]
• “For a lot of white coat investors who do a really good job in the accumulation phase, this is all just academic… You’re probably not even going to spend 1 or 2% of your portfolio.” [20:40]
• “Your asset allocation remains just as personal as it was before retirement.” [34:14]
• “50x is nuts. … If you’re only spending 2% a year, there’s no scenario where you run out of money.” [41:24]
• “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen [43:21]
• “One of the dumbest things you can do is put your kid on your house title…” [47:20]

Important Timestamps

| Segment | Timestamp | |----------------------------------|------------------| | Types of investors & advisors | 03:30 – 09:00 | | Decumulation fundamentals | 09:00 – 22:44 | | Decumulation strategies | 22:44 – 28:02 | | Asset allocation in retirement | 28:02 – 37:32 | | Inflation and FI multiples | 37:32 – 44:16 | | Gift tax & real estate transfers | 44:16 – 51:00 | | Withdrawal order & tax strategy | 51:00 – 55:00 | | Quote of the day | 43:21 |

Summary Takeaways

• Decumulation isn’t rocket science—but it requires planning, flexibility, and a basic understanding of risk, taxes, and your own psychology.
• Most retirees can plan withdrawals themselves with some education, but hiring help is totally valid for those who want it.
• Avoid hyper-precision and over-conservatism—flexible, moderately safe approaches work best.
• Withdrawal rates, asset allocation, and tax strategies should be reviewed regularly and tailored to your needs, not dogma.
• Focus on purposeful spending and don’t let a quest for safety prevent a fulfilling retirement.

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