Funding My Retirement:Withdrawal Strategy One

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Funding My Retirement:Withdrawal Strategy One

Postby parastoo » Fri Apr 05, 2013 11:54 am

Hi,
I need some advice.
I'm a recent retiree.
FERS participant.
Good health with a family history of good health.
No heirs
No dependents
No desire to die rich
I'd rather have more money now while I'm young and healthy and can enjoy the money without having to use a cane or a wheelchair.
I'm not particularly fond of volatility after 2000-2002 and 2007-2009.
Emergency funds: yes
Debt:$700-credit card
Tax filing status:single
Tax rate: 25% fed,4.33% state
State MI.
Age 62.5
Asset Allocation now:34%stocks/66% G Fund
Desired international: more than I have now.

NON RETIREMENT ASSETS
350k
78% cash for home purchase
22% individual stocks,physical gold and silver, Van. Energy Fund

RETIREMENT FUNDS
TSP 320K
95% G Fund, 5% F Fund
IRA's 141K
52% TIRA ,48% RIRA
Invested as follows:
Bridgeway Sm. Cap Value [BRSVX] 2.5%
Mutual Quest Z [MQIFX] 16%
Long Leaf Partners [LLPFX] 21%
Third Ave. Value Inst.TAVFX] 12%
Tweedy Browne Value[TWEBX] 8.5%
VAN. REIT[VGSLX] 7%
Pimco Comm. R.R. Cl. D[PCRDX] 7%
Wisdom Tree Int. Sm. Cap Div.[DLS] 1%
Hussman Strategic Growth[HSGFX] 10%
Cash[$$$] 4%
I want to convert substantially all of the TIRA to RIRA by the time I'm 70.

INHERITED TIRA 18K
Dodge&Cox Int. 5%
Hennessey Corn. Growth 6%

This is one of the strategies I've come up with.
I've read of the FERS likened to a three legged stool; the Basic annuity, S.S., and the TSP.
I would take S.S. now.
My Basic Annuity and S.S. should cover all or almost all of my non-discretionary expenses.
I would leave the TSP largely in the G Fund and deplete it over a 240 month[20 year] period.First year 1/20 times the beginning balance.Second year 1/19 times that years beginning balance and so on.
I would leave the IRA's alone.
In twenty years when the TSP is gone I would either do the same thing or annuitize the IRA's.
Option: I could extend the depletion period of the TSP to 288 or 336 months.

ADVANTAGES [as I see them]
I don't think I'll run out of money.
The withdrawals from the TSP should increase year after year.
Doing a 240 month versus 288 o336 month TSP drawdown gives me more money at the beginning of retirement.
I control my money versus annuitization; S.S. and the B.A. are already controlled by a second party.
I have three sources of COLA'd income ; S.S.,the B.A., the TSP withdrawals.
It occured to me this is like a two bucket `bucket strategy' . The first bucket contains the more safely invested assets, the last one the riskier or more volatle ones.
DISADVANTAGES
I'm not maximizing my income; an SPIA would pay me more ,at least from the start.
With a 240 month TSP drawdown I deplete it before my actuarily expected demise.

QUESTIONS
What do people think of this idea?
What other drawbacks are there?
Any suggestions? Advice?
Am I being too cautious by investing TSP mainly in G Fund?
Also, I'm assuming interest rates at least won't go any lower. With any interest rise G Fund should start paying more.
Am I being too cautious by depleting TSP?

SOME ALTERNATIVES
Partial annuitization now[SPIA]= More money now.
Partial annuitization when I'm about 70 or 72=I think more money a little later.
Apply a 4%ish WR to combined TSP + IRA balance now= More money now and,potentially,more later?

Thanks in advance.I don't have computer so I don't check the forum everyday so if I don't answer promptly please bear with me.I also might be out of town on vacation after next week

Thanks
M.
Last edited by parastoo on Sun Apr 07, 2013 1:17 pm, edited 2 times in total.
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Posts: 19
Joined: Sun Mar 31, 2013 5:48 pm

Re: FUnding My Retirement:Withdrawal Strategy One

Postby pkcrafter » Sat Apr 06, 2013 12:55 am

Welcome, just a few comments/questions to start...

parastoo wrote:Hi,
I need some advice.
I'm a recent retiree.
FERS participant.
Good health with a family history of good health.
No heirs
No dependents
No desire to die rich
I'd rather have more money now while I'm young and healthy and can enjoy the money without having to use a cane or a wheelchair.
I'm not particularly fond of volatility after 2000-2002 and 2007-2009.
Emergency funds: yes
Debt:$700-credit card
Tax filing status:single
Tax rate: 25% fed,4.33% state
State MI.
Age 62.5
Asset Allocation now:31% almost all G Fund/66.5% stocks/2.5% REITS<--REITS are stocks, so let's call it 69 stocks/31bonds.
Desired international: more than I have now.

NON RETIREMENT ASSETS
350k
78% cash for home purchase
22% individual stocks,physical gold and silver, Van. Energy Fund

RETIREMENT FUNDS
TSP 320K
95% G Fund, 5% F Fund
IRA's 141K<--Did I miss something? How do you get 69% stocks when you have 320k in G and F funds and 141k + 77 in hard assets + 18k inherited TIRA in stocks?
52% TIRA ,48% RIRA
Invested as follows:
Bridgeway Sm. Cap Value [BRSVX] 2.5%
Mutual Quest Z [MQIFX] 16%
Long Leaf Partners [LLPFX] 21%
Third Ave. Value Inst.TAVFX] 12%
Tweedy Browne Value[TWEBX] 8.5%
VAN. REIT[VGSLX] 7%
Pimco Comm. R.R. Cl. D[PCRDX] 7%
Wisdom Tree Int. Sm. Cap Div.[DLS] 1%
Hussman Strategic Growth[HSGFX] 10%
Cash[$$$] 4%
I want to convert substantially all of the TIRA to RIRA by the time I'm 70.
INHERITED TIRA 18K
Dodge&Cox Int. 5%
Hennessey Corn. Growth 6%

Bogleheads won't agree with your fund choices, but we'll leave that alone for now.

This is one of the strategies I've come up with.
I've read of the FERS likened to a three legged stool; the Basic annuity, S.S., and the TSP.
I would take S.S. now.
My Basic Annuity and S.S. should cover all or almost all of my non-discretionary expenses.
I would leave the TSP largely in the G Fund and RMD it over a 240 month period.
I would leave the IRA's alone.<--RMD won't start until your 70.5, so are you saying you will start withdrawing now or wait 8 years?
In twenty years when the TSP is gone I would either RMD or annuitize the IRA's.
Option: I could extend the depletion period of the TSP to 288 or 336 months.

ADVANTAGES [as I see them]
I don't think I'll run out of money.
The withdrawals from the TSP should increase year after year.
Doing a 240 month versus 288 or 336 month TSP drawdown gives me more money at the beginning of retirement.
I control my money versus annuitization; S.S. and the B.A. are already controlled by a second party.
I have three sources of COLA'd income ; S.S.,the B.A., the TSP withdrawals.
It occured to me this is like a two bucket `bucket strategy' . The first bucket contains the more safely invested assets, the last one the riskier or more volatle ones.
DISADVANTAGES
I'm not maximizing my income; an SPIA would pay me more ,at least from the start.
With a 240 month TSP drawdown I deplete it before my actuarily expected demise.<--Not a problem because the rest of your portfolio has 20 years to grow. Another possible option is to not take SS until at least 66. That can be counted as increasing your SS annuity income for the rest of your life.

QUESTIONS
What do people think of this idea?<--You are considering such a low withdrawal rate (2.8%) that you won't have much of a problem. I don't think I'd want 69% in stocks though, because a 50% loss would definitely alter your plan.
What other drawbacks are there?
Any suggestions? Advice?
Am I being too cautious by investing TSP mainly in G Fund?<--If your overall AA is 69% stock you are not being to cautious.
Also, I'm assuming interest rates at least won't go any lower. With any interest rise G Fund should start paying more.
Am I being too cautious by depleting TSP?<--If you deplete bond funds your equity allocation will rise and increase risk if you don't rebalance.

SOME ALTERNATIVES
Partial annuitization now[SPIA]= More money now.<--Too young, rates too low.
Partial annuitization when I'm about 70 or 72=I think more money a little later.
Apply a 4%ish WR to combined TSP + IRA balance now= More money now and,potentially,more later?<--You are proposing a 2.8% withdrawal rate and you could increase that, but at 62 I would keep the withdrawal rate at about 3.5% max.

Thanks in advance.I don't have computer so I don't check the forum everyday so if I don't answer promptly please bear with me.I also might be out of town on vacation after next week

Thanks
M.
Last edited by pkcrafter on Sat Apr 06, 2013 1:37 pm, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Location: CA

Re: FUnding My Retirement:Withdrawal Strategy One

Postby umfundi » Sat Apr 06, 2013 3:04 am

A couple of general comments:

Delaying SS is such a good deal, everyone should do it. The only reasons not to are:

1. You do not expect to live out your current life expectancy. (Ill health.)
2. You REALLY need the money now, in which case you probably would not be on this site.

A "bucket" strategy generally looks at establishing mental accounts for short, medium, and long-term needs. But, it does not then involve spending the short term funds until they are gone, then moving on to spend the medium term, then the long term. If you spend from the short term, next year you should replenish that bucket.

So, if you think about it, you really have a short term fund (3 years?) that is constant, a medium term fund (another 3 years?) that is also constant, and your long term funds. In normal times you are annually adjusting your funds by decreasing the plan by one year of the long term funds.

In other words, suppose you are making a 25-year plan. You might choose:

Short: 3 years short term treasuries.
Medium: 3 years medium term investment grade bonds.
Long: 19 years in a 60/40 stock/bond AA.

In six years, where will you be? I would propose it is:

Short: 3 years short term treasuries.
Medium: 3 years medium term investment grade bonds.
Long: 13 years in a 60/40 stock/bond AA.

See? The current funds come from the back end, not the front end. The short term bucket will actually only be invoked if something bad happens. Say, the market drops 50%. Then, you can tap the short term fund and leave the long term alone (except for rebalancing) until the market recovers.

Keith
Déjà Vu is not a prediction
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Re: FUnding My Retirement:Withdrawal Strategy One

Postby parastoo » Sat Apr 06, 2013 11:42 am

Hi to pkcrafter'
Thanks for the reply. I made a mistake;it's about 34% stock/66% GFund.
I'm not including any of the non retirement assets in the asset allocation; the gold and silver are for a SHTF situation; most of the rest is for a house. My housing situation is in flux right now; I'm not sure how much I'm going to use.
I separated the 141K IRA's and the inherited IRA's in the list I presented but totaled together =about 160K+ 320K=480K.
I wonder about my fund choices too sometimes.
Maybe RMD was the wrong way to put it; how about this way:year one balance divided by 240months= first year /mo. withdrawal.Resulting year two begin. balance divided by 228months=second year /month withdrawal and so on until year 19? or 20? when its beginning of that years balance divided by 12 months.There's probably a term to describe this process I just don't know it.In effect, I guess, I'm just making my own actuarial table for the 320K.
Remember,the RMD proposal referred to the GFund; I would like to convert theTIRA's to RIRA's by the time I'm 70.The TIRA's seem to me to be a tax trap.
Ive thought about waiting til 65,66 for S.S.
Ive thought about the rebalance risk ,too.
2.8% withdrawal rate? Remember, I'm proposing only withdrawing from the 320K;320 divided by 240 months gives me $1333/mo. or about 16K the first year which to me = about 5%.The TSP would be purposely depleted in 20 years.
parastoo
 
Posts: 19
Joined: Sun Mar 31, 2013 5:48 pm

Re: FUnding My Retirement:Withdrawal Strategy One

Postby parastoo » Sat Apr 06, 2013 11:46 am

Hi umfundi,
Thanks for the reply.
M
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Posts: 19
Joined: Sun Mar 31, 2013 5:48 pm


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