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Say you want to retire at age 50-55 with a combination of taxable account and IRAs. Pension and SS expected at 62 but will get higher benefit for both if I wait until full retirement age. The pension and SS will cover expenses but both may have a haircut before I get them. What withdrawal rate is safe for the period before pension and SS start? Would think it would be higher than 4 percent?
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The quick answer is clearly "yes"... The "4% rule" (possibly modified to 2.5 or 3% based on recent thought) is based on the premise that the money must last 30 years or more. Your question implies that the money needs to last only 7-12 years, and SS + pension will cover expenses at that time. So, if you can live with a plan "run out of money" at age 62 and begin to live off SS and pension at that time, your safe withdrawal rate is much more than 4%. Probably more like 10-15%.
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am wrote:Say you want to retire at age 50-55 with a combination of taxable account and IRAs. Pension and SS expected at 62 but will get higher benefit for both if I wait until full retirement age. The pension and SS will cover expenses but both may have a haircut before I get them. What withdrawal rate is safe for the period before pension and SS start? Would think it would be higher than 4 percent?
Here is what I'm doing to handle this situation. I have a Portfolio with X Amount. I am planning to delay S.S. until age 70. This will be 8 years to wait until S.S. Kicks in. So, I set aside 8 years of S.S. in another 'Account'. My portfolio that remains, I withdraw my 3-4% from (Whatever number you are comfortable with). And spend that amount plus 1 year of the separate account that will be depleted when S.S. kicks in. I will use 3% of Remaining Portfolio Balance each year for my Portfolio Withdrawal Amount.
And you are correct the Total Amount Spent will be a lot higher than 4%
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Bill Bernstein's new ebook on "Ages of the Investor" (~$4 on amazon) has a nice discussion about delaying SS and living off your assets to do so...seems relevant to the OP.
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Just about any of the retirement planning models, including FireCalc for starters, allow increments to be added to or subtracted from income and costs, such as when SS is started, when a house is sold, etc. The outcome can be evaluated at least as far as such models go. The problem is not less complex than embodied in these calculations.
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