Retired but low income

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Topic Author
pocketplayer
Posts: 79
Joined: Sat Feb 19, 2011 7:34 am

Retired but low income

Post by pocketplayer »

I'm 61, single, no kids and took early retirement six years ago
and got creamed for early retirement. I make only $490 a month.
I was a teacher and will not get SSI but a meager $235 when I turn 62.

Ive had very difficult family relations since my dad died and left me
an inheritance of $360k which Ive had in a MM. I live off of $20k in
my checking account for rent which is only $350 a month. I need to get
back in the market with a plan.

Ive battled mental health issues (bipolar depression with acute anxiety).
I was in a fog after my dad passed and played it safe by going almost
all MM.

I have a rollover IRA w/$88K, brokerage acct (MM) w/$439K ans a Roth IRA
Rollover brokerage acct w/$13k

I need to get the IRA rollover and MM acct's back in the game but feel lost.

Any advice appreciated.
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CAsage
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Re: Retired but low income

Post by CAsage »

You have a decent nest egg, hopefully low overall expenses (rent plus???). What might be useful would be a Target Date 2020 or 2025 Index fund (a mix of stocks/bonds for current retirees). The rule of thumb is you can withdraw about 4% of your nest egg value today, to hopefully stretch over your life. What other expenses do you have, and is there any opportunity to work part time to increase your income?
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
GAAP
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Re: Retired but low income

Post by GAAP »

Not sure I'm reading this correctly, so here's what I think you have:

Assets:
  • Rollover IRA (TIRA/Tax-deferred): $88K
  • Brokerage acct (MM): $439K
  • Roth IRA: $13k
Liabilities:
  • No debt?
Income:
  • Pension: $490/month (COLA?)
  • SSI: $0 (permanently)
  • SSI replacement income: $235@age 62 (COLA?, any benefit from deferring to later age?)
Expense:
  • Rent: $350/month
  • Other expenses not clear
Knowing the parameters will help people give you better answers.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
cjcerny
Posts: 620
Joined: Sat Sep 15, 2007 12:47 pm

Re: Retired but low income

Post by cjcerny »

I don't think you need a plan--that sounds like you are waiting for just the right moment--a right moment that may or may not ever arrive. All you reallly need to do is take your money and buy a low cost stock market and bond market index fund with it. The Boglehead wiki will steer your right there.

The only thing that the Boglehead wiki can't really decide for you is your risk tolerance. Are you the kind of person that can sleep at night if the stock market had a bad day or month or year? Maybe. Maybe not. If you don't know the answer to that, start very conservatively and then adjust the ratios as you gain confidence. Maybe 10% or 20% in a stock market index fund and the rest in a bond market index fund for a year or two until you feel confortable. Then, revisit those percentages if you feel like you need to re-visit them.

The important part is that you don't need some kind of complicated master plan that requires reading all kinds of stock market tea leaves about when you to jump in. Just jump in, even if you jump in very, very conservatively with 100% of your money in a short term t-bill index fund or something like that.

Also keep in mind that you don't need to jump in all at once. You can do it in chunks, but don't drag it out too long. Wading into ice cold water is a little easier than jumping straight in, but you do have to get in the water at some point very soon with that money.

One last thought--this might be an excellent situation for a SPIA. A SPIA is a life insurance product. You are buying a guaranteed pension with your money. They pay you a fixed amount every month as long as you live. When you die, they keep the money. Easy to shop for a SPIA on the internet. A guaranteed monthly payment may bring you the financial peace you seek. You can spend as much or as little as you want to on a SPIA.
Last edited by cjcerny on Mon Mar 25, 2024 2:26 pm, edited 1 time in total.
Topic Author
pocketplayer
Posts: 79
Joined: Sat Feb 19, 2011 7:34 am

Re: Retired but low income

Post by pocketplayer »

Thank you.

ZERO debt. Yet, no house so I was thinking of buying
a mobile home in a retirement community, using the
retirement and SSI to pay for the lot rent and finding
a way to live off the other monies invested for the
basics; utilities, internet, etc. I live VERY frugal and
had to off the $20k in my checking account, I have
not touched my in inheritance thus far.
delamer
Posts: 17581
Joined: Tue Feb 08, 2011 5:13 pm

Re: Retired but low income

Post by delamer »

cjcerny wrote: Mon Mar 25, 2024 2:22 pm I don't think you need a plan--that sounds like you are waiting for just the right moment--a right moment that may or may not ever arrive. All you reallly need to do is take your money and buy a low cost stock market and bond market index fund with it. The Boglehead wiki will steer your right there.

The only thing that the Boglehead wiki can't really decide for you is your risk tolerance. Are you the kind of person that can sleep at night if the stock market had a bad day or month or year? Maybe. Maybe not. If you don't know the answer to that, start very conservatively and then adjust the ratios as you gain confidence. Maybe 10% or 20% in a stock market index fund and the rest in a bond market index fund for a year or two until you feel confortable. Then, revisit those percentages if you feel like you need to re-visit them.

The important part is that you don't need some kind of complicated master plan that requires reading all kinds of stock market tea leaves about when you to jump in. Just jump in, even if you jump in very, very conservatively with 100% of your money in a short term t-bill index fund or something like that.

Also keep in mind that you don't need to jump in all at once. You can do it in chunks, but don't drag it out too long. Wading into ice cold water is a little easier than jumping straight in, but you do have to get in the water at some point very soon with that money.

One last thought--this might be an excellent situation for a SPIA. A SPIA is a life insurance product. You are buying a guaranteed pension with your money. They pay you a fixed amount every month as long as you live. When you die, they keep the money. Easy to shop for a SPIA on the internet. A guaranteed monthly payment may bring you the financial peace you seek. You can spend as much or as little as you want to on a SPIA.
A SPIA is a good option in this situation, but it isn’t a life insurance product. Life insurance is a payment to your heirs when you due.

A SPIA, as you suggested, is a substitute pension.

OP, what are your total monthly expenses (food, transportation, utilities, medical, etc.) including your rent? Is the $350/month rent sustainable in the long run?

Is the $490/month from a part-time job and the $235/month a pension?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
pocketplayer
Posts: 79
Joined: Sat Feb 19, 2011 7:34 am

Re: Retired but low income

Post by pocketplayer »

OP, what are your total monthly expenses (food, transportation, utilities, medical, etc.) including your rent? Is the $350/month rent sustainable in the long run?

Is the $490/month from a part-time job and the $235/month a pension?
$350 a month is total expenses outside transportation which is minimal. I live in
CA, small mountain community with nothing to do so go out little. The $490 was
teacher retirement I took early due to family circumstances. Got hit with aw good
penalty but I was living in a motel and desperate at the time. NO the $350 is NOT
sustainable which is stressful for the future of course. I am one of a few in CA
that has such low rent...I rent a room right now.
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leeks
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Re: Retired but low income

Post by leeks »

pocketplayer wrote: Mon Mar 25, 2024 1:22 pm
Ive had very difficult family relations since my dad died...

Ive battled mental health issues (bipolar depression with acute anxiety).
I was in a fog after my dad passed and played it safe by going almost
all MM.
You are doing very well all things considered. There is little harm in leaving a money market longer until you feel confident about next steps.

A part-time job would be the obvious way to boost your budget for future housing and such. Perhaps substitute teaching on occassion since it is daily work you can accept or reject as needed? Or some part-time tutoring which you could do on your own or through one of the many tutoring companies?

Do you have health coverage?
walkingg
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Joined: Thu Feb 01, 2024 11:43 am

Re: Retired but low income

Post by walkingg »

Hello,
You say you haven't touched your inheritance which is currently in a MM? Have you looked at it lately? Can you use the interest to find a surer place to live?
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mhadden1
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Location: North Alabama

Re: Retired but low income

Post by mhadden1 »

leeks wrote: Mon Mar 25, 2024 7:18 pm There is little harm in leaving a money market longer until you feel confident about next steps.
OP, the better money market funds are paying around 5% right now, so if all your assets right now could earn that much, the interest would exceed $25,000/year while those rates remain. With your low expenses, that much should keep you going in the near term. When MM rates do go down, it likely won't be all at once, so you should have enough time to make long term plans.
Retired 12/31/2015
AlaskaTeach
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Re: Retired but low income

Post by AlaskaTeach »

looks like if you are a super tightwad, you can increase your total another 100k, and if you put 500k into an immediate annuity at age 70, you will have it made with an annuity of about $43k per year. That plus your SS and teacher pension covers the future, with the possible exception of long-term care, which honestly you are not likely to save enough to cover anyway. You would be a medicaid patient in a worst-case scenario.

Part-time or full-time work doesn't hurt if you can save the dough. Who knows, you might end up with more than 100k of additional money?
Topic Author
pocketplayer
Posts: 79
Joined: Sat Feb 19, 2011 7:34 am

Re: Retired but low income

Post by pocketplayer »

Do you have health coverage?
Yes, CA has what's called Medi-Cal and I pay
next to nothing for insurance w low-income now.

The SPIA sounds interesting.
100k, and if you put 500k into an immediate annuity at age 70, you will have it made with an annuity of about $43k per year.
My living situation must change for the better,,,I dont think I could rent a room for another 9 years until 70 without going nutz. This is why I mentioned above a senior retirement mobile home park...taking money form the MM fund and buying a single or double wide and then use the retirement and SSI to pay lot rent, then either part-time job or tap the MM for needed funds (utilities, etc). It would still be living very frugal but at least I would have a place to live on my own. Make sense?
Topic Author
pocketplayer
Posts: 79
Joined: Sat Feb 19, 2011 7:34 am

Re: Retired but low income

Post by pocketplayer »

I'd like to take the IRA that is in a MM and seek
advise where to put the $88k? I would lean to an
index fund. Thanks
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Beensabu
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Re: Retired but low income

Post by Beensabu »

pocketplayer wrote: Tue Apr 02, 2024 3:27 pm I'd like to take the IRA that is in a MM and seek
advise where to put the $88k? I would lean to an
index fund. Thanks
The $88k in the rollover IRA is ~16% of your portfolio. The $13k in the Roth IRA is ~2%. If both of those are invested in stocks, you will still have a very conservative asset allocation (18/82 stock:cash). Either some combo of VTSAX and VTIAX, or just VTWAX - if you only want US stocks, then VTSAX is fine. It won't even matter if there's a 50% crash right after you invest the funds - you'd be down less than you are up on your MM fund since you got your inheritance; and it's not like you're going to touch either of the IRA accounts for at least 10 years.

The taxable account is throwing off ~$22k per year in income for you right now. A money market fund is not going to do that forever, but that's pretty sweet for the moment. If there's any of that income that you don't need for the year, you could invest the extra in a total stock market index ETF like VTI. Or not. Your call. :)

As of right now, you're getting $5880 per year from the pension. As of ~1 year from now, you'll be getting $8700 per year from the pension + SS replacement.

How much of the MM funds do you anticipate using to buy a home? What do you really think your annual expenses are likely to be (lot rent, mobile home insurance, property tax / vehicle license fee, utilities, food and sundries, clothing, transportation, entertainment, etc.) once you do that?

Right now, as long as you spend less than $1800/mo from your taxable account (less than 4% of total portfolio value per year), you're good. If you buy a home, then you'll have less available for living expenses (which will have gone up). Is renting your own apartment/home vs a room an option for you? It doesn't have to be $350/mo for a room vs. own your own home. There's middle ground in there - but to figure out which situation would work best, you have to run the actual numbers on each one.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
madbrain
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Re: Retired but low income

Post by madbrain »

Bipolar in CA here too. Sorry for your struggles.
The annuity isn't necessarily bad advice, but most don't adjust for inflation. There will be significant loss of purchasing power, especially over long periods (over a decade). Just something to be aware of before relinquishing a large portion of your net worth to your insurance company.
If you still want to get one, get a rated annuity, which will take your bipolar disorder into account, and pay more. Bipolar people have a reduced life expectancy compared to the general population making a regular annuity a bad deal. The average life expectancy for people with bipolar is only 67.
Of course, there is no way to know for sure. My grandfather on my mother's side had bipolar and still lived to 80. His bipolar meds, lithium, caused kidney toxicity. He had a heart attack during a dialysis session. My father didn't have bipolar, but died at 67 from pancreatic cancer that we attribute to radioactivity exposure at nuclear plants.

I'm personally not planning my retirement funding beyond age 80 . I do have a bunch of other medical conditions besides bipolar, though.
bonesly
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Re: Retired but low income

Post by bonesly »

pocketplayer wrote: Mon Mar 25, 2024 1:22 pm ...took early retirement six years ago and got creamed for early retirement.
...will not get SSI but a meager $235 when I turn 62.
...I've had very difficult family relations since my dad died and left me an inheritance
Welcome to the forum! I'm sorry to hear of your life-challenges, so be sure to retain social connections with former colleagues you called friend and try to forge new connections. Your mental health is as important as your physical and financial health.

You've expressed an interest to invest some/all of the inheritance assets, but before you can do that you need a desired Asset Allocation (AA) among stocks, bonds, and cash. Nobody can tell you what that is as it's based on your time-frame (looking at 30-35 years in the withdrawal phase starting now) and your risk-tolerance, which is very personal. I'd recommend taking the (free) Vanguard Investor Questionnaire to see what AA it recommends based on your personal responses to the quiz, then share that here in this thread.

Absent a desired AA, we can still look at withdrawal/success rates for various AAs to supplement your income, which will get a small boost at 62.

Asset totals/locations:
$439K Taxable (MM)
$88K Rollover IRA
$13K Roth IRA
- - - - -
$540K Total

Typical AAs for an early 60s retiree are 70/30, 60/40, and 50/50, so we'll look at those to see what might be sustainable for a 30-year remaining life-span (age 91) and 35-year span (age 96). To keep this simple I've not added any international stocks, so there' only two funds to deal with US stocks and US bonds. I've suggested Total Stock Market (VTSAX) although you could use 500 Index as well (VFIAX). I've also suggested Total Bond Market, but some don't like the price swings that bond funds subject them to and for those folks a combination of nominal individual US Treasury Notes in a ladder and/or Series I Savings Bonds (through TreasuryDirect) might be a better bond vehicle than a bond fund.

The Withdrawal Monte Carlo assumptions include a constant dollar strategy (X% of total value in year-1, then +3%/yr increases for inflation every year thereafter), an average expense ratio of 0.10% (achievable with Vanguard and probably Fidelity index mutual funds). A constant dollar strategy is reliable (no pay cuts) but tends to leave a large residual (it's designed for a bad sequence of returns). If you're not planning to leave a legacy to friends/relatives/charity (no kids), then an alternative strategy like Variable Percentage Withdrawal might be more appealing. The results are presented as a success rate of NOT running out of money before the period is over (30 or 35 years). The withdrawal amounts are tied to the period so for 30 years it's $21.6K (4%) and for 35 years it's ~$20.0K (3.7%), which is explicitly shown for the first case, but omitted from the other two cases.

70/30
$378K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$61K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8% with a 4.0% withdrawal in year-1 of $21,600/yr ($1,800/mo)
For 35 years the success rate is about 91.5±0.9% with a 3.7% withdrawal in year-1 of $19,980/yr ($1,665/mo)

60/40
$324K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$115K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8%
For 35 years the success rate is about 91.5±0.9%

50/50
$270K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$169K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.7±0.8%
For 35 years the success rate is about 91.2±0.9%

Holding bonds (VBTLX) in a taxable account isn't ideal, but you're out of room in all your tax-advantaged accounts, so you just have to accept the tax-drag of holding bonds in taxable. I don't think it will be too big an issue as your total income (at least until age 62) is under $30K/yr so maybe 16% total Fed+CA tax per this Talent.com Calculator. The stock dividends and sales from taxable will likely be in the 0% long-term capital gains rate (income < $47,025).

Those success rates are are very similar (probably not a statistical difference among them). What would really drive your choice among those three options (or any AA in between) is your risk-tolerance, which the Vanguard quiz is likely to help you determine. Once you know that and share it here, we could consider whether a slightly higher withdrawal rate in the first year or 2, with a step-down once SocSec kicks in would help with your immediate cash-flow needs.

$1,665/mo Portfolio
$490/mo Teacher Pension
$235/mo SSI
-----
$2,390/mo

If that bold income figure meets your needs, then I think you could be set. If you have a shortfall, we can think about ways to address that.

You also mentioned a purchase of a mobile-home and renting a lot for it. How big is the purchase after sales tax/registrations/etc.? How much will your monthly expenses of $500/mo (just guessing on room rent and "very frugal") change with the mobile park lot rental?

A big purchase will reduce the amount of your portfolio income, but that might work out fine if the reduced portfolio income, along with pension & SSI, is still adequate to meet your expenses. Knowing the dollar amount of the purchase and associated costs can provide an updated portfolio income amount (just take 4% or 3.7% of the $540K - Mobile Home Total Cost).

P.S. my models and some other Monte Carlo tools are posted below so you can explore these kinds of things yourself if you're interested.

Data and Models I use for Monte Carlo:
NYU Data Set 1928-2017 with Model Fits
Accumulation Monte Carlo
Withdrawal Monte Carlo <-- used for your potential AA success rates

You'll need a MS Excel license; download to your local machine and enable macros (required for the 1,000 random trials and results aggregation).

I'm using my own model as I like to know what's under the hood, but there are other models I like that have public facing website interfaces:
Portfolio Visualizer's Monte Carlo,
FiCalc,
TPAW,
and many others here seem to like FireCalc.
Jovby
Posts: 431
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Re: Retired but low income

Post by Jovby »

pocketplayer wrote: Tue Apr 02, 2024 3:27 pm I'd like to take the IRA that is in a MM and seek
advise where to put the $88k? I would lean to an
index fund. Thanks
I agree with others that with MM paying 5%+ there really is no hurry to do anything.

Before you can decide on an investment you need to figure out what you want to use the money for. If you plan to use the money in the next 1-3 years the MM is fine, 3 to 6 years consider a CD or Myga, 7+ years you can think about mutual funds such as VSMGX.

I would start by figuring out your housing situation whether that be the mobile home, or a subsidized senior apartment, or something else. Once you have a better idea of your housing expense, and what you’ll have after the possible mobile home purchase, you can make a plan for your investments. If at that point you can live off 4% of your total portfolio then you could go with something like VSMGX for everything. If that won’t be sufficient then you could look at a SPIA for 50-70% of your portfolio with the remainder invested which should bump your income.
Topic Author
pocketplayer
Posts: 79
Joined: Sat Feb 19, 2011 7:34 am

Re: Retired but low income

Post by pocketplayer »

70/30
$378K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$61K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8% with a 4.0% withdrawal in year-1 of $21,600/yr ($1,800/mo)
For 35 years the success rate is about 91.5±0.9% with a 3.7% withdrawal in year-1 of $19,980/yr ($1,665/mo)

60/40
$324K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$115K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8%
For 35 years the success rate is about 91.5±0.9%

50/50
$270K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$169K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.7±0.8%
For 35 years the success rate is about 91.2±0.9%

Holding bonds (VBTLX) in a taxable account isn't ideal, but you're out of room in all your tax-advantaged accounts, so you just have to accept the tax-drag of holding bonds in taxable. I don't think it will be too big an issue as your total income (at least until age 62) is under $30K/yr so maybe 16% total Fed+CA tax per this Talent.com Calculator. The stock dividends and sales from taxable will likely be in the 0% long-term capital gains rate (income < $47,025).

Those success rates are are very similar (probably not a statistical difference among them). What would really drive your choice among those three options (or any AA in between) is your risk-tolerance, which the Vanguard quiz is likely to help you determine. Once you know that and share it here, we could consider whether a slightly higher withdrawal rate in the first year or 2, with a step-down once SocSec kicks in would help with your immediate cash-flow needs.

$1,665/mo Portfolio
$490/mo Teacher Pension
$235/mo SSI
-----
$2,390/mo

If that bold income figure meets your needs, then I think you could be set. If you have a shortfall, we can think about ways to address that.
Forgive my lack of comprehension but which AA model you presented would give the $2390mo mentioned.
That would would be amazing for me and gives me HOPE with this response,
madbrain
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Joined: Thu Jun 09, 2011 5:06 pm
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Re: Retired but low income

Post by madbrain »

pocketplayer wrote: Thu Apr 04, 2024 3:43 pm
70/30
$378K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$61K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8% with a 4.0% withdrawal in year-1 of $21,600/yr ($1,800/mo)
For 35 years the success rate is about 91.5±0.9% with a 3.7% withdrawal in year-1 of $19,980/yr ($1,665/mo)

60/40
$324K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$115K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8%
For 35 years the success rate is about 91.5±0.9%

50/50
$270K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$169K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.7±0.8%
For 35 years the success rate is about 91.2±0.9%

Holding bonds (VBTLX) in a taxable account isn't ideal, but you're out of room in all your tax-advantaged accounts, so you just have to accept the tax-drag of holding bonds in taxable. I don't think it will be too big an issue as your total income (at least until age 62) is under $30K/yr so maybe 16% total Fed+CA tax per this Talent.com Calculator. The stock dividends and sales from taxable will likely be in the 0% long-term capital gains rate (income < $47,025).

Those success rates are are very similar (probably not a statistical difference among them). What would really drive your choice among those three options (or any AA in between) is your risk-tolerance, which the Vanguard quiz is likely to help you determine. Once you know that and share it here, we could consider whether a slightly higher withdrawal rate in the first year or 2, with a step-down once SocSec kicks in would help with your immediate cash-flow needs.

$1,665/mo Portfolio
$490/mo Teacher Pension
$235/mo SSI
-----
$2,390/mo

If that bold income figure meets your needs, then I think you could be set. If you have a shortfall, we can think about ways to address that.
Forgive my lack of comprehension but which AA model you presented would give the $2390mo mentioned.
That would would be amazing for me and gives me HOPE with this response,

The 70/30 allocation. Look at the last 2 lines for that AA.
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SB1234
Posts: 1134
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Location: Laniakea

Re: Retired but low income

Post by SB1234 »

pocketplayer wrote: Thu Apr 04, 2024 3:43 pm
70/30
$378K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$61K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8% with a 4.0% withdrawal in year-1 of $21,600/yr ($1,800/mo)
For 35 years the success rate is about 91.5±0.9% with a 3.7% withdrawal in year-1 of $19,980/yr ($1,665/mo)

60/40
$324K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$115K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.3±0.8%
For 35 years the success rate is about 91.5±0.9%

50/50
$270K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$169K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.7±0.8%
For 35 years the success rate is about 91.2±0.9%

Holding bonds (VBTLX) in a taxable account isn't ideal, but you're out of room in all your tax-advantaged accounts, so you just have to accept the tax-drag of holding bonds in taxable. I don't think it will be too big an issue as your total income (at least until age 62) is under $30K/yr so maybe 16% total Fed+CA tax per this Talent.com Calculator. The stock dividends and sales from taxable will likely be in the 0% long-term capital gains rate (income < $47,025).

Those success rates are are very similar (probably not a statistical difference among them). What would really drive your choice among those three options (or any AA in between) is your risk-tolerance, which the Vanguard quiz is likely to help you determine. Once you know that and share it here, we could consider whether a slightly higher withdrawal rate in the first year or 2, with a step-down once SocSec kicks in would help with your immediate cash-flow needs.

$1,665/mo Portfolio
$490/mo Teacher Pension
$235/mo SSI
-----
$2,390/mo

If that bold income figure meets your needs, then I think you could be set. If you have a shortfall, we can think about ways to address that.
Forgive my lack of comprehension but which AA model you presented would give the $2390mo mentioned.
That would would be amazing for me and gives me HOPE with this response,
I believe user bonesly has provided calculations for three different asset allocations and the calculations indicate that there is not much difference statistically between them.

1665/month = 20k per year is 3.7% of 540k. this is the withdrawal if you want to plan for 35 years.
1800/month = 21.6k per year is 4% of 540k. this is the withdrawal if you want to plan for 30 years.
the longer you plan for the lesser you can withdraw for a safe withdrawal.

If the difference is not statistically different the safe choice would be to with a more conservative AA. that would be 50/50 as per calculations above.

so the 2390/mo figure includes a withdrawal of 1665 + 490/mo teacher pension + 235/mo ssi.
superstition: belief that market will one day come around to your concept of fair value
bonesly
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Re: Retired but low income

Post by bonesly »

pocketplayer wrote: Thu Apr 04, 2024 3:43 pm Forgive my lack of comprehension but which AA model you presented would give the $2390mo mentioned.
That would would be amazing for me and gives me HOPE with this response,
As @SB1234 noted, any of those AAs will provide that income level if your initial withdraw in year-1 is 3.7%. They will provide a bit more if you withdraw 4%, but the portfolio has a slightly higher chance of running out of money earlier if you live past 91. If Madbrain's statement applies to you specifically, you might want to choose the 4% initial withdrawal over 3.7%. If you would describe yourself as risk-averse, you should likely pick the 50/50 AA as it's less-volatile, despite all three AAs having an indistinguishable success rate. Madbrain's statement is reiterated in the quote below.
madbrain wrote: Wed Apr 03, 2024 6:01 pm The average life expectancy for people with bipolar is only 67. Of course, there is no way to know for sure. My grandfather on my mother's side had bipolar and still lived to 80.
At the risk of being repetitive, this is probably what I'd suggest:

50/50
$270K Total Stock Market (VTSAX) in Taxable Brokerage Acct; could use 500 Index (VFIAX) instead of TSM
$169K Total Bond Market (VBTLX) in Taxable Brokerage Acct
$88K Total Bond Market (VBTLX) in Rollover IRA
$13K Total Bond Market (VBTLX) Roth IRA
For 30 years the success rate is about 92.7±0.8% with a 4.0% withdrawal in year-1 of $21,600/yr ($1,800/mo)

$1,800/mo Portfolio
$490/mo Teacher Pension
$235/mo SSI
-----
$2,525/mo Total

As noted in my first response, taxes will be due on some portion of these withdrawals (mostly the bond portion from the Rollover IRA) and your tax-bracket is likely to be very low anyway, but still it needs to be budgeted for (elect a Fed withholding of 10% or 12% on withdrawals from the Rollover IRA, and a state withholding of 6% if your brokerage supports state tax withholding). Another edit: The bond fund held in taxable will also create an on-going tax bill, but that's the cost of not having a big tax-deferred space to hold them, so it's fine.

Edit to add....
pocketplayer wrote: Thu Apr 04, 2024 3:43 pm I was thinking of buying a mobile home in a retirement community...
bonesly wrote: Wed Apr 03, 2024 8:55 pm A big purchase will reduce the amount of your portfolio income, but that might work out fine if the reduced portfolio income, along with pension & SSI, is still adequate to meet your expenses. Knowing the dollar amount of the purchase and associated costs can provide an updated portfolio income amount (just take 4% or 3.7% of the $540K - Mobile Home Total Cost).
That $1,800/mo from the portfolio will be smaller if you take $50K or $100K or $150K out to buy a mobile home:

Code: Select all

Cost  | 4% Initial Draw
$0K   | $1,800/mo <-- Keep renting vs buy mobile home
$50K  | $1,633/mo
$100K | $1,467/mo
$150K | $1,300/mo
Last edited by bonesly on Fri Apr 05, 2024 12:00 pm, edited 1 time in total.
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tennisplyr
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Re: Retired but low income

Post by tennisplyr »

It may be difficult but how about some part-time work (for money) and volunteering (for mental health)...keep fighting!!
“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
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