If my million dollar nest egg becomes valued at $350, then I'm sure that I've already waited way too long to make meaningful adjustments!Ron Scott wrote: ↑Sun Mar 25, 2018 7:10 pm I think what’s happening is that by the time the million-dollar retirement kitty reaches its mid-life, when growth is theoretically over and the decline is supposed to kick in, a) you realize you’re really NOT going to continue spending like you did before, and b) that million is only worth about $350 and you’re thinking it’d be best to nurse it.
How old were you when you started spending your “principal”?
Re: How old were you when you started spending your “principal”?
- Sandtrap
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Re: How old were you when you started spending your “principal”?
Thanks "SeeMoe"SeeMoe wrote: ↑Sun Mar 25, 2018 7:41 pmThanks. A CCRC stands for Continuing Care Retirement Community. Sometimes we feel so secure in our 1,404 acre CCRC that it feels like we have been living in a cocoon when we venture out into the world for a day or two. Everyone is of a similar age, and share in the aches and pains and era we cane from...Forgetting how everyday life evolves around work. In my estimation anyway.Sandtrap wrote: ↑Sun Mar 25, 2018 7:17 pmSounds great!SeeMoe wrote: ↑Sun Mar 25, 2018 7:03 pm We retired over 22+ years ago with good pensions and traveled the world. Then bought into a 5 Star CCRC, but only take the RMD’s and usually reinvest them in the taxable folio. Amazing how our investments continue to grow for us to the point we prefer letting them grow ever more now that we stopped traveling.....We have Good Insurance plans, but one never knows per medical expenses, as one ages!
SeeMoe..
What is a "5-Star CCRC ??
j
SeeMoe..
I'm going to post a thread on this as it's off topic on this thread and timely to the forum.
mahalo,
jim
Re: How old were you when you started spending your “principal”?
My wife and I are spending principal in our first year of retirement. We are upsizing from our very small house of 26 years to a mid sized condo that is more expensive and in a better neighborhood.
Wre will likely spend some in year two as well. Once we begin taking Social Security in year 3 we will drop down and settle in at a 2.75% withdrawl rate which might or might not exceed interest and dividend income depending on Mr. Market's behavior in any given year.
Wre will likely spend some in year two as well. Once we begin taking Social Security in year 3 we will drop down and settle in at a 2.75% withdrawl rate which might or might not exceed interest and dividend income depending on Mr. Market's behavior in any given year.
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Re: How old were you when you started spending your “principal”?
I don't understand the question. What is the "principal" of my portfolio?
I know how to determine its value, but I have no idea how to determine my portfolio's principal.
Disclaimer: I'm not retired.
I know how to determine its value, but I have no idea how to determine my portfolio's principal.
Disclaimer: I'm not retired.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
Re: How old were you when you started spending your “principal”?
I just retired last year. I'm not selling shares of funds unless I need to rebalance.
I'm directing my dividends, capital gains, and CD interest from my taxable accounts to my checking account. Is that spending principal? Some may argue yes, since dividends and capital gains, when distributed, lowers the per share price. Others may said no, since I'm not "selling" any shares for spending.
Others may not including CDs in the investment portfolio, but I do. When a CD from my CD ladder comes due I will replenish my cash account as necessary based on my expected cash flow and create a new CD with the remainder. Am I spending principal? Yes.
But that is all fine IMO. My spending rate is low, well under 4%. I think that should be the measure.
I'm directing my dividends, capital gains, and CD interest from my taxable accounts to my checking account. Is that spending principal? Some may argue yes, since dividends and capital gains, when distributed, lowers the per share price. Others may said no, since I'm not "selling" any shares for spending.
Others may not including CDs in the investment portfolio, but I do. When a CD from my CD ladder comes due I will replenish my cash account as necessary based on my expected cash flow and create a new CD with the remainder. Am I spending principal? Yes.
But that is all fine IMO. My spending rate is low, well under 4%. I think that should be the measure.
- Will do good
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Re: How old were you when you started spending your “principal”?
With 2000 and 2008 down market and today at 130% real, that's great!plannerman wrote: ↑Sun Mar 25, 2018 4:57 pm I Retired in 1999 at age 56. On a nominal basis my portfolio went below its starting level for the first time in July 2002 and again in February 2009. Today it's 1.95 the nominal starting value.
On a more important real basis, it went below the starting level on Sept 2001, June 2002, September 2008 and May 2010. Today it is at 130% real.
plannerman
If you don't mind what's your average SWR?
Re: How old were you when you started spending your “principal”?
I used the CPI inflation calculator at https://data.bls.gov/cgi-bin/cpicalc.pl ... ar2=201802 Using that calculator I typed in my savings balance in October 1998 when I retired and looked at what it calculates what that balance would be in today's dollars. That figure is very close to my actual present balance. So our savings distributions and SS has kept up with our spending. Very fortunate.Sandtrap wrote: ↑Sun Mar 25, 2018 7:14 pm13 years behind you. I hope that I can chart a path as successful as yours.Sheepdog wrote: ↑Sun Mar 25, 2018 5:22 pm 19 years 6 months out. Accounts are still growing, spending is still growing and that is with very conservative investments. That accounts growth is nominal growth, but if I recalculated my growth for the affect of inflation in this period (real growth) it is virtually even. (A good Boglehead calculated that last year when I made a similar post.)
*How did you calculate in the effect of inflation?
*Where did the inflation figures come from?
Whenever I see your "avatar". . .
I still can't figure out how you got the dog to sit in front of a computer.
jim
Tne avatar picture? She was a very smart dog...very computer literate. She liked streaming Lassie
movies and you tubes about wolves and would sit there for hours howling
You ask good .questions here and make good comments. I am sure you will do well in your retirement.
Jim
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
- Sandtrap
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Re: How old were you when you started spending your “principal”?
Thanks for the link.Sheepdog wrote: ↑Sun Mar 25, 2018 11:28 pmI used the CPI inflation calculator at https://data.bls.gov/cgi-bin/cpicalc.pl ... ar2=201802 Using that calculator I typed in my savings balance in October 1998 when I retired and looked at what it calculates what that balance would be in today's dollars. That figure is very close to my actual present balance. So our savings distributions and SS has kept up with our spending. Very fortunate.Sandtrap wrote: ↑Sun Mar 25, 2018 7:14 pm13 years behind you. I hope that I can chart a path as successful as yours.Sheepdog wrote: ↑Sun Mar 25, 2018 5:22 pm 19 years 6 months out. Accounts are still growing, spending is still growing and that is with very conservative investments. That accounts growth is nominal growth, but if I recalculated my growth for the affect of inflation in this period (real growth) it is virtually even. (A good Boglehead calculated that last year when I made a similar post.)
*How did you calculate in the effect of inflation?
*Where did the inflation figures come from?
Whenever I see your "avatar". . .
I still can't figure out how you got the dog to sit in front of a computer.
jim
Tne avatar picture? She was a very smart dog...very computer literate. She liked streaming Lassie
movies and you tubes about wolves and would sit there for hours howling
You ask good .questions here and make good comments. I am sure you will do well in your retirement.
Jim
I wonder if there is something like "FireCalc" for the CPI that would project forward based on historic patterns. That would be interesting.
mahalo,
jim
Re: How old were you when you started spending your “principal”?
Thanks for the link.
I wonder if there is something like "FireCalc" for the CPI that would project forward based on historic patterns. That would be interesting.
mahalo,
jim
[/quote]
FireCalc does forward project the CPI because that program runs the test scenarios in real dollars using sequences of historical CPI.
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Re: How old were you when you started spending your “principal”?
I'll be retired 11 years come May. I have yet to exceed the amount of savings/investments that I had on day one of retirement. I guess that means that I started spending principal at age 59.
Of course, I retired a bit earlier than some without any retirement income other than my investments and have spent well over the recommended 4% at times, depending on what I was doing that year. BTW, I never cut back on my spending, even through the downturn of 2008-09. I had (and continued) to maintain a 4-year "bucket #1" cash reserve, so I never worried what the market was doing during the down period - or future down periods of my retirement. That cash bucket was refilled to the 4-year balance as profits presented themselves.
Today, things are a bit different. I started my (age 70) SS last month. It, along with a small VA disability payment and SPIA, more than cover my monthly expenses with the exception of FIT (no state, local income tax to consider). I've also started RMD's this year, prepaying FIT on January 2nd, along with moving the remaining RMD to savings. Since I no longer need fear the short/long term gyrations of the market, I no longer maintain a cash bucket.
As to the reduction in savings/investment balances when measured from my date of retirement though Dec 31, 2017 (ignoring the current year downturn), I'm down a total of 4.47% for the period of just over a decade. IOW, I still have 95.53% of the assets I had on day 1 of retirement (ignoring the measurement of inflation).
More importantly, I'm 41.7% above the total value of my investments as I projected them to be at this moment in time (plan vs. actual) against the reports I generated back in 2007 to see if I could retire. For me, that is a more important measurement rather than to see if one just "dipped" into their principal.
FWIW,
- Ron
Of course, I retired a bit earlier than some without any retirement income other than my investments and have spent well over the recommended 4% at times, depending on what I was doing that year. BTW, I never cut back on my spending, even through the downturn of 2008-09. I had (and continued) to maintain a 4-year "bucket #1" cash reserve, so I never worried what the market was doing during the down period - or future down periods of my retirement. That cash bucket was refilled to the 4-year balance as profits presented themselves.
Today, things are a bit different. I started my (age 70) SS last month. It, along with a small VA disability payment and SPIA, more than cover my monthly expenses with the exception of FIT (no state, local income tax to consider). I've also started RMD's this year, prepaying FIT on January 2nd, along with moving the remaining RMD to savings. Since I no longer need fear the short/long term gyrations of the market, I no longer maintain a cash bucket.
As to the reduction in savings/investment balances when measured from my date of retirement though Dec 31, 2017 (ignoring the current year downturn), I'm down a total of 4.47% for the period of just over a decade. IOW, I still have 95.53% of the assets I had on day 1 of retirement (ignoring the measurement of inflation).
More importantly, I'm 41.7% above the total value of my investments as I projected them to be at this moment in time (plan vs. actual) against the reports I generated back in 2007 to see if I could retire. For me, that is a more important measurement rather than to see if one just "dipped" into their principal.
FWIW,
- Ron
Re: How old were you when you started spending your “principal”?
Anyone who retired just before 2007/2008 would soon have a portfolio well below starting point with no withdrawals. The only question would be how much the withdrawals one does take prevent the recovering stock market from driving the portfolio back above the initial point. The less one has in stocks and the more one has in bonds the greater the negative effect of taking withdrawals in this particular scenario of a large market fall followed by an even larger and seemingly continuing market climb. It is just a lesson in how particular the "luck of the draw" is in determining what will happen to the retiree and how little one can do about it, even controlling spending.
Re: How old were you when you started spending your “principal”?
Like Gill....
Don't know yet. Age 70 and have been retired for 6 full years and the portfolio is still larger than when I retired in spite of spending each year. The bull has been kind enough I may have to wait another 8 years, even if the market has zero gains, just to get back to the $$ at retirement. Methinks I need to spend more.
Martin
- Sandtrap
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Re: How old were you when you started spending your “principal”?
FireCalc does forward project the CPI because that program runs the test scenarios in real dollars using sequences of historical CPI.
[/quote]
"Brain Fart"
Of course!
thanks,
j
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Re: How old were you when you started spending your “principal”?
One of my relatives started at age 40 to dip into principle and now at 65 has 700k or so left. He may start SS in two years at which point SS + interest and dividends should pretty much cover his expenses. His biggest regret is he feels he should have retired at 35! He lives a rather frugal lifestyle, although most of his discretionary spending is on alcohol, which he greatly enjoys.
Re: How old were you when you started spending your “principal”?
I will retire next year at age 62 and I expect to have a capital balance <$X in the second month of retirement.
I am spending capital to grow my SS benefit, benefit calculators suggest that somewhere in the range of 68 and 70 is the "sweet spot". This is because I have a very low earning spouse (35 year average is below the first knee) so it is a big jump when I file and she gets 50% of my PIA.
I am spending capital to grow my SS benefit, benefit calculators suggest that somewhere in the range of 68 and 70 is the "sweet spot". This is because I have a very low earning spouse (35 year average is below the first knee) so it is a big jump when I file and she gets 50% of my PIA.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: How old were you when you started spending your “principal”?
I've been spending some of my principal since I first retired 2 years ago because I'm delaying SS until I turn 70 (next year).
Re: How old were you when you started spending your “principal”?
I have never viewed 'money' or 'funds' as something that can bring you anything valuable unto themselves.
The only purpose of 'money' is to trade it for experiences and assetts which bring you happines.
With that in mind I hope that I will be spending a good deal of my money the balance of my life - that is why I accumulated it.
My wish/goal for heirs will hopefully be the only remainder and then the rest of the money will have been well used.
The only purpose of 'money' is to trade it for experiences and assetts which bring you happines.
With that in mind I hope that I will be spending a good deal of my money the balance of my life - that is why I accumulated it.
My wish/goal for heirs will hopefully be the only remainder and then the rest of the money will have been well used.
Re: How old were you when you started spending your “principal”?
I have not retired yet. Am thinking about it though.
My current plan is to buy an annuity at about the same time I retire. Likely that will reduce my available funds (what you call principle). Probably spend 10-20% of my available funds on it.
Then I plan to defer SS. Which will also likely reduce my available funds.
Time will tell, I could change my mind
My current plan is to buy an annuity at about the same time I retire. Likely that will reduce my available funds (what you call principle). Probably spend 10-20% of my available funds on it.
Then I plan to defer SS. Which will also likely reduce my available funds.
Time will tell, I could change my mind
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
Re: How old were you when you started spending your “principal”?
A legitimate question as to how to define principal/capital. Does not spending it mean:longinvest wrote: ↑Sun Mar 25, 2018 10:04 pm I don't understand the question. What is the "principal" of my portfolio?
I know how to determine its value, but I have no idea how to determine my portfolio's principal.
Disclaimer: I'm not retired.
1. Account balances are same in nominal terms as when first retired.
2. Account balances are same in real terms as when first retired.
3. No investment shares sold for purposes of spending sale proceeds.
4. Other?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: How old were you when you started spending your “principal”?
I love Sandtrapś comment and Sheepdoǵs reply about the dogś photo.
I guess I have been retired about a year. I have no idea about my finanaces - do not follow where the market is currently unless I log onto Bogleheads. I am living off of my pensions and SS. I am much too busy with my Spanish and photography at a community college.
I guess I have been retired about a year. I have no idea about my finanaces - do not follow where the market is currently unless I log onto Bogleheads. I am living off of my pensions and SS. I am much too busy with my Spanish and photography at a community college.
Last edited by Lynette on Mon Mar 26, 2018 3:09 pm, edited 1 time in total.
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Re: How old were you when you started spending your “principal”?
I retired 9 1/2 years ago, in late 2008, at age 45. My principal has risen a lot, as I live off the monthly and quarterly dividends from my main bond fund and main stock fund in my taxable account. I spend less than the dividends I earn, so that also adds to the principal.
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Re: How old were you when you started spending your “principal”?
Never calculated it. My withdrawal rate varied between 2%-3% of my annual portfolio balance--closer to 3% than 2%. I might go back and calculate what it was compared to a 4% adjusted for inflation withdrawal rate for the fun of it.Will do good wrote: ↑Sun Mar 25, 2018 11:09 pmWith 2000 and 2008 down market and today at 130% real, that's great!plannerman wrote: ↑Sun Mar 25, 2018 4:57 pm I Retired in 1999 at age 56. On a nominal basis my portfolio went below its starting level for the first time in July 2002 and again in February 2009. Today it's 1.95 the nominal starting value.
On a more important real basis, it went below the starting level on Sept 2001, June 2002, September 2008 and May 2010. Today it is at 130% real.
plannerman
If you don't mind what's your average SWR?
plannerman
- Will do good
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Re: How old were you when you started spending your “principal”?
I just realized you have withdrawal close to 3% for 19 years and your portfolio is up not 30% but 130% real, which means close to triple your portfolio in nominal dollars, just like FireCalc projected for some cases.plannerman wrote: ↑Mon Mar 26, 2018 4:11 pmNever calculated it. My withdrawal rate varied between 2%-3% of my annual portfolio balance--closer to 3% than 2%. I might go back and calculate what it was compared to a 4% adjusted for inflation withdrawal rate for the fun of it.Will do good wrote: ↑Sun Mar 25, 2018 11:09 pmWith 2000 and 2008 down market and today at 130% real, that's great!plannerman wrote: ↑Sun Mar 25, 2018 4:57 pm I Retired in 1999 at age 56. On a nominal basis my portfolio went below its starting level for the first time in July 2002 and again in February 2009. Today it's 1.95 the nominal starting value.
On a more important real basis, it went below the starting level on Sept 2001, June 2002, September 2008 and May 2010. Today it is at 130% real.
plannerman
If you don't mind what's your average SWR?
plannerman
Can I ask what's your AA? Are you a passive Bogleheads investor?
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Re: How old were you when you started spending your “principal”?
This is an excellent illustration of why, absent an extremely unlikely black swan catastrophe, ultra-conservative withdrawal rates of 2-3% are such powerful bequest generators!Will do good wrote: ↑Tue Mar 27, 2018 9:28 am I just realized you have withdrawal close to 3% for 19 years and your portfolio is up not 30% but 130% real, which means close to triple your portfolio in nominal dollars, just like FireCalc projected for some cases.
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Re: How old were you when you started spending your “principal”?
When I retired, I was 70/30 equities/fixed income. I retired early, I had just turned 56 and my wife is the same age. We had a 40 year planning horizon for the second of us to die. Accordingly, I believed I needed to be aggressive. Now, our planning horizon is about 20 years, and I suppose I could be a lot more conservative, but the fact of the matter is we are not going to run out of money. We are now investing for our grandkids. I have, however, cut back to 60/40, although I sometimes wonder why. I am a mostly passive slice and dice investor overweighted in small and value.Will do good wrote: ↑Tue Mar 27, 2018 9:28 amI just realized you have withdrawal close to 3% for 19 years and your portfolio is up not 30% but 130% real, which means close to triple your portfolio in nominal dollars, just like FireCalc projected for some cases.plannerman wrote: ↑Mon Mar 26, 2018 4:11 pmNever calculated it. My withdrawal rate varied between 2%-3% of my annual portfolio balance--closer to 3% than 2%. I might go back and calculate what it was compared to a 4% adjusted for inflation withdrawal rate for the fun of it.Will do good wrote: ↑Sun Mar 25, 2018 11:09 pmWith 2000 and 2008 down market and today at 130% real, that's great!plannerman wrote: ↑Sun Mar 25, 2018 4:57 pm I Retired in 1999 at age 56. On a nominal basis my portfolio went below its starting level for the first time in July 2002 and again in February 2009. Today it's 1.95 the nominal starting value.
On a more important real basis, it went below the starting level on Sept 2001, June 2002, September 2008 and May 2010. Today it is at 130% real.
plannerman
If you don't mind what's your average SWR?
plannerman
Can I ask what's your AA? Are you a passive Bogleheads investor?
plannerman
Re: How old were you when you started spending your “principal”?
We don't talk about it this way much around here but the typical conservative SWR for a 30-year retirement assumes an average 0% real returns--just breaking even with inflation. That would be a withdrawal rate of about 3.33% annually.PhilosophyAndrew wrote: ↑Tue Mar 27, 2018 9:57 amThis is an excellent illustration of why, absent an extremely unlikely black swan catastrophe, ultra-conservative withdrawal rates of 2-3% are such powerful bequest generators!Will do good wrote: ↑Tue Mar 27, 2018 9:28 am I just realized you have withdrawal close to 3% for 19 years and your portfolio is up not 30% but 130% real, which means close to triple your portfolio in nominal dollars, just like FireCalc projected for some cases.
To get conservatives comfortable with WRs between 2-3% you don't need to rely on black swans. If you're not in the top 2% or so, 'set asides" to help family pay for college or a downpayment on a house, a second residence for yourself, another 5-years' retirement, potentially large medical expenses, etc. can easily do the job for you.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.
Re: How old were you when you started spending your “principal”?
Ron, may I ask at what age you bought the annuity and your reasoning for doing so? An annuity is my backup plan but I'm pretty sure I won't need it as my SS is unbelievably high, almost close to the max, and I was lucky enough to retire 3 years ago into a strong market.Ron wrote: ↑Mon Mar 26, 2018 8:45 am I'll be retired 11 years come May. I have yet to exceed the amount of savings/investments that I had on day one of retirement. I guess that means that I started spending principal at age 59.
Of course, I retired a bit earlier than some without any retirement income other than my investments and have spent well over the recommended 4% at times, depending on what I was doing that year. BTW, I never cut back on my spending, even through the downturn of 2008-09. I had (and continued) to maintain a 4-year "bucket #1" cash reserve, so I never worried what the market was doing during the down period - or future down periods of my retirement. That cash bucket was refilled to the 4-year balance as profits presented themselves.
Today, things are a bit different. I started my (age 70) SS last month. It, along with a small VA disability payment and SPIA, more than cover my monthly expenses with the exception of FIT (no state, local income tax to consider). I've also started RMD's this year, prepaying FIT on January 2nd, along with moving the remaining RMD to savings. Since I no longer need fear the short/long term gyrations of the market, I no longer maintain a cash bucket.
As to the reduction in savings/investment balances when measured from my date of retirement though Dec 31, 2017 (ignoring the current year downturn), I'm down a total of 4.47% for the period of just over a decade. IOW, I still have 95.53% of the assets I had on day 1 of retirement (ignoring the measurement of inflation).
More importantly, I'm 41.7% above the total value of my investments as I projected them to be at this moment in time (plan vs. actual) against the reports I generated back in 2007 to see if I could retire. For me, that is a more important measurement rather than to see if one just "dipped" into their principal.
FWIW,
- Ron
Re: How old were you when you started spending your “principal”?
retired 10 years ago and wife 12 years ago, portfolio is 2X what we retired with, not inflation adjusted. Pensions and dividends cover more than our expenses.
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Re: How old were you when you started spending your “principal”?
I purchased the SPIA when I turned 59.5, in mid-2007. The computed actual IRR return of the SPIA is 4.79%, meaning that it does not include the return of premium paid. Unfortunately, if you look at most SPIA return quotes today, it will include that return of premium which inflates the actual return received. My main concern at the time of purchase was what would inflation do? I survived the inflation of the '80's and I was well aware of how it could impact a constant value income stream. Luckily, actual inflation from retirement until I claimed SS turned out to be relatively calm. BTW, that 4.79% return is computed for the minimum term of the policy which is age 87 for each of us (we're the same age). If one/both live beyond age 87, payments continue (at 100%) until we're both gone and the computed return actually increases (but we won't be around to know about it ).2015 wrote: ↑Tue Mar 27, 2018 6:27 pmRon, may I ask at what age you bought the annuity and your reasoning for doing so? An annuity is my backup plan but I'm pretty sure I won't need it as my SS is unbelievably high, almost close to the max, and I was lucky enough to retire 3 years ago into a strong market.
I originally planned taking my SS at age 66 (FRA). That would be 6.5 years after I purchased the SPIA with the only income coming from my portfolio along with a small VA disability benefit. The SPIA acted both as a defined benefit (pension) plan, which my former company eliminated back in the mid-'80's. Like a non-governmental pension, it is not adjusted for inflation.
As it turned out, by the time I got to FRA (and "surviving" the downturn of 2008-09), I was still in good financial shape thanks to a four year expense cash cushion that I maintained and eliminated the requirement to liquidate at a loss. In addition, I (or rather my wife) started receiving 50% of my SS FRA benefit under the old file/suspend/restricted application process at age 66, her FRA.
The reasons for delaying SS to age 70 (both my wife/me) :
1. Desire to maximize the survivor benefit for my wife, assuming I pass first.
2. Able to draw down a bit of our extensive tax-deferred benefits and not make them subject to future RMD's. I know a lot of people plan on converting their tax-deferred holdings before age 70.5. For us, it did not make sense from the standpoint of not having taxable funds to pay the FIT due on conversions. Since we're "bleeding edge" boomer retirees, most of our 401(k)/IRA contributions were made where Roth equivalent investing was not even available. Roth IRA's did not become available until 1998 (which we contributed to after they started) and Roth 401(k)'s were not available to us when we were still employed. The calculations showed that it made no sense to convert using tax-deferred funds to pay FIT.
3. Take advantage of the file/suspend/restricted application process, as available at the time.
4. Have a larger SS benefit check that would reap the benefit of a larger (in dollar amount) of any future inflation adjustment. In addition, since (under current law) 15% remains FIT tax free, we would have a larger amount totally tax free (we don't pay state/local tax on SS).
5. Have a higher income source available that would not be subject to actions I would take to maintain my/our portfolio at a later age that may reflect "senior infirmities". Our current combined SS income is just over $70k/year. I was at maximum SS contributions 20 of the 35 years for SS calculations, with being very close to the maximum the remaining 15 years. My/our SPIA (along with wife's two small pensions and my VA disability) pushes up our income to an amount that covers our retirement budgeted expenses. Our intent/desire is to leave a substantial portfolio (along with the rest of our joint estate) for the future care of our adult disabled son.
- Ron
Last edited by Ron on Wed Mar 28, 2018 8:47 am, edited 1 time in total.
Re: How old were you when you started spending your “principal”?
Did you have long term care insurance for your spouse? How much of that was self-funded?littlebird wrote: ↑Sun Mar 25, 2018 3:32 pm 30 years in, with spouse in assisted living for two years, having retired early and very early respectively, with very modest incomes and assets, and it hasn't happened yet. Of course, we were very lucky in our timing.
Edited to add: I've read your definition of "X" again, and I have to add that not only are we nowhere near crossing "X" on the way down, but we are (at the start of '18) at about 5X.
Health care, in general, is the big question mark for me and my planning.
Re: How old were you when you started spending your “principal”?
If I never dip into my "principal" in retirement it means one of two things:
1) The market returns are way better than I predicted
2) I worked longer than I needed to
1) The market returns are way better than I predicted
2) I worked longer than I needed to
- Will do good
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Re: How old were you when you started spending your “principal”?
I wonder the same thing. why you would be more conservative today at 60/40 when you will not run out of money and the portfolio is investing for the grandkids? In a way shouldn't your portfolio be in the growing phase again (for future generations)?plannerman wrote: ↑Tue Mar 27, 2018 12:30 pmWhen I retired, I was 70/30 equities/fixed income. I retired early, I had just turned 56 and my wife is the same age. We had a 40 year planning horizon for the second of us to die. Accordingly, I believed I needed to be aggressive. Now, our planning horizon is about 20 years, and I suppose I could be a lot more conservative, but the fact of the matter is we are not going to run out of money. We are now investing for our grandkids. I have, however, cut back to 60/40, although I sometimes wonder why. I am a mostly passive slice and dice investor overweighted in small and value.Will do good wrote: ↑Tue Mar 27, 2018 9:28 amI just realized you have withdrawal close to 3% for 19 years and your portfolio is up not 30% but 130% real, which means close to triple your portfolio in nominal dollars, just like FireCalc projected for some cases.plannerman wrote: ↑Mon Mar 26, 2018 4:11 pmNever calculated it. My withdrawal rate varied between 2%-3% of my annual portfolio balance--closer to 3% than 2%. I might go back and calculate what it was compared to a 4% adjusted for inflation withdrawal rate for the fun of it.Will do good wrote: ↑Sun Mar 25, 2018 11:09 pmWith 2000 and 2008 down market and today at 130% real, that's great!plannerman wrote: ↑Sun Mar 25, 2018 4:57 pm I Retired in 1999 at age 56. On a nominal basis my portfolio went below its starting level for the first time in July 2002 and again in February 2009. Today it's 1.95 the nominal starting value.
On a more important real basis, it went below the starting level on Sept 2001, June 2002, September 2008 and May 2010. Today it is at 130% real.
plannerman
If you don't mind what's your average SWR?
plannerman
Can I ask what's your AA? Are you a passive Bogleheads investor?
plannerman
Like you, I plan to leave my portfolio for future generations. When I become retirement secure like you I plan to be aggressive and switch from preservation to grow mode since that money will than have a different job to do.
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Re: How old were you when you started spending your “principal”?
I wonder the same thing. why you would be more conservative today at 60/40 when you will not run out of money and the portfolio is investing for the grandkids? In a way shouldn't your portfolio be in the growing phase again (for future generations)?plannerman wrote: ↑Tue Mar 27, 2018 12:30 pmWhen I retired, I was 70/30 equities/fixed income. I retired early, I had just turned 56 and my wife is the same age. We had a 40 year planning horizon for the second of us to die. Accordingly, I believed I needed to be aggressive. Now, our planning horizon is about 20 years, and I suppose I could be a lot more conservative, but the fact of the matter is we are not going to run out of money. We are now investing for our grandkids. I have, however, cut back to 60/40, although I sometimes wonder why. I am a mostly passive slice and dice investor overweighted in small and value.Will do good wrote: ↑Tue Mar 27, 2018 9:28 amI just realized you have withdrawal close to 3% for 19 years and your portfolio is up not 30% but 130% real, which means close to triple your portfolio in nominal dollars, just like FireCalc projected for some cases.plannerman wrote: ↑Mon Mar 26, 2018 4:11 pmNever calculated it. My withdrawal rate varied between 2%-3% of my annual portfolio balance--closer to 3% than 2%. I might go back and calculate what it was compared to a 4% adjusted for inflation withdrawal rate for the fun of it.Will do good wrote: ↑Sun Mar 25, 2018 11:09 pmWith 2000 and 2008 down market and today at 130% real, that's great!plannerman wrote: ↑Sun Mar 25, 2018 4:57 pm I Retired in 1999 at age 56. On a nominal basis my portfolio went below its starting level for the first time in July 2002 and again in February 2009. Today it's 1.95 the nominal starting value.
On a more important real basis, it went below the starting level on Sept 2001, June 2002, September 2008 and May 2010. Today it is at 130% real.
plannerman
If you don't mind what's your average SWR?
plannerman
Can I ask what's your AA? Are you a passive Bogleheads investor?
plannerman
Like you, I plan to leave my portfolio for future generations. When I become retirement secure like you I plan to be aggressive and switch from preservation to grow mode since that money will than have a different job to do.
Re: How old were you when you started spending your “principal”?
Thank you for your generous response Ron. Your thinking on annuities mirrors mine in many ways. May I indulge just a bit more? There are many back and forth debates here about cash buckets, with lots of theory involved which I don't find very helpful. I underlined above your real life experience with holding and using a 4 year cash cushion during the dreadful 08/09 downturn. Can you please elaborate your rationale prior to the downturn for creating that cushion? It would also be very useful to me to hear your real life experience with how you felt during that serious downturn as a result of holding and using the cushion? I ask because this is something I am seriously considering doing before delayed SS starts at age 70.Ron wrote: ↑Wed Mar 28, 2018 8:01 amI purchased the SPIA when I turned 59.5, in mid-2007. The computed actual IRR return of the SPIA is 4.79%, meaning that it does not include the return of premium paid. Unfortunately, if you look at most SPIA return quotes today, it will include that return of premium which inflates the actual return received. My main concern at the time of purchase was what would inflation do? I survived the inflation of the '80's and I was well aware of how it could impact a constant value income stream. Luckily, actual inflation from retirement until I claimed SS turned out to be relatively calm. BTW, that 4.79% return is computed for the minimum term of the policy which is age 87 for each of us (we're the same age). If one/both live beyond age 87, payments continue (at 100%) until we're both gone and the computed return actually increases (but we won't be around to know about it ).2015 wrote: ↑Tue Mar 27, 2018 6:27 pmRon, may I ask at what age you bought the annuity and your reasoning for doing so? An annuity is my backup plan but I'm pretty sure I won't need it as my SS is unbelievably high, almost close to the max, and I was lucky enough to retire 3 years ago into a strong market.
I originally planned taking my SS at age 66 (FRA). That would be 6.5 years after I purchased the SPIA with the only income coming from my portfolio along with a small VA disability benefit. The SPIA acted both as a defined benefit (pension) plan, which my former company eliminated back in the mid-'80's. Like a non-governmental pension, it is not adjusted for inflation.
As it turned out, by the time I got to FRA (and "surviving" the downturn of 2008-09), I was still in good financial shape thanks to a four year expense cash cushion that I maintained and eliminated the requirement to liquidate at a loss. In addition, I (or rather my wife) started receiving 50% of my SS FRA benefit under the old file/suspend/restricted application process at age 66, her FRA.
The reasons for delaying SS to age 70 (both my wife/me) :
1. Desire to maximize the survivor benefit for my wife, assuming I pass first.
2. Able to draw down a bit of our extensive tax-deferred benefits and not make them subject to future RMD's. I know a lot of people plan on converting their tax-deferred holdings before age 70.5. For us, it did not make sense from the standpoint of not having taxable funds to pay the FIT due on conversions. Since we're "bleeding edge" boomer retirees, most of our 401(k)/IRA contributions were made where Roth equivalent investing was not even available. Roth IRA's did not become available until 1998 (which we contributed to after they started) and Roth 401(k)'s were not available to us when we were still employed. The calculations showed that it made no sense to convert using tax-deferred funds to pay FIT.
3. Take advantage of the file/suspend/restricted application process, as available at the time.
4. Have a larger SS benefit check that would reap the benefit of a larger (in dollar amount) of any future inflation adjustment. In addition, since (under current law) 15% remains FIT tax free, we would have a larger amount totally tax free (we don't pay state/local tax on SS).
5. Have a higher income source available that would not be subject to actions I would take to maintain my/our portfolio at a later age that may reflect "senior infirmities". Our current combined SS income is just over $70k/year. I was at maximum SS contributions 20 of the 35 years for SS calculations, with being very close to the maximum the remaining 15 years. My/our SPIA (along with wife's two small pensions and my VA disability) pushes up our income to an amount that covers our retirement budgeted expenses. Our intent/desire is to leave a substantial portfolio (along with the rest of our joint estate) for the future care of our adult disabled son.
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Re: How old were you when you started spending your “principal”?
djpeteski wrote: ↑Wed Mar 28, 2018 8:36 amDid you have long term care insurance for your spouse? How much of that was self-funded?littlebird wrote: ↑Sun Mar 25, 2018 3:32 pm 30 years in, with spouse in assisted living for two years, having retired early and very early respectively, with very modest incomes and assets, and it hasn't happened yet. Of course, we were very lucky in our timing.
Edited to add: I've read your definition of "X" again, and I have to add that not only are we nowhere near crossing "X" on the way down, but we are (at the start of '18) at about 5X.
Health care, in general, is the big question mark for me and my planning.
No, no LTC insurance. But his assisted living group home, based in a family residence, is providing wonderful care at $4000 a month, and we are managing that so far with our modest income (augmented by annuitizing a Vanguard Variable Annuity) plus 2.75% of capitol. The care he needs is above the level which corporate assisted living homes usually offer, and would ordinarily have to be supplied by an expensive skilled nursing facility, were it not for the existence of licensed group homes in my state. So, quality care is not necessarily above the means of middle-class families.
Re: How old were you when you started spending your “principal”?
Not sure what "principal" means.
It sounds like most people are saying whatever their retirement savings balance was on the date they retired was their "principal". Of course, even that beginning balance contained money actually contributed (Principal) and money gained over the many years of pre-retirement.
So, at least the way I see it, the title should be "How old were you when your retirement balance became less than the amount you had when you started retirement?" Is that what the OP was really trying to ask?
It sounds like most people are saying whatever their retirement savings balance was on the date they retired was their "principal". Of course, even that beginning balance contained money actually contributed (Principal) and money gained over the many years of pre-retirement.
So, at least the way I see it, the title should be "How old were you when your retirement balance became less than the amount you had when you started retirement?" Is that what the OP was really trying to ask?
Re: How old were you when you started spending your “principal”?
Yes, I think that is clear from the body of his first post:
Ron Scott wrote: ↑Sun Mar 25, 2018 3:10 pm So you retire with $X and that amount continues to grow for some years as the plan sets itself up for the big inflation affect to catch up to you. Then, at some point, the accounts are less than the original $X.
How old were you when your accounts dropped below $X?
Meet my pet, Peeve, who loves to convert non-acronyms into acronyms: FED, ROTH, CASH, IVY, ...
Re: How old were you when you started spending your “principal”?
That seems to be the question. But it might be the hidden question behind this is whether anyone stopped spending when their portfolio value fell below its initial value.22twain wrote: ↑Wed Mar 28, 2018 1:45 pmYes, I think that is clear from the body of his first post:Ron Scott wrote: ↑Sun Mar 25, 2018 3:10 pm So you retire with $X and that amount continues to grow for some years as the plan sets itself up for the big inflation affect to catch up to you. Then, at some point, the accounts are less than the original $X.
How old were you when your accounts dropped below $X?
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Re: How old were you when you started spending your “principal”?
Retired 7 years ago and started spending principal immediately. Portfolio went down a bit but is higher now than then due to market growth and cash from downsizing.
“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
Re: How old were you when you started spending your “principal”?
I'm 83 and I haven't touched principal yet. Receive my Req Min Distri on Dec. 15 -- that plus pension, SS makes up my budget for the next year. Never spend beyond that income.