So...what’s Plan B [for your retirement security]?

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Ron Scott
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So...what’s Plan B [for your retirement security]?

Post by Ron Scott » Thu Oct 18, 2018 5:48 pm

The following post by pivoprussia, from another thread, stuck with me:
pivoprussia wrote:
Tue Oct 16, 2018 5:58 pm
These are my favorite threads. We all want to know IF we should be ok in our decisions.

I have seen lots of comments about "flexibility" and the notion people will not blindly just follow the 4% rule from the Trinity Study.

I have not seen anyone mention the articles specifically addressing the myths of flexibility addressed in the Early Retirement Now series.
Certainly people will cut back, but exactly how helpful is this? I guess it boils down to how much discretionary spending you have budgeted.

Regardless, if you have not, I suggest reading the 3 articles:

https://earlyretirementnow.com/2018/02/ ... exibility/
https://earlyretirementnow.com/2018/05/ ... s-reality/
https://earlyretirementnow.com/2018/05/ ... ity-myths/
There has been a good deal of debate on a proper SWR and how to manage to one, but this question is different.

What if you realize your plan is obviously failing?

...what’s Plan B?
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.

J295
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Re: So...what’s Plan B?

Post by J295 » Thu Oct 18, 2018 6:01 pm

Spend less $$ and/or make more $$.

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JoMoney
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Re: So...what’s Plan B?

Post by JoMoney » Thu Oct 18, 2018 6:04 pm

J295 wrote:
Thu Oct 18, 2018 6:01 pm
Spend less $$ and/or make more $$.
Or plan on not living as long.
I don't see any other options.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Broken Man 1999
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Re: So...what’s Plan B?

Post by Broken Man 1999 » Thu Oct 18, 2018 6:14 pm

Ron Scott wrote:
Thu Oct 18, 2018 5:48 pm
The following post by pivoprussia, from another thread, stuck with me:
pivoprussia wrote:
Tue Oct 16, 2018 5:58 pm
These are my favorite threads. We all want to know IF we should be ok in our decisions.

I have seen lots of comments about "flexibility" and the notion people will not blindly just follow the 4% rule from the Trinity Study.

I have not seen anyone mention the articles specifically addressing the myths of flexibility addressed in the Early Retirement Now series.
Certainly people will cut back, but exactly how helpful is this? I guess it boils down to how much discretionary spending you have budgeted.

Regardless, if you have not, I suggest reading the 3 articles:

https://earlyretirementnow.com/2018/02/ ... exibility/
https://earlyretirementnow.com/2018/05/ ... s-reality/
https://earlyretirementnow.com/2018/05/ ... ity-myths/
There has been a good deal of debate on a proper SWR and how to manage to one, but this question is different.

What if you realize your plan is obviously failing?

...what’s Plan B?
1. Get a job, if possible.
2. Reduce spending, if possible.
3. Annuitize some portion of your retirement portfolio if over XX years old. XX age is variable, depending on actual circumstances. Probably older is better.
4. Find some relatives that allow you to move in with them.

Actually I read an article the other day discussing shared living setups. Basically it was like dorms for college kids, same idea. Private bedroom, shared common areas of home.

The Golden Girls TV show could be a model for some seniors who are overwhelmed by retirement expenses, housing being a major expense for many.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

dknightd
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Re: So...what’s Plan B?

Post by dknightd » Thu Oct 18, 2018 6:33 pm

Food stamps. Or Walmart greeter. Or holiday post office helper. I'm actually pretty confident plan A will work. It has enough slush so that plan B should not be needed. If things go horrible wrong we'd have to cut all discretionary spending. But that would require the stock market to loose 50% of its value, and never recover, and have 10% inflation for several years. That does not seem likely. Hope I'm right!

Edit: I think a lot depends on what you consider "discretionary". Even my base budget has some things I could call discretionary if I had to. For example, I could always take the bus to the library for internet access if absolutely necessary. I consider a computer and internet in my house necessary. But many people get along just fine with out it. Same with Cell phones, Cars, and many other things.

KlangFool
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Re: So...what’s Plan B?

Post by KlangFool » Thu Oct 18, 2018 6:43 pm

OP,

1) I save 1 year of my current annual expense every year. So, as long as I am employed long enough, I have enough. I am at 20 times my current annual expense now.

2) Social security can cover 50% of my annual expense. That is my plan B.

3) I can retire to the country where I came from. I can live a very good life with 50% or less of my current annual expense in that country. It includes medical expense. That is the plan C.

In summary, I will survive one way or another.

KlangFool

P.S.: In general, if you make much more than the median income and you save 1 year of expense every year, it will be fine. This is true even for somebody like me that made a huge mistake and lost 50% of my whole life savings 10+ years ago.

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Re: So...what’s Plan B?

Post by flyingaway » Thu Oct 18, 2018 6:49 pm

My sons.

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Re: So...what’s Plan B [for your retirement security]?

Post by triceratop » Thu Oct 18, 2018 6:52 pm

^^To clarify the question, I edited the thread title.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

McGilicutty
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Re: So...what’s Plan B [for your retirement security]?

Post by McGilicutty » Thu Oct 18, 2018 7:05 pm

I sometimes volunteer at the local food pantry and see lots of seniors come through.

Plan B (or maybe Plan A for some) as near as I can tell is as follows:
(1) Stretch SS as far as you can
(2) Rely on Medicare or Medicaid for healthcare
(3) Rely on food stamps and the food pantry for food (also eat at the soup kitchen if you have one available)
(4) Try to get Senior discounts on your utilities
(5) Get a roommate or two or three
(6) Get a helping hand from family if possible

Now, most Bogleheads won't want to get anywhere near this Plan B, but living mostly on SS (with some handouts) can be done in my LCOL area.

cody69
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Re: So...what’s Plan B?

Post by cody69 » Thu Oct 18, 2018 7:07 pm

As the need is getting close, this is a topic of great interest to me as well. From reading Michael McClung's book I'm leaning more toward a variable withdraw approach to mitigate some of this risk and moderate spending levels during down markets.

I am also studying income harvesting plans to decide if a) rebalancing each year, or b) a variation that does not rebalance each year, is right for me. I know it would be difficult for me in retirement to rebalance into stocks during an event like 2008-9.

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Re: So...what’s Plan B [for your retirement security]?

Post by Watty » Thu Oct 18, 2018 7:29 pm

McGilicutty wrote:
Thu Oct 18, 2018 7:05 pm
Now, most Bogleheads won't want to get anywhere near this Plan B, but living mostly on SS (with some handouts) can be done in my LCOL area.
A lot of lower income people don't get a lot of Social Security and the average is about $1,400. With a much better than average Social Security check of around $2,400($28,800 a year) at my full retirement age and a lot more if I delay starting it until I am 70 that would be enough to live a frugal but comfortable life if I had to since I have a paid off house and very low property taxes. I am married so while we are both alive we will be getting two Social Security checks which would make this even more doable.

During the financial meltdown in 2008 even at its worst it was not at all clear if things would continue to get much worse than they already were. I toyed with various "Plan C", and "Plan D" scenarios. Some of these involved things like moving to an inexpensive midwest college town that I know and buying a triplex and renting out two of the units.

Dandy
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Re: So...what’s Plan B [for your retirement security]?

Post by Dandy » Fri Oct 19, 2018 7:19 am

1. A big part of Plan B was waiting to age 70 to collect SS.
2. Cut expenses. e.g one car instead of 2, less entertainment/travel, smaller gifts/charity
3. House paid for. Sell and rent apt and use proceeds of sale for rent and living expenses
4. Move to lower cost area.

I am fortunate not to have too much worry about Plan B. I should have enough and follow Dr. Bernstein's idea of having enough "safe" assets until age 90 and the rest is invested 67/33. Since I was able to wait to collect SS at age 70 my income comes close to our current expense run rate. Luck, living below our means and saving double digits for decades seems to have paid off.

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randomizer
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Re: So...what’s Plan B [for your retirement security]?

Post by randomizer » Fri Oct 19, 2018 7:41 am

I don't really have a plan B. Trying to get plan A to work at all is a bit of a long shot. Work longer, save harder, live simpler, is about all I can think to do, other than going into Bitcoin (not going there).
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Re: So...what’s Plan B [for your retirement security]?

Post by 2015 » Fri Oct 19, 2018 12:40 pm

If I have to go to Plan B things will be so bad I'll be thinking about other things besides investments. Given my own temperament, I subscribe to the safety versus probability school of thinking. As such, I would never be comfortable using an SWR strategy. I have engaged in liability matching for all discretionary/non-discretionary expenses through end of life, coupled with using longinvest's VPW strategy for my risk portfolio beyond my liability matched sources. I intend to tap the RP using VPW only in the event I want to increase my lap dances from twice a day to three or more.

I supposed a Plan B could be partial annuitization, but I'm so frugal and have so much padding/stuffing everywhere I seriously doubt that will ever come to pass.

MarkRoulo
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Re: So...what’s Plan B [for your retirement security]?

Post by MarkRoulo » Fri Oct 19, 2018 12:45 pm

Ron Scott wrote:
Thu Oct 18, 2018 5:48 pm
There has been a good deal of debate on a proper SWR and how to manage to one, but this question is different.

What if you realize your plan is obviously failing?

...what’s Plan B?
For those of us who are planning on retiring in a high cost of living area, one option in 'plan B' is to move to a low (or lower) cost of living area.

San Francisco Bay Area to Phoenix, as an example.

JoeRetire
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Re: So...what’s Plan B [for your retirement security]?

Post by JoeRetire » Fri Oct 19, 2018 12:47 pm

Ron Scott wrote:
Thu Oct 18, 2018 5:48 pm
What if you realize your plan is obviously failing?
Then I reassess and come up with another plan.

Without now knowing the reason why my fully-thought-out current plan is obviously failing, then I obviously can't come up with an alternative yet. Any viable alternative will have to overcome the failings of my primary plan.

Work more?
Eat less?
Mooch off the kids?
Live in my sibling's basement?
Get on the government dole?
Rob a bank?
Join the zombie hoards?
Take the eternal dirt nap sooner than planned?

Hard to tell today which would be most effective.
Last edited by JoeRetire on Fri Oct 19, 2018 12:48 pm, edited 1 time in total.

arsenalfan
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Re: So...what’s Plan B [for your retirement security]?

Post by arsenalfan » Fri Oct 19, 2018 12:47 pm

Rental income

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HomerJ
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Re: So...what’s Plan B [for your retirement security]?

Post by HomerJ » Fri Oct 19, 2018 1:27 pm

Ron Scott wrote:
Thu Oct 18, 2018 5:48 pm
What if you realize your plan is obviously failing?

...what’s Plan B?
I have more than one.
  • (Plan B1) If it happens early enough in my retirement, try to get some part-time work.
  • (Plan B2) If that's not possible, reduce spending, which means 2 vacations a year instead of 4 (or 4 cheaper vacations). We're NOT talking about eating cat-food under a bridge.
  • (Plan C) Sell the lake condo. Reduces expenses, and generates some cash.
  • (Plan D) SPIA.
  • (Plan E) Sell the primary house or get a reverse mortgage.
My 4% withdrawal plan has plenty of discretionary expenses. A full 1% is travel and vacations. Cutting back to 3% would not be painful for me at all (since I'm not that keen on traveling anyway - my wife would be sad though - we'd still be able to visit family and friends - just no more cruises or trips to Australia).

We also have a lake condo. Technically, if things were going bad, we should sell the primary house and move to the cheaper lake condo, but I doubt my wife would go for that. So we could sell the condo, reduce expenses even further. 3% for sure, maybe even 2.5% at that point.

If we got 15 years into our retirement, and our portfolio was 50% depleted, at that point, I would indeed seriously look at SPIAs (Plan D). It would some pretty bad times for a 3% withdrawal rate to drop that far, but let's pretend it happens. At older ages, SPIAs could pay in the 8%-10% range.

So say I started with $2 million at age 60. At age 75, we're at $1,000,000. I would have already cut back to the 3% withdrawals (See Plan B and C), so instead of pulling $80,000 a year (plus SS), I've been living just fine on $60,000 a year (plus SS). To make sure the $1,000,000 lasts, I could buy a 9% SPIA for $666,000 which would guarantee $60,000 a year (plus SS) for life. And I'd still have $333,000 in the bank.

Yep, the kids get less inheritance, but this is Plan D.

If I hit some big medical emergency and deplete all my remaining savings, I guess it's time to tap the equity in the paid-off primary house (Plan E).

I expect plan A to work. But I AM prepared if it doesn't.
Last edited by HomerJ on Fri Oct 19, 2018 1:44 pm, edited 3 times in total.
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HomerJ
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Re: So...what’s Plan B [for your retirement security]?

Post by HomerJ » Fri Oct 19, 2018 1:36 pm

Watty wrote:
Thu Oct 18, 2018 7:29 pm
McGilicutty wrote:
Thu Oct 18, 2018 7:05 pm
Now, most Bogleheads won't want to get anywhere near this Plan B, but living mostly on SS (with some handouts) can be done in my LCOL area.
A lot of lower income people don't get a lot of Social Security and the average is about $1,400. With a much better than average Social Security check of around $2,400($28,800 a year) at my full retirement age and a lot more if I delay starting it until I am 70 that would be enough to live a frugal but comfortable life if I had to since I have a paid off house and very low property taxes. I am married so while we are both alive we will be getting two Social Security checks which would make this even more doable.
Yes, as long as SS is around, most of us Bogleheads (with larger SS checks) will be fine. I'm shooting for $80,000 a year with a paid off house in retirement, and when both myself and my wife are alive, we'll probably get $40,000-$60,000 just from SS.

Of course, SS could get cut 75%, or one of us could die, so we're not planning 100% on those numbers from SS.

But high-income Bogleheads could easily retire to a LCOL area if they had to. Again, not their first choice, but it's nice to know there is a fallback position that keeps you warm, safe, fed, and dry for the rest of your life.

Small midwest college towns can indeed be very nice. A nice view from your back deck isn't expensive at all. And good books and long walks are free.
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Re: So...what’s Plan B [for your retirement security]?

Post by bhsince87 » Fri Oct 19, 2018 1:51 pm

A federally backed reverse mortgage is plan B for me. Any time after age 62 if we have a bad sequence of returns.

Other than that, we can live fairly well on Social Security alone, if need be.

IMO, the talk of eating dog food is ridiculous in the US. Barring mental issues, I guess.


I have an acquaintance age 85, with no income. Zero social security. She owns a small home. Between medicaid, food stamps, government energy assistance, government transportation, etc. she gets along fine. Some of these assitance programs are specific to Pennsylvania, so that is ometing to consider in deciding where to spend your final years.


I think her son gives her a little cash every now and then. I bet she could live better with a reverse mortage, but I don't think they want to deal with it.
Retirement: When you reach a point where you have enough. Or when you've had enough.

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Re: So...what’s Plan B [for your retirement security]?

Post by marcopolo » Fri Oct 19, 2018 2:32 pm

MarkRoulo wrote:
Fri Oct 19, 2018 12:45 pm
Ron Scott wrote:
Thu Oct 18, 2018 5:48 pm
There has been a good deal of debate on a proper SWR and how to manage to one, but this question is different.

What if you realize your plan is obviously failing?

...what’s Plan B?
For those of us who are planning on retiring in a high cost of living area, one option in 'plan B' is to move to a low (or lower) cost of living area.

San Francisco Bay Area to Phoenix, as an example.

This is kind of my plan B or C, but the concern I have is that in scenarios where my plan A/B fail, it is quite likely the housing prices (the biggest factor in HCOL area) will be severely depressed as well. So, the cushion is likely smaller than it might seem.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: So...what’s Plan B [for your retirement security]?

Post by zeeke42 » Tue Oct 23, 2018 10:35 am

I've been saying for years that the Y2038 problem is my retirement plan B. Many computer systems store time in a signed 32 bit integer number of seconds since Jan 1, 1970 00:00. This will overflow at 03:14:07 UTC on 19 January 2038. General purpose computers will be long updated by then, but I work in embedded systems, which will likely need a bunch of updating in the 2030s.

MnD
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Re: So...what’s Plan B [for your retirement security]?

Post by MnD » Tue Oct 23, 2018 1:49 pm

Safe money covers true needs so Plan A (% of annual portfolio withdrawal) can't fail and is just bankrolling "wants". And as such, inherently has plan B through Z contained depending on what the markets do, which will simply dictate the magnitude of spending on wants.

Other levers I have but don't plan to need are SPIA, downsizing the money pit, side-hustles, reverse mortgage, my age 70 SS which isn't even in the plan due to being 15 years out. DD may be very high income (getting PhD in AI and robotics and in a LTR with a blockchain cryptocurrency expert) so I could sponge off them. Win Mega Millions tonight.

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Re: So...what’s Plan B [for your retirement security]?

Post by Jacklh » Tue Oct 23, 2018 2:14 pm

I have three accounts: Traditional IRA, Roth IRA and taxable. Plan A is to use mandatory withdrawals from my Traditional IRA for all my needs along with social security. That should be more than sufficient barring extraordinary events. I plan on preserving the other accounts for my heirs if I can. Otherwise, The Roth IRA is plan B. If that's exhausted, my taxable account is plan C. If that's not needed, it will be passed on to my heirs and be tax free for them due to the step up in its tax basis.

heyyou
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Re: So...what’s Plan B [for your retirement security]?

Post by heyyou » Tue Oct 23, 2018 3:27 pm

Plan B has been part of Plan A:
Keep necessary expenses low to accommodate variable retirement income
Retired in a LCOL area in a retirement sized, paid off home
We have consistently purchased used cars known for long term reliability
Delayed SS to age 70

Per McClung with some of his methods confirmed by applying the RMD % to the entire portfolio:
Start retirement with a near 50/50 allocation and WD from only bond funds to buffer the first decade's stock returns
(RMD) Variable WD amount based on each recent annual portfolio value
(RMD) Rising WD rate as longevity decreases
Tilt initial WD rate considering recent equity valuations (domestic CAPE10 and a less precise one for foreign stocks done by just dividing the historical returns into quartiles and comparing them to the decade returns that followed each one)
Reduce Large Growth and Small Growth allocations in retirement portfolio due to their poor performances when each tested as the sole allocation in historical 30 year spending portfolios

Stayed at the job with the pension (although it has no COLA)
Pension, SS, and portfolio WDs, any two are enough for the first point in this reply
Move to western Panama if truly necessary

protagonist
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Re: So...what’s Plan B [for your retirement security]?

Post by protagonist » Tue Oct 23, 2018 3:34 pm

Not too concerned. I keep enough in CDs , I-bonds etc. that if the market drops by 99% and does not recover within my lifetime I should be able to maintain my current lifestyle via SS and CDs. Having much more money doesn't seem like it would make me much (if at all) happier anyway, so I don't invest more in the stock market than I am willing to lose. (Plan A)

Plus if things got bad enough I could sell my home, downsize and rent, which might be a good lifestyle option anyway if when I am older taking care of my property, going up and down stairs, etc becomes a burden. (Plan B)

And in a worst-case scenario I could live in a cheap warm tropical paradise for a fraction of what I spend in the USA. (Plan C)

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Re: So...what’s Plan B [for your retirement security]?

Post by badger42 » Tue Oct 23, 2018 3:47 pm

Plan B for us is pretty fluid, but in general:

We'll have a paid off house (part of plan A is paying cash for a house in a lower cost area)
Social security at 70 for longevity / inflation / other flavors of tail risk
Reduce lifestyle to match (we're talking "Road trip to national park" instead of "Flight to Hawaii / Europe", not a van under the bridge)
Pick up side hustles - consulting (if recently retired), tutoring, part time job, drive for Uber, etc
Have a reasonable buffer in assets (our target is in the ballpark of $1.5m-$2m investable, plus the house) so that a 50% decline does not mean *having* to go back to work.

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snackdog
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Re: So...what’s Plan B [for your retirement security]?

Post by snackdog » Tue Oct 23, 2018 3:56 pm

Liquidate real estate.

longinvest
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Re: So...what’s Plan B [for your retirement security]?

Post by longinvest » Tue Oct 23, 2018 4:02 pm

  • Plan A: Have a robust and comprehensive plan.
  • Plan B: If you're considering this, go back reworking Plan A.
I don't have a Plan B; it would be an indication that I've failed the design of Plan A.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international) stocks / (nominal/inflation-indexed) long-term domestic bonds | VCN/VXC/VLB/ZRR

ReadyOrNot
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Re: So...what’s Plan B [for your retirement security]?

Post by ReadyOrNot » Tue Oct 23, 2018 4:12 pm

I think the question was what to do if the 4% rule (or something close to it) failed. I think I do not depend on a rule like that. I should be able to live on my meager Social Security. So everything else is for extras. If I lose everything, I would have to do without any extras.
If expenses blew up, I would probably do what most people do -- spend down my assets; and if they run out, use the government safety nets. (They may be slow, but seem adequate for the people I know who live on them.)

longinvest
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Re: So...what’s Plan B [for your retirement security]?

Post by longinvest » Tue Oct 23, 2018 4:16 pm

ReadyOrNot wrote:
Tue Oct 23, 2018 4:12 pm
I think the question was what to do if the 4% rule (or something close to it) failed.
The 4% rule doesn't meet the requirements of my Plan A. Problem solved. :)
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international) stocks / (nominal/inflation-indexed) long-term domestic bonds | VCN/VXC/VLB/ZRR

MathWizard
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Re: So...what’s Plan B [for your retirement security]?

Post by MathWizard » Tue Oct 23, 2018 4:23 pm

My plan B is to spend more.

My plan A is so conservative that short of the Zombie Apocalypse, I am going to end up with
way more than I need.

I assume only 75% of estimated SS benefits.
I'll delay till 70 to minimize longevity risk,
I'll spend some on an annuity some to handle the essentials.
I assume a 20% drop in my portfolio on the first few years of retirement to minimize sequence of returns risk.
I assume only 4% real return even after the 20% downturn, though it is likely to be higher after a downturn.
I am planning for my wife to survive me, and live to 100.
I have a plan that includes health insurance and medigap, car replacement, and estimated income taxes.
In about 1.5 years, I will be able to maintain current spend with all the above assumptions.
I plan to work 2 more additional years after that for potential spend on
a more elderly friendly house,
assisted living expenses.

Plan C is if all goes to H... in a handbasket, and that is to sell the house or use a reverse mortgage, and drop to one car
(or none) if whoever is left is in assisted living.

Plan D is to move in with one or both of the kids.
That was the case with my MIL, a great aunt, and one of my grandparents. Families used to do that.

spreadsheetguy
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Re: So...what’s Plan B [for your retirement security]?

Post by spreadsheetguy » Tue Oct 23, 2018 4:26 pm

We are in pretty good shape, but if we were to have issues that cutting back spending by 20% couldn't solve, we could liquidate our real estate and move to a much lower COL area and probably add 40% of our current investable assets.

We'll probably get an inheritance too though we aren't expecting to need it.

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