How do you view a savings surplus in retirement?

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TheTimeLord
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How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 10:34 am

If you have determined that in retirement you need $1,000,000 to generate enough passive income to cover your expenses in retirement (let's say using the 4% rule of thumb) but have saved $1,250,000 how do you view the extra $250,000? Do you view it as a $250,000 surplus or do you view it as being able to withdraw an additional $10,000/year in passive income? I ask because in a discussion with a friend we theorized that some people never recognize how much they have saved because they only view it through the lens of what it would produce annually using their chosen SWR instead of the actual amount.
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Re: How do you view a savings surplus in retirement?

Post by ionball » Sun Jan 06, 2019 10:40 am

From a risk perspective, I would view the extra amount as a cushion that makes the plan more robust. If I felt my plan was solid as a rock, I would view it as additional withdrawal.

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Re: How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 10:44 am

ionball wrote:
Sun Jan 06, 2019 10:40 am
From a risk perspective, I would view the extra amount as a cushion that makes the plan more robust. If I felt my plan was solid as a rock, I would view it as additional withdrawal.
I was wondering more form the perspective of either a lump sum spendable pool of money to be dipped into at will or a supplemental amount of annual income to be discounted using your SWR.
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Re: How do you view a savings surplus in retirement?

Post by MiddleOfTheRoad » Sun Jan 06, 2019 10:53 am

I wondered something similar

viewtopic.php?f=10&t=257706&p=4093253#p4093253

Read the comments near the end

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Re: How do you view a savings surplus in retirement?

Post by bubbadog » Sun Jan 06, 2019 11:08 am

If I had a relatively small surplus of say 25% as in your example, I would view it as a cushion.

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Re: How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 11:12 am

bubbadog wrote:
Sun Jan 06, 2019 11:08 am
If I had a relatively small surplus of say 25% as in your example, I would view it as a cushion.
It would have never dawned on me to consider 25% a relatively small cushion, maybe 5%-10%, but I would view 25% as substantial so can you help me to understand your perspective.
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Re: How do you view a savings surplus in retirement?

Post by sambb » Sun Jan 06, 2019 11:14 am

cushion or better yet, inheritance. if >25%
Invest it more aggressively, if you have won the game

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Re: How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 11:20 am

So nobody would view it as a lump sum spendable pool of money to be dipped into at will?
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Re: How do you view a savings surplus in retirement?

Post by balbrec2 » Sun Jan 06, 2019 11:30 am

I would view it as spendable but within the confines of my SWR.
Unless you are planning to leave a sizable legacy to heirs, go
enjoy your life to a greater degree than you other wise would.

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Re: How do you view a savings surplus in retirement?

Post by staycalm » Sun Jan 06, 2019 11:34 am

Cushion. I would consider myself fortunate to have more than I need. Plus future withdrawals and longevity of the portfolio are based on a lot of assumptions.

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Re: How do you view a savings surplus in retirement?

Post by digarei » Sun Jan 06, 2019 11:46 am

TheTimeLord wrote:
Sun Jan 06, 2019 11:20 am
So nobody would view it as a lump sum spendable pool of money to be dipped into at will?
You’ll have to decide whether the surplus is part of your investable assets (portfolio) or not.

If your expenses are fully met, you could increase your withdrawal rate and spend more... or maintain your current withdrawal rate on the 1M and consider the 250k as a separate resource for legacy, LTC / emergency medical fund, charity, etc. Mental accounting.

I have a similar situation but treat surplus as part of my total assets. It means that my portfolio can withstand a higher safe withdrawal rate and still result in an increased heritable portion (likely). I have far less need for high returns and the luxury of maintaining a higher stock allocation, if I choose. So far, I’ve elected to take a little more risk by sticking with a 80/20 allocation mix. One could also reasonably choose to take a lower risk, if returns are inconsequential to meeting your goals: At the extreme, a 0/100 mix of assets.
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Re: How do you view a savings surplus in retirement?

Post by jeffyscott » Sun Jan 06, 2019 11:52 am

TheTimeLord wrote:
Sun Jan 06, 2019 11:12 am
bubbadog wrote:
Sun Jan 06, 2019 11:08 am
If I had a relatively small surplus of say 25% as in your example, I would view it as a cushion.
It would have never dawned on me to consider 25% a relatively small cushion, maybe 5%-10%, but I would view 25% as substantial so can you help me to understand your perspective.
It's small because it could disappear quickly or returns could be less than expected. If stocks, the market could decline. If bonds, inflation could erode it's value.

By my estimates, we've got at least double. I view this as both as our retirement security blanket and kid's inheritance.

Of course, we can dip into it at will, but we've never made our life about spending as much as possible, that'd be too much work. One of these days we'll dip in for a new car, but aside from that, with no mortgage, spending $25-30K per year, excluding taxes and medical, seems to be enough to buy and do whatever we want.
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Re: How do you view a savings surplus in retirement?

Post by scrabbler1 » Sun Jan 06, 2019 11:57 am

I don't look at the surplus in the portfolio amount. Instead, I look at the surplus in the investment income it generates, the surplus over the expenses it has to cover. But, as others have replied, I view that surplus as a cushion of investment income over expenses.

Furthermore, when I look at a surplus in investment income, I look at mainly the monthly and quarterly dividends I receive, not the more erratic and unreliable cap gain distributions which don't occur every year.

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Re: How do you view a savings surplus in retirement?

Post by willthrill81 » Sun Jan 06, 2019 12:04 pm

If you're withdrawing $40,000 from a portfolio valued at $1.25M, then your withdrawal rate is obviously under 4%, so all you've done is gotten more conservative in terms of your withdrawal rate.

Whether you treat this as two separate portfolios of $1M and $250k or one $1.25M portfolio is just mental accounting. That being said, unlike many here, I do not believe that mental accounting is necessarily a crutch. It can be a useful way for us to think about the different things we need to fund. For instance, you may wish to make your regular withdrawals from your 'main' portfolio but keep the 'side' portfolio for major financial needs, such as long-term care. And to that end, the two portfolios could be invested differently as well.
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Re: How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 12:18 pm

Very intrigued by the answers. They are falling along the lines I was expecting for BH. It does seem like in general BH don't either believe it is a surplus or don't believe in acknowledging it in that manner. This does lead me to question how you ever figure out if you have enough or what your number is but philosophically I understand where people are coming from. So is this driven just by having a savings lifestyle, always LBYM or do BH just tend to be financially minimalist?

I think the main motivation for asking is when I look at it as a surplus I much more positive about my savings than when I look at it as $X more annually using my SWR.
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Re: How do you view a savings surplus in retirement?

Post by StarsandStripes » Sun Jan 06, 2019 12:31 pm

A 25 percent cushion is exactly what I figured into our retirement budget. If we have a little left over at the end of the year we reinvest the funds. Better to have too much to leave for the kids.

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Re: How do you view a savings surplus in retirement?

Post by smitcat » Sun Jan 06, 2019 12:38 pm

TheTimeLord wrote:
Sun Jan 06, 2019 12:18 pm
Very intrigued by the answers. They are falling along the lines I was expecting for BH. It does seem like in general BH don't either believe it is a surplus or don't believe in acknowledging it in that manner. This does lead me to question how you ever figure out if you have enough or what your number is but philosophically I understand where people are coming from. So is this driven just by having a savings lifestyle, always LBYM or do BH just tend to be financially minimalist?

I think the main motivation for asking is when I look at it as a surplus I much more positive about my savings than when I look at it as $X more annually using my SWR.
"So is this driven just by having a savings lifestyle, always LBYM or do BH just tend to be financially minimalist?"
This comes from me living life a fiarly long time and finding that 'crap' happens in life , business and everywhere.
Besides - if my nuimber was formulated well we dont need the surplus.

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Re: How do you view a savings surplus in retirement?

Post by digarei » Sun Jan 06, 2019 12:38 pm

TheTimeLord wrote:
Sun Jan 06, 2019 12:18 pm
Very intrigued by the answers. They are falling along the lines I was expecting for BH. It does seem like in general BH don't either believe it is a surplus or don't believe in acknowledging it in that manner. This does lead me to question how you ever figure out if you have enough or what your number is but philosophically I understand where people are coming from. So is this driven just by having a savings lifestyle, always LBYM or do BH just tend to be financially minimalist?
I suspect you already know these answers but I’ll give you mine... 😀

I figured out that I had enough by writing a retirement budget and then adhering to it for a number of years, before I retired. Once I could establish sufficient income (via pension, possible future portfolio withdrawals and social security) plus a generous cushion—about 25% over my budget, I felt that I had enough. 3 1/2 years in, I still have a 20% monthly surplus.

I’m eligible for SS but have no reason to draw on it. In this way, I was conservative. Three-legged stool. I’m nicely balanced today on one leg. The years of discipline required to get out of debt and build my investments continues to prevail in retirement.

I’m relatively frugal but don’t lack for anything. I guess you could call this a “savings lifestyle”... but I’m still accumulating.
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Re: How do you view a savings surplus in retirement?

Post by bubbadog » Sun Jan 06, 2019 1:00 pm

TheTimeLord wrote:
Sun Jan 06, 2019 11:12 am
bubbadog wrote:
Sun Jan 06, 2019 11:08 am
If I had a relatively small surplus of say 25% as in your example, I would view it as a cushion.
It would have never dawned on me to consider 25% a relatively small cushion, maybe 5%-10%, but I would view 25% as substantial so can you help me to understand your perspective.
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Re: How do you view a savings surplus in retirement?

Post by radiowave » Sun Jan 06, 2019 1:10 pm

TheTimeLord wrote:
Sun Jan 06, 2019 12:18 pm
Very intrigued by the answers. They are falling along the lines I was expecting for BH. It does seem like in general BH don't either believe it is a surplus or don't believe in acknowledging it in that manner. This does lead me to question how you ever figure out if you have enough or what your number is but philosophically I understand where people are coming from. So is this driven just by having a savings lifestyle, always LBYM or do BH just tend to be financially minimalist?

I think the main motivation for asking is when I look at it as a surplus I much more positive about my savings than when I look at it as $X more annually using my SWR.
You can take the original assumption, 1M + 250K at 4% SWR and say that a MFJ couple in early retirement can meet all routine expenses with SS and pensions. Sothe entire $1.25M portfolio is "surplus" Yes it can be a way to fund skilled nursing care or pay it forward to heirs, but how would this affect asset allocation and other portfolio concerns?
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Re: How do you view a savings surplus in retirement?

Post by heyyou » Sun Jan 06, 2019 1:43 pm

While starting with the same asset amount, take a look at the dispersion of the remaining asset levels of Bengen's 4% SWR retirees. Some finished 30 years with several multiples of their starting balances, while his 1966 & 1968 retirees failed, but still within his 95% confidence level. Their portfolios' problem was obvious by the end of the first decade of retirement for those who monitored spending as they went along, so none of the failures were Bogleheads.

Having retired at 55, longevity was my concern. Now with 13 years of experience as a retiree, I thought I knew what our spending was. DW now has a medical problem that may top out of her lifetime insurance coverage before she is 62. Our current surplus or more, may get spent on health care. Somehow risk changes unnoticed until it becomes significant.

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Re: How do you view a savings surplus in retirement?

Post by texasdiver » Sun Jan 06, 2019 1:48 pm

My parents are about 80 and have been facing this for years.

Essentially with their pensions, social security and RMDs they have more monthly income coming in than they manage to spend by a factor of about 40%. They just save the difference like they have been doing for the past 60 years of their life. They have their guy who manages their money and who invests it for them. I don't pay a lot of attention because they are happy using a financial manager that they trust. I think it is mostly in "socially conscious" actively managed funds that they are comfortable with. Their net worth continues to grow so who am I to argue.

I think there are two things going on. First, after being born in the depression they just have frugal habits ingrained. It's part of who they are. They don't see the point of being more consumeristic and wasteful just because they can. I can respect that. Second, I think they are somewhat more well off than the majority of their friends and family. They have brothers and sisters and church friends who lived more blue collar lives and are forced to live more modest retirements. My parents would not be comfortable showing them up by driving nicer cars and owning a fancier house.

So they happily go about their retirment living well beneath their means as they had done for their entire lives. Saving what they don't spend. In the end their estate will benefit, which means a combination of their 3 sons and their favorite charities.
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Re: How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 1:52 pm

bubbadog wrote:
Sun Jan 06, 2019 1:00 pm
TheTimeLord wrote:
Sun Jan 06, 2019 11:12 am
bubbadog wrote:
Sun Jan 06, 2019 11:08 am
If I had a relatively small surplus of say 25% as in your example, I would view it as a cushion.
It would have never dawned on me to consider 25% a relatively small cushion, maybe 5%-10%, but I would view 25% as substantial so can you help me to understand your perspective.
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Very fondly yes, not like i am planning to be 100% equities in retirement.
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Re: How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 1:54 pm

StarsandStripes wrote:
Sun Jan 06, 2019 12:31 pm
A 25 percent cushion is exactly what I figured into our retirement budget. If we have a little left over at the end of the year we reinvest the funds. Better to have too much to leave for the kids.
There seem to be lots of people looking at things sort of this way. I have zero concern about the size of the legacy I leave behind.
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Re: How do you view a savings surplus in retirement?

Post by abc132 » Sun Jan 06, 2019 1:56 pm

The danger of treating the 250k as surplus is that the extra 250k could become directly spendable in a way that ones standard of living could grow to beyond the 40k (larger house, boat, things with recurring expenses that are difficult to cut back on).

Thinking of the money as producing 50k of revenue would allow one to save up for any additional "wants" that increase standard of living in a more sustainable way, and with a comfort level in dropping back to 40k in a extended period of poor returns. In this second scenario, you would have to save up for several years for some of those wants, which means that you likely will do a better job of buying the extra things you still desire over an extended number of years, and avoid more frivolous decisions because you have 250k laying around that is expendable.

4% rule was designed for ~30 years of spending, so if you find yourself with excess at age 75, of course spending/donations could ramp up, or the likely extra balance could be passed on to heirs.

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Re: How do you view a savings surplus in retirement?

Post by TheTimeLord » Sun Jan 06, 2019 2:01 pm

abc132 wrote:
Sun Jan 06, 2019 1:56 pm
The danger of treating the 250k as surplus is that the extra 250k could become directly spendable in a way that ones standard of living could grow to beyond the 40k (larger house, boat, things with recurring expenses that are difficult to cut back on).

Thinking of the money as producing 50k of revenue would allow one to save up for any additional "wants" that increase standard of living in a more sustainable way, and with a comfort level in dropping back to 40k in a extended period of poor returns. In this second scenario, you would have to save up for several years for some of those wants, which means that you likely will do a better job of buying the extra things you still desire over an extended number of years, and avoid more frivolous decisions because you have 250k laying around that is expendable.

4% rule was designed for ~30 years of spending, so if you find yourself with excess at age 75, of course spending/donations could ramp up, or the likely extra balance could be passed on to heirs.
I am thinking I can think of more fun ways to spend money in my 50s and 60s than at 75. My main motivation for savings is to have very enjoyable retirement especially in my early years not to prepare for every possible black swan scenario.
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Re: How do you view a savings surplus in retirement?

Post by Riprap » Sun Jan 06, 2019 2:05 pm

I view a surplus as retained earnings. I'm probably an oddball, but I view my investment portfolio as a business.

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Re: How do you view a savings surplus in retirement?

Post by stlutz » Sun Jan 06, 2019 2:21 pm

Another option is to view it as money to be given away--to charity, to the kids/grandkids, whatever.

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Re: How do you view a savings surplus in retirement?

Post by PaulF » Sun Jan 06, 2019 2:25 pm

Well, if it makes you feel any better, I am all over the map on this question. For a few reasons, I am 2 years out from retiring, but it seems that we will be moderately overfunded. I have gone back and forth between the alternatives you inquired about. Sometimes I think I am going to buy a more expensive house or other lumpy spending. Sometimes I think I will upgrade my overall standard of living. Sometimes I think I will just keep a lower withdrawal rate (especially initially, to mitigate sequence of return risk). Time will tell, I suppose!

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Re: How do you view a savings surplus in retirement?

Post by MathIsMyWayr » Sun Jan 06, 2019 2:27 pm

scrabbler1 wrote:
Sun Jan 06, 2019 11:57 am
I don't look at the surplus in the portfolio amount. Instead, I look at the surplus in the investment income it generates, the surplus over the expenses it has to cover. But, as others have replied, I view that surplus as a cushion of investment income over expenses.

Furthermore, when I look at a surplus in investment income, I look at mainly the monthly and quarterly dividends I receive, not the more erratic and unreliable cap gain distributions which don't occur every year.
I also have a similar line of thinking. I divide retirement income into three categories; A) SS+pension B) RMD from pre-tax accounts C) dividends + interests from taxable. My ultimate goal is to meet a comfortable retirement spending from A + B or A + C. Any left-over will be directed to taxable or Roth IRA by conversion. This way, I increase the cushion for some future unknown needs or the amount of inheritance or charity at the end.

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Re: How do you view a savings surplus in retirement?

Post by The Wizard » Sun Jan 06, 2019 2:28 pm

Answer depends on when the surplus occurs and in which type of account.
In my case, 95% of my financial assets were in my tax deferred 403(b) account at start of retirement in 2013. I did not have a precise dollar target number for this accumulation so I never viewed any of this money as "surplus". I planned to annuitize a significant portion of my accumulation for lifetime income, which I did.

Remaining accumulation in tax deferred had two purposes:
1) to permit withdrawals of $3000/month in lieu of SS for seven years until age 70.
2) to act as reserves to be available as additional income to fight the Ravages of Inflation at some later date.

Now, six years into retirement, surpluses have indeed materialized, as additional funds added to both my Roth IRA and my taxable account from "excess" retirement income.
And yes, these surpluses are available for whatever purpose I chose, but the primary intent is to fund new vehicle purchases, the next of which might be in two years and require $35k or so...
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Re: How do you view a savings surplus in retirement?

Post by Sandtrap » Sun Jan 06, 2019 2:31 pm

TheTimeLord wrote:
Sun Jan 06, 2019 12:18 pm
Very intrigued by the answers. They are falling along the lines I was expecting for BH. It does seem like in general BH don't either believe it is a surplus or don't believe in acknowledging it in that manner. This does lead me to question how you ever figure out if you have enough or what your number is but philosophically I understand where people are coming from. So is this driven just by having a savings lifestyle, always LBYM or do BH just tend to be financially minimalist?

I think the main motivation for asking is when I look at it as a surplus I much more positive about my savings than when I look at it as $X more annually using my SWR.
Surplus >> Further Diversify fixed holdings (outside of allocation).
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Re: How do you view a savings surplus in retirement?

Post by MathWizard » Sun Jan 06, 2019 2:37 pm

I'll be in a similar place.

I plan to use the earnings from it in good years, and not in down years, safeguarding the principal for potential long term care.

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Re: How do you view a savings surplus in retirement?

Post by Wilderness Librarian » Sun Jan 06, 2019 3:05 pm

TheTimeLord wrote:
Sun Jan 06, 2019 1:54 pm
StarsandStripes wrote:
Sun Jan 06, 2019 12:31 pm
A 25 percent cushion is exactly what I figured into our retirement budget. If we have a little left over at the end of the year we reinvest the funds. Better to have too much to leave for the kids.
There seem to be lots of people looking at things sort of this way. I have zero concern about the size of the legacy I leave behind.
Like you I have zero concern about leaving money behind. Brother & sister both have kids so family mementos etc. stay in family - that gives me sufficient piece of mind. So I would view the 250K initially as a cushion for unexpected expenses or big ticket items I don't want now but might later. If I suddenly passed away my siblings and or their kids get some or all of the 250K. I'm gone no big deal. If I last long enough I would probably annuitize some of this amount (SPIA single life no guarentee period in addition to what I already have through TIAA) and use that income for life style enhancement (probably increased travel but who knows). I would always want some cushion especially for long term care (and I do have LTC insurance) Actually this is more or less what I may do myself if no big expenses in the next 10-15 yrs.

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Re: How do you view a savings surplus in retirement?

Post by DrGoogle2017 » Sun Jan 06, 2019 3:07 pm

I view it as nice, time to splurge a little.

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Re: How do you view a savings surplus in retirement?

Post by Phineas J. Whoopee » Sun Jan 06, 2019 3:18 pm

Dude, if you want to spend more then spend more. It's up to you.
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Re: How do you view a savings surplus in retirement?

Post by goodenyou » Sun Jan 06, 2019 3:20 pm

Legacy. Also, to be as bulletproof as possible. I am sure there are studies that show that behavior is consistent over time. That is, savers' frugality persist over time. Having "extra" doesn't increase consumption.
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Re: How do you view a savings surplus in retirement?

Post by yousha » Sun Jan 06, 2019 3:25 pm

Cash is King.

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Re: How do you view a savings surplus in retirement?

Post by Retired2013 » Sun Jan 06, 2019 3:31 pm

jeffyscott wrote:
Sun Jan 06, 2019 11:52 am
TheTimeLord wrote:
Sun Jan 06, 2019 11:12 am
bubbadog wrote:
Sun Jan 06, 2019 11:08 am
If I had a relatively small surplus of say 25% as in your example, I would view it as a cushion.
It would have never dawned on me to consider 25% a relatively small cushion, maybe 5%-10%, but I would view 25% as substantial so can you help me to understand your perspective.
It's small because it could disappear quickly or returns could be less than expected. If stocks, the market could decline. If bonds, inflation could erode it's value.

By my estimates, we've got at least double. I view this as both as our retirement security blanket and kid's inheritance.

Of course, we can dip into it at will, but we've never made our life about spending as much as possible, that'd be too much work. One of these days we'll dip in for a new car, but aside from that, with no mortgage, spending $25-30K per year, excluding taxes and medical, seems to be enough to buy and do whatever we want.
I just call it Financial Freedom.

DW and I took our lump sum pensions and put it in our 401(k) when downsized in our 40s.

When I retired, I setup a monthly transfer of $3k to mirror a paycheck to cover normal expenses including taxes and medical.

Mentally, I budget another $12k per year for extras, new car, roof, season tickets, furnace, fence, new windows, trips. Some years we spend this and some years we may only used $2k.

When DW and I are 70 and both collecting SS, SS will cover everything above, 100%. What's my cushion then?

Wild Card: Married with NO KIDS. No Kid's inheritance. On the flip side, No kid's to help in old age. Hence, probable assisted living in our future. No LTC. Self-insuring. What's my cushion then?

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Earl Lemongrab
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Re: How do you view a savings surplus in retirement?

Post by Earl Lemongrab » Sun Jan 06, 2019 3:37 pm

I didn't plan it like that. Depending on what inflation does, my pension and later SS might cover all regular spending. Possibly some draw depending on circumstances.

The majority of my savings are extreme backup dollars. If I have to go to nursing care, I'm going to get the best in the area. Anything else I need for assistance or health needs will be covered.

I would not be surprised if the vast majority of my money went to my heirs. That's okay. They're family. I like them.

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Re: How do you view a savings surplus in retirement?

Post by marcopolo » Sun Jan 06, 2019 3:44 pm

I am not really sure how to think about the "surplus".

I guess that has to assume some baseline that is the "right" amount?

While I worked, we never really thought too much about a budget. We tracked spending and looked at it at the end of the year as a retrospective, but never really worried about maintaining a budget. We are just not big spenders. We saved whatever was leftover. Over the years, as the income grew at much faster pace than spending, the savings became substantial, but we never felt the need to expand our lifestyle.

Now, in retirement, we are spending more, but that is because we planned that to take advantage of our extra free time, and relatively young age.
I am sure we will settle at an expense level that is the new "normal" for us. My guess is that our portfolio will be something like 40x those expenses. Is some of that already "surplus"? If it grows more, how will that change anything?

I don't see us ramping our lifestyle just because we have a bigger portfolio, just like we didn't do that when we had a bigger income.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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goodenyou
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Re: How do you view a savings surplus in retirement?

Post by goodenyou » Sun Jan 06, 2019 3:46 pm

TheTimeLord wrote:
Sun Jan 06, 2019 1:54 pm
StarsandStripes wrote:
Sun Jan 06, 2019 12:31 pm
A 25 percent cushion is exactly what I figured into our retirement budget. If we have a little left over at the end of the year we reinvest the funds. Better to have too much to leave for the kids.
There seem to be lots of people looking at things sort of this way. I have zero concern about the size of the legacy I leave behind.
The views on legacy, like many things in life, are viewed through the lens of personal experience. How you grew up, the challenges that you had while growing up and your relationships that you had with parents, your children, sibling and family all are factors in the priority of legacy.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

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Re: How do you view a savings surplus in retirement?

Post by drk » Sun Jan 06, 2019 3:46 pm

Earl Lemongrab wrote:
Sun Jan 06, 2019 3:37 pm
That's okay. They're family. I like them.
That's a fortunate surplus of a different sort.

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Re: How do you view a savings surplus in retirement?

Post by MotoTrojan » Sun Jan 06, 2019 3:47 pm

TheTimeLord wrote:
Sun Jan 06, 2019 10:44 am
ionball wrote:
Sun Jan 06, 2019 10:40 am
From a risk perspective, I would view the extra amount as a cushion that makes the plan more robust. If I felt my plan was solid as a rock, I would view it as additional withdrawal.
I was wondering more form the perspective of either a lump sum spendable pool of money to be dipped into at will or a supplemental amount of annual income to be discounted using your SWR.
I think you could/should view it is both. If the extra $10K/year makes a difference, enjoy it. If you'd rather do a crazy once-in-a-lifetime $50K vacation and then have the $150K for additional spending/cushion, great. If you want to buy that Lambo you've always wanted, go for it, but then the surplus is gone.

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Horton
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Re: How do you view a savings surplus in retirement?

Post by Horton » Sun Jan 06, 2019 3:47 pm

I would compare my assets to my Liability Matching Portfolio (LMP) to derive my funded ratio. The LMP would be in fixed income* and any surplus would be in a return seeking portfolio (mainly equities, but fixed income could be included as well for those who are risk averse). I would use the surplus for discretionary/infrequent expenses, charitable giving, and inheritance.

* I would prefer duration matched TIPS funds and/or SPIAs.

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Re: How do you view a savings surplus in retirement?

Post by marcopolo » Sun Jan 06, 2019 3:51 pm

Earl Lemongrab wrote:
Sun Jan 06, 2019 3:37 pm

I would not be surprised if the vast majority of my money went to my heirs. That's okay. They're family. I like them.
+1 :beer
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: How do you view a savings surplus in retirement?

Post by drk » Sun Jan 06, 2019 3:51 pm

goodenyou wrote:
Sun Jan 06, 2019 3:20 pm
Legacy. Also, to be as bulletproof as possible. I am sure there are studies that show that behavior is consistent over time. That is, savers' frugality persist over time. Having "extra" doesn't increase consumption.
Agreed. I'm targeting a level of consumption at a safe withdrawal rate, not the withdrawal rate itself. If I end up with more than I need, I'll lower my withdrawal rate and decide how to divvy up the rest.

2015
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Re: How do you view a savings surplus in retirement?

Post by 2015 » Sun Jan 06, 2019 3:53 pm

I moved from a place where people are in the habit of equating spending with happiness, and I saw none were the happier for it. They were simply more neurotic about it.

I in fact do have a sizable surplus but as I'm content I don't need to spend more in order to become more content.

staycalm
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Re: How do you view a savings surplus in retirement?

Post by staycalm » Sun Jan 06, 2019 4:14 pm

"You can't be too rich or too thin." If I had had a surplus in my retirement account, my only concern would be reducing the surplus in my bathroom scale account 8-)

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Re: How do you view a savings surplus in retirement?

Post by aspirit » Sun Jan 06, 2019 4:38 pm

Taylor Larimore recently mentioned he had a COL health care treatment cost increase of 600k last yr.
He expects that cost to rise annually. Luckily he's covered. You might experience health challenges TimeLord and need expensive medical cares funding.
Will you have adequate insurance since you only have 1.25M nearing a decade long market peak?
Many want to live a quality life after a challenging health circumstance sidelines them.
You have that covered?
hmmm..... :oops:

There are many, many variables. I'd suggest you regroup and reconsider it.

I'm poking fun TimeLord, so you have to much money eeh? I only know 2 people with to much money, both inherited well over 1B.
Odds are your mistaken.

Good luck and all.
Last edited by aspirit on Sun Jan 06, 2019 7:27 pm, edited 1 time in total.
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