Go-Go Years Retirement Strategy

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nigel_ht
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Go-Go Years Retirement Strategy

Post by nigel_ht »

Go-Go Years Retirement Strategy

Objective:
  • To be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
  • To SWAN knowing I will have a comfortable, if perhaps not luxurious, retirement.
Step 1. Bid my retirement like a fixed price contract. Why fixed price? Because you get only one life and there’s no do-overs. Nor will anyone likely bail you out if you mess things up.

1.1 Estimate a comfortable but minimal lifestyle. Housing, cable, cell phones etc. Don’t gold plate but don’t leave anything out. Don’t factor in extra travel or hobbies in the go-go years. That happens in step 4...but if you want 1 modest vacation a year to visit the grandkids, I'd factor that in.

This gives you an estimate where you have a “normal” retirement with some amount of slack in the budget.

1.2 Figure out a contingency reserve. This covers known unknowns that you can estimate a cost for and a probability of occurrence. This part is tough to do right but presumably you have decades of life experience to help. Examples might be help with kid’s college expenses, new roof in 10-20 years, etc.

1.3 Create a management reserve. This is to cover unknown unknowns. When I was doing bid and proposal we tacked on a 15% management reserve…but we were pretty confident in our estimation abilities. There’s a balancing act here since you need enough to mitigate risk but not so much you lose the bid. Each industry or company has its own rules of thumb here from 10% to 100%+. I'm reasonably happy with 15%, YMMV...

1.4 Compute end of life expenses. If this means CCRC then you need to budget that in…either amortized across the whole period or better, if you use an online tool or spreadsheet, put it in as a known future expense and it will figure it out for you. CCRC is a big spend…and future cost estimates are questionable. In my personal case, I hope to offset the buy-in cost with the proceeds of selling our final house.

Step 2. This gives you an annual budget target to use as a WR. If this WR is below SWR (for your retirement duration) in your country great. If not, hope Step 3 fixes this.

Step 3. Compute your retirement income outside of your portfolio. Social security, pensions, sale of house, etc.

For US retirees, delay SS to age 70.

Add this into the WR equation…using an online calculator makes this step easier.

Step 4: If your computed WR is lower than your country’s SWR for your retirement duration you can use this method. Otherwise you don’t have enough slack to have a Go-Go years up-spend. Use another method…

Step 5 Calculate the portfolio size required to support your budget using SWR. Round up to the nearest $100K for a little more safety.

The remainder becomes your Go-Go years fun budget.

For example if your portfolio is $2M but only $1.8 million is required to support your computed budget using SWR (ie 100% success rate in your favorite retirement calculator) then you have $200K for your go-go years. See below for a FICalc example.

Spend this as you please knowing:
  • Your estimated retirement expenses has some slack built in before you have to eat cat food.
  • You considered known unknowns and set aside a reserve for them,
  • You considered unknown unknowns and set aside a reserve for them.
  • You considered longevity when you picked the duration of your retirement for SWR.
  • Your withdrawal rate didn’t run out of money using the historical worst case for your country.
  • You include cost of living increases everywhere you could so even in 1966 your plan survived
  • Your go-go year budget is yet another reserve until you completely spend it all. If SORR hits in the first 10 years fly coach instead…I’d still do everything planned, just be more frugal about it…
Simple Example using FI Calc

$2M portfolio 60/40, rebalance annually
40 year retirement period (60-100)

$60K a year expenses
$200K Contingency Reserve ($5K a year over 40 years)
15% Management Reserve ($9K a year)
=
$74,000 a year of which you plan to spend only up to $60K. The other $14K a year you can put into your EF, leave it in your portfolio or use to cover any uncovered expenses.

$20K a year SS income starting age 70 (10 years after start of retirement)
$250K income at age 75 from selling primary residence
$500K expense for CCRC buy in at age 75

100% success rate at $1,800,000

That gives us a $200K Age 60 to Age 70 Go-go years budget or $20K a year.

https://ficalc.app?additionalIncome=%5B ... tantDollar

But I don’t like SWR!

The nice thing is that using a tool like FICalc you can change it to anything the tool supports.

Keep $1.8M portfolio and switch to VPW with a minimum spending of $74,000. Still 100% success rate. $10K extra initial withdrawal over SWR + 20K go-go budget gives you an extra $30K above your nominal spend for your first go-go year,

And so forth for the other withdrawal options.

Note that 5.2% Constant Percentage has a 100% historical success rate with a floor of $74K a year and a $1.8M portfolio. You can front load even more spending that way…$93K first year or $39K for first year go-go spend...almost double the SWR amount of $20K.

https://ficalc.app?additionalIncome=%5B ... lioPercent

I choose SWR because I want to leave a decent estate with a step up in basis…but the nice thing is that I can use something like VPW or a high Constant Percentage the first 10 years for more up front spend ($30K vs $20K) and then just drop back down to $60K a year spend from age 70+ and get something in-between in the results…all with a historical 100% success rate AND with reserves built into the plan.

This works because the WR to cover my expenses (including reserves) is below SWR…essentially I’m spending the extra between $1.8M and whatever the amount really is supposed to be and if SORR hits I still go back down to the $74K a year withdrawal number...so I still should have a 100% success rate. This may require a little more analysis to be sure...but it seems right.

Now, obviously, if you don’t have enough saved to meet your estimated retirement expenses, with or without reserves, this approach doesn’t help you much…although going through the process and figuring out contingencies and so forth should still be useful.

Obligatory Disclaimer: Im not a financial professional and this is by no means financial advice. This is just what I’m looking at for my own retirement.
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David Jay
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Re: Go-Go Years Retirement Strategy

Post by David Jay »

nigel_ht wrote: Wed Aug 03, 2022 12:47 pmFor US retirees, delay SS to age 70.
Only for unmarried individuals.

For married individuals, the spouse with the higher benefit should normally delay to 70, but often the lower earning spouse should claim earlier. This is due the the difference in longevity calculation (lower benefit spouse return is calculated on first-to-pass age, higher benefit spouse return is calculated on second-to-pass age).

There are exceptions (large age differences, etc.) but the above is commonly optimum.
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nigel_ht
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

David Jay wrote: Wed Aug 03, 2022 1:02 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmFor US retirees, delay SS to age 70.
Only for unmarried individuals.

For married individuals, the spouse with the higher benefit should normally delay to 70, but often the lower earning spouse should claim earlier. This is due the the difference in longevity calculation (lower benefit spouse return is calculated on first-to-pass age, higher benefit spouse return is calculated on second-to-pass age).

There are exceptions (large age differences, etc.) but the above is commonly optimum.
Very good point.
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mrmass
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Re: Go-Go Years Retirement Strategy

Post by mrmass »

Great post. The way you spelled it out is very helpful to me. Brings a clarity to things. Your example numbers are similar to mine.
Thank you :sharebeer
jsiulinski
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Re: Go-Go Years Retirement Strategy

Post by jsiulinski »

You may want to check out the "Retirement and IRA Show" Podcast. Their firm specializes in asset liability matching retirement planning and they have an extremely thorough process which they tell their listeners step by step. They are big believers in spending most of your fun money in your go-go years, regardless of market fluctuations. The host is a bit wordy, but I'm guessing it would answer some of your questions.
rich126
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Re: Go-Go Years Retirement Strategy

Post by rich126 »

I'm saying this partly sarcastically but unfortunately it is true for more than you might think, the go-go years occur prior to retirement when you are young and healthy unless you retire young or are luckier than average. Not saying some can have a good time in their 60s+ but I've seen many cases where people would have been better off spending the money in their 30s/40s/50s and worry less about retirement savings.
----------------------------- | If you think something is important and it doesn't involve the health of someone, think again. Life goes too fast, enjoy it and be nice.
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nigel_ht
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

rich126 wrote: Wed Aug 03, 2022 3:02 pm I'm saying this partly sarcastically but unfortunately it is true for more than you might think, the go-go years occur prior to retirement when you are young and healthy unless you retire young or are luckier than average. Not saying some can have a good time in their 60s+ but I've seen many cases where people would have been better off spending the money in their 30s/40s/50s and worry less about retirement savings.
There is that too but I think many folks have one or two items on their bucket lists that are difficult to do during working years.

For example we tend to visit places as tourists rather than travelers because we’re limited to a 2 week or so stay during high season when the kids are out of school. Staying a couple months in Tuscany simply hasn’t been in the cards.

For those with the opportunity, a long sabbatical before retirement would be worthwhile…
Zeno
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Re: Go-Go Years Retirement Strategy

Post by Zeno »

Interesting
Last edited by Zeno on Sun Aug 07, 2022 8:24 pm, edited 1 time in total.
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WoodSpinner
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Re: Go-Go Years Retirement Strategy

Post by WoodSpinner »

Nigel_HT,

First, I think you are in the right track but you may find there are opportunities to optimize the process.

A few questions….
  1. Why are you not factoring in Income during Retirement — this can significantly affect the Cashflow requirements.
  2. How are you factoring in Legacy Plans for beneficiaries? Charities?
  3. Can you help me understand what you are using for:
    - Inflation
    - Discount Rate for Future Income
    - LTC
    - Asset Allocation
    - Expected Returns
    - Longevity
  4. How do you plan to invest the funds for the Contingency and Management Reserves? What are the expected returns for these positions.
From my perspective, I would address the Cashflow Requirements as a priority.

I am also a fan of the Retirement and IRA show and have built my own positioning model to help determine my Fun Number.

I estimate the NPV for each of the positions using a different AA and Discount Rate (e.g. Expected Return).

I also estimate the Minimum spend and the Desired spend by year which helps me model lumpy expenses (e.g. New Cars etc.).

Something like this:

Delay Period (till main recipients SS begins)
- NPV of the Minimum Expense Cashflow(AA 0/100 (Stocks/Bonds); Discount Rate 2%
- NPV of Desired - Minimum Expenses Cashflow(AA 30/70), Discount Rate 3%

Post Delay
- NPV of the Minimum Expense Cashflow(AA 30/70 (Stocks/Bonds); Discount Rate 3%
- NPV of Desired - Minimum Expenses Cashflow(AA 60/40), Discount Rate 5%

Legacy
- NPV for beneficiaries, charities (AA 100), Discount Rate 8%

LTC
-NPV of expected LTC costs, AA (60/40), Discount Rate 5%

Reserves
-NPV of Reserves, AA (30/70), Discount Rate 3%


Fun Number = Portfolio value - Sum Of NPV outlined above

I update the models at least yearly and mainly use the Fun Number to gauge:
- Is my spending out of whack with my Retirement Goals?
- Do I need to cut back spending due to market fluctuations or is there a sufficient buffer
- How does my target AA map to the AA of the various positions

I modeled everything in Nominal terms and use different inflation rates for various types of expenses.

WoodSpinner
Last edited by WoodSpinner on Wed Aug 03, 2022 4:01 pm, edited 1 time in total.
gamboolman
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Re: Go-Go Years Retirement Strategy

Post by gamboolman »

rich126 wrote: Wed Aug 03, 2022 3:02 pm I'm saying this partly sarcastically but unfortunately it is true for more than you might think, the go-go years occur prior to retirement when you are young and healthy unless you retire young or are luckier than average. Not saying some can have a good time in their 60s+ but I've seen many cases where people would have been better off spending the money in their 30s/40s/50s and worry less about retirement savings.
rich126 is correct.

I retired at 61.5 year old.

The truth is we did not have the money piled up to be able to retire earlier. Thus I kept working including afew OMY's....

After 43 year in the Oilpatch, I am paying for the "Sins of My Youth" and just am not physically as tough as I was for most of my working life.

If you can make it work financially - that would be wonderful to go early as possible.

I will say that retirement is wonderful !

gambooman....
Topic Author
nigel_ht
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

WoodSpinner wrote: Wed Aug 03, 2022 3:35 pm Nigel_HT,

First, I think you are in the right track but you may find there are opportunities to optimize the process.

A few questions….
  1. Why are you not factoring in Income during Retirement — this can significantly affect the Cashflow requirements.
FICalc certainly allows you to add income streams after retirement but this was a simple example so there isn’t any.

Plus some folks don’t plan to work after retirement…
[*]How are you factoring in Legacy Plans for beneficiaries? Charities?
There are multiple ways of doing this but you end up with a lower SWR If you want to target a specific leave behind.

The easiest in FICalc is just to make it a one time withdrawal on the last year by or just look at the minimum ending portfolio value.

In this case it was $254,763.55.

That’s assuming you also blew through all of your reserves…

If you spent $100K less on your go-go budget the smallest ending portfolio was $778,839.83.

Essentially I’m factoring in legacy plans by picking SWR rather than VPW or high constant percentage.
[*]Can you help me understand what you are using for:
- Inflation
Everything is adjusted for inflation. I believe that the tool uses CPI.
- Discount Rate for Future Income
I do not believe this applies.
- LTC
CCRC
- Asset Allocation
60/40
- Expected Returns
Historical.
[*]How do you plan to invest the funds for the Contingency and Management Reserves? What are the expected returns for these positions.
This requires more discussion but personally my default position is just to hold it as part of the inflation protected fixed income allocation (TIPS or iBonds) as opposed to something separate.
From my perspective, I would address the Cashflow Requirements as a priority.
Cash flow requirement is step 1…
Last edited by nigel_ht on Wed Aug 03, 2022 4:39 pm, edited 2 times in total.
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22twain
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Re: Go-Go Years Retirement Strategy

Post by 22twain »

nigel_ht wrote: Wed Aug 03, 2022 4:21 pm Plus some folks don’t plan to work after retirement…
Plus some folks don't consider you to be really "retired" if you're still working... :wink:

Yes, I know there are "shades of gray" here. After my wife officially retired from her college faculty position, she continued to teach one or two classes per semester for several years as an adjunct instructor, while receiving retirement benefits from the college.
It's "IRMAA" (Income Related Monthly Adjustment Amount), not "IIRMA" or "IRRMA" or "IRMMA".
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JoeRetire
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

nigel_ht wrote: Wed Aug 03, 2022 12:47 pmTo be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
How did you decide the first 10 years will be Go-Go? For me, it doesn't make any sense to decide beforehand when you must stop Go-Go-ing.

I'm 7 years into my retirement. I have no plans to stop anything.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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TheTimeLord
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Re: Go-Go Years Retirement Strategy

Post by TheTimeLord »

David Jay wrote: Wed Aug 03, 2022 1:02 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmFor US retirees, delay SS to age 70.
Only for unmarried individuals.

For married individuals, the spouse with the higher benefit should normally delay to 70, but often the lower earning spouse should claim earlier. This is due the the difference in longevity calculation (lower benefit spouse return is calculated on first-to-pass age, higher benefit spouse return is calculated on second-to-pass age).

There are exceptions (large age differences, etc.) but the above is commonly optimum.
How would this work for the person who takes SS early if they divorce?
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Gnirk
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Re: Go-Go Years Retirement Strategy

Post by Gnirk »

JoeRetire wrote: Wed Aug 03, 2022 8:34 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmTo be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
How did you decide the first 10 years will be Go-Go? For me, it doesn't make any sense to decide beforehand when you must stop Go-Go-ing.

I'm 7 years into my retirement. I have no plans to stop anything.
From our experience, our go-go years were the first 10 years and we were able to cross off most of our bucket list, and enjoyed some amazing experiences. Then came the slow-go years, and now we are at the wish-we-could-go years. We retired 16 years ago at the ages of at 63 and 68, but unexpected health issues arose, so now even though our minds want to GO, our bodies won't let us. So plan for as many go-go years as you want,
and hopefully you will have that many and more.
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TheTimeLord
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Re: Go-Go Years Retirement Strategy

Post by TheTimeLord »

rich126 wrote: Wed Aug 03, 2022 3:02 pm I'm saying this partly sarcastically but unfortunately it is true for more than you might think, the go-go years occur prior to retirement when you are young and healthy unless you retire young or are luckier than average. Not saying some can have a good time in their 60s+ but I've seen many cases where people would have been better off spending the money in their 30s/40s/50s and worry less about retirement savings.
Not sure why it would be one or the other.Retirement savings is after current spending.
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ResearchMed
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Re: Go-Go Years Retirement Strategy

Post by ResearchMed »

TheTimeLord wrote: Wed Aug 03, 2022 8:43 pm
David Jay wrote: Wed Aug 03, 2022 1:02 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmFor US retirees, delay SS to age 70.
Only for unmarried individuals.

For married individuals, the spouse with the higher benefit should normally delay to 70, but often the lower earning spouse should claim earlier. This is due the the difference in longevity calculation (lower benefit spouse return is calculated on first-to-pass age, higher benefit spouse return is calculated on second-to-pass age).

There are exceptions (large age differences, etc.) but the above is commonly optimum.
How would this work for the person who takes SS early if they divorce?

If a couple have been married at least 10 years (I think it is), then if they've been divorced (maybe something like at least one year?), then one spouse can claim on the other spouse's SS for Spousal benefits, regardless of the SS or employment status of the other person. The other person does not even need to know about this (that is, no approval or notification is required).

It doesn't matter if either take SS early or not.
Note: I'm not sure if this is age dependent, such as something like full retirement age or such.

ETA: for links:

https://www.ssa.gov/benefits/retirement ... g7.html#h4
How to file:
https://www.ssa.gov/forms/ssa-2.html

RM
Last edited by ResearchMed on Wed Aug 03, 2022 9:20 pm, edited 1 time in total.
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mtmingus
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Re: Go-Go Years Retirement Strategy

Post by mtmingus »

Great example. Thanks!
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TheTimeLord
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Re: Go-Go Years Retirement Strategy

Post by TheTimeLord »

ResearchMed wrote: Wed Aug 03, 2022 9:09 pm
TheTimeLord wrote: Wed Aug 03, 2022 8:43 pm
David Jay wrote: Wed Aug 03, 2022 1:02 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmFor US retirees, delay SS to age 70.
Only for unmarried individuals.

For married individuals, the spouse with the higher benefit should normally delay to 70, but often the lower earning spouse should claim earlier. This is due the the difference in longevity calculation (lower benefit spouse return is calculated on first-to-pass age, higher benefit spouse return is calculated on second-to-pass age).

There are exceptions (large age differences, etc.) but the above is commonly optimum.
How would this work for the person who takes SS early if they divorce?

If a couple have been married at least 10 years (I think it is), then if they've been divorced (maybe something like at least one year?), then one spouse can claim on the other spouse's SS for Spousal benefits, regardless of the SS or employment status of the other person. The other person does not even need to know about this (that is, no approval or notification is required).

It doesn't matter if either take SS early or not.
Note: I'm not sure if this is age dependent, such as something like full retirement age or such.

RM
But isn't spousal benefit 50% of full benefit?
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David Jay
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Re: Go-Go Years Retirement Strategy

Post by David Jay »

TheTimeLord wrote: Wed Aug 03, 2022 8:43 pm
David Jay wrote: Wed Aug 03, 2022 1:02 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmFor US retirees, delay SS to age 70.
Only for unmarried individuals.

For married individuals, the spouse with the higher benefit should normally delay to 70, but often the lower earning spouse should claim earlier. This is due the the difference in longevity calculation (lower benefit spouse return is calculated on first-to-pass age, higher benefit spouse return is calculated on second-to-pass age).

There are exceptions (large age differences, etc.) but the above is commonly optimum.
How would this work for the person who takes SS early if they divorce?
Looking it up in my copy of "Social Security Made Simple" (Mike Piper's book) *flip* *flip* *flip* (actually it's on my kindle):
Surviving Divorced Spouse - for marriages that lasted more than 10 years, benefits are calculated in the same way as widow(er) benefits (assuming no remarriage, there are rules for that too). Surviving (ex) gets the greater of their benefit or ex-spouse's benefit, minimum of 82.5% of ex's PIA (if ex filed early) assuming they file after their personal FRA. Survivor's benefit is reduced if the survivor applies for survivor's benefit before FRA. [note: paraphrase, not verbatim]
How to apply? The low earner is probably best served by filing early for their personal benefit to receive the maximum number of months of benefits, knowing that if they outlive their ex then they will receive their ex's benefit amount. In other words, using their ex's benefit as a kind of "longevity insurance". In the event of an ex's early death, continue to receive your personal benefit and do not claim survivor's benefits until you reach your FRA.

For the high earner, it's pretty much the same calculation as filing single. Your benefit is your benefit and you won't receive anything when your ex passes.

(I am assuming an amicable divorce, where neither party is deliberately seeking any sort of harm to their ex)
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ResearchMed
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Re: Go-Go Years Retirement Strategy

Post by ResearchMed »

David Jay wrote: Wed Aug 03, 2022 9:39 pm (I am assuming an amicable divorce, where neither party is deliberately seeking any sort of harm for their ex)

In the past, there may have been some way for one divorced spouse to interfere with the other's claiming of SS, but I don't know the specifics.

But nowadays, there's no way, AFAIK, for one party to "deliberately" harm the other using SS as some method.
Last I read, there is no need for "the divorced spouse who is claiming" to notify the other spouse.

If I'm wrong, then please let us know, so someone in that situation knows what does or doesn't work well. Thanks.

RM
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nigel_ht
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

JoeRetire wrote: Wed Aug 03, 2022 8:34 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmTo be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
How did you decide the first 10 years will be Go-Go? For me, it doesn't make any sense to decide beforehand when you must stop Go-Go-ing.

I'm 7 years into my retirement. I have no plans to stop anything.
If you’d like to pick 15 or 20 feel free…you get less per year to spend though…

It also depends on retirement age. Retiring at age 57 you’d expect a much longer active period than 67.
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WoodSpinner
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Re: Go-Go Years Retirement Strategy

Post by WoodSpinner »

nigel_ht wrote: Wed Aug 03, 2022 4:21 pm
WoodSpinner wrote: Wed Aug 03, 2022 3:35 pm Nigel_HT,

First, I think you are in the right track but you may find there are opportunities to optimize the process.

A few questions….
  1. Why are you not factoring in Income during Retirement — this can significantly affect the Cashflow requirements.
FICalc certainly allows you to add income streams after retirement but this was a simple example so there isn’t any.

Plus some folks don’t plan to work after retirement…
[*]How are you factoring in Legacy Plans for beneficiaries? Charities?
There are multiple ways of doing this but you end up with a lower SWR If you want to target a specific leave behind.

The easiest in FICalc is just to make it a one time withdrawal on the last year by or just look at the minimum ending portfolio value.

In this case it was $254,763.55.

That’s assuming you also blew through all of your reserves…

If you spent $100K less on your go-go budget the smallest ending portfolio was $778,839.83.

Essentially I’m factoring in legacy plans by picking SWR rather than VPW or high constant percentage.
[*]Can you help me understand what you are using for:
- Inflation
Everything is adjusted for inflation. I believe that the tool uses CPI.
- Discount Rate for Future Income
I do not believe this applies.
- LTC
CCRC
- Asset Allocation
60/40
- Expected Returns
Historical.
[*]How do you plan to invest the funds for the Contingency and Management Reserves? What are the expected returns for these positions.
This requires more discussion but personally my default position is just to hold it as part of the inflation protected fixed income allocation (TIPS or iBonds) as opposed to something separate.
From my perspective, I would address the Cashflow Requirements as a priority.
Cash flow requirement is step 1…
Nigel,

I am not familiar with FI Calc but am very familiar with a DIY approach for modeling Retirement Needs.

Even in your example, SS will be a key Income stream that significantly affects cashflow once it’s turned on.

Discount Rate is important, consider:

I need to have a sum of money $X available for LTC in 20 years. In reality I do not need to put $X away at this time since it will grow based on how it is invested. This can significantly affect the Fun Number calculations.

WoodSpinner
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JoeRetire
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

nigel_ht wrote: Wed Aug 03, 2022 10:10 pm
JoeRetire wrote: Wed Aug 03, 2022 8:34 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmTo be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
How did you decide the first 10 years will be Go-Go? For me, it doesn't make any sense to decide beforehand when you must stop Go-Go-ing.

I'm 7 years into my retirement. I have no plans to stop anything.
If you’d like to pick 15 or 20 feel free…you get less per year to spend though…

It also depends on retirement age. Retiring at age 57 you’d expect a much longer active period than 67.
That's kind of the point. To me, it doesn't make sense to preplan when your no-go years must start.
I want to do what I enjoy for "the rest of my life".

Your mileage may vary.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

JoeRetire wrote: Thu Aug 04, 2022 6:21 am
nigel_ht wrote: Wed Aug 03, 2022 10:10 pm
JoeRetire wrote: Wed Aug 03, 2022 8:34 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmTo be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
How did you decide the first 10 years will be Go-Go? For me, it doesn't make any sense to decide beforehand when you must stop Go-Go-ing.

I'm 7 years into my retirement. I have no plans to stop anything.
If you’d like to pick 15 or 20 feel free…you get less per year to spend though…

It also depends on retirement age. Retiring at age 57 you’d expect a much longer active period than 67.
That's kind of the point. To me, it doesn't make sense to preplan when your no-go years must start.
I want to do what I enjoy for "the rest of my life".

Your mileage may vary.
How long you want the go-go years to last is somewhat immaterial…just that you have a $200K budget for whatever it is you want to do, for however long you want/can do it…

“Pre-planning” the duration simply give you an idea of the annual budget available. It doesn’t have to be spread evenly…
Last edited by nigel_ht on Thu Aug 04, 2022 6:45 am, edited 2 times in total.
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

WoodSpinner wrote: Thu Aug 04, 2022 3:06 am
nigel_ht wrote: Wed Aug 03, 2022 4:21 pm
WoodSpinner wrote: Wed Aug 03, 2022 3:35 pm
- Discount Rate for Future Income
I do not believe this applies.
Nigel,

I am not familiar with FI Calc but am very familiar with a DIY approach for modeling Retirement Needs.

Even in your example, SS will be a key Income stream that significantly affects cashflow once it’s turned on.

Discount Rate is important, consider:

I need to have a sum of money $X available for LTC in 20 years. In reality I do not need to put $X away at this time since it will grow based on how it is invested. This can significantly affect the Fun Number calculations.

WoodSpinner
Putting the CRCC buy-in expense (inflation adjusted) at year 15 accounts for that. That’s why it doesn’t need to be computed.

The resulting numbers reflect the worst historical case while still achieving 100% success and be able to afford the $250K delta between home sale and CRCC buy in.
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

nigel_ht wrote: Thu Aug 04, 2022 6:36 am
JoeRetire wrote: Thu Aug 04, 2022 6:21 am
nigel_ht wrote: Wed Aug 03, 2022 10:10 pm
JoeRetire wrote: Wed Aug 03, 2022 8:34 pm
nigel_ht wrote: Wed Aug 03, 2022 12:47 pmTo be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
How did you decide the first 10 years will be Go-Go? For me, it doesn't make any sense to decide beforehand when you must stop Go-Go-ing.

I'm 7 years into my retirement. I have no plans to stop anything.
If you’d like to pick 15 or 20 feel free…you get less per year to spend though…

It also depends on retirement age. Retiring at age 57 you’d expect a much longer active period than 67.
That's kind of the point. To me, it doesn't make sense to preplan when your no-go years must start.
I want to do what I enjoy for "the rest of my life".

Your mileage may vary.
How long you want the go-go years to last is somewhat immaterial…just that you have a $200K budget for whatever it is you want to do, for however long you want/can do it…

“Pre-planning” the duration simply give you an idea of the annual budget available. It doesn’t have to be spread evenly…
So
- figure out what you need
- everything else is discretionary
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

JoeRetire wrote: Thu Aug 04, 2022 6:48 am
nigel_ht wrote: Thu Aug 04, 2022 6:36 am
JoeRetire wrote: Thu Aug 04, 2022 6:21 am
nigel_ht wrote: Wed Aug 03, 2022 10:10 pm
JoeRetire wrote: Wed Aug 03, 2022 8:34 pm
How did you decide the first 10 years will be Go-Go? For me, it doesn't make any sense to decide beforehand when you must stop Go-Go-ing.

I'm 7 years into my retirement. I have no plans to stop anything.
If you’d like to pick 15 or 20 feel free…you get less per year to spend though…

It also depends on retirement age. Retiring at age 57 you’d expect a much longer active period than 67.
That's kind of the point. To me, it doesn't make sense to preplan when your no-go years must start.
I want to do what I enjoy for "the rest of my life".

Your mileage may vary.
How long you want the go-go years to last is somewhat immaterial…just that you have a $200K budget for whatever it is you want to do, for however long you want/can do it…

“Pre-planning” the duration simply give you an idea of the annual budget available. It doesn’t have to be spread evenly…
So
- figure out what you need
- everything else is discretionary
-Figure out what you need.
-Account for known unknowns with a contingency reserve
-Account for unknown unknowns with a management reserve
-Everything else is discretionary

Yep. I never claimed it to be rocket science :)

But I think the two steps in the middle may add a lot to the ability to SWAN when explicitly called out.

In many ways the accumulation phase is very much like a cost plus contract…you get paid as you go and the thresholds for LBYM is mostly understood as expenses < income with the plus part applied to savings.

At retirement you’ve got $X budget to get the job done with no guarantee that you can add to $X because of age or health.

It’s firm fixed price and that’s scary. What does LBYM mean when $X fluctuates based on the performance of your portfolio? The historical range of outcomes is quite wide…and you still want to have fun while healthy. How much CAN I safely spend and not compromise completing the job?

So I’m using a proposal analogy to plan for retirement spending through the go-go years where you want to spend your “profit” at the beginning of the job as opposed to the end…for obvious reasons.

Also by using this analogy my hope is folks with more business experience might chime in with rule of thumbs from their own past experience regarding how to quantify and mitigate risks for fixed price bids that might apply here.
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

The other thing is that using this contracts/proposal analogy highlights that the biggest risk isn’t an outcome worse than 1966 or 1929 but screwing up your cost estimate…

Worse than worst historical performance should be quite rare…so to a large degree using SWR mitigates portfolio risk. Diversification beyond Bengen/Trinity provides for a higher SWR which gives a higher margin of portfolio safety.

The biggest risk is therefore estimation risk…
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Re: Go-Go Years Retirement Strategy

Post by TheTimeLord »

nigel_ht wrote: Wed Aug 03, 2022 12:47 pm Go-Go Years Retirement Strategy

Objective:
  • To be able to spend more in my Go-Go years (first 10 years) without needing to cut back regardless of what the markets do.
  • To SWAN knowing I will have a comfortable, if perhaps not luxurious, retirement.
My approach (there is a thread on this) is to have 3 portfolios (Pre-SS, Post-SS and Unassigned), the Pre-SS is a LMP TIPS ladder.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

nigel_ht wrote: Thu Aug 04, 2022 7:05 am -Figure out what you need.
-Account for known unknowns with a contingency reserve
-Account for unknown unknowns with a management reserve
-Everything else is discretionary

Yep. I never claimed it to be rocket science :)

But I think the two steps in the middle may add a lot to the ability to SWAN when explicitly called out.
I understand what you are shooting for, but realistically the middle two steps are just guesses. If this helps you feel confident in spending more during your 10 year go-go period, that's good for you. You have covered everything you feel is important. You'll find out after your go-go period ends if you have saved enough or not. At that point, you'll presumably be happy with a comfortable but minimal lifestyle should it be necessary.

Do you have Long Term Care insurance?

Our strategy is to have enough so that we can spend what we need and want, when we want. We have no fear of ever running out.
We have always lived a comfortable, non-minimal lifestyle. And we'll be able to do the same going forward. We know what it takes to fund that lifestyle, because we tracked the expenses for years. We have always planned for expenses quite a bit higher than we have actually spent.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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Re: Go-Go Years Retirement Strategy

Post by smitcat »

nigel_ht wrote: Thu Aug 04, 2022 7:13 am The other thing is that using this contracts/proposal analogy highlights that the biggest risk isn’t an outcome worse than 1966 or 1929 but screwing up your cost estimate…

Worse than worst historical performance should be quite rare…so to a large degree using SWR mitigates portfolio risk. Diversification beyond Bengen/Trinity provides for a higher SWR which gives a higher margin of portfolio safety.

The biggest risk is therefore estimation risk…

"The biggest risk is therefore estimation risk…"
Exactly - well said.
Fortunately, we have many years of our own data on core spending, 'extras' spending, and 'surprise' spending to draw from for our best guess.
After we have that data in front of us the best solution always seems to be the simplest solution with an appropriate amount of 'sandbagging' added for our personality.
We avoid complication with these choices and make the simplest solutions we can while updating on a regular basis (yearly for us).
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Re: Go-Go Years Retirement Strategy

Post by cryingshame »

JoeRetire wrote: Thu Aug 04, 2022 2:19 pm
nigel_ht wrote: Thu Aug 04, 2022 7:05 am -Figure out what you need.
-Account for known unknowns with a contingency reserve
-Account for unknown unknowns with a management reserve
-Everything else is discretionary

Yep. I never claimed it to be rocket science :)

But I think the two steps in the middle may add a lot to the ability to SWAN when explicitly called out.
I understand what you are shooting for, but realistically the middle two steps are just guesses. If this helps you feel confident in spending more during your 10 year go-go period, that's good for you. You have covered everything you feel is important. You'll find out after your go-go period ends if you have saved enough or not. At that point, you'll presumably be happy with a comfortable but minimal lifestyle should it be necessary.

Do you have Long Term Care insurance?

Our strategy is to have enough so that we can spend what we need and want, when we want. We have no fear of ever running out.
We have always lived a comfortable, non-minimal lifestyle. And we'll be able to do the same going forward. We know what it takes to fund that lifestyle, because we tracked the expenses for years. We have always planned for expenses quite a bit higher than we have actually spent.
I really cannot add much to the discussion other than to say I really understand the op desire to have more within reason in the go-go period...I found bogleheads late in life 56. I was able to get my stock/bond assets maybe 85 percent there. So simple and cost effective! Now because of Joe Retire and others though provoking insights I now am delaying my SS to 70. So now those two factors of delaying SS and wanting to spend more in the early years has complicated the fixed income side of my portfolio. :oops: ...I miss simple.. good problem to have though.. :happy
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

JoeRetire wrote: Thu Aug 04, 2022 2:19 pm
nigel_ht wrote: Thu Aug 04, 2022 7:05 am -Figure out what you need.
-Account for known unknowns with a contingency reserve
-Account for unknown unknowns with a management reserve
-Everything else is discretionary

Yep. I never claimed it to be rocket science :)

But I think the two steps in the middle may add a lot to the ability to SWAN when explicitly called out.
I understand what you are shooting for, but realistically the middle two steps are just guesses. If this helps you feel confident in spending more during your 10 year go-go period, that's good for you. You have covered everything you feel is important. You'll find out after your go-go period ends if you have saved enough or not. At that point, you'll presumably be happy with a comfortable but minimal lifestyle should it be necessary.

Do you have Long Term Care insurance?
I’m under the impression that LTCI coverage durations and maximums aren’t long or high enough that folks like us are probably better off self insuring.

CCRC is the current long term mitigation because you can be healthy for years but need constant care because dementia…just have to get in before it hits…
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Re: Go-Go Years Retirement Strategy

Post by willthrill81 »

OP, I get your idea and had a similar one years ago when I proposed a strategy whereby one would split one's portfolio in two, one used to fund 'essential spending' and another to fund 'discretionary spending'.

Setting aside X amount of funds to pay for Y amount of expenses for Z number of years in addition to the assets and income streams needed to fund one's 'base' expenses before and after would likely be a simple means of achieving your desired result.
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Re: Go-Go Years Retirement Strategy

Post by willthrill81 »

nigel_ht wrote: Thu Aug 04, 2022 4:31 pm I’m under the impression that LTCI coverage durations and maximums aren’t long or high enough that folks like us are probably better off self insuring.

CCRC is the current long term mitigation because you can be healthy for years but need constant care because dementia…just have to get in before it hits…
WoW2012 has said that policies with unlimited benefits are available, but I've never seen the cost of such policies.

I agree that a financially sound CCRC with a type A (i.e., lifetime) contract is at least one of the most reliable means of mitigating the risk of left-tail risk stemming from LTC.
Last edited by willthrill81 on Thu Aug 04, 2022 6:41 pm, edited 1 time in total.
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

nigel_ht wrote: Thu Aug 04, 2022 4:31 pm
JoeRetire wrote: Thu Aug 04, 2022 2:19 pm
nigel_ht wrote: Thu Aug 04, 2022 7:05 am -Figure out what you need.
-Account for known unknowns with a contingency reserve
-Account for unknown unknowns with a management reserve
-Everything else is discretionary

Yep. I never claimed it to be rocket science :)

But I think the two steps in the middle may add a lot to the ability to SWAN when explicitly called out.
I understand what you are shooting for, but realistically the middle two steps are just guesses. If this helps you feel confident in spending more during your 10 year go-go period, that's good for you. You have covered everything you feel is important. You'll find out after your go-go period ends if you have saved enough or not. At that point, you'll presumably be happy with a comfortable but minimal lifestyle should it be necessary.

Do you have Long Term Care insurance?
I’m under the impression that LTCI coverage durations and maximums aren’t long or high enough that folks like us are probably better off self insuring.

CCRC is the current long term mitigation because you can be healthy for years but need constant care because dementia…just have to get in before it hits…
So how much have you set aside for your long term care, if you have decided to self insure and not to purchase insurance?
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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Re: Go-Go Years Retirement Strategy

Post by smitcat »

nigel_ht wrote: Thu Aug 04, 2022 4:31 pm
JoeRetire wrote: Thu Aug 04, 2022 2:19 pm
nigel_ht wrote: Thu Aug 04, 2022 7:05 am -Figure out what you need.
-Account for known unknowns with a contingency reserve
-Account for unknown unknowns with a management reserve
-Everything else is discretionary

Yep. I never claimed it to be rocket science :)

But I think the two steps in the middle may add a lot to the ability to SWAN when explicitly called out.
I understand what you are shooting for, but realistically the middle two steps are just guesses. If this helps you feel confident in spending more during your 10 year go-go period, that's good for you. You have covered everything you feel is important. You'll find out after your go-go period ends if you have saved enough or not. At that point, you'll presumably be happy with a comfortable but minimal lifestyle should it be necessary.

Do you have Long Term Care insurance?
I’m under the impression that LTCI coverage durations and maximums aren’t long or high enough that folks like us are probably better off self insuring.

CCRC is the current long term mitigation because you can be healthy for years but need constant care because dementia…just have to get in before it hits…
In our experience if you have the funds ($$) or the insurance (LTCI) for 3-4 years on hand the facility will take you in knowing that if you do run out they will continue the care.
Utilizing CCRC's is only as good as the long-term financial state of those CCRC's which have been challenging to find out in the past and likely very difficult to determine in the future. Much careful research would be needed to uncover enough data to 'maybe' know how secure the CCRC might be in the future.
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

smitcat wrote: Thu Aug 04, 2022 5:27 pm In our experience if you have the funds ($$) or the insurance (LTCI) for 3-4 years on hand the facility will take you in knowing that if you do run out they will continue the care.
Maybe. But everyone needs to read the contract very, very carefully. They are all different.

It's important to know what is covered by the entrance fee and monthly fees, and what is not. It's important to know how the costs change as you move between the different "levels" of care. And it's important to know exactly what this particular CCRC does if you cannot pay.

There are no free lunches in CCRCs, just as in the rest of life.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

JoeRetire wrote: Thu Aug 04, 2022 5:20 pm
nigel_ht wrote: Thu Aug 04, 2022 4:31 pm
JoeRetire wrote: Thu Aug 04, 2022 2:19 pm
nigel_ht wrote: Thu Aug 04, 2022 7:05 am -Figure out what you need.
-Account for known unknowns with a contingency reserve
-Account for unknown unknowns with a management reserve
-Everything else is discretionary

Yep. I never claimed it to be rocket science :)

But I think the two steps in the middle may add a lot to the ability to SWAN when explicitly called out.
I understand what you are shooting for, but realistically the middle two steps are just guesses. If this helps you feel confident in spending more during your 10 year go-go period, that's good for you. You have covered everything you feel is important. You'll find out after your go-go period ends if you have saved enough or not. At that point, you'll presumably be happy with a comfortable but minimal lifestyle should it be necessary.

Do you have Long Term Care insurance?
I’m under the impression that LTCI coverage durations and maximums aren’t long or high enough that folks like us are probably better off self insuring.

CCRC is the current long term mitigation because you can be healthy for years but need constant care because dementia…just have to get in before it hits…
So how much have you set aside for your long term care, if you have decided to self insure and not to purchase insurance?
Well, there's $200K of contingency reserve in this scenario. The reality is that there is no real upper limit to what you can spend in a health event.

For my real plan I have other assets we can sell and other income streams which we may or may not maintain in retirement. At the end of the day, if you need LTC early for a long duration you won't qualify to get into a CCRC anyway so the initial plans are moot and we will have to re-evaluate.

We looked at LTCI through work and they limit the duration to 2 years and it wasn't cheap..like $3000 a year...given my wife wants to work another 10 years and the average cost for a private room in our area is $146K we were going to pay nearly as much as it's worth in premiums in that period and we're not likely going to need it. Even if we do, we can cash flow some of it using long term disability and the other partner's income.

Given the median stay is 22 months...and the lifetime chance of someone who buys a policy at age 60 who will use it, assuming a 90 day elimination period is only 35%. With 0 day elimination it's around 50/50.

https://www.aaltci.org/long-term-care-i ... m-care.php

I assumed that the numbers here are biased in favor of buying insurance so I'm comfortable using them. There was a high probability we would pay $300K worth of premiums and never use it and even if we did the payout wasn't that much more than what we were going to pay in.

I decided we'd rather have $3000 more VTI a year.

Now this is a decision we will revisit before we retire and see what things cost then. If the market has been really good the last 10 years...probably won't bother.

If the market hasn't been good then maybe the premiums are worthwhile since our ability to absorb any significant adverse events will be lower.
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Re: Go-Go Years Retirement Strategy

Post by delamer »

rich126 wrote: Wed Aug 03, 2022 3:02 pm I'm saying this partly sarcastically but unfortunately it is true for more than you might think, the go-go years occur prior to retirement when you are young and healthy unless you retire young or are luckier than average. Not saying some can have a good time in their 60s+ but I've seen many cases where people would have been better off spending the money in their 30s/40s/50s and worry less about retirement savings.
I’ve seen a lot more cases where people were extravagant in their working years and ended up having to make major sacrifices in their retirement, versus what you’ve experienced.

The average baby boomer will live to be 79. No question that I’ve had baby boomer friends & colleagues die much too young. But the vast majority have well into lived into their 60’s — like me — and I can only think of one whose health is compromised to the point where their quality-of-life is poor.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Go-Go Years Retirement Strategy

Post by delamer »

willthrill81 wrote: Thu Aug 04, 2022 4:47 pm OP, I get your idea and had a similar one years ago when I proposed a strategy whereby one would split one's portfolio in two, one used to fund 'essential spending' and another to fund 'discretionary spending'.

Setting aside X amount of funds to pay for Y amount of expenses for Z number of years in addition to the assets and income streams needed to fund one's 'base' expenses before and after would likely be a simple means of achieving your desired result.
The more that you can annuitize your essential spending, the more sound footing you’ll be on. We are very fortunate to have pensions in addition to SS.

I know that SPIAs haven’t been popular on the forum in recent years due to low interest rates, but I would guess they are becoming better options now?

The mental trick is being willing to give up a chunk of your savings to guarantee that monthly income. That’s a hurdle that many people can’t get over.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

willthrill81 wrote: Thu Aug 04, 2022 4:47 pm OP, I get your idea and had a similar one years ago when I proposed a strategy whereby one would split one's portfolio in two, one used to fund 'essential spending' and another to fund 'discretionary spending'.

Setting aside X amount of funds to pay for Y amount of expenses for Z number of years in addition to the assets and income streams needed to fund one's 'base' expenses before and after would likely be a simple means of achieving your desired result.
I certainly don't think I've proposed anything profound or new. The only thing I haven't seen a lot of is trying to add reserves into the process.

I think the only difference is I've included a bunch of discretionary in the "essential" portfolio...partly because I'd rather baseline on a comfortable retirement than a minimal one and partly because if gives me more built in margin.

Also, because I plan on front loading spending the discretionary part isn't more aggressive since the time horizon is fairly low...

Are you still planning to do this or have you found something better?
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Re: Go-Go Years Retirement Strategy

Post by willthrill81 »

delamer wrote: Thu Aug 04, 2022 8:07 pm I know that SPIAs haven’t been popular on the forum in recent years due to low interest rates, but I would guess they are becoming better options now?
Nominal interest rates have improved somewhat, but inflation risk is high right now. We've seen that the inflation beast wasn't permanently tamed as many appeared to have believed it to be.
delamer wrote: Thu Aug 04, 2022 8:07 pm The mental trick is being willing to give up a chunk of your savings to guarantee that monthly income. That’s a hurdle that many people can’t get over.
Making an irrevocable decision to fork over a big chunk of one's portfolio for the promise of a future payment that's not adjusted to inflation is indeed a big hurdle.
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Re: Go-Go Years Retirement Strategy

Post by delamer »

willthrill81 wrote: Thu Aug 04, 2022 8:30 pm
delamer wrote: Thu Aug 04, 2022 8:07 pm I know that SPIAs haven’t been popular on the forum in recent years due to low interest rates, but I would guess they are becoming better options now?
Nominal interest rates have improved somewhat, but inflation risk is high right now. We've seen that the inflation beast wasn't permanently tamed as many appeared to have believed it to be.
delamer wrote: Thu Aug 04, 2022 8:07 pm The mental trick is being willing to give up a chunk of your savings to guarantee that monthly income. That’s a hurdle that many people can’t get over.
Making an irrevocable decision to fork over a big chunk of one's portfolio for the promise of a future payment that's not adjusted to inflation is indeed a big hurdle.
Aren’t there inflation-adjusted SPIAs that would mitigate that concern?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

delamer wrote: Thu Aug 04, 2022 8:46 pm Aren’t there inflation-adjusted SPIAs that would mitigate that concern?
Not any more. It turns out that accepting open ended inflation risk was a poor business decision...lol...
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Re: Go-Go Years Retirement Strategy

Post by willthrill81 »

nigel_ht wrote: Thu Aug 04, 2022 8:21 pm
willthrill81 wrote: Thu Aug 04, 2022 4:47 pm OP, I get your idea and had a similar one years ago when I proposed a strategy whereby one would split one's portfolio in two, one used to fund 'essential spending' and another to fund 'discretionary spending'.

Setting aside X amount of funds to pay for Y amount of expenses for Z number of years in addition to the assets and income streams needed to fund one's 'base' expenses before and after would likely be a simple means of achieving your desired result.
I certainly don't think I've proposed anything profound or new. The only thing I haven't seen a lot of is trying to add reserves into the process.

I think the only difference is I've included a bunch of discretionary in the "essential" portfolio...partly because I'd rather baseline on a comfortable retirement than a minimal one and partly because if gives me more built in margin.

Also, because I plan on front loading spending the discretionary part isn't more aggressive since the time horizon is fairly low...

Are you still planning to do this or have you found something better?
I'm still planning on doing this but in a different way. Rather than set aside funds for discretionary purposes, I'll have a target portfolio size when I reach age 70 and begin SS benefits, which should cover all our anticipated essential spending needs. That target will be the FV in the ABW method.
I have left the forum but occasionally check PMs.
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JoeRetire
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

nigel_ht wrote: Thu Aug 04, 2022 7:37 pm We looked at LTCI through work and they limit the duration to 2 years and it wasn't cheap..like $3000 a year...
There was a high probability we would pay $300K worth of premiums
:confused

Pay premiums for 100 years?
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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nigel_ht
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Re: Go-Go Years Retirement Strategy

Post by nigel_ht »

JoeRetire wrote: Fri Aug 05, 2022 6:06 am
nigel_ht wrote: Thu Aug 04, 2022 7:37 pm We looked at LTCI through work and they limit the duration to 2 years and it wasn't cheap..like $3000 a year...
There was a high probability we would pay $300K worth of premiums
:confused

Pay premiums for 100 years?
Hmmm. Nope, that’s not right. I’ll have to go back and look again.

Edit: it’s $7400 per year but that’s still only $74,000…and they now have a 5 year option ($365K max lifetime benefits) which is what I just priced.

Eh, might be worth doing but that’s over a year worth of nursing home care saved by the time we retire.
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JoeRetire
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Re: Go-Go Years Retirement Strategy

Post by JoeRetire »

nigel_ht wrote: Fri Aug 05, 2022 6:25 am
JoeRetire wrote: Fri Aug 05, 2022 6:06 am
nigel_ht wrote: Thu Aug 04, 2022 7:37 pm We looked at LTCI through work and they limit the duration to 2 years and it wasn't cheap..like $3000 a year...
There was a high probability we would pay $300K worth of premiums
:confused

Pay premiums for 100 years?
Hmmm. Nope, that’s not right. I’ll have to go back and look again.

Edit: it’s $7400 per year but that’s still only $74,000…and they now have a 5 year option ($365K max lifetime benefits) which is what I just priced.

Eh, might be worth doing but that’s over a year worth of nursing home care saved by the time we retire.
We were advised that the "sweet spot" for purchasing LTCi is just before turning 60.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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