First post from this retiree with questions - my daughter sent me here!

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jtdretiree
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First post from this retiree with questions - my daughter sent me here!

Post by jtdretiree » Tue Dec 05, 2017 9:25 am

Hello! This is my first post, I have some questions about my retirement accounts. My daughter is a member of the site and recommended that I join to ask the knowledgeable members of the forum for advice and help with my retirement accounts. :happy

Here is an overview of my current situation:

Age: turning 67 in January and in good health

Debt: None

Income
Retired
Social Security Disability Benefit: $23k annual
Small Pension Benefit: $3k annual

Assets:

Vanguard Traditional IRA
SP500 Index Fund Admiral: $77k (16.5%)
Total Bond Index Fund Admiral: $250k (53.2%)
Dividends are set to reinvest in this account.

Vanguard Taxable
Total Stock Index Admiral: $142k (30.3%)
I collect quarterly dividends from this account.

Cash
$30k

Home
$130k approximate value

Questions

1. How is my overall picture? I realize I'm not wealthy, but I hope to hear feedback that I'm doing OK overall to ease my mind. My biggest goal is to not be a financial burden to my children.

2. As noted above I am retired and on disability. I have been living off my social security, small pension, and the quarterly dividends from my taxable account, and I have been feeling that things are tight for me on a month-to-month basis. I try to avoid regularly going into my cash savings unless necessary. My daughter said that I should be OK to start taking some of my retirement nest egg money at this point, but I've been worried to start touching it as I don't know how I stand and am worried about running out of money (see number 1) so I have basically avoided taking anything from it other than the dividends. Is she right? I think I'd like to maybe take an additional $1000 a month. I wouldn't necessarily spend all of this...maybe tuck some away to buy Christmas presents for my family and save for larger purchases or maybe a vacation...but I just would also like to be able to go out for a nice dinner and not worry about it being close to the end of the month and I'm low on cash until my next SS check comes. I hope this makes sense to you all! Can anyone give me some guidance?

I appreciate any advice you all can give me.

Thank you.

TG2
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Re: First post from this retiree with questions - my daughter sent me here!

Post by TG2 » Tue Dec 05, 2017 2:38 pm

Well, in four years the choice is going to be made for you. RMD's will be right around the $12,000 per year that you want. But if you wish to start earlier than that I see no problem. It's a want, not something that you need to get by. And wasn't the idea of making your life better in retirement the purpose of building a nest egg in the first place? You don't destroy your future by taking small amounts now. Just don't take BIG amounts now. :D

miamivice
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Re: First post from this retiree with questions - my daughter sent me here!

Post by miamivice » Tue Dec 05, 2017 2:44 pm

I calculate you can probably spend withdraw $2,500 per month for the rest of your life from your retirement accounts.

Would $2,000 plus the monthly income you receive provide a nice retirement for you? If so, you are in good shape.

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TomatoTomahto
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Re: First post from this retiree with questions - my daughter sent me here!

Post by TomatoTomahto » Tue Dec 05, 2017 2:49 pm

More capable hands than mine will advise you, OP, but I did want to welcome you to the forum!

Good daughter that you raised; I sent my son this way recently. :D

Chip
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Chip » Tue Dec 05, 2017 2:49 pm

Hi, and welcome!

I agree with TG2. An extra $1000 a month, along with the dividends your spending would be about 15k per year draw from your portfolio, which is about 3.2%. That's certainly a reasonable amount at your age.

You should be aware that an additional 12k per year of income will cause you to pay a little bit in federal tax. But if you sell 12k of your Total Stock Market fund you probably will have much less income than 12k, as only the profit from the sale counts when figuring your taxes.

But once you start getting those RMDs that TG2 mentioned you probably will owe some tax. Those are probably 100% taxable for you.

P.S. Nice job in composing your first post in the recommended format!

TG2
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Re: First post from this retiree with questions - my daughter sent me here!

Post by TG2 » Tue Dec 05, 2017 3:05 pm

Given that the OP's top concern seems to be security, and that he doesn't need the money to get by, I'd suggest $2000 per month would be doable but maybe not above that. It's probably also going to make his SS benefits taxable so that should be taken into account when figuring what the ultimate numbers should be. He can really do whatever he wants, since he is unlikely (by his own account) to spend everything he withdraws. Having the bigger cushion either in savings or reinvested into his taxable account should ease his mind tremendously about enjoying his money a little bit. Go for it. You earned it, and that's what it's there for.

staythecourse
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Re: First post from this retiree with questions - my daughter sent me here!

Post by staythecourse » Tue Dec 05, 2017 3:07 pm

Most important questions that needs to be answered for a retiree is...

What are my monthly fixed expenses?
How much income do I bring in per month from: SS, pension, SPIA, disability, etc...
Is there a deficit? If there is then we start looking at you liquid investments. If not then you can just throw all the liquid investments in a simple portfolio according to your risk tolerance and future endeavors for said money after your die. Anywhere from 25-60% equities.
If there is a deficit I would consider taking some of that liquid investments and buy a SPIA or reverse home mortgage or some similar avenue to increase your income per month until there is no deficit. Part time job may not be an option in this case since you are disabled. Well maybe Uber depending on the disability.

That is the basics.

Good luck.

p.s. Again kudos to your daughter to pointing you in the right direction.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

delamer
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Re: First post from this retiree with questions - my daughter sent me here!

Post by delamer » Tue Dec 05, 2017 6:56 pm

There is a general rule that someone your age with your investments can take 4% from his portfolio in his first year of retirement. Then each year after that, he can increase the amount withdrawn by the rate of inflation.

Following this rule will make it extremely unlikely that you'll run out of money; in fact it is highly likely that you'll leave something for your heirs.

In your case you have $469,000 in investments, so that is $18,670 per year or $1556 per month. If inflation was 2% next year, then the yearly amount would go up $19,043 per year, and so on each year.

Note that this includes any dividends that you take, so if your dividends are now $250/month then you can add about $1300.

If you want to be a more conservative you could use 3% instead of 4%; if you want to be more aggressive you could use 5%.

Your investments are well chosen, so you are well ahead of a lot of retirees there.

So enjoy your money a little more, and good luck.

Good Listener
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Good Listener » Tue Dec 05, 2017 7:02 pm

I'm concerned about your disability. Is it life limiting because if so, you would want to avoid an annuity and would want to start taking social security asap right?

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cfs
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Re: First post from this retiree with questions - my daughter sent me here!

Post by cfs » Tue Dec 05, 2017 7:03 pm

Welcome aboard, your first post

Daughter knows best!

Wishing YOU and YOUR family a Merry Christmas, and thanks for reading.
~ Donating Member ~

mouses
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Re: First post from this retiree with questions - my daughter sent me here!

Post by mouses » Tue Dec 05, 2017 7:09 pm

When you say "I have been feeling that things are tight for me on a month-to-month basis. I try to avoid regularly going into my cash savings unless necessary." that sounds like you are not sure how much you are overrunning your "income." If you can figure that out, people can give better advice.

SimplicityNow
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Re: First post from this retiree with questions - my daughter sent me here!

Post by SimplicityNow » Tue Dec 05, 2017 8:24 pm

To give suggestions of what would be reasonable we would need more information. Specifically your monthly expenses.

The 4% withdrawal rate that other posters are mentioning is a result of a study that was done. It is not a rule but more a planning tool and it does not succeed 100% of the time especially with a portfolio that seems to be less then 50% stock. You have almost 470K invested in stocks and bond funds. Lets say the 30K is your emergency fund (home repairs, car repairs, etc.).

Under that 4% withdrawal rate scenario you could withdraw $18,800/yr adjusting for inflation and never run out of money over a 30 year retirement. That's including the dividends you are already withdrawing, not in addition to them.

There are however many things that can derail that scenario. The first is a poor sequence of returns. So if you start to withdraw and the market has a huge drop in the first year your failure rate would increase. Of course the wise person could adapt and withdraw less if they are able decreasing the risk of failure.

I would suggest reading up on safe withdrawal rates. There is a website (Earlyretirementnow.com) that has a lot of good information to consider. The writer there would suggest that a 4% withdrawal rate with your portfolio would be too aggressive I think.

The 1k /month you mention is probably a little over 2% including the dividends you are already withdrawing. That might be a reasonably conservative withdrawal rate with the limited information you have supplied.

TG2
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Re: First post from this retiree with questions - my daughter sent me here!

Post by TG2 » Tue Dec 05, 2017 9:17 pm

We actually do have most of the information we need. His income is $26,000 which he can get by on but it sometimes feels tight. That implies that his expenses are right around that. He would like to be able to take an extra $1000 per month to ease whatever stress he feels occasionally. With close to $500,000 in financial assets that is easily doable, and he'll be forced into that amount in four years regardless. I would argue that he should have been taking extra money from the IRA all along. He could take some amount per year from the IRA and his SS benefits would still not be taxable. That effectively means he has tax-free withdrawals up to that level, does it not, assuming that his dividends are not taxed as well?

There is no indication that he needs to or even would spend all of that money anyway. He could easily park it in savings or taxable accounts if he felt like he did not want to spend that much that month. I would rather be as tax-efficient as possible, getting money out of tax-deferred while paying little or nothing on it and putting it into taxable where only the gains are taxed. Better than leaving it tax-deferred and being forced to take out too much later on, which could at some point make SS taxable too.

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bottlecap
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Re: First post from this retiree with questions - my daughter sent me here!

Post by bottlecap » Tue Dec 05, 2017 9:23 pm

How about start taking $500 per month and see how you feel about it?

JT

Sandi_k
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Sandi_k » Tue Dec 05, 2017 9:47 pm

miamivice wrote:
Tue Dec 05, 2017 2:44 pm
I calculate you can probably spend withdraw $2,500 per month for the rest of your life from your retirement accounts.

Would $2,000 plus the monthly income you receive provide a nice retirement for you? If so, you are in good shape.
How did you calculate $30k per year from retirement accounts of $469k?

Most recommend between 3-4% as a Safe Withdrawal Rate. And in 4 years, the Required Minimum Distributions will be about 3.7%.

3% = $14k annually
3.7% = $17k annually
4% = nearly $19k annually.

How in the world do you recommend $30k annually??!!

miamivice
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Re: First post from this retiree with questions - my daughter sent me here!

Post by miamivice » Wed Dec 06, 2017 2:36 pm

Sandi_k wrote:
Tue Dec 05, 2017 9:47 pm
miamivice wrote:
Tue Dec 05, 2017 2:44 pm
I calculate you can probably spend withdraw $2,500 per month for the rest of your life from your retirement accounts.

Would $2,000 plus the monthly income you receive provide a nice retirement for you? If so, you are in good shape.
How did you calculate $30k per year from retirement accounts of $469k?

Most recommend between 3-4% as a Safe Withdrawal Rate. And in 4 years, the Required Minimum Distributions will be about 3.7%.

3% = $14k annually
3.7% = $17k annually
4% = nearly $19k annually.

How in the world do you recommend $30k annually??!!
I use Excel payment function. I put 4% in as annual return, 25 year duration, nothing left at the end. It pumps out $2,500 as the amount that one could withdraw each month.

=PMT(4%/12,300,469000,0)

CnC
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Re: First post from this retiree with questions - my daughter sent me here!

Post by CnC » Wed Dec 06, 2017 3:00 pm

I'll also chip in even though I am not adding anything new because when making decisions I know retirees like to hear many people saying the same thing.

It boosts confidence :mrgreen:


You are 67 and going to be forced to take RMD's Inna few years. No sense putting off feeling comfortable until then. RMD's are required distributions of your IRA that start at 70.

4% is a very safe rate which should last you untill you are 95+ years old.


So I would say you should comfortably be able to spend 45,000 a year. Including taxes.

$19,000 from investments 23,000 from social security and 3,000 from your pension.

Likely you could spend $50,000 a year but then the confidence of it lasting you past 90 years old decreases.

Dottie57
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Dottie57 » Wed Dec 06, 2017 9:57 pm

Sandi_k wrote:
Tue Dec 05, 2017 9:47 pm
miamivice wrote:
Tue Dec 05, 2017 2:44 pm
I calculate you can probably spend withdraw $2,500 per month for the rest of your life from your retirement accounts.

Would $2,000 plus the monthly income you receive provide a nice retirement for you? If so, you are in good shape.
How did you calculate $30k per year from retirement accounts of $469k?

Most recommend between 3-4% as a Safe Withdrawal Rate. And in 4 years, the Required Minimum Distributions will be about 3.7%.

3% = $14k annually
3.7% = $17k annually
4% = nearly $19k annually.

How in the world do you recommend $30k annually??!!
Pmt. is a payment for a loan. Not sure why it is used.

miamivice
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Re: First post from this retiree with questions - my daughter sent me here!

Post by miamivice » Thu Dec 07, 2017 10:06 am

Dottie57 wrote:
Wed Dec 06, 2017 9:57 pm
Sandi_k wrote:
Tue Dec 05, 2017 9:47 pm
miamivice wrote:
Tue Dec 05, 2017 2:44 pm
I calculate you can probably spend withdraw $2,500 per month for the rest of your life from your retirement accounts.

Would $2,000 plus the monthly income you receive provide a nice retirement for you? If so, you are in good shape.
How did you calculate $30k per year from retirement accounts of $469k?

Most recommend between 3-4% as a Safe Withdrawal Rate. And in 4 years, the Required Minimum Distributions will be about 3.7%.

3% = $14k annually
3.7% = $17k annually
4% = nearly $19k annually.

How in the world do you recommend $30k annually??!!
Pmt. is a payment for a loan. Not sure why it is used.
PMT will work for either paying off a loan or drawing down an investment account. Whether the initial

In this case, the PMT equation shows that a person can make 300 withdrawals of ~$2,500 from an investment, one per month, if the person receives a return of 4% on the investment.

The only downside of the PMT function is that it doesn't account for changing spending power. The $2,500 withdrawn today will purchase more goods/services than $2,500 in 20 years will. On the flip side, I think the spending requirements of a 90 year old are less than a 67 year old, so at the moment I don't consider trying to maintain spending power.

More powerful computation is available through FireCalc.org website, but the Excel PMT function is a quick check.

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Re: First post from this retiree with questions - my daughter sent me here!

Post by pkcrafter » Thu Dec 07, 2017 12:52 pm

miamivice, a 30k withdrawl is 6.3%. No, not a safe withdrawal rate. You used 25 years in your calculation and the SWR uses 30, but it's still a problem because the 4% growth you used isn't going to be even. In times when the market is down, a 6.3% withdrawal rate increases and could spin into a nonreversible decline.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

pkcrafter
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Re: First post from this retiree with questions - my daughter sent me here!

Post by pkcrafter » Thu Dec 07, 2017 12:52 pm

duplicate----------deleted
Last edited by pkcrafter on Thu Dec 07, 2017 7:48 pm, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

jtdretiree
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Re: First post from this retiree with questions - my daughter sent me here!

Post by jtdretiree » Thu Dec 07, 2017 1:21 pm

Thank you all very much for so many helpful responses!

I was thinking the same about the RMD starting when I turn 70 1/2 from my IRA, and found that it should be around $12k annually based on one of those calculators. So glad to hear that essentially starting this early from my taxable account will make OK sense based on my amount of savings!!

I would love to be able to leave my kids a chunk of change when I do go eventually...but they will tell me to spend it all on myself. So if I can land somewhere in between leaving them a big chunk and nothing, that will make me :happy

I have not added up exactly how much my bills and expenses are each month, but I do know that after I pay all of those and pay for groceries and other essentials, I'm left with very little at the end of the month to spend on non-essentials.

For example a month or 2 ago I was invited to go out with a lady friend I hadn't seen in a while to have dinner, but I decided to postpone it a week until after my next month's SS check came in so I wouldn't have to go into my savings account because I can't rationalize going into savings for a restaurant dinner. When my kids found out about this they "strongly" suggested I loosen up and make myself more comfortable. And finally I think they're right. So that's what I'm trying to do now at this point.

miamivice
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Re: First post from this retiree with questions - my daughter sent me here!

Post by miamivice » Thu Dec 07, 2017 1:38 pm

pkcrafter wrote:
Thu Dec 07, 2017 12:52 pm
miamivice, a 30k withdrawl is 6.3%. No, not a safe withdrawal rate. You used 25 years in your calculation and the SWR uses 30, but it's still a problem because the 4% growth you used isn't going to be even. In times when the market is down, a 6.3% withdrawal rate increases and could spin into a nonreversible decline.

Paul
Paul, it's how I run my calculations. I also put the numbers into FireCalc.com and it shows a 93% probability of success (using their default portfolio and zeroing out inflation - meaning purchasing power decreases over time). Using my portfolio allocations, the probability of success increases to 100%.

I know that a lot of Bogleheads believe in way lower safe withdrawal rates, but it's my belief that a 3% or 4% SWR means that one will exit life with a lot in the bank. This may or may not be desireable.

One can debate the length of time needed to spend the money, but I think 25 years is fine for a 67 year old. The chance a 67 year old makes it to 97 is small.

For comparison, many people here said $1,000 a month in spending. FireCalc estimates that this spending rate will cause the portfolio will rise to a couple million. This may or may not be what the OP wants.

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Meg77
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Meg77 » Thu Dec 07, 2017 1:51 pm

A very easy and appropriate first step would just be to stop reinvesting the dividends in your other account. The yield on your bond fund alone will give you another $520 a month based on the current 2.52% yield. That is a nice cushion for entertainment and some fun money.

If all you do is take the income from your investments, you'll never run out of money because you won't be selling the underlying investments. While you can technically afford to do that too, I might try to avoid it for as long as possible so that you have a big pot to dip into when large expenses inevitably hit - major home repairs, hospitalization or other medical issue, need a new vehicle, etc.
"An investment in knowledge pays the best interest." - Benjamin Franklin

SimplicityNow
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Re: First post from this retiree with questions - my daughter sent me here!

Post by SimplicityNow » Thu Dec 07, 2017 2:05 pm

jtdretiree wrote:
Thu Dec 07, 2017 1:21 pm
Thank you all very much for so many helpful responses!

I was thinking the same about the RMD starting when I turn 70 1/2 from my IRA, and found that it should be around $12k annually based on one of those calculators. So glad to hear that essentially starting this early from my taxable account will make OK sense based on my amount of savings!!

I would love to be able to leave my kids a chunk of change when I do go eventually...but they will tell me to spend it all on myself. So if I can land somewhere in between leaving them a big chunk and nothing, that will make me :happy

I have not added up exactly how much my bills and expenses are each month, but I do know that after I pay all of those and pay for groceries and other essentials, I'm left with very little at the end of the month to spend on non-essentials.

For example a month or 2 ago I was invited to go out with a lady friend I hadn't seen in a while to have dinner, but I decided to postpone it a week until after my next month's SS check came in so I wouldn't have to go into my savings account because I can't rationalize going into savings for a restaurant dinner. When my kids found out about this they "strongly" suggested I loosen up and make myself more comfortable. And finally I think they're right. So that's what I'm trying to do now at this point.
I agree with your kids. The reason you work so hard and saved was so you CAN go out with your lady friend and have a nice dinner. It is good to be frugal but not to the point where you always have to say no. As I mentioned in my prior post. If you read up on the links I gave you, they should give you enough confidence in how much additional you can spend and the amount that makes YOU feel comfortable and able to sleep well at night.

onthecusp
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Re: First post from this retiree with questions - my daughter sent me here!

Post by onthecusp » Thu Dec 07, 2017 2:32 pm

Just agreeing with everyone here. I can be king of the complicated answers but for contrast:

You are in great shape given your current spending habits.
Start taking an extra $1000/month from your IRA and adding it to savings.
Spend like you do now, but don't put off those dinners if you don't want to.
If you need a new car or house repairs take it from the IRA and/or taxable if you have not built up an excess in the savings account.

If you want to spend even more, you could, but take it easy for now and pursue some of the learning opportunities mentioned above up to your level of interest first.

Welcome!

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Sheepdog
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Sheepdog » Thu Dec 07, 2017 4:03 pm

You should know what your spending is now. Is that what you would like to have coming in? If you would like some more, make a note of that in addition. You show that you know what your income is now (not including from investments.) Subtract that income from what your expenses you wish to meet and that is the amount that you would like to have from your investments.

Expenses minus income = needed investment return.
You should be fine.

Here is my history to show what I did when I was to retire in 1998 which may give you ideas and hopefully some comfort?

You have $501K for one person. 19 years ago at retirement, I had $640K for two with no pension plus SS for me and SS for my wife which was about 1/4 of mine to live on. I had a record of spending the last 2 to 3 years before retiring which included a new car, some foreign travel, and other spending likely to continue. I neglected federal taxes in that calculation because I knew that my taxes in retirement would be considerably less. My planned goal at retirement was a withdrawal from investments of 4.5% a year, NOT adjusted for inflation. (Have more we could spend more. Have less, we would have to try to spend less.) That has worked for our lifestyle....good living, house maintenance, new autos for my wife and me on regular basis, nice vacations and cruises, sports and entertainment, etc. Actual annual withdrawals have been variable (3.11% to 7.52% a year) to meet market performance and spending needs and wants, but the average actual withdrawal over 18 years is very close (4.59%) to my 4.5% planned average. My investments have been very conservative in retirement (100 minus my age in stock, but has been 23% stock since 2010) Our investments have grown to $1MM after those withdrawals. We will not run out.
People should not say everything they think. They should think about everything they say.

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TheGreyingDuke
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Re: First post from this retiree with questions - my daughter sent me here!

Post by TheGreyingDuke » Thu Dec 07, 2017 4:11 pm

I am wondering why it has not been suggested that OP do some TIRA-Roth conversions. I can see one concern would be the Social Security "cliff", not an area that I have paid much attention to and not sure if disability social security is affected in the same way.

Otherwise might not such a move make sense? What would be the other concerns?
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells

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Sheepdog
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Sheepdog » Thu Dec 07, 2017 4:14 pm

TheGreyingDuke wrote:
Thu Dec 07, 2017 4:11 pm
I am wondering why it has not been suggested that OP do some TIRA-Roth conversions. I can see one concern would be the Social Security "cliff", not an area that I have paid much attention to and not sure if disability social security is affected in the same way.

Otherwise might not such a move make sense? What would be the other concerns?
It is right that you brought that up. I did conversions when I retired....4.5% of my investment total each year for the first 5 years before RMDs would start. It was not much of a tax burden for the benefit I am receiving now.
People should not say everything they think. They should think about everything they say.

Thesaints
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Re: First post from this retiree with questions - my daughter sent me here!

Post by Thesaints » Thu Dec 07, 2017 4:27 pm

You have a 26k income and about 500k in assets. I'm assuming your home is paid for.

At age 67 residual life expectancy is about 16 years. You say you are in good health (but on disability ?) so you should factor at least twice that number of years.
4% rule in the present market is completely out of place. I would not use it for anything longer than 25 years. I'd say you would be a lot less exposed using a 3.5%, if not a 3% return.
3% return from 500k is another 15k, but you can't withdraw that much safely while keeping your present asset allocation; too many bonds.

You write that you would like an extra 12k/year. How much is your portfolio currently providing you in dividends ? I would estimate not a lot above 10k/year.
To get 25k instead it would require a 5% withdrawal rate, which in your case is not advisable (risk of running out of money).
You have the option of buying an annuity, though, which will pay you more than that at the price of relinquishing all, or almost all, of your capital.
That leaves the door open to unforeseeable emergencies which could be disastrous in the absence of any cushioning assets.

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David Jay
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Re: First post from this retiree with questions - my daughter sent me here!

Post by David Jay » Thu Dec 07, 2017 4:33 pm

TheGreyingDuke wrote:
Thu Dec 07, 2017 4:11 pm
I am wondering why it has not been suggested that OP do some TIRA-Roth conversions. I can see one concern would be the Social Security "cliff", not an area that I have paid much attention to and not sure if disability social security is affected in the same way.

Otherwise might not such a move make sense? What would be the other concerns?
Your RMD percentage goes up over time, nominally based on your life expectancy (the IRS would prefer that you to pay all of those deferred taxes before you pass on but they can't determine your longevity in advance). For instance, RMD percentage is 9.3% at age 90. So your RMDs (and thus taxable income) can become quite large in later years, bumping you up into higher tax brackets. Moving some of that money to Roth in the earlier years at lower rates reduces the impact of the higher RMD rates in the later years.

Doing Roth conversions can even make sense after the start of RMD withdrawals, thread here: viewtopic.php?t=224985
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Thesaints
Posts: 939
Joined: Tue Jun 20, 2017 12:25 am

Re: First post from this retiree with questions - my daughter sent me here!

Post by Thesaints » Thu Dec 07, 2017 4:43 pm

Sheepdog wrote:
Thu Dec 07, 2017 4:03 pm
My planned goal at retirement was a withdrawal from investments of 4.5% a year, NOT adjusted for inflation. (Have more we could spend more. Have less, we would have to try to spend less.) That has worked for our lifestyle....good living, house maintenance, new autos for my wife and me on regular basis, nice vacations and cruises, sports and entertainment, etc. Actual annual withdrawals have been variable (3.11% to 7.52% a year) to meet market performance and spending needs and wants, but the average actual withdrawal over 18 years is very close (4.59%) to my 4.5% planned average. My investments have been very conservative in retirement (100 minus my age in stock, but has been 23% stock since 2010) Our investments have grown to $1MM after those withdrawals. We will not run out.
It certainly worked very well when inflation was low (to use an euphemism) and vanguard balanced index fund returned 7%/year...

cherijoh
Posts: 4067
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: First post from this retiree with questions - my daughter sent me here!

Post by cherijoh » Thu Dec 07, 2017 8:08 pm

miamivice wrote:
Thu Dec 07, 2017 10:06 am
Dottie57 wrote:
Wed Dec 06, 2017 9:57 pm
Sandi_k wrote:
Tue Dec 05, 2017 9:47 pm
miamivice wrote:
Tue Dec 05, 2017 2:44 pm
I calculate you can probably spend withdraw $2,500 per month for the rest of your life from your retirement accounts.

Would $2,000 plus the monthly income you receive provide a nice retirement for you? If so, you are in good shape.
How did you calculate $30k per year from retirement accounts of $469k?

Most recommend between 3-4% as a Safe Withdrawal Rate. And in 4 years, the Required Minimum Distributions will be about 3.7%.

3% = $14k annually
3.7% = $17k annually
4% = nearly $19k annually.

How in the world do you recommend $30k annually??!!
Pmt. is a payment for a loan. Not sure why it is used.
PMT will work for either paying off a loan or drawing down an investment account. Whether the initial

In this case, the PMT equation shows that a person can make 300 withdrawals of ~$2,500 from an investment, one per month, if the person receives a return of 4% on the investment.

The only downside of the PMT function is that it doesn't account for changing spending power. The $2,500 withdrawn today will purchase more goods/services than $2,500 in 20 years will. On the flip side, I think the spending requirements of a 90 year old are less than a 67 year old, so at the moment I don't consider trying to maintain spending power.

More powerful computation is available through FireCalc.org website, but the Excel PMT function is a quick check.
You have also ignored the fact that to earn an average of 4% return in the current interest rate environment you have to take a good deal of risk - which means that the OP would have to risk losing a chunk of principal in a stock market downturn!

The reason why the PMT function is most often used for payments is because it is much more likely that the interest rate is know in advance for the entire period of the loan. The same is not true for most investments. IMO its use is NOT appropriate for the circumstances outlined by the OP.

printer86
Posts: 58
Joined: Mon Apr 25, 2016 8:45 am

Re: First post from this retiree with questions - my daughter sent me here!

Post by printer86 » Thu Dec 07, 2017 10:46 pm

Thesaints wrote:
Thu Dec 07, 2017 4:43 pm
Sheepdog wrote:
Thu Dec 07, 2017 4:03 pm
My planned goal at retirement was a withdrawal from investments of 4.5% a year, NOT adjusted for inflation. (Have more we could spend more. Have less, we would have to try to spend less.) That has worked for our lifestyle....good living, house maintenance, new autos for my wife and me on regular basis, nice vacations and cruises, sports and entertainment, etc. Actual annual withdrawals have been variable (3.11% to 7.52% a year) to meet market performance and spending needs and wants, but the average actual withdrawal over 18 years is very close (4.59%) to my 4.5% planned average. My investments have been very conservative in retirement (100 minus my age in stock, but has been 23% stock since 2010) Our investments have grown to $1MM after those withdrawals. We will not run out.
It certainly worked very well when inflation was low (to use an euphemism) and vanguard balanced index fund returned 7%/year...
Yeah, but you should read Sheepdog’s thread from the 2008 crash. It should be required reading for investors. I’m so happy to see Sheepdog still posting here and doing well. He is a true Boglehead survivor. All the best Sheepdog. And to the original poster, welcome. You can learn a lot here and build a smart retirement withdrawal strategy from these folks.

naha66
Posts: 139
Joined: Sun Jul 14, 2013 6:02 pm

Re: First post from this retiree with questions - my daughter sent me here!

Post by naha66 » Sat Dec 09, 2017 1:44 am

Thesaints wrote:
Thu Dec 07, 2017 4:27 pm
You have a 26k income and about 500k in assets. I'm assuming your home is paid for.

At age 67 residual life expectancy is about 16 years. You say you are in good health (but on disability ?) so you should factor at least twice that number of years.
4% rule in the present market is completely out of place. I would not use it for anything longer than 25 years. I'd say you would be a lot less exposed using a 3.5%, if not a 3% return.
3% return from 500k is another 15k, but you can't withdraw that much safely while keeping your present asset allocation; too many bonds.

You write that you would like an extra 12k/year. How much is your portfolio currently providing you in dividends ? I would estimate not a lot above 10k/year.
To get 25k instead it would require a 5% withdrawal rate, which in your case is not advisable (risk of running out of money).
You have the option of buying an annuity, though, which will pay you more than that at the price of relinquishing all, or almost all, of your capital.
That leaves the door open to unforeseeable emergencies which could be disastrous in the absence of any cushioning assets.
Really to 99 years, :sharebeer

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