## Calculating amount needed for SS bridge

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Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Calculating amount needed for SS bridge

I am planning to bridge SS from 55 to 70. My SS @ 70 will be \$54,000 in 2018 dollars. In my spreadsheet right now, I simply multiply \$54,000 x 15 years to get my bridge amount of \$810,000. I did not consider any earnings on that amount when determining the amount needed. I guess that means I am assuming a 0% real return? That seems too conservative for me. The \$810,000 just comes out of my 60/40 portfolio and I sure hope it makes more than 0% real over those 15 years.

I would like to ask your thoughts on how to determine a reasonable guesstimate for the bridge amount. If mine is reasonable I will stick with it. The reason I am asking is my SS+COLA Pension cover all of my expenses and anything left is available to blow that dough or cover SOR.

Thanks,

Corn
Don't do something, just stand there!

JoeRetire
Posts: 2447
Joined: Tue Jan 16, 2018 2:44 pm

### Re: Calculating amount needed for SS bridge

corn18 wrote:
Tue Oct 09, 2018 5:00 pm
I am planning to bridge SS from 55 to 70. My SS @ 70 will be \$54,000 in 2018 dollars. In my spreadsheet right now, I simply multiply \$54,000 x 15 years to get my bridge amount of \$810,000.
I don't think I understand the point.

You cannot collect \$54,000 at age 55 (or 62 or 67).

Is that the amount of money you need annually for each of the next 15 years to cover expenses?

Silk McCue
Posts: 2412
Joined: Thu Feb 25, 2016 7:11 pm

### Re: Calculating amount needed for SS bridge

I don’t believe it’s possible to get \$54k in 2018 dollars for a maxed out Social Security benefit at age 70. I think the current max at age 70 is \$3698 per month, or \$44,376 per year.

You might want to recheck your numbers.

Cheers

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

JoeRetire wrote:
Tue Oct 09, 2018 5:34 pm
corn18 wrote:
Tue Oct 09, 2018 5:00 pm
I am planning to bridge SS from 55 to 70. My SS @ 70 will be \$54,000 in 2018 dollars. In my spreadsheet right now, I simply multiply \$54,000 x 15 years to get my bridge amount of \$810,000.
I don't think I understand the point.

You cannot collect \$54,000 at age 55 (or 62 or 67).

Is that the amount of money you need annually for each of the next 15 years to cover expenses?
Affirmative.

COLA Pension = \$45,000 / yr
SS @ 70 = \$54,000 / yr

I want a base income of \$98,000 / year starting at age 55. Thus the bridge to 70. How much do I need for the bridge? \$54,000 x 15 years is \$810,000. If I assume a 2% real return, the amount needed goes down to \$695,000.
Don't do something, just stand there!

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

Silk McCue wrote:
Tue Oct 09, 2018 5:36 pm
I don’t believe it’s possible to get \$54k in 2018 dollars for a maxed out Social Security benefit at age 70. I think the current max at age 70 is \$3698 per month, or \$44,376 per year.

You might want to recheck your numbers.

Cheers
Sorry, forgot to say this includes spousal benefits.
Don't do something, just stand there!

JoeRetire
Posts: 2447
Joined: Tue Jan 16, 2018 2:44 pm

### Re: Calculating amount needed for SS bridge

corn18 wrote:
Tue Oct 09, 2018 5:39 pm
JoeRetire wrote:
Tue Oct 09, 2018 5:34 pm
corn18 wrote:
Tue Oct 09, 2018 5:00 pm
I am planning to bridge SS from 55 to 70. My SS @ 70 will be \$54,000 in 2018 dollars. In my spreadsheet right now, I simply multiply \$54,000 x 15 years to get my bridge amount of \$810,000.
I don't think I understand the point.

You cannot collect \$54,000 at age 55 (or 62 or 67).

Is that the amount of money you need annually for each of the next 15 years to cover expenses?
Affirmative.

COLA Pension = \$45,000 / yr
SS @ 70 = \$54,000 / yr

I want a base income of \$98,000 / year starting at age 55. Thus the bridge to 70. How much do I need for the bridge? \$54,000 x 15 years is \$810,000. If I assume a 2% real return, the amount needed goes down to \$695,000.
When does the COLAed pension kick in?

It seems odd to calculate what you need at 55 based on what you'll get at 70. To me that seems backwards.
Last edited by JoeRetire on Tue Oct 09, 2018 5:43 pm, edited 1 time in total.

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

JoeRetire wrote:
Tue Oct 09, 2018 5:41 pm
corn18 wrote:
Tue Oct 09, 2018 5:39 pm
JoeRetire wrote:
Tue Oct 09, 2018 5:34 pm
corn18 wrote:
Tue Oct 09, 2018 5:00 pm
I am planning to bridge SS from 55 to 70. My SS @ 70 will be \$54,000 in 2018 dollars. In my spreadsheet right now, I simply multiply \$54,000 x 15 years to get my bridge amount of \$810,000.
I don't think I understand the point.

You cannot collect \$54,000 at age 55 (or 62 or 67).

Is that the amount of money you need annually for each of the next 15 years to cover expenses?
Affirmative.

COLA Pension = \$45,000 / yr
SS @ 70 = \$54,000 / yr

I want a base income of \$98,000 / year starting at age 55. Thus the bridge to 70. How much do I need for the bridge? \$54,000 x 15 years is \$810,000. If I assume a 2% real return, the amount needed goes down to \$695,000.
When does the COLAed pension kick in?
I have been receiving it since age 42 (52 now). Military pension.
Don't do something, just stand there!

dknightd
Posts: 1639
Joined: Wed Mar 07, 2018 11:57 am

### Re: Calculating amount needed for SS bridge

When calculating my bridge amount I assume -3% real return. Yep negative in real dollars.
I have my bridge in MM and short term bonds. I assume they will earn a little bit, but not much.
I assume inflation will be about 3%. So for planning purposes I assume -3%. If it comes out better than that I'll smile and be happy

I'm bridging 61-70. So not quite as many years as you. You might want to be more aggressive since you will not need some of that money for 15 years.

When it comes to future rates of return I always err on the side of caution. It is better to be better off than worse off.
0% real over 15 years is not an unreasonable guess IMO. I'd be happy if safe investments kept up with inflation.

galeno
Posts: 1548
Joined: Fri Dec 21, 2007 12:06 pm

### Re: Calculating amount needed for SS bridge

Use the SEC Yield of a 20 yr TIPS as your discount rate. Today it's 1.11%.

Here's an article that explains why:

https://obliviousinvestor.com/claiming- ... we-assume/

Are you going to exchange a portion of your portfolio for a TIPS ETF with an average duration of 20 years? Or build a 15 year ladder of individual TIPS and cash one in every year?
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

galeno wrote:
Tue Oct 09, 2018 6:24 pm
Use the SEC Yield of a 20 yr TIPS as your discount rate. Today it's 1.11%.

Here's an article that explains why:

https://obliviousinvestor.com/claiming- ... we-assume/

Are you going to exchange a portion of your portfolio for a TIPS ETF with an average duration of 20 years? Or build a 15 year ladder of individual TIPS and cash one in every year?
I might just put it all in the TSP G fund, but haven't decided yet.
Don't do something, just stand there!

CRTR
Posts: 217
Joined: Sat Apr 11, 2015 1:15 pm

### Re: Calculating amount needed for SS bridge

Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
Last edited by CRTR on Tue Oct 09, 2018 6:34 pm, edited 1 time in total.

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

CRTR wrote:
Tue Oct 09, 2018 6:29 pm
For \$660K, you can get a 15 year, period certain, immediate annuity that will pay \$4500/month, with COL increases indexed to CPI
Dang, that's a 2.7% real rate, if my math is correct. I hadn't thought of annuatizing the bridge, but maybe I should.
Don't do something, just stand there!

CRTR
Posts: 217
Joined: Sat Apr 11, 2015 1:15 pm

### Re: Calculating amount needed for SS bridge

corn18 wrote:
Tue Oct 09, 2018 6:33 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
For \$660K, you can get a 15 year, period certain, immediate annuity that will pay \$4500/month, with COL increases indexed to CPI
Dang, that's a 2.7% real rate, if my math is correct. I hadn't thought of annuatizing the bridge, but maybe I should.
www.immediateannuities.com is a good place to start . . . .

TravelforFun
Posts: 1759
Joined: Tue Dec 04, 2012 11:05 pm

### Re: Calculating amount needed for SS bridge

CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
For bridge amount, I would assume 0% real return i.e. my return would just keep up with inflation.

Investing in an annuity would reduce the size of the bridge amount but you'd lose if you died early.

TravelforFun

delamer
Posts: 7866
Joined: Tue Feb 08, 2011 6:13 pm

### Re: Calculating amount needed for SS bridge

corn18 wrote:
Tue Oct 09, 2018 6:33 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
For \$660K, you can get a 15 year, period certain, immediate annuity that will pay \$4500/month, with COL increases indexed to CPI
Dang, that's a 2.7% real rate, if my math is correct. I hadn't thought of annuatizing the bridge, but maybe I should.
It depends in part on what you’d have in savings after annuitizing your bridge, but I’d hesitate to annuitize the whole bridge.

This is especially true given the relatively low interest rates now.

The G fund is a good option.

blastoff
Posts: 242
Joined: Thu Jan 19, 2012 12:04 pm

### Re: Calculating amount needed for SS bridge

corn18 wrote:
Tue Oct 09, 2018 5:43 pm
JoeRetire wrote:
Tue Oct 09, 2018 5:41 pm
corn18 wrote:
Tue Oct 09, 2018 5:39 pm
JoeRetire wrote:
Tue Oct 09, 2018 5:34 pm
corn18 wrote:
Tue Oct 09, 2018 5:00 pm
I am planning to bridge SS from 55 to 70. My SS @ 70 will be \$54,000 in 2018 dollars. In my spreadsheet right now, I simply multiply \$54,000 x 15 years to get my bridge amount of \$810,000.
I don't think I understand the point.

You cannot collect \$54,000 at age 55 (or 62 or 67).

Is that the amount of money you need annually for each of the next 15 years to cover expenses?
Affirmative.

COLA Pension = \$45,000 / yr
SS @ 70 = \$54,000 / yr

I want a base income of \$98,000 / year starting at age 55. Thus the bridge to 70. How much do I need for the bridge? \$54,000 x 15 years is \$810,000. If I assume a 2% real return, the amount needed goes down to \$695,000.
When does the COLAed pension kick in?
I have been receiving it since age 42 (52 now). Military pension.
Are you retired now or plan to retire soon?

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

blastoff wrote:
Tue Oct 09, 2018 6:51 pm
Are you retired now or plan to retire soon?
I retired from the Navy in 2008 and went to megacorp. 52, now, might retire (for good) at 55 or 56.
Don't do something, just stand there!

David Jay
Posts: 6560
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

### Re: Calculating amount needed for SS bridge

Silk McCue wrote:
Tue Oct 09, 2018 5:36 pm
I don’t believe it’s possible to get \$54k in 2018 dollars for a maxed out Social Security benefit at age 70. I think the current max at age 70 is \$3698 per month, or \$44,376 per year.
I come up with about a \$64,000 max family benefit for someone born in 1956 (the latest year for which an AWI is available) with one 35 year max-out and one spousal benefit. That is roughly a \$46,000 age 70 benefit + \$18,000 spousal benefit. Reference here: https://bogleheads.org/forum/viewtopic. ... 0&t=230506
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

dknightd
Posts: 1639
Joined: Wed Mar 07, 2018 11:57 am

### Re: Calculating amount needed for SS bridge

CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
where?

galeno
Posts: 1548
Joined: Fri Dec 21, 2007 12:06 pm

### Re: Calculating amount needed for SS bridge

We have a bridge of 10 years until my wife and I receive our pensions. We compensate by counting the NPV of our pensions as fixed income (annuity) in our retirement portfolio and OVERWITHDRAWING for 10 years.

Our port w/o pension: \$40/\$60/\$0 = \$100. 95%SWR for 30 years = 3.9%

Our port w pension: \$40/\$60/\$20 = \$120. 95%SWR for 30 years = 4.4% (of \$100).

Once the pensions begin we cut back our annual withdrawals in the same amount as our pensions.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

David Jay
Posts: 6560
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

### Re: Calculating amount needed for SS bridge

dknightd wrote:
Tue Oct 09, 2018 6:57 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
where?
I believe that only Principle still writes an SPIA with true COLA. I do not know if they will write it as 15 year date certain.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

David Jay wrote:
Tue Oct 09, 2018 7:09 pm
dknightd wrote:
Tue Oct 09, 2018 6:57 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
where?
I believe that only Principle still writes an SPIA with true COLA. I do not know if they will write it as 15 year date certain.
immediate annuities shows a NON COLA for \$646,000 15 year period certain \$54k / yr. Not sure what a COLA would cost for 15 years, but it would cost something.
Last edited by corn18 on Tue Oct 09, 2018 7:22 pm, edited 2 times in total.
Don't do something, just stand there!

Silk McCue
Posts: 2412
Joined: Thu Feb 25, 2016 7:11 pm

### Re: Calculating amount needed for SS bridge

David Jay wrote:
Tue Oct 09, 2018 6:57 pm
Silk McCue wrote:
Tue Oct 09, 2018 5:36 pm
I don’t believe it’s possible to get \$54k in 2018 dollars for a maxed out Social Security benefit at age 70. I think the current max at age 70 is \$3698 per month, or \$44,376 per year.
I come up with about a \$64,000 max family benefit for someone born in 1956 (the latest year for which an AWI is available) with one 35 year max-out and one spousal benefit. That is roughly a \$46,000 age 70 benefit + \$18,000 spousal benefit. Reference here: https://bogleheads.org/forum/viewtopic. ... 0&t=230506
The OP did not mention a spouse in the original post and acknowledged that after I made my post.

Cheers

galeno
Posts: 1548
Joined: Fri Dec 21, 2007 12:06 pm

### Re: Calculating amount needed for SS bridge

It's cheaper and simpler for the OP to annuitize those 15 years by exchanging part of his portfolio a 20 yr TIP ETF. Or by using a 15 year ladder of individual TIPS.

Unless the annuity is from Vanguard I wouldn't trust it. Too many legal ways for the insurance company to "cheat".

My way is to use www.firecalc.com and calculate the 95%SWR for our port w/o counting pensions and counting pensions.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

David Jay
Posts: 6560
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

### Re: Calculating amount needed for SS bridge

Silk McCue wrote:
Tue Oct 09, 2018 7:21 pm
David Jay wrote:
Tue Oct 09, 2018 6:57 pm
Silk McCue wrote:
Tue Oct 09, 2018 5:36 pm
I don’t believe it’s possible to get \$54k in 2018 dollars for a maxed out Social Security benefit at age 70. I think the current max at age 70 is \$3698 per month, or \$44,376 per year.
I come up with about a \$64,000 max family benefit for someone born in 1956 (the latest year for which an AWI is available) with one 35 year max-out and one spousal benefit. That is roughly a \$46,000 age 70 benefit + \$18,000 spousal benefit. Reference here: https://bogleheads.org/forum/viewtopic. ... 0&t=230506
The OP did not mention a spouse in the original post and acknowledged that after I made my post.

Cheers
Yea, the biggest problem with these “maximum benefit” numbers is that they are highly dependent on the year of PIA calculation (year in which one turns 60).

I am a ‘57 baby so I am waiting anxiously for the 2017 AWI - should be out later this month...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

TravelforFun wrote:
Tue Oct 09, 2018 6:41 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
For bridge amount, I would assume 0% real return i.e. my return would just keep up with inflation.

Investing in an annuity would reduce the size of the bridge amount but you'd lose if you died early.

TravelforFun
The quote I got from immediate annuity is for 15 year period certain with 100% payout even if I die. Not that I like it, but if I die early, my wife still gets the annuity balance.
Don't do something, just stand there!

grabiner
Posts: 24402
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

### Re: Calculating amount needed for SS bridge

galeno wrote:
Tue Oct 09, 2018 6:24 pm
Use the SEC Yield of a 20 yr TIPS as your discount rate. Today it's 1.11%.

Here's an article that explains why:

https://obliviousinvestor.com/claiming- ... we-assume/
While I agree with this discounting idea, I wouldn't use a 20-year TIPS. At age 55, you could buy a 15-year TIPS ladder to cover the next 15 years, but that ladder would have a 7-year duration. If you buy the ladder now (at age 52), it has a 10-year duration.
David Grabiner

inbox788
Posts: 6388
Joined: Thu Mar 15, 2012 5:24 pm

### Re: Calculating amount needed for SS bridge

dknightd wrote:
Tue Oct 09, 2018 6:57 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
where?
You could look into one of these "build your own annuity" strategies.

viewtopic.php?t=110799
viewtopic.php?t=59918
https://www.cbsnews.com/news/build-your-own-annuity/

I came across one using EE savings bonds that double in 20 years, but you have to start 20 years before your need it. Supposedly it's about 3.5% return.

GuyInFL
Posts: 182
Joined: Thu Aug 04, 2016 7:17 pm

### Re: Calculating amount needed for SS bridge

corn18 wrote
COLA Pension = \$45,000 / yr
SS @ 70 = \$54,000 / yr
\$810K for a bridge is a lot of money.
I've thought about this for myself and considered reducing the bridge to \$30,000/yr * 15 yr = 450K. That gives you \$30K + \$45K = \$75K / year base and then fund the additional \$23K (\$98K - \$75K) using a fixed or variable withdrawal rate. Assuming you've got some fluff in the 98K budget, you could probably go with somewhere between 4 and 5%.

At 70, the 450K would be gone, assuming 0% real growth rate
Assuming a 5% withdrawal rate to get the 23K requires 23K/.05 = 460K
Running the scenario through firecalc...
460K @ 5% withdrawal rate with 75% Equities/ 25% Fixed yields
100% success and average balance of 539K at 70. (Min of 32K, Max of \$1.5M)
This requires 450K + 460K = 910K instead of the \$810K, but on average works out pretty well (100K needs a rate of return of 12% to get to 539K).
If you end up working to 57, the 450K drops to \$390K for the bridge and the withdrawal rate can likely be reduced which increases the \$ at 70.
Thoughts?

dknightd
Posts: 1639
Joined: Wed Mar 07, 2018 11:57 am

### Re: Calculating amount needed for SS bridge

inbox788 wrote:
Tue Oct 09, 2018 8:23 pm
dknightd wrote:
Tue Oct 09, 2018 6:57 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
where?
You could look into one of these "build your own annuity" strategies.

viewtopic.php?t=110799
viewtopic.php?t=59918
https://www.cbsnews.com/news/build-your-own-annuity/

I came across one using EE savings bonds that double in 20 years, but you have to start 20 years before your need it. Supposedly it's about 3.5% return.

Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

GuyInFL wrote:
Tue Oct 09, 2018 8:55 pm
corn18 wrote
COLA Pension = \$45,000 / yr
SS @ 70 = \$54,000 / yr
\$810K for a bridge is a lot of money.
I've thought about this for myself and considered reducing the bridge to \$30,000/yr * 15 yr = 450K. That gives you \$30K + \$45K = \$75K / year base and then fund the additional \$23K (\$98K - \$75K) using a fixed or variable withdrawal rate. Assuming you've got some fluff in the 98K budget, you could probably go with somewhere between 4 and 5%.

At 70, the 450K would be gone, assuming 0% real growth rate
Assuming a 5% withdrawal rate to get the 23K requires 23K/.05 = 460K
Running the scenario through firecalc...
460K @ 5% withdrawal rate with 75% Equities/ 25% Fixed yields
100% success and average balance of 539K at 70. (Min of 32K, Max of \$1.5M)
This requires 450K + 460K = 910K instead of the \$810K, but on average works out pretty well (100K needs a rate of return of 12% to get to 539K).
If you end up working to 57, the 450K drops to \$390K for the bridge and the withdrawal rate can likely be reduced which increases the \$ at 70.
Thoughts?
I think I am kindof doing that at the \$98k level. I should have \$2M in my portfolio @ age 55. The bridge to SS is just to establish a base @ \$98k which covers all expenses with fluff. The portfolio left after the bridge is for blowing the dough, SOR, reduction, charity, kids or inheritance.
Don't do something, just stand there!

inbox788
Posts: 6388
Joined: Thu Mar 15, 2012 5:24 pm

### Re: Calculating amount needed for SS bridge

dknightd wrote:
Tue Oct 09, 2018 9:08 pm
inbox788 wrote:
Tue Oct 09, 2018 8:23 pm
dknightd wrote:
Tue Oct 09, 2018 6:57 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
where?
You could look into one of these "build your own annuity" strategies.

viewtopic.php?t=110799
viewtopic.php?t=59918
https://www.cbsnews.com/news/build-your-own-annuity/

I came across one using EE savings bonds that double in 20 years, but you have to start 20 years before your need it. Supposedly it's about 3.5% return.
No. Not at all. Very doable. OP gave the immediateannuities.com option. If you knew at age 35 that you needed \$54k/year for 20 years, you could buy a EE savings bond for \$27k each year for 20 years for a total of \$540k (not discounted). [I see now you might be saying no CPI COLA....Hmm...anyway, you might find a 10 year 3% CD that you could use to build a ladder and if you make it past 5 years and get hit with a 6 month or 12 month penalty, that's 10-20% lower interest (2.4-2.7%). Hopefully you can do better and there are several pick your own CD term products to consider for this to fill in the early years.]

The goal of all these build your own strategies is to beat the SPIA in specific ways, but not necessarily others. You can't have it all, but you can tailor your desired outcomes a bit. In some cases, you give up the mortality credits so your heirs can inherit the remaining funds. In other, you invest a portion trying to beat the returns, emulating the variable annuities. At the very least, you gain the commissions and likely reduce fees significantly.

How to Create Your Own Equity-Indexed Annuity
http://tonyisola.com/2017/03/how-to-cre ... d-annuity/

Anyway, OP, I don't know if any of this makes any sense, but if you have excess funds in case of disaster in 60/40 after this 810k to fall back on (which you seem to have), I'd take my chances with the market portfolio. Maybe dial it back to 50/50, just in case if it's close.

Dandy
Posts: 5790
Joined: Sun Apr 25, 2010 7:42 pm

### Re: Calculating amount needed for SS bridge

The bridge to SS is not the years times how much you will collect at age 70. It is how much you need to supplement your income to cover the retirement expenses needed to support your desired life style while you on on the bridge. e.g. suppose your living expenses are 75k per year and you have a pension of 35k per year. You need 40k per year to support your life style. The amount of bridge assets you need is 40k x the number of years to age 70.

I bridged from age 62 to 70. I made sure I had say about 5 or 6 years worth of needed bridge funding set aside. I would supplement that as the years went by from taxable distributions, tax returns etc. and found that worked for me. A few years in my wife's took SS which lowered our gap, then later I took a spousal on her SS which again lowered the gap. I don't know that you have to lock up the whole amount from the start.

bhsince87
Posts: 2294
Joined: Thu Oct 03, 2013 1:08 pm

### Re: Calculating amount needed for SS bridge

If you are going to have \$2million at 55, what are you even worrying about? You should be able to pull 3% from that indefinitely.

Hell, splurge and pull 4%, since you've got a colad pension and SS coming in.
Retirement: When you reach a point where you have enough. Or when you've had enough.

2015
Posts: 2906
Joined: Mon Feb 10, 2014 2:32 pm

### Re: Calculating amount needed for SS bridge

Dandy wrote:
Wed Oct 10, 2018 8:11 am
The bridge to SS is not the years times how much you will collect at age 70. It is how much you need to supplement your income to cover the retirement expenses needed to support your desired life style while you on on the bridge. e.g. suppose your living expenses are 75k per year and you have a pension of 35k per year. You need 40k per year to support your life style. The amount of bridge assets you need is 40k x the number of years to age 70.

I bridged from age 62 to 70. I made sure I had say about 5 or 6 years worth of needed bridge funding set aside. I would supplement that as the years went by from taxable distributions, tax returns etc. and found that worked for me. A few years in my wife's took SS which lowered our gap, then later I took a spousal on her SS which again lowered the gap. I don't know that you have to lock up the whole amount from the start.
I think of bridging as an aspect of liability matching. I'm bridging 7 full years until age 70 by indeed locking up the entire amount. I know it's expensive but given my personal historical reaction to risk and disruption I view the peace of mind as worth it.

The Wizard
Posts: 13355
Joined: Tue Mar 23, 2010 1:45 pm

### Re: Calculating amount needed for SS bridge

2015 wrote:
Wed Oct 10, 2018 8:18 pm
Dandy wrote:
Wed Oct 10, 2018 8:11 am
...I bridged from age 62 to 70. I made sure I had say about 5 or 6 years worth of needed bridge funding set aside. I would supplement that as the years went by from taxable distributions, tax returns etc. and found that worked for me. A few years in my wife's took SS which lowered our gap, then later I took a spousal on her SS which again lowered the gap. I don't know that you have to lock up the whole amount from the start.
I think of bridging as an aspect of liability matching. I'm bridging 7 full years until age 70 by indeed locking up the entire amount. I know it's expensive but given my personal historical reaction to risk and disruption I view the peace of mind as worth it.
I'm most of the way through a seven year bridge from age 63 to 70. I've just been withdrawing \$3000/month from my tax deferred portfolio, originally 50% stocks but now closer to 60%.
I do not recommend "setting aside" money for the SS bridge in a low yielding "safe" account.

When I hit age 70 in about 16 months, I won't "need" to withdraw from portfolio much anymore. Pension/annuity income + maximal SS income should cover my bills.
But I will have RMD income on top of that to play with...
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Topic Author
corn18
Posts: 1400
Joined: Fri May 22, 2015 6:24 am

### Re: Calculating amount needed for SS bridge

The Wizard wrote:
Thu Oct 11, 2018 4:02 am
2015 wrote:
Wed Oct 10, 2018 8:18 pm
Dandy wrote:
Wed Oct 10, 2018 8:11 am
...I bridged from age 62 to 70. I made sure I had say about 5 or 6 years worth of needed bridge funding set aside. I would supplement that as the years went by from taxable distributions, tax returns etc. and found that worked for me. A few years in my wife's took SS which lowered our gap, then later I took a spousal on her SS which again lowered the gap. I don't know that you have to lock up the whole amount from the start.
I think of bridging as an aspect of liability matching. I'm bridging 7 full years until age 70 by indeed locking up the entire amount. I know it's expensive but given my personal historical reaction to risk and disruption I view the peace of mind as worth it.
I'm most of the way through a seven year bridge from age 63 to 70. I've just been withdrawing \$3000/month from my tax deferred portfolio, originally 50% stocks but now closer to 60%.
I do not recommend "setting aside" money for the SS bridge in a low yielding "safe" account.

When I hit age 70 in about 16 months, I won't "need" to withdraw from portfolio much anymore. Pension/annuity income + maximal SS income should cover my bills.
But I will have RMD income on top of that to play with...
I like this approach and that is my plan right now. I am just going to withdraw from my 60/40 portfolio during the bridge period. The 40% bonds @ age 55 will equal the bridge amount required with a 0% discount rate, but I will just withdraw from the portfolio and maintain the 60/40 allocation. At least that's the plan today.
Don't do something, just stand there!

galeno
Posts: 1548
Joined: Fri Dec 21, 2007 12:06 pm

### Re: Calculating amount needed for SS bridge

We also over withdraw as a bridge to our pensions. W/o pension firecalc says our 95%SWR = 3.7%. With pensions it's 4.6%.

Since we over withdraw by 0.9% over the next 10 years we maintain a conservative asset allocation. This is to mitigate a bad sequence of returns during this bridge period. We pull this extra 0.9% from our bond allocation which over time will increase our equity allocation.
corn18 wrote:
Thu Oct 11, 2018 4:56 am
I like this approach and that is my plan right now. I am just going to withdraw from my 60/40 portfolio during the bridge period. The 40% bonds @ age 55 will equal the bridge amount required with a 0% discount rate, but I will just withdraw from the portfolio and maintain the 60/40 allocation. At least that's the plan today.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

AlmstRtrd
Posts: 57
Joined: Fri Dec 08, 2017 4:57 pm

### Re: Calculating amount needed for SS bridge

David Jay wrote:
Tue Oct 09, 2018 7:28 pm
Silk McCue wrote:
Tue Oct 09, 2018 7:21 pm
David Jay wrote:
Tue Oct 09, 2018 6:57 pm
Silk McCue wrote:
Tue Oct 09, 2018 5:36 pm
I don’t believe it’s possible to get \$54k in 2018 dollars for a maxed out Social Security benefit at age 70. I think the current max at age 70 is \$3698 per month, or \$44,376 per year.
I come up with about a \$64,000 max family benefit for someone born in 1956 (the latest year for which an AWI is available) with one 35 year max-out and one spousal benefit. That is roughly a \$46,000 age 70 benefit + \$18,000 spousal benefit. Reference here: https://bogleheads.org/forum/viewtopic. ... 0&t=230506
The OP did not mention a spouse in the original post and acknowledged that after I made my post.

Cheers
Yea, the biggest problem with these “maximum benefit” numbers is that they are highly dependent on the year of PIA calculation (year in which one turns 60).

I am a ‘57 baby so I am waiting anxiously for the 2017 AWI - should be out later this month...
Looks like it's already out. Check this:

https://www.ssa.gov/OACT/COLA/AWI.html

David Jay
Posts: 6560
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

### Re: Calculating amount needed for SS bridge

AlmstRtrd wrote:
Thu Oct 11, 2018 12:35 pm
David Jay wrote:
Tue Oct 09, 2018 7:28 pm
Silk McCue wrote:
Tue Oct 09, 2018 7:21 pm
David Jay wrote:
Tue Oct 09, 2018 6:57 pm
Silk McCue wrote:
Tue Oct 09, 2018 5:36 pm
I don’t believe it’s possible to get \$54k in 2018 dollars for a maxed out Social Security benefit at age 70. I think the current max at age 70 is \$3698 per month, or \$44,376 per year.
I come up with about a \$64,000 max family benefit for someone born in 1956 (the latest year for which an AWI is available) with one 35 year max-out and one spousal benefit. That is roughly a \$46,000 age 70 benefit + \$18,000 spousal benefit. Reference here: https://bogleheads.org/forum/viewtopic. ... 0&t=230506
The OP did not mention a spouse in the original post and acknowledged that after I made my post.

Cheers
Yea, the biggest problem with these “maximum benefit” numbers is that they are highly dependent on the year of PIA calculation (year in which one turns 60).

I am a ‘57 baby so I am waiting anxiously for the 2017 AWI - should be out later this month...
Looks like it's already out. Check this:

https://www.ssa.gov/OACT/COLA/AWI.html
Yup, I wrote a post here: viewtopic.php?f=10&t=261133
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

PaulF
Posts: 186
Joined: Wed Aug 06, 2008 10:07 pm
Location: Wisconsin

### Re: Calculating amount needed for SS bridge

I realize you changed your plan by the end of the thread that has been posted so far. As others have mentioned, you could use a TIPS ladder to build your bridge. Using #Cruncher's nice spreadsheet , I calculated the cost of building a 15-year bridge of \$54k per annum including years 2021 to 2035 to be \$792k. This accounts for the modest amount of earnings you get from TIPS.

I am in a not-so-dissimilar position. My current plan is to create such a bridge with a TIPS ladder, but only cover the amount of expected necessary (not discretionary) expenditures. Then I plan to draw on the rest of the portfolio for lumpy spending and discretionary, aspirational spending.

David Jay
Posts: 6560
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

### Re: Calculating amount needed for SS bridge

corn18 wrote:
Thu Oct 11, 2018 4:56 am
I like this approach and that is my plan right now. I am just going to withdraw from my 60/40 portfolio during the bridge period. The 40% bonds @ age 55 will equal the bridge amount required with a 0% discount rate, but I will just withdraw from the portfolio and maintain the 60/40 allocation. At least that's the plan today.
I wanted a bit of a cushion in the event of unforeseen interest rate shocks or a massive stock sell-off, so I have put two years of living expenses in a ST bond fund. It pays a bit less than an IT bond fund, but it has much lower volatility in the face of an interest rate spike.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

texasdiver
Posts: 2997
Joined: Thu Jun 25, 2009 12:50 am
Location: Vancouver WA

### Re: Calculating amount needed for SS bridge

If you are former military, do you have a TSP account and IRAs or 401k funds that you can roll into the TSP?

Right now the TSP G fund which is based on the 10-year treasury note is paying about 3.22% and is only likely to go up in the future.

With a 3% return from the TSP G-Fund you'd need to have about \$650,000 in it to make it last for 15 years at a \$54,000/year withdrawal rate unless I messed up on my math.

2015
Posts: 2906
Joined: Mon Feb 10, 2014 2:32 pm

### Re: Calculating amount needed for SS bridge

The Wizard wrote:
Thu Oct 11, 2018 4:02 am
2015 wrote:
Wed Oct 10, 2018 8:18 pm
Dandy wrote:
Wed Oct 10, 2018 8:11 am
...I bridged from age 62 to 70. I made sure I had say about 5 or 6 years worth of needed bridge funding set aside. I would supplement that as the years went by from taxable distributions, tax returns etc. and found that worked for me. A few years in my wife's took SS which lowered our gap, then later I took a spousal on her SS which again lowered the gap. I don't know that you have to lock up the whole amount from the start.
I think of bridging as an aspect of liability matching. I'm bridging 7 full years until age 70 by indeed locking up the entire amount. I know it's expensive but given my personal historical reaction to risk and disruption I view the peace of mind as worth it.
I'm most of the way through a seven year bridge from age 63 to 70. I've just been withdrawing \$3000/month from my tax deferred portfolio, originally 50% stocks but now closer to 60%.
I do not recommend "setting aside" money for the SS bridge in a low yielding "safe" account.

When I hit age 70 in about 16 months, I won't "need" to withdraw from portfolio much anymore. Pension/annuity income + maximal SS income should cover my bills.
But I will have RMD income on top of that to play with...
Yes I know I've seen this recommendation many times before (more accurately, I've seen circular arguments concerning it many times before).

My choice is strongly influenced by Bernstein's won the game concept as well as behavioral finance. Even more importantly, the choice is informed by my own historical relationship with risk and disruption. I find viewing the reality of my historical actions far superior to any sterile theory of risk. I also seek optimization, as opposed to maximization (which most here appear to gallop after). I view seeking maximization as akin to Icarus whose own hubris resulted in ignoring repeated warnings not to take things too far.

And yes, it's quite possible once my RMD's start I will increase my daily lap dances to twice daily, but we shall see.

GuyInFL
Posts: 182
Joined: Thu Aug 04, 2016 7:17 pm

### Re: Calculating amount needed for SS bridge

The Wizard wrote:
When I hit age 70 in about 16 months, I won't "need" to withdraw from portfolio much anymore. Pension/annuity income + maximal SS income should cover my bills.
But I will have RMD income on top of that to play with...
Corn18 wrote:
I like this approach and that is my plan right now. I am just going to withdraw from my 60/40 portfolio during the bridge period. The 40% bonds @ age 55 will equal the bridge amount required with a 0% discount rate, but I will just withdraw from the portfolio and maintain the 60/40 allocation. At least that's the plan today.
I like the 'rising glidepath' route as well. 60/40 seems pretty conservative if all your needs + some desires are covered by an inflation adjusted pension and social security. Perhaps start at 60/40 and end at 70/30 or so once social security kicks in.

GuyInFL
Posts: 182
Joined: Thu Aug 04, 2016 7:17 pm

### Re: Calculating amount needed for SS bridge

galeno wrote:
We have a bridge of 10 years until my wife and I receive our pensions. We compensate by counting the NPV of our pensions as fixed income (annuity) in our retirement portfolio and OVERWITHDRAWING for 10 years.

Our port w/o pension: \$40/\$60/\$0 = \$100. 95%SWR for 30 years = 3.9%

Our port w pension: \$40/\$60/\$20 = \$120. 95%SWR for 30 years = 4.4% (of \$100).

Once the pensions begin we cut back our annual withdrawals in the same amount as our pensions.
Can you add a little more detail to your explanation? This looks interesting.
thanks

galeno
Posts: 1548
Joined: Fri Dec 21, 2007 12:06 pm

### Re: Calculating amount needed for SS bridge

Use www.firecalc.com to find your 95% SWR (safe withdrawal rare) for your portfolio without counting SS. Then do it again counting social security.

Use https://opensocialsecurity.com/ to find the net present value (NPV) of your optimal SS payments. Add that amount to your retirement portfolio and use 4% of that.
GuyInFL wrote:
Thu Oct 11, 2018 8:56 pm
galeno wrote:
We have a bridge of 10 years until my wife and I receive our pensions. We compensate by counting the NPV of our pensions as fixed income (annuity) in our retirement portfolio and OVERWITHDRAWING for 10 years.

Our port w/o pension: \$40/\$60/\$0 = \$100. 95%SWR for 30 years = 3.9%

Our port w pension: \$40/\$60/\$20 = \$120. 95%SWR for 30 years = 4.4% (of \$100).

Once the pensions begin we cut back our annual withdrawals in the same amount as our pensions.
Can you add a little more detail to your explanation? This looks interesting.
thanks
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

The Wizard
Posts: 13355
Joined: Tue Mar 23, 2010 1:45 pm

### Re: Calculating amount needed for SS bridge

TravelforFun wrote:
Tue Oct 09, 2018 6:41 pm
CRTR wrote:
Tue Oct 09, 2018 6:29 pm
Another option could be an immediate annuity. \$650k investment, 15 year, period certain, with CPI COLA would give you ~\$54k/year
For bridge amount, I would assume 0% real return i.e. my return would just keep up with inflation.

Investing in an annuity would reduce the size of the bridge amount but you'd lose if you died early.

TravelforFun
No.
A period certain annuity generally pays out for that period whether you die or not.
So the extra money obtained is very low.
This is why it's a better bet, IMO, to leave the bridge funds in a 50/50 balanced fund which is likely to outperform over 15 years...
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The Wizard
Posts: 13355
Joined: Tue Mar 23, 2010 1:45 pm

### Re: Calculating amount needed for SS bridge

GuyInFL wrote:
Thu Oct 11, 2018 8:54 pm
...I like the 'rising glidepath' route as well. 60/40 seems pretty conservative if all your needs + some desires are covered by an inflation adjusted pension and social security. Perhaps start at 60/40 and end at 70/30 or so once social security kicks in.
That will probably tend to happen over time as I reinvest excess income in my taxable account where presently I just hold VTSAX...
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The Wizard
Posts: 13355
Joined: Tue Mar 23, 2010 1:45 pm

### Re: Calculating amount needed for SS bridge

2015 wrote:
Thu Oct 11, 2018 8:00 pm

...Yes I know I've seen this recommendation many times before (more accurately, I've seen circular arguments concerning it many times before).

My choice is strongly influenced by Bernstein's won the game concept as well as behavioral finance. Even more importantly, the choice is informed by my own historical relationship with risk and disruption. I find viewing the reality of my historical actions far superior to any sterile theory of risk. I also seek optimization, as opposed to maximization (which most here appear to gallop after). I view seeking maximization as akin to Icarus whose own hubris resulted in ignoring repeated warnings not to take things too far.

And yes, it's quite possible once my RMD's start I will increase my daily lap dances to twice daily, but we shall see.
In my case, around 80% of my retirement income presently comes from pension/annuities and divorced spouse SS.
The only \$\$ I'm withdrawing from portfolio is this bridge amount and half of that is actually reinvested each month in my Roth IRA.

So when I hit 70 in 2020, my withdrawals from tax deferred portfolio will likely DECREASE a bit down to just my RMD while my SS increases significantly.

My risk profile would be quite different during the bridge years if I was funding expenses primarily from portfolio with a >4% withdrawal rate...
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