Retired Four Years, Feeling Alright, Am I Kidding Myself?

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Lawrence of Suburbia
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Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

Age: 69
Male, single
2021 AGI: $4,917
Federal taxes paid last year: 0
Condo & car (2019 Toyota Corolla) free & clear
No debt
Newcastle, WA, US
Retired in 11/2018

All numbers rounded, and probably optimistic (market is plummeting)

Portfolio:

Taxable: SCHD (Schwab U.S. Dividend Equity Fund): 144k
IRA: VWIAX (Vanguard Wellesley Fund) 137k
401k: VTTVX (Vanguard Target 2025 Fund) 101k
Roth IRA: DODBX (Dodge & Cox Balanced Fund) 46k
-------------------------------------‐------------------------------------------------
$428k
Current asset allocation: ~66/34
No rebalancing is done (rising equity glidepath); I'd have more like a 50/50 or 40/60 allocation, but for my terror of our inflationary situation.

403b: 62k (TIAA Traditional; my cash reserve/emergency/etc.)

Condo equity: ~250k (optimistic guess)

Estimated annual expenses: 33,400 (includes day to day, monthly, insurance, condo assessment, property tax, etc., along with a guess for a sizeable unexpected expense)
SS annual income: 15,100
SPIA annual income: 6,300 (no COLA)
---------------‐-----------------------------‐--------------------------------
Annual shortfall: $12k
2.8% withdrawal rate from 68/32portfolio -- if Chairman Powell is successful

If conditions permit, and additional guaranteed income is required, I will convert the 403b to a SPIA when I turn 71. If that happens, will probably switch out VWIAX for VWENX or VBIAX (Vanguard Wellington Fund or Vanguard Balanced Index Fund) in my IRA.

Given my tax bracket, I'm wondering if I should start taking some/all of my living expenses from IRA and 401k?


.... whew. A challenge to my ADD, that was!
Last edited by Lawrence of Suburbia on Sun Sep 25, 2022 3:36 pm, edited 12 times in total.
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
Enolacs
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Enolacs »

Using the Monte Carlo Simulation on PortfolioVisualizer I got "9995 portfolios out of 10000 simulated portfolios (99.95%) survived all withdrawals."

Even if you live 30 more years >90% of outcomes have a end balance greater than one million dollars.

This doesn't include the equity in your condo.

I don't think you are kidding yourself.

Enjoy retirement.
50% IJS (Small Cap Value), 25% VSS (International Small Cap), 25% AVDV (International Small Cap Value)
kd2008
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by kd2008 »

I want to thank you for writing such a lucid post. Everything was easy to read and understand. You are in good shape. Your low withdrawal rate is a great buffer against market volatility. Great job!

If you still feel anxious, just pick up something part time to supplement your withdrawals for a year or two till we pass this episode of high inflation. It is strictly not necessary.
aristotelian
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by aristotelian »

Enolacs wrote: Thu Sep 22, 2022 12:00 pm Using the Monte Carlo Simulation on PortfolioVisualizer I got "9995 portfolios out of 10000 simulated portfolios (99.95%) survived all withdrawals."

Even if you live 30 more years >90% of outcomes have a end balance greater than one million dollars.

This doesn't include the equity in your condo.

I don't think you are kidding yourself.

Enjoy retirement.
I got 99.58%. Did you account for the SPIA not being inflation adjusted? I still think 99.58% is "close enough" to be bulletproof.
HomeStretch
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by HomeStretch »

Lawrence of Suburbia wrote: Thu Sep 22, 2022 11:46 am … 2021 AGI: $4,917
Federal taxes paid last year: 0 …

… IRA: VWIAX (Vanguard Wellesley Fund) 137k
401k: VTTVX (Vanguard Target 2025 Fund) 101k
403b: 62k (TIAA Traditional; my cash reserve/emergency/etc.) …

… Given my tax bracket, I'm wondering if I should start taking some/all of my living expenses from IRA and 401k? …
The 2021 standard deduction was $14,250 $12,550. With a 2021AGI of $4,917, you had room to withdraw or convert to Roth from your pretax tax deferred accounts about $9k $7.5k without paying any Federal tax. You didn’t say when you will start receiving SS/SPIA benefits. If 2022 AGI will be less than the 2022 standard deduction age 65+, at a minimum withdraw enough to reach Form 1040 Taxable Income of $0. Consider whether it makes sense to take distributions/convert to Roth to the top of the 10% bracket.

You will need to take separate RMDs from the 401k, 403b and IRA accounts. Consider whether it makes sense to simplify by rolling over the 401k and 403b balances into your Traditional IRA by December 31 of the year prior to the year you reach age 72.
Last edited by HomeStretch on Thu Sep 22, 2022 6:41 pm, edited 2 times in total.
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winterfan
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by winterfan »

Look at that AGI! I think you are doing great. Hard to beat a 2.8 withdrawal rate. Have you had a lot of sizeable unexpected expenses? How much to you put aside? I'm just curious.
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Lawrence of Suburbia
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

HomeStretch wrote: Thu Sep 22, 2022 2:59 pm
Lawrence of Suburbia wrote: Thu Sep 22, 2022 11:46 am … 2021 AGI: $4,917
Federal taxes paid last year: 0 …

… IRA: VWIAX (Vanguard Wellesley Fund) 137k
401k: VTTVX (Vanguard Target 2025 Fund) 101k
403b: 62k (TIAA Traditional; my cash reserve/emergency/etc.) …

… Given my tax bracket, I'm wondering if I should start taking some/all of my living expenses from IRA and 401k? …
The 2021 standard deduction was $12,550. With a 2021AGI of $4,917, you had room to withdraw or convert to Roth from your pretax tax deferred accounts about $7.5k without paying any Federal tax. You didn’t say when you will start receiving SS/SPIA benefits. If 2022 AGI will be less than the 2022 standard deduction, at a minimum withdraw enough to reach Form 1040 Taxable Income of $0. Consider whether it makes sense to take distributions/convert to Roth to the top of the 10% bracket.

You will need to take separate RMDs from the 401k, 403b and IRA accounts. Consider whether it makes sense to simplify by rolling over the 401k and 403b balances into your Traditional IRA by December 31 of the year prior to the year you reach age 72.
I'm retired and taking SS and SPIA income now (~$15,000 and $6,000/year, respectively). That probably affects my tax situation if I start withdrawals, I expect. Next year's meeting with my accountant will be much more involved than usual!
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
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Lawrence of Suburbia
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

winterfan wrote: Thu Sep 22, 2022 3:06 pm Look at that AGI! I think you are doing great. Hard to beat a 2.8 withdrawal rate. Have you had a lot of sizeable unexpected expenses? How much to you put aside? I'm just curious.
Putting aside? Zero, I'm retired. Doing the Big Spend! (But slowly, I hope!) :happy

I did have about $3k in unexpected dental bills that weren't covered by my insurance; but, I shopped for much cheaper car insurance and was approved for an elderly person/low-income property tax reduction, with two years' refunds, which made it basically a wash.
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
HomeStretch
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by HomeStretch »

Lawrence of Suburbia wrote: Thu Sep 22, 2022 3:22 pm
HomeStretch wrote: Thu Sep 22, 2022 2:59 pm
Lawrence of Suburbia wrote: Thu Sep 22, 2022 11:46 am … 2021 AGI: $4,917
Federal taxes paid last year: 0 …

… IRA: VWIAX (Vanguard Wellesley Fund) 137k
401k: VTTVX (Vanguard Target 2025 Fund) 101k
403b: 62k (TIAA Traditional; my cash reserve/emergency/etc.) …

… Given my tax bracket, I'm wondering if I should start taking some/all of my living expenses from IRA and 401k? …
The 2021 standard deduction was $12,550. With a 2021AGI of $4,917, you had room to withdraw or convert to Roth from your pretax tax deferred accounts about $7.5k without paying any Federal tax. You didn’t say when you will start receiving SS/SPIA benefits. If 2022 AGI will be less than the 2022 standard deduction, at a minimum withdraw enough to reach Form 1040 Taxable Income of $0. Consider whether it makes sense to take distributions/convert to Roth to the top of the 10% bracket. …
I'm retired and taking SS and SPIA income now (~$15,000 and $6,000/year, respectively). That probably affects my tax situation if I start withdrawals, I expect. Next year's meeting with my accountant will be much more involved than usual!
It’s worthwhile to talk to your tax accountant before year-end to get advice on how much you can withdraw by year-end without paying tax, at a minimum. Or buy tax prep software such as TurboTax when available in November to do a projected 2022 tax return.

You should have space to take 2022 withdrawals/Roth conversions from your tax deferred accounts. How much space depends in part on how much SPIA income is subject to tax and what your 2022 SCHD dividends are and whether they are qualified or not.

Keep in mind that if your income is $25,000+, your SS benefit becomes subject to taxation.
tesuzuki2002
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by tesuzuki2002 »

I would look for opportunities to do some side work or a passion project that you enjoy and can net you some cash to supplement your $12K draw...

you have lots of room to convert TIRA and 401K to a ROTH status.. I'd do that.
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Lawrence of Suburbia
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

HomeStretch wrote: Thu Sep 22, 2022 5:15 pm[...] Keep in mind that if your income is $25,000+, your SS benefit becomes subject to taxation.
So, the IRS looks more at gross income than AGI, for determining SS taxation? ...
Last edited by Lawrence of Suburbia on Thu Sep 22, 2022 7:49 pm, edited 1 time in total.
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
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Lawrence of Suburbia
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

I'd like to thank you all for the thoughtful, cogent replies! It's a big help for me.
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
HomeStretch
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by HomeStretch »

Lawrence of Suburbia wrote: Thu Sep 22, 2022 7:47 pm
HomeStretch wrote: Thu Sep 22, 2022 5:15 pm[...] Keep in mind that if your income is $25,000+, your SS benefit becomes subject to taxation.
So, the IRS looks more at gross income than AGI, for determining SS taxation? ...
Your AGI + 50% of your gross SS + tax exempt interest income = income used to determine the taxation of SS benefits. SS benefits start to be taxed when such income reaches $25k.

The BH wiki page about SS benefit taxation is here:
https://www.bogleheads.org/wiki/Taxatio ... y_benefits
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Sandtrap
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Sandtrap »

Lawrence of Suburbia wrote: Thu Sep 22, 2022 7:48 pm I'd like to thank you all for the thoughtful, cogent replies! It's a big help for me.
Aloha
You've gotten some excellent suggestions and input thusfar. Great!
And, you have things well thought out and in place for you as a long term financial strategy (hard earned) Great!

There are one two areas that you may or may not be prepared for: (which can sink what looks like a healthy financial ship).

Personal "Black Swans" (some family dynamic change or so forth, episodic or becomes ongoing, financial intervention, etc)
Do you have something in place for this? (estate planning, etc)

Health related/etc "Black Swans" (whether episodic or ongoing resulting in a need for lifestyle changes, long term care, etc, etc.)
Do you have something in place for this? (IE: financially, or trustee in place if you lose health or "your marbles", etc).
Aging is a certainty

Just to point out an added perspective.
I hope this is helpful for you.
j :D
Wiki Bogleheads Wiki: Everything You Need to Know
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Lawrence of Suburbia
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

Lots of likely 'action items' to think about here, thanks to your suggestions (I'd blithely ignored the potential tax issue re: Social Security income).

Right now the thing I'm grappling with is, how to deal with what seems to be a likely encounter with the dreaded "sequence of returns" risk. It appears to me that I've got very little wiggle room in my cash flow; and it's possible that an extended bear market might raise my withdrawals above the 'safe' 4% or more. My lifestyle is already pretty basic. So, I'm looking out for possible part-time work that's low-impact.
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
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AnnetteLouisan
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by AnnetteLouisan »

I assume you have signed up for Medicare? I ask become some self-sufficient types don’t and have to be arm twisted. With no debt, no taxes, low expenses, low cost of living area in the healthy Pacific Northwest and feeling fine and optimistic, I think that is ok overall. Ss has cost of living adjustments. Your home could increase in value. You are eligible for tax abatements and even SNAP or meals in wheels with that income level, I would think - I mention that just because older singles often don’t cook nutritious means for themselves daily and it’s just convenient for some. What is your social and family network like? Maybe cultivate that so that in the future you could have a roommate if you want or need to. Did you do the I bonds this year? You could do 10k this year and 10k next for some nice interest.

Love your name btw. Easily top 5 on here.
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Sandtrap
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Sandtrap »

Lawrence of Suburbia wrote: Thu Sep 22, 2022 9:50 pm Lots of likely 'action items' to think about here, thanks to your suggestions (I'd blithely ignored the potential tax issue re: Social Security income).

Right now the thing I'm grappling with is, how to deal with what seems to be a likely encounter with the dreaded "sequence of returns" risk. It appears to me that I've got very little wiggle room in my cash flow; and it's possible that an extended bear market might raise my withdrawals above the 'safe' 4% or more. My lifestyle is already pretty basic. So, I'm looking out for possible part-time work that's low-impact.
Good points.

SRR might be something that many in retirement transition or earlier retirement years are getting hit with right now.

read:
W Bernstein in "Ages of the Investor: Life Cycle Investing" (amazon softcover) talks about this in detail.

However, I wonder how much of that older research id dated given the lack of "safe haven" snd "fixed" yields now and perhaps going forward.

Besides cutting expenses, Additional income streams have the strongest snd most immediate impact in things, glide slope, etc.
So, good idea as long as extra work is an option without compromising health and life.

J🌺
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Lawrence of Suburbia
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

AnnetteLouisan wrote: Fri Sep 23, 2022 6:20 am I assume you have signed up for Medicare? I ask become some self-sufficient types don’t and have to be arm twisted. With no debt, no taxes, low expenses, low cost of living area in the healthy Pacific Northwest and feeling fine and optimistic, I think that is ok overall. Ss has cost of living adjustments. Your home could increase in value. You are eligible for tax abatements and even SNAP or meals in wheels with that income level, I would think - I mention that just because older singles often don’t cook nutritious means for themselves daily and it’s just convenient for some. What is your social and family network like? Maybe cultivate that so that in the future you could have a roommate if you want or need to. Did you do the I bonds this year? You could do 10k this year and 10k next for some nice interest.

Love your name btw. Easily top 5 on here.
Thanks! T.E. Lawrence is actually a model for me -- as a retiree. In one of the books about him I've read, he stated that all he was looking for in retirement income was £1 a day*. He was frugal. (Now, for all I know £365/year in 1935 adjusted for inflation is something like $100k/year now, ha ha!)

I never thought I'd be eligible for SNAP! But you may be right, and I shall look into it. Uh, I certainly need to eat better at home. 🍔🍕🌭🍿🌮 :wink: I got a big savings this year by getting a low-income/senior property tax reduction. My bill went from $2k+ to around $800/year.


*IIRC this was in his correspondence with Jonathan Cape, the publisher.
Last edited by Lawrence of Suburbia on Sun Sep 25, 2022 6:47 pm, edited 8 times in total.
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
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Lawrence of Suburbia
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Re: Retired Four Years, Feeling Alright, Am I Kidding Myself?

Post by Lawrence of Suburbia »

I just reviewed my category exposures in Portfolio Visualizer, and something I suspected is confirmed -- I'm about 50% in large-cap value stocks. Based on my generally conservative inclination, I'm not really concerned about that. Supposed to do better in down markets, plus provide a bit more income etc.

Might there be any downsides to this I'm not aware of? Apart from underperforming the broad index going forward? I mean, I'm not looking for much other than keeping up with the cost of living. My investments have historically been in balanced funds, probably a mistake in my accumulation years; but now I'm retired, I feel it's where I ought to be.
SCHD 34% | VWIAX 32% | VTTVX 25% | DODBX 9% | ... and about 4 years' cash
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