Book on withdrawal strategies / retirement income?

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germark
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Book on withdrawal strategies / retirement income?

Post by germark » Mon Jan 14, 2019 3:47 pm

I'm interested in learning more about portfolio withdrawal strategies and different ways to convert stocks and bonds to a lifetime stream of income.

Several years ago I read Retirement Portfolios: Theory,Construction and Management. I remember that I liked it at the time, and might consider actually rereading it in order to scratch this current itch.

I just read the first few chapters of Living Off Your Money: The Modern Mechanics of Investing During Retirement with Stock and Bonds but didn't like it.

I'm considering buying How Much Can I Spend in Retirement?: A Guide to Investment-Based Retirement Income Strategies by Wade Pfau next.

Any other suggestions are welcome!

azanon
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Re: Book on withdrawal strategies / retirement income?

Post by azanon » Mon Jan 14, 2019 4:29 pm

IMO, our wiki page is pretty thorough on the topic: https://www.bogleheads.org/wiki/Withdrawal_methods

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munemaker
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Re: Book on withdrawal strategies / retirement income?

Post by munemaker » Mon Jan 14, 2019 4:32 pm

germark wrote:
Mon Jan 14, 2019 3:47 pm

I just read the first few chapters of Living Off Your Money: The Modern Mechanics of Investing During Retirement with Stock and Bonds but didn't like it.
Curious what you did not like about it. I thought it was excellent and pretty much covered the subject.

Monster99
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Re: Book on withdrawal strategies / retirement income?

Post by Monster99 » Mon Jan 14, 2019 4:36 pm

I enjoyed Michael McClung's book "Living off your Money".
You can find the1st 3 chapters free online.

Topic Author
germark
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Re: Book on withdrawal strategies / retirement income?

Post by germark » Mon Jan 14, 2019 5:03 pm

munemaker wrote:
Mon Jan 14, 2019 4:32 pm
germark wrote:
Mon Jan 14, 2019 3:47 pm

I just read the first few chapters of Living Off Your Money: The Modern Mechanics of Investing During Retirement with Stock and Bonds but didn't like it.
Curious what you did not like about it. I thought it was excellent and pretty much covered the subject.
It felt more like a dissertation more than practical advice. I read up through section 3, which is about income harvesting strategies. The chapter methodically goes through 12 strategies, and has charts and a detailed discussion of each of them. I found the detail to be overwhelming.

Freefun
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Re: Book on withdrawal strategies / retirement income?

Post by Freefun » Mon Jan 14, 2019 5:12 pm

I found the “ultimate guide to safe withdrawal rates” helpful

https://earlyretirementnow.com/2016/12/ ... t-1-intro/
Remember when you wanted what you currently have?

22twain
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Re: Book on withdrawal strategies / retirement income?

Post by 22twain » Mon Jan 14, 2019 5:57 pm

Monster99 wrote:
Mon Jan 14, 2019 4:36 pm
I enjoyed Michael McClung's book "Living off your Money".
You can find the1st 3 chapters free online.
That's the book he said he didn't like. :wink:
My investing princiPLEs do not include absolutely preserving princiPAL.

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Horton
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Re: Book on withdrawal strategies / retirement income?

Post by Horton » Mon Jan 14, 2019 8:06 pm

Check out Bill Bernstein's "Investing for Adults" books. When I visit my bookshelves for a quick read, I often pick up one of these books.
"You must know that there is nothing higher and stronger and more wholesome and good for life in the future than some good memory, especially a memory of childhood, of home." - Dostoyevsky

AlohaJoe
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Re: Book on withdrawal strategies / retirement income?

Post by AlohaJoe » Mon Jan 14, 2019 8:30 pm

germark wrote:
Mon Jan 14, 2019 3:47 pm
I'm considering buying How Much Can I Spend in Retirement?: A Guide to Investment-Based Retirement Income Strategies by Wade Pfau next.
I found this pretty....not good. And definitely not practical.

NoblesvilleIN
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Re: Book on withdrawal strategies / retirement income?

Post by NoblesvilleIN » Tue Jan 15, 2019 7:48 am

I recently checked out from our local library (Kindle version) "How to make your money last: the indispensable retirement guide" by Jane Bryant Quinn. It gave me several things to think about and I recommend it.

TN_Boy
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Re: Book on withdrawal strategies / retirement income?

Post by TN_Boy » Tue Jan 15, 2019 9:38 am

AlohaJoe wrote:
Mon Jan 14, 2019 8:30 pm
germark wrote:
Mon Jan 14, 2019 3:47 pm
I'm considering buying How Much Can I Spend in Retirement?: A Guide to Investment-Based Retirement Income Strategies by Wade Pfau next.
I found this pretty....not good. And definitely not practical.
Could you give us the one paragraph expansion of that statement?

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ObliviousInvestor
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Re: Book on withdrawal strategies / retirement income?

Post by ObliviousInvestor » Tue Jan 15, 2019 9:44 am

I thought Pfau's book was excellent.

You may also find this study (summary version below) to be of interest.
http://longevity.stanford.edu/wp-conten ... ersion.pdf
http://longevity.stanford.edu/wp-conten ... -final.pdf
Mike Piper, author/blogger

AlohaJoe
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Re: Book on withdrawal strategies / retirement income?

Post by AlohaJoe » Tue Jan 15, 2019 10:32 am

TN_Boy wrote:
Tue Jan 15, 2019 9:38 am
AlohaJoe wrote:
Mon Jan 14, 2019 8:30 pm
germark wrote:
Mon Jan 14, 2019 3:47 pm
I'm considering buying How Much Can I Spend in Retirement?: A Guide to Investment-Based Retirement Income Strategies by Wade Pfau next.
I found this pretty....not good. And definitely not practical.
Could you give us the one paragraph expansion of that statement?
The book is mostly a collection of stuff that Pfau has already published (though in many cases he has tuned it up a bit in the years since initial publication or expanded on it slightly for this volume). That means a) you can just go read his original work for free on ssrn.com and b) everything has a very disjointed feel and there's not a holistic approach tying it together.

For instance, he talks about how guaranteed income, like Social Security, increases the amount that you can withdraw from a portfolio. He writes,

"A risk-tolerant retiree may prefer a withdrawal rate of between 5 and 7 percent with a guaranteed income of $20,000."

But what if I have $30,000? Then what do I do? Can I withdraw 8%? And a range like 5-7% is huge -- especially since Bogleheads often argue about 0.5% of withdrawal rate ("should I use 4% or 3.5%?") -- with no guidance really given on why you'd pick one over another or what the tradeoffs are.

He has a chapter on mortality, tells us that a male-female couple has a 45% chance of one member reaching age 95, so "a thirty-year horizon is not so conservative when we look at data that better reflects higher earning and more educated individuals"....but then all of his analyses for the rest of the book assume a 30-year retirement. Why not a 40-year retirement?

Later on there's another chapter talking about the current high valuations and low yields and how the pushes rates down. But at no point is there a chapter that combines the two topics: Social Security plus high valuations plus longer retirement horizons. Does that means I can withdraw....5%? Or...what?

To make my point concretely, what is the withdrawal rate that should be used for the following scenario:
  • future US returns are lower than in past
  • the planning horizon is 40 years
  • a bond tent is used
  • Social Security provides $30,000
  • the retiree partially annuitizes with a SPIA
  • a variable withdrawal strategy is used
  • we accept the "retirement smile" that spending doesn't need to keep up with inflation, due to declining spending
The book provides no way to tie all of that together, despite having individual chapters on each of the topics. For instance, his analysis of variable withdrawal strategies only considers the case where you have a 30-year retirement, you have no Social Security, you have a fixed asset allocation (i.e. no glidepaths), and it is 50% intermediate Treasuries and 50% S&P 500.

At the end of the day, the book provides you a dozen disconnected thought experiments but when it comes to putting them together into a coherent plan....you are directed to contact McLean Asset Management:

"After you complete the RIO Questionnaire, we will analyze your answers to determine where you stand with respect to various aspects of retirement income planning."

AlohaJoe
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Re: Book on withdrawal strategies / retirement income?

Post by AlohaJoe » Tue Jan 15, 2019 9:10 pm

One of the co-authors -- Steve Vernon -- has published a book Retirement Game Changers which is basically the non-technical version of the SCL/SOA report, for people who don't find the above links engrossing reading :)

Greg in Idaho
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Re: Book on withdrawal strategies / retirement income?

Post by Greg in Idaho » Wed Jan 16, 2019 8:27 am

AlohaJoe wrote:
Tue Jan 15, 2019 10:32 am
TN_Boy wrote:
Tue Jan 15, 2019 9:38 am
AlohaJoe wrote:
Mon Jan 14, 2019 8:30 pm
germark wrote:
Mon Jan 14, 2019 3:47 pm
I'm considering buying How Much Can I Spend in Retirement?: A Guide to Investment-Based Retirement Income Strategies by Wade Pfau next.
I found this pretty....not good. And definitely not practical.
Could you give us the one paragraph expansion of that statement?
The book is mostly a collection of stuff that Pfau has already published (though in many cases he has tuned it up a bit in the years since initial publication or expanded on it slightly for this volume). That means a) you can just go read his original work for free on ssrn.com and b) everything has a very disjointed feel and there's not a holistic approach tying it together.

For instance, he talks about how guaranteed income, like Social Security, increases the amount that you can withdraw from a portfolio. He writes,

"A risk-tolerant retiree may prefer a withdrawal rate of between 5 and 7 percent with a guaranteed income of $20,000."

But what if I have $30,000? Then what do I do? Can I withdraw 8%? And a range like 5-7% is huge -- especially since Bogleheads often argue about 0.5% of withdrawal rate ("should I use 4% or 3.5%?") -- with no guidance really given on why you'd pick one over another or what the tradeoffs are.

He has a chapter on mortality, tells us that a male-female couple has a 45% chance of one member reaching age 95, so "a thirty-year horizon is not so conservative when we look at data that better reflects higher earning and more educated individuals"....but then all of his analyses for the rest of the book assume a 30-year retirement. Why not a 40-year retirement?

Later on there's another chapter talking about the current high valuations and low yields and how the pushes rates down. But at no point is there a chapter that combines the two topics: Social Security plus high valuations plus longer retirement horizons. Does that means I can withdraw....5%? Or...what?

To make my point concretely, what is the withdrawal rate that should be used for the following scenario:
  • future US returns are lower than in past
  • the planning horizon is 40 years
  • a bond tent is used
  • Social Security provides $30,000
  • the retiree partially annuitizes with a SPIA
  • a variable withdrawal strategy is used
  • we accept the "retirement smile" that spending doesn't need to keep up with inflation, due to declining spending
The book provides no way to tie all of that together, despite having individual chapters on each of the topics. For instance, his analysis of variable withdrawal strategies only considers the case where you have a 30-year retirement, you have no Social Security, you have a fixed asset allocation (i.e. no glidepaths), and it is 50% intermediate Treasuries and 50% S&P 500.

At the end of the day, the book provides you a dozen disconnected thought experiments but when it comes to putting them together into a coherent plan....you are directed to contact McLean Asset Management:

"After you complete the RIO Questionnaire, we will analyze your answers to determine where you stand with respect to various aspects of retirement income planning."
+1

Gotta leave something for the advisers to do (and get paid for)...

TN_Boy
Posts: 1060
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Re: Book on withdrawal strategies / retirement income?

Post by TN_Boy » Wed Jan 16, 2019 9:13 pm

AlohaJoe wrote:
Tue Jan 15, 2019 10:32 am
TN_Boy wrote:
Tue Jan 15, 2019 9:38 am
AlohaJoe wrote:
Mon Jan 14, 2019 8:30 pm
germark wrote:
Mon Jan 14, 2019 3:47 pm
I'm considering buying How Much Can I Spend in Retirement?: A Guide to Investment-Based Retirement Income Strategies by Wade Pfau next.
I found this pretty....not good. And definitely not practical.
Could you give us the one paragraph expansion of that statement?
The book is mostly a collection of stuff that Pfau has already published (though in many cases he has tuned it up a bit in the years since initial publication or expanded on it slightly for this volume). That means a) you can just go read his original work for free on ssrn.com and b) everything has a very disjointed feel and there's not a holistic approach tying it together.

For instance, he talks about how guaranteed income, like Social Security, increases the amount that you can withdraw from a portfolio. He writes,

"A risk-tolerant retiree may prefer a withdrawal rate of between 5 and 7 percent with a guaranteed income of $20,000."

But what if I have $30,000? Then what do I do? Can I withdraw 8%? And a range like 5-7% is huge -- especially since Bogleheads often argue about 0.5% of withdrawal rate ("should I use 4% or 3.5%?") -- with no guidance really given on why you'd pick one over another or what the tradeoffs are.

He has a chapter on mortality, tells us that a male-female couple has a 45% chance of one member reaching age 95, so "a thirty-year horizon is not so conservative when we look at data that better reflects higher earning and more educated individuals"....but then all of his analyses for the rest of the book assume a 30-year retirement. Why not a 40-year retirement?

Later on there's another chapter talking about the current high valuations and low yields and how the pushes rates down. But at no point is there a chapter that combines the two topics: Social Security plus high valuations plus longer retirement horizons. Does that means I can withdraw....5%? Or...what?

To make my point concretely, what is the withdrawal rate that should be used for the following scenario:
  • future US returns are lower than in past
  • the planning horizon is 40 years
  • a bond tent is used
  • Social Security provides $30,000
  • the retiree partially annuitizes with a SPIA
  • a variable withdrawal strategy is used
  • we accept the "retirement smile" that spending doesn't need to keep up with inflation, due to declining spending
The book provides no way to tie all of that together, despite having individual chapters on each of the topics. For instance, his analysis of variable withdrawal strategies only considers the case where you have a 30-year retirement, you have no Social Security, you have a fixed asset allocation (i.e. no glidepaths), and it is 50% intermediate Treasuries and 50% S&P 500.

At the end of the day, the book provides you a dozen disconnected thought experiments but when it comes to putting them together into a coherent plan....you are directed to contact McLean Asset Management:

"After you complete the RIO Questionnaire, we will analyze your answers to determine where you stand with respect to various aspects of retirement income planning."
Thanks AlohaJoe. I've had the book for a while, skimmed it. I understand your objection, though I doubt many sources are willing to give a definitive answer on what a retiree should do. There are so many variables ....

Beliavsky
Posts: 932
Joined: Sun Jun 29, 2014 10:21 am

Re: Book on withdrawal strategies / retirement income?

Post by Beliavsky » Wed Jan 16, 2019 10:20 pm

The books mentioned look interesting. but a book can only provide principles and guidelines and cannot give advice tailored to an individual. What software, either desktop or online, helps investors formulate a spending and investment plan in retirement, estimating life expectancy and incorporating assets such as

(1) Social Security benefits
(2) amounts in Roth and Traditional IRAs
(3) amounts in taxable accounts and their cost bases
(4) home equity
(5) cash value (if any) of life insurance

FBN2014
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Re: Book on withdrawal strategies / retirement income?

Post by FBN2014 » Wed Jan 16, 2019 10:39 pm

I went through this analysis a few years ago for some trust accounts I manage. With a 40/60 allocation using index funds and a withdrawal rate of 3.5%, 85% probability of not running out of money over a 35 year retirement span.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

dbr
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Re: Book on withdrawal strategies / retirement income?

Post by dbr » Thu Jan 17, 2019 10:07 am

Beliavsky wrote:
Wed Jan 16, 2019 10:20 pm
The books mentioned look interesting. but a book can only provide principles and guidelines and cannot give advice tailored to an individual. What software, either desktop or online, helps investors formulate a spending and investment plan in retirement, estimating life expectancy and incorporating assets such as

(1) Social Security benefits
(2) amounts in Roth and Traditional IRAs
(3) amounts in taxable accounts and their cost bases
(4) home equity
(5) cash value (if any) of life insurance
I have never seen an investment planning program that also estimates life expectancy. On the other hand from time to time people post such things as longevity does not run in their family, etc. The only financially operative response to longevity estimate I know of is that people can have a hard time buying life insurance or long term care insurance if they have medical issues. On the other hand medical underwriting that increases the payout from an SPIA exists. I did see a paper by Milevsky once that formulated the withdrawal problem relative to chances of still being alive and running out of money with longevity statistics incorporated in the formalism, but the calculation was not individualized except by age.

Part of your list implies tax issues. I know i-ORP supposedly looks at that. Individual tax planning is quite complex and difficult to incorporate in a one-size fits all routine.

Beliavsky
Posts: 932
Joined: Sun Jun 29, 2014 10:21 am

Re: Book on withdrawal strategies / retirement income?

Post by Beliavsky » Thu Jan 17, 2019 10:49 am

dbr wrote:
Thu Jan 17, 2019 10:07 am
Beliavsky wrote:
Wed Jan 16, 2019 10:20 pm
The books mentioned look interesting. but a book can only provide principles and guidelines and cannot give advice tailored to an individual. What software, either desktop or online, helps investors formulate a spending and investment plan in retirement, estimating life expectancy and incorporating assets such as

(1) Social Security benefits
(2) amounts in Roth and Traditional IRAs
(3) amounts in taxable accounts and their cost bases
(4) home equity
(5) cash value (if any) of life insurance
I have never seen an investment planning program that also estimates life expectancy. On the other hand from time to time people post such things as longevity does not run in their family, etc. The only financially operative response to longevity estimate I know of is that people can have a hard time buying life insurance or long term care insurance if they have medical issues. On the other hand medical underwriting that increases the payout from an SPIA exists. I did see a paper by Milevsky once that formulated the withdrawal problem relative to chances of still being alive and running out of money with longevity statistics incorporated in the formalism, but the calculation was not individualized except by age.

Part of your list implies tax issues. I know i-ORP supposedly looks at that. Individual tax planning is quite complex and difficult to incorporate in a one-size fits all routine.
Thanks for mentioning the Optimal Retirement Planner. I see that it asks for your asset levels in tax-deferred, Roth IRA, and regular accounts, but it does not ask about the tax basis of the regular account. In early 2009 I harvested losses in equity mutual funds and bought replacements. I have an unrealized gain in an S&P 500 index fund of 142%. I hope to leave this untouched for another 20 years, ideally until death so my heirs can benefit from step up in basis. Software that ignores tax bases is incomplete. I better write my own :).

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burnsh
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Re: Book on withdrawal strategies / retirement income?

Post by burnsh » Thu Apr 25, 2019 3:12 am

AlohaJoe wrote:
Tue Jan 15, 2019 9:10 pm
One of the co-authors -- Steve Vernon -- has published a book Retirement Game Changers which is basically the non-technical version of the SCL/SOA report, for people who don't find the above links engrossing reading :)
Currently reading the Optimizing Retirement Income paper after I heard Obliviousinvestor recommendation in the Bogleheads podcast. I’m guessing Vernon’s book is easier to read than Pfau’s?
Burnsh | ______________________________________ | VFIAX 17%, VVIAX 17%, VEXAX 16%, VTIAX 21%, VGSIX 9%, VIPSX 10%, VBMFX 10%

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Forester
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Re: Book on withdrawal strategies / retirement income?

Post by Forester » Thu Apr 25, 2019 4:13 am

Monster99 wrote:
Mon Jan 14, 2019 4:36 pm
I enjoyed Michael McClung's book "Living off your Money".
You can find the1st 3 chapters free online.
I struggled with this book. It didn't help that it introduced its own acronyms. I think it's a good book for people with high IQs.

My takeaway was - "you're probably OK to just withdraw 4% a year".

yousha
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Re: Book on withdrawal strategies / retirement income?

Post by yousha » Thu Apr 25, 2019 4:45 am

Withdraw what you need and not what you want. Follow this simple strategy and you will not run out of money.

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privatefarmer
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Re: Book on withdrawal strategies / retirement income?

Post by privatefarmer » Thu Apr 25, 2019 6:30 am

azanon wrote:
Mon Jan 14, 2019 4:29 pm
IMO, our wiki page is pretty thorough on the topic: https://www.bogleheads.org/wiki/Withdrawal_methods
thx for posting that link! it was very informative. I really like the variable percentage w/d strategy. I am thinking of implementing that for my pre-retirement years (ie ages 35-70) where i'll still be working, at least part-time, until I hit maximum SS at which point i'll live off my SS/401k and have a paid-off house. So I could apply the VPW strategy to my current investments outside my 401k/house to start taking supplemental income from now until I retire...

dknightd
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Re: Book on withdrawal strategies / retirement income?

Post by dknightd » Thu Apr 25, 2019 7:32 am

yousha wrote:
Thu Apr 25, 2019 4:45 am
Withdraw what you need and not what you want. Follow this simple strategy and you will not run out of money.
That assumes you have enough money to cover what you need.
I'm taking a similar approach. Arrange things so that SS and SPIA cover what I/we need. Budget enough safe money to get me through till I claim SS (current plan is at 70). Then I can take whatever I want out of the rest and not worry about having food, cloths and a place to live. The wrinkle is we do not know if SS will be cut. For now I'm assuming it will not. I'm 61 so hope they will not cut my future benefits. We could survive the potential SS cut, but it would not be pleasant. So I'll probably have to be a little conservative until that gets sorted. I naturally tend to being conservative, so that should not be a problem.

There is no book that can address everything. Everybody is unique. I'll be retiring this year. I expect to have to figure out withdrawal strategies every year. I'm 99% sure I can cover what I/we need (I'd say 100%, but you never know). I'm 90% sure we cover our needs, and still have some fun money. There is a good chance we'll have some left over. There is also a good chance my parents will have something left over. I'm telling my kids to not plan on either.

Just like you can never really plan for how things will go in your working life, you can never really plan for how things will go in your retirement. So have a plan, and change it as needed ;)

capjak
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Re: Book on withdrawal strategies / retirement income?

Post by capjak » Thu Apr 25, 2019 11:14 am

Beliavsky wrote:
Thu Jan 17, 2019 10:49 am
dbr wrote:
Thu Jan 17, 2019 10:07 am
Beliavsky wrote:
Wed Jan 16, 2019 10:20 pm
The books mentioned look interesting. but a book can only provide principles and guidelines and cannot give advice tailored to an individual. What software, either desktop or online, helps investors formulate a spending and investment plan in retirement, estimating life expectancy and incorporating assets such as

(1) Social Security benefits
(2) amounts in Roth and Traditional IRAs
(3) amounts in taxable accounts and their cost bases
(4) home equity
(5) cash value (if any) of life insurance
I have never seen an investment planning program that also estimates life expectancy. On the other hand from time to time people post such things as longevity does not run in their family, etc. The only financially operative response to longevity estimate I know of is that people can have a hard time buying life insurance or long term care insurance if they have medical issues. On the other hand medical underwriting that increases the payout from an SPIA exists. I did see a paper by Milevsky once that formulated the withdrawal problem relative to chances of still being alive and running out of money with longevity statistics incorporated in the formalism, but the calculation was not individualized except by age.

Part of your list implies tax issues. I know i-ORP supposedly looks at that. Individual tax planning is quite complex and difficult to incorporate in a one-size fits all routine.
Thanks for mentioning the Optimal Retirement Planner. I see that it asks for your asset levels in tax-deferred, Roth IRA, and regular accounts, but it does not ask about the tax basis of the regular account. In early 2009 I harvested losses in equity mutual funds and bought replacements. I have an unrealized gain in an S&P 500 index fund of 142%. I hope to leave this untouched for another 20 years, ideally until death so my heirs can benefit from step up in basis. Software that ignores tax bases is incomplete. I better write my own :).
Did you look at the "Extended i-orp" tab? I believe it has a cost basis included as an input?

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