Book on withdrawal strategies / retirement income?

[germark]

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]

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

[munemaker]

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]

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

[germark]

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]

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

https://earlyretirementnow.com/2016/12/ ... t-1-intro/

[22twain]

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.

[Horton]

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.

[AlohaJoe]

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]

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]

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?

[ObliviousInvestor]

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

[AlohaJoe]

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]

http://longevity.stanford.edu/wp-conten ... ersion.pdf
http://longevity.stanford.edu/wp-conten ... -final.pdf

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]

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]

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]

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]

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.

[dbr]

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]

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 .