Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-11-2015, 11:05 AM   #21
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Welcome to the forum,

I think you could loosen up the purse strings but do you really want to spend that much? The "rule of thumb" is that you could spend $200k/yr and have a safe 30 year retirement. The $200k would increase with inflation. This doesn't include SS or any of your pensions.

I'll tell you my approach. I have a couple of small non-COLA pensions. I plan on deferring my SS to age 70 and DW will start taking her spousal SS when I turn 66. The total income from these sources is safely above what I consider to be our basic cost of living.

I have created a sinking fund to cover these income streams and medical care until Medicare kicks in. This is subtracted from our portfolio. I then take 5% of this reduced portfolio and add in the phantom SS and added medical costs to this amount. This becomes my maximum spending allowance for the year. 2015 is the first year of my retirement plan.

This works because I can live comfortably with just the SS and pension income while on Medicare. No matter what happens to my equities I won't go hungry. Our paid for house is the fall back funding of any extended assisted living/nursing care.

I've considered going with 6% but I can't comfortably get that aggressive. I also don't think I'd want to spend that much.

As for your house with a view, I doubt that this would make a substantial impact on your portfolio unless you were really moving way up in housing cost.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-11-2015, 11:07 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,962
Apologies if I am missing it, but what's your withdrawal methodology (often left unspecified here)?

Many experts (real & imaginary) have been suggesting a 3% WR for folks substantially under 65 yo, in contrast to the often publicized 4% SWR methodology which was/is meant for 65 yo's expecting to live 30 years in retirement. So at your relatively young ages, 2.5% inflation adjusted annually thereafter (SWR methodology) isn't necessarily too conservative.

However, 2.5% of remaining portfolio is dramatically more conservative (and cannot fail theoretically). Reading between the lines it appears you mean % of remaining portfolio, which I would agree is unnecessarily conservative.

I wonder which methodology the replies you're getting are assuming?

But if it were me, I'd first ask if you actually feel deprived at your current level of spending? If not, I'd ask myself what I'd do with more spending before I'd target some unknowable inflation adjusted % WR.
__________________

__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 02-11-2015, 11:32 AM   #23
Recycles dryer sheets
 
Join Date: May 2014
Posts: 342
I would suggest the OP to have a higher withdraw rate before other incomes kick in. People usually spend less as they get older (except the medical bills). If it were me, I would spend more money when I still have energy to spend the money.
__________________
flyingaway is offline   Reply With Quote
Old 02-11-2015, 11:33 AM   #24
Recycles dryer sheets
swakyaby's Avatar
 
Join Date: Feb 2011
Location: Northern Cal
Posts: 228
I think your husband is right. If you are foregoing some things both of you would like because of worry you might outspend your savings, it seems you're being too conservative. At $5 million investable assets and not counting the equity of your home and not counting the income bump later in life with SS and small pension, withdrawing 3% or even 3.5% seems rather safe. I also think it's true that, generally speaking, when many retirees reach their 70's, discretionary spending begins to slow down, even as your income rises with SS and a small pension.

So I join others in encouraging you and your husband to enjoy that well-earned raise in discretionary spending, while you're both still young and healthy enough to appreciate it.
__________________
swakyaby is offline   Reply With Quote
Old 02-11-2015, 11:49 AM   #25
Thinks s/he gets paid by the post
Major Tom's Avatar
 
Join Date: Nov 2009
Location: SF East Bay
Posts: 3,128
Quote:
Originally Posted by Midpack View Post
Apologies if I am missing it, but what's your withdrawal methodology (often left unspecified here)?
I believe she answered that in this post -

Quote:
Originally Posted by ElizabethT View Post
Our 2.5% WR is based on portfolio value each Jan 1, so it ebbs and flows with the portfolio and should not lose out to inflation.
__________________
ER, for all intents and purposes. Part-time income <5% of annual expenditure.
Major Tom is online now   Reply With Quote
Old 02-11-2015, 12:17 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,962
Quote:
Originally Posted by Major Tom View Post
I believe she answered that in this post -
Not in the OP, but her subsequent post is the reason I also mentioned in red below. It is a significant distinction, many times overlooked in threads.
Quote:
Originally Posted by Midpack View Post
However, 2.5% of remaining portfolio is dramatically more conservative (and cannot fail theoretically). Reading between the lines it appears you mean % of remaining portfolio, which I would agree is unnecessarily conservative.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 02-11-2015, 12:17 PM   #27
Full time employment: Posting here.
 
Join Date: Jul 2014
Posts: 616
Logic suggests that you could withdraw more and be fine, but I tend to be conservative and would not want a lot (any?) risk that I wouldn't have enough later in life. One middle ground is to continue your approach, but identify some specific things that you want to do - a dream trip, more dinners out or moving expenses for your dream house with a view. Come up with a budget for those. If the budget for the other expenses fits with a higher (but reasonable) withdrawal rate, you can spend on those items. This way you can accommodate your desire to do some more enjoyable things, without just increasing the budget each year without regard to specific spending goals. This could help avoid overall "lifestyle creep" but allow you to do some of the items that you've been putting off.
__________________
Katiek is offline   Reply With Quote
Old 02-11-2015, 12:39 PM   #28
Thinks s/he gets paid by the post
 
Join Date: Feb 2011
Posts: 1,629
Any WR is not too conservative if it lets you sleep well at night
__________________
ERhoosier is offline   Reply With Quote
Old 02-11-2015, 12:48 PM   #29
Recycles dryer sheets
 
Join Date: Feb 2015
Posts: 295
To responders thus far: I really can't thank you all enough. I fully recognize this isn't what most people would consider a real problem, and yet, finding balance, regardless of portfolio value, is likely something many of us struggle to do.

I am going to heed the advice given here, and bump us to 3% of Jan 1 portfolio value, beginning in 2016. That's $25,000 in real dollars today, which is more than enough to cover what we are currently putting off - some additional travel, a once a year family trip we would like to provide for our children/grandchildren, and better seats when we go out to the theater. Oh, and better wine when we dine out.

Doing that now will give us the freedom to use our future pensions and SS for paying the higher property taxes trading 'up' to a smaller home, but in a better location, would create. (Price differential of the home would be negligible, but our property tax base would reset significantly.)

My husband will be thrilled when I tell him, truly.
__________________
ElizabethT is offline   Reply With Quote
Old 02-11-2015, 01:08 PM   #30
Full time employment: Posting here.
MuirWannabe's Avatar
 
Join Date: Oct 2009
Posts: 670
Quote:
Originally Posted by ElizabethT View Post
I am going to heed the advice given here,

My husband will be thrilled when I tell him, truly.
I guess it's obvious who wears the financial pants in this relationship.

FWIW, your decision seems like a good move to me.

Muir
__________________
“Of all the paths you take in life, make sure a few of them are dirt.” John Muir
MuirWannabe is offline   Reply With Quote
Old 02-11-2015, 01:26 PM   #31
Recycles dryer sheets
 
Join Date: Oct 2007
Location: San Diego
Posts: 283
Considering none of us know how much time we have left, I would vote for spending more now, and cut back later.

I would be quite tempted to take a big chunk out, and make it your fun fund. Take something like 250k, to spend on fun things over the next few years. Keep your withdrawal at 2.5% for your new 4.75m balance.
__________________
Office Space
Bob Porter: Looks like you've been missing a lot of work lately.
Peter Gibbons: I wouldn't say I've been *missing* it, Bob.
meekie is offline   Reply With Quote
Old 02-11-2015, 01:37 PM   #32
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Posts: 1,842
Quote:
Originally Posted by ElizabethT View Post
...
I am going to heed the advice given here, and bump us to 3% of Jan 1 portfolio value, beginning in 2016. .... Oh, and better wine when we dine out.

....

My husband will be thrilled when I tell him, truly.
I agree with your call--but in my household, DW would not be thrilled if "better wine" were ever relegated to a secondary consideration!
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Old 02-11-2015, 01:53 PM   #33
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by ElizabethT View Post
I am going to heed the advice given here, and bump us to 3% of Jan 1 portfolio value, beginning in 2016.
I still think you are still being too conservative when you are basing you withdrawal on total portfolio. Heck, go back and up your 2015 spending plan. You're just trying to delay the spending longer.

Have you looked at how a 50% drop in equities would impact your withdrawals? Do you still cover your basic living expenses?

Quote:
Originally Posted by meekie View Post
I would be quite tempted to take a big chunk out, and make it your fun fund. Take something like 250k, to spend on fun things over the next few years. Keep your withdrawal at 2.5% for your new 4.75m balance.
+1

This is another approach that would give you the same result but separate your "really safe" money for living expenses from the "fun" money.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 02-11-2015, 01:56 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,453
Quote:
Originally Posted by Fermion View Post
So you are currently spending $125,000 a year?

SS plus pension will drop that to under $100k?

You could go 0% stocks and still have enough money for a 40 year retirement with that nest egg and withdrawal rate.
Without adjusting spending for inflation.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 02-11-2015, 02:04 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,453
50 and 64 - yes, I think 2.5% of remaining portfolio is too conservative. 3% or even 3.3% is still pretty conservative. Even if you don't spend it all in one year, you can put it to good use in the near future. Or even as a cushion for years where the remaining portfolio drops.

Now some people will go 100% dividend paying stocks as you can easily match 2.5% annually in qualified dividends. And let the stocks and dividends grow over time and leave a sizable inheritance. You just have to be able to ignore the volatility of such a portfolio.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 02-11-2015, 02:08 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,453
Quote:
Originally Posted by ElizabethT View Post
The tradeoff in this approach, of course, is that we are deferring some lifestyle choices until that point, wisely or unwisely. And which is really my question, one as much philosophical as financial I would imagine.
That deferral of lifestyle choices is the rub, because your health may deteriorate 5 years from now. That's a risk too.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 02-11-2015, 04:27 PM   #37
Dryer sheet aficionado
 
Join Date: Feb 2013
Posts: 27
Hi Elizabeth T

In my opinion, you have chosen great ways to use additional income. Most of our additional spending has been on home remodeling and travel. For me, I can't see any scenarios where my family will regret our increased spending on these items. But, if we had not done the travel with our kids now, I think that ten years from now we would have regretted the missed opportunity. While I do still struggle with spending money, the money we have spent on travel and home improvement has been worth it to me and has brought much joy to our family life.
__________________
formerly known as 5yearstogo
just walk away is offline   Reply With Quote
Old 02-11-2015, 05:00 PM   #38
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 2,204
Just some thoughts to consider:

Even if your portfolio just keeps up with inflation (e.g. throw it all in a TIPS ladder, not that I would recommend that), you have enough to fund 33 years of retirement at 3% withdrawal. That's without SS, downsizing your house or pensions.

In 33 years more than likely one of you will be dead.
Plan for a long retirement | Vanguard

Even worse, if your husband is 60 there is a 90% chance he won't be there then. If you are 60 it's still 80% ..

So +1 on the setting aside a chunk of money for fun things now, and +1 on the increasing spending to 3%.

Will you still be able to do fancy things like travel and adventures once you even hit SS and pension age?

Enjoy life now, you earned it and you will be fine! Only thing to consider is how big your inheritance you want to have - but even that will be ok unless you go to 4% - 5% permanently and both live up to 110 years old.
__________________
Totoro is offline   Reply With Quote
Old 02-11-2015, 05:21 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,325
You don't have to bump your spending up all at once. I've been lowering the amount I think would be good to leave for the kids as they get on in college and have increasingly good odds of becoming self supporting before too long. I agree with a previous post that having too much money to look forward to, at least for some adult kids, may not be a good thing, similar to the hazards of Economic Outpatient Care described in the Millionaire Next Door.

It is not easy to just flip a switch and one day go from super saver to even moderate spender for some of us. But then again after a certain point spending more money doesn't necessarily buy more happiness, and leaving money to a favorite charity can be a good use, too.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is online now   Reply With Quote
Old 02-11-2015, 06:05 PM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Personally I want to make sure that I die with an estate which doesn't owe estate taxes (currently 5.43 million double for a couple). Even withdrawing 3% of the balance each year gives a good chance of exceeding that amount. Now you can leave the amount over that to charities, but I personally would rather make the gifts while still living, or spend it on myself.
__________________

__________________
clifp is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Determining if you are living below your means Car-Guy FIRE and Money 60 12-25-2014 09:52 PM
How far below your means? GeoffC FIRE and Money 96 01-24-2011 05:10 PM
Paying for High Quality Household Items and Living Below Your Means nico08 FIRE and Money 48 01-19-2011 08:14 PM
Why I Live Below my Means Culture FIRE and Money 80 03-23-2009 12:00 AM
At, Below, or Above your means Sam FIRE and Money 27 03-30-2007 11:23 AM

 

 
All times are GMT -6. The time now is 11:14 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.