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Old 01-16-2010, 12:54 PM   #1
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Hi, I am JimP

I am JimP. I am 60 years old and married to 63 year old wonderful woman. I am still working and hope to retire in the next two years. My wife is on SS Disability and has been for 10 years. We have $2.1 Mil in assets, have $100m in income a year, will need approximately the same amount in retirement. Medical insurance is our biggest concern. We hope to travel and help our families as much as possible. We have no children. Our assets are apporx 50/50 mix. We live in the Tidewater Virginia area and will stay here for the time being.
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Old 01-16-2010, 01:15 PM   #2
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Hey Jim. Welcome here.

Don't hesitate to jump into the skirmish.
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Old 01-16-2010, 01:40 PM   #3
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Welcome, JimP! You can run your numbers through FIREcalc (link near the bottom of this page, in the light green menu bar) to see one projection of how much $ you can spend based on your nest egg, other sources of income, lifespan, etc.

Does your wife have health insurance now?
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Old 01-16-2010, 02:04 PM   #4
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Hi JimP, I would have thought that ss disability makes one eligible for medicare, isn't that the case?


Anyway welcome to the board.
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Old 01-18-2010, 10:59 AM   #5
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Welcome!

$100,000 income from $2.1 million in financial assets works out to a 4.76% yield ... which sounds a bit on the high side to me.

Still, as you have no children you won't be worried about leaving an estate, so you'll have the freedom to encroach upon capital should that prove necessary.
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Old 01-19-2010, 07:01 PM   #6
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Thanks for the welcome. I will jump when I have time.
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Old 01-19-2010, 07:05 PM   #7
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I should have answered the question in the first message. My wife has medical insurance with my work insuurance. If I retire, then we lose that. She has a lot of medical problems and is petrified of losing insurance.
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Old 01-19-2010, 07:06 PM   #8
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She is on Medicare and my work insurance.
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Old 01-19-2010, 07:08 PM   #9
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Thanks for the comments on my info. I think I am borderline at this time. If I can get my portofolio back to where it was two years ago ($2.5 mil), I would be more comfortable.
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Old 01-19-2010, 10:14 PM   #10
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Yes, that would reduce the $100,000 to 4%. I too would be more comfortable with the latter.

To get back to $2.5 million, your portfolio will need to grow at an annual rate of ~9.5% over the next two years. Unfortunately I have no crystal ball, so I have no real idea how likely that is ... but it doesn't seem obviously impossible, anyway. Good luck to you.
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Old 01-23-2010, 06:31 PM   #11
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Hello Jim,
I'm certainly not a financial expert, just another retired guy making ends meet but maybe some of the following might help.

Is your house included in your assets, if so that is not a very liquid asset. So if for example you have $1.5M in stock, cash, bonds etc, then with strategic planning & life expectancies etc you could plan on drawing down on your savings for lets say 25 years which would put you around 87 & wife around 90 of age if you worked for another two years.

You indicated you wanted to retain close to $100,000 per year income after retirement. Based on $1.5M you could probably draw down roughly $88,000 per year for 25 years if you earn 3.5% compounded annually and maybe another $12,000 per year on a reverse mortgage monthly payment of approx. $1000/mo (forever as long as one of you live in your home) if your home has enough value & no debt. This amount added to your $88,000 drawdown would give you your $100,000 income. Remember though, you have a 25 year timeline on your savings draw unless you can earn higher interest rates. You would need to verify how much you could get with a Reverse Mortgage Calculator & completely understand the ramifications & benefis of this type of mortgage.

These are some of the financial exercises my wife and I are going thru as we retired last year at 62 & 63 and we're still working at putting everything into place. Like yourselves, we also do not have any children, so we are considering every option. By the way it is obviously important to maintain the highest rate of return you can get, but it is just as important if not more, not to lose your capital base...If you do, forget your dreams! We just placed a CD @ 4.5%. The CD is a 15 yr with 1-yr call. We decided that if the CD goes out until maturity we could live with that as we have other CD's earning good rates.

Anyways, this is getting to be way too long but below is a copy of a printout of your $88,000 per Year Payout from this great Savings Distribution Calculator.

You can the Savings Distribution Calculator here: Savings Distribution Calculator - Financial Calculators from Dinkytown.net

Starting amount $1,500,000
Years you wish to make withdrawals 25 years
Periodic withdrawal from savings* $88,000 per year
Rate of return 3.50% compound annually
Total amount you will have withdrawn $2,197,405
Ending balance after 25 years = $0

Good luck to you Jim & do not lose your capital base! You're not a 30 year old anymore with decades left to recover. Also don't forget your wife goes onto Medicare in two years so that can take a burden off from her valid health care worries.
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Old 01-23-2010, 07:19 PM   #12
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Ummm....it would be highly risky to try to take out $88,000 a year with $1.5 million. You are ignoring the risk of volatility. Investments don't return 3.5% like clockwork each year. A few years of negative returns and the original poster is broke.

I ran $1.5 million taking out $88,000 through Firecalc with a 25 year term. It failed about 35% of the time (i.e. ran out of money).

I then ran it with a more typical 30 year term and it failed almost half the time.
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Old 01-23-2010, 07:42 PM   #13
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Hello Katsmeow, Depends on what type of risk you're talking about....I'm talking about conservative FDIC CD's, not much risk of failure unless the Federal Gov't fails which in that case, we had all better start learning how to build log cabins. That is also why I based the drawdown on safe 3.5% FDIC protected issues, which should be doable with some research and work.

I totally agree with your premise of watching for failures & I should have reiterated about earnings based on non-risk issues. My wife and I took two major hits several years ago in "Safe Stocks". The losses were in the amounts of $100K & $200K. We learned a "HARD LESSON" and have never looked back. Now we only work with FDIC protected CD's.

For liquidity we have "Reward Checking" accounts with high max limits earning over 4%. Nothing is easy these days and a person needs to be creative, savvy, streetsmart and have an overwhelming sense of self preservation to come out ok. It's work, but isn't that what most of us have done for over 40 years?

Granted, no one is going to get rich this way...But I can guarantee we're not going to lose our cash generating, income earning capital base either. A lot depends on the age of the people and their acceptance of risk and their ability to recover given a timeline of productive, recoverable years.

Your thoughts are valuable as everyone needs to consider every strategy and possibility. Thanks for highlighting the ultimate need for safe returns on capital...
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Old 01-23-2010, 08:06 PM   #14
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The following article,

Safe Withdrawal Rates - Bogleheads

provides links to papers and references discussing safe withdrawal rates in retirement.

These papers will provide a good foundation upon which to determine a withdrawal rate with which you feel comfortable. I recommend reading and studying such matters before retiring.

I would urge that readers take the time and care to study withdrawal rates. This is especially urgent if they are considering withdrawing from their nestegg at greater than the commonly accepted rate of 4% per year for 25-30 years, including taxes.
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Old 01-23-2010, 08:41 PM   #15
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Quote:
Originally Posted by moreorless View Post
For liquidity we have "Reward Checking" accounts with high max limits earning over 4%...
This is a very high rate. Could you tell us where to find these accounts?

Ha
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Old 01-23-2010, 11:19 PM   #16
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Originally Posted by haha View Post
This is a very high rate. Could you tell us where to find these accounts?
I had to google that for myself. Apparently such things do exist, although I can't verify the how or why of it. Lots of rules and I think you have to pay attention to what you're doing or you will find yourself not earning the teaser interest rate advertised.

From BankRate.Com:
Quote:
The bank is offering a high-yield checking account, as described in the Bankrate feature "High-yield checking: A good bet." In this case, the hook -- besides the whole redneck thing -- is that you can earn 4 percent annual percentage yield on up to $10,000 on deposit in a redneck rewards checking account.
&#39Redneck&#39 checking account promises big yield

Enter your zip code at this site and it will take you (or at least it did for my zip) to local banks (and some online) with similar offers. https://www.checkingfinder.com/

Many of them require a certain number of check/debt card POS purchases each month, a minimum balance, direct deposit, etc. Here is some more from a site I'm not familiar with:How is 5% Checking Possible? The Math Behind Reward Checking Accounts

Interesting, but I would do a lot of research on it before I made the move. Would like to hear what others think after reading up on it.
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Old 01-24-2010, 12:06 AM   #17
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I'm talking about conservative FDIC CD's, not much risk of failure unless the Federal Gov't fails which in that case, we had all better start learning how to build log cabins. That is also why I based the drawdown on safe 3.5% FDIC protected issues, which should be doable with some research and work.

I had thought by 3.5% return you meant a real return after inflation. If you are talking about an actual return of 3.5% then it seems like you would be vulnerable to inflation. The volatility isn't there but the value of the $1.5 million steadily decreases due to withdrawals that are too high given the low return after inflation.

It is tempting to think that CDs are safer than equities with a risk of volatility. But the lack of real return is a killer. A $1.5 million portfolio without equities with a withdrawl of $88000 per year has even less likelihood of success, far below 50%.
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Old 01-24-2010, 11:25 AM   #18
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Here is a link for some high Reward checking rates. Yes there are rules & it does take some effort and some banks are better than others. We needed additional liquidity and yet wanted to have a somewhat decent rate so we opened ours with Coulee and have found them pleasurable to work with.
http://www.depositaccounts.com/checking/reward-checking-accounts.html

For CD rates look at www.fisn.com, We took a 15 yr/1 yr Callable CD @ 4.5% We can live with that rate if it goes to maturity & yes I know, what about future inflation etc. well, that's a decision every person needs to make. If the CD is called, then we'll look for another decent bridge rate until the economy turns up. Everyone has their own level of need and expectations, my wife and I are conservative so we go to secure FDIC protected CD's. Of course the problem is they have not been returning very good rates lately but then again a few years back we took several long term CD's at close to 6% and they are still going for a couple more years . Again, it depends on each persons individual approach to their own personal finances. My wife and I find we can sleep very well at night not worrying about the markets.

Concerning the previous portfolio, as long as rate of return is maintained at 3.5% the mathematics work according to the online Savings Distribution Calculator (link previously provided). This calculator does not determine anything about market volatility, inflation etc. it is simply a mathematical calculator. The problem as always is maintaining a constant maximum % rate on the maximum principle base. Jim stated he wanted to try to maintain a certain income level but he didn't say "after inflation" so the exercise was to simply see how much of a drawdown could be attained with an assumed capital base for a set period of years @ a certain rate of return, ending at zero capital remaining...Wasn't that shown on the recap & understood? Sorry if the example wasn't clear enough. The example above stated a 3.5% rate of return compounded annually, nothing fancy & didn't say anything about "after inflation". Yes inflation is certainly a factor and for those that can handle some risk to attain 3.5% after inflation, great, go for it but if anyone finds a secure, insured way to achieve that level of return now, please let me know.

Here is a Financial Blog that has great information, we found Coulee through this site. http://www.depositaccounts.com/blog/

Good luck on finding the right CD or Reward account that works best for your own situation.
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Old 01-24-2010, 01:13 PM   #19
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CD Update - I just went onto www.fisn.com site to check their latest CD offering & noticed the CD we took (4.5% 15yr/1yr uncallable) is the same except has a 2 year uncallable term. I like this even better but alas we took out our CD some time ago through them. I know this thread is about Jim's portfolio but since I mentioned FISN in a previous post I thought I would just add this update...Hope this information on FISN & their CD's helps anyone who is looking for a CD but didn't know about them. Have a great day everyone.
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Old 01-25-2010, 08:18 PM   #20
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Wow. I can't fathom spending $100k a year. In top earning years, I made a lot more than that, but still can't fathom actually spending all of it.
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