Factoring in SS

[airstyle]

We should accomplish ER in 2014 when I'm 56, my wife is 53, our two kids will be done with college, the house will be paid off, and we'll have enough saved in my 401k/Roth for income.

However...  how do we factor in the additional income influx when the SS checks start arriving in my mailbox at age 65  (and then again, three years later when my wife reaches 65)?

Do we ignore SS in the meantime and just stay the course at a 4% - 5% withdrawel rate?  Then when those SS checks start arriving, consider them an increase in our income, to spend or to save?

Or...  Do we withdraw a more generous percentage during our early ER years (is that redundant?),  with the potential of even decreasing our savings,  but knowing that SS is on the horizon to rescue and rejuvinate our income?

Or... is there another approach I'm not even considering?

We're expecting just a modest income at ER so an increase in our income would be welcome.

Thanks!

 

[REWahoo]

Airstyle,

Great question. We're taking the higher early withdrawal route.

I'm planning ER at 58, the spouse at 57. Our plans are to withdraw 5-6% for the 3.5 year period until I turn 62, then 4-5% until she turns 62. With SS (and her small pension at 65), we should be able to maintain a withdrawal rate between 3.5-4% after our initial 5 years of ER.

This plan does have some risk, but I believe it is an acceptable risk considering the rewards of ER. If the market takes a significant turn for the worse during our five year period of higher withdrawal rates, I may have to "de-ER" and return to work. Worse things can (and may) happen. But no risk = no reward.

REWanabe

 

[John Galt]

Re. "De-ERing and going back to work", that's why
I keep my .357 Magnum nearby at all times. This boy
is all done dancin' as far as gainful employment is concerned

John Galt

 

[cute fuzzy bunny]

I've done the ER planning for myself and my fiancees retirement planning without regard for pensions or social security. I figure this creates a conservative nature to the plans and if they work without them factored in, they'll surely work better if/when they do materialize.

I'll consider them cream on the top at the point they're available, and if the rest of either of our plans falls a little short, then they can fill the gap. If the roaring inflation monsters come along and stay a while, SS and pensions may be the diving save at the right time.

In the meanwhile, if my ER plan or her retirement plan wouldnt work without social security then i'd change the plan or wait to implement it. As it stands, my ER plan works 100% of the time in firecalc and she wants to keep working until she's at least 60, and the plan I put together for her works 100% of the time as well, even independent of my assets.

 

[Bob_Smith]

Hi airstyle,

Get Quicken Financial Planner and enter all future income streams into it. If you can get your hands on an earlier version (99) you'll get much better graphs, I use QFP from Quicken 99 and integrate that into Quicken 2003. It will look something like this:

It will give you a very good idea of how the cash flows under one scenario at a time (I wish it would provide multiple scenarios). I used a conservative 2.5% real return in the above graph. You can use either nominal or real dollars - the above chart uses real dollars and provides a good illustration of the impact of inflation on a pension. In a high inflation environment it would be much worse. I think I used 4% inflation and a 6.5% return above.

I find QFP indispensable and use the charts all the time. I would highly recommend it. I think Cut-throat uses it too.

John Galt, you summed up my feelings about going back to work once I leave. It ain't gonna happen! Got quite a laugh out of your imagery. You should write a book!

 

[John Galt]

Bob_Smith.............Very nice graph!

Yes, I should write a book. I know some good stories.
So what's holding me back you ask? Good writing is
hard work. Still, I may get to it eventually.

John Galt

 

[REWahoo]

Re. "De-ERing and going back to work", that's why
I keep my .357 Magnum nearby at all times. This boy
is all done dancin' as far as gainful employment is concerned

John Galt

So you are truly "taking a shot" at ER!