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Old 06-02-2016, 07:49 PM   #41
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My WD rate will be higher before taking SS, but I don't think of it as pre-spending.
Think of it this way......

If you would spend less today if SS didn't exist in your future, then you're pre-spending SS.
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Old 06-03-2016, 05:29 AM   #42
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You spend more from savings today based on the fact you'll have SS coming in the future. It's a basic premise in the "delay until 70" strategy.
OP here.

Yes. My question was whether people use their savings to make up for their SS benefit until it become available or if they wait and consider SS as a 'raise'.

If your calculated SWR minus SS is $50K and your SS is $10K, do you withdraw $60K from your savings until SS arrives or do you live on $50K until then?
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Old 06-03-2016, 05:59 AM   #43
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I don't think you want to pre-spend the whole SS amount. If your SS income is $10K you can't magically stretch that $10K to include the years before you collect and have 0 income from it. If you figure on collecting that $10K for 20 years, but want to pre-spend it 10 years early, that is $200K you are stretching over 30 years (ignoring the time value of money to make this simpler). So, you'd figure $6666 available per year, even after you start to collect. In essence you are borrowing $6666 from your savings for 10 years, and then when you start collecting SS you have to pay back $3333 from your SS income back to your savings for 20 years. That $10K can't come from thin air, unless you're willing to risk a higher than 4% WR.


This is why I calculate SS as an annuity. Then I can just treat it like a source of funds that I can't yet tap, like an IRA. You aren't pre-spending from your IRA, right? Think of SS in the same way.


Think of it like 3 jugs of water of varying size, corresponding to how much you have in each type of account. You have a bottle that you are going to fill 4% of the total amount of water each year. Water is water, just like the "money is fungible" comment someone else made. At first you can only fill from the taxable jug. Later you will be able to fill from the IRA and SS jugs, requiring you to take less from the taxable jug. But if you take more than 4% from the taxable jug early, knowing that eventually the SS jug will start running, you have more risk that the taxable and IRA jugs will go dry.
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Old 06-03-2016, 06:37 AM   #44
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You aren't pre-spending from your IRA, right?
Well, actually we are.

In our case, I'm drawing from my IRA and DW turns 59.5 in 18 months. We each have sizable IRAs and I consider her's as part of the total portfolio from which we draw.

It's just a matter of where the withdrawal comes from. That was kind of the point of my original question.

She'll be getting SS in four years and we're supplementing that with additional withdrawals until then.

If we had to make a 15 or 20 year bridge, that might be different, but we view the four year bridge as a minor additional withdrawal.
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Old 06-03-2016, 06:54 AM   #45
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Well, that's up to you what kind of risk you want to take. To answer your original question, I do not, and would not, take a extra withdrawal for the full future SS amount.
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Old 06-03-2016, 07:12 AM   #46
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Well, that's up to you what kind of risk you want to take. To answer your original question, I do not, and would not, take a extra withdrawal for the full future SS amount.
I could stand corrected here, but when I enter my numbers into FireCalc (and others) I enter my portfolio size and expected SS dates of beginning SS.

I am under the belief that the calculated SWR included delayed SS dates and gave me a SWR that had steady withdrawals with delayed SS factored in.

No?
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Old 06-03-2016, 07:19 AM   #47
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I am planning to take my pension at 65 and SS at 70. These will cover my expenses very well. So I can spend down savings until I get to these "life savers", I am now 51.

So I guess I am "pre-spending" SS.
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Old 06-03-2016, 07:26 AM   #48
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I could stand corrected here, but when I enter my numbers into FireCalc (and others) I enter my portfolio size and expected SS dates of beginning SS.

I am under the belief that the calculated SWR included delayed SS dates and gave me a SWR that had steady withdrawals with delayed SS factored in.

No?
My understanding is that in its simulations that Firecal withdraws from the portfolio spending in excess of SS (aka the gap). You provide the spending and it returns the success rate. Firecalc does not provide a WR to my knowledge... it can provide the amount you can spend at different success rates.
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Old 06-03-2016, 07:40 AM   #49
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Yes, we'll be "pre-spending" our SS. Our withdrawals from our savings (which we compute as a % of each year's year-end balance) will be higher in the years before we start SS, then we'll reduce the percentage after the SS checks start.
And, yes, we'll be spending from our tIRAs from the get-go (I'll be 55YO), using 72t (aka SEPP) to avoid penalties. They aren't very big withdrawals from the tIRAs, but they will help a bit to reduce later possible tax bracket increases for us.
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Old 06-03-2016, 07:47 AM   #50
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I could stand corrected here, but when I enter my numbers into FireCalc (and others) I enter my portfolio size and expected SS dates of beginning SS.

I am under the belief that the calculated SWR included delayed SS dates and gave me a SWR that had steady withdrawals with delayed SS factored in.

No?
It's been quite awhile since I've used Firecalc so I can't say for sure but I didn't think Firecalc gives you a SWR. From what I see, you give it your portfolio and SS with planned begin date, along with your expenses, and Firecalc tells you if that plan works based on history. If you go take 4 extra years out of your portfolio to make up for the shortfall before you start collecting SS, you are no longer following the plan that you entered into Firecalc.

If you use a tool like I-orp, it would have you taking more out of your portfolio early, then reducing that when your SS kicks in.

Someone more familiar with those tools can correct me if I'm wrong.

Like you say, it's only 4 years. But if you were doing this for 20 years, I think you could see clearly this is wrong and puts your portfolio at risk. For 4 years, or even 1 year, is still wrong, but just not nearly as risky as 20 years.
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Old 06-03-2016, 07:49 AM   #51
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Yes. My question was whether people use their savings to make up for their SS benefit until it become available or if they wait and consider SS as a 'raise'.
By this definition, I am pre-spending SS. I didn't really think of it that way. I am also pre-spending tax preferred accounts till age 59.5. At this moment I'm pre-spending a very small pension I'll turn on later this year.

I never thought of it in those terms. I have a steady spending in firecalc, i-orp, etc... (Adjusted for inflation). I guess you could say I'm pre-paying taxes too - through Roth conversions now (pre-59.5), and tapping/reducing tax deferred accounts pre RMD.
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Old 06-03-2016, 07:52 AM   #52
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Originally Posted by youbet View Post
You spend more from savings today based on the fact you'll have SS coming in the future. It's a basic premise in the "delay until 70" strategy.
Quote:
Originally Posted by youbet View Post
Think of it this way......

If you would spend less today if SS didn't exist in your future, then you're pre-spending SS.
based on this definition, I don't pre-spend SS, but I don't look at it as a raise either.

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Originally Posted by marko View Post
OP here.

Yes. My question was whether people use their savings to make up for their SS benefit until it become available or if they wait and consider SS as a 'raise'.

If your calculated SWR minus SS is $50K and your SS is $10K, do you withdraw $60K from your savings until SS arrives or do you live on $50K until then?
SWR is often a misused term. Many use it for in place of WR (whatever someone is withdrawing from their assets). When I calculated my SWR, I used SS in the calculation. However, I defined my WR at 1.5% which was well below my SWR (the maximum WR where Firecalc gives 100% success rate). So far I have failed to spend my planned WR... something I need to work on. So, I really don't know where I fit in the OP question since I did not calculate w/o SS. However, my WR would be safe if I had left SS out of the calculation.

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Well, actually we are.

In our case, I'm drawing from my IRA and DW turns 59.5 in 18 months. We each have sizable IRAs and I consider her's as part of the total portfolio from which we draw.

It's just a matter of where the withdrawal comes from. That was kind of the point of my original question.

She'll be getting SS in four years and we're supplementing that with additional withdrawals until then.

If we had to make a 15 or 20 year bridge, that might be different, but we view the four year bridge as a minor additional withdrawal.
If you plan on SS in a 2 earner/SS family and one passes, you're assumptions and SS income can be significantly off assuming SS is a significant part of spending rate.
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Old 06-03-2016, 09:05 AM   #53
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I'll be bridging the gap between ER and SS eligibility at age 62 with withdrawals from taxable accounts and 401k. Overall planned withdrawal of about 4% the first year (medical premiums covered by HRA) and 7% the second year. This leaves the nest egg at about 88% of original balance when SS comes into play.

For those of you who have bridged the gap with savings, what % of nest egg draw down did you find acceptable?
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Old 06-03-2016, 09:18 AM   #54
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Well, that's up to you what kind of risk you want to take. To answer your original question, I do not, and would not, take a extra withdrawal for the full future SS amount.
I would and, in fact, do take something very close to my full future SS. It increases my income by about one third. My basic living expenses are covered by pension and SS on the late DWs account. If I don't bump my income up my WR is zero. I am 66 and am only doing this for another 4 years. When my SS kicks in, my WR will be back down to zero and my "risk" will be that I am adding to my nest egg which means I waited until way too late to retire. So you might say I am working at lowering my "risk"!
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Old 06-03-2016, 09:59 AM   #55
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My understanding is that in its simulations that Firecal withdraws from the portfolio spending in excess of SS (aka the gap). You provide the spending and it returns the success rate. Firecalc does not provide a WR to my knowledge... it can provide the amount you can spend at different success rates.
What I do is run two simulations, setting the scenario for 'Spending Level'.

One with SS and another with no SS at all. The one without SS gives me what my portfolio alone should provide as a spending level and I then back fill with SS benefits.

My assumption (yes, I know, 'when you assume') is that the calculation for WR includes taking SS at a later date and implies that I'll be making up the difference until then with additional portfolio withdrawals.
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Old 06-03-2016, 10:11 AM   #56
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If you plan on SS in a 2 earner/SS family and one passes, you're assumptions and SS income can be significantly off assuming SS is a significant part of spending rate.
Of course! In our case, we have a fairly sizable portfolio (and family trust fund income), relatively short bridging gap (4 years) period coupled to fairly good longevity odds.
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Old 06-03-2016, 12:17 PM   #57
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What I do is run two simulations, setting the scenario for 'Spending Level'.

One with SS and another with no SS at all. The one without SS gives me what my portfolio alone should provide as a spending level and I then back fill with SS benefits.

My assumption (yes, I know, 'when you assume') is that the calculation for WR includes taking SS at a later date and implies that I'll be making up the difference until then with additional portfolio withdrawals.
I don't think that assumption is correct, though I'm not 100% clear what you are saying.

The results screen says
Quote:
This spending level is x.xx% of your starting portfolio.
It does not say this is your withdrawal rate, because it goes on to say:

Quote:
(Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)
It seems pretty clear to me that they say you can spend that amount using all sources. Meaning that if you aren't getting SS yet, you spend it all from the portfolio. Later, when you start SS, you take less from your portfolio.

Look at the results with and without SS. With SS they allow you a higher spending level, which makes sense because they know that later you can start tapping into SS and take less out of your portfolio. This tells me they have included the full value of SS in that calculation. There's no way they are giving you a bigger number, and then imply that you can also tack SS income on top of that for an even bigger number.

Maybe I'm misunderstanding what you are trying to say.
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Old 06-03-2016, 12:26 PM   #58
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Since our income will be 100% pension/SS we have projected smaller expenditures in the early years to maximize savings and give ourselves a nest egg. We don't want to rely on either pension or SS, just to be safe and/or prudent. As our different pension and SS plans kick in, we will only slightly increase our budget while continuing to save most of the money back. Once we reach a comfortable level in our nest egg investments, then we'll feel more free for the occasional splurge. Fortunately we're very much the LBYM/sustainability types who enjoy living in countries with rich cultures and reasonable lifestyles.
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Old 06-03-2016, 12:32 PM   #59
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"Or do you view it as a 'raise' ?

That's how I view it
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Old 06-03-2016, 12:41 PM   #60
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It seems pretty clear to me that they say you can spend that amount using all sources. Meaning that if you aren't getting SS yet, you spend it all from the portfolio. Later, when you start SS, you take less from your portfolio.
That is exactly how I understand it and what I meant be 'pre-spending' SS.

My original question was whether people spend less until SS arrives and then consider it a raise that brings them up to their calculated spending level when it does arrive.
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