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Are you 55 & retired with no more than $2mm?
Old 05-31-2010, 08:18 PM   #1
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Are you 55 & retired with no more than $2mm?

If you retired at 55 or younger and had no more than 2 million bucks (in & outside of 401k) to start (and no pension), please tell me 1) how you are investing the amount and how much you withdraw annually, 2) how many years you've been in retirement, 3) any regrets you've had with regards to financial preparation, 4) any lessons learned form recent slump.

I am 46 and would like to retire at 55 with $2MM. I figure, I would need to withdraw $100K/yr before taxes for next 35 yrs.
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Old 05-31-2010, 08:20 PM   #2
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What else would you like to know?
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Old 05-31-2010, 08:32 PM   #3
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5% withdrawal rate is definitely higher than most to all here would be comfortable with. 4% is a decent nominal, but you would then need $2.5M. That allows some increases for inflation, which you didn't mention. It also depends on what you mean by "need". If your income can be flexible, a 5% withdrawal each year, varying with your portfolio value, could work. But your income could be down 50% in a really bad year.

With 5% withdrawal rate, with inflation increases, you'll need a nearly all stock portfolio.
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Old 05-31-2010, 08:42 PM   #4
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My reaction too.
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Old 05-31-2010, 08:52 PM   #5
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Old 05-31-2010, 08:55 PM   #6
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Yes, I am 55, retired (as of this weekend), but have nowhere near $2M. Then again, I wouldn't know how to spend $100k/year--unless I lived lavishly and gave away a lot. (I am single with no kids or mortgage.) Does your scenario include a spouse (and/or mortgage)?
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Old 05-31-2010, 09:04 PM   #7
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Originally Posted by Sportsfan View Post
If you retired at 55 or younger and had no more than 2 million bucks (in & outside of 401k) to start (and no pension), please tell me 1) how you are investing the amount and how much you withdraw annually, 2) how many years you've been in retirement, 3) any regrets you've had with regards to financial preparation, 4) any lessons learned form recent slump.
I am 46 and would like to retire at 55 with $2MM. I figure, I would need to withdraw $100K/yr before taxes for next 35 yrs.
Sportsfan,

You've been lurking/posting here for over a year. I doubt that anything new has been learned during that time. If you still haven't done it yet then I recommend you run your portfolio through FIRECalc.

You should also, if you haven't already, track your spending to put together a "bare bones" budget and a "good retirement" budget. Ideally the biggest withdrawal rate would be around 4-5% and the bare bones SWR would be 4% or below.

There are many different ER portfolios. The key is to choose an asset allocation you're comfortable with-- one that you'll stick to during recessions so that you don't get emotionally frustrated and sell out at the bottom. It can be as simple or as complicated as you want, but the more "experienced" ERs tend to have simple stock/bond portfolios about evenly split (or with a substantial allocation in CDs/TIPS).

I've learned that when everyone tries to exit through the revolving door at the same time, all correlations go to "one" and liquidity is a misnomer. But when you've studied investing and asset allocation, you have the confidence to stick with it and rebalance as necessary.

No regrets on financial preparation. Everything I've learned so far keeps me from chasing bad ideas, and it gives me confidence during the volatility.
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Old 05-31-2010, 09:31 PM   #8
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1) how you are investing the amount and how much you withdraw annually?
Our portfolio is 35/45/20 (equity/fixed income/cash). No withdrawal.
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2) how many years you've been in retirement?
Not retired yet. Still working.
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3) any regrets you've had with regards to financial preparation,
No regrets.
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4) any lessons learned form recent slump.
Equity is volatile! Reduce exposure (but not entirely) to it as you approach retirement.
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Old 05-31-2010, 10:33 PM   #9
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1) have (fingers crossed here) more, allocated 55/45 equity/fixed, plus a 3 year barebones cash fund (lately I don't include cash in my stated AA because it earns next to nothing...I expect to live off of the cash throw-off from dividends and bond interest-mostly from munis).

2) still working, age 48, punch out anticipated at age 51.

3) Wish I would have had access to a 401k or IRA early in my career, that not being the case, I wish I would have known more about investing and saving. You know, they don't teach enough about this stuff in college. Dad taught me to save, but his idea of savings was a passbook acct, then CDs, both of which currently pay a pittance.

4) keep some cash on hand to take advantage of dips or downturns, as well as emergency fund. I didn't have much cash laying around so I relied only on my paycheck to DCA into the falling market...

Btw, if I were you, I would not take 100k on a 2m port. I don't think the port will last as long as you do, if you expect to reach 90. I always plan to 95 personally, because of DW's longevity genetics. On a 2m port, I would not take more than 80k (ESRBob would suggest up to 86k). Even then, for the first years I would limit to 4% even if inflations said you should take more, or even 95% of prior year if the port actually went down. I would probably adjust my thinking when I began collecting SS, if applicable.

Good luck.

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Old 06-01-2010, 07:00 AM   #10
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I figure, I would need to withdraw $100K/yr before taxes for next 35 yrs.
Income: Firecalc will tell you that a 5% withdrawal is aggressive and well below a 90% certainty for 35 years with a 60/40. You should model with Firecalc scenarios with various equity percentages, success rates, and withdrawal rates to get a plan you are comfortable with

Expenses: I think it is important to distinguish between "need" and "want". Is the $100K a "must have" ? Or, could you handle a 20% probability case where you had to live on $60k ?

I am still w*rking, but my thinking is for a 4% SWR for "desired" income of $80k/year with a "could live with if had to" of $50k/year for the 10% case of the portfolio not surviving.
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Old 06-01-2010, 04:46 PM   #11
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The devil is in the details... and you likely omitted some important details.

If the $100k/yr is not inflation adjusted... The original trinity study would suggest that 5% ($100k from a $2mm portfolio that is properly constructed) without an inflation adjustment might survive 30 years (if the past is an indication of future performance).

You can consider using FireCalc to test your assumptions.
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Old 06-01-2010, 04:52 PM   #12
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Quick wit.... made me chuckle.
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Old 06-01-2010, 05:32 PM   #13
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While a 5% withdrawal rate is high, you may only need this until you are 62 when SS kicks in.
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