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Old 09-12-2008, 01:04 PM   #41
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I understand the 4% thing (4% day one increased by the inflation rate in the current year added to the 4% for the next year). So routine inflation (more or less 3% a year) would it not take you to a 8% rate about 24 years down the line? (3% X 24 = 72 which using the rule of 72 be a 100% increase over the starting %). I know it is just a yardstick but if one really kept to the 4% + Inflation rule).
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Old 09-12-2008, 02:40 PM   #42
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Originally Posted by harley View Post
I thought the 4% was supposed to be based on the total net worth the first year you were retired, then that amount is adjusted up for inflation each year. Are y'all just taking 4% of whatever your net worth is at some point each year? I know that's one choice, as is the 95% of 4% option. But I guess I was assuming most people used option one, if they were doing a "4%" strategy.

I started at 3.5% of my NW my first year, and I'm adjusting up for inflation at 3% per year. In about 10 years (at age 62) we'll start our SS draw, assuming it's still available. Then when we reach 70.5 I'll repay the total and do the John Greaney SS annuity plan.

In 5 years or so I will readdress our situation, and may increase the draw to 4% if we're doing well. But even if we can't we should be fine with the original plan.

Just a thought Harley,


If you are worried about SS still being viable why would you repay your withdrawals and up the SS component of your ER? Won't this increase your exposure to SS cut backs should there be any or are you worried about means testing for SS? I think Greaney's plan is viable as long as the SS rules don't change. But you seem worried they will.

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Old 09-12-2008, 03:05 PM   #43
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so stop trying to confuse me. it's not as if others haven't already tried.
OK, if you insist. BTW, what's the name of this group of folks who have tried (and failed) to confuse you? Maybe I'm qualified to join

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Old 09-12-2008, 03:16 PM   #44
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Just a thought Harley,


If you are worried about SS still being viable why would you repay your withdrawals and up the SS component of your ER? Won't this increase your exposure to SS cut backs should there be any or are you worried about means testing for SS? I think Greaney's plan is viable as long as the SS rules don't change. But you seem worried they will.

Grunt
Not worried, just aware. I'm certainly concerned about means testing, and I just don't see how SS rules can remain the same as they are now. And I'm only 52 now, so that leaves a lot of time for things to change.

But as I said, I'm not worried. I've always made my retirement plans based on the assumption that SS won't be there at all, even though I know it will in some fashion. Just being ultra-conservative on something that's not under my personal control. So for now I'm planning based on the rules being what they are now. If they change, I'll adjust. Just like I have to do with taxes. The only reason I'm planning to do the Greaney method is to maximize my draw from the gov't. I'll have it if I die early, and if I live a long time I'll get a do-over.

Also, going back to my previous post, I apologize for misleading. When I said net worth, I meant minus my primary residence's worth. In my head I disregard the value of my home when doing my calculations.
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Old 09-12-2008, 03:17 PM   #45
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1. I currently don't exceed it, but I will from age 62-70 while I delay SS and reduce my Traditional/Rollover IRA's in order to reduce my projected RMD's. My withdrawl rate at age 69 is currently at 8.6%, but then drops to 3.1% at age 70 (SS kicks in). It is not forecast to exceed the "magic 4%" till age 90 (guess I'll just have to cut back then ...)

2. Income tax is not required to be paid on a quarterly basis with Traditional/Rollover IRA withdrawls. You can compute your taxes in late November/early December and pay them at that time (let your tax $$ continue to earn interest during January-November ). Since it's not considered "earned income", quarterly taxes need not be made. However, be sure you get it in before Dec 31, or you will invoke a nice bill from the IRS! BTW, I have my taxes paid directly from my Vanguard/Fidelity accounts (depending on that year's withdrawl scheme). No need to send any checks! Fidelity/Vanguard handles it as a direct ETF payment to the governement.

3. As far as "long term expenses", I have them budgeted (using the previous 15+ year actual expenses from Quicken). These go into my projected monthly/annual budget. I then withdraw from (either) my Vanguard/ Fidelity MM accounts (which is funded with several years of forecast income to avoid problems as we are having today with the market).

Anyway, that's how I do it (in my situation).

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Old 09-12-2008, 03:31 PM   #46
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I've run a lot of FIRECalc simulations that say we are probably OK (in the past from 1925 to now anyway). Withdrawal rates:

2004 7.3%
2005 4.2%
2006 5.1%
2007 6.3%
2008 5.3% (estimate)

current portfolio (inflation adjusted) value above starting value: +4%

Includes our kid's college expenses which will go to zero in 4yrs. Also will take SS in 6 yrs.

A few years ago a Vanguard planner said his retirement simulation showed our plan looked OK. Will be repeating this with Vanguard soon.
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Old 09-12-2008, 05:26 PM   #47
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OK, if you insist. BTW, what's the name of this group of folks who have tried (and failed) to confuse you? Maybe I'm qualified to join
no doubt some self-appointed illuminati. lucky for you, i don't believe they are currently recruiting.
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Old 09-12-2008, 11:21 PM   #48
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no doubt some self-appointed illuminati. lucky for you, i don't believe they are currently recruiting.


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Old 09-13-2008, 10:49 AM   #49
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by that then i guess you've already set aside from your 4% generating pile an amount equal to what you plan to use to purchase your downtown seattle condo?
I have RE to sell, my share of which should make a large dp. The monthly payment should then be similar to my rent, or just a little higher.

If it is meaningfully more expensive than this, I won't do it anyway.

Ha
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