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Old 03-01-2012, 10:50 AM   #21
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Any thoughts on my questions above particularly question #1?

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1) Assuming our retiree owns his house (no mortgage), wouldn't a good Plan B be to assume he could sell at 85, then rent and live on the balance + SS? In that case, couldn't he just run the simulation for 20 years and assume that it's pretty much worst case?
Or alternately, as that lower red line on the original chart showed poor results at year 20, couldn't the retiree just sell the house and rent to increase their disposable income? I'm assuming the house has some pretty decent market value and has been maintained and is in a decent local.
That seems like a viable option to me. Around here you can get a very nice 2 bed, 2 bath, luxury apartment for $1,000/month, and that includes all maintenance, property tax, property insurance etc.

I actually know a lady who did exactly that at age 70. Last visited with her in January 2010 just before we moved away. She was then 79, and said that it has worked out fantastically well for her.
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Old 03-01-2012, 10:57 AM   #22
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Originally Posted by Lsbcal View Post
Any thoughts on my questions above particularly question #1?

Repeated here:
Or alternately, as that lower red line on the original chart showed poor results at year 20, couldn't the retiree just sell the house and rent to increase their disposable income? I'm assuming the house has some pretty decent market value and has been maintained and is in a decent local.
Any asset that could come into play, and certainly a house would be one, at age 80 would be helpful. We've had a number of discussions here on the pros and cons, benefits and pitfalls, of including the value of your primary residence in FireCalc numbers. I think that as long as you're willing to give up ownership status of your primary residence and live off the proceeds, there's no reason to not plan on doing so.

My MIL currently lives off of SS and a reverse mortgage on her condo. She's a long time widow and previous stay at home mom who retired at 65 with marginal resources. The reverse mortgage is an expensive way to get at the equity value of the condo but was much less of a hassle for her (now age 85) than selling and moving to an apartment. Well worth it and a viable option to selling and renting.
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Old 03-01-2012, 11:28 AM   #23
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Thanks Alan & Youbet for the replies on the "sell the house" Plan B option. We have a big home in a very well thought of location and really enjoy it. No plans to move. But should we not be able to afford a lot of servicing as we grown older or should it become a burden (financial and/or physical) it seems that Plan B will work fine.

DW used to say she wanted to live by the ocean. I'd always point out the difficulty of getting back to the city for shopping and for good medical care. She would sigh and just dream on. Now some artist friends of hers have moved to a retirement oriented community. She's now mentioning that as a Plan B in the distant future. Never thought I'd see the day.
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Old 03-01-2012, 12:38 PM   #24
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More input for Lsbcal's question.

I probably *will* sell the house at age 85, if not before. However, my house is only worth about 12%-14% of my portfolio value. My portfolio has gained more than that in the past year. So, the extra cash will not be that helpful. Besides, at that point I may want to go to a continual care facility and some of them require a "buy in", so it is possible that that money may go to that. If not, I guess I will want to buy a very low maintenance condo in an over-55 building.

To me, renting is not desirable when over age 85 or so because of the difficulty, in fact near impossibility of moving by myself should that become necessary. By 85 I want to be someplace where I can stay for the duration. My present house would work for that and is just 1-2 miles from the best hospital in the area, but the advantage of a continual care facility would be the ease of getting extra assistance, nutritious meals, and so on.

As far as the original topic goes - - Midpack, those are neat graphs! I agree, it's amazing to see how different the outcome can be for just one retirement scenario. I guess that as retirement progresses, one may be able to get a sense of how things are going and could "fudge" a little on the withdrawals if one's portfolio balance has skyrocketed for the first fifteen years or so. I notice that if one's portfolio is doing wonderfully in the third year of retirement (where I am), it is not necessarily very meaningful, though. It takes a decade (give or take a few years) for the "best case" line to really break away from the "average" line in your second graph.
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Old 03-01-2012, 03:16 PM   #25
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Just in case it got lost in the further discussion, my questions were really designed to probe Midpack's red line scenario that ran out of money. I was thinking that running a 30 year plan for many (but not all retirees) who are 65 is ignoring the real estate asset's place in the picture. For us our house is about 35% of net worth (house + liquid assets, ignoring SS).
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Old 03-01-2012, 03:27 PM   #26
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Just in case it got lost in the further discussion, my questions were really designed to probe Midpack's red line scenario that ran out of money. I was thinking that running a 30 year plan for many (but not all retirees) who are 65 is ignoring the real estate asset's place in the picture. For us our house is about 35% of net worth (house + liquid assets, ignoring SS).
Like I said, the graphs (and FIRECALC) show a scenario where the 4% SWR withdrawal methodology is followed regardless, and again no one would or should do that. We all need to have a Plan B (or several) to fall back on, selling your house or a reverse mortgage are certainly options.
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Old 03-01-2012, 03:41 PM   #27
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OK. I must be missing the the point here. I agree that looking at those worst case curves (along with the rising ones) is a good exercise.
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Old 03-01-2012, 04:09 PM   #28
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Like I said, the graphs (and FIRECALC) show a scenario where the 4% SWR withdrawal methodology is followed regardless, and again no one would or should do that.
Well...... I kept spending during the 2008/2009 downturn despite my portfolio being down in excess of 30%. It was just a hunch but it turned out to be the right thing to do. The discretionary activities we might have cancelled were all things we'd be unlikely to do today but were things we really wanted to do while we still could. And our FIRE portfolio recovered despite not cutting back on discretionary spending.

Time keeps running through the hour glass. There is a risk associated with not doing things......
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Old 03-01-2012, 04:46 PM   #29
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Well...... I kept spending during the 2008/2009 downturn despite my portfolio being down in excess of 30%. It was just a hunch but it turned out to be the right thing to do. The discretionary activities we might have cancelled were all things we'd be unlikely to do today but were things we really wanted to do while we still could. And our FIRE portfolio recovered despite not cutting back on discretionary spending.

Time keeps running through the hour glass. There is a risk associated with not doing things......
Also, for those who have discipline, recessions are sometimes the best time to spend above the trend line for things like home-improvements, travel etc. The prices can be excellent and availability (contractors, in the case of home improvements) is also usually not a problem. It does take some discipline to not spend in follow-on years if you need to maintain your asset base to a target.
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