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For the DINKs
Old 11-11-2014, 03:33 PM   #1
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For the DINKs

If you don't have any plans to leave your egg to anyone else, then likely you'll be wanting to dig into the principle once you get up there in age. Easy to make decisions if your doctor says you have less than a year to live.

But what strategy is sensible if you are, say, 70 and in decent health? Surely 2% no longer makes sense.


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Old 11-11-2014, 03:48 PM   #2
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But what strategy is sensible if you are, say, 70 and in decent health? Surely 2% no longer makes sense.
How about subtracting a "pad" (10 years is probably fairly conservative, many people might prefer 5 years) from your age, and taking the IRS RMD for the resulting age? Keep adjusting every year. The RMD is calculated to run you out of money over the average expected remaining lifespan for a person your age, and subtracting the "pad" makes the withdrawal rate less aggressive, so it is highly likely the money will outlast you. It still will leave money on the table, but it will be a lot less than a straight 2% (or 4%), etc.

Using a 10 year "pad":
Actual age Approx Yearly "take"
80............. 3.7%
90. . . . . .. 5.3%
100. . .. . . . 8.8%
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Old 11-11-2014, 03:59 PM   #3
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If your AA can at least keep pace with inflation, figure your maximum possible years remaining, divide the principle by that number, and spend/donate that amount during the year. Lather, rinse, recompute, and repeat each following year.
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Old 11-11-2014, 04:10 PM   #4
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Old 11-11-2014, 04:14 PM   #5
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If I was living on a 2% withdrawal rate at 70, I would probably find it difficult to increase that to 8-10%. Luckily I have plenty of non-children to whom I can leave any remaining assets. Other family, friends, organizations, etc.


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Old 11-11-2014, 04:22 PM   #6
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If I was living on a 2% withdrawal rate at 70, I would probably find it difficult to increase that to 8-10%.
Well, it can be given away while one is still alive.
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Old 11-11-2014, 04:39 PM   #7
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I use to worry about what to do with our remaining assets after we die -- not having any descendents nor legal heirs closer than first cousin.

I finally came up with the idea to open a Donor Advised Fund and have the Fund be the recipient of all unspecified assets in my will.

The Fund will have consolidated records of receipients of charitable grant recommendations that I made while living. I have also named a contingent grant recommender, who upon my death, will be able to continue to recommend grants and/or name their own successor.

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Old 11-11-2014, 04:42 PM   #8
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Well, it can be given away while one is still alive.

True. I would just be worried about giving away too much. I used one of the longevity calculators yesterday - it said I should live until 93. Considering that is still 60+ years away and the medical advancements that will happen in that time, who knows how long I'll need to make my money last? Plus my budget already includes a healthy amount of "giving away." I can't imagine thinking I'd want to quadruple my withdrawal rate even if I was in the situation OP described.


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Old 11-11-2014, 04:44 PM   #9
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There is always strippers and beer to invest in. The rest you can just waste.
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Old 11-11-2014, 05:09 PM   #10
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I use to worry about what to do with our remaining assets after we die -- not having any descendents nor legal heirs closer than first cousin.

I finally came up with the idea to open a Donor Advised Fund and have the Fund be the recipient of all unspecified assets in my will.

The Fund will have consolidated records of receipients of charitable grant recommendations that I made while living. I have also named a contingent grant recommender, who upon my death, will be able to continue to recommend grants and/or name their own successor.

-gauss
+1. This is what we are doing.
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Old 11-11-2014, 05:27 PM   #11
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But the optimum scenario would be to live very comfortably off the INTEREST of your principal with the thought that the principal will be left regardless when you pass, right? Sounds strange to spend just to deplete it completely.
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Old 11-11-2014, 05:32 PM   #12
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I am not a DINK, but a SINK. If I have surplus finances in my 70s I will make some tax deductible charitable donations, but not at the expense of putting my own financial security at risk.
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Old 11-11-2014, 05:36 PM   #13
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But the optimum scenario would be to live very comfortably off the INTEREST of your principal with the thought that the principal will be left regardless when you pass, right? Sounds strange to spend just to deplete it completely.
That's also my thought on this but my needs/wants are modest compared to our resources (at least for now). Others might have a different situation.

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Old 11-11-2014, 05:38 PM   #14
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Warning - Intentional mis-quoting for an attempt at humor -

But as I scanned this thread, I read the following two comments in order:

Quote:
Originally Posted by Senator View Post
There is always strippers and beer to invest in. The rest you can just waste.
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Originally Posted by JoeWras View Post
+1. This is what we are doing.


Well, OK, at least I thought it was funny...

-ERD50
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Old 11-11-2014, 05:45 PM   #15
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But the optimum scenario would be to live very comfortably off the INTEREST of your principal with the thought that the principal will be left regardless when you pass, right? Sounds strange to spend just to deplete it completely.
Some people might want to do that. When I'm 90, if I'm in good health there's no way I'm going to be "living it up" on 3% dividends. By using an increasing distribution rate that is recalculated annually based on the average remaining life expectancy for people your age (plus a buffer), you'd never go to zero. But you'd be recognizing that the grim reaper does eventually come for us all.
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Old 11-11-2014, 06:48 PM   #16
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Warning - Intentional mis-quoting for an attempt at humor -

But as I scanned this thread, I read the following two comments in order:





Well, OK, at least I thought it was funny...

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Not a bad plan either.
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Old 11-11-2014, 07:03 PM   #17
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I use to worry about what to do with our remaining assets after we die -- not having any descendents nor legal heirs closer than first cousin.

I finally came up with the idea to open a Donor Advised Fund and have the Fund be the recipient of all unspecified assets in my will.

The Fund will have consolidated records of receipients of charitable grant recommendations that I made while living. I have also named a contingent grant recommender, who upon my death, will be able to continue to recommend grants and/or name their own successor.

-gauss
+2.
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Old 11-11-2014, 07:27 PM   #18
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I am not a DINK, but a SINK. If I have surplus finances in my 70s I will make some tax deductible charitable donations, but not at the expense of putting my own financial security at risk.
Actually if you reach the 70s then a charitable annunity makes a lot of sense. Check with any major charity on the details, but in summary you make a gift to a charity and get an income stream back for life. Rates at 70 are in the neighborhood of 6.0% for a single person or for a couple both 70 5.3% or with a 5 year deferral of payments 8.4% and 7.4%. In addition there is a substantial charity deduction involved. So you can give and still have some income coming in.
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Old 11-11-2014, 07:45 PM   #19
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Actually if you reach the 70s then a charitable annunity makes a lot of sense. Check with any major charity on the details, but in summary you make a gift to a charity and get an income stream back for life. Rates at 70 are in the neighborhood of 6.0% for a single person or for a couple both 70 5.3% or with a 5 year deferral of payments 8.4% and 7.4%. In addition there is a substantial charity deduction involved. So you can give and still have some income coming in.
Yes, my understanding is that the charity would purchase the annuity for the donor with a portion of the donation, and use the remainder of the funds for operations. The donor would get a tax credit for the entire donation, and the tax credit can be applied to taxes over several years. I would imagine the rate of return is calculated on the purchase price of the annuity, and therefore the real rate of return would be lower as a percentage of the total donation. Annuity income is taxed as a combination of capital return and ordinary income, and the funds should come from non-tax-sheltered assets. At least that's how it works in Canada. YMMV.

https://www.sunnet.sunlife.com/files...F/810-1901.pdf

http://www.lifeannuities.com/article...+20140102.html
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Old 11-11-2014, 07:53 PM   #20
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There is always strippers and beer to invest in. The rest you can just waste.

That's my kind of thinking!


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