How much would YOU spend?

2% ER WRs are more common with younger retirees that depend entirely on their portfolio. The older you are and less dependent on equities for living, the higher the WR. I am 61 and DW 66, but pensions and SS will provide over $9k/mo. A 3% WR brings us over $12k. Incould say 4%, but what would be the point? More not to spend. I didn’t include rental property owned either. The only reason I am even that conservative is that we are both healthy, still have a mortgage (intentionally), and all parents but one is gone. Once DF passes, (and he already has a number of health issues, none mental) and I hit 70, then net income available increases more for LTC planning. I am a firm believer in spending to enjoy life while young enough to actually enjoy it. That’s why I worked to 61. DW retired at 56.
 
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I would spend enough to maintain my current lifestyle ($55k) plus healthcare plus a retirement hobby or vacation, then I would consider converting some tIRA to Roth if it makes sense. Without considering your current average spend, I would roughly say $100 -110k per year assuming conservative 50/50 AA, but depends ultimately on your AA. The higher your cash/CD/bonds, the less to be spent.

I'm not an expert but you noted SS at 70 for your DH, if your spouse predecease you, you may qualify for his FRA amount at your FRA only, so the $40k number might be smaller. Please confirm with SS.
 
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ImaCheesehead said:
SS and Pension together are 49k. At 3.5% that would be 1,400k equivalent.
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I don't figure the value of SS or pensions that way, I use a quote from immediateannuities.com instead, or use an NPV formula. I don't know how to do all the factors for marrieds that way so I didn't try. I think dividing by 3.5% is misleadingly high.
 
I would also look at this https://www.i-orp.com/bequest/extended.html extended form.

I did a quick one with the information you provided and it the MAX was 136,000 including taxes with a bunch of assumptions (spending increase at 2%, 60% allocation across all accounts stock return 6%, 40% across all accounts bond 3%, end of plan 84 male, 96 female, SS at 70 and 40,000) you can play with all of these but that is the "MAX" it came to based on the assumptions.

So with this quick analysis I think $100,000 adjusted for inflation to start and look at it again yearly would be comfortable for me.
 
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Cut-Throat said:
And at their age, most experts would say age in Bonds... I agree with SS at age 70 and age in Bonds.
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I think the experts are wrong after reading numerous articles by https://www.kitces.com

I have a different approach to determining the amount of bonds/cash to have in our portfolio.
I determine how much we need to withdraw each year. Then I set aside 6 times that amount in short-term bonds and some cash. That way, if the market crashes tomorrow, I have 6 years covered while waiting for the recovery.

For us, that means $300K and not a percentage (which happens to be 25% currently). If the stock market goes up then that % will decline.
We have:
1. Age 61 wife's tIRA at 100% stocks.
2. Age 70 husband with:
a. $150K in tIRA to cover RMDs.
b. $150K in regular account to cover the remainder of the $300K.
 
davebarnes said:
I think the experts are wrong after reading numerous articles by https://www.kitces.com

I have a different approach to determining the amount of bonds/cash to have in our portfolio.
I determine how much we need to withdraw each year. Then I set aside 6 times that amount in short-term bonds and some cash. That way, if the market crashes tomorrow, I have 6 years covered while waiting for the recovery.

For us, that means $300K and not a percentage (which happens to be 25% currently). If the stock market goes up then that % will decline.
We have:
1. Age 61 wife's tIRA at 100% stocks.
2. Age 70 husband with:
a. $150K in tIRA to cover RMDs.
b. $150K in regular account to cover the remainder of the $300K.
Click to expand...
This makes a lot of sense to me, but I'm wondering how to actually implement it.

How do you (and other people who do something like this) handle in-between cases? That strategy seems clear if we fall off the edge one day and gradually recover over time, but that's not how it usually happens.

If we take a 5% hit one year, would you still go with 6 years of reserves going forward, or would you only do 5 years? How about 10%? 20%? At what number do eat into that 6 year reserve rather than replenish?

And if you do start eating into your reserves, at what point in the recovery do you start replenishing it and get back to 6 years?

Do you have a written out (or mental) plan exactly how you'd implement this strategy, or do you fly by the seat of your pants?

Was anyone using this strategy in 2008, and what did you do then?
 
Can someone please help me try to figure out what the SPIA is actually paying in interest return, not Interest + a portion of your investment. My math does not seem to work. Numbers for SPIA Payment is from Immediate Annuities Web site.

SPIA of $500,000
5 Year Period Certain distribution $8,730 per month.

60 x $8,730 = $523,800 total payout.

$0 left after 5 years.

$500,000 x 3.85% =$1,604 in the first month. So $7,840 will come from premium. Income will reduce in the following months as the capital depletes.

When I do the math on this it comes out to and average $1.85% return on your money. That seems terrible to me. Am I missing something.

I found this calculator and it seems to jive with my numbers. But don't you simply calculate like a 5 year loan of $500,000 at 1.85% interest?

https://www.calculatorpro.com/calculator/immediate-annuity-calculator/

If one loaned the money to themselves for the same period of time at current 5 year rates (3.8), one could pay themselves $9,163 a month.
 
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davebarnes said:
I think the experts are wrong after reading numerous articles by https://www.kitces.com
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The Vanguard Target Retirement Funds are on autopilot to move all Target Funds into VTINX (Vanguard Target Retirement Income Fund) when the Person reaches age 67. Here is the Asset Allocation of that Fund. I don't believe experts are wrong as no one knows the future. But, I do think Vanguard knows a thing or two about Investing.
 

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If you need a new car for $100,000, your life style must be high.
 
It's been stated multiple times that the $100K is for more than the car. Reading comprehension continues to be an issue for some here.
 
ShokWaveRider said:
Can someone please help me try to figure out what the SPIA is actually paying in interest return, not Interest + a portion of your investment. My math does not seem to work. Numbers for SPIA Payment is from Immediate Annuities Web site.

SPIA of $500,000
5 Year Period Certain distribution $8,730 per month.

60 x $8,730 = $523,800 total payout.

$0 left after 5 years.

$500,000 x 3.85% =$1,604 in the first month. So $7,840 will come from premium. Income will reduce in the following months as the capital depletes.

When I do the math on this it comes out to and average $1.85% return on your money. That seems terrible to me. Am I missing something.

I found this calculator and it seems to jive with my numbers. But don't you simply calculate like a 5 year loan of $500,000 at 1.85% interest?

https://www.calculatorpro.com/calculator/immediate-annuity-calculator/

If one loaned the money to themselves for the same period of time at current 5 year rates (3.8), one could pay themselves $9,163 a month.
Click to expand...

Period Certain are typically around 1.9% or lower for 5 years, they are not very good, so your math is probably close. I would not buy period certain. I would buy life annuity with 5 years guaranteed perhaps however.

The life annuity is the ones that can pay higher IRR if you live long enough.
 
ImaCheesehead said:
LOL, good problem to have!

I didn’t say what our current spend was as I was curious as to what others would do in my situation. The numbers have been fairly close, except for W2R, who agreed with the others on max spend, but wouldn’t spend that much herself.

The responses have surprised me a bit, I thought there would be more conservative suggestions because it always seems like I am reading posts from 2% ers.

I wouldn’t spend as much as most have suggested. Over the last few years we have averaged less than 55k per year, after taxes, but after retirement the big issue is health care expense and I expect that to increase our spending for some number of years.
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I think W2R makes a good point. My earlier response was intellectual - what would my mind think is OK to spend given your numbers and situation.

In my own case, I think 3.5% of my FIRE stash at age 49 is reasonable to my mind, but my net WR is 1.31%. There are multiple reasons for this, but among them is spending more than that doesn't feel safe emotionally yet.

So there can be a big gap between what the mind says is OK and what the feelings say is OK.

ETA: I would suggest actually pricing out your health care costs as best you can. You might be surprised one way or the other.
 
davebarnes said:
I have a different approach to determining the amount of bonds/cash to have in our portfolio.
I determine how much we need to withdraw each year. Then I set aside 6 times that amount in short-term bonds and some cash. That way, if the market crashes tomorrow, I have 6 years covered while waiting for the recovery.
Click to expand...


Doesn't that leave you 100% in stocks at the end of 6 years if the markets don't recover to your satisfaction?
 
Aiming_4_55 said:
I'm not an expert but you noted SS at 70 for your DH, if your spouse predecease you, you may qualify for his FRA amount at your FRA only, so the $40k number might be smaller. Please confirm with SS.
Click to expand...


Oh, yes, the SS portion of it is a whole ‘nother can of worms. I have tried to read some articles and do a few google searches but finding credible, easy to understand information that exactly answers my specific questions about survivor benefits at various ages and that takes into account when I claim my benefit has been unsuccessful so far.

My step one was figuring out if we have enough savings/retirement income to live a decent lifestyle and I think the answers on this thread so most people would say we do.

Step 2 is figuring out health care. None of it matters if we can’t get decent health care.

Step 3 is nailing down an understanding of the most like SS scenarios we would face. Of course, expenses should drop at the first death and I am not including any of my own benefit in any planning. I am not super worried about a 10k or so difference per year.

Step 4 is looking at CCRC’s and that is down the road some.
 
SecondCor521 said:
I think W2R makes a good point. My earlier response was intellectual - what would my mind think is OK to spend given your numbers and situation.

In my own case, I think 3.5% of my FIRE stash at age 49 is reasonable to my mind, but my net WR is 1.31%. There are multiple reasons for this, but among them is spending more than that doesn't feel safe emotionally yet.

So there can be a big gap between what the mind says is OK and what the feelings say is OK.

ETA: I would suggest actually pricing out your health care costs as best you can. You might be surprised one way or the other.
Click to expand...



I have been working on this a bit. We would need to change our SD domicile to FL as we are full time rv’ers and SD doesn’t currently have any plans that are good for travelers. FL does offer options that have larger networks.

Actually, the only reason DH is still working is for health ins. We are scared about what is going to happen but I think we might just have to take the leap. If everything goes to H I think there are some states that offer guaranteed coverage, or we could go abroad for a few years, or I could work again for coverage for us.

I was actually trying to think through time of the process and if he retires this year when there is ACA guaranteed issue, maybe we couldn’t be dropped down the road if ACA goes away, assuming we can cover the premiums??

Our plans for health coverage have already been derailed twice. First by the current administration, and second by loss of DHs retiree medical when his co was bought out. He needs to retire soon or he might never get the chance to enjoy that part of his life when he is still well enough to have fun.
 
ImaCheesehead said:
I have been working on this a bit. We would need to change our SD domicile to FL as we are full time rv’ers and SD doesn’t currently have any plans that are good for travelers. FL does offer options that have larger networks.

Actually, the only reason DH is still working is for health ins. We are scared about what is going to happen but I think we might just have to take the leap. If everything goes to H I think there are some states that offer guaranteed coverage, or we could go abroad for a few years, or I could work again for coverage for us.

I was actually trying to think through time of the process and if he retires this year when there is ACA guaranteed issue, maybe we couldn’t be dropped down the road if ACA goes away, assuming we can cover the premiums??

Our plans for health coverage have already been derailed twice. First by the current administration, and second by loss of DHs retiree medical when his co was bought out. He needs to retire soon or he might never get the chance to enjoy that part of his life when he is still well enough to have fun.
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I'm not sure what you mean by your HI comments,what has changed in the last two and half years to impact your buying insurance on the open market? Still have the ACA intact as well as the pre-existing conditions waiver. Remember the pre-existing conditions waiver is the least likely to be overturned.

For ACA you would use the after tax money for your spend, for sure until the oldest goes on Medicare... This gets you max premium credits on your insurance costs. Don't get paralyzed by HI costs there are things you can do to lower your costs of coverage.
 
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I don’t think OP mentions home equity, unless I missed it. Home equity post-sale possibly could fund end of life / LT care costs, or partially / substantially do so.

Several people are using 4% real rate of return / 6% total return in their calculations. That might play out fine, but I would use only a 2-3% real rate at this point in the market. I am using 2% for my planning. Said differently, a correction could knock 10-20% off your starting portfolio value and your annual withdrawals. Studies show that portfolio shocks in early retirement are particularly damaging (don’t make me find it; I saw a reputable study years ago).

Still, most people under-spend in early retirement because their late retirement costs tend to decline (except for end of life medical). Moreover, it doesn’t seem that you’re planning for age 100 (you didn’t mention your own family history on longevity). Not knowing about your home or longevity, with your described situation I personally would be comfortable spending $100-110 K per year, at least for the next 10 years while in early years of retirement. That might be a bit lower than the best projections, but you won’t know that until looking back later.
 
ivinsfan said:
I'm not sure what you mean by your HI comments,what has changed in the last two and half years to impact your buying insurance on the open market? Still have the ACA intact as well as the pre-existing conditions waiver. Remember the pre-existing conditions waiver is the least likely to be overturned.

For ACA you would use the after tax money for your spend, for sure until the oldest goes on Medicare... This gets you max premium credits on your insurance costs. Don't get paralyzed by HI costs there are things you can do to lower your costs of coverage.
Click to expand...



First we planned on the company’s retiree medical benefit, but that got ripped away, and then the escalating assault on the current ACA is what has made us too scared to make a further move yet. We cannot be without good heath insurance, I cannot even imagine loosing everything we have worked so hard for in the blink of an eye due to accident or catastrophic illness. I know the pre-existing clause is popular to so many but I cannot rely on the politicians keep it and the cases in the court system have the potential to upend everything.

That is actually why I was thinking that maybe if we got on this year we couldn’t be dropped later:confused: That could be wishful and naive thinking. Luckily, we have less than 3 years before he is Medicare eligible, and after that we only have one person to worry about. Still scary, but not as much so.
 
RIGM said:
I don’t think OP mentions home equity, unless I missed it. Home equity post-sale possibly could fund end of life / LT care costs, or partially / substantially do so.



Several people are using 4% real rate of return / 6% total return in their calculations. That might play out fine, but I would use only a 2-3% real rate at this point in the market. I am using 2% for my planning. Said differently, a correction could knock 10-20% off your starting portfolio value and your annual withdrawals. Studies show that portfolio shocks in early retirement are particularly damaging (don’t make me find it; I saw a reputable study years ago).



Still, most people under-spend in early retirement because their late retirement costs tend to decline (except for end of life medical). Moreover, it doesn’t seem that you’re planning for age 100 (you didn’t mention your own family history on longevity). Not knowing about your home or longevity, with your described situation I personally would be comfortable spending $100-110 K per year, at least for the next 10 years while in early years of retirement. That might be a bit lower than the best projections, but you won’t know that until looking back later.
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Nope, we live an a beautiful depreciating asset! I don’t have longevity on my side either, sorry to say.

I am thrilled that the vast majority of commentators are saying over 100k. Even after some additional health expenses I don’t think we will come close to spending that much.
 
ImaCheesehead said:
First we planned on the company’s retiree medical benefit, but that got ripped away, and then the escalating assault on the current ACA is what has made us too scared to make a further move yet. We cannot be without good heath insurance, I cannot even imagine loosing everything we have worked so hard for in the blink of an eye due to accident or catastrophic illness. I know the pre-existing clause is popular to so many but I cannot rely on the politicians keep it and the cases in the court system have the potential to upend everything.

That is actually why I was thinking that maybe if we got on this year we couldn’t be dropped later:confused: That could be wishful and naive thinking. Luckily, we have less than 3 years before he is Medicare eligible, and after that we only have one person to worry about. Still scary, but not as much so.
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You found out you can't count on Mega-corp to take care of you either. Don't live your life in fear of what could come out of DC. Work within the system to have the life you want. Manage your income for lower premiums and live your life.
 
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