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Increase WR now and drop it down later
Old 12-03-2015, 11:50 AM   #1
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Increase WR now and drop it down later

Don't need SS right now and am planning to wait until 70 (DW will take hers at 66 at the same time). This will increase our income by almost 30%.

So I'm thinking, why not increase our WR from savings, IRA's, etc to 5% for the next 7 years to enjoy life a bit more, and then after taking SS, drop it to 4%?

I have a military pension and the 2 SS payouts would keep us under a roof and food in the pantry in case of a total market meltdown, so I'm not sure how much the risk would be in this.

I just don't want to pass up opportunities to travel while able and then have way more money than we need in old age.
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Old 12-03-2015, 12:01 PM   #2
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That appears to be my plan at this point as well. Draw 6-7% from the nestegg while allowing SS benefits to grow. Our combined benefits at 70 will cover over 80% of our estimated expenses. The rest would come from our investments at about 1.5-2% draw.
Time will tell if I have the courage to pull the trigger on it though.
I still have a few years to figure it out.
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Old 12-03-2015, 12:04 PM   #3
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Sounds prudent... you could test in Firecalc by including the increased spending as an off-chart spending and then offset with a corresponding off-chart pension beginning 7 years form now.... or adjust via the manual expense input and see how much your results change.

My WR is higher from when I retired until my pension and SS begin (first 6-16 years) and then it drops precipitously.
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Old 12-03-2015, 12:15 PM   #4
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We are planning the same kind of strategy. SS and pensions will cover essentials at 70 and beyond. The extreme version of this plan would have us put aside 7 years of cash to meet the expenses from DW's retirement at 62 to my SS at 70. The rest of the stash could remain invested in equities. In reality I won't be that extreme, but I've got a few years to work out the details.
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Old 12-03-2015, 12:16 PM   #5
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That would be a no-brainer for me, but if you are still nervous about it, just commit to doing it for one year and see how you and your portfolio feel after that. Just because you decide to do it now, it doesn't mean you are committed 100%. As long as the extra money is spent on things that can easily be cut back on like travel or hobbies...and not a new car or house.
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Old 12-03-2015, 02:49 PM   #6
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That is how mine looks. During first 15 years from age 51-65 the WR is between 4.6% and 9.7% then for the next 30 years it is like 2%. During the first 15 years of retirement we will definitely have uneven spending (based on how the market is performing).
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Old 12-03-2015, 02:56 PM   #7
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Sounds like my plan as well, but still 55, so a long way from SS.
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Increase WR now and drop it down later
Old 12-03-2015, 03:13 PM   #8
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Increase WR now and drop it down later

From what I can see, that's how FIDO calculates my WR rate, and I imagine all calculators do take SS into account, but psychologically, at least for me, it is not easy to spend more at the beginning of my retirement, and I have a feeling the other conservative folks here are not doing that either while considering different what if scenarios. But theoretically speaking, we should all be able to raise the WR a little before SS kicks in, depending upon how much SS we will be getting. I wish I could do that. Well, at least, I know if I should had emergency situations, I should be able to spend more.
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Old 12-03-2015, 03:15 PM   #9
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One way to handle this is to set aside enough money to pay yourself the same amount during the next 7 years, that SS will pay you later. For example, if SS will pay you $20K/year, then

$20,000/year x 7 years = $140,000.

Put that in something non-volatile, like cash, and don't consider it to be part of your portfolio for purposes of SWR calculations any more. You will be using it for "mock SS", payments to yourself to mimic what SS will pay you later.

If your portfolio was $1,000,000, now it is $860,000 for purposes of SWR computations. If you plan an SWR of 4%, instead of $40,000/year your 4% would give you $34,400.

For the next 7 years that $34,400/year would be supplemented by the $20K/year that you are paying yourself in mock Social Security. After that, it would be supplemented by real SS.
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Old 12-03-2015, 04:20 PM   #10
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Thanks for the responses. Since I'm only talking about 1%, I think the risk is pretty low and the payoff (i.e. living a bit better) is high.

Just don't want to be like my parents who never spent anything on themselves and then had money galore when in their 90's (when it wasn't much use to them)
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Old 12-03-2015, 05:18 PM   #11
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Another way to do this is to annuitize social security and pensions, and include them in your net worth for inclusion in your SWR calculations. Reduce them if you think the benefit will be cut before you take it. Before you start collecting those, take the full amount. Once you start collection, reduce your portfolio withdraws by that amount.
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Old 12-03-2015, 05:54 PM   #12
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Just withdrew $20K last week. That is about what I will get when SS kicks in at 70. I'll do this every year until I reach 70. I have enough in a Stable Value Fund in my 401K to cover this withdrawal until 70 if the market tanks, but this year I will still come out with the overall portfolio growing so I will just rebalance. That's not bad for a fairly poor year.
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Old 12-03-2015, 08:25 PM   #13
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DH didn't delay SS and I'm not sure how long I'll do it. But, we do intentionally have a much higher WR now than we will in the future. This is because we have kids in college. In 2017, we will drop out lower. We've modeled it and think it will be fine. I didn't like seeing our net worth going down this year from a psychological standpoint, but I've run Firecalc and we are actually still ahead of where I projected we would be two years ago.
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Old 12-03-2015, 08:36 PM   #14
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Quote:
Originally Posted by dtbach View Post
Don't need SS right now and am planning to wait until 70 (DW will take hers at 66 at the same time). This will increase our income by almost 30%.

So I'm thinking, why not increase our WR from savings, IRA's, etc to 5% for the next 7 years to enjoy life a bit more, and then after taking SS, drop it to 4%?

I have a military pension and the 2 SS payouts would keep us under a roof and food in the pantry in case of a total market meltdown, so I'm not sure how much the risk would be in this.

I just don't want to pass up opportunities to travel while able and then have way more money than we need in old age.
When I entered in our projected SS to FIRECalc, it said I can spend upward of 5.5% WR now, then cut back when SS comes online. The amount did not vary much whether I claim SS at 62, FRA, or 70.

So, it does make me feel a bit better when I spent 4.5% WR for the last 12 months. I still anticipate cutting back next year though.

Ah, the joy of having money can be better than that of spending it, if you have no good things to spend it on.
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Old 12-03-2015, 09:12 PM   #15
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Quote:
Originally Posted by dtbach View Post
Don't need SS right now and am planning to wait until 70 (DW will take hers at 66 at the same time). This will increase our income by almost 30%.

So I'm thinking, why not increase our WR from savings, IRA's, etc to 5% for the next 7 years to enjoy life a bit more, and then after taking SS, drop it to 4%?

I have a military pension and the 2 SS payouts would keep us under a roof and food in the pantry in case of a total market meltdown, so I'm not sure how much the risk would be in this.

I just don't want to pass up opportunities to travel while able and then have way more money than we need in old age.
Model your plan on FireCalc and see what that tells you.

I agree that since your pension and SS would cover life's basic needs should the investment world totally crash, your risk is limited. You'll never live under a bridge in a Frigidaire box.

And I very much endorse not passing up opportunities while you're young enough to take advantage of them. You have that right IMHO!
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Old 12-03-2015, 10:28 PM   #16
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Quote:
Originally Posted by dtbach View Post
Don't need SS right now and am planning to wait until 70 (DW will take hers at 66 at the same time). This will increase our income by almost 30%.

So I'm thinking, why not increase our WR from savings, IRA's, etc to 5% for the next 7 years to enjoy life a bit more, and then after taking SS, drop it to 4%?

I have a military pension and the 2 SS payouts would keep us under a roof and food in the pantry in case of a total market meltdown, so I'm not sure how much the risk would be in this.

I just don't want to pass up opportunities to travel while able and then have way more money than we need in old age.

I'm in a similar situation. I want to spend more in good health and younger. I plan on taking higher withdrawals offset by future equity in rentals and taking SS at 70. Travel is in the plans this time with the DW.




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Old 12-04-2015, 09:00 AM   #17
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We planned to spend down assets more quickly before SS started. However, I didn't think of it as "increasing the withdrawal rate from our long term investments".

We had explicit short term investments that we intended to liquidate to provide the bridge.

I started a poll on this back in 2009. At that time, about half the people who had a plan had some sort of dedicated assets.

Social Security Gap
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Old 12-04-2015, 09:10 AM   #18
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The other reason I want to increase WR now is that I have 2 kids in college and a small mortgage. In 4 years, both those costs go away. So even if I spend down some of the "stash" in the near future, I won't need as much from it either going forward from there.
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Old 12-04-2015, 09:28 AM   #19
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The other reason I want to increase WR now is that I have 2 kids in college and a small mortgage. In 4 years, both those costs go away...
FIRECalc can accommodate that too. Enter that in!
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Old 12-04-2015, 09:39 AM   #20
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Quote:
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We planned to spend down assets more quickly before SS started. However, I didn't think of it as "increasing the withdrawal rate from our long term investments".

We had explicit short term investments that we intended to liquidate to provide the bridge.

I started a poll on this back in 2009. At that time, about half the people who had a plan had some sort of dedicated assets.

Social Security Gap
Thanks for the link. Back then I voted that I had explicitly earmarked assets to spend during the gap, and that is exactly what we have been doing.

To answer the OP, we have been spending at a higher WR in these first few years before other income streams come into play. (Only a year away now before that starts to happen)
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