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possible stupid question
Old 04-04-2004, 11:10 AM   #1
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possible stupid question

When calculating WR of retirement funds, are most people assuming this is their only income stream, or do most of you have other sources of retirement cash and the WR calculations are just to ensure the fund does not run out?

Mark
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Re: possible stupid question
Old 04-04-2004, 11:31 AM   #2
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Re: possible stupid question

Actually, one of the dumbest things I did was thinking only about non-retirement accounts when considering retiring. I thought I wouldn't be able to touch my retirement money until I was 59 1/2. Howsome ever, my husband pointed out that I was going to use all my assets, both in retirement vehicles and non-retirement vehicles, to live on one day, so I should consider the whole shebang as my asset base for determining a withdrawal rate.

It gets trickier when you have a pension coming in at some point, but that's really no different than SS (if it actually happens). I believe that dory's Firecalc calculator takes account of all these things.

So I consider all liquid assets when figuring out my withdrawal rate. I don't include the house because you have to live somewhere, no matter what.

arrete
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Re: possible stupid question
Old 04-04-2004, 12:00 PM   #3
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Re: possible stupid question

I will have three sources of income: investments, pension, and SS. I count on all three to be there, and I believe they will be there. I could not make it on my investments alone.

Also, I had three grandparents who required long term care for several years each. My wife and I bought LTC policies a couple years ago and paid them off in one lump sum.
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Re: possible stupid question
Old 04-04-2004, 12:03 PM   #4
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Re: possible stupid question

Quote:
When calculating WR of retirement funds, are most people assuming this is their only income stream, or do most of you have other sources of retirement cash and the WR calculations are just to ensure the fund does not run out?

Mark
I think most people add in everything if they actually retiring. People like me who are 15-30 years away from retiring sometimes don't count SS or pension, or we recudce the expected amounts to allow for various pessimistic scenarios about SS going away or the companies backing our pensions folding. But then we are mainly calculating SWR for the sake of planning savings and giving us an idea of when we may be able to retire.

FIREcalc does allow for 2 or 3 reductions in withdrawals; this would coincide with SS, pensions or other revenue streams kicking in.

As for questions about "most of you", my perception is that there are too many variables to divide people in to the majority and the minority.

Also, remember FIREcalc and any calculators are just tools and can't really predict the future. There are periodic discussions about the 4% or 4.1% "100% safe" rate these calculators will tell you; I just got involved in my first one and learned a lot and adjusted my opinions.

Most actual retirees around here seem to ignore the SWR after they retire and adjust their spending annually based on how there portfolio does. Many seem to be able to tolerate a 2% withdrawal but prefer 3-3.5% and have extra fun at 4%.
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Re: possible stupid question
Old 06-15-2004, 09:37 PM   #5
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Re: possible stupid question

If you think that is a 'possible stupid question,' I'm still trying to absorb the entire SWR thing.

To answer your question, I am living off my pension and it current covers all my basic living needs. Travel is sort of outside that loop but with the link I bookmarked (http://www.moments-notice.com/) that'll become much more affordable. I'm not drawing on my 457 [currently earns between 5 - 8% with a large portion in a general account earning 5% per yr], SSA kicks in in 9 yrs [I'll take the early payout], and I have an IRA that I'll leave alone until 70.5. Sort of 'laddering up' the withdrawals.

I called into a talk show today and asked what he thought a safe withdrawal rate from my 457 might be as I did not want to outlast my money. He stated somewhere between 1% and 10% but that I had to start taking out now or I'd have a penalty (I'm 53). I think the posters here are much more intelligent than the TV guy!!!

Thanks
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Re: possible stupid question
Old 06-15-2004, 10:13 PM   #6
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Re: possible stupid question

Gayl, in my opinion one of the best resources on withdrawal rates can be found here:

http://www.retireearlyhomepage.com

And if you want a book, I'd recommend John Greaney's 68 page document which you can find here for $5.00:

http://www.retireearlyhomepage.com/reports1.htm

I bought it a year or so ago. It is very well done.
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Re: possible stupid question
Old 06-15-2004, 10:30 PM   #7
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Re: possible stupid question

Thanks for the links. Are there 2 ER message boards? if so, do you know what the difference is?

According to the FIRECALC site, I will definitely outlast my money (if the numbers are correct) as long as I don't take out more than 8.76% of my starting portfolio per year.

Hard to believe!
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Re: possible stupid question
Old 06-15-2004, 10:48 PM   #8
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Re: possible stupid question

BigMoneyJim how did you get that counter up there? Oh, and congrats on paying off the credit cards.
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Re: possible stupid question
Old 06-15-2004, 10:55 PM   #9
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Re: possible stupid question

Yes gayl, there is a board at the Retire Early Home Page and there is one here (associated with FIRECalc) as well. There is also an active board here:

http://nofeeboards.com/

There's also a board at the Motley Fool, but they charge.

The differences have more to do with the people who frequent the boards than anything else. But some people here also post at the other boards.
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Re: possible stupid question
Old 06-15-2004, 11:09 PM   #10
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Re: possible stupid question

Quote:
BigMoneyJim how did you get that counter up there? Oh, and congrats on paying off the credit cards.
Thanks! This is a big milestone...I have a car loan that I'll pay off next month, then I should be completely debt free.

As for how I did the countdown: You can pick any URL for your avatar; it doesn' t have to be in the list. I have a web server with a permanent address, so I can set the URL and change the avatar picture daily. Now I'm a lazy procrastinator, but I'm technically savvy, so I figured out how to make it update itself. I have a blank image without the number. I set the computer to run a script every day at 12:00am (I can't tell you how many nights I checked it shortly after midnight to see my countdown number shrink...it was actually a helpful motivator); the script determines how many days it is until June 17, 2004 and then uses the blank and the number to make my new daily avatar.

I toyed with the idea of making a customizable countdown timer available to others with a simple web configuration form, but I haven't decided to do it yet.

For those who really want to know the techincal details: I'm using the free ImageMagick convert utility and the GNU date command. Here's the script:

Code:
#!/bin/sh

DDAY=20040617  # Date I pay off the credit cards!
FILEPATH=/home/jim/public_html/er

#see if today is later than DDAY

TODAY=`date +%-s`
TEMP=`date -d $DDAY +%-s`

if ((TODAY > TEMP));
 then
  #echo "Now is later than DDAY";
  DAYS=0
 else
  #echo "Now is not later than DDAY";
  DAYS=$((`date -d $DDAY +%-j` - `date +%-j`))
  #echo $DAYS
fi

eval convert -draw \'text 26,36,\"$DAYS\"\' $FILEPATH/countdown.png $FILEPATH/countdown.gif
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Re: possible stupid question
Old 06-16-2004, 04:22 AM   #11
 
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Re: possible stupid question

I am a technophobe and lazy to boot. I am pretty sure
if you people were not so much fun I would smash my computer and go back to snail mail for communicating.
There is one advantage though (to being technically
inept and completely unhandy). There is a whole raft
of stuff I do not venture near as I know I do not have
the skills. This saves a bunch of time, which by the way
seems to be in very short supply, even though I no longer work. I know we've beat that horse to death
but it is truly amazing how your days can fill up.

John Galt
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