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Pre Poll - Retirement Income
Old 12-05-2010, 08:47 AM   #1
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Pre Poll - Retirement Income

I know no one will divulge their strategy in any kind of detail, but I thought I might run a poll to find out how the various fundamental approaches would fare here. The candidates (based on a recent FPAnet article) I know of would be:
  • Structured systematic withdrawal program (ie SWR)
  • Time-based segmentation (Lucia's buckets, Grangaard et al)
  • Essential versus discretionary income
  • Primarily Social Security, pension and/or annuities (in past polls, I've gathered this is the dominant approach at this forum - SIRE vs FIRE)
  • Other
But are there other options I should add to the list - since I've had several polls that brought back other options after the fact?

We all have some Soc Sec element, I'm asking for the overriding approach.
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Old 12-05-2010, 08:54 AM   #2
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How about income from DW/partner?

In our case, we both planned on retiring at the same time (early 2007). However as the date approached, DW found she was not "emotionally ready" to pull the plug.

While retirement should not (IMHO) depend on the other person continuing to wo*k, sometimes it actually is part of the plan. In our case, it added a bit of buffer to our income plan (of which we did not plan for), but some other couple may be planning on doing a "staged" retirement...
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Old 12-05-2010, 09:11 AM   #3
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I am considering small parts of all of them.

The only one I am not intending to use is the SWR/Constant Mix approach.

It provides valuable insight into what a portfolio might sustain... but I do not intend to rely on that as an approach to manage it.


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Old 12-05-2010, 09:18 AM   #4
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I am not sure but I think my approach doesn't exactly fit into your categories so I will describe it.

Other than my small pension, I am living entirely on my portfolio right now.

From my taxable account, I withdraw only the previous year's dividends and I do this in January. Pretty simple.

I will claim SS in 2014, and until then I am partially making up for not having SS by withdrawing a little more than a sustainable withdrawal from the TSP. After 2014, I will withdraw less than I am withdrawing right now from the TSP, so that it will last.

Also, my withdrawals are constrained by limiting all of them to 3.5% of my entire portfolio now, and 3% after I claim SS.

This year, my dividends have been lower so my withdrawals for 2011 may not reach 3.5%. If we have another hideous bear market as in 2008-2009, I will spend much less, returning the excess to my portfolio as always. Flexibility is a big part of my plan.

I paid off my house a few years ago, so my basic living expenses are covered by my tiny pension and TSP withdrawal (or, SS in the future). The rest is for "fluff" and may or may not be spent. So, my effective withdrawal rate may end up being lower than my planned maximum of 3.5% (or 3.0% after 2014). The bulk of my income is from portfolio withdrawals which I choose to limit by both my SWR and my dividend earnings.
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Old 12-05-2010, 09:19 AM   #5
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Employment income, perhaps?

In 3 years when we are both 40, we are planning on relocating and ESRing. After a ~6 month sabbatical, we intend to generate some income either via one of us going to work for an employer or via one or both of us being self employed/running a small business. How long we continue working/running a business will depend on how our portfolio does.

SS is not part of our plans at all, and probably never will be.
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Old 12-05-2010, 09:36 AM   #6
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Employment income/income from a partner or business (though not working?) is a good one, I will add that.

And W2R's post reminds of the Norwegian widow/constant principal approach - no, I am not saying that's what you are doing W2R, just made me think of it.
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Old 12-05-2010, 09:38 AM   #7
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Mine was similar to W2R's. When we retired we had a pension income, we withdrew from savings what ever was necessary until DW and I both started SS. Now SS and pension covers living expenses and the savings are tapped for extras. We do not use any sort of withdrawal rate.
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Old 12-05-2010, 11:07 AM   #8
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We'll be using our state pensions for living expenses and saving our SS income. (Before retiring, we both worked half-time and spent our entire salaries, and our state pensions are bringing in about half our previous base pay, so that's why the state pensions match our living expenses.)
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Old 12-05-2010, 11:23 AM   #9
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I have not completely formulated my withdrawal plan yet; but, I expect it to be something along the lines of setting a budget to be X% (likely somewhere between 2.5% and 4.0%) of current portfolio value for the coming year along with a target of 2-3 years minimal living expenses in cash so I do not have to liquidate investments during crazy markets.

I have been a consultant for most of my professional life; so, I am very used to wide fluctuations in income.
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Old 12-05-2010, 01:08 PM   #10
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Some folks may have a pension, plus a taxable savings acct., plus a 401K, plus future SS. You might capture that somehow.
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Old 12-05-2010, 01:12 PM   #11
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Originally Posted by Midpack View Post
But are there other options I should add to the list - since I've had several polls that brought back other options after the fact?
Dividend-based 72t (for those with most of their money in IRAs, like me). Top quality stocks yield about 3% now, which is about the amount for an annual-recalc 72t withdrawal for someone around 50.
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Old 12-05-2010, 01:30 PM   #12
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Small pension which covers all living expenses.
Started harvesting CDs last year.
Have cashed in some US bonds.
Am trying to figure out how to withdraw money from TSP.
Don't know when I'll start SS.
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Old 12-05-2010, 01:39 PM   #13
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Quote:
Originally Posted by dessert View Post
Some folks may have a pension, plus a taxable savings acct., plus a 401K, plus future SS. You might capture that somehow.
I plan to thanks. I am going to exclude SS since it's pretty universal and a part of everyone's retirement income. I also plan to acknowledge flexibility during the plan and the hybrid aspect that's probably the case for most. The question will be each individual's dominant approach. Thanks again...
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Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
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Old 12-05-2010, 01:41 PM   #14
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Quote:
Originally Posted by Khan View Post
Small pension which covers all living expenses.
Started harvesting CDs last year.
Have cashed in some US bonds.
Am trying to figure out how to withdraw money from TSP.
Don't know when I'll start SS.
Just in case you didn't have this link...

https://www.tsp.gov/planparticipatio...gAccount.shtml
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Old 12-05-2010, 01:46 PM   #15
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When I quit my job I was thinking time off followed by working as needed. After a couple of years I concluded ER was possible, and beginning then I have focused on SWR. We have no other income and even if I do receive SS it will be a very small amount because most of my career was abroad.
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Old 12-05-2010, 01:55 PM   #16
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For us, dividend/interest income plus, in the early years of retirement, some earned income from a part time job.
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Old 12-05-2010, 02:04 PM   #17
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CLOSED - Please refer to Poll: Retirement Income Approach.
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No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
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Old 12-05-2010, 02:06 PM   #18
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Quote:
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Some folks may have a pension, plus a taxable savings acct., plus a 401K, plus future SS. You might capture that somehow.

That is my scenario .I have a pension , taxable savings , an IRA , SS & an expensive house that at some point I plan on downsizing from. Right now I could live on the Pension & SS but the taxable savings puts the icing on the cake and allows me to travel ,remodel my house , buy a new car & indulge my grandson. I write down what 4% of the taxable is on Jan.1 but I have never used it all & believe me this year I tried . The housing market seems to be improving slightly here so hopefully I can put my house on the market in a year . I do not have to sell my house but it is large with a lot of maintenance so I'm ready to move to something smaller . The excess from the sale on my house will just be added to the taxable account .
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Old 12-05-2010, 02:12 PM   #19
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Rental income will be one of my income streams. I own some rental properties and my goal is to have their mortgages paid off before I RE. I have some consulting income which could continue in RE. I also have a professional corporation from which I would take dividends in RE. I expect that almost all income will be corporate from 2012, and I am going to investigate whether it is worth my while setting up an individual pension plan (IPP). This might be a lot of work to set up but could be a very tax efficient way of pensionizing my corporate earnings. I think that if I go that route I would have to pay myself a salary while still working. I'm not counting on anything from the government and I have no pension.
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Old 12-05-2010, 02:21 PM   #20
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I am not sure I would exclude SS. Not everyone does have it. In fact many teachers, and other government workers do not receive SS.
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