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Safe and how much
Old 01-06-2005, 11:00 AM   #1
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Join Date: Jan 2005
Posts: 10
Safe and how much

Turning 60 (wife 55) and thinking about the ER, but it seems a scary. Keep hearing or maybe as it approaches noticing every negative comment about the economy. i.e. cutting social security, bear market ahead, etc.

I am assuming that if they cut Social Security it won't be by more than 25%, is this a reasonable assumption ?

Investments: 600K invested
Dodge & Cox balanced 25K
Oakmark Eqty Income 25K
T Rowe Capital Appreciation 50K
Undecided 70K
Insurance Company Stable Value 330K
I Bonds purchased 5 yrs ago 100K

The Stable Value and I bonds will produce a steady stream minimum of 2 - 3% above inflation.

If I have a minimum of 3% over inflation on all, we would be in pretty good shape. Is this realistic, very conservative amount if we get into a stagnit or bear market conditions ?

Require 49K
Pension 20K, 25% of SS = 11K @62, 18k from investments.

Am I missing something that would effect the withdrawal rate.
(I won't make it over 23 years and my wife 34, probably less the more I think about this stuff.)




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Re: Safe and how much
Old 01-06-2005, 11:37 AM   #2
Full time employment: Posting here.
 
Join Date: Nov 2002
Posts: 768
Re: Safe and how much

Quote:
I am assuming that if they cut Social Security it won't be by more than 25%,
The President's current plan won't cut Social Security for anyone over age 55, so you are probably safe there.
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Re: Safe and how much
Old 01-06-2005, 02:46 PM   #3
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Join Date: Dec 2002
Posts: 290
Re: Safe and how much

Quote:
The Stable Value and I bonds will produce a steady stream minimum of 2 - 3% above inflation.

If I have a minimum of 3% over inflation on all, we would be in pretty good shape. Is this realistic, very conservative amount if we get into a stagnate or bear market conditions?
You can withdraw 3% (plus inflation) annually for 49.5+ years with complete safety.

What this requires is TIPS (and/or I bonds) that yield 2% above inflation. If so, you can withdraw 3% for 30 years and still have 59% of your principal (in real dollars). If you can match inflation (i.e., get a real interest rate of zero percent or better), this will last another 19.5 years.

Here are the links. They include the formulas:
3% SWR for 56 Years from Mon Oct 13, 2003.
http://nofeeboards.com/boards/viewtopic.php?t=1541
http://nofeeboards.com/boards/viewto...?p=12536#12536

What you forgot is that you can draw down principal.

Have fun.

John R.
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Re: Safe and how much
Old 01-07-2005, 01:33 PM   #4
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Re: Safe and how much

Social Security estimates it can pay 73% of expected benefits, so I reduce my expected SS income by 27%, then subtract off the medicare B deduction (about $77 per month), and I treat it as fully income taxed since the laws affecting it are not indexed to inflation.
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