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Old 08-17-2010, 10:50 AM   #81
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Isn't "self-annuitize" just a fancy phrase for "put some money into the fixed-income asset class"?
If I really wanted to be fancy I could've said "self-defease" .

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Extrapolate out basic expenses until age 80 to 85 and then a second set of expenses of 5 to 10 years...

On the surface, this seems to make sense, but I think this idea incorporates the fallacy of false accuracy.
When I ran various scenarios through a number of different retirement calculators it became evident that the end results were like a teeter-totter. Very bang-bang one way or the other. There was virtually no area in the middle where you'd die with a medium or large and stable amount of money. Either you ran out of money, or you account value was growing to the sky, limited by your death.

There is no finely-tuned SWR value that will let you spend what you want during your lifetime and will also not leave oodles of money for your heirs.
Thinking about it gave me a "Well, DUH" moment. The growth of an investment/savings portfolio is an exponential curve, and exponential curves have the characteristics of rapidly falling to zero or growing to the sky, depending on the exact parameters. Exponential curves never stay flat.
Clearly the ability to plan to die with next to zero is not realistic. The real objective is to not end up with "oodles of money". I remain convinced that there is a point, in the not too distance future in our case, where the crossover will occur that the ability to increase spending will not cause net worth to so rapidily fall as to jeopardize our final years. Again that will mean "leaving" capital on the table, but hopefully not an amount measured in the millions (in today's dollars).

At the end of the day this is an issue that is more art than science and so must be actively managed with mid-course corrections as many have stated. I suppose to be on the safeside of this issue, an other aspect is that "excess" spending should be tilted toward "tangible" assets (i.e. homes/art) as they can always be liquidated to cover future expenses if you've "over-spent".
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Old 08-17-2010, 10:53 AM   #82
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At the end of the day this is an issue that is more art than science and so must be actively managed with mid-course corrections as many have stated. I suppose to be on the safeside of this issue, an other aspect is that "excess" spending should be tilted toward "tangible" assets (i.e. homes/art) as they can always be liquidated to cover future expenses if you've "over-spent".
This is another area where, if you *want* to increase spending if you thought you could do so safely, a form of the "one more year" syndrome can rear its ugly head. You may think you're fine now, but you'll hold off "one more year" to start increasing your burn rate. (Never mind that you could be dead in "one more year.")

Obviously, if someone has more than enough and really doesn't have the desire to spend more, it's a moot point but for those who do, this is very similar to the decision as to when to retire because it requires you to determine that you "have enough" (plus some delta for safety, perhaps) before taking the plunge.
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Old 08-17-2010, 10:56 AM   #83
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The real objective is to not end up with "oodles of money".
What does it matter?

Once you're dead, I don't think you will be worrying about what you "left on the table".

As for myself (and I read this on another forum)? "I would rather die with money than live without it" ...
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