Sources of funding retirement

[David1961]

It seems to me the expenses for retirement come from three main "buckets"

1. Pension and/or SS.

2. Income from your investments (such as dividends, interest, or other distributions).

3. The sale of some of your investments.


For those who have retired, I'm curious what percentage of your last year's expenses came from each bucket. Oh, and let me know if I'm missing a bucket - it's late and past my bedtime.

 

[Cassie]

It seems to me the expenses for retirement come from three main "buckets"

1. Pension and/or SS.

2. Income from your investments (such as dividends, interest, or other distributions).

3. The sale of some of your investments.

For those who have retired, I'm curious what percentage of your last year's expenses came from each bucket. Oh, and let me know if I'm missing a bucket - it's late and past my bedtime.

100% - I only have one bucket for my retirement living expenses & savings....and that is a pension (no SS as I'm under a Federal civil service retirement system which didn't include paying into SS). My TSP (Federal version of 401k) and meager investments are not needed for monthly expenses. There are a few previous threads with similar information, however I''m not technically savvy enough to make a link.

Cheers, Cassie

 

[Htown Harry]

A number 4 would be an income source rarely cited by ER.org posters - borrowing. I'm thinking primarily of reverse mortgages.

Number 5, also rare here among the "early" retired, would be support from family. This could be direct payments, or an offset of necessary expenses by providing a place to live.

I'm not FIRE'd yet, but reading the posts of those who are retired it appears the percentage of income among the Big 3 categories varies significantly. And it varies not only from household to household, but it varies over time for each household.

On this last point, it seems to me that for most of us there are four financial phases to ER income:

1. prior to 59-1/2
2. 59 to 62 (or whenever one starts social security payments)
3. 62 to 70-1/2
4. After 70-1/2, when RMDs kick in

 

[Alan]

1) 50%
2) 30%
3) 20%

 

[W2R]

1.) 22%
2.) 78%
3.) 0%

 

[daylatedollarshort]

Oh, and let me know if I'm missing a bucket - it's late and past my bedtime.

We have part time hobby jobs.

 

[donheff]

1) 60%
2) & 3) 40%

I haven't calculated the portions in 2 and 3 since a lot of interest and dividends are in tax deferred and still reinvested. I will pay closer attention when we switch over to RMDs.

 

[REWahoo]

1) 44%
2) 31%
3) 25%

 

[marko]

1) 40%
2) 50%
3) 5%
4) 5% hobbyjob

 

[Accidental Retiree]

1) 40%
2) 60%

 

[H2ODude]

Hmmm. 1-50%, 3-50%. For some strange reason, as a MF investor, as a matter of habit I've always reinvested dividends and cap gain distributions rather than take the cash. That goes for bond interest on those funds as well. Reason? Makes it easier to see what a fund had done for me over the life I've held it. As a result, if I need to replenish the cash (income) bucket I have to sell stuff. I get the distinct impression that I may be one of the few around here who does that, and there may be a good reason (as in it doesn't make tax sense?). Anyway, that's what I do.

 

[pb4uski]

2013 (in ER before pensions and SS): 0% pensions/SS, 73% income, 27% appreciation. Income includes both taxable account income which we receive in cash and spend and tax-deferred account income that is reinvested and offset by taxable account withdrawals.

Actually, with appreciation in 2013 income and growth exceeded living costs.

Projected when we are 71 (first full year after pensions/SS kick in): 60% pensions/SS, 40% investment results.

If we have a down year, I would have to dip into principal and I am willing to do so if needed. I don't consider principal sacrosanct.

 

[arky]

1) 80%
2) 20%

In two years, if I start SS at FRA, this will change to

1) 100%

 

[scrabbler1]

It seems to me the expenses for retirement come from three main "buckets"

1. Pension and/or SS.

2. Income from your investments (such as dividends, interest, or other distributions).

3. The sale of some of your investments.


For those who have retired, I'm curious what percentage of your last year's expenses came from each bucket. Oh, and let me know if I'm missing a bucket - it's late and past my bedtime.

Pardon my ignorance, but where would IRA and retirement plan distributions be placed? Would they be considered distributions in #2 (or did your use of the term "distributions" refer more to cap gains distributions?) or the sale of investments in #3?

In my case, it doesn't matter because 100% of my expenses were paid for by #2.

 

[jerome len]

1. 10%
2. 90%

I"m lucky!

 

[jebmke]

If you reinvest "income" and then spend it the next year, is it still "income" or is it then "selling investments"?

 

[calmloki]

And once again, those who live off rental property income get marginalized....

 

[rescueme]

...For some strange reason, as a MF investor, as a matter of habit I've always reinvested dividends and cap gain distributions rather than take the cash. That goes for bond interest on those funds as well. Reason? Makes it easier to see what a fund had done for me over the life I've held it. As a result, if I need to replenish the cash (income) bucket I have to sell stuff. I get the distinct impression that I may be one of the few around here who does that...

I/wife do the same thing, for the same reason; you are not alone ...

 

[powerplay]

1) 100%

 

[scrabbler1]

On this last point, it seems to me that for most of us there are four financial phases to ER income:

1. prior to 59-1/2
2. 59 to 62 (or whenever one starts social security payments)
3. 62 to 70-1/2
4. After 70-1/2, when RMDs kick in

Similar to whenever someone starts collecting SS, might there be a similar break point for when someone starts collecting a pension? Because I left my job prior to turning 55, I can't start collecting my pension, albeit a frozen one, until I turn 65. Then there is the pittance of the "cash-balance" program which replaced the (frozen) pension. I think I can start cashing that out when I turn 55 but I am not sure.

 

[martyb]

Not quite retired, but very close (months). Will be:

1. 80%
2. 20%

 

[Sue J]

1) 100%
2) 0%
3) 0%

We keep our cost of living very reasonable so DH's pension covers more than 100% of our expenses. We save the excess. I have a part time job and most years most or all of my income goes into my Roth IRA. All investment income gets reinvested.

I just turned 59. I used to think that I'd take SS ($535/mo) at 62, but lately I'm thinking that if I don't need it I should wait. If I do take it I may just use it to fund our HSA from 62 to 65.

Things change, stuff happens. I'll see when I get there.

So far, so good.

 

[FIREd]

When DW retires, the plan is:

1) 0%
2) 100% (including rental income)
3) 0%

at least until we reach our 60's.

After that, SS will come online. We might sell the rentals and buy a SPIA with the proceeds. And if we have done well, we might even start eating into our investments.

 

[audreyh1]

1. 0%
2 & 3. 100%

Since I rebalance as part of withdrawing, there is almost always some sale of investment involved. However, usually the investments have appreciated more than my withdrawal.

How do you classify capital gains distributions? As sale of investment? Or income? They are actually the result of the former.

 

[CyclingInvestor]

0-100-0 (too young for SS)