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Sources of funding retirement
Old 02-28-2014, 08:56 PM   #1
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Sources of funding retirement

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.
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Old 02-28-2014, 09:30 PM   #2
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Quote:
Originally Posted by David1961 View Post
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
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Old 02-28-2014, 09:39 PM   #3
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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
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Old 02-28-2014, 10:29 PM   #4
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Old 02-28-2014, 10:48 PM   #5
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Old 02-28-2014, 11:54 PM   #6
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Oh, and let me know if I'm missing a bucket - it's late and past my bedtime.
We have part time hobby jobs.
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Old 03-01-2014, 06:51 AM   #7
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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.
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Old 03-01-2014, 07:08 AM   #8
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Old 03-01-2014, 07:17 AM   #9
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Old 03-01-2014, 07:18 AM   #10
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Old 03-01-2014, 11:04 AM   #11
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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.
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Old 03-01-2014, 11:05 AM   #12
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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.
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Old 03-01-2014, 11:40 AM   #13
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In two years, if I start SS at FRA, this will change to

1) 100%
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Old 03-01-2014, 11:46 AM   #14
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Quote:
Originally Posted by David1961 View Post
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.
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Old 03-01-2014, 11:58 AM   #15
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Old 03-01-2014, 12:00 PM   #16
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If you reinvest "income" and then spend it the next year, is it still "income" or is it then "selling investments"?
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Old 03-01-2014, 12:04 PM   #17
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And once again, those who live off rental property income get marginalized....
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Old 03-01-2014, 12:31 PM   #18
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...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 ...
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Old 03-01-2014, 12:37 PM   #19
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Old 03-01-2014, 12:53 PM   #20
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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.
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Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

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