I'm so confused.....

[txdakini]

Here's the link: http://firecalc.com/calc-research.ph...+++&mix8=+5+++


Moderator: how do I include the link correctly?

Here's my question/confusion: when I run the model, in the outer years, the amount withdrawn from the portfolio sometimes drops to zero or to 7k. Doesn't seem logical to me. i would have expected it to stay relatively the same after social kicks in at 62, or just grow by CPI amount. Why would it drop down and vary so much?

here's the basics:
couple retires in 2008.
Desire 70k in income.
Has 730,000 in assets with another 160k to be added when house sells this year.
We will then take out 160000 in 2011 to buy a house.
We're going to take 135000 out now to put in short-term money instruments to pay for first five years of retirement starting in 2008.
That leaves 595000 (plus house 160k for three years) to run through firecalc.
We'll have non-cola pensions of 20k starting in 2008 and we will have part-time income of 20k starting in 2008 until social security kicks in at 2015.
SS are approximately 35k in today's dollars.
We're using the 70% equities model.

In simple terms we are pre-retiring in 2008 with fixed pensions of 20k, work income of 20k and 30k from investments. that equals 70k. The first five years the investment income will come from money market/cds, etc. set aside for that purpose. After that this will come from investments in market and bonds (595k). Work income drops off when social security kicks in in 2015.

Thanks for any insight!

[dory36]

The link looks fine.

I think the zero is coincidence. Change your withdrawals to 100,000 and look at the withdrawal graph. Same pattern, with some randomness due to the averages of the inflation and market volatility.

If you change the inflation rate selection to a fixed 3%, you'll see that line loses all its fluctuations (except for your scheduled changes).

[txdakini]

Thanks for your reply. I did what you suggested. What I think you said is that because we chose CPI, it fluctuates up and down through the years. And thus would cause the amount needed to fund our retirement to go up and down as well. Therefore, the amount to be pulled from investments could go up or down in any given year. That means to me that the calcs do not use an "average" CPI amount, but instead use ... ? It's a little difficult for me to understand why it would ever be zero unless social security is not using CPI but something else. This brings up a couple more questions. Does social security increase yearly based on CPI or some other rate? When we choose "adjust by inflation" for various items, is that an average inflation rate or CPI or something else?

Thanks again!

[dory36]

Each cycle uses the actual figures for that starting year and the next 26 years (in your case, since you selected a 26 year retirement).

Instead of averaging, if you want to see actual withdrawal amounts, it uses whatever starting year you select, and assumes the next 26 years behave the same way.

The adjustments for Social Security use whatever inflation you selected to use for your own withdrawal adjustments. So it is not averaged -- it is using the market and inflation performance for 1875 -- the year you selected to use as the model year for showing your future results - -and the following 26 years' actual results.

Selecting 1960 (in "options", last item) which is the default shows very different results.

[txdakini]

thanks, this was v ery helpful. I wondered why I was picking a year. I will play with it to see results change.

I really appreciate your help.