Your approach to 3-4% income with 3% withdrawal and 15 year plus horizon?

[Mulligan]

Good post Timemoveson. Personally, I may be a bit different but I love the opposing opinions and perspectives on a particular issue such as this. I never searched for the "right" or "wrong" answer, but used most to either challenge my own view or question why they agree.
You definitely have to not only select the most suitable method, but also believe in it also, or you will bail at the wrong time.
I was in search for a suitable method and found one through a forum member. Although it was too aggressive for my personal tastes, I researched deeper to take the essence of the idea and mold it into something I am comfortable with.


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[rayinpenn]

What the OP chooses to spend has little to do with what anyone else thinks is reasonable or doable. You compare his assets to what the "average American retires with" - and what you think is reasonable. And then go on suggest he read Dave Ramsey's ideas on spending? Seriously?

1. If you post on a retirement blog that you have 6.5 million and are worried about retirement it is likely you elicit responses 'hey your kidding - right' to think otherwise is ignore human nature and a bit silly.
2. I suggested that the op visit Dave's site as a further reminder of just how fortunate he is. I actually find the success stories a joy to watch- food for the soul so to speak.
3. Yes I reminded the op just how fortunate he is to be able to earn in a year more then the average American retires with - again nothing wrong with that.

"Our role is to assess whether a families assets will support theirspending. Not to judge what they choose to spend. "

1) Who defines our role here You? There is nothing wrong with pointing out that one can live quite a good life on $200k a year. (Our OP expressed a concern about running depleting his funds.) I missed it - did anyone say anything about overspending?
2) the dismissive nature of your post "ignore the your kidding crowd" says it all. You want your POV respected but you don't grant the same courtesy to others... That's a point "you fail to grasp."

We can disagree but there's never a need to be dismissive...


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[MichaelB]

Come on, lets not hijack th thread with an argument about hijacking the thread.

 

[Midpack]

We can disagree but there's never a need to be dismissive...

Agree to disagree, and we're both guilty. Moving on...

 

[nun]

So the OP has a lot of money in taxable accounts and wants to retire and generate income. I suggested a ladder of tax free municipal bonds, another suggestion was preferred stock. How about we discuss the merits/problems with these and how they might fit into a portfolio for the OP's particular assets.

 

[Gazingus]

Rich people have to have everything! Even our forum!


Joe Dominguez is rolling over in his grave.

 

[Mulligan]

So the OP has a lot of money in taxable accounts and wants to retire and generate income. I suggested a ladder of tax free municipal bonds, another suggestion was preferred stock. How about we discuss the merits/problems with these and how they might fit into a portfolio for the OP's particular assets.

I will bite.... My disclaimer first.....Like 53and done, I have a nice pension and assets wanting to invest for income. However I have no where near the assets 53 has and my pension provides about 140% of my yearly expenses. So basically I can invest anyway I want, so I invest "aggressive/conservatively". Basically I have almost all my money in 6.25% -7.2% utility preferreds. I know the 20-60 year track record of how they preform vis a vis to the inflation/interest rate and can live with it, since I am collecting my dividends.
Some people conflate "chasing yield" with seeking income from higher yield. Thus assuming they are high risk, when in fact the dividends are very low risk. Many preferred have better bond ratings than senior bonds from other companies. And the fact they are 15% qualified vs a much higher rate on interest issues in a higher tax bracket cannot be ignored. BUT, one most be cognizant and tolerant of any negative price movement in the stock itself despite the dividends being very secure. That issue must be squared away in ones mind before purchasing. If you are truly not wanting to invest "for income" these should not be bought as a general rule I believe anyways.
Also, most prudent financial advisors consider these "garnishes" with their portfolio. In other words no more than 10%-20% of portfolio.
My opinion means nothing, but I agree also with Nun. If I had a stash of that size and yearly taxes to deal with considering size of pension, I would be boning up on the muni bond market!


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[NW-Bound]

$6.5 mil is a lot, but I think we could have achieved that if we worked until 58 or 60 instead of retiring at 45. The pension is pretty jaw dropping though...

Just think of all the covered calls and cash-backed puts you can write. Who needs a pension?

There is a limit to how patient most on here will be with high net worth individuals. If someone comes on stating they have $120 million and want to know if they can retire early, I think I won't be able to respond seriously.

Look at Buffett who is still working at 85 despite his stash of $67B. What's his WR I wonder. Too bad he does not come to this forum for us to learn how he spends his money, but from media coverage I gather that he's drinking coke and eating at hamburger joints. Should that make me feel guilty about eating steaks, then sipping XO Cognac after dinner? Nah!

 

[Mulligan]

Just think of all the covered calls and cash-backed puts you can write. Who needs a pension?




Look at Buffett who is still working at 85 despite his stash of $67B. What's his WR I wonder. Too bad he does not come to this forum for us to learn how he spends his money, but from media coverage I gather that he's drinking coke and eating at hamburger joints. Should that make me feel guilty about eating steaks, then sipping XO Cognac after dinner? Nah!

+1 and since your "NW" drawfs mine, please have an extra for me!
Personally I don't know why any gutter sniping has been fired OP's way. He has been nothing but nice without any chest puffing.


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[NW-Bound]

+1 and since your "NW" drawfs mine, please have an extra for me!

If I had a 2nd shot, it would be for me, not you. I need no pretext.

Sorry my friend, but my bottle of spirit costs a lot less than your trip to Vegas to play your sport bets. You see, it's all about priority that one decides how to self-indulge with his money.

 

[Fermion]

Both of you have more than us, but this isn't really a contest if everyone is pretty much happy. NW has two home to take care of and our homebuilt RV will outlast his class C

Like I said, we could likely have had 6 mil by age 58, maybe earlier instead of retiring this year at 45. We only started really saving 6 years ago and went from $100,000 NW to over $1.5 mil in that time. Figure 13 more years of that and $6 mil seems pretty much in the bag with just a little good market returns.

But who is going to guarantee we don't get cancer at 54 and never even get to enjoy the money?

To the OP, just retire already. Life is expensive and always seems to be out of stock.

 

[pb4uski]

....Personally I don't know why any gutter sniping has been fired OP's way. He has been nothing but nice without any chest puffing. ....

+1 Sad

 

[Jack_Pine]

Just out of curiosity, what type of job had a $127k pension after (25?) years of service plus the ability to sock away $6.5mil?

That is one of the higher pensions I have seen on here.

Got to say I am not sure of the point of asking if "this is enough?". If that is not then most of us are toast...................

YMMV

 

[pb4uski]

It all depends on what you need to support the lifestyle that you want in retirement.

I suspect that the envy of some have scared the OP away. Too bad.

 

[Mulligan]

It all depends on what you need to support the lifestyle that you want in retirement.

I suspect that the envy of some have scared the OP away. Too bad.

That is exactly the way I see it. I spend about 60k a year including taxes, and save the rest to build up the reserves I should have done 30 years ago when I was being stupid. That said, I damn well would be spending more and have a higher standard of living than I do now if I knew it was 100% financially feasible!

Maybe we should have this sticky note posted in the forum..."All rich people seeking information about their financial situation should automatically deduct the last "0" on their assets and yearly expenditures before posting any questions"


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[NW-Bound]

Both of you have more than us, but this isn't really a contest if everyone is pretty much happy...

.... our homebuilt RV will outlast his class C

I have no doubt that it is true. However, my lowly class C may outlast me, or at least my desire or ability to travel. In that sense, it is adequate.

But it is true that one's happiness is all that matters. Earlier I joked about Buffett and his simple taste, but I was not making fun of him at all.

Buffett's happiness is in doing what he does best, i.e. making money. He would be bored out of his mind just goofing around like I do. And then, he is able to afford things like a fractional jet ownership while I fly coach (he could have bought a personal 747 but he did not care for it). It is nice to have extra money, even if you do not spend it. If I knew how to make money like Buffett, I would not quit either, knowing that he has a lot less stress making 100M's than a surgeon who works hard to get $300K/yr.

... who is going to guarantee we don't get cancer at 54 and never even get to enjoy the money?

To the OP, just retire already. Life is expensive and always seems to be out of stock.

+1

I do not see anybody showing envy of the OP. Rather, what I read was that they were saying that if the OP wanted to retire, he should be able to live a fine life even with a lower WR. Cutting down from, say, $400K/yr down to $250K/yr is a lot easier than from $40K/yr down to $25K.

If one really wants to retire, he can find a way with a few M's. I think that's what some posters were trying to say.

"One can live well whether he is rich or poor. When he is poor, it just costs less" -- Andrew Tobias

 

[timemoveson]

Thank you, that is exactly what "some posters" were trying to say in different ways. At this level, the investment details aren't all that relevant. You could successfully do plan A, B or C and produce sufficient financial results to fund a retirement forever.

You could also blow it, but it probably wouldn't be a result of a faulty investment plan since it is clear you could do essentially nothing and be doing as well or better than most of the population of the western world.

It is the rest of their story that is the interesting part for me, and how successful each person will ultimately be with the next stage of their lives in some form of FIRE.

 

[nun]

The OP asked a pretty simple question and has only received a few posts that actually try to answer his question. Pretty poor performance!

 

[Danmar]

Just out of curiosity, what type of job had a $127k pension after (25?) years of service plus the ability to sock away $6.5mil?

That is one of the higher pensions I have seen on here.

My pension is multiples of this one and started at 62, 20 years service. Very senior exec at very large company. Very lucky, I know.

Why not try to answer the question rather than a voyeuristic wondering of how he got it? Let's offer help rather than judge.

 

[Danmar]

Our role is to assess whether a families assets will support their spending. Not to judge what they choose to spend.

You might have also noticed several other members found your judgements beside the point if not unwelcome...but it's really not worth getting worked up over. Relax...

Well put. It would seem to be difficult for many 99%'ers to get their minds around some of the issues that face HNW people. For many of these people the solution is just spend less (like us ) and relax.

I have Participated in several threads over the years where important issues get reduced to "surely you don't need to spend that much" . There is a lot of wealth in the US. Most Americans espouse the view "good for them" but when it gets right down to it at a personal level not so much. That's why percentages usually work better here than absolute dollars.

 

[nun]

Originally Posted by Fermion View Post
Just out of curiosity, what type of job had a $127k pension after (25?) years of service plus the ability to sock away $6.5mil?

That is one of the higher pensions I have seen on here.

I worked at a state medical school where many of the senior doctors and surgeons were paid large salaries....up to $300k. With sufficient service they can receive an 80% pension, ie $240k. As well as this DB plan there are 403b and 457 plans so a lot can be saved before tax and obviously a lot can be saved after tax on such large a salary.

 

[nun]

Well put. It would seem to be difficult for many 99%'ers to get their minds around some of the issues that face HNW people. For many of these people the solution is just spend less (like us ) and relax.

I have Participated in several threads over the years where important issues get reduced to "surely you don't need to spend that much" . There is a lot of wealth in the US. Most Americans espouse the view "good for them" but when it gets right down to it at a personal level not so much. That's why percentages usually work better here than absolute dollars.

If someone asks a question it's polite to try to answer it. Some comments about budget as it relates to assets is sensible in light of the 4% rule, but why do we feel the need to comment at length on someone's spending. The OP's question has not been answered......where is the discussion about tax strategies for people with larger than average assets, municipal bonds, preferred stocks for income, tax free mutual funds etc.

 

[Fermion]

I worked at a state medical school where many of the senior doctors and surgeons were paid large salaries....up to $300k. With sufficient service they can receive an 80% pension, ie $240k. As well as this DB plan there are 403b and 457 plans so a lot can be saved before tax and obviously a lot can be saved after tax on such large a salary.

I wonder how many years someone would have to contribute the maximum allowed to a 401K in order to purchase a $240,000 a year annuity! Would it even be possible at $18,000 a year contribution?

 

[nun]

I wonder how many years someone would have to contribute the maximum allowed to a 401K in order to purchase a $240,000 a year annuity! Would it even be possible at $18,000 a year contribution?

No, but DB pensions aren't limited in the amount of contributions. The state DB plan mandates an 11% employee contribution and a 5% employer contribution so for someone on $300k a year that's $33k from the employee and $15k from the state. You have to work over 30 years to get the 80% pension....the IRR implied on the state pension when I've done the calculation with lump sum payouts vs pension and life expectancy is around 8%...although that makes some assumptions about the COLA. It will be less for a large pension as the COLA is only on the first $15k of income.

 

[NW-Bound]

OK, coming late to this thread, I saw that the OP's question was already amply answered, so thought that some diversion would be safe.

But just look at his post again.

I am 53 and retiring soon.

So I am looking at 15 years before pensions, etc. I have a nice next egg that I believe I can easily live on if I can get a 3-4% dividend and can withdrawal around 3% each year from principle. Funds will easily last if I simply maintain principle at this rate but of course some growth would be nice.

Looking for ideas on what approaches some of the folks on this board would use with this scenario.

FWIW I am sitting in cash now but I am still working for a few more months.

Thanks

It was not clear whether he intends to draw the 3-4% dividend, plus the 3% principal, or just the dividend. Then, does he like to have growth on top of that 6-7% WR? Earlier posters raised this question, which was not answered.

Because the above requires extraordinary investment performance, it brought about the possibility of cutting expenses to match realistic expectations. If someone knows how to deliver the above performance, i.e. growing a portfolio despite a 6-7% WR, the entire forum will be all ears.