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

[NW-Bound]

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Originally Posted by Fermion 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.

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... 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]

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Originally Posted by Fermion 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]

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Originally Posted by Midpack 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]

Quote:

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]

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Originally Posted by Danmar 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]

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Originally Posted by nun 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]

Quote:

Originally Posted by Fermion 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.

Quote:

Originally Posted by 53anddone 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.

[Danmar]

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Originally Posted by pb4uski It all depends on what you need to support the lifestyle that you want in retirement. .

Or sometimes the other way around, ie what kind of a retirement can I have given the assets/pension I have?

[hesperus]

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Originally Posted by timemoveson Note, this OP has many millions of dollars and is coming to an Internet forum blindly for the MOST BASIC advice, eliciting a wide range of responses from many perspectives.

It does surprise me a bit to see posts like this, that is, HNW individuals coming to a forum first for basic investment advice, or at least in what appears to be a first foray into understanding what their wealth can offer them as far as investments. Even though I came into a similarly sized windfall a few years ago (minus the pension), some of my first conversations were with a couple of professionals that gave me the basics of what was now in front of me. I'm not talking about investment advisors who see $$ when I walked in the door, but just a good accountant or fee only CFP who can explain the basics of asset management in person. It was a small price to pay for getting individualized advice, tailored to one's personal situation. Maybe I'm assuming too much about the OP, but I couldn't see coming to an internet forum first for advice on investing millions of dollars. Timemoveson point about the spectrum of responses (and attitudes toward HNW) to a post like this is valid, and to be expected.

[MichaelB]

My guess is individuals with very high incomes are heavily focused on their jobs, and while they have the capacity to learn how to invest, they haven't done so yet because of the job focus. They come here asking for help, just like most of us did at one time.

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Originally Posted by Danmar That's why percentages usually work better here than absolute dollars.

I agree with this.

[Danmar]

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Originally Posted by hesperus It does surprise me a bit to see posts like this, that is, HNW individuals coming to a forum first for basic investment advice, or at least in what appears to be a first foray into understanding what their wealth can offer them as far as investments. Even though I came into a similarly sized windfall a few years ago (minus the pension), some of my first conversations were with a couple of professionals that gave me the basics of what was now in front of me. I'm not talking about investment advisors who see $$ when I walked in the door, but just a good accountant or CFP who can explain the basics of asset management in person. Maybe I'm an outlier, but I couldn't see coming to an internet forum first for basic advice on investing millions of dollars. Timemoveson point about the spectrum of responses (and attitudes toward HNW) for a post like this is valid.

Agree, it is a little surprising. But many people, myself included, like to DIY. I participate in several forums like this one and have learned quite a lot. This despite the fact I am qualified to begin with (CPA, MBA, CFA).

Any advice that comes my way from these forums is taken with a truck load of salt. it was particularly surprising that the OP had so little basic understanding of how a SWR works, but I was in a similar position when I first started posting here.

So, either you welcome financial diversity or you find comfort in a common denominator.

[Danmar]

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Originally Posted by MichaelB My guess is individuals with very high incomes are heavily focused on their jobs, and while they have the capacity to learn how to invest, they haven't done so yet because of the job focus. They come here asking for help, just like most of us did at one time. .

Absolutely, I certainly wasn't focused on anything other than my job until quite close to retirement. I too was of the mistaken assumption that you could take the 4% SWR plus any div yield. This forum helped me quite a bit despite what I thought I already knew.

[GrayHare]

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Originally Posted by 53anddone Looking for ideas on what approaches some of the folks on this board would use with this scenario.

Historically, a healthy dose of utility stocks / index fund, plus another of municipal bonds, will generate income for you. Another chunk in non-dividend payers like BRKB will provide growth at a lower-tax rate for your withdrawals of principal.

[nun]

Quote:

Originally Posted by GrayHare Historically, a healthy dose of utility stocks / index fund, plus another of municipal bonds, will generate income for you. Another chunk in non-dividend payers like BRKB will provide growth at a lower-tax rate for your withdrawals of principal.

Something practical at last. I think tax planning should is even more important for HNW individuals than it is for most retirees. I'm lucky that my tax planning is basically limited to keeping my income small enough to qualify for Medicaid for the next few years. The OP has lots more to consider. A municipal bond ladder would be good for income, but how much should go there, what equities are appropriate? Would a some rental property be a good thing to as the deductions and depreciation would offer some tax savings.

[Animorph]

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Originally Posted by 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. 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.

I agree, that is what struck me about the OP. And no expense data. I figured someone would jump on that and we'd get some clarification. Still waiting. Not enough info for a reasonable answer.

[Danmar]

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Originally Posted by nun Something practical at last. I think tax planning should is even more important for HNW individuals than it is for most retirees. I'm lucky that my tax planning is basically limited to keeping my income small enough to qualify for Medicaid for the next few years. The OP has lots more to consider. A municipal bond ladder would be good for income, but how much should go there, what equities are appropriate? Would a some rental property be a good thing to as the deductions and depreciation would offer some tax savings.

While I hesitate to give advice here because I am not very familiar with US tax,etc. how about this.
1) Take the PV of your pension into account as a Fixed Income proxy. This will allow for a fairly high allocation to equities.
2) for the equity component I would recommend well established div payers that should generate a yield of 3-4%. Telco's, consumer disc, utilities, pipes, financials. Reinvest any income you don't want to spend or increase your spend to match the divs. If the market does well after a couple of years consider selling a few percent of you principal if you wish. If you don't feel comfortable picking individual stock get a broad market ETF(I would rec div ETF) wouldn't let the tax tail wag the dog.

[53anddone]

Quote:

Originally Posted by Fermion 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 am sorry I have not been on the board in a week (trying to exit my job). Trying to sift through all the great responses.

I have 4 sources of pension. Normal company retirement plan, SS, a foreign pension from working 5 years in Europe, and most importantly a SERP plan which contributes the most of the 4.