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-   -   Anything wrong with this? (http://www.early-retirement.org/forums/f29/anything-wrong-with-this-24217.html)

setab 11-24-2006 09:28 AM

Anything wrong with this?
 
As a follow on to my other recent post, I was wondering if the following approach to spending is somehow flawed. Given that I have a pension with COLA and that it covers the basics, is there anything wrong with using the earnings from my IRA each year to supplement? That would leave the principle in place. The principle would not grow much, if at all, but it really doesn't have to since my pension is COLA'd. Thoughts and thanks.

setab

Cut-Throat 11-24-2006 09:49 AM

Re: Anything wrong with this?
 
Quote:

Originally Posted by setab
As a follow on to my other recent post, I was wondering if the following approach to spending is somehow flawed. Given that I have a pension with COLA and that it covers the basics, is there anything wrong with using the earnings from my IRA each year to supplement? That would leave the principle in place. The principle would not grow much, if at all, but it really doesn't have to since my pension is COLA'd. Thoughts and thanks.

setab

It depends on what you are trying to accomplish! - If you want to die with a big pile of money, this plan should accomplish this.

The earnings from the IRA will fluctuate if invested in the market, and inflation will cause the withdrawal to be smaller over time.

mickeyd 11-24-2006 12:51 PM

Re: Anything wrong with this?
 
Quote:

is there anything wrong with using the earnings from my IRA each year to supplement?
As long as you are age 59 1/2 or older and you need/would like to spend the $ to live on, of course use it. That's why you stashed it away wasn't it? Sure you will be diluting your stash in the long run but if your COLAd pension pays most of the way you appear to be in a good position to consider this move.

Bob_Smith 11-24-2006 07:57 PM

Re: Anything wrong with this?
 
Just one more suggestion which you've probably already considered... I'd want to be sure that I considered the difference between my own personal cost of living increases, and the CPI, or whatever your pension is pegged to. In my case, any cost reductions due to retirement (and some of my expenses have gone down quite a bit) are more than consumed by health care inflation. If something doesn't change, health insurance increases will dwarf other savings. This comes as no surprise to me, but at some point the spiraling costs of health insurance is unsustainable. Whether the issue will continue to be ignored until it chews into your COLA'd pension (assuming you're paying out of pocket for health insurance) is anybody's guess.

setab 11-25-2006 09:30 AM

Re: Anything wrong with this?
 
Bob,
You raise one of my major concerns. While part of my health care is covered, I still have significant out of pocket expenses, and I worry about the long term effects of what you mention. I'll just have to keep an eye on that, I guess.

setab

Bob_Smith 11-25-2006 11:35 AM

Re: Anything wrong with this?
 
Quote:

Originally Posted by setab
You raise one of my major concerns. While part of my health care is covered, I still have significant out of pocket expenses, and I worry about the long term effects of what you mention. I'll just have to keep an eye on that, I guess.

Yep, at some point you just have to take the leap. When I left the job, I decided that I had enough for health insurance - up to a point - and if that wasn't enough, I'd just join the growing ranks of the uninsured. It's not like I wouldn't be able to buy ANY health care; with what I'm paying for insurance I could buy a fair amount. And if I get hammered with a major event... well, I guess I will have rolled the dice and lost. I just wasn't willing to let more health care security force me to continue working.

bosco 11-28-2006 09:47 AM

Re: Anything wrong with this?
 
Quote:

Originally Posted by Cut-Throat

The earnings from the IRA will fluctuate if invested in the market, and inflation will cause the withdrawal to be smaller over time.

if you invested the IRA in TIPs, the principle would theoretically keep pace with inflation and you could spend all the earnings. Although long-term you would probably get higher returns with some equities.

Also, bear in mind that unless you invest in predominantly fixed income, you will have years of negative return. Then do you wait until the principle gets back up to par, or continue taking the gains as soon as you have a + year?


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