In decumulation (living off the fat of the land)

[cashflo2u2]

I am a FIRE person with DW both now on SS. After our very small pension (8K per year), SS and some important rental income we have a shortfall of about 19K per year which must come from investment income. Our retirement budget and plan went haywire within 6 months after retirement.

 

[REWahoo]

Don't leave us hanging, we need details!

 

[bssc]

Welcome and post more.

Maybe we can both learn from your examples and help you in return.

 

[Darryl]

What SWR have are you using? What do you want to use? How are you intending to get another 19K a year from investments? Why not consider a return to work. How can we help?

 

[cashflo2u2]

Wow, thanks for the attention. We have LTC ins and a govt. health plan (FEHBP). We fund the annual shortfall from a $800,000 portfolio (55/45). We were fortunate to have experience a bull market in our early retirement years (it was 500K on retirement). I find that most financial planners (especially under 50 which they all are) do not understand that this amount is an IRREPLACEABLE asset. They concentrate on models of projected end value of portfolio and don't understand our need is lifetime consumption. I read where both VG and TRP is coming out with a "managed payout portfolio" which purports to manage the portfolio to accomplish the desired pay ratio of the retiree. They will do the rebalancing, etc. and send a monthly check for the desired amount. Of course their will be no guarantees and as opposed to an immediate fixed annuity (expensive) which we are considering.

 

[Rich_by_the_Bay]

I read where both VG and TRP is coming out with a "managed payout portfolio" which purports to manage the portfolio to accomplish the desired pay ratio of the retiree. They will do the rebalancing, etc. and send a monthly check for the desired amount. Of course their will be no guarantees and as opposed to an immediate fixed annuity (expensive) which we are considering.

I and others are watching those funds with great interest since they seem to encompass an AA that many here would be content with. Do a search if you'd like to read more on that. Over-bundling still makes me uneasy - I am not a market timer, but certain investments are intended for certain purposes in my bucketized world and I like to look at them separately.

If your expense shortfall is in the $30-$35K range it sounds to me like you are in pretty good shape, barring other unusual circumstances.

 

[Darryl]

Most here would doubt if an annuity is the solution to your problem.

How much do you need per year?
Pension is 8k. Is it secure?
How much SS are you getting?
Are you both drawing? Did you pull at 62 or full benefits?
How many rentals do you have?
What is the net you can pull off?

 

[goodguy1_64]

Hello Cashflo2u2,

From what I can glean, you need $19k yearly from an $800k portfolio. If that is the case, you should be in good shape.

I'm confused about your

"Our retirement budget and plan went haywire within 6 months after retirement."

comment..


Please elaborate

GG

 

[clifp]

To follow on to GoodGuy comments.

If you check out firecalc and plug in your 800K portfolio with 55% stock/45% equities mix you'll find that you have a 100% chance of being able to withdraw an additional 19K and adjust for inflation for the next 30 years. In fact, you should be able to withdraw up to $30K safely. Another way of looking at the situation is that your initial nest egg of $500K was adequate to support a $19K withdrawal. You were fortunate to retire during bull market, unlike I who retired near the top of the dot.com bubble.

I'd encourage you to play around with this retirement calculator, and don't sweat that your retirement budget isn't exactly what you planned. Now if you really need 50K a year more that is a different story.

One piece of critical data is your age before we give your more advice.

What you say about financial planners is sadly true, once you are retired you can't earn back your losses and they don't really understand that.

 

[RetireeRobert]

I am a FIRE person with DW both now on SS. After our very small pension (8K per year), SS and some important rental income we have a shortfall of about 19K per year which must come from investment income. Our retirement budget and plan went haywire within 6 months after retirement.

So your shortfall is only $19k which has to come from your $800k investment pot. An SWR of only 2.4% from that pot gives you $19200.

Looks like no problem to me. If you get the urge to make some splurges, looks like you could take an SWR in an occassional year of say a "high" 3.75% to give you $30000 instead of $19200. Still under the commonly accepted "safe" rate of 4%.

Looks like you have it made. Are you tired of managing the rental(s)?

 

[dex]

I'm always a bit skeptical about a person who's second post is written such as this one is. It looks like a troll to me.
The first post is the hook or the teaser.
The second post is the pull that sets the hook.
Anyone that read a few of the posts here and really wants some help knows to give more information than what is given here.

 

[unclemick]

I'm always a bit skeptical about a person who's second post is written such as this one is. It looks like a troll to me.
The first post is the hook or the teaser.
The second post is the pull that sets the hook.
Anyone that read a few of the posts here and really wants some help knows to give more information than what is given here.

Hmmm - for a $5 mil cash advance(hey I work cheap) and a decent split on the book royalities - I'll outline how I retired at 49 on 200k and lived like a king on 12k/yr - till she threatened bloody murder.

Of course a cheap bastard could read between the lines of my old posts - which 'nobody' would do - when they could wait for the book and buy hard cover.

heh heh heh - bottom of the coffee can this morning(slept late) and have some candy leftover - last kids(teenagers) at 11.

 

[cashflo2u2]

cliffp, I did the firecalc thing (I like it) and monte carlo simulations. The problem I have with the survivability calcs is that they define failure as portfolio going to zero (total and complete financial ruin). I could not tolerate even a 1% chance of that. I read where a better benchmark is that the port should never fall below an amount needed to annuitize your remaining cash flow needs. (I realize in firecalc you can put in a desired residual value). Also, that risk is not measured just by probability but- Total Risk = probability X magnitude.

 

[cashflo2u2]

To follow on to GoodGuy comments.

If you check out firecalc and plug in your 800K portfolio with 55% stock/45% equities mix you'll find that you have a 100% chance of being able to withdraw an additional 19K and adjust for inflation for the next 30 years. In fact, you should be able to withdraw up to $30K safely. Another way of looking at the situation is that your initial nest egg of $500K was adequate to support a $19K withdrawal. You were fortunate to retire during bull market, unlike I who retired near the top of the dot.com bubble.

I'd encourage you to play around with this retirement calculator, and don't sweat that your retirement budget isn't exactly what you planned. Now if you really need 50K a year more that is a different story.

One piece of critical data is your age before we give your more advice.

What you say about financial planners is sadly true, once you are retired you can't earn back your losses and they don't really understand that.

Oh, my DW and I are 67 and retired 6 years ago. Of course that barely qualifies me for FIRE.

 

[cashflo2u2]

Most here would doubt if an annuity is the solution to your problem.

How much do you need per year?
Pension is 8k. Is it secure?
How much SS are you getting?
Are you both drawing? Did you pull at 62 or full benefits?
How many rentals do you have?
What is the net you can pull off?

19K-20K
pension 8K is very secure
SS (joint) will be 31K for 2008 we pulled at 62
single tenant commercial property nets 21K per year

 

[RunningBum]

If you check out firecalc and plug in your 800K portfolio with 55% stock/45% equities mix you'll find that you have a 100% chance of being able to withdraw an additional 19K and adjust for inflation for the next 30 years. In fact, you should be able to withdraw up to $30K safely. Another way of looking at the situation is that your initial nest egg of $500K was adequate to support a $19K withdrawal. You were fortunate to retire during bull market, unlike I who retired near the top of the dot.com bubble.

You can't just inflation adjust the 19K shortfall if the pension, SS, and rental income doesn't go up with inflation. Certainly rental income should rise, SS rises some (enough?), but pension may not. All expenses are subject to inflation, not just that 19K.

Still probably fine, especially with the rental income, but you can't run firecalc on just part of it.

 

[cashflo2u2]

That would take some time - all I know is I go out for coffee and lunch all the time, same as work (didn't think I would), took up golf, photography, gas expenses are as high as when commuting due to price increases and more running around than I thought, weekend getaways more frequent and expensive, pets are getting older and need more vet care, heating oil here in the northeast is beyond expected, medical premium increase running at 7% actual make my personal inflation rate almost a point higher than I figured (didn't think of splitting it out in my initial calculations), etc. I just bring this up as a warning to others. Frugal was not my middle name