Poll: Primary Retirement Income Source

[Midpack]

Comments/caveats:

1. Soc Sec is not an option because it's almost universal, and a part of most everyone's retirement income. If Soc Sec is your primary source of retirement income, please choose the Pension/Annuity option.
2. Flexibility seems to be an essential ingredient to any successful retirement income plan, that's understood and assumed for all poll answers (including SWR).
3. Using various sources is also probably very common, that's understood and assumed with all poll answers as well.
4. I have deliberately left off OTHER as an option, though there may be others.

The question is what is/will be your PRIMARY source of retirement income as you know it today?

Let's see how long it takes someone to point out an option or caveat I've missed...

 

[W2R]

Thanks for your pre-poll in the other thread. I took your suggestion and voted that my primary income source was the Norwegian widow variety.

 

[haha]

I don't see the poll?

 

[GregLee]

I don't see the poll?

That's grammatically interesting. Are you asking us whether you see the poll? Or are you saying you don't see the poll and asking: "What's going on here?"

 

[haha]

Found it. I believe you left out one very important source- spend dividends and real interest, but not gains.

In a real sense, you cannot spend gains and keep principle intact. One can only imagine doing this he confuses real principle with nominal value of that principle.

For example, how could you spend income and gains without winding up with fewer shares? If you have fewer shares, you have a smaller part of an earning enterprise -no matter at what price that smaller part is currently priced.

Ha

 

[Meadbh]

I had to read the Grangaard strategy paper to answer the poll, and in fact, the paper puts into words the approach that I have been thinking of taking, more or less. However, none of these approaches discusses the sequence of tax sheltered and non tax sheltered portfolios.

Another problem I had was that the poll mixes income sources and strategies.

 

[NW-Bound]

... how could you spend income and gains without winding up with fewer shares?

Assuming that one is lucky enough to "buy low sell high rinse repeat", he would have more shares.

Oops. Make it "rebalancing" to be PC here. Yes, would rebalancing not get one more shares over time?

 

[W2R]

Found it. I believe you left out one very important source- spend dividends and real interest, but not gains.

In a real sense, you cannot spend gains and keep principle intact. One can only imagine doing this he confuses real principle with nominal value of that principle.

For example, how could you spend income and gains without winding up with fewer shares? If you have fewer shares, you have a smaller part of an earning enterprise -no matter at what price that smaller part is currently priced.

Ha

Yes, I agree. I am not selling shares to live on, but only to rebalance as needed. My withdrawal from my taxable account each January is based only on dividends earned in the previous year plus a tiny bit of money market interest, not on principle or capital gains.

 

[hankster]

Pension, annuity etc.

Our primary source will be a non-COLA pension with 401k, Roths and taxable funds used in a sort of bucket approach to supplement pension and as inflation protection.

SS will be taken at whatever point it is most advantageous regarding future rules.

 

[haha]

Assuming that one is lucky enough to "buy low sell high rinse repeat", he would have more shares.

Oops. Make it "rebalancing" to be PC here. Yes, would rebalancing not get one more shares over time?

Not if you spend the gain. You cannot assume that a stock will always be offered at the same per share price that you once bought it at. 1000 shares is bought at $20,000 and sold at $40,000 We spend the $20,000- now our dividend income has been cut in half. Maybe the good fairy will make the shares go back to $20, so we can again buy 1000 shares with our remaining $20,000-less friction of course. And for you, she might just do this.

 

[Rich_by_the_Bay]

By "SWR/Constant percentage approach" do you mean x% corrected for inflation annually, or do you mean x% of portfolio value each year, disregarding inflation?

 

[kcowan]

Gosh I am a Norwegian Widow! I wonder what DW will think of that?

 

[NW-Bound]

And for you, she might just do this.

The good fairy offers the same good deal to all of us. However, not all of us take up on the offer for one reason or another. I suspect the most frequent reason is that we tend to be suspicious that she might be foolin'.

Anyway, if one sells all of his cap gains to live on, then you are right that one cannot count on the price dropping in half again for repurchasing. But, to sell just a few percent, then would that not be more feasible? And perhaps sustainable if the market keeps going up and down like yo yo?

It's just in theory, of course. Due to my part-time income, I have not had to touch my savings, except for 2008, hence I can still "talk big". But at this point, I can live on a range from 2% to 4%, so can have a bit of a leeway.

 

[traineeinvestor]

The Norwegian widow is the closest for me but not quite right - I'll live off dividends and rents, but hope not to spend any other gains so that the real value of my assets can be maintained. A cash bucket will provide a buffer should I have a lean year or two or three.

 

[W2R]

Gosh I am a Norwegian Widow! I wonder what DW will think of that?

She'll probably love it, given that most women seem to outlive their husbands. She'll have more money after you are gone (should you predecease her), than if you took a less conservative approach.

 

[freebird5825]

Pension, annuity etc.

Current:
CSRS survivor pension
TSP 401(k) converted into a fixed annuity
Future :
my own deferred FERS pension in 4 years
income generating national muni bond fund (instead of cash, CDs, money market)
40/60 AA mutual fund modest retirement portfolio
SS in some form (from my own w*rk record)

 

[BigNick]

I voted "Pension, Annuity etc." after some thought. I don't expect that those will provide more than 40% of our first ten years worth of retirement spending. However, my w*rk-related pension, with its associated medical coverage, is the basis of the "never having to eat dog food" part of the plan.

 

[FIREd]

Mostly Norvegian Widowish (spend dividends and interests but reinvest gains) but I also make sure that essential expenses are covered by income from relatively reliable sources.

 

[Arnie]

Which option covers two swr's - higher before ss and lower after?

 

[Alan]

Pension/annuity is my main source of income.

For example, how could you spend income and gains without winding up with fewer shares? If you have fewer shares, you have a smaller part of an earning enterprise -no matter at what price that smaller part is currently priced.

Ha

I agree if you are purely talking about selling shares of stock or of a Mutual Fund.

For my Wellesley account I have dividends going to MM for income, but captital gains re-invested, which results in more shares each time there is a distribution. (Usually in December each year there is a capital gain distribution).

However, if I chose to have the cap gains also go towards my income I would still maintain the same number of shares in my Wellesley account.

 

[haha]

However, if I chose to have the cap gains also go towards my income I would still maintain the same number of shares in my Wellesley account.

True enough, but that same number of shares respresents a smaller % holding of Wellesley, and of the underlying earning assets in the fund. As long as the underlying is growing as fast as Wellesley is liquidating, the person who takes income and dividends as cash will not lose absolutely, but he will lose relative to the growth of the underlying.

Ha

 

[dessert]

We will be mainly living on non-cola DB pension. We will supplement for extras with our after tax account. We also each have a Roth IRA and I have a 401K for long term possible self insured LTC and whatever unknowns may be out there. Undecided about when to take SS.

 

[Alan]

True enough, but that same number of shares respresents a smaller % holding of Wellesley, and of the underlying earning assets in the fund. As long as the underlying is growing as fast as Wellesley is liquidating, the person who takes income and dividends as cash will not lose absolutely, but he will lose relative to the growth of the underlying.

Ha

Just checking the facts, man

As I say, I have it set up for the cap gains to reinvest.

 

[martyb]

In 2 yrs, I'll start receiving a federal employee COLA'd pension (CSRS). At that time, I'll be able to tap into my 401k (TSP) penalty free if I want to, and might use it to pay cash for our retirement home. Wife will continue to work for 2-3 more years, then will join me in retirement with her 401k, no pension, which we probably won't touch & will keep it for big emergencies. In 2018, I'll begin drawing my military (reserves) COLA'd pension. We also each have Roth IRA's. Wife will get SS when she reaches age 62. I may get a very small SS, possibly just enough to pay for beer. Our game plan is to have no mortgage, and live happily ever after on my 2 pensions, with her 401k, the IRA's & her SS as back-ups. We should be ok.....hopefully.

 

[W2R]

This is amazing. In answer to the question,

Excluding Soc Sec, what is/will be your PRIMARY retirement income approach?

so far, half of the members here are selecting "pension, annuity, etc."!

That is not the case for me, and I would not have guessed that this poll would turn out like this.