Forced to Retire
Dryer sheet aficionado
I know a person with $600K to his name and he is just turning 62 next month. He is trying to figure out what to do. He can't work any longer in any job because of an injury and arthritis. So no more income from employment.
His minimum spending needs is $4000 a month. His SS at age 62 would be $1300 a month and at age 70 would be $2200 a month in 2016 dollars
Option One: Wait until he is seventy to collect Social Security and use his IRA Money ($600K) to pay for 100% of his $4000 a month living expenses from age 62-70. That would be $48,000 a year or $384,000.00 over time period, with additional uncertain amounts for inflation. To pay for his expenses without Social Security he would have to take an annual inflation adjusted withdrawal of 8% a year. So is it likely the principal of his $600K in his IRA would shrink in the coming 8 years.
But once he starts collecting Social Security at age seventy, he can drop his withdrawal to 3% of the 2016 figure, because of the larger Social Security Check for waiting until he is 70. But it is highly likely he will not have $600K in his IRA account in eight years because of this 8% annual withdrawals.
OPTION TWO: Take Social Security at age 62 and collect $1300 a month and take 4% withdrawals with minor adjustments for inflation and needs for the rest of his life. (His withdrawals are smaller because of getting Social Security)
Which option is best for my friend:
Wait until seventy and take huge annual 8% withdrawal per year for the next 8 years but smaller 2-3% withdrawals starting at age 70, or start to collect Social Security at age 62 and take smaller checks but only four percent withdrawals going forward? Your choice.
His minimum spending needs is $4000 a month. His SS at age 62 would be $1300 a month and at age 70 would be $2200 a month in 2016 dollars
Option One: Wait until he is seventy to collect Social Security and use his IRA Money ($600K) to pay for 100% of his $4000 a month living expenses from age 62-70. That would be $48,000 a year or $384,000.00 over time period, with additional uncertain amounts for inflation. To pay for his expenses without Social Security he would have to take an annual inflation adjusted withdrawal of 8% a year. So is it likely the principal of his $600K in his IRA would shrink in the coming 8 years.
But once he starts collecting Social Security at age seventy, he can drop his withdrawal to 3% of the 2016 figure, because of the larger Social Security Check for waiting until he is 70. But it is highly likely he will not have $600K in his IRA account in eight years because of this 8% annual withdrawals.
OPTION TWO: Take Social Security at age 62 and collect $1300 a month and take 4% withdrawals with minor adjustments for inflation and needs for the rest of his life. (His withdrawals are smaller because of getting Social Security)
Which option is best for my friend:
Wait until seventy and take huge annual 8% withdrawal per year for the next 8 years but smaller 2-3% withdrawals starting at age 70, or start to collect Social Security at age 62 and take smaller checks but only four percent withdrawals going forward? Your choice.
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