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Old 01-27-2017, 07:24 AM   #21
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I would look solely at expenses that need to be funded outside your pension and SS. Clearly the next few years involve some, then your combined pension/SS will cover everything for a few years, after which inflation will probably eventually bring you into withdrawal range again. As others have stated dividends will probably be sufficient to cover your expenses so you could stay high in equities and not even need to free up cash for the short term (just direct distributions into a MMF and withdraw as needed). The downside to that is the potential need to fund a surprise major expense. It might make sense to liquidate a somewhat bigger cash cushion now that you could use for a roof or whatever in the next few years. If you keep expenses at your current level you will start generating excesses that can fund a cushion for a while post age 62 before inflation catches up to you.
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Old 01-27-2017, 07:31 AM   #22
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It's an option if he is not allowed to withdraw money from his 401(k) prior to 59 1/2
True, but most 401ks allow penalty-free withdrawals if you terminate service in the year you turn 55 or later... which seems to apply to the OP.
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Old 01-27-2017, 11:21 AM   #23
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...While some people include an imputed value of pensions and SS in calculating AA, more do not based on my experience. I recall exploring that a few years ago and concluding that it was preferable not to do so as in most cases you end up overloaded in equities.

The more common practice is to reduce spending/withdrawals for pensions and SS in computing a WR and go with a more moderate AA.
+1

That's been my take-away after much reading on this topic here and on other forums.

We have 2 pensions that cover 55% of spending. If I count their NPV as a bond equivalent, I need to own 100% equity in the portfolio to be 60/40 overall. I'm not comfortable with 100% equity to cover the other 45%. I like some stability provided by bonds. The numbers get even more lopsided if I count the NPV of SS as a bond equivalent. I'm just not sure how meaningful these AA numbers are.

Seems to me that our situation is not substantively different than someone, with no pension/SS, who uses a 60/40 portfolio to cover their total expenses equal to my 45%. Guaranteed income just needs to be carved out separately. Then, portfolio AA should align with your risk profile in terms of withdrawing the remainder, and time-frame.
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Old 01-27-2017, 12:04 PM   #24
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The more common practice is to reduce spending/withdrawals for pensions and SS in computing a WR and go with a more moderate AA.
+1

I think the underlying question goes to how much risk the OP "needs to take" vs. how much he "wants to take". He has enough to not need to take more risk; so to sleep better at night, I'd go with a more moderate AA...55-60% equities until ss kicks in. Then, I'd re-evaluate.

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Old 01-27-2017, 01:55 PM   #25
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I am around 86% total equities, thanks to recent run-up in stocks. I have a target of 80%, and I sleep fine with that. I will be able to cover approx 75% of anticipated income needs through my modest pension and SS (both me and DW) once I am not working. It will be less than the 75% until SS kicks in. Both of us are still working, part-time for each now, which basically covers expenses and so not taking any regular withdrawals from savings. We even still contribute to savings with 401k and TSP, just a lot less now being part-time.

If you consider your pension as like equivalent to a fixed income portion, you are really less than your currrent 88% equities/12% fixed ratio in your 401k. Example, if you use the 4% withdrawal rate for calculation your pension is equal to about $1.075M equivalent. Of course being non-COLA'd it will be less of your total income as time and inflation go on.

So if you consider the $1.16M (1.075 + .12 x 715) as fixed, and your $630K (.88 x 715) as equity; then you sort of have an equivalent ratio of 35% (630/1790) equities and 65% (1160/1790) fixed income. Just call your other $20K as cash for simplification purposes.

My conclusion: stay the course you are on and you are fine. Take withdrawals as needed to supplement income until SS kicks in. Sleep well and don't worry.

Good suggestion to take the dividends as cash instead of reinvesting. Use that first before principal for the supplement needed until SS kicks in.
Like you and DW I'm considering some part-time contract work. I retired as an IT project manager and was a financial analyst prior to that (and I still have finance questions!).

I get your point that in the big scheme of things my AA is lower than 88% since my pension is a fixed income stream. It's more about my age and at this point not adding to the 401K since right now I'm not working after 31 yrs of doing it M-F 8-5pm. Ha.
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Old 01-27-2017, 01:56 PM   #26
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There's a chance OP could be eligible for the "age 55" rule and take money out of the 401K penalty free right now as he's over 55. The Age 55 Rule.


Another retirement calculator is ********. It allows for adding Social Security and pensions (COLA'd or not), and several different asset classes.
OP here. I can WD without the 10% penalty yes. Cheers.
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Old 01-27-2017, 01:59 PM   #27
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True, but most 401ks allow penalty-free withdrawals if you terminate service in the year you turn 55 or later... which seems to apply to the OP.
OP here. Yes true. I retired at just over 55 yrs old so I'm penalty free for WD's. However from what I can see on the website we don't have an option of having dividends NOT re-invested. Cheers.
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Old 01-27-2017, 07:25 PM   #28
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Re 60/40 guidelines ignoring social security and pensions: on my phone here, tough to give links, but look up
. Trinity study bengen
. Pfau
There's a third author I can't recall.

They do testing with the asset classes of ten year treasuries, s&p. The third author added small cap stocks and cash.
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Old 01-27-2017, 08:50 PM   #29
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They are not ignoring social security and pensions... they would say that what someone can safely spend would be the safe withdrawals that they suggest PLUS pensions and social security... they are just focused on what the portfolio contributes. Earlier, many of us suggested the same thing.. reducing what you need to live by pensions and social security and then calculating a withdrawal rate... same thing.
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Old 01-28-2017, 10:16 PM   #30
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He's less than 59 - so he needs to keep it in his 401k till then if he wants (needs) to make withdrawals. And it sounds like he does need that.

OP - I remember reading a thread on here where someone ran various firecalc scenarios with a range of AA. And the outcome was basically pretty good anywhere from 30/70 to 70/30.... So I'd lower it to 70% equities.

Have you run firecalc - making sure to properly mark your pension as NON COLA.
OP here. Firecalc and a I are not getting along too well. I've used it many times before my ER and it came up 93% pretty much every time. Now using 735K savings, 30 yr life span, $43K a year pension, $52K expenses, $20K a year SS at 62, etc etc it comes up at 70% success, Ugh.
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Old 01-28-2017, 10:21 PM   #31
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I like ********.com...
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Old 01-28-2017, 10:21 PM   #32
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OP here. Firecalc and a I are not getting along too well. I've used it many times before my ER and it came up 93% pretty much every time. Now using 735K savings, 30 yr life span, $43K a year pension, $52K expenses, $20K a year SS at 62, etc etc it comes up at 70% success, Ugh.
Some potential gotcha's. Make sure you're putting 2017 (or later) for the pension/ss/other income fields... It doesn't like looking in the past.

Are you doing constant spending? Or Bernicke's spending... A big difference in results there.
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Old 01-28-2017, 10:30 PM   #33
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I like ********.com...
I'll check it out!
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Old 01-28-2017, 10:31 PM   #34
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Some potential gotcha's. Make sure you're putting 2017 (or later) for the pension/ss/other income fields... It doesn't like looking in the past.

Are you doing constant spending? Or Bernicke's spending... A big difference in results there.
Very good tip. I must have been using past year vs. 2017. Just re-did it and it came back at 100%. Wow. I using the constant spending method. Cheers.
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Old 01-28-2017, 10:34 PM   #35
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Very good tip. I must have been using past year vs. 2017. Just re-did it and it came back at 100%. Wow. I using the constant spending method. Cheers.
Good news. I've been "bitten" by that "feature" a few times so I've learned....
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Old 01-29-2017, 04:13 PM   #36
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I like ********.com...
OP here. Thanks again for the tip on ********. I like the way the input fields are laid out and the flexibility of adding more than one pension etc.
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Old 01-29-2017, 04:16 PM   #37
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OP here. Thanks again for the tip on ********. I like the way the input fields are laid out and the flexibility of adding more than one pension etc.
With the history of how that calculator was created, "user discretion advised."
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Old 01-29-2017, 04:54 PM   #38
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With the history of how that calculator was created, "user discretion advised."
Thanks for the tip. I didn't check out the history of how the tool was developed. Better do so.
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Old 01-29-2017, 05:54 PM   #39
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I don't know anything about the history of ********.com, just that it's open source and seems to work well.
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Old 01-29-2017, 06:42 PM   #40
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I don't know anything about the history of ********.com, just that it's open source and seems to work well.
I just tried it twice and it did not work on my iPad.
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