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Just took SS!! Now how do I calculate my Withdrawal Rate?
Old 02-01-2023, 07:21 AM   #1
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Just took SS!! Now how do I calculate my Withdrawal Rate?

So my wife and I just took our SS starting in January. Age 66 and 7 months. Just worried about waiting longer and potential adjustments to SS by Congress. I am wondering now how to calculate our withdrawal rate. We always tried to stay around 4%. But with SS we either have a monthly raise if we keep our withdrawal at 4% or we drop way below 4% if we keep the total inline with previous. How do you deal with this event?

Thanks
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Old 02-01-2023, 07:35 AM   #2
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My withdrawal is expenses minus exogenous income (SS, pension)
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Old 02-01-2023, 07:36 AM   #3
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I don't see why you would drop your withdrawal rate unless there's nothing you wan to spend the cash on.
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Old 02-01-2023, 07:52 AM   #4
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I don't see why you would drop your withdrawal rate unless there's nothing you wan to spend the cash on.
I think your point is good. If a 4% rate work works out to pay for your lifetime reducing that would leave money behind. So you would not included the SS in your calculation and still withdraw 4% of your investments, as I understand you? This is where I tend to land too. But just want to make sure this is how most people deal with it.
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Just learned a bad thing about waiting to age 70 to withdraw.
Old 02-01-2023, 07:56 AM   #5
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Just learned a bad thing about waiting to age 70 to withdraw.

As I mentioned we waited until I was 66 and 7 months. My. FRA was 66 and 4 months. My wife did not get 1/2 my Total Monthly Benefit. She gets 1/2 of my Full Retirement Age benefit. That means if you wait till 70, your spouse doesn't get the 8% raise per year for waiting. S(he) is stuck at 1/2 your Full Retirement Age benefit. This reduced the benefit of waiting. Seems a scam to me!
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Old 02-01-2023, 08:36 AM   #6
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As I mentioned we waited until I was 66 and 7 months. My. FRA was 66 and 4 months. My wife did not get 1/2 my Total Monthly Benefit. She gets 1/2 of my Full Retirement Age benefit. That means if you wait till 70, your spouse doesn't get the 8% raise per year for waiting. S(he) is stuck at 1/2 your Full Retirement Age benefit. This reduced the benefit of waiting. Seems a scam to me!
You are not considering that if she survives you, she would have gotten your 8% per year raise. That's not such a scam.

Are you following a flat 4% per year? Or did you start at 4% and add COL each consecutive year as in the Trinity study? One way or the other, you would only need to withdraw your (last year's amount * the COL) minus this year's SS benefit to stay at your current lifestyle. Without knowing more, this might be a good time to consider Roth conversions. There are many threads here on this action. No need to repeat again.
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Old 02-01-2023, 09:16 AM   #7
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This is the way I have always calculated required portfolio size for retirement:

(Expenses - Income (pensions/social security)) x 25 = required portfolio.

So my withdrawal rate is what I actually take from the portfolio to supplement my other sources of income in order to meet my expenses. Right now, it is less than 1% and that only if we take an extended fancy overseas vacation with first class tickets. But, per the Trinity study, I could go up to 4% and not deplete my portfolio (although I have no idea what I'd spend the extra money on).

There is a thought by some that if you can take 4%, why not take it and, if you don't spend it, put it in a risk free asset class like US Treasuries. Others, however, would just continue on with the same portfolio that got you here in the first place and therefore not withdraw what you don't need to spend. I guess I am in the latter camp for now, but I have occasionally considered joining the former.
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Old 02-01-2023, 09:26 AM   #8
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This is the way I have always calculated required portfolio size for retirement:

(Expenses - Income (pensions/social security)) x 25 = required portfolio.

So my withdrawal rate is what I actually take from the portfolio to supplement my other sources of income in order to meet my expenses. Right now, it is less than 1% and that only if we take an extended fancy overseas vacation with first class tickets. But, per the Trinity study, I could go up to 4% and not deplete my portfolio (although I have no idea what I'd spend the extra money on).
How does that work if Total SS & Pensions cover say 2 x total expenses?

I think it would be more like picking a "Desired" income - expenses.

For example: If Total Income from SS and Pensions is $55k and desired income is $120k. Then $65k has to come from Portfolio. With a "Sensible" annual return of 4% that would require a Portfolio of approximately $1.64m. Put it into Fixed income and enjoy life. That is without drawing down on one's stash. If all or some of one's stash is in IRA/401k vehicles, then RMD will need to be taken into account and the math becomes a little more complicated.
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Old 02-01-2023, 09:32 AM   #9
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We already have everything we need and most of what we have ever thought to want. As a consequence, we're spending as much as we "desire" right now. If spending more would make us happier, we would do that.
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Old 02-01-2023, 09:33 AM   #10
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We already have everything we need and most of what we have ever thought to want. As a consequence, we're spending as much as we "desire" right now. If spending more would make us happier, we would do that.
Us too.
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Old 02-01-2023, 09:47 AM   #11
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We already have everything we need and most of what we have ever thought to want. As a consequence, we're spending as much as we "desire" right now. If spending more would make us happier, we would do that.
same
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Old 02-01-2023, 04:22 PM   #12
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I think your point is good. If a 4% rate work works out to pay for your lifetime reducing that would leave money behind. So you would not included the SS in your calculation and still withdraw 4% of your investments, as I understand you? This is where I tend to land too. But just want to make sure this is how most people deal with it.
what does your retirement plan say?
You need to plan not only until both claim, but also what happens after "first to pass" !

while we haven't come close to 4% (more like 2% or less) before the first SS, we have a plan
--if I pass first, then pension drops to 50% (the max I could set it for)
--my PIA is the lower (but not that much lower) but I am older
So: if I pass first, SO goes on surviving spouse (my SS, which is starting first payment this month); then there would have to be something to make up the difference
What makes up the difference is savings (able to make up difference until they get their higher age-70 payout). If I'm gone after we both are claiming, pension still drops by half, but part of the payments that are received when we both are collecting are saved for future offset of the difference, so that SO won't suffer a drop in living. {....and if SO passes first, I would receive the higher SS and (potentially) a step up in pension. The age difference, plus that I'm male, makes that unlikely}
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Old 02-01-2023, 04:54 PM   #13
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I view my WR as withdrawals from retirement portfolio for a year divided by the beginning year balance. Since our spending will not change when we start SS, SS will result in a significant decline in our withdrawals and our WR.
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Old 02-01-2023, 05:44 PM   #14
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We already have everything we need and most of what we have ever thought to want. As a consequence, we're spending as much as we "desire" right now. If spending more would make us happier, we would do that.
+4. If we want or need something then we buy it, trying to find a good value, not because we have to but because that is the way we are wired.

When the lottery gets rich I sometimes buy a ticket, but if we won $100m or $500m or more, I'm not sure what we would do with it. I just can't think that big.
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Old 02-01-2023, 10:11 PM   #15
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Quote:
Originally Posted by Safe Harbour View Post
As I mentioned we waited until I was 66 and 7 months. My. FRA was 66 and 4 months. My wife did not get 1/2 my Total Monthly Benefit. She gets 1/2 of my Full Retirement Age benefit. That means if you wait till 70, your spouse doesn't get the 8% raise per year for waiting. S(he) is stuck at 1/2 your Full Retirement Age benefit. This reduced the benefit of waiting. Seems a scam to me!
Wow.... Some single people would consider that she getting 1/2 of your Full Retirement Age benefit, without working for it is a scam !

Your household gets 1.5 times your SS , The single person gets 1.0 times for the same SS contributions as you. And you complain
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Old 02-02-2023, 01:39 AM   #16
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Quote:
Originally Posted by Safe Harbour View Post
As I mentioned we waited until I was 66 and 7 months. My. FRA was 66 and 4 months. My wife did not get 1/2 my Total Monthly Benefit. She gets 1/2 of my Full Retirement Age benefit. That means if you wait till 70, your spouse doesn't get the 8% raise per year for waiting. S(he) is stuck at 1/2 your Full Retirement Age benefit. This reduced the benefit of waiting. Seems a scam to me!
As mentioned above it is the “life insurance “ factor that might be worth waiting for since the survivor gets the higher of the benefits.

For comparison, in the UK each person gets OAP (UK SS) based only on their record, and when one spouse dies their OAP stops and the surviving spouse gets no extra income to compensate. If a person earned less than 10 years credit then they get nothing, even after their spouse dies. Far from being a scam I think that SS is extremely generous.
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