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Please critique my retirement plan
08-08-2018, 03:57 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Please critique my retirement plan
I posted this on bogleheads and someone immediately spotted a hole in it. Drat. So I wanted to ask the ER world to take a look as well and see if I am missing something.
52, planning to retire @ 55. All values in 2017 dollars.
$1,826,900 portfolio value @ retirement 60/40 25% international
$43,757 COLA pension, goes up to $46,812 @ 72 (survivor benefits paid off)
$53,196 SS @ 70
My plan is to bridge to SS and use a SWR for the remainder.
55-70
$43,757 pension
$53,196 SS bridge
SWR
70+
$43,757 pension
$53,196 SS
SWR
To determine the SWR amount, I take what is left of my portfolio @ age 70 (after bridging to SS) and use a 4% SWR.
$1,028,960 Portfolio left @ 70 (assumes no growth) = $41,158 @ 4% SWR
So this is what it looks like:
55-70
$43,757 pension
$53,196 SS bridge
$41,158 SWR
$138,111 Total
70+
$43,757 pension
$53,196 SS
$41,158 SWR
$138,111 Total
Expenses:
$75k base (some discretionary but no travel budget, includes health care)
$15k +20% for lumpy stuff like cars, major home repair, etc...
$25k Travel
$15k taxes (per iORP)
$130k Total expenses
Seems like if I stick to the plan and have $1.8M in Mar 2021, I can FIRE.
The hole they found on BH was survivor benefits if I die. I have term life insurance to cover that until age 78, but then I have a hole to fill. Haven't figured that bit out yet, but thinking on it.
Appreciate your thoughts.
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08-08-2018, 04:29 PM
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#2
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Recycles dryer sheets
Join Date: Nov 2010
Location: Earth
Posts: 334
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Where is the SS Bridge money coming from? IF the money is coming from investments along with SWR monies that calculates to ~$1.4mm from investment total leaving about $400k left.
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08-08-2018, 04:36 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,076
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One thing you did not state was how much of your investments were in either a 401K or IRA. This is VERY important. At 70.5 years of age you will have to start taking RMD's.
The first bite is 3.6%, and it goes up from there, at age 79 it is 5%.
So, if you have $1 Mil in IRA's, you will have an extra 36,000 in taxable income and must make provisions for the extra income tax.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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08-08-2018, 04:36 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by DFA
Where is the SS Bridge money coming from? If the money is coming from your investments that looks to be 1.4mm from 55 to 70 with the SWR withdrawals.
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That is correct.
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08-08-2018, 04:49 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,298
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Quote:
Originally Posted by corn18
That is correct.
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If the 94k for 15 years equals the 1.4m, how is there 1.0m left at 70 years old to equate to a 41K(4%) WR ?
__________________
TGIM
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08-08-2018, 05:19 PM
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#6
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Recycles dryer sheets
Join Date: Oct 2015
Location: Indiana/Florida
Posts: 318
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Looks promising as long as you're done traveling by the time you're 70.
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08-08-2018, 05:20 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by Dtail
If the 94k for 15 years equals the 1.4m, how is there 1.0m left at 70 years old to equate to a 41K(4%) WR ?
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It might help to look at it in buckets:
Bucket 1: SS bridge $797,940
15 years * $53,196 (SS) = $797,940 I need this much to bridge from 55 to 70. This doesn't include an allowance for inflation which is why I assume no growth and hope the return on the $797,940 offsets inflation.
Bucket 2: SWR $1,028,960
$1,826,900 - $797,940 = $1,028,960 this is what's left @ 70. I want to start withdrawing @ 55 so I just took 4% of this and add that to my income.
This results in a very high initial withdrawal rate until age 70 and then a tiny withdrawal rate at age 70. If the black swan cometh, then I have a lot of discretionary to manage that as it comes along.
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08-08-2018, 06:23 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,298
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Quote:
Originally Posted by corn18
It might help to look at it in buckets:
Bucket 1: SS bridge $797,940
15 years * $53,196 (SS) = $797,940 I need this much to bridge from 55 to 70. This doesn't include an allowance for inflation which is why I assume no growth and hope the return on the $797,940 offsets inflation.
Bucket 2: SWR $1,028,960
$1,826,900 - $797,940 = $1,028,960 this is what's left @ 70. I want to start withdrawing @ 55 so I just took 4% of this and add that to my income.
This results in a very high initial withdrawal rate until age 70 and then a tiny withdrawal rate at age 70. If the black swan cometh, then I have a lot of discretionary to manage that as it comes along.
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Ok understand.
__________________
TGIM
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08-08-2018, 07:31 PM
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#9
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Recycles dryer sheets
Join Date: Nov 2010
Location: Earth
Posts: 334
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Quote:
Originally Posted by corn18
It might help to look at it in buckets:
Bucket 1: SS bridge $797,940
15 years * $53,196 (SS) = $797,940 I need this much to bridge from 55 to 70. This doesn't include an allowance for inflation which is why I assume no growth and hope the return on the $797,940 offsets inflation.
Bucket 2: SWR $1,028,960
$1,826,900 - $797,940 = $1,028,960 this is what's left @ 70. I want to start withdrawing @ 55 so I just took 4% of this and add that to my income.
This results in a very high initial withdrawal rate until age 70 and then a tiny withdrawal rate at age 70. If the black swan cometh, then I have a lot of discretionary to manage that as it comes along.
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OK on that, but where would the SWR ($617k) from 55 to 70 come from? That would also have to be deducted from the $1,025,960 leaving ~$400k @ 70.
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08-08-2018, 07:38 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by DFA
OK on that, but where would the SWR ($617k) from 55 to 70 come from? That would also have to be deducted from the $1,025,960 leaving ~$400k @ 70.
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Yup, just like any SWR withdrawal.
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08-08-2018, 09:47 PM
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#11
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Full time employment: Posting here.
Join Date: Jul 2016
Location: gypsy traveller
Posts: 682
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I like your approach and explanation regarding buckets. Yet, maybe I'm missing something. Doesn't $1,028,960 Portfolio left @ 70 assume 4% growth, not no growth. That way the growth matches the withdrawal from 55 to 70, and you can have the 1,028,960 amount at age 70?
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08-08-2018, 10:57 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by HarveyS
I like your approach and explanation regarding buckets. Yet, maybe I'm missing something. Doesn't $1,028,960 Portfolio left @ 70 assume 4% growth, not no growth. That way the growth matches the withdrawal from 55 to 70, and you can have the 1,028,960 amount at age 70?
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You are correct. The SWR bucket assumes growth to support the 4% SWR. It's just the SS bridge bucket that I assume no real growth.
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08-08-2018, 11:56 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Location: SoCal, Lausanne
Posts: 4,408
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I would start SS withdrawals at 62. If you wait until 70 you will push your break-even into the mid 80's.
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08-09-2018, 05:10 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 1,087
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LTC plan is?
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08-09-2018, 05:31 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by Z3Dreamer
LTC plan is?
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I haven't figured that bit out yet. Right now I plan to put my head in the sand and ignore it.
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08-09-2018, 05:33 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by Freedom56
I would start SS withdrawals at 62. If you wait until 70 you will push your break-even into the mid 80's.
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My wife is 4 years younger than I so I am delaying SS to 70 to maximize her survivor benefits. I would love to take it @ 62 and get on with spending it and reduce the bridge length, though. I have a few years to change my mind at least 1,437 times.
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08-09-2018, 06:32 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,327
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To simplify this , you are starting with a total withdrawal that starts at a little over 5% and then ratchets down at age 70. This is fine if sequence of returns don't get you and leaves you cramped if we get a particularly bad turn in the early years. Being able and willing to dump the travel if we get a major downturn in the early years will give you some flexibility.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
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08-09-2018, 08:15 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Nov 2016
Location: Washington State
Posts: 2,359
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Quote:
$75k base (some discretionary but no travel budget, includes health care)
$15k +20% for lumpy stuff like cars, major home repair, etc...
$25k Travel
$15k taxes (per iORP)
$130k Total expenses
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Obviously, your expenses will determine how much money you need to live on. Your numbers caught my eye because our total expenses will be less than 40K per year INCLUDING healthcare, travel, cars, and home repairs. Your numbers seem high to me, but maybe we have different lifestyles and expectations.
Do you really spend $15K each year on cars, home repairs, etc? We generally spend less than $2000 per year on our cars AND home repairs, but we tend to do most things ourselves. With $15K I could buy a new used car every year. I might need to spend $15K for a new roof or a remodel, but that's a one time expense I can spread out over time.
I'm also curious what kind of traveling you'll be doing that will cost $25K per year? We typically spend $3000 or less per year on travel, but we tend to stay close to home and won't be taking cruises or traveling the world.
Sorry, I don't have anything useful to add, I just thought those expense numbers were interesting.
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08-09-2018, 08:36 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,076
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Quote:
Originally Posted by mountainsoft
I'm also curious what kind of traveling you'll be doing that will cost $25K per year? We typically spend $3000 or less per year on travel, but we tend to stay close to home and won't be taking cruises or traveling the world.
Sorry, I don't have anything useful to add, I just thought those expense numbers were interesting.
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$25 K is not unreasonable. When DW and I were first married, we traveled with a vengeance, .We spent 40 K on travel that year. We have slowed down, and are only taking one cruise that is about 8 K for 15 days.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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08-09-2018, 08:44 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Nov 2016
Location: Washington State
Posts: 2,359
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Quote:
Originally Posted by Souschef
$25 K is not unreasonable. When DW and I were first married, we traveled with a vengeance, .We spent 40 K on travel that year. We have slowed down, and are only taking one cruise that is about 8 K for 15 days.
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Really? Wow, I need to get out more. I don't think we've ever spent more than $4K on a vacation, including trips to Hawaii, Puerto Vallarta, Canada, and Alaska. When we take a big vacation like that, we don't really do any other major traveling that year. I'm hoping to travel more once we retire, but I can't imagine spending $25K per year. That's awesome if you can afford to do it, but I don't think that's in the cards for us.
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