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Time to pull the plug?
Old 12-05-2007, 10:05 AM   #1
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Posts: 98
Time to pull the plug?

I think I've finally got a simplified plan that will work...

Vital stats:
Age 44 - single
1.1 M outside IRAs
225k inside IRAs
No pensions

So I dollar value average 1 M into Vanguard's new managed payout fund (available early next year) over the next 3 years - the 5% payout option. I'll live on maturing CDs in the intervening 3 years.

That should generate something on the order of 50k per year once established.

Of that 50k, I figure taxes should be something like 7k per year, assuming that the managed payout funds distributions are 1/2 capital gains and 1/2 interest payments.

So the expected "spendable" money becomes 50 - 7 - 3 (HSA contribution) = 40k /year, 3.3k/mo.

I only spend about 2k/mo now.

The IRA money would be left untouched, and total portfolio withdrawal would only be 3.6% (since the HSA contribution is not really spending, its just a transfer from one account to another).

If there is money left at the end of the year, I would transfer that into my Roth IRA, possibly lowering the withdrawal % further.

I have an individual Anthem HSA with a $2500 deductible - costs me $156/mo. (Just went up from $147 - only a 6% increase. Colorado is thinking about implementing mandatory health care, sort of in the model of MA, so I assume the insurance companies are playing nice until they get a chance to shoot it down .

The IRA money would become available in 16 years, SS in 18 years.

Seems workable. Am I missing anything?
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Old 12-05-2007, 04:16 PM   #2
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Wow. That is some impressive coin for a single person in their early forties. Well done.

Everything seems kosher to me. As long as you are happy with the cash flow, withdrawl rate, and the risk profile.

What is the AA for the VG managed payout fund? Does it change over time?
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Old 12-05-2007, 04:36 PM   #3
Recycles dryer sheets
Join Date: May 2006
Posts: 98
From a post on Bogleheads:


U.S. Stocks Total Stock Market Index Fund 15%-35%
Non-U.S. Stocks FTSE All-World ex-US Index Fund 15%-35%
Bonds Total Bond Market Index Fund 0%-25%
Cash Market Liquidity Fund 0%-20%
Market Neutral Investments Market Neutral Fund 0%-25%
Commodity-Linked Investments Not applicable 0%-10%
Inflation-Linked Investments Inflation-Protected Securities Fund 0%-20%
Real Estate Investments REIT Index Fund 0%-10%

It looks like a combination of the Target Retirement and Life Strategy funds on steroids. Your own private little endowment or immediate annuity. If you want market neutral and commodities from Vanguard you'll have to buy them in this fund. Unless you can come up with the $250K minimum for the market neutral fund by itself."

Sounds like just what I've been looking for. Includes most of the asset classes used by I really like the addition of real estate, commodities and market-neutral.

As for changes over time, the fund will be actively managed seeking that sustainable 5% withdrawal rate, so I don't believe the ratios will shift towards bonds with time, as is typical with the lifecycle funds...
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Old 12-05-2007, 05:42 PM   #4
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Originally Posted by cyclone6 View Post
If there is money left at the end of the year, I would transfer that into my Roth IRA, possibly lowering the withdrawal % further.
Not unless you have earned income = to the amount you want to put into the Roth.
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