Jimonlimon
Recycles dryer sheets
- Joined
- Dec 12, 2022
- Messages
- 136
I'm trying to break my issues into reasonable questions rather than put everything into one 10,000 word dissertation, so apologies if this doesn't paint the whole picture.
Planning to retire in a year at age 58-1/2 and start drawing my pension which is generous but won't cover all of our expenses. Currently targeting drawing SS just before FRA at 66-1/2 which means we would need to bridge the 8 year gap with withdrawals from our 401k's. While it's likely that my wife would draw earlier and I would draw later, for simplicity assume we both start at the same time. Our combined SS benefit estimate at 66-1/2 is $67,000/yr. We're both the same age (within two weeks!)
We will need at least $30,000 per year from the 401k to maintain our standard of living plus a few deferred costs. I would like to pull the same $67,000 that we will eventually get from SS per year as we plan to travel a lot and do other expensive things in our early years of retirement. (Actually it would take $73,000 fully taxable to match $67k SS after taxes)
Our combined 401k's total about $1.05 million as of now. I would like to preserve at least $400k (Inflation adjusted) at the end of this 8 year draw period, but ideally more like $500k.
The question: What's a good method to adjust our annual draws between the minimum $30k and wish of $67k?
One thought of a simple method is to just segregate about $400k now into an index fund and let it follow the market. With the remaining $650k +-, take the lesser of $67k or 1/8 the first year, 1/7 the next, etc. until starting SS. If it isn't providing enough we could increase the draws and start SS earlier; if it's doing better we could reduce the fractional draws and defer SS or just keep the excess invested.
This seems too ridiculously simple. If it shrinks our draws would be reduced and hopefully avoid a major problem in the out years. Even if it loses half the value to a crash in the first year we should have more than our $30k need. We could definitely get by on less. In fact we could get by on just the pension if it came to it.
Each of our 401k's are about 70% in stock funds and the rest in allegedly more stable bond/money/etc. funds. Mine will be available immediately upon my retirement via the "rule of 55".
Planning to retire in a year at age 58-1/2 and start drawing my pension which is generous but won't cover all of our expenses. Currently targeting drawing SS just before FRA at 66-1/2 which means we would need to bridge the 8 year gap with withdrawals from our 401k's. While it's likely that my wife would draw earlier and I would draw later, for simplicity assume we both start at the same time. Our combined SS benefit estimate at 66-1/2 is $67,000/yr. We're both the same age (within two weeks!)
We will need at least $30,000 per year from the 401k to maintain our standard of living plus a few deferred costs. I would like to pull the same $67,000 that we will eventually get from SS per year as we plan to travel a lot and do other expensive things in our early years of retirement. (Actually it would take $73,000 fully taxable to match $67k SS after taxes)
Our combined 401k's total about $1.05 million as of now. I would like to preserve at least $400k (Inflation adjusted) at the end of this 8 year draw period, but ideally more like $500k.
The question: What's a good method to adjust our annual draws between the minimum $30k and wish of $67k?
One thought of a simple method is to just segregate about $400k now into an index fund and let it follow the market. With the remaining $650k +-, take the lesser of $67k or 1/8 the first year, 1/7 the next, etc. until starting SS. If it isn't providing enough we could increase the draws and start SS earlier; if it's doing better we could reduce the fractional draws and defer SS or just keep the excess invested.
This seems too ridiculously simple. If it shrinks our draws would be reduced and hopefully avoid a major problem in the out years. Even if it loses half the value to a crash in the first year we should have more than our $30k need. We could definitely get by on less. In fact we could get by on just the pension if it came to it.
Each of our 401k's are about 70% in stock funds and the rest in allegedly more stable bond/money/etc. funds. Mine will be available immediately upon my retirement via the "rule of 55".