The trust is hardly earning anything, and the investment firm said 5% is the only allowable w/d per year. Since inception, it's earned <1%/yr.
I wish I could just transfer the Trust assets to Vgd but for some reason due to it being a trust, w/d is limited to 5% annually, due to the special stipulations of the trust. Anyway, I am probably shelling out at least 2%/yr in expenses even if the fund ever does well.
Here is the updated budget:
$1,565.00 (total monthly income (disability + investments---assuming a very conservative return of 2% after inflation in this crazy market)
v.
$2,460.00 (total monthly expenses)
----
= - $895.00 (total monthly shortfall
Because of my investments being tied up in the Trust that is earning virtually zero, my total investable assets (which are all in VGD), are only $241885.00.
Hi jqrz,
Thanks for the updated numbers. This makes more sense and more obvious why you are concerned about running out of $$
The bottom line: I agree with the other response for drawing down the trust as quickly as allowed. Firecalc suggests that you can use the dividends and cap gains from your Vanguard investments to make up any shortfall. Furthermore, you are likely to have more than enough to survive on just your disability and Vanguard investments even when your trust runs out.
The basic plan:
Years 1 to 20: expenses funded by disability, plus 5% of trust annually, and about 1.5% of Vanguard (dividends/cap gains) annually.
Years 21 to 40+: expenses funded by disability, and balance from Vanguard dividends, cap gains and possibly principle (depending on market).
Overall, I believe you stand an excellent chance of making it 40+ years in more or less your current situation/lifestyle, if desired. Of course, reducing expenses helps add even further margin of safety, again only if desired. Firecal gives 99% chance of success over 40 yrs if you are willing to completely spend down your trust. Realistically, though, I'd call it 90% plus since we haven't factored in margin for condo special assessments, extra health costs, and "unknown unknowns". Still I'd consider this an excellent start.
The details (if so inclined):
Given:
Expenses: $2460 monthly or $29,520 annually
Income (disability + 2% of Vanguard): $1565 monthly or $18,780 annually
Savings:
Trust + Vanguard: $480,000
Vanguard (assume market growth): $241,855
Therefore, we calculate:
Trust (assume 0% growth): $238,115
Trust, 5% annually: $11,906
Vanguard, 2% annual: $4,838
Therefore, the trust will last about 20 years at 5% annual draw, assuming 0% annual growth.
From total income stated above and 2% income from Vanguard, we estimate your disability income at $1,162 monthly or $13,942 yearly.
Plan for years 1 to 20:
$13,942 disability + $11,906 trust + $3,672 Vanguard dividends = $29,520 expenses
Plan for yrs 21 to 40+: $13,942 disability + $15,578 Vanguard dividends/cap gain and principle as needed = $29,520 expenses
Notes:
- Under this plan we assume the trust is completely consumed in 20 yrs.
- Firecalc gives 99% survival of Vanguard investents for 40 total years, with a shortfall of only about $15,000 in the worst case historic scenario (probably if you had retired in 1966). The good news is that the average ending value is $883,177, when you only start with $241,855! I used all default settings, except for 3% inflation instead of the default CPI, based on your own Firecalc run. Note that the 40 yrs success improves to 100% if you use the default CPI inflation adjustment. Expenses are input as $3672 yearly, then increasing by $11,906 (off chart spending, tab 2 in Fircalc) to give a total of $15,578 starting year 21.
- Inflation assumptions. We assume your disability is COLA'd (inflation adjusted). Is it?? The Vanguard numbers are COLA'd in the Firecalc run, of course. As for the trust, it may be hard to entirely judge performance based on 2015. For example, my VGD total bond index fund yielded only about 2% in 2015, similar to the dividend + cap gains on the S&P 500 index fund. In your trust, however, a 2% gain is probably completely taken by the advisor's 2% fee, leaving you with zero gain, actually a loss after inflation! Hopefully, even this dog will do better on decent market years, at least keeping up with inflation if the good years make up for the bad and mediocre ones.
Feel free to PM if you want the spreadsheet calcs and/or firecalc output or anything else.
FB