I dug deeper and I realized that the SWR I quoted was derived from the SWR Toolbox spreadsheet: 60/40 stock/bond, 720 month retirement and 100% final value target few years ago. The 2.71% was in the table "SWRs to target different Failure Rates" for the cell J18 (CAPE>30 and 0% failure rate). The SWR number in J18 cell (as of today) has gone up to 3.11% with the same assumptions. The assumptions DO change the SWR but only slightly and all the results hover around 3% for 100% success rate.
45 and Retire (or semi?)
- Thread starter lordjust
- Start date
I dug deeper and I realized that the SWR I quoted was derived from the SWR Toolbox spreadsheet: 60/40 stock/bond, 720 month retirement and 100% final value target few years ago. The 2.71% was in the table "SWRs to target different Failure Rates" for the cell J18 (CAPE>30 and 0% failure rate). The SWR number in J18 cell (as of today) has gone up to 3.11% with the same assumptions. The assumptions DO change the SWR but only slightly and all the results hover around 3% for 100% success rate.
scrabbler1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Nov 20, 2009
- Messages
- 6,703
I have been a Fido client since 1990 (I began with a bond fund) and Fido has a large selection so I began there. My goal was to generate a reasonably steady, monthly "paycheck" to replace my biweekly salary to cover my bills. I did some careful research on FHIFX and was satisfied at its composition and rate of return. From my long experience with bond funds, I felt this was the way to go.
Bond funds can rise and fall in value. However, because I plan to never sell any of its shares (and haven't done so in the last 11 years), it is instead the monthly dividends per share I am most concerned about. That DPS has fallen gradually over the years, but I have bought more shares to compensate, often through rebalancing with my existing stock fund (whose value has grown). The stock fund, which acts as a partial inflation guard, spins off some quarterly dividends which I use to supplement the bond fund's monthly income. Any excess dividends go back into the main bond fund.
So in just a few years, the SWR for a 60-year retirement has gone from 2.71% to 3.11%?
That makes me even more skeptical. I'll have to dig in more.
Thanks for the insight!
BeachOrCity
Full time employment: Posting here.
- Joined
- Jun 1, 2016
- Messages
- 892
Wow! $1,000 a YEAR for discretionary? That includes all meals out, travel, gifts, donations, impulse spending on clothes, goods etc?
You must run a really tight ship
BeachOrCity
Full time employment: Posting here.
- Joined
- Jun 1, 2016
- Messages
- 892
I know a lot of folks are saying you can do this financially, but you are 20 years from your pension and 20 years +- from social security.... alot can change in those years.
It sounds like you have a nice option to work anywhere in the world remotely for 100K / yr in the meantime.
I would beef up my post tax savings as well as roth IRA / 401K in your situation, especially if you plan to use ACA insurance at some point. If you manage it carefully you might squeak by the subsidy limits on income. I think the key to managing ACA subsidies is having a variety of taxable / non taxable assets to draw upon to keep your MAGI under the limit.
Given you desire 100K in spending but say you can do 70K that makes your 70K not very flexible....you want to be really confident that you can always spend at least that.
It sounds like you have a nice option to work anywhere in the world remotely for 100K / yr in the meantime.
I would beef up my post tax savings as well as roth IRA / 401K in your situation, especially if you plan to use ACA insurance at some point. If you manage it carefully you might squeak by the subsidy limits on income. I think the key to managing ACA subsidies is having a variety of taxable / non taxable assets to draw upon to keep your MAGI under the limit.
Given you desire 100K in spending but say you can do 70K that makes your 70K not very flexible....you want to be really confident that you can always spend at least that.
LarryMelman
Recycles dryer sheets
At 55, I have $1.8M of taxable assets that generate almost $70K annual income (stock dividends, mutual fund distributions, a little bank interest, and some interest deferral in US Savings Bonds). That seems like way more than enough for me. Most of the stock dividends are from conservative "dividend growth" stocks which is my inflation hedge.
You have the same nest egg, although part of it's locked up in the IRA. Anything taken out would be taxed as ordinary income. And you'd need to do 72(t) or Roth conversions (which you could withdraw penalty-free after 5 years). I view my IRA and Roth ($1.2M combined) are a safety net of sorts. I'll be doing Roth conversions but don't expect to touch it otherwise.
You could plan to drain the taxable accounts more so than I plan to (which is, not at all), but at 45 that seems risky. My two cents.
You have the same nest egg, although part of it's locked up in the IRA. Anything taken out would be taxed as ordinary income. And you'd need to do 72(t) or Roth conversions (which you could withdraw penalty-free after 5 years). I view my IRA and Roth ($1.2M combined) are a safety net of sorts. I'll be doing Roth conversions but don't expect to touch it otherwise.
You could plan to drain the taxable accounts more so than I plan to (which is, not at all), but at 45 that seems risky. My two cents.
gwraigty
Thinks s/he gets paid by the post
I totally get your idea of wanting to live off the cash flow from your investments. That's our goal after my husband retires.
Here are some of our ETF investments:
IGLB, IHYV, USHY, FALN, SRLN, PFF, PSK, SPYD, FDVV, XSHD
Some of them yield more than your fund choices. The first 5 are bonds. The next 2 are preferred stocks. The last 3 are high yield stocks.
No way would I commit money to a sector stock fund yielding less than a general broad stock fund, if you're looking for cash flow.
Here are some of our ETF investments:
IGLB, IHYV, USHY, FALN, SRLN, PFF, PSK, SPYD, FDVV, XSHD
Some of them yield more than your fund choices. The first 5 are bonds. The next 2 are preferred stocks. The last 3 are high yield stocks.
No way would I commit money to a sector stock fund yielding less than a general broad stock fund, if you're looking for cash flow.
gwraigty
Thinks s/he gets paid by the post
BTW, doing a bit of math here. Your $900K at 3.5% gets you $31,500. 4.5% gets you $40,500. 5.5% gets you $49,500. That's a general idea of the cash flow you might expect with the tickers I list above. It doesn't matter what you hear or read. What matters is how much YOU need to live the life you want.
BeachOrCity
Full time employment: Posting here.
- Joined
- Jun 1, 2016
- Messages
- 892
Thats close to 4% average and higher than Vanguard's high dividend fund. Are you buying individual high dividend stocks like Verizon / ATT to get that?
LarryMelman
Recycles dryer sheets
The taxable side is:
55% - dividend growth stocks, 3.5% overall yield. This is easier to do than you might think. I am very well diversified.
17% - company stock, 1.7% yield.
6% - preferred stocks, 5.9% overall yield.
17% - mutual funds, 2018 distributions were about 7% but they are unpredictable.
6% - cash, negligible income.
Overall yield: about 3.8%.
While I'm working, all dividends get invested in the dividend growth basket. With ER coming up soon, I'm also growing the cash bucket. In ER, that all will change. I plan to gradually sell off the company stock and the funds, using the proceeds for living expenses (I'll let my stock dividends keep reinvesting) and any surplus will get reinvested or will stay in the cash bucket.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Care to share some tickers? I'm skeptical.
Henry Lili
Recycles dryer sheets
- Joined
- Oct 18, 2009
- Messages
- 246
I'd "guess" it's yield on cost?
LarryMelman
Recycles dryer sheets
Most of my stocks can be found in the "U.S. Companies with 25 Straight Years Higher Dividends" list at: https://www.dripinvesting.org/tools/tools.asp
You'll see many well-known companies, and others that aren't so well known.
And no, it's not YOC. It's real current yield.
You'll see many well-known companies, and others that aren't so well known.
And no, it's not YOC. It's real current yield.
Scrabbler
Any reason you didnt or dont choose FAGIX ? For those that are following any thoughts regarding this T-Rowe fund ? TRHYX (it happens to be an option in my current retirement account and am looking at it as an possible bond fund for myself).
Any reason you didnt or dont choose FAGIX ? For those that are following any thoughts regarding this T-Rowe fund ? TRHYX (it happens to be an option in my current retirement account and am looking at it as an possible bond fund for myself).
scrabbler1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Nov 20, 2009
- Messages
- 6,703
I was a little uncomfortable with the lower distribution of credit ratings on FAGIX's underlying bonds, compared to FHIFX, to put a lot of money into that fund.
Feels like you can afford more risk, especially inside the retirement assets. Plus you are still employable at fabulous salary with flexible cost structure. 20 years is a long time.
You have not expressed any desire to ER, just the ability and willingness. I spend far less, and am "living on the proceeds" as you say, while I invest on taxable/retirement accounts. I used involuntary retirement as excuse to consolidate retirement assets and then serially roll them into the Roth. Looks like you have more than enough assets to start on that path, if you wished.
If your career is stable and enjoyable, why give it up? On the other hand, you are young enough that you could try it out for a few years, and then return to work from some low cost location if ER is not to your liking... no harm no foul.
Good to have optionality.
You have not expressed any desire to ER, just the ability and willingness. I spend far less, and am "living on the proceeds" as you say, while I invest on taxable/retirement accounts. I used involuntary retirement as excuse to consolidate retirement assets and then serially roll them into the Roth. Looks like you have more than enough assets to start on that path, if you wished.
If your career is stable and enjoyable, why give it up? On the other hand, you are young enough that you could try it out for a few years, and then return to work from some low cost location if ER is not to your liking... no harm no foul.
Good to have optionality.
JAACrabbit
Confused about dryer sheets
I would say you are in a good position. I 95% retired in 2008 with an accumulation close to yours.
I am married and have about $3000.00 total expenses per month. We definitely are wise on purchases and doing most projects/maintenance ourselves.
My spreadsheet has me spending 85k per year from 40-85. I am maybe taking half of that. I have a handful of clients left so I am able to supplement 20k a year by working 3-4 hours a month. For that reason my savings is climbing roughly 30k per year.
If you enjoy your job, I would say hold onto it part time (if poss?) but don't if it ties you down from living the way you can now
I am married and have about $3000.00 total expenses per month. We definitely are wise on purchases and doing most projects/maintenance ourselves.
My spreadsheet has me spending 85k per year from 40-85. I am maybe taking half of that. I have a handful of clients left so I am able to supplement 20k a year by working 3-4 hours a month. For that reason my savings is climbing roughly 30k per year.
If you enjoy your job, I would say hold onto it part time (if poss?) but don't if it ties you down from living the way you can now
I havent done a lot of research but in theory ill grab aetna for international health as I will be in other countries many months. While in the US... ill have to spend the money... Its an excellent question as I expect that to be my largest single expense. At least while i am in the US.
Yes, with my wife we have similar savings to you and are a few years younger, but really cannot retire early (at the moment) due to healthcare constraints. We could try to do it but it would be too risky for us in my estimation. I have a friend who works for a public University who is vested for healthcare 75% at 15 years of service, and reported @ 20 years would be 100% vested healthcare. His is one of the best benefits I've seen for an average paying job. I myself am a FED under FERS and as such cannot retire until 57 if I want retirement healthcare coverage. That's a fairly long ways away though. I have periodically been contemplating and investigating how to make it work with funding our own healthcare. For us, its the biggest 'monster under the bed'. Difficult to reconcile. The 2nd sapling monster - Long Term Care - of course is lying in wait and even less controllable at this point. I've thought a little about John Hancock coverage, but I am afraid of horrible premium creep.
I have friends in state positions with similar benefits. We all discuss how healthcare coverage is the challenge of the future. I even wonder how state/fed will cover medical at 100%. I have a bad feeling there will need to be drastic changes for that "guaranteed" health coverage to exist in 10 years.
