Does my "Winning the Game" math pass the sniff test?

[JohnnyPHX]

We have been fine tuning our 2026 budget with lots of padding for cost increases. We even added a 5k lumby expenses into the budget. Pretty sure we have everything covered in our budget as we have been doing them forever. We live a pretty modest lifestyle compared to a lot of people on here I think. We can live comfortably on 60k to 65K annually with close to half of that being in the discretionary category. This doesn't include our 450k paid for home which may be used for LTC needs way down the road. No kids to worry about leaving a nest egg to.
So I was just playing around with a 3 bucket strategy to kind of plan out where our moneys should maybe be allocated. Just kicking around numbers, nothing serious here. I did bucket 1 for the first 5 years at 65K annual spending each year, bucket two for the next 5 years at 75k spending each year and bucket three for 20 years at 90K spending each year. I had the spread sheet start deducting 49.5K annually for our Social Security starting at year 6 which is bucket 2. I tried to account for increasing cost by the spending increase and did not account for any increases in SS payments through the years. Again just playing with some numbers here because we can't really predict the future. So the total dollar amount needed to fill all three buckets was about 1.2 million. This happens to be about the same as our current retirement accounts balance. So other than accounting for the great unknowns ahead of us seems maybe "we won the game" or close enough where we could invest it all in safer assets than the stock market. Not planning on doing any big changes of course but perhaps getting a little less aggressive than our current 60/40 allocation?
So feel free to shoot holes in my very rough plan/idea. Does the math work? Is it close enough that I should sleep a little better at night?

 

[TheWizard]

I don't do buckets, so I'm not going to try to analyze that scheme.

You appear to have longer than 30 years of possible retirement, so let's assume 3.5% withdrawal rate.
With $1.2M, that's $42,000 a year. $65,000 a year is quite a bit more than $42k, but once SS starts, your withdrawals could be less than 3.5-4%.
That's assuming you don't buy new cars too often...

 

[Al18]

Looks like a good starting plan to start. My balances were similar when I retired 7 years ago. Be advised you likely won't spend nearly as much from bucket #1 as bucket #2 in your first 6 years, before collecting SS. I took some money cashing in CD's, some from selling FBALX and selling some long held stocks from my brokerage account. Also I don't directly own any bond funds, because they don't behave like individual bonds/CD in a down market like 2022.

Also, I would think about more diversification in bucket #3. The SP500 is heavily concentrated on the performance of the Magnificent 7 for the past 3 years or so, while the other 493 companies have not been doing as good. Do you have any foreign equities? Total Market funds don't help, as they are still concentrated in the Maginificent 7. You may want to look at the SP500 equal weight fund RSP. For foreign stock exposure, you may want to look at Fidelity's FFNOX, which has about 30%+ foreign stocks or FHASX 2035 target date funds which has about 1/3 US stocks, 1/3 Foreign stocks and 1/3 bonds.

Overall I think 60/40 stock/fixed income is fine.

 

[COcheesehead]

I don’t follow a bucket strategy, but if I did, this guy explains it pretty clearly.

How to Build A Retirement Paycheck From Your Investments - The Retirement Manifesto

How to build a retirement paycheck from your investments using the bucket strategy. The withdrawal phase is different than the accumulation phase.

www.theretirementmanifesto.com

 

[pb4uski]

... So feel free to shoot holes in my very rough plan/idea. Does the math work? Is it close enough that I should sleep a little better at night?

I don't get the math. For bucket #1 5 years * $65k a year is $325k. But for bucket #2 should it be 5 years * $75k a year is $375k? And for bucket #3, 20 years @ $90k a year would be $1.8 million. So total would be $2.5 million.

And if bucket #3 was equities and buckets #1 and #2 were fixed income then the overall AA would be 72/28 which is a little high in equities. OTOH, if your amounts were all consistently $65k in 2025 $$$, then the total would be $1.95m (30 years * $65k a year and the AA would be 67/33.

Stick with FIRECalc.

 

[HarveyS]

Sorry, but no, it does not pass the smell test.
If you need $60K today, you will need more than $90K in 30 years.
As PB4 says, stick with FIRECalc.

 

[VanWinkle]

I think OP was accounting for Social Security in the amounts in buckets 2 and 3. That would reduce the amounts needed from his buckets to get to the 75,000 and 90,000 income

 

[Aerides]

We have been fine tuning our 2026 budget with lots of padding for cost increases. We even added a 5k lumby expenses into the budget. Pretty sure we have everything covered in our budget as we have been doing them forever. We live a pretty modest lifestyle compared to a lot of people on here I think. We can live comfortably on 60k to 65K annually with close to half of that being in the discretionary category. This doesn't include our 450k paid for home which may be used for LTC needs way down the road. No kids to worry about leaving a nest egg to.
So I was just playing around with a 3 bucket strategy to kind of plan out where our moneys should maybe be allocated. Just kicking around numbers, nothing serious here. I did bucket 1 for the first 5 years at 65K annual spending each year, bucket two for the next 5 years at 75k spending each year and bucket three for 20 years at 90K spending each year. I had the spread sheet start deducting 49.5K annually for our Social Security starting at year 6 which is bucket 2. I tried to account for increasing cost by the spending increase and did not account for any increases in SS payments through the years. Again just playing with some numbers here because we can't really predict the future. So the total dollar amount needed to fill all three buckets was about 1.2 million. This happens to be about the same as our current retirement accounts balance. So other than accounting for the great unknowns ahead of us seems maybe "we won the game" or close enough where we could invest it all in safer assets than the stock market. Not planning on doing any big changes of course but perhaps getting a little less aggressive than our current 60/40 allocation?
So feel free to shoot holes in my very rough plan/idea. Does the math work? Is it close enough that I should sleep a little better at night?
View attachment 59960

Row 1 is 5xexpenses, so let's say 5xC. And I'm a proponent of cash for the first few years, so no issues there.
Row 2 and Row 3 also need to be the outside timeframe numbers (10 and 30) multiplied by the annual expenses. They aren't. I don't understand the math.

Row 2, 75x10= 750, minus your 49.5 SS x10 would be 255k instead of 127. (and bond funds nope, too much money in stuff that's far too "safe" and currently performing not very well)
Row 3 would be 1215

But yes this seems like an overly complicated way to look at it, and I'd just go with firecalc as there's a lot that's not factored into this sheet. And a 65K annual spend on 1.2 would have me nervous with SS at least 6 years away. Does that account for taxes and healthcare?

 

[engineernerd]

Another vote for sticking with FIRECalc.

We have a lower withdrawal rate than you do, and I don’t think we have “won the game.” I think Suze Orman has. People like that, who have MULTIPLES of what they could possibly spend even if they got a health problem that costs outrageous amounts of money to treat (or were sued by some vindictive entity with deep pockets) AND lived to 120 years old.

If you are not in those rarified ranks, I think it’s better to do the hard thinking that cures you of fearing sequence-of-returns risk so much that you forget inflation risk, rather than trying to reduce your discomfort by skewing your portfolio too far away from stocks. Hopefully even if there is a stockmarket crash soon you can be at peace with your optimal allocation as reported by FIRECalc, knowing that you rationally balanced the risks and everything is likely to turn out OK if you just stay the course.

FIRECalc does teach inflation risk, not just the sequence-of-returns risk that gets the lion's share of discussion. When I use the “Investigate changing my allocation” feature, I invariably find that there is more risk of running out of money at the low end of the stock-allocation graph than at the high end.

BTW, if you are curious about what historical era was worst for a fixed-income-heavy portfolio (as well as for a stock-heavy portfolio), that is easier to see in FICalc than in FIRECalc. FICalc shows you your results for each retirement year starting in 1871, you can scroll up and down to find the bad years.

All that said, there is one thing that concerns me about today's US stock market. The total market is much less diversified than it has been in the past. It may be a good idea to buy more stocks that are not part of the big AI bet. Foreign or smallcap or midcap funds, or non-tech large caps.

Sorry for the long post

 

[JohnnyPHX]

Thanks so much for the feedback on my little back of the cocktail napkin experiment everyone. It was just something I came up with as I was playing around with our 2026 estimated budget which is 60k so I started the buckets at 65K just to add some padding for inflation. The 3 bucket short term, med term, long term strategy has been talked about so much I decided to see what it might look like for us. As noted I did start deducting SS out at bucket two just to see how that affects the total needed just as an easy place to change the spreadsheet formula. I am almost 63 so if I wait another 6 years for SS the amount would be much higher. I left it alone just trying to pad some more for inflation. I did not add any returns on the money we currently have invested because I wanted to do it as a what if we stuck the money in a tin car jar with inflation and catastrophic issues were the only risk. Again just an experiment. I will definitely play around with the two FireCalcs more and read the bucket link provided above.

 

[JohnnyPHX]

Row 1 is 5xexpenses, so let's say 5xC. And I'm a proponent of cash for the first few years, so no issues there.
Row 2 and Row 3 also need to be the outside timeframe numbers (10 and 30) multiplied by the annual expenses. They aren't. I don't understand the math.

Row 2, 75x10= 750, minus your 49.5 SS x10 would be 255k instead of 127. (and bond funds nope, too much money in stuff that's far too "safe" and currently performing not very well)
Row 3 would be 1215

But yes this seems like an overly complicated way to look at it, and I'd just go with firecalc as there's a lot that's not factored into this sheet. And a 65K annual spend on 1.2 would have me nervous with SS at least 6 years away. Does that account for taxes and healthcare?

Thanks for taking a look at my little back of the napkin experiment. SS could be started any time as I am 63. It does try to account for some taxes and healthcare.
So this is bucket 2 for years 6-10 so 5 years = ( 75,000 - 49,452 SS) x 5.

6-10 years

$ 75,000.00

$ 127,740.00

 

[imjustawarrior]

I have never been a fan of buckets, but I use to do something similar. We have three levels of spending from our portfolio.

1. Until kids are launched. 2X
2. Kids launched, waiting for SS. 1.5X
3. SS. 1X

X: some dollar value.

I would add up our total spend for our remaining days. Once our portfolio hit that, I felt very comfortable. It means that we need 0% real growth to fund our retirement. That is very conservative.

Your 3 bucket system is similar to a liability matched portfolio. That may suit your needs.

 

[Koolau]

With the idea that you can take SS "when you need it as a back up" I think you've likely won the game.

I'd still check FIRECalc!

 

[pb4uski]

I think OP was accounting for Social Security in the amounts in buckets 2 and 3. That would reduce the amounts needed from his buckets to get to the 75,000 and 90,000 income

Good point that I missed, but I would still stick with FIRECalc.

 

[JohnnyPHX]

Good point that I missed, but I would still stick with FIRECalc.

Ok, I played around with FIRECalc. Does this sound right? Are there things I should adjust for more accuracy?
Current Plan (not set in stone) aware I should probably delay SS till 70 for max survivor benefit.
Spending 65,000
Portfolio 1,200,000
Full years 30 (Me 63 in Jan 26, Wife 59)
Me SS 29,000 starting 2028 (65)
Wife SS 20,500 starting 2029 (62)
Pension 3,075.00 not inflation adjusted but 100% survivor benefits.
Spending model and inflation left at default.
Portfolio left set on Total market changed to 60%.
FireCalc shows: The lowest and highest portfolio balance at the end of your retirement was $1,200,000 to $7,767,301, with an average at the end of $3,544,969.
FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

Looks like we can adjust spending all the way up to 88,650 and still get 100%. The lowest and highest portfolio balance at the end of your retirement was $89 to $5,499,432, with an average at the end of $1,841,424.
Interesting numbers if I am using FIRECalc appropriately.

 

[Dtail]

Is the pension of 3,075 a yearly or monthly amount?

 

[Dtail]

Did you also adjust the fee ratio? Portfolio fees if one is DIY and in index funds tends to be much lower than the default number.

 

[JohnnyPHX]

Is the pension of 3,075 a yearly or monthly amount?

Unfortunately it is yearly. The company used the old BS excuse "To remain competitive were freezing pensions and going in another direct". I just look at it as at least we have our property taxes (currently 2,100 a year) covered for life.

 

[bada bing]

Just eyeballing your plan numbers, It looks good to me. But not "won the game and sell all equities" good. As Firecalc demonstrates, plan success percentages go up with equity allocation. The "Efficient Frontier" is a thing you can see in Firecalc results and a useful concept to understand, in case you haven't been exposed

My personal formulation of my own plan, with somewhat similar numbers, was to treat the portfolio as a unit, not buckets. Although I do keep ~3 years spending in cash within my fixed income allocation. I started retirement at 60/40 and have let the equity allocation drift upwards to 72/28 now. Part of my rationale for the equity drift up was I've been deferring my SS claim, which has some bond like aspects.

You should sleep well at night. But there is probably plenty of opportunity to do more long term tax planning. A $65K annual budget should leave plenty of choices around Roth conversions and ACA planning to explore.
And it's not necessarily a recommendation, but with no legacy concerns, a small SPIA might be something to investigate since you expressed an interest in cutting equity exposure.

 

[pb4uski]

One thing that you might want to play with... go to the Investigate tab on the far right along the tab bar and select the last option to solve for safe spending at 95% success... then hit submit.

There are other interesting things on that Investigate tab too, like to show your success rate at different asset allocations.

 

[JohnnyPHX]

One thing that you might want to play with... go to the Investigate tab on the far right along the tab bar and select the last option to solve for safe spending at 95% success... then hit submit.

There are other interesting things on that Investigate tab too, like to show your success rate at different asset allocations.

Is it safe to assume the pension amount you enter is annual like the Social Security amount?
Thanks for the tip.
Safe spending rate: A spending level of $92,502 provided a success rate of 95.2% (125 total cycles, of which 6 failed). This spending level is 7.71% of your starting portfolio. Wow better not show that to the wifey.....

 

[USGrant1962]

Is it safe to assume the pension amount you enter is annual like the Social Security amount?
Thanks for the tip.
Safe spending rate: A spending level of $92,502 provided a success rate of 95.2% (125 total cycles, of which 6 failed). This spending level is 7.71% of your starting portfolio. Wow better not show that to the wifey.....

Yup, I still run the safe spending level calculation a few times a year, though I do it at 100%. This helps me make sure everything is on track and gauge how much headroom we have for extravagances. We have headroom .

I also run the Starting Portfolio Value calculation to keep in mind an action level where I might want to adjust spending and other things (also at 100% but 95% is fine for that one too).

 

[SecondCor521]

Current Plan (not set in stone) aware I should probably delay SS till 70 for max survivor benefit.

I like opensocialsecurity.com for a good SS claiming strategy. It'll probably recommend 70 for you and 62 for your wife.

Full years 30 (Me 63 in Jan 26, Wife 59)

I think you may be underestimating your life expectancy. I used the Social Security Longevity Estimator tool with your and your wife's approximate ages and got the result below.

There is a more than 62% chance that one or the other or both of you will be alive 30 years from now. If the survivor can live on just survivor SS and the pension survivor benefits ($29K + ~$3K = ~$32K), then maybe that will work. If not, you might need to increase the number of years in your plan.

Your wife is the one who is likely to survive you, her expenses probably won't drop by 50% ($65K / $32K), and her taxes as a widow will be worse.

 

[Dtail]

Is it safe to assume the pension amount you enter is annual like the Social Security amount?
Thanks for the tip.
Safe spending rate: A spending level of $92,502 provided a success rate of 95.2% (125 total cycles, of which 6 failed). This spending level is 7.71% of your starting portfolio. Wow better not show that to the wifey.....

View attachment 59967

Yes pension is entered as an annual amount.

 

[JohnnyPHX]

I like opensocialsecurity.com for a good SS claiming strategy. It'll probably recommend 70 for you and 62 for your wife.



I think you may be underestimating your life expectancy. I used the Social Security Longevity Estimator tool with your and your wife's approximate ages and got the result below.

There is a more than 62% chance that one or the other or both of you will be alive 30 years from now. If the survivor can live on just survivor SS and the pension survivor benefits ($29K + ~$3K = ~$32K), then maybe that will work. If not, you might need to increase the number of years in your plan.

Your wife is the one who is likely to survive you, her expenses probably won't drop by 50% ($65K / $32K), and her taxes as a widow will be worse.

View attachment 59972

Yes, I tried openSS and got 70 and 62 too.

I just added 10 years and go this. Still looking ok. Thanks for the charts.