Too much money in retirement accounts? I don't want to die rich!

[redspot321]

Age 46
I have just reached the $1M mark in retirement accounts (457, 401K, Roth)

I understand I can access these accounts early with no penalty (Age 55) if I am unemployed.

At 55 my nest egg is projected to be $2.2M based on 9% for 9 years. This is plenty for the retirement years based on the 4% rule (4% is 80K + I receive a pension of $48K adjusted for cost of living =$128 annual income)


Questions:
Again, I feel I have plenty of money for years 55 - death. What should I do over the next 5-9 years?

Is 9% a good rate for projecting future amount of my nest egg? 10.2% is historical average.
What do I do with my savings over the next 5-9 years?
1. Continue to invest in retirement accounts and looks for early out / no penalty clauses if I want to retire at 50?
2. Invest in taxable investments?
3. Blow it until I retire?
4. Combination of above

 

[rembrandt]

I can take it off your hands.

 

[bloom2708]

I think you will be fine. Returns are not linear. Projections can be wrong.

Find the chart that shows the gain you need to make up for a loss.

Chances are you will experience 2-3 more corrections (or worse) in your working life.

Also, $1 is a nice milestone, but $3 is the new $1.

 

[Al18]

10.2% historical average? Sounds like you have 100% growth stocks and nothing else. Prepare for a 50% drop. I would move some of those assets in a 60% stock/40% fixed balanced fund.

 

[redspot321]

I am not a fan of living off of the interest of a nest egg (4% rule, etc) When you die, you could have millions sitting in accounts.

What is a plan or model that allows you to withdrawal your Principal and Interest over the course of 30 years?

 

[rembrandt]

Get a 30 year period certain annuity.

 

[Luvtoride]

Yeah! Another “Die with Zero” book fan!

 

[Lorenzo]

That is the conundrum for many of us: how to draw down our savings so as to maximize our enjoyment of life right up until the day we die, with zero left over.

 

[fosterscik]

We use a modified VPW method. The withdrawal rate escalates as you age. I modify it by setting aside guaranteed funds to prepay my age 70 SS check to me now, and VPWing the remainder. Works for DW and me.

 

[imjustawarrior]

If you are 100% equities, I would only plan 5% real to be conservative.

I would not increase spending now. If you increase spending, you save less and need more for retirement due to lifestyle creep.

I would shoot for earlier retirement.

Saving in taxable once you max out tax sheltered accounts is the normal path.

 

[GenXguy]

I am not a fan of living off of the interest of a nest egg (4% rule, etc) When you die, you could have millions sitting in accounts.

What is a plan or model that allows you to withdrawal your Principal and Interest over the course of 30 years?

That's not what the 4% rule is. It assumes you will spend down principal as well.

 

[Golden Mean]

In Die Broke, Pollan and Levine suggest spending (aggressively?) and as your nest egg dwindles (and you are past 80ish?) you start laddering into SPIAs. There are some complexities with long term care (insurance) that weren't great when the book was written (1998) and probably aren't better now, but that's the gist of it.

I follow VPW which is probably in between dying broke and a withdrawal rate that leaves a large nest egg.

 

[redspot321]

That's not what the 4% rule is. It assumes you will spend down principal as well.

All of the tables I see show the principal actually increasing

 

[GenXguy]

All of the tables I see show the principal actually increasing

It accounts for scenarios based on worst cases of historical real gains to allow your portfolio to survive in those conditions during your retirement. In most cases, stocks have performed better than those worst cases that you are preparing for with the 4% rule.

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[big-papa]

Amortization methods like VPW, ABW and TPAW can target a terminal portfolio value of $0 or any other number you wish.

 

[Gumby]

But what happens when you live for 31 years or more?

 

[Mr. Tightwad]

I'll take the under on 9% future returns.

 

[NgineER]

Age 46
I have just reached the $1M mark in retirement accounts (457, 401K, Roth)

I understand I can access these accounts early with no penalty (Age 55) if I am unemployed.

At 55 my nest egg is projected to be $2.2M based on 9% for 9 years. This is plenty for the retirement years based on the 4% rule (4% is 80K + I receive a pension of $48K adjusted for cost of living =$128 annual income)


Questions:
Again, I feel I have plenty of money for years 55 - death. What should I do over the next 5-9 years?

Is 9% a good rate for projecting future amount of my nest egg? 10.2% is historical average.
What do I do with my savings over the next 5-9 years?
1. Continue to invest in retirement accounts and looks for early out / no penalty clauses if I want to retire at 50?
2. Invest in taxable investments?
3. Blow it until I retire?
4. Combination of above

Nice work!

I use 7% returns (could do 7.2% to simplify rule of 72) in my calculations. Consider the breakdown of your retirement accounts, how much is tax deferred vs. tax free). I use a 3% rule for an early retirement and because I'm conservative.
You can access your retirement accounts via the 72T at any point, penalty free, you can access your Roth contributions penalty free at any point. There is also the rule of 55 that may or may not apply, employer dependent, that allows you to withdraw from your retirement accounts when you retire or are terminated in the year you turn 55 or later.

I'd take a look at your balance in your retirement accounts and if you are considering not doing a tax deferred investment in your 457/401k I would do a Roth contribution in those accounts rather than going into taxable as it would be tax free gains.
That said, I think it is prudent to invest in taxable investments also, to be able to better manage taxes later on. I'd also consider what you might want to spend in retirement vs. now. You don't want to blow more now and get used to it and not be able to support that in retirement.

 

[erkevin]

What is that old saying?..."I want to leave my last $50 as a tip to the escort as she leaves my room before I roll over and have a widow-maker in my sleep" (or something like that)

 

[redspot321]

But what happens when you live for 31 years or more?

You'll be old af and broke

 

[Car-Guy]

The way I've been looking at this, is to blow the dough while I can still enjoy it. By the time I get down to my last few hundred grand, I'm going to be to old to care about much of anything. (Sorry, but that's the way I see it). If I can still live on my own, it will be at my paid off home/property. If I can't, I'll sell it. Between the profit I make on my property, the few hundred grand I have left and social security, I should be able pay for several years of high quality long term care. If by some miracle I'm still around after all that is gone, I guess I will be at some state run old folks home. But that shouldn't be for long, if at all.

 

[Texas Proud]

I am not a fan of living off of the interest of a nest egg (4% rule, etc) When you die, you could have millions sitting in accounts.

What is a plan or model that allows you to withdrawal your Principal and Interest over the course of 30 years?

And what happens to your plan when you put it in place and die next year? You left a lot on the plate...

OR, you live 33 years and have nothing to live on (well, hopefully SS)..

 

[HI Bill]

I'm also using VPW. It's probably the 'safest' way to maximize your spending. Unfortunately, with both VPW and the 4% 'rule' (both have inherent goals of not outliving your $), there is likely going to be some $ left over. Of course, the problem is that if you over-spend too early, and then you hit a bad sequence of returns (look up SORR), then you could run out of $ way too early. I'm pushing the upper boundaries of what VPW tells me, planning to cut spending by the time I'm 70, have completed most of my big travel, diving, home improvements, and car purchases. The unfortunate truth is that it's safer to spend more later, when you have fewer desires, abilities, and needs, most likely.

 

[HI Bill]

9% isn't a bad average, but there have been many years when the market is down. I use 7%, which includes an inherent 3% inflation adjustment, and the projected value is then essentially 'inflation-adjusted' to today's $.

 

[HI Bill]

I'd try to max out ROTH IRA investments after your 401(k), then invest in a taxable brokerage account. I have mostly tax-deferred investments, and am facing the 22% tax bracket in retirement, paying 2-3X what I did when working in Federal taxes. Not a bad problem to have, but not ideal. Originally for me, ROTH IRAs weren't available, and when they were, I had limited potential to contribute to them due to my salary.