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My father, who is in his late 60s is quite, proud that he only pulls 2% out of his million dollar 401k and IRA retirement accounts a year. (vs the standard 4% withdrawal rate of most of his friends)
He wants to travel more and eat out more often but was told by financial experts to only take two percent of his portfolio a year in retirement.
He lives on a combination of Social Security and his 2% withdrawals. He and Mom's Social Security payments are about $4000 a month combined and he takes about $1600 a month out of his million dollar 401k/IRA investments. (Neither have a pension)
I always tell him to live a little and spend more money. I think he his playing it too safe. He could eat out more and travel if he just pulled out 4-5% out of his retirement accounts each year instead of 2%.
Isn't he one of many people who is retired and is playing it too safe with their annual withdrawals?
My father, who is in his late 60s is quite, proud that he only pulls 2%
He lives on a combination of Social Security and his 2% withdrawals.
He and Mom's Social Security payments are about $4000 a month combined
He wants to travel more and eat out more often but was told ...
I always tell him to live a little and spend more money.
I think he his playing it too safe.
He could eat out more and travel if he just pulled out 4-5% out ...
Stop focusing on the specific percentages of withdraw. Instead shift the discussion
into the specific cost amount for the extra's he's denying himself and Mom...
and where in the budget that amount could come from.
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Would the vacation trips and dinners out and a few ball game seats add up to $19,200?
Would that $19,000 even be enough? This is what your suggesting.
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eta: Then there's the overall annual budget and whether some things can be shifted.
Personally I prefer to pair an indulgence expense like travel with a no choice expense like OOP medical.
Last edited by MrRational; 05-03-2017 at 07:05 AM..
Old habits are hard to break. When you have spent a lifetime being prudent, it is very hard to switch into spend mode.
Even though, rationally, you know that you only have 20 or 30 years left on this earth and you also know that you cannot take the money with you, there is a comfort in knowing that the money is there in the account should anything untoward happen.
The reason your father has a million is because he didn't blow it in the past. Expecting him to start spending now is asking for a big psychological turnaround.
My father, who is in his late 60s is quite, proud that he only pulls 2% out of his million dollar 401k and IRA retirement accounts a year. (vs the standard 4% withdrawal rate of most of his friends)
He wants to travel more and eat out more often but was told by financial experts to only take two percent of his portfolio a year in retirement.
He lives on a combination of Social Security and his 2% withdrawals. He and Mom's Social Security payments are about $4000 a month combined and he takes about $1600 a month out of his million dollar 401k/IRA investments. (Neither have a pension)
I always tell him to live a little and spend more money. I think he his playing it too safe. He could eat out more and travel if he just pulled out 4-5% out of his retirement accounts each year instead of 2%.
Isn't he one of many people who is retired and is playing it too safe with their annual withdrawals?
That last question is impossible to answer without knowing how his million is invested. 2% might be all that is safe.
He could easily spend more money just on a nicer home. There are countless ways for him to spend his money between now and death.
Maybe he doesn't want a nicer home. Maybe he doesn't REALLY want to travel. (I see that one a lot.) Maybe, just maybe, he's happy living the way he's living now, and he knows spending more money won't significantly increase his happiness.
If you review the research on the 4% you will find that the percent should be lower due to the low interest rate we currently have and the effects on investments that future increase will have.
But I would think the 2% could have a 50% increase to 3% from my review of the lititure.
You might want to ask your advisor about using the IRS minimum required distribution tables table procedures to develop current year distributions. These consider life expectancy and the value of the investment portfolio. This method might be better than the 4% rule.
I think the point is I would use the 4% rule for planning for someone saving from retirement but when you get to retirement you need a better rule. Since you are paying an advisor I think he should be doing better than say 4%.
However he knows the financial picture and we do not.
how is he invested ? if he is only using fixed income investments then depending on age he may not be able to safely draw more than 2-2-1/2% safely .
4% counts on 35-40% minimum in equities to cover a 30 year retirement
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