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Old 04-24-2014, 06:33 AM
 
Location: Saint Johns, FL
1,193 posts, read 943,629 times
Reputation: 1267

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The 4% rule means you CANNIBALIZE your retirement assets by 4% a year, and hopefully you don't run out of money. It's a bad way to run a railroad.

Just like you said earlier, the right way to do it is to hopefully be able to withdraw 4% of your money because your investments earn 4%. That way you never deplete the principle.

But you have been unclear what your investments are in, or what they are earn or even whether they are in post or pre-tax accounts. Those are critical elements.
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Old 04-24-2014, 06:35 AM
 
71,700 posts, read 71,829,507 times
Reputation: 49273
the entire idea of having a safe withdrawal rate is you DO NOT take an income hit if markets fall in the short term .

it is a sustainable level of income based on worst case conditions to date. the pile of money in the bucket left over at the end varies but the income stream should stay consistent through the think and thin of rising and falling markets..
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Old 04-24-2014, 06:36 AM
 
Location: Whereever we have our RV parked
8,797 posts, read 7,712,915 times
Reputation: 15089
In general, I think the OP's plan is risky, if her health stays good and lives a long life. The one thing about planning ahead many years is that you can't possibly know the future. What you cannot assume is that there will be a net gain in value of your assets, your continued good health, that inflation stays low etc. You really can assume anything. Its all a gamble. If it was me, or say I was advising my sister, I'd say work some, keep your hand in your profession. It will still give you some income, yet free you to follow your other interests. But we don't know her whole life, and so advice can't always be a one size fits all. I think its great she wants to do some charity work. God Bless you.
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Old 04-24-2014, 07:01 AM
 
Location: Florida
2,291 posts, read 4,949,120 times
Reputation: 5236
Quote:
Originally Posted by biscuitmom View Post
The downside of your scenario is almost 1/2 her nest egg is gone before she reaches Medicare and SS FRA.
Not a pretty picture, and that's assuming she has no tax liability on the $24k.

Her investments might or might not outpace inflation, like you say that's guess work.
I really get lost in this thinking, that is assuming she will make nothing on her investments, if she makes
8% a year on her 600k, that is 48k a year, before taxes. I realize this is not a given, however, properly invested, she will reap a ROI.
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Old 04-24-2014, 07:18 AM
 
6,323 posts, read 5,064,142 times
Reputation: 12848
Quote:
Originally Posted by kelly237 View Post
I am a 56 year old widow with grown kids and have just been through 2 years of downsizing stuff/house repair/listing/selling/moving. I bought a nice townhouse that I can clean in about an hour..woohoo !!

My house is paid for and HOA fees are 120/month...I will be able to live fine on 2000 per month..
I have about 580K in retirement investments...No loans or depts..

I worked as a Speech Pathologist before the kids were born and could easily find work because of a shortage in the field...I could do part time, hourly PRN work, or take temporary assignments....

My question is , Do I really need to work with my home owned and almost 600K invested...
SS will kick in before too long..

I have lots of goals, hobbies & adventures that I would love to focus on if I could be free to not work..
I think you should do it slowly. Go part time. All those activities, goals, hobbies, etc. can add up money wise.

I retired at 44, but have pensions and medical care covered. House is also mortgage free, but I would not be comfortable at 2K a month. It would be doable, but I wouldn't feel "carefree".

Would you be able to save on this? You really wouldn't want to draw too much from your retirement savings to pay for unexpected expenses.
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Old 04-24-2014, 07:26 AM
 
Location: Saint Johns, FL
1,193 posts, read 943,629 times
Reputation: 1267
Here's one more factor. Social Security can get complicated. Even more so in your case because you have 2 ex-spouses. But you are eligible for Survivor Benefits for SS starting at age 60. You'll take a fairly large hit because you filed early. But you could draw 71.5% of your age 66 Survivor Benefits if you filed at 60.

So you do need to talk to a SS expert (and the best experts may not be at SS office).
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Old 04-24-2014, 07:58 AM
 
2,635 posts, read 3,377,645 times
Reputation: 6975
You are still quite young, and could live another 40+ years. It seems a little risky to stop working now, but honestly you are doing pretty well so far. I would definitely try out living on 2k a month first, because you seem to have some unrealistic plans already.... new car, remodeling, travel etc... That is not cheap, and doesn't really fit into a 2k per month lifestyle, unless you do it smart.

Like you really don't need a new car. Such a waste of money.... buy used/pre-owned, but run your current car into the ground first. If you can do any home improvement projects yourself, that is the cheaper way to go. Check out the Mr. Money Mustache website, and see if you can follow this philosophy, and find even more ways to save money to retire early.

But honestly, I would use your lucrative job training (speech pathology) to get a part time job. You could work for a home care agency doing home visits, and work part time hours. You may need to brush up your skills though if you haven't worked since before the kids were born. That might be a little hard initially, but you can do it.

Overall - well done, and I wish you well in your next phase of life.
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Old 04-24-2014, 08:50 AM
 
59 posts, read 188,891 times
Reputation: 59
Hi Kelly,

I think you're getting some very conservative advice from many posters that you need to keep working. You may want to run your numbers through a several of the retirement planners online. I ran your numbers ($560K investments, SS at $20,400 annually at age 65, $2000 monthly spending, assumed 50/50 equities/bonds) through cfiresim and got 100% success rate. Rerunning for maximum spending level at 95% success yielded $31,000 annual spending.

You need to get a firm grasp on your spending needs. Is the health insurance available at $300 monthly in retirement? Are your investments in pre-tax accounts or after tax? That will have an impact on the taxes paid but assuming your spending needs are for somewhere around $24,000 annually, your tax bill would be hard pressed to be over $2500 annually. Likely much less (or nothing) if you can use after tax accounts for the years prior to SS kicking in. Perhaps with a low income, Obamacare may be a cheaper alternative on the health care front.

Don't be too quick to heed advice that you need to keep working if you don't want to. There is a great discussion board out there on the Net for early retirement planning with but I don't believe we are allowed to post links. I'm sure you can find it using our friend, Mr.Google!
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Old 04-24-2014, 11:23 AM
 
8,080 posts, read 13,468,155 times
Reputation: 10322
Quote:
Originally Posted by biscuitmom View Post
Your naivete is refreshing yet terrifying. I wish you the best.
I really haven't gotten this far & done this well by being naive..
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Old 04-24-2014, 11:40 AM
 
8,080 posts, read 13,468,155 times
Reputation: 10322
Quote:
Originally Posted by woodguy00 View Post
Hi Kelly,

I think you're getting some very conservative advice from many posters that you need to keep working. You may want to run your numbers through a several of the retirement planners online. I ran your numbers ($560K investments, SS at $20,400 annually at age 65, $2000 monthly spending, assumed 50/50 equities/bonds) through cfiresim and got 100% success rate. Rerunning for maximum spending level at 95% success yielded $31,000 annual spending.

You need to get a firm grasp on your spending needs. Is the health insurance available at $300 monthly in retirement? Are your investments in pre-tax accounts or after tax? That will have an impact on the taxes paid but assuming your spending needs are for somewhere around $24,000 annually, your tax bill would be hard pressed to be over $2500 annually. Likely much less (or nothing) if you can use after tax accounts for the years prior to SS kicking in. Perhaps with a low income, Obamacare may be a cheaper alternative on the health care front.

Don't be too quick to heed advice that you need to keep working if you don't want to. There is a great discussion board out there on the Net for early retirement planning with but I don't believe we are allowed to post links. I'm sure you can find it using our friend, Mr.Google!
Very helpful...
Insurance is hard to plan because who knows how Obama Care will change ...The 300 is with the
Obama marketplace now...
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