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who are these experts who say you can generate 20k with inflation adjusting off 500k in very safe assets?
safe assets according to Bernstein and the trinity study cannot support for than 2% withdrawals inflation adjusted without a high risk of failure.. that is 10k off 500k using no equities.
at least 35-40% equities has been found to be needed to successfully avoid an unacceptable failure rate drawing 4% inflation adjusted.
what researchers do agree on is lock in essential spending into some kind of immediate annuity ,ss, pension combo and develop a pay safe ,secure consistent pay check. . then use equities to grow money and inflation proof on your own.
Here's a short and sweet article by Bill Bernstein that addresses how much you need to have saved based on your anticipated spending, pension, SSA, and age range.
To retire at age 60 he recommends having 25 years worth of residual living expenses (RLE), which he defines as all your spending requirements net of any pension and SSA benefits.
He goes on to give some guidelines on your investment allocation based on how many years of RLE you have saved at retirement.
Here's a short and sweet article by Bill Bernstein that addresses how much you need to have saved based on your anticipated spending, pension, SSA, and age range.
To retire at age 60 he recommends having 25 years worth of residual living expenses (RLE), which he defines as all your spending requirements net of any pension and SSA benefits.
He goes on to give some guidelines on your investment allocation based on how many years of RLE you have saved at retirement.
Dave
there is a bit more to the bernstein story.
don't forget how much you need is dependent on how it is going to be invested. those formulas assume at least a 40% equity stake not 100% safe and secure money.
based on todays rates and equity valuations bill recommends his liability matched portfolio or LMP.
As i said above he recommends safe secure consistant sources of income for all the spending needs . he then says you can use equities for wants and inflation adjusting.
but in his latest book ages of the investor he warns that expecting more than 2% withdrawal rates from safe secure money will not be bullet proof , 3 % likely but at a high rate of failure and 4% which the 25x is based on you better like alpo.
that changes the amount you need to have compared to what bill used to think when rates were higher and valuations lower and he wanted retirees in equities.
much greater amounts are needed now to draw the same income with no equities if you follow his LMP.
to quote bill:
"William Bernstein says: 2% is bullet proof, 3% is probably safe, 4% is pushing it and if you take 5% there is a 50% chance you will run out of money. So if you have $1,000,000 as your nest egg:
$20000 per year is safe
$30000 per year is probably safe
$40000 per year is pushing it
$50000 per year means there is a 50% chance you will run out of money.
as you see a statement that 500k with safe secure money is pretty much a big risk.
Last edited by mathjak107; 01-23-2015 at 06:31 PM..
And the more we have the higher are comfort threshold. Talk to me in seven years money bags: you will increase your spending
our spending limits will be dynamic based on each years balance on 12/31.
if markets fall we will set a limit of 5% less than the previous year or 4% of the balance ,which ever is higher. that way our limits go up if markets do well or our spending in a year is less.
that does not mean we have to spend it , only that we can spend it. if we don't it just increases next years budget.
mathamatically that has never ever failed out to 40 years during any time frame to date.
Last edited by mathjak107; 01-23-2015 at 06:10 PM..
our spending limits will be dynamic based on each years balance on 12/31.
if markets fall we will set a limit of 5% less than the previous year or 4% of the balance ,which ever is higher. that way our limits go up if markets do well or our spending in a year is less.
that does not mean we have to spend it , only that we can spend it. if we don't it just increases next years budget.
mathamatically that has never ever failed out to 40 years during any time frame to date.
You can and you will. You enjoy to much in life. Camera equipment, and expensive lens, food both eat in and eat out. Diabetic without financial restrictions on what and where to eat. Trips, gifts etc etc.
Whatever a person can afford, or thinks they can afford in THEIR OWN retirement is their business. And if they can afford a 'higher level of spending' on the things they enjoy, good for them. Is commentary from others really relevant about that?
Whatever a person can afford, or thinks they can afford in THEIR OWN retirement is their business. And if they can afford a 'higher level of spending' on the things they enjoy, good for them. Is commentary from others really relevant about that?
Sure, it gives a real life perspective on retirement and when I was planning helped me to establish realistic personal goals. We create our own retirement yes but for many it is from the inspiration provided by the narratives of others. Always loved the Money magazine case studies of which MathJak was one.
I asked this question before and I'm pretty sure I got the answer I didn't want. But I'll ask again.
I have been convinced that index funds have a real value for me and others. Problem is my money (not 401 which is still in the managed funds available through work) has been with a brokerage account who has put me in a mix of funds. If I were to pull some or all of the money out and invest in a series of low fee index funds how would I avoid the huge tax hit on the cap gains? And how would that huge tax hit not take decades to recover even if my index funds outperform my current situation of paying fees?
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