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Old 12-20-2015, 07:02 AM
 
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After eight years I have what for me is the wrap around answer to this and the related questions about when to take SS, draw downs etc.

How much annual positive cash flow is enough, to much or not enough. This is very much age related and income source dependent.

How much annual negative cash flow is to much, enough or not enough. This is very much age related and income source dependent.

How much financial reserves are to much, not enough or just right.

Many use FireCalc or a similar tool to help evaluate. Do we figure just once at retirement or do we review and adjust on a periodic time schedule. Isn't this what so much of the retirement financial discussion, questions and answers boil down to? Is this a simplified answer to many questions? Maybe yes maybe no!
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Old 12-20-2015, 07:45 AM
 
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i always say , how did you allocate when working what was spent , what was saved for a rainy day and what was your emergency fund ?

the calculators and rules of thumb give you the best but not perfect odds of poor markets disrupting your income stream .

but it has no guarantees as far as leaving much at the end of 30 years or so .

it has no provisions for that new roof or major expense or long term care issues . . calculators like firecalc or fidelity only look at the income side of things.

so you need to decide what you want to do with that available income just as you decided what do with your pay check .

in our case we have covered our medical and long term care exposure as best as we could , we have a decent size emergency fund and the rest goes in to the pile for income generation .

we have a life insurance policy in place for heirs too . so things are allocated not much different then when we were working and had to decide .


historically 96% of the time you had more then you started with at the end of 30 years and 2/3's of the time you had more then 2x what you started with at the end just drawing 4% inflation adjusted .


but there were a few times it made it by the skin of it's teeth . betting the ranch on a favorable outcome for what as left over is not the route i would take .

.

one of the most effective methods is a combo of your own investing , a life policy and an immediate annuity .

with guarantees in place for income and heirs having only favorable outcomes in markets and rates become less crucial .

you may want to do something dynamically based on each year's opening balance . there are lots of formulas out there for doing that . we use bob clyatts method .

.

Last edited by mathjak107; 12-20-2015 at 08:18 AM..
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Old 12-21-2015, 08:27 AM
 
Location: Central Massachusetts
4,800 posts, read 4,847,776 times
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Quote:
Originally Posted by TuborgP View Post
After eight years I have what for me is the wrap around answer to this and the related questions about when to take SS, draw downs etc.

How much annual positive cash flow is enough, to much or not enough. This is very much age related and income source dependent.

How much annual negative cash flow is to much, enough or not enough. This is very much age related and income source dependent.

How much financial reserves are to much, not enough or just right.

Many use FireCalc or a similar tool to help evaluate. Do we figure just once at retirement or do we review and adjust on a periodic time schedule. Isn't this what so much of the retirement financial discussion, questions and answers boil down to? Is this a simplified answer to many questions? Maybe yes maybe no!

mathjak i think did a good job answering your other questions but I think he left these kind of limp. He suggested beginning of the year balances. He is correct just not on the timing and here is why. Honestly you should evaluate your retirement income, expenses, and reserves at a minimum annually. Using those tools that we have been given here like FIRECalc and others. This will allow you to make adjustments. Like in the case of us FERS employees. We have TSP and we are limitted in what we can do. Initially we can take all. We can take none until age 70.5. We can convert all or part to an annuity. Or we can set up monthly withdrawals. In the case of taking monthly withdrawals we can only adjust one time per year and that needs to be done by 16 December to take effect in January of the following year. Once you begin taking that money you can never stop taking so you always have to have some money coming out. The smallest withdrawal is $25.00 monthly so that is nearly $0.00 anyway. But that process is similar to many in that we need to know what we will need for the year and adjust accordingly.

Last edited by oldsoldier1976; 12-21-2015 at 08:29 AM.. Reason: clarification
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Old 12-21-2015, 08:37 AM
 
Location: Close to an earthquake
890 posts, read 677,224 times
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When I've run numbers for myself and others, I believe after you've made the assumptions of annual living cost, inflation rate and retirement asset rate of return, then the real kicker is how much of your assets do you want to leave to heirs.

Running an amortization schedule for the rest of your assumed life expectancy of your retirement assets with different residual values (i.e. 100% intact, 50% amortization or none as in spend it all during the time you have remaining) produces vastly different results.

There's so much emotion in all of this. I've seen the little old lady who had plenty but didn't believe so because she was a young child during the depression era and the experiences of her parents had a lasting impact on her. She didn't want to be a burden to her adult children and she wanted to leave what she had to them. This is very common and in some instances, people who have these emotional thoughts of not wanting to be a burden to their adult children and wanting to leave what they have to him have adult children who are nowhere to be found when an aging parent greater needs that some may describe as a burden.
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Old 12-21-2015, 08:47 AM
 
29,779 posts, read 34,867,277 times
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Quote:
Originally Posted by borninsac View Post
When I've run numbers for myself and others, I believe after you've made the assumptions of annual living cost, inflation rate and retirement asset rate of return, then the real kicker is how much of your assets do you want to leave to heirs.

Running an amortization schedule for the rest of your assumed life expectancy of your retirement assets with different residual values (i.e. 100% intact, 50% amortization or none as in spend it all during the time you have remaining) produces vastly different results.

There's so much emotion in all of this. I've seen the little old lady who had plenty but didn't believe so because she was a young child during the depression era and the experiences of her parents had a lasting impact on her. She didn't want to be a burden to her adult children and she wanted to leave what she had to them. This is very common and in some instances, people who have these emotional thoughts of not wanting to be a burden to their adult children and wanting to leave what they have to him have adult children who are nowhere to be found when an aging parent greater needs that some may describe as a burden.
I think we can all go through this and always wonder how much is enough. One person's questionable resources would seem rich to another. There really is a psychological comfort floor that is much higher than many in this forum would acknowledge for other folks. If a person felt they needed a years worth of income in reserve while working wouldn't that be a minimum amount when retired to them?
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Old 12-21-2015, 08:58 AM
 
Location: Close to an earthquake
890 posts, read 677,224 times
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Quote:
Originally Posted by TuborgP View Post
I think we can all go through this and always wonder how much is enough. One person's questionable resources would seem rich to another. There really is a psychological comfort floor that is much higher than many in this forum would acknowledge for other folks. If a person felt they needed a years worth of income in reserve while working wouldn't that be a minimum amount when retired to them?
Agreed because we are for the most part creatures of habit in both an emotional and behavioral sense. Change doesn't come easy for most of us.

And if we spent our lives giving scarce thought and attention to our financial planning then what is the probability that we'll give much more thought and effort to our retirement planning? For many, retirement planning is signing up for Social Security and they're done. For those of minimal or modest wealth-endowment, you can't worry if the enough you have will be enough if you don't have it.
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Old 12-21-2015, 11:01 AM
 
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more and more today retirees want guarantees to go with their investing and the whims of the markets .

although i have not done it the trend is more and more to use a single life immediate annuity when married for a high cash flow , your own investing and instead of making the annuity joint for a spouse it seems to be a better deal leaving life insurance to the spouse which is tax free instead of the taxable annuity payments .


that way your spouse and heirs get guaranteed money , your investing covers growth and you lock in your non discretionary bills with the annuity .

it seems like a good way to take out some of the unknown .
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Old 12-21-2015, 12:41 PM
 
6,443 posts, read 3,071,556 times
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Quote:
Originally Posted by mathjak107 View Post
more and more today retirees want guarantees to go with their investing and the whims of the markets .

although i have not done it the trend is more and more to use a single life immediate annuity when married for a high cash flow , your own investing and instead of making the annuity joint for a spouse it seems to be a better deal leaving life insurance to the spouse which is tax free instead of the taxable annuity payments .


that way your spouse and heirs get guaranteed money , your investing covers growth and you lock in your non discretionary bills with the annuity .

it seems like a good way to take out some of the unknown .

Agreed but with a question I'll ask later.


In the real life experience with my sister, she would be in a world of hurt if she did not have the life insurance my BIL left to cover 5-6 yrs of living expenses. When he died she immediately lost half a year of his over 6 figure salary as well as the SS they were planning to get for him. Being 10 years his junior she has years to go to collect her own or his SS as well as potential part time earnings he was planning if they needed by doing some easy consulting or online instructing.


She would have had to hit the rest of the portfolio very hard and much faster than they planned to maintain her current lifestyle. It might have worked, but it would have been a lot more stressful and risky.


I don't think most people plan well enough for what happens when the first spouse dies, especially if as there usually is the surviving spouse is facing a big reduction in pension benefits or SS that negatively impact them.


He was still in the process of deciding on an annuity, but she can still do that if she wants. We got the same advice annuitize for the non-discretionary expenses and the peace of mind you have something that cant run out.


What I don't get about that is that unless you have a large fixed rate mortgage, most of these non-discretionary expenses will be going up, up, up. Unless, you buy an inflation protected annuity which gets pricey how do you mitigate that? Wont the annuity end up being almost worthless?
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Old 12-21-2015, 01:58 PM
 
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Blondy,

My understanding of that was that there has to be several income streams of which the immediate annuity is only one. So, if your immediate annuity is covering the necessities at a certain point in time, the Social Security and savings are increasing your net worth and not being touched, or are being spent on wants rather than needs. As the cost of needs increases, the Social Security and interest/dividends can then be employed to cover the shortfall and spending on wants can be decreased.
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Old 12-21-2015, 02:05 PM
 
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If I still feel a need to stay in the market, I'm not ready to retire because I haven't saved enough yet. And, btw, there's no such thing as "too much."


It's a good idea to get the stuff out of IRA's and other non-taxed contribution accounts as quick, and as tax-savvy as you can. Taxes have been way higher in former times, and today, there is no telling what lies ahead - especially given what's been going on in Washington of late.
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