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Old 03-04-2016, 05:28 PM
 
Location: RVA
2,176 posts, read 1,275,748 times
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My condolences on the loss of your wife, John. I'm not on enough to catch all, and I missed that event.

Everyones income generation is so different. I used Firecalc and similar to run scenarios based on estimated living expenses with plenty of fat, and no tax breaks, based on 98% success rate. I will (plan to in 4 years) withdraw from tIRA mostly to rollover to Roth during the first few years, only keeping out what is needed to add to wifes SS & our pensions, while delaying my SS. Our savings is not needed (hypothetically on paper) to live out our same lifestyle, so I anticipate 8-10 years of no withdrawals, (except for rollovers) until forced to by my MRDs. But I WANT to use that savings for living LIFE. I've been saving forever, dammit, and I want to use it, not let it get sucked away by some government regulation or LTC facilty down the road! If my pension plus a maxed out SS can't get me a quality LTC, well. Then Inhope I'm too old to care!

Based on the calculators I used, my forced income will always exceed even a generous overage of living expenses (meaning moderate travel vacations, etc), so I can ride poor years as needed. Large expenditures like a new car or expensive vacation, new roof, whatever would come out of the Roth so as to not affect the tax bite. Once inflation decimates our pensions, then savings withdrawals would be needed depending on age and inflation rates. On paper, of course. Assuming God doesn't laugh it all away!
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Old 03-04-2016, 05:38 PM
 
72,069 posts, read 72,068,214 times
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Quote:
Originally Posted by Burkmere View Post
Interesting how you've done a 360 from a few months ago. On the other hand, I "think" I'm going to take mine in Sept. or shortly after when I turn 62. I already have a pension and some land income and this will make it all the sweeter and I can let my equities ride even though I think we are in a bear market. I did pare back a little for the possibility.
I was always going to play it by ear . If markets really tanked i would take it earlier. But the more i worked with the numbers the more i liked delaying and not being held hostage as much by the markets
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Old 03-04-2016, 05:50 PM
 
Location: Central Massachusetts
4,800 posts, read 4,865,465 times
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Quote:
Originally Posted by Burkmere View Post
Interesting how you've done a 360 from a few months ago. On the other hand, I "think" I'm going to take mine in Sept. or shortly after when I turn 62. I already have a pension and some land income and this will make it all the sweeter and I can let my equities ride even though I think we are in a bear market. I did pare back a little for the possibility.
A lot of us have I imagine. I can tell you I have gone back and forth over several issues we discuss here. One is LTCi while another is when to take SS.

Quote:
Originally Posted by mathjak107 View Post
I was always going to play it by ear . If markets really tanked i would take it earlier. But the more i worked with the numbers the more i liked delaying and not being held hostage as much by the markets
It is part of that dynamic plan we have talked about anyway. There is no shame or problem in changing your mind or path. What is a shame is to be so adament and so inflexible that you refuse to see the forest through the trees.
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Old 03-04-2016, 10:53 PM
 
Location: SoCal
13,419 posts, read 6,417,350 times
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I was thinking of taking my SS at FRA until I saw the actual amount at 70. It's worth the wait because my husband already taking it.
I've budget $40-$50k for travel the first few years, I know it will go down less than that in 5 years. But it's a separate budget from spending. For traveling, if I don't feel like doing it, I can scale down.
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Old 03-05-2016, 02:56 AM
 
72,069 posts, read 72,068,214 times
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70 is enticing , especially if you are solely dependent on the markets for the bulk of your income .

while the break even point can be 22 years if you are spending down invested assets the fact that you only have to endure up to 8 years of great market dependency can be a good thing down the road .

you can be less dependent for decades later on .

there are so many other aspects to filing age other then what if i die or the bottom line dollars . we actually can spend more early on by delaying since we know we can refill savings down the road with a check almost 70% bigger plus colas at at a time when spending should start to fall off a bit .

social security has no sequence risk so while i need to keep a lot more powder dry on my own for poor sequencing you do not have that issue with ss . that allows a bigger spending rate .

plus the higher ss check as of now is only taxed at 85% while rmd's are taxed at 100% so more ss and less in rmd's is a better tax deal

Last edited by mathjak107; 03-05-2016 at 03:15 AM..
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Old 03-05-2016, 06:24 AM
 
33,046 posts, read 22,132,853 times
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Here's a simple plan:

"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
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Old 03-05-2016, 06:54 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,972,970 times
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Quote:
Originally Posted by bpollen View Post
I've been reading lots on this this year and last year.

It seems to me, and what I have TRIED to set up (although not very well...yet) is to have income from the principal. If you can get 4% income, then your principal is still there. The principal value may go down and up over the years, but you still have the stocks or bonds or funds.

Inflation is a problem. Investing in some of the tried and true, albeit lower dividends, blue chip "dividend aristocrats" should give an increasing income to some extent over the years. Then there will be the growth amount in the growth portion of the portfolio, to sell shares here and there.

A person does have to watch the portfolio and rebalance or change out some of the investments. If a person can't do that, they should think about getting a financial advisor at some point.

There should still be a growth portion of the portfolio. Some stock funds. Some of the portfolio will not be needed for a couple of decades, so that money can be put into growth funds. That's enough time to weather bear markets.

Social Security plus 4% income (which grows a bit every year) from the portfolio, while leaving the principal alone for some years, should work for me. Coupled with no debt and a conservative lifestyle. I just hope I don't live much past 90. At the end, if it's necessary, I can start using the principal. And in a worst case scenario ( a big unexpected expense), I can always do a reverse mortgage. I don't care about leaving anything (I don't have kids).
Yes - that is the flip side way of doing things. Taking the SS earlier - and living off income. Not eating into principal. That's pretty much the way we've been doing things. In the 8 years since my husband turned 62 and started SS (I started 2 years later) - our liquid net worth has gone up about 20% (although some of that is in unrealized capital gains which we may never realize because we usually hold bonds until calls/maturity). Which (only in hindsight) makes me think we did the right thing. We don't get a lot of SS. But it's the difference between running at a net profit or a net loss every year these days.

I think calculations like these have a lot of moving parts. For example - what does your tax situation look like between ages 62 and 70? How might it change if you have to take RMDs at 70 1/2? Would a combination of higher social security payments when you're 70 and RMDs be tax-inefficient? Our portfolio is very tax efficient - so we've saved a lot of $$$ when it comes to taxes between ages 62 and 70. A tax dollar saved in taxes is as good as a dollar earned IMO. A good tax calculator is your friend when it comes to running potential what-if scenarios. Note that our situation will change somewhat when I have to start RMDs in 2 years (my husband's IRA is all Roth). But - so far so good.

Some of the moving parts here can be surprise "gotchas". Like the Medicare premium increase last year for people who were deferring SS. These people dodged part of the bullet when Congress rolled back the planned 50% or so increase to to about 15%. But there is no guarantee they will be so lucky in the future if the same situation arises (entirely possible).

I think your 4% estimated return is a little high today. My number is 3% - simply because that's what I've been able to get in safe fixed income the last few years. I do have fixed income at higher yields - but doubt I'll be able to replace those higher yields when instruments mature/are called. To give you an idea of today's interest rate environment - I just had a longer term callable CD called. And the interest rate was only 3.125% .

In terms of inflation - that's a very personal thing. Rather than relying on any official statistics - it's best to look at your personal shopping basket - and see how the costs of the things in it are behaving/misbehaving. A renter today may see more inflation than an owner. OTOH - the renter may not have to be concerned with the cost of landscape maintenance or homeowners' insurance or possible capital expenditures like a new roof. Also - different homeowners may be in different situations depending on the extent to which their places are financed - and how.

One item that's overlooked too much IMO is spending - your budget. And overall lifestyle. Especially when it comes to non-discretionary items. I like to have all our spending covered out of current income but covering non-discretionary spending is essential. I approach things from the POV of what kind of lifestyle can the income I'm pretty sure I'll have support. Not how much do I have to generate to support the lifestyle I might want. I don't think it's prudent to do the latter in today's investing climate (if it ever was in the past). Because it can result in retirees taking on more risk than they can handle financially (and emotionally). Essentially - what I'm talking about is matching known income with known liabilities/spending. There's a lot more discussion of this when it comes to pension fund analysis these days. With a lot of prominent analysts tending to think that pension funds can't simply pull income projections out of thin air based on what's happened in the past.

Finally - as my husband and I enter our early 70's - I think we can relax a bit when it comes to spending down principal. Don't know if we will spend down - just saying I won't be as uncomfortable with the notion of doing it as I would have been a decade ago. Which is probably a good thing. Since I'm in the camp that sees the fed going back to 0% before it gets to 1%. Robyn
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Old 03-05-2016, 06:58 AM
 
72,069 posts, read 72,068,214 times
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Quote:
Originally Posted by freemkt View Post
Here's a simple plan:

"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
works well in a zero cost increase world . otherwise all bets are off
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Old 03-05-2016, 07:15 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,972,970 times
Reputation: 6723
Quote:
Originally Posted by mathjak107 View Post
Only problem is the same problem that has been a problem through history. INFLATION ADJUSTING.
As well as getting 4% with never a negative year. Average returns mean nothing when spending down . Sequence risk is what counts

Rising healthcare costs alone are a huge expense.

The reality is you can't speak in terms of nominal returns but you need real returns.

So far drawing 4% inflation adjusted has taken maintaining a 2% real return average over the first 15 years. Equity's have not done that since 2000.
In terms of a reality check - being on Medicare has stabilized our health costs a lot (we went on Medicare in the nick of time and were spared having to deal with the ACA). Even our Medigap premiums have risen only modestly since my husband first started on Medicare 5+ years ago. The big wildcard for most people on Medicare is drug costs. Which can of course vary greatly from one person to another. A person who takes no drugs or only a couple of cheap generics is in a much different situation than someone who needs 1 or 2 or 3 so-called "specialty drugs".

Also - medical expenses (which includes everything from Medicare/Medigap to LTCI premiums to drug costs to in-home care to glasses) are deductible to the extent that they exceed 7.5% of your AGI if you or your spouse is > 65. It's 10% if you're < 65 - and the > 65 rules are set to change to 10% starting in 2017. IOW - 2016 is a good year to get something like expensive dental work done. Don't put it off until 2017. Robyn
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Old 03-05-2016, 07:23 AM
 
Location: Central IL
15,250 posts, read 8,589,533 times
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Quote:
Originally Posted by mathjak107 View Post
70 is enticing , especially if you are solely dependent on the markets for the bulk of your income .

while the break even point can be 22 years if you are spending down invested assets the fact that you only have to endure up to 8 years of great market dependency can be a good thing down the road .

you can be less dependent for decades later on .

there are so many other aspects to filing age other then what if i die or the bottom line dollars . we actually can spend more early on by delaying since we know we can refill savings down the road with a check almost 70% bigger plus colas at at a time when spending should start to fall off a bit .

social security has no sequence risk so while i need to keep a lot more powder dry on my own for poor sequencing you do not have that issue with ss . that allows a bigger spending rate .

plus the higher ss check as of now is only taxed at 85% while rmd's are taxed at 100% so more ss and less in rmd's is a better tax deal
I get the logic but my image was that you had a LOT of reserves invested - so much that a few hundred a month difference in SS benefits would not have a huge impact.

At what point/percentage of "replacement" income would SS have to make up in order to make delaying important....
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