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Old 04-28-2016, 11:44 AM
 
71,760 posts, read 71,853,273 times
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Quote:
Originally Posted by Nell Plotts View Post
Put your money in a Vanguard Managed Payout Fund or in Wellington Income Fund. The latter has a 5 year average return in excess of 8.5%. The above scenarios indicate a withdrawal rate of 10.8% on an investment of $100,000. Assuming that Wellington's gain is consistent throughout the period you will exhaust your investment in 18 years.




just for laughs i ran the numbers properly for a 40/60 mix like wellesley . trying to pull 10.50% over 18 years from 100k had disastrous real world results .

out of the 128 rolling 18 year cycles we had to date you went broke before 18 years 123x . with the worst shortfall by the 18th year of minus 199,000.00 dollars .

the best 18 year time frame had you finishing with your 100k in tact .

the average for all 128 18 year periods was minus 77k by the 18th year .


please ! folks , never use average returns while spending down , you can be off drastically .
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FIRECalc looked at the 128 possible 18 year periods in the available data, starting with a portfolio of $100,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 128 cycles. The lowest and highest portfolio balance at the end of your retirement was $-198,840 to $100,000, with an average at the end of $-77,477. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 18 years. FIRECalc found that 123 cycles failed, for a success rate of 3.9%

Last edited by mathjak107; 04-28-2016 at 12:45 PM..
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Old 04-28-2016, 01:47 PM
 
Location: Portland, Oregon
10,013 posts, read 16,685,481 times
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Absolutely use FireCalc!!! My point is that the OP has the choice of a CD, a balanced investment portfolio or funding an annuity at today's interest rates. I would rather use a balanced investment portfolio as it will survive longer. There are no guarantees in life or investing.
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Old 04-28-2016, 01:47 PM
 
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When I mentioned average withdrawals in my last mail, I meant the average of multiple annuities that I have with multiple companies. Fixed annuity payments never change, and the % withdrawal from each annuity account. (as well as the average % withdrawal from several annuity accounts combined) is known with certainty in advance; the % can vary only for variable or index annuities (neither of which I have). Market conditions do not affect fixed annuities at all. During the 2008 market crash, I had my first life annuity already paying, it was from the lowest rated of the 4 companies with which I have annuities (ie, John Hancock), and they kept paying the same monthly amount as always (while I kept watching the balance in my mutual funds account drop to about 50%).
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Old 04-28-2016, 01:49 PM
 
71,760 posts, read 71,853,273 times
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Quote:
Originally Posted by Nell Plotts View Post
Absolutely use FireCalc!!! My point is that the OP has the choice of a CD, a balanced investment portfolio or funding an annuity at today's interest rates. I would rather use a balanced investment portfolio as it will survive longer. There are no guarantees in life or investing.
depends , at a 6% draw rate today you have a whole lot more spending money . in fact 50% more up front .

once i delayed ss which is the best annuity money can buy i would entertain a partial annuitization with my own investing . that has beaten just investing alone over much more outcomes then only the times markets were co-operating .

success rates go higher and higher with partial annuitization as the portfolio gets more and more conservative .

it all depends on your prioritys , who you are investing for as far as income or legacy money and the risk and volatility you want to take to get that income and or legacy money

Last edited by mathjak107; 04-28-2016 at 02:19 PM..
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Old 04-28-2016, 01:57 PM
 
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using a draw rate high enough to exhaust both portfolio's to see how much partial annuitization helped success rates the study below shows a big difference in portfolio longevity with an spia as a base compared to a balanced portfolio alone .


Last edited by mathjak107; 04-28-2016 at 02:20 PM..
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Old 04-28-2016, 02:43 PM
 
Location: Portland, Oregon
10,013 posts, read 16,685,481 times
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mathjak107 is a member of Early Retirement & Financial Independence Community , the website where you find FireCalc. I recommend the OP post their question on their forum for answers by folks who have been there, done that, and push a mean pencil.
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Old 04-28-2016, 02:53 PM
 
71,760 posts, read 71,853,273 times
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most of what i know came from that site as well as being introduced to the studies of the likes of kitces ,pfau and guyton .

there are a lot of very very well versed folks in the area of retirement planning .

in fact my method of withdrawals came from bob clyatt who i also learned of and is a member of that site
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Old 04-28-2016, 03:05 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,945,286 times
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Quote:
Originally Posted by elnrgby View Post
And if you give the annuity company $270k, you will get $300k over 10 years at the rate of 30k per year, with which you can spend every other month vacationing in a different country... or you can truly invest $270k, and then spend 10 years glued to stock market diagrams, worrying how your investments are doing, followed by spending your last decade (for which you invested so frantically) enjoying cancer and dementia.
How old are you? Do you have a terminal disease (seriously)? My husband is 72 - and I reckon he has at least another 10-15 years. Maybe more. Don't think I'd care to have handed off all our money to an insurance company if and when we get to a point in our lives where we might need some extra cash in our pockets to pay for a lot of extra help to live comfortably (we already pay for a fair amount). Even if we wind up with something as simple as age-related decreasing mobility/lack of strength (as opposed to anything more serious).

BTW - I would rather wind up 7 years down the road still dealing with investments (I think they keep me sharp mentally) than worrying about whether the company I bought that 10 year annuity from was going to go belly-up. My father has some annuities like that (although he doesn't have to worry about them because he put a lot of cash in his pocket when he sold his house). Note that since annuities are basically unsecured corporate obligations - I would definitely diversify (no more than 20% in any one company).

Finally - I still don't think that people like you understand the difference between a return of principal - and a return on principal. Why not just take your $270k - and simply spend $27k/year? Robyn
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Old 04-28-2016, 03:11 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,945,286 times
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Quote:
Originally Posted by Nell Plotts View Post
Absolutely use FireCalc!!! My point is that the OP has the choice of a CD, a balanced investment portfolio or funding an annuity at today's interest rates. I would rather use a balanced investment portfolio as it will survive longer. There are no guarantees in life or investing.
The best thing is to retire with a lot of money (relative to the lifestyle you want). So you don't have to worry about this stuff (a lot of the so-called "investments" I've seen discussed here are silly/stupid IMO). Robyn
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Old 04-28-2016, 03:18 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,945,286 times
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Quote:
Originally Posted by ReachTheBeach View Post
BTW, the roof wasn't a "what if?" - I really did have mine done a year or so ago and I really didn't have much choice. When it comes time to sell, I definitely need paint and carpets and if I don't do omething in the kitchen it will likely sell slower and at a lower price. The AC is on right now and upstairs it is a few degrees warmer than the thermostat setting. Hmmm...
I don't know anything about your real estate market. But my approach has always been to do whatever I wanted to do for myself - and to sell "as is". Odds are if you spend big $$$ to attract a new buyer - the new buyer won't like what you did and/or be willing to pay a lot more for it. New OTOH - new roofs often aren't optional - at least where I live - in terms of being to get a new homeowners' policy. Robyn
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