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a yearly average return on investments does you little good when dealing with spending down because sequence risk is the big factor . same average return can be off by as much as 15 years depending on the order it comes in at .
you will always have negative return years burning principal and how they fall out is key . get 5 poor years in a row and that can alter the outcome of even the best markets happening after that point . by 15 years game is over and can't be reversed if things are poor .
i suggest a good calculator like firecalc or fidelity retirement income planner which accounts for poor sequences and the probability of your situation failing .
A coworker calls withdrawing from an investment account during a downturn "catching the falling knife". Fear of that is why I like the fixed annuity to fund the gap idea. Yes, it is likely that I could do better but I don't want to revisit the decision every year. I want to decide using actual numbers. unless something changes dramatically by then, it is likely that it will work and that I will do it.
A coworker calls withdrawing from an investment account during a downturn "catching the falling knife". Fear of that is why I like the fixed annuity to fund the gap idea. Yes, it is likely that I could do better but I don't want to revisit the decision every year. I want to decide using actual numbers. unless something changes dramatically by then, it is likely that it will work and that I will do it.
That's my thinking as well. Early years will be funded by something very certain. I am envisioning a ladder of Treasuries or CDs, but there are other options as well. We will likely be in better health in the early years of retirement, so we'll want to do the traveling and other things while we are able. I certainly do not want to do any sort of "belt tightening" during those years.
Then when SS benefits for both of us kick in we will live on that plus a much smaller draw from assets.
I'll have another account that's invested for the longer term in something more aggressive. This thing can simmer for many years and surf the ups and downs of the market. When the pool of safe assets runs out then we'll start drawing at an appropriate SWR for our ages. If the account balance is not as big as we had hoped we can always use some of it to buy an SPIA.
This is a type of reverse glide path, starting out with a smallish allocation to stocks, but with the allocation percentage increasing over time.
I am not sure I can ladder CDs without a tax problem. I can get a qualified annuity, roll untaxed money directly into it and only pay taxes as it comes out. I also like the idea of monthly payments from the start.
I'm not sure discussing the possibility that we can die young adds anything to the discussion. We all understand any one of us can die at any times. For the sake of this discussion we should just stay with the assumption that we will live long enough to weigh the good and bad ramifications of waiting. If you die at 65 it really doesn't matter which decision you made.
I did find it interesting that the SS office encouraged early filing. I have noticed this to be a pattern, everyone I know that talked to them got the same feedback.
I am not sure I can ladder CDs without a tax problem. I can get a qualified annuity, roll untaxed money directly into it and only pay taxes as it comes out. I also like the idea of monthly payments from the start.
The annuity is simpler, sure, but it reduces my flexibility. I guess the taxes are a little more front-loaded with the ladder, but interest rates are so low today I don't see it as a big issue.
Either way, the idea is the same. Fund the early retirement years from a source that is secure. This makes a great deal of sense to me. It may not be the best approach from a back tested or a monte carlo analysis, but each of us only gets one roll of the dice, so to speak.
I did find it interesting that the SS office encouraged early filing. I have noticed this to be a pattern, everyone I know that talked to them got the same feedback.
It seems surprising that they would be giving advice like this. I would think they are only supposed to give the benefit amounts under different scenarios?
It seems surprising that they would be giving advice like this. I would think they are only supposed to give the benefit amounts under different scenarios?
The whole SS benefits position of SS has become politicized and is part of the inequality debate. The more affluent are able to delay and thus get higher benefits. The lower income workers aren't able and they get lower benefits. Together they help contribute to the wealth/income gap as a direct result of government practice. Which is a no no in the minds of the Executive Branch and Progressive candidates and allies.
The annuity is simpler, sure, but it reduces my flexibility. I guess the taxes are a little more front-loaded with the ladder, but interest rates are so low today I don't see it as a big issue.
Either way, the idea is the same. Fund the early retirement years from a source that is secure. This makes a great deal of sense to me. It may not be the best approach from a back tested or a monte carlo analysis, but each of us only gets one roll of the dice, so to speak.
A little more front loaded? Unless I misunderstand how it would work, I will stay in and below the 15% bracket, averaging below 10%, each year with the annuity. If i take it all as income in year one and ladder CDs most of it would be taxed at and above 25%.
I agree that you are correct, so since you will be taking it at 62, will you be spending as if you will die in your 70s or spend like you will live longer so you leave more money to your heirs if you are correct and die then? I only ask because if you do the former, what exactly is the plan if you unfortunately do live longer? I'm not being a smartazz, because we all know actuarially SS is break even, so one is just betting on the other side of the same coin as another. Hopefully, the answer is that the SS amount is not even really needed for retirement, so you are just taking the sure thing bet, factoring health and life expectancy. That would be a great position to be in! (The SS not being needed part, not the planning to die in my 70s part..) I would prefer to be in that camp myself, but SS is too big a part of my plans..
To the OP, IMHO, 7% is literally right at the limit, as based on your SS amount it is easy to calculate what you have saved. The point being that getting a regular average 3% from $800k and up is far easier than getting it from $200k and down, where you would about be. If you are married, as long as you have a decent amount of life insurance, then it makes sense. $900/month of inflation adjusted income sounds like it would be a large percentage of your total income. And you are certainly not going to get that (12x 900) $10800 a year, inflation adjusted from the $144k you have extra if you filed at 62. Well you COULD, but it would only last roughly 16 years if you never lost any and only increased by inflation. Would I do it? I can't answer that. I will take far less than 7% to delay and none from savings when I get to 70 to live on. The forced RMDs I have to take will be invested after tax.
You raise a fair question. I did not need to take SS and it has never been part of my financial planning. Had it been, I might have rolled the dice and waited. On the other hand, my precious wife took hers as soon as possible. She had it for five years and dropped dead at 68 having just gotten a clean bill of health the morning before she died in the late afternoon.
Everyone is different of course. It is nice to read what intelligent people say here.
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