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if the total draw is 50k than for 8 years you need to lay out 400k plus the inflation adjusting on it not counting out of budget big expenses. that may be 450k- 500k or so which is more than 40% of a million . to me that is to close for my comfort . you would have to count on markets being decent to grow that money.
what if it is another lost decade? so my rule of thumb is i like more of a cushion left , but that is up to you .
What happens if you split up? Looks like you will be living right on the edge with no buffer for unexpected expenses. I know this is just a what-if, but many people would be more comfortable with taking the relationship risk than the market risk. Not me.
The worst case is I’m single living on $43,524 of Social Security benefit with a sizable reserve for big ticket expenses. If my car dies, I pay cash for a new car. If my house needs a new roof, I write the check. I’ve structured my life to be able to live comfortably on that.
if the total draw is 50k than for 8 years you need to lay out 400k plus the inflation adjusting on it not counting out of budget big expenses. that may be 450k- 500k or so which is more than 40% of a million . to me that is to close for my comfort . you would have to count on markets being decent to grow that money.
what if it is another lost decade? so my rule of thumb is i like more of a cushion left , but that is up to you .
So feed a 40% market correction and a decade of stagflation into the equation. I run out of money and have to fall back on a much lower Social Security check.
For arguments sake, let’s say I’m shooting for a COLA-protected cash flow of $50k. From age 70 onwards, Social Security would be most of it. I’d only need 15% more to top it up. Ignoring the house since I don’t plan to sell it, I see no reason why I couldn’t stop working at 62, burn the IRA over 8 years in the most tax efficient way, and hit age 70 with a big slush fund to handle any unexpected expenses.
Makes perfect sense to me. I don't see any logic behind a percentage drawdown rule of thumb. All that matters is that your slush fund is big enough.
So feed a 40% market correction and a decade of stagflation into the equation. I run out of money and have to fall back on a much lower Social Security check.
I could see a decade of stagnation OR a 40% market decline. But not both. If both happened, SS would probably be cut back enough that you’d take a hit there too.
Personally, my biggest concern is a decade of stagnation. I’m lucky to have enough to survive most anything, but the decade of stagnation I think would hurt most. Now, if interest rates would get back up to 5% or so, I’d have a whole different outlook, because I’d shift things around to take less risk.
if rates hit 5% you better worry about inflation leaving you worse off than now. rates on bonds don't rise without the perception of inflation going higher to match .
I could see a decade of stagnation OR a 40% market decline. But not both. If both happened, SS would probably be cut back enough that you’d take a hit there too.
Personally, my biggest concern is a decade of stagnation. I’m lucky to have enough to survive most anything, but the decade of stagnation I think would hurt most. Now, if interest rates would get back up to 5% or so, I’d have a whole different outlook, because I’d shift things around to take less risk.
If you inflation adjusted market valuations, that was the 1970s. Remember Nixon wage price controls? That was 1970. 1980 inflation rate:13.91%. We inflated the bill for the Vietnam war away in 12 years. Personally, I put a high value on the COLA aspect of Social Security. I think it’s politically impossible to slash benefits. Everyone age 50+ votes. No Congressman would risk getting tarred and feathered by that voting block. This is contingency planning. I’d put Social Security benefit cuts as a least likely thing to happen.
Makes perfect sense to me. I don't see any logic behind a percentage drawdown rule of thumb. All that matters is that your slush fund is big enough.
Agree. A flaw with the percentage drawdown rule of thumb is that it changes depending on how big a bucket one has, along with other assets. For example, if I had $1 million in savings, and a paid-off house worth $600k, I would be very comfortable drawing down half the savings in order to guarantee myself an inflation-protected annuity (SS) of nearly $40k for the rest of my life, starting at 70. If OTOH I had $400,000 in savings and was a lifelong renter, with no ability for a reverse mortgage or downsize option, I'd be nervous drawing down to $200k.
If you inflation adjusted market valuations, that was the 1970s. Remember Nixon wage price controls? That was 1970. 1980 inflation rate:13.91%. We inflated the bill for the Vietnam war away in 12 years. Personally, I put a high value on the COLA aspect of Social Security. I think it’s politically impossible to slash benefits. Everyone age 50+ votes. No Congressman would risk getting tarred and feathered by that voting block. This is contingency planning. I’d put Social Security benefit cuts as a least likely thing to happen.
Yup. The COLA aspect of Social Security is huge.
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