# The Right Way to Think About the 4% Rule for Retirement Income



## MULTIZ321 (Jan 14, 2018)

The Right Way to Think About the 4% Rule for Retirement Income
By Walter Updegrave/ CNN Money/ New Rules for Retirement/ money.cnn.com

*"My husband and I will be retiring soon and are thinking of using the 4% rule to draw income from our retirement portfolio. We don't want to run out of money, but we also don't want to spend too little. Is there some sort of "reset" we should do periodically to ensure we don't end up with too little or too much money later in retirement?--K.B.*

*You raise an important, but often overlooked, issue when it comes to the 4% rule, or for that matter any withdrawal system designed to turn savings into reliable retirement income -- namely, that the goal isn't just to make sure your nest egg lasts as long as you do, but also to avoid withdrawing so little to conserve assets that you live unnecessarily frugally in retirement.


But before I get to what you can do to strike a balance between withdrawing too much or too little, I want to quickly explain for the benefit of people who may not be familiar with the 4% rule, how it works and why, despite its name, you should think of this metric more as a general guideline than a hard-and-fast rule..."

Richard
*


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## Passepartout (Jan 14, 2018)

Interesting. This year (exactly today, coincidentally), I turn 70 1/2! So I checked my Mandatory Minimum Withdrawal chart, and Glory Be! I have to divide my IRAs by a factor of 25. Or put another way, I have to withdraw 4%. Now to try to figure out how to live for the next 30 years to need the income. 

Jim


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## rapmarks (Jan 14, 2018)

My husband moved his ira to vanguard funds in early 2000, before the recession, and the other big one. He never changed the funds.   He has been doing the mandatory withdrawals five times, and has removed more than he initially put in, he still has more than six times his initial investment, he is going to need to live a long time to use it up.


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## Patri (Jan 14, 2018)

Passepartout said:


> Now to try to figure out how to live for the next 30 years to need the income.
> Jim


Such a dilemma.


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## Passepartout (Jan 14, 2018)

Patri said:


> Such a dilemma.


Yup. We're just taking it one day at a time and enjoying them all.


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## WinniWoman (Jan 14, 2018)

rapmarks said:


> My husband moved his ira to vanguard funds in early 2000, before the recession, and the other big one. He never changed the funds.   He has been doing the mandatory withdrawals five times, and has removed more than he initially put in, he still has more than six times his initial investment, he is going to need to live a long time to use it up.




Until the stock market crashes.


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## MULTIZ321 (Jan 14, 2018)

Passepartout said:


> Yup. We're just taking it one day at a time and enjoying them all.



Hi Jim,

If I interpreted your initial post in this thread correctly - Happy Birthday and many Happy Returns!

Richard


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## VacationForever (Jan 14, 2018)

mpumilia said:


> Until the stock market crashes.


The stock market is getting scary currently...  I think I read that Nasdaq has already gone up 5% since first of the year.


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## x3 skier (Jan 14, 2018)

I must be going to live forever. I been getting the RMD and I wind up at the end with more than I started with every year

Cheers


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## CalGalTraveler (Jan 14, 2018)

Time to add trailing stop losses into stock portfolios.  As we get older we don't want to experience another dotcom or 2008 crash.


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## rapmarks (Jan 14, 2018)

We have already been through two crashes since we retired.  But the market is due for a correction.


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## VacationForever (Jan 14, 2018)

We don't directly manage our portfolio anymore but we still have a decision we need to make wrt to whether we want to withdraw next 5 years of living expenses (over and above social security and MRD/RMD) when one of our taxable investments mature in May, and keep them fairly safe so that if the stock market crashes we will not be forced to sell to raise money.  Decisions decisions.


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## bluehende (Jan 14, 2018)

mpumilia said:


> Until the stock market crashes.



As all gains can be fleeting so too can all loses.  Good sound financial planning that gives you enough cushion to weather a downturn is essential.  I believe the downturn is coming (not political) as it has been almost 10 years  since the last one.  That is about the average.  I have been lowering my exposure and have actually twice what I need.  The last nine years have been very kind to me and has given me the ability to keep a lot in the market while insuring my near time needs.


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## Talent312 (Jan 14, 2018)

CalGalTraveler said:


> Time to add trailing stop losses into stock portfolios.  As we get older we don't want to experience another dotcom or 2008 crash.



OTOH, with that strategy, you may lock in losses and find yourself on the outside when the market rebounds.
IMHO, better to skim some off the top when the market is frothy and buy on the next downturn or panic.
IME, it's when I start bragging about my returns (like now) that we enter a danger zone.


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## bluehende (Jan 14, 2018)

x3 skier said:


> I must be going to live forever. I been getting the RMD and I wind up at the end with more than I started with every year
> 
> Cheers




With average returns of 8% I wonder how old you have to be before you need to take that much out.


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## x3 skier (Jan 14, 2018)

bluehende said:


> With average returns of 8% I wonder how old you have to be before you need to take that much out.



Here’s a calculator to figure RMD and the balance remaining. 

https://personal.vanguard.com/us/insights/retirement/estimate-your-rmd-tool

Cheers


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## bluehende (Jan 14, 2018)

x3 skier said:


> Here’s a calculator to figure RMD and the balance remaining.
> 
> https://personal.vanguard.com/us/insights/retirement/estimate-your-rmd-tool
> 
> Cheers



this is the one I have used to estimate mine

https://www.bankrate.com/finance/money-guides/ira-minimum-distributions-table.aspx

To answer my question looks like at 89 you have to start taking out more than 8%  and even then it appears your life expectancy is over 100.


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## WinniWoman (Jan 15, 2018)

VacationForever said:


> We don't directly manage our portfolio anymore but we still have a decision we need to make wrt to whether we want to withdraw next 5 years of living expenses (over and above social security and MRD/RMD) when one of our taxable investments mature in May, and keep them fairly safe so that if the stock market crashes we will not be forced to sell to raise money.  Decisions decisions.



I keep 3 years living expenses in cash. I don't care what any of the financial experts tell me. They keep saying I should up my stock exposure- my husband even has his whole 401k in a stable value fund and just 9% in company stock. Sure- they would love to get their hands on our cash to invest in their company mutual funds. I feel we have enough in the stock and bond funds. 

Even more imperative for us to have a good emergency reserve, as we will have no pensions when we retire and will be trying to live on SS.


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## pedro47 (Jan 15, 2018)

We have Vanguard and we loved their low expense costs.  My only suggestion to everyone please start saving early in life.


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## taloa (Jan 15, 2018)

Divide age by 20.
If 70 years old 70 divided by 20 =3.5%
if 80   80 divided by 20 =4%  etc
use age of youngest spouse.
If really want to play it safe limit payout to 3%


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## Eric B (Jan 15, 2018)

Join the military when you’re young.  Serve for 30 years.  Retire in your late 40s and start another career.  Enjoy a cost of living indexed pension & figure out what else you want to spend your 4% on.


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## Talent312 (Jan 15, 2018)

Being fortunate enuff to have a pension and SSx2 to cover operating expenses, and with a decent rainy-day fund, my concern is that we'll never get a chance to truly enjoy the $$ we've socked away in investments and most of it will end up in hands of our heirs (a/k/a blood-suckers). 

.


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## bogey21 (Jan 15, 2018)

MULTIZ321 said:


> http://money.cnn.com/2017/04/12/retirement/4-percent-rule/index.html
> 
> *"My husband and I will be retiring soon and are thinking of using the 4% rule to draw income from our retirement portfolio. We don't want to run out of money, but we also don't want to spend too little. Is there some sort of "reset" we should do periodically to ensure we don't end up with too little or too much money later in retirement?--K.B.*



Fortunately I am set getting monthly payments from a Fixed Benefit Pension Plan and from Social Security but if I were retiring today and had a bunch of money and was concerned about running out I would look at (and at least consider) using some of it to buy Deferred Fixed Annuities kicking in at say age 80 and age 90.  That way I could spend with less worry about running out.  Just a  thought.

George


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## Eric B (Jan 15, 2018)

My bigger concern than running out was tax effects on our savings.  We converted our IRAs to Roth when they first allowed that and shifted them to deferred indexed annuities, starting at about age 60.  This will allow us to defer taking social security until 70 1/2, which will maximize that return.  It's worth considering whether it would be better to start a deferred annuity earlier in order to delay social security since the benefit amount increases by a fixed amount, I believe it's 8% per year you delay starting it.


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## WinniWoman (Jan 15, 2018)

taloa said:


> Divide age by 20.
> If 70 years old 70 divided by 20 =3.5%
> if 80   80 divided by 20 =4%  etc
> use age of youngest spouse.
> If really want to play it safe limit payout to 3%




That is what I hope to do. 3%


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## WinniWoman (Jan 15, 2018)

bogey21 said:


> Fortunately I am set getting monthly payments from a Fixed Benefit Pension Plan and from Social Security but if I were retiring today and had a bunch of money and was concerned about running out I would look at (and at least consider) using some of it to buy Deferred Fixed Annuities kicking in at say age 80 and age 90.  That way I could spend with less worry about running out.  Just a  thought.
> 
> George




I would be more worried handing over a big chunk of money to an insurance company and then possibly dying before I ever got all my money back. I would rather hold on to my money and draw it down as needed. To me, social security is an annuity. Delay until 70 and it is deferred. Our plan is for me to take mine at 66 and hubby at 70. In the meantime, since we can't just live on mine, we have to draw down from our savings and live very frugally for several years at least until he can get his.

Will this work out ok? I have no clue. At this stage of the game, anything can happen and we will have to roll with it.


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## klpca (Jan 15, 2018)

Well, that calculator was surprisingly reassuring. Funny how the retirement calculators on the financial services website scare the heck out of you.

I agree about investing early. Even when our kids were little and we were seriously pressed for money, we still contributed the maximum. For the longest time I would look at the balance and think that it would never be enough to retire on, but here we are (almost) and retirement looks good. I can't say the same for some other folks I know. Between circumstances and poor spending habits, their retirement prospects scare me, but that's not my problem. I suppose they will learn to be a little more frugal.


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## bogey21 (Jan 15, 2018)

mpumilia said:


> I would be more worried handing over a big chunk of money to an insurance company and then possibly dying before I ever got all my money back.



I may be wrong but I think there is a lump sum that goes to your beneficiary if you die before collecting.

George


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## Patri (Jan 15, 2018)

Talent312 said:


> my concern is that we'll never get a chance to truly enjoy the $$ we've socked away in investments and most of it will end up in hands of our heirs (a/k/a blood-suckers).


Now Talent, you raised those blood-suckers.


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## bogey21 (Jan 15, 2018)

Talent312 said:


> ....my concern is that we'll never get a chance to truly enjoy the $$ we've socked away in investments and most of it will end up in hands of our heirs (a/k/a blood-suckers).



I resolved this by setting things up so I die as near broke as possible.  What I do is help my kids out while I am alive.  One benefit of this approach is that my kids are rooting for me to live a long life rather than looking forward to me dying and a big payoff.

Geoge


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## Elan (Jan 15, 2018)

Although I understand the premise, I've never really seen the 4% rule fully detailed.  For instance, the example below from the article doesn't really doesn't really say how the $500K is invested.  Is it in Bitcoin, or buried in your back yard?  Whats the stock to bond mix?  Are the numbers the result of a Monte Carlo analysis, or what?  Also, 2% inflation compounded doesn't equate to the numbers given. 

  I know it's just a "rule of thumb" based on historical returns, but still.  Anyone have a thorough understanding??


_The basic mechanics of the 4% rule are pretty simple. You start with an initial withdrawal of 4% of savings and then increase the dollar amount of that first withdrawal by inflation each year to maintain purchasing power.

So, for example, if you have a nest egg of $500,000 and inflation is running at 2% a year, you would withdraw $20,000 the first year of retirement, $20,400 the second year, $20,800 the third and so on. This regimen results from research done in the early 1990s by now retired financial planner William Bengen. After testing different withdrawal rates using historical rates of return for stocks and bonds, Bengen concluded that 4% was the highest withdrawal rate you could use if you want your savings to last 30 or more years._


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## Passepartout (Jan 15, 2018)

Elan said:


> Although I understand the premise, I've never really seen the 4% rule fully detailed.  For instance, the example below from the article doesn't really doesn't really say how the $500K is invested.  Is it in Bitcoin, or buried in your back yard?  Whats the stock to bond mix?
> 
> 
> _The basic mechanics of the 4% rule are pretty simple. You start with an initial withdrawal of 4% of savings and then increase the dollar amount of that first withdrawal by inflation each year to maintain purchasing power._


It doesn't matter. At least as far as mandatory distributions is concerned. You DO have to declare what the balance is, and the table tells you what the amount is that you MUST withdraw from tax advantages accounts. Now, it's up to you what you withdraw from taxable accounts. This is one of those great 'freedoms' . Nobody is going to tell you what you must invest in, or what you must spend the distribution on. Or for that matter, how long it has to last. But following the 4% rule, over the last 150 years, there has never been a single 30 year period that exhausted the retirement stash, and multiple 30 year periods where the principle more than doubled despite the withdrawals.


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## Egret1986 (Jan 15, 2018)

Talent312 said:


> OTOH, with that strategy, you may lock in losses and find yourself on the outside when the market rebounds.
> IMHO, better to skim some off the top when the market is frothy and buy on the next downturn or panic.
> IME, it's when I start bragging about my returns (like now) that we enter a danger zone.



Agreed.  I've got some needed adjusting to do.  As you say, "bragging about my returns" is clearly a "tap on the shoulder."  It's overdue.  Today's the day!  Thank you for this "reminder" post.  I find the current market quite frothy.


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## Elan (Jan 15, 2018)

Answering my own question:

  A simple spreadsheet obviously yields vastly different results dependent on what assumptions are made WRT ROI and inflation.   If I didn't make errors in my spreadsheet,  (I guess I could write it all out as a single equation and ensure it's correctness, but for now, I'll trust the spreadsheet because it's Monday, and I'm lazy  ),  the net assumption is that over the 30 years, one's rate-of-return must beat inflation by roughly 1.5% annually to stretch the inherent 25 years to 30 (if withdrawing 4% of original principal annually).


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## WinniWoman (Jan 15, 2018)

bogey21 said:


> I may be wrong but I think there is a lump sum that goes to your beneficiary if you die before collecting.
> 
> George



That's good, but it doesn't help you if you need some money for something- like big medical expenses or home repairs or to help an adult child or grandchild or whatever- BEFORE you die.


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## VacationForever (Jan 15, 2018)

We are technically drawing at 3% until when I reach 60, then my deferred income annuity will kick in, the withdrawal rate will drop to about 2% which constitutes my husband's MRD/RMD.  Although that 1% for the few years is translated into a lump sum that I will be withdrawing this May and then we will put into accounts with higher liquidity and independent of stock market performance.  Now it is a matter of whether we will adhere to our budget.


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## Passepartout (Jan 15, 2018)

mpumilia said:


> That's good, but it doesn't help you if you need some money for something- like big medical expenses or home repairs or to help an adult child or grandchild or whatever- BEFORE you die.


You CAN terminate an annuity if you wish, but there may be penalties. The whole reason you buy an annuity is for a stream of income that you can never outlive. NOT for an emergency savings account. THAT'S what insurance is for.


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## WinniWoman (Jan 15, 2018)

Deleted Duplicate


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## WinniWoman (Jan 15, 2018)

Passepartout said:


> You CAN terminate an annuity if you wish, but there may be penalties. The whole reason you buy an annuity is for a stream of income that you can never outlive. NOT for an emergency savings account. THAT'S what insurance is for.




I get that, Jim. My point is that it is still risky handing your money over to an insurance company to keep for you- instead of keeping and managing it yourself-even if you have a big emergency fund- because you ever know what will happen in life down the line.

No secret I don't like annuities. Like all insurance products, they exist because the insurance company plans on coming out the winner and it usually is. They wouldn't sell them if that wasn't the case. I can make my own "annuity" and take out the money as I need it or not. Might not be perfect, but I still have control over the money.

Social Security is enough of an annuity for me.


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## x3 skier (Jan 15, 2018)

Just for my edification since there’s nothing I can do about it, I figuered out my RMD is about 4%. Works out to about 2.5-3.0% after tax. No clue what it will be with the new tax rates nor can I do much about that either.

Cheers


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## Blues (Jan 15, 2018)

Elan said:


> Although I understand the premise, I've never really seen the 4% rule fully detailed.  For instance, the example below from the article doesn't really doesn't really say how the $500K is invested.  Is it in Bitcoin, or buried in your back yard?  Whats the stock to bond mix?  Are the numbers the result of a Monte Carlo analysis, or what?  Also, 2% inflation compounded doesn't equate to the numbers given.
> 
> I know it's just a "rule of thumb" based on historical returns, but still.  Anyone have a thorough understanding??



The original Trinity Study showed success rates for 4% inflation-adjusted withdrawals for various portfolio compositions, from 100% stock to 0% stock / 100% bonds.  Their chart shows that you really need at least 50% stocks to make it successful.  I've seen several later studies, and many use anywhere from 50/50 stocks/bonds, to 60/40, or even 75/25.  Again, most agree that you need at least 50% in stocks to successfully use the 4% rule.

ETA:  Wade Pfau's article in Forbes about Trinity Study:  https://www.forbes.com/sites/wadepf...etirement-and-the-trinity-study/#75c3ef3a6fc1

I'm also a big fan of Michael Kitces, e.g. https://www.kitces.com/blog/what-returns-are-safe-withdrawal-rates-really-based-upon/


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## VacationForever (Jan 15, 2018)

One big plus for us in using some of our money to buy a deferred income annuity is that it allows us to increase our stock/bond ratio as we can ride out a bear market without the need to withdraw from our holding.  Having multiple income streams allow us to invest more heavily into stocks for investments which we do not anticipate the need to draw on for income.  In our portfolio, a small percentage of it goes to 2 notes which are based on stock market indices (DIA and S&P500), with some downward protection.  That is when you can get all of the stock market appreciation.  One of them is a 5-year note maturing this May which is based on S&P 500, which has appreciated 68% from May 2013.  We also bought another 5-year note last June which is based on DIA, and it has appreciated 25% todate.  We will need to make a decision in May as to whether we will buy another note after taking out some of it to go to our living expenses for the next 5 years, or just put the money together with the rest of our 60/40 portfolio.


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## Elan (Jan 15, 2018)

Blues said:


> The original Trinity Study showed success rates for 4% inflation-adjusted withdrawals for various portfolio compositions, from 100% stock to 0% stock / 100% bonds.  Their chart shows that you really need at least 50% stocks to make it successful.  I've seen several later studies, and many use anywhere from 50/50 stocks/bonds, to 60/40, or even 75/25.  Again, most agree that you need at least 50% in stocks to successfully use the 4% rule.
> 
> ETA:  Wade Pfau's article in Forbes about Trinity Study:  https://www.forbes.com/sites/wadepf...etirement-and-the-trinity-study/#75c3ef3a6fc1



  Thanks.  That's interesting data.  It would be more informative, IMO, if they simply listed the net return range for every asset mix.


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## DancingWaters (Jan 15, 2018)

We retired 9 months ago and didn’t realize how much “fun” money we were spending, though our part time jobs are taking care of the fun money. We have cut back and are still working on scaling back.  We still haven’t started taking all of my pension or my DH social security.  We hope those will cover us without us continuing to work.  We meet with our Edward Jones guy next week so we will have a better grasp of how we are doing.  I need to decide whether to take the second half of my pension as a lump sum or take it as an annunity. I’m leaning towards an annunity and I liked the comment how that dews your money up to invest a little stronger


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## turkel (Jan 15, 2018)

Very interesting topic. I second the save early and max out. Our retirement will start in 22 months. We will be 53 and 52. Although I may continue to work occasionally if I am able to max out my 401k for a few years. Depends on if the job will interfere with our travel plans. My DH pension will sustain us but not lavishly. By our 60's we should have 2 paid for homes and may start withdrawing from my 401k in small amounts. The houses are the big expense which will effect us in the early years.

I lose sleep over my close friends and family lack of planning for retirement. (I am a little anal about finances) it is scary how few people I know have a solid plan for retirement. I realize how lucky we are to have access to a pension but we are all getting older i.e. 50 plus. It makes me sad when I think of those I love working until they die or become disabled.

Save, save,save! It will make a difference in your comfort in the years to come.


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## Tamino (Jan 16, 2018)

Peter Lynch, who ran the Fidelity Magellan Fund for many years and did so very successfully, stated that in order to preserve one´s principal, he should never withdraw more than 7%.  A number of analysts, notably Scott Burns a syndicated personal finance writer, noted that during several intervals within the last 70 or 80 years, someone systematically withdrawing 7% of his principal could actually be left with nothing.  Burns did note that limiting withdrawals to 4%, over the same period, would have preserved one´s base investment amount.  

One could limit his withdrawals to 3% or even 2%, but why?  If the objective is to die with more money than you have ever had then you can do that.  Your heirs might thank you; posthumously of course.


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## lizap (Jan 16, 2018)

bluehende said:


> As all gains can be fleeting so too can all loses.  Good sound financial planning that gives you enough cushion to weather a downturn is essential.  I believe the downturn is coming (not political) as it has been almost 10 years  since the last one.  That is about the average.  I have been lowering my exposure and have actually twice what I need.  The last nine years have been very kind to me and has given me the ability to keep a lot in the market while insuring my near time needs.



This is actually one of the longest bull markets in stock market history. We got very conservative last year when we realized it was no longer worth taking a lot of risk as we are getting close to retirement.


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## WinniWoman (Jan 16, 2018)

DancingWaters said:


> We retired 9 months ago and didn’t realize how much “fun” money we were spending, though our part time jobs are taking care of the fun money. We have cut back and are still working on scaling back.  We still haven’t started taking all of my pension or my DH social security.  We hope those will cover us without us continuing to work.  We meet with our Edward Jones guy next week so we will have a better grasp of how we are doing.  I need to decide whether to take the second half of my pension as a lump sum or take it as an annunity. I’m leaning towards an annunity and I liked the comment how that dews your money up to invest a little stronger



My husband will have a tiny pension- if the company doesn't totally eliminate it by the time he retires.  He can't take it until he is 65 anyway and he plans to retire at 66 or 67. Most financial experts will say to take the annuity, but we will probably take the lump sum depending on what it is. The company already cut it at the knees so it will not be a lot, but I figure even if we put it in a savings account with no interest we could take the same amount of money the annuity would have paid out every month and it will last 10 years- bringing us close to 80 years old. If we invest it with a decent return, it should last a lot longer. And- maybe we won't even take money out each month. We have our IRA's and so forth. 

If we would take the joint and survivor payout on the annuity, the monthly payout would be smaller and if we replicated that ourselves it would take us even further out if we are still alive. 

So I don't see the point of giving it to an insurance company, paying them fees, paying the agent a commission. 

Being most people can't retire younger due to no pensions, annuities to me aren't as attractive. It is one thing if you are retiring at 50 and have an annuity to use for a long period of time. Another if you are retiring at 70. Of course, as I understand it, deferred annuities do have a much larger payout. But again, why not keep the money and pay yourself the larger payout if you need it?

That said, annuities do work for some people, of course, especially if you have a ton of money and don't know where to put some of it. I am no financial wiz to be sure so I could be totally off on the whole thing, but this is where I just go with my gut.


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## Eric B (Jan 16, 2018)

For annuities, the question winds up being if you believe you will outlive your actuarial life span.  Insurance companies base the payment amount on how long they think you will live and what they think the economy will do (how much money they’ll make), taking a share as profits and commissions, of course.  If you’re healthy and your parents lived to a ripe old age, an annuity might be right, particularly if you don’t have a pension.  If your family history puts you on the low side of the actuarial tables or you have health issues, an annuity probably isn’t a good choice.  For us, it’s part of the mix and let’s me be more heavily weighted in stocks for my investments, although as others have noted this bull market is getting old and the political background makes me a bit leery of policy stability supporting business decisions.


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## lizap (Jan 16, 2018)

We plan to create our own pension by annuitizing a large portion of our retirement assets. We have helped support our adult daughter (who has a Masters degree and doesn't want to work), so we don't feel the need to leave her very much.


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## WinniWoman (Jan 16, 2018)

lizap said:


> We plan to create our own pension by annuitizing a large portion of our retirement assets. We have helped support our adult daughter (who has a Masters degree and doesn't want to work), so we don't feel the need to leave her very much.




Annuitizing it on your own or buying an annuity? Annuitizing is a verb. An annuity is a noun. Two different things.


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## VacationForever (Jan 16, 2018)

deleted... answer was posted further down...


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## VacationForever (Jan 16, 2018)

mpumilia said:


> My husband will have a tiny pension- if the company doesn't totally eliminate it by the time he retires.  He can't take it until he is 65 anyway and he plans to retire at 66 or 67. Most financial experts will say to take the annuity, but we will probably take the lump sum depending on what it is. The company already cut it at the knees so it will not be a lot, but I figure even if we put it in a savings account with no interest we could take the same amount of money the annuity would have paid out every month and it will last 10 years- bringing us close to 80 years old. If we invest it with a decent return, it should last a lot longer. And- maybe we won't even take money out each month. We have our IRA's and so forth.
> 
> If we would take the joint and survivor payout on the annuity, the monthly payout would be smaller and if we replicated that ourselves it would take us even further out if we are still alive.


The issue is that you won't be able to take the money out of a savings account with the same amount an annuity would pay.  Annuity payout includes mortality credits due to pooling of mortality risk.  An annuity is certainly not for everyone.  When I bought the 2 annuities, there were several pages with all sorts of warning the buyer that it is illiquid, and that it is suitable only for people who have a large enough net worth and that it should only constitute a small part of one's portfolio. 

If annuity is not for you, then instead of putting it into a savings account, a better option is to roll the lump sum into a rollover IRA to defer taxes on the growth of the investment.


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## VacationForever (Jan 16, 2018)

Tamino said:


> One could limit his withdrawals to 3% or even 2%, but why?  If the objective is to die with more money than you have ever had then you can do that.  Your heirs might thank you; posthumously of course.



One problem with most people's retirement planning is that they have not planned for when they may need long term care.  Someone with Alzheimers can live for as long as 10 years with home care, in a memory care unit or even a skilled nursing facility.  We both bought long term care insurance, with fairly high amounts that has built in inflation growth.  Even then, there is no guarantee that we have enough.

Having the pot of money grow is a good thing in case there is a need to use it towards later years.  Some of us would also want to leave an estate to our heirs.


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## WinniWoman (Jan 16, 2018)

VacationForever said:


> The issue is that you won't be able to take the money out of a savings account with the same amount an annuity would pay.  Annuity payout includes mortality credits due to pooling of mortality risk.  An annuity is certainly not for everyone.  When I bought the 2 annuities, there were several pages with all sorts of warning the buyer that it is illiquid, and that it is suitable only for people who have a large enough net worth and that that it should only constitute a small part of one's portfolio.
> 
> If annuity is not for you, then instead of putting it into a savings account, a better option is to roll the lump sum into a rollover IRA to defer taxes on the growth of the investment.




Yes. I know that. A lump sum pension payout should go directly into an IRA. That is what we intend to do. That is what I meant.

I was just trying to make a point that if you were using savings to buy an annuity- yes- you could certainly take out the same money every month that an annuity would pay you- or more or less- and it could last a pretty long time as you draw it down- or you could invest the money and get a decent return and it could last even longer.


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## bogey21 (Jan 16, 2018)

The first question that one must answer is "Do I want to leave an estate or do I want to die broke?". Ones answer to this question will shape how one manages their money. 

George






y


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## Talent312 (Jan 16, 2018)

Those who take a lump-sum payout from a pension need to determine if it's taxable or not.
Payouts from many defined-benefit plans are taxable, whether rolled into an IRA or not.
Just pay attention to the tax consequences and don't assume it's a non-taxable transaction.

OTOH, lump-sum payments from a defined contribution plan usually can be rolled-over w/o tax.


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## VacationForever (Jan 16, 2018)

Talent312 said:


> Those who take a lump-sum payout from a pension need to determine if it's taxable or not.
> Payouts from many defined-benefit plans are taxable, whether rolled into an IRA or not.
> Just pay attention to the tax consequences and don't assume it's a non-taxable transaction.
> 
> OTOH, lump-sum payments from a defined contribution plan usually can be rolled-over w/o tax.


Lumpsum payout that is rolled over into an IRA within 30 days is non-taxable.  If taken as annuity is taxable.


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## Wyominguy (Jan 16, 2018)

mpumilia said:


> Until the stock market crashes.


The best thing to do during a crash is to buy stock.


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## Eric B (Jan 16, 2018)

Wyominguy said:


> The best thing to do during a crash is to buy stock.



Don’t forget drink heavily....


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## WinniWoman (Jan 16, 2018)

VacationForever said:


> Lumpsum payout that is rolled over into an IRA within 30 days is non-taxable.  If taken as annuity is taxable.



I thought it was 60 days. Maybe that is for a 401k?


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## VacationForever (Jan 16, 2018)

mpumilia said:


> I thought it was 60 days. Maybe that is for a 401k?


It may be 60 days.


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## Talent312 (Jan 16, 2018)

Just sayin' that not all pensions come from plans qualified for IRA rollovers.
If it is, great; but if not... Its subject to IRA contribution limits.

.


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## geekette (Jan 16, 2018)

it's nice to have a rule of thumb if a person needs it, so the 4% rule is worth knowing.

It doesn't do anything for me, tho, since I won't be selling assets and don't base things on portfolio value.  Divs can raise by much more than inflation, much more than 4%, so I'll live my life and take out the money I need to float my butt and wants.  Sure, divs can also be cut but that's not anything I lie awake worrying over since I haven't had any major setbacks in 25ish years.

I don't need to leave money for anyone, just make it to my own expiration without downsizing to van down by the river or cardboard box anywhere.   I'd probably be a great candidate for an annuity but I'd rather leave my leftovers to the neighbor's puppy than to an insurance company.


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## geekette (Jan 16, 2018)

Talent312 said:


> Just sayin' that not all pensions come from plans qualified for IRA rollovers.
> If it is, great; but if not... Its subject to IRA contribution limits.
> 
> .


whoa, a rollover to IRA is subject to annual contribution limits???  that's a terrible rule, farting a few dollars per year for decades.  that's not a rollover, it's a hijack.


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## VacationForever (Jan 16, 2018)

Talent312 said:


> Just sayin' that not all pensions come from plans qualified for IRA rollovers.
> If it is, great; but if not... Its subject to IRA contribution limits.
> 
> .


Agree with Geekette.  I am very confused by your statements.  I know that pensions are taxable in most states, and at federal level.  When rolling over a lump sum pension into an IRA rollover account, I have never heard of a limit on the amount.


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## VacationForever (Jan 16, 2018)

geekette said:


> I'd probably be a great candidate for an annuity but I'd rather leave my leftovers to the neighbor's puppy than to an insurance company.



It depends on the kind of annuity that one buys.  There is no leftovers in mine that go back to the insurance company.  I get paid when I am alive and my beneficiaries get paid all of the "leftovers" when I die.


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## SmithOp (Jan 16, 2018)

geekette said:


> whoa, a rollover to IRA is subject to annual contribution limits???  that's a terrible rule, farting a few dollars per year for decades.  that's not a rollover, it's a hijack.



I think Talent is saying not all plans allow rollovers to other specific plans so you have to take it as a distribution then contribute (with limits) to the disallowed plan.

https://www.irs.gov/pub/irs-tege/rollover_chart.pdf


Sent from my iPad using Tapatalk Pro


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## Talent312 (Jan 16, 2018)

VacationForever said:


> Agree with Geekette.  I am very confused by your statements.  I know that pensions are taxable in most states, and at federal level.  When rolling over a lump sum pension into an IRA rollover account, I have never heard of a limit on the amount.



Sorry about that. You're right, there is no limit to a rollover. What I meant to say:
While lump-sums usually can rolled over, in some plans, that's not an option.

Quoting www.marketplace.org:
Monthly payments can't be sheltered from taxes by rolling the payment into an IRA.
If you had the option of a lump-sum payment, you could roll that into an IRA.
But that's up to the plan...

.


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## Passepartout (Jan 16, 2018)

VacationForever said:


> It depends on the kind of annuity that one buys.  There is no leftovers in mine that go back to the insurance company.  I get paid when I am alive and my beneficiaries get paid all of the "leftovers" when I die.


This is how mine works as well. Plus, I can terminate it if I NEED to- for instance to fund Alzheimer's care or something catastrophic & I won't be living long anyway. And it would continue to pay the agreed upon amount should I outlive the balance. That's why you only buy an annuity from a very stable insurance company. Mine is the 'Piece of the Rock'.

Jim


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## VacationForever (Jan 16, 2018)

Passepartout said:


> This is how mine works as well. Plus, I can terminate it if I NEED to- for instance to fund Alzheimer's care or something catastrophic & I won't be living long anyway. And it would continue to pay the agreed upon amount should I outlive the balance. That's why you only buy an annuity from a very stable insurance company. Mine is the 'Piece of the Rock'.
> 
> Jim


You had me looking up what is the "Piece of the Rock" and I found it.


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## lizap (Jan 17, 2018)

mpumilia said:


> Annuitizing it on your own or buying an annuity? Annuitizing is a verb. An annuity is a noun. Two different things.[/
> 
> We will annuitize part of our retirement assets by purchasing immediate annuities with highly rated companies, such as New York Life.


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## geekette (Jan 17, 2018)

Thanks for annuity education, folks.  There are indeed a zillion flavors, early term and leftovers to beneficiaries are very nice features.  I still don't want to part with a lump sum to have one, however, preferring to manage for myself how much $ I get per month.   Money in my account today is more valuable that money in my account tomorrow.  I've never seemed to have the same "sleep well at night" requirements that others do, but I understand the serenity of knowing a payment is going to show up every month for the rest of your life.  For me, that payment is SS only, eventually.  

"A piece of the rock", what a blast from the past!  Next up, what did E F Hutton really say??  

Meanwhile, how many here are using the 4% plan or expect to?   If you are using 4%, do you also have a pension or are you completely self-funded (401k in my opinion is "self-funded")?   I personally don't see the point of "the rule" if a person has pension or annuities but since Tug collects a diverse set of folks, it seems to me that someone has a situation for which it makes sense and I am endlessly curious.


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## Elan (Jan 17, 2018)

geekette said:


> Meanwhile, how many here are using the 4% plan or expect to?   If you are using 4%, do you also have a pension or are you completely self-funded (401k in my opinion is "self-funded")?   I personally don't see the point of "the rule" if a person has pension or annuities but since Tug collects a diverse set of folks, it seems to me that someone has a situation for which it makes sense and I am endlessly curious.



  The 4% rule applies to any nest egg. Doesn't matter if it's a sole source, or not.  It's really just a math problem solved, at it's root.


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## Eric B (Jan 17, 2018)

Elan said:


> The 4% rule applies to any nest egg. Doesn't matter if it's a sole source, or not.  It's really just a math problem solved, at it's root.



That’s true if your goal is to retain a particular nest egg through your lifespan.  The approach I’ve used for planning purposes is to map out my cash flow sources over the projected years, accounting conservatively for expected growth and inflation, and evaluate my options.  I haven’t completely retired yet, but could do so and draw down one retirement account until one pension kicks in.  This gives me a basis to compare the various possibilities and choose one, then adjust for realized rather than anticipated changes.


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## Elan (Jan 17, 2018)

Eric B said:


> That’s true if your goal is to retain a particular nest egg through your lifespan.  The approach I’ve used for planning purposes is to map out my cash flow sources over the projected years, accounting conservatively for expected growth and inflation, and evaluate my options.  I haven’t completely retired yet, but could do so and draw down one retirement account until one pension kicks in.  This gives me a basis to compare the various possibilities and choose one, then adjust for realized rather than anticipated changes.


  Sure, everyone can use their nest egg to their best advantage, but strictly speaking, the 4% figure is derived from the premise of making a nest egg last 30 years over any market return.  As I posted earlier, the "net net" is that one has to achieve returns that beat inflation by 1.5% to make a nest egg last 30 years if withdrawing 4%, inflation adjusted. 

  I have no pension, just a 401K.  So my plan is to save enough outside my 401K to either 1) delay 401K withdrawal, 2) be able to skip withdrawal on years with low return or 3) live it up for 30 years, supplementing my withdrawal with my savings, and then lean on my kids when I go broke .


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## VacationForever (Jan 17, 2018)

I have a spreadsheet that shows projected expenses for the next 20 years... so between annuities (factored in with net present value with a 3% "depreciation"/inflation per year), social security and Minimum Required Distribution (also brought back to net present value), our income needs should be met.  We have a separate sum of money which we do not use as income to us.  We don't even think about the 4% rule.  I did recently use MRD withdrawal against our savings/investments and it amounts to about 2% withdrawal.


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## Elan (Jan 17, 2018)

VacationForever said:


> We don't even think about the 4% rule.  I did recently use MRD withdrawal against our savings/investments and it amounts to about 2% withdrawal.



  The 4% rule is just a "rule of thumb".  It's intended to give those *planning* for retirement some idea of what their nest egg will provide over 30 years.  If one's planning on retiring at age 60, and living until 90, then a $1M nest egg will provide ~$40K per year, inflation adjusted.  Whether that's enough, solely, or combined with other income sources, is up to the retiree.  If one has a $50M nest egg, they probably don't need to dial in to the implications of the 4% rule.  Again, it's a planning guideline -- not a requirement.


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## Talent312 (Jan 17, 2018)

VacationForever said:


> I have a spreadsheet that shows projected expenses for the next 20 years...



I feel lucky if I can estimate expenses for the next two months.
Recurring monthly bills and annual expenses are easy, but CC's can vary wildly.
I track CC spending as we go, and near the end of each cycle, I'm like, "Holy cow!"
.


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## VacationForever (Jan 17, 2018)

Talent312 said:


> I feel lucky if I can estimate expenses for the next two months.
> Recurring monthly bills and annual expenses are easy, but CC's can vary wildly.
> I track CC spending as we go, and near the end of each cycle, I'm like, "holy cow!"
> .


It is called a budget.  The challenge is to be able to stick to a budget.  We do have a problem especially in the area of entertainment and travel which is a little out of control where spending is quite a bit higher than the budget.  Our Jan bills (due in Feb) for our credit cards totaled about $20K. Ouch... about 5K of that was not in our budget.  I normally drill down to see the deviations, one item is my March trip back to Singapore that was not originally planned and my husband wanted me to fly business instead of economy plus.  Some are incurring spending earlier than planned which is not an issue.


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## x3 skier (Jan 17, 2018)

I have a budget. Income = Outgo  Works for me since just about every month, I wind up with zero in my checking account on the last day of the month. SS+RMD+Pension = Income. Wine, women and song + some other frivolous stuff like food, health insurance and housing = Outgo.

Life is good

Cheers


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## klpca (Jan 17, 2018)

Yes, a key part of any financial discussion is the spending side. I keep a tight rein on everything, and am not above buying things used. Living within your means is a key part of financial success, imo. In my immediate family (parents/siblings) I am the only member who is chronically thrifty. Of course they can't figure out how we vacation as often as we do, but we use miles, fly economy, and stay in timeshares that run us about $100-$150/night. We make meals at home. And we have a great time. We don't have to live this way, but after awhile it becomes a habit.


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## clifffaith (Jan 17, 2018)

bogey21 said:


> The first question that one must answer is "Do I want to leave an estate or do I want to die broke?". Ones answer to this question will shape how one manages their money.
> 
> George
> y



That's how we determined we really could afford to move into a CCRC sometime in the not too distant future. I hope there is enough leftover so that Delta Rescue and my high school could each get $50K. High school may end up being disappointed because before we decided to "spend all the money on ourselves", I had designated them beneficiary of my estate.


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## Passepartout (Jan 17, 2018)

Elan said:


> The 4% rule applies to any nest egg. Doesn't matter if it's a sole source, or not.  It's really just a math problem solved, at it's root.


The primary reason I went with the annuity when I retired  (or in preparation for it) was that it was offered with 7% guaranteed payoff until age 98. The difference between what the insurance company pays and what I could have contrived in 2009 (remember the market in '09?) is thousands of bucks a year for life. This product is no longer available.


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## Elan (Jan 17, 2018)

Passepartout said:


> The primary reason I went with the annuity when I retired  (or in preparation for it) was that it was offered with 7% guaranteed payoff until age 98. The difference between what the insurance company pays and what I could have contrived in 2009 (remember the market in '09?) is thousands of bucks a year for life. This product is no longer available.


Every time I've read about your annuity, it seems you got one of the better products, which I'm sure isn't coincidental. 
   I need to look into them more.  Not inherently a fan, but having a small percentage of my savings in one might make sense.  

Sent from my Moto G (5S) Plus using Tapatalk


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## Passepartout (Jan 17, 2018)

Elan said:


> Every time I've read about your annuity, it seems you got one of the better products, which I'm sure isn't coincidental.


Yeah. I get the Fisher junk mail, and pop-ups too, and for every 'Don't buy an annuity because they blah, blah, blah', I say, but mine doesn't DO that. I did go through a broker, and I suppose he gets a few scheckles a month or year for his trouble. I'm happy. If he's happy too, the world goes around.


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## lizap (Jan 17, 2018)

Talent312 said:


> I feel lucky if I can estimate expenses for the next two months.
> Recurring monthly bills and annual expenses are easy, but CC's can vary wildly.
> I track CC spending as we go, and near the end of each cycle, I'm like, "Holy cow!"
> .



We also have a budgeted income/expense statement for post retirement.


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## lizap (Jan 17, 2018)

Passepartout said:


> The primary reason I went with the annuity when I retired  (or in preparation for it) was that it was offered with 7% guaranteed payoff until age 98. The difference between what the insurance company pays and what I could have contrived in 2009 (remember the market in '09?) is thousands of bucks a year for life. This product is no longer available.



As interest rates head back up (and they are very likely to as the economy 'appears' to be growing strongly), annnuity rates will increase. This is a very unusual period. Historically speaking, rates should be a good bit higher by now.  The FED has been very slow in increasing rates, which may well have adverse consequences down the road.


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## lizap (Jan 17, 2018)

Passepartout said:


> Yeah. I get the Fisher junk mail, and pop-ups too, and for every 'Don't buy an annuity because they blah, blah, blah', I say, but mine doesn't DO that. I did go through a broker, and I suppose he gets a few scheckles a month or year for his trouble. I'm happy. If he's happy too, the world goes around.



The key to annuities is to buy with a highly rated company.  Annuity companies do not advertise this (I don't believe they are allowed to), but annuities are protected by state guaranty associations up to a certain amount (usually around 300k, but depends on state). If you want to annuitize more, it's best to spread around to more than one company, as you are protected up to an amount per annuity.


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## SmithOp (Jan 17, 2018)

geekette said:


> Meanwhile, how many here are using the 4% plan or expect to?   If you are using 4%, do you also have a pension or are you completely self-funded (401k in my opinion is "self-funded")?   I personally don't see the point of "the rule" if a person has pension or annuities but since Tug collects a diverse set of folks, it seems to me that someone has a situation for which it makes sense and I am endlessly curious.



I’m not following a formula, I take out what I need for right now and we are enjoying life in our 60s.  I wont take SS until 70 and then will just take RMDs.  Not concerned about running out since we both have joint/survivor pensions also.



Sent from my iPad using Tapatalk Pro


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## VacationForever (Jan 17, 2018)

SmithOp said:


> I’m not following a formula, I take out what I need for right now and we are enjoying life in our 60s.  I wont take SS until 70 and then will just take RMDs.  Not concerned about running out since we both have joint/survivor pensions also.
> 
> 
> 
> Sent from my iPad using Tapatalk Pro


Ah.... pension.... Lucky you!


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## Elan (Jan 17, 2018)

Some random thoughts on retirement planning:  1) I've seen the "80% of pre-retirement income" guideline kicked around, and that seems absurd to me.  If I need 80% of my pre-retirement income to get by, I'll just shoot myself now.  2) Most retirement analyses don't mention home equity.  When I'm retired, I won't need as big of house as I have now.  My house is paid off, so I could sell it and buy something smaller and easier to maintain, in a similar location, and net around $200-250k in the process.  That's not insignificant.  3)   I'm always guilty of thinking of income going to zero in retirement, but one can always go mow greens at the muni or shake paint at HD a few hours a day, a few days a week.  Just enough to generate some pocket change or get free greens fees while getting out of the house and staying socially active (away from old folks ).  4) There are other stay-at-home ways to generate income on a piecemeal basis.  Things one enjoys doing, when they feel like doing it.   

  In short, the key to retirement for me will be adaptability.   Live simply and don't do anything extravagant until it's justified.  Kind of like I do now.


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## lizap (Jan 17, 2018)

Elan said:


> Some random thoughts on retirement planning:  1) I've seen the "80% of pre-retirement income" guideline kicked around, and that seems absurd to me.  If I need 80% of my pre-retirement income to get by, I'll just shoot myself now.  2) Most retirement analyses don't mention home equity.  When I'm retired, I won't need as big of house as I have now.  My house is paid off, so I could sell it and buy something smaller and easier to maintain, in a similar location, and net around $200-250k in the process.  That's not insignificant.  3)   I'm always guilty of thinking of income going to zero in retirement, but one can always go mow greens at the muni or shake paint at HD a few hours a day, a few days a week.  Just enough to generate some pocket change or get free greens fees while getting out of the house and staying socially active (away from old folks ).  4) There are other stay-at-home ways to generate income on a piecemeal basis.  Things one enjoys doing, when they feel like doing it.
> 
> In short, the key to retirement for me will be adaptability.   Live simply and don't do anything extravagant until it's justified.  Kind of like I do now.



We are hoping for a better lifestyle post-retirement.  We have elected to work until we are around 64, so we can build the house we want in the NC mountains.


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## Elan (Jan 17, 2018)

lizap said:


> We are hoping for a better lifestyle post-retirement.  We have elected to work until we are around 64, so we can build the house we want in the NC mountains.


  Yep, everyone's different.  I can't imagine a better lifestyle than not going to my current job every day.  Personally, I'm more concerned about running out of health than I am running out of money.


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## lizap (Jan 17, 2018)

Elan said:


> Sure, everyone can use their nest egg to their best advantage, but strictly speaking, the 4% figure is derived from the premise of making a nest egg last 30 years over any market return.  As I posted earlier, the "net net" is that one has to achieve returns that beat inflation by 1.5% to make a nest egg last 30 years if withdrawing 4%, inflation adjusted.
> 
> I have no pension, just a 401K.  So my plan is to save enough outside my 401K to either 1) delay 401K withdrawal, 2) be able to skip withdrawal on years with low return or 3) live it up for 30 years, supplementing my withdrawal with my savings, and then lean on my kids when I go broke .



If you have adult kids you can 'lean' on, consider yourself lucky.


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## lizap (Jan 17, 2018)

Elan said:


> Yep, everyone's different.  I can't imagine a better lifestyle than not going to my current job every day.  Personally, I'm more concerned about running out of health than I am running out of money.



Love my job as well.  Have known so many people who retire and just 'waste' away by basically doing nothing.  We recently bought a large lot in a gated development in western NC (it is not a 65+ community, but there are alot of retirees who live there). There are many activities for people, form social clubs to hiking, golf, tennis, etc.. The key (I think) is to stay active.  Your're right, health is also key.


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## PigsDad (Jan 17, 2018)

geekette said:


> I still don't want to part with a lump sum to have one, however, preferring to manage for myself how much $ I get per month.   Money in my account today is more valuable that money in my account tomorrow.  I've never seemed to have the same "sleep well at night" requirements that others do, but I understand the serenity of knowing a payment is going to show up every month for the rest of your life.  For me, that payment is SS only, eventually.


I have similar thoughts for managing my retirement (7-10 years away).  Just doing some estimations, between my wife's and my SS benefit, that will account for ~40% of our expected living expenses.  To me, that is plenty in the "annuity" category.  We also have some farm and oil royalty income (from inheritance) for another ~20%.  Given those factors, I feel we can be more invested in equities for our retirement investments (401k, IRAs) vs. someone who is completely relying on investment accounts, as these other sources of income provide a stability "buffer" for our retirement income needs.  A good portion of those equity investments will be held for the dividend earnings.

What do you (the collective "you") think of this plan?  Is it too risky?  Am I missing something?

Kurt


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## Elan (Jan 17, 2018)

lizap said:


> Love my job as well.  Have known so many people who retire and just 'waste' away by basically doing nothing.  We recently bought a large lot in a gated development in western NC (it is not a 65+ community, but there are alot of retirees who live there). There are many activities for people, form social clubs to hiking, golf, tennis, etc.. The key (I think) is to stay active.  Your're right, health is also key.


 
  Although I like my _work_, I don't like some of the restrictions of my _job_, but more importantly, I have so many other interests that I feel like I don't/won't have time to pursue them all.  I am relatively certain I'll be far more busy in retirement than I am holding down an 8-5, and that's not even thinking about any travel.  That's why I'm prioritizing earlier retirement over lavish retirement lifestyle.  Again, there's no one answer that suits everyone.


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## turkel (Jan 17, 2018)

VacationForever said:


> Ah.... pension.... Lucky you!



Ah... I'll trade the pension to be able to spend 20k in a month :


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## VacationForever (Jan 17, 2018)

turkel said:


> Ah... I'll trade the pension to be able to spend 20k in a month :



I wish!  You read January?  Some of the timeshare maintenance fees are part of the cc bills.  The other big item on this Jan cc is the final payment for our Apr cruise.


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## Elan (Jan 17, 2018)

PigsDad said:


> I have similar thoughts for managing my retirement (7-10 years away).  Just doing some estimations, between my wife's and my SS benefit, that will account for ~40% of our expected living expenses.  To me, that is plenty in the "annuity" category.  We also have some farm and oil royalty income (from inheritance) for another ~20%.  Given those factors, I feel we can be more invested in equities for our retirement investments (401k, IRAs) vs. someone who is completely relying on investment accounts, as these other sources of income provide a stability "buffer" for our retirement income needs.  A good portion of those equity investments will be held for the dividend earnings.
> 
> What do you (the collective "you") think of this plan?  Is it too risky?  Am I missing something?
> 
> Kurt



  I think your plan is fine.  Just depends on your risk tolerance and whether you'll need or just _want_ the potential extra $ that comes with added risk.  I plan to be pretty conservative with my retirement accounts, because for me, the pain/stress of them getting hammered would far outweigh the joy of having a few extra dollars.  Plus, I plan on supplementing my SS+retirement account income with savings (in some manner), so I hopefully won't need to maximize returns.  I hope/plan to hit retirement with 8-10 years retirement expenses in non- 401K/IRA savings.  If only I didn't have kids to get through college, I'd be there...

  Hypothetically, if an ROI on your investments of say 5% provided a comfortable lifestyle (when added to SS and royalties), would you still want to shoot for 10% (to travel more, for instance) while incurring added risk?


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## WinniWoman (Jan 17, 2018)

Elan said:


> Some random thoughts on retirement planning:  1) I've seen the "80% of pre-retirement income" guideline kicked around, and that seems absurd to me.  If I need 80% of my pre-retirement income to get by, I'll just shoot myself now.  2) Most retirement analyses don't mention home equity.  When I'm retired, I won't need as big of house as I have now.  My house is paid off, so I could sell it and buy something smaller and easier to maintain, in a similar location, and net around $200-250k in the process.  That's not insignificant.  3)   I'm always guilty of thinking of income going to zero in retirement, but one can always go mow greens at the muni or shake paint at HD a few hours a day, a few days a week.  Just enough to generate some pocket change or get free greens fees while getting out of the house and staying socially active (away from old folks ).  4) There are other stay-at-home ways to generate income on a piecemeal basis.  Things one enjoys doing, when they feel like doing it.
> 
> In short, the key to retirement for me will be adaptability.   Live simply and don't do anything extravagant until it's justified.  Kind of like I do now.




Our problem is even if we sell our home and get a smaller home or condo- they are more money than what we will get for our house- which is upgraded- meaning there's a good chance we have to live in something we will not be happy with because what we get NET after fees and so forth for our house is what we will have to buy something else.

I agree on living simply. We are all about simple.


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## Luanne (Jan 17, 2018)

mpumilia said:


> Our problem is even if we sell our home and get a smaller home or condo- they are more money than what we will get for our house- which is upgraded- meaning there's a good chance we have to live in something we will not be happy with because what we get NET after fees and so forth for our house is what we will have to buy something else.
> 
> I agree on living simply. We are all about simple.


That's one reason we moved out of the area where we were living when we retired.  We wanted to downsize and a smaller place would have ended up costing us more.


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## WinniWoman (Jan 17, 2018)

Luanne said:


> That's one reason we moved out of the area where we were living when we retired.  We wanted to downsize and a smaller place would have ended up costing us more.




Our problem is where we want to move when we retire it is that way.


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## VacationForever (Jan 17, 2018)

mpumilia said:


> Our problem is where we want to move when we retire it is that way.


I thought you wanted to move close to your son?  How is the housing prices there?  Any state tax?


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## bogey21 (Jan 17, 2018)

clifffaith said:


> That's how we determined we really could afford to move into a CCRC sometime in the not too distant future. I hope there is enough leftover so that Delta Rescue and my high school could each get $50K. High school may end up being disappointed because before we decided to "spend all the money on ourselves", I had designated them beneficiary of my estate.



For those considering the CCRC route (I live in one) try to get a contract that guarantees that they will not throw you out if you have a non-intentional reversal in your financial wherewithal and can't cover your monthly fees.  My contract guarantees this in black and white.

George


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## VacationForever (Jan 17, 2018)

bogey21 said:


> For those considering the CCRC route (I live in one) try to get a contract that guarantees that they will not throw you out if you have a non-intentional reversal in your financial wherewithal and can't cover your monthly fees.  My contract guarantees this in black and white.
> 
> George


At what age did you buy/move into yours?  With the contract, are you saying that if you run out of money to pay your monthly dues, you get services for free?


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## vacationhopeful (Jan 17, 2018)

IMHO, today's world is a mobile society. Planning to live near _a single family member_ is more likely to NOT WORK OUT for the older generation. The single family member is NOT a support system; situations can change for both the younger & older parties. 

Remember where YOU were when 25yo or 35yo ... did your parent(s) eat twice a week at YOUR dinner table? Did you take Mom or Dad to doctor's appointments or pay their bills when you were 35yo with kids in elementary/middle school ... and you had a fulltime job? Did Mom or Dad offer to watch your sick 10yo with the flu ... fearing for their health at age 70+?


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## lizap (Jan 17, 2018)

vacationhopeful said:


> IMHO, today's world is a mobile society. Planning to live near _a single family member_ is more likely to NOT WORK OUT for the older generation. The single family member is NOT a support system; situations can change for both the younger & older parties.
> 
> Remember where YOU were when 25yo or 35yo ... did your parent(s) eat twice a week at YOUR dinner table? Did you take Mom or Dad to doctor's appointments or pay their bills when you were 35yo with kids in elementary/middle school ... and you had a fulltime job? Did Mom or Dad offer to watch your sick 10yo with the flu ... fearing for their health at age 70+?



When our parents were in their 70s and our daughter was around 5, they moved to the same town we lived in. I remember how wonderful it was to have them in the same town. We tried to give them their space and not ask too much of them.


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## WinniWoman (Jan 18, 2018)

VacationForever said:


> I thought you wanted to move close to your son?  How is the housing prices there?  Any state tax?




That is correct- New Hampshire. Housing prices and property taxes are high. No state tax, though there are some politicians there trying to institute one. 

No sales tax either there. But the housing leaves a lot to be desired in our price category (well under $300,00). I am hard pressed even just looking on line to see much that gets me excited except for homes/condos in the $450,000 +++range.  Forgetaboutit!

The house we have here- if it were in a place like the NY Metropolitan area, for example- would probably be over a million dollars (though that to me would be way overpriced for what it is)! LOL! 

In better times, our house probably could sell here for at least $300,000 or maybe a bit more(paid $208,000 for it in 1987. Lots of upgrades and well maintained and clean), but we've been here for 30 years and nothing has changed. Heck- the 10.5 acres of land it sits on alone has to be worth a lot- at least $100,000. Sigh....


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## WinniWoman (Jan 18, 2018)

vacationhopeful said:


> IMHO, today's world is a mobile society. Planning to live near _a single family member_ is more likely to NOT WORK OUT for the older generation. The single family member is NOT a support system; situations can change for both the younger & older parties.
> 
> Remember where YOU were when 25yo or 35yo ... did your parent(s) eat twice a week at YOUR dinner table? Did you take Mom or Dad to doctor's appointments or pay their bills when you were 35yo with kids in elementary/middle school ... and you had a fulltime job? Did Mom or Dad offer to watch your sick 10yo with the flu ... fearing for their health at age 70+?




That is true to a point, but also living nearby your parents makes things easier for the younger person as well. I know when my son was little and I needed a babysitter due to being sick, one of my parents would drive the hour up to my house- they were in their 70's- and watch him. Or- my husband would take him the hour down to them if he wasn't sick.My parents would also come up to help us with some things at the house and we would go to their house to do the same.

My parents thought of moving to Florida or at least being snowbirds, but quickly decided against it because they did not want to be away so from their children and grandchildren. 

When my parents became ill, I was just an hour away, and it was still very hard because I was working. I can't imagine how more stressful it would have been if they lived very far away!

Living nearby the only person who might care about and help you a bit when you are in your old age is about the best plan you can make. No one else will ever care about you as much as a good, responsible family member that loves you. I do realize that this isn't the case in some families and that is unfortunate. 



As we say in Italian- FAMILIA!


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## WinniWoman (Jan 18, 2018)

VacationForever said:


> At what age did you buy/move into yours?  With the contract, are you saying that if you run out of money to pay your monthly dues, you get services for free?




I have read this in some CCC literature and was even told this when we went on a tour of one. It is true.


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## bogey21 (Jan 18, 2018)

VacationForever said:


> At what age did you buy/move into yours?  With the contract, are you saying that if you run out of money to pay your monthly dues, you get services for free?



I bought in at age 65.  At that time you paid your deposit (In my case $65,000) and if you moved out (or died) after 3 months, it was theirs to keep.  The contract stated very clearly *in bold black and white* that if I fell on hard times and couldn't pay some or all of my monthly fees (and hadn't intentionally dissipated my assets), they would cover them.  Later they formed a Charitable Foundation with which to do this.

Since I moved in they built 2 new towers and sell them differently.  In the new towers the front end fee is substantially higher, something in  the range of $600,000 to $900,000 but depending on the option you choose if you die or move out, between 60% and 90% of the front end fees are returned as soon as they get someone new to take the unit and spring for a new front end fee.   *I'm guessing* that with this arrangement if you can't pay your fees, they will take care of them but will deduct the fees they advanced from the amount to be returned when you die or move out.

George


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## clifffaith (Jan 18, 2018)

VacationForever said:


> At what age did you buy/move into yours?  With the contract, are you saying that if you run out of money to pay your monthly dues, you get services for free?



The CCRC in Carlsbad where we are on the waiting list mentioned this, as well as the facility in our own neighborhood (which I rejected as not being an "adventure"). Comments in both cases were a joke about blowing your money in Las Vegas, and a more serious comment about giving your money away when a grandchild came begging that he needed capital to start a new business--they would not be inclined to have you live for free in those instances.  Other than that they are committed to caring for you (and of course in these two cases there would have been a buy in of over $300K when one first moves in).


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## geekette (Jan 18, 2018)

Elan said:


> Although I like my _work_, I don't like some of the restrictions of my _job_, but more importantly, I have so many other interests that I feel like I don't/won't have time to pursue them all.  I am relatively certain I'll be far more busy in retirement than I am holding down an 8-5, and that's not even thinking about any travel.  That's why I'm prioritizing earlier retirement over lavish retirement lifestyle.  Again, there's no one answer that suits everyone.


exactly.  I only work because I have to, there are a lot of other things I would prefer to do with my time.  I'm lucky to do something interesting and tolerable, but that could describe a tv show so I don't feel I would be missing out by exiting at my earliest opportunity.  

I am also more into early retirement than piling up money I may never need.  My needs are simple and sanity tops the list.  some jobs are not compatible with that and some are simply free standing stress machines.  As soon as I can slap the badge down and walk out, I will, towards my own idea of Happy.


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## Talent312 (Jan 18, 2018)

geekette said:


> I am also more into early retirement than piling up money I may never need.  My needs are simple and sanity tops the list.



Eggsactly why I retired at 62.
My experience with it: Everyday is a Saturday. It's like an endless weekend.
.


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## vacationhopeful (Jan 18, 2018)

As a single person with a few closeby family members, my work is mostly with my regular source of "people to people" daily contact. As I am selfemployed with 1 co-conspiriter (another selfemployed contractor type)... we could write a TV series. Cops, elected officials, thieves, state judges, contractor dudes, government employees and real life street people would all be the "real people with names changed to protect the guilty and truly slimey".

Now, if the ecomony EVER improves, I will cash out. I KNOW I could adjust to a regular lifestyle.


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## VacationForever (Jan 18, 2018)

I am one of the sick ones who love working. When we sold the business in 2016 it put me out of a job.  Because I have so much time on my hands I am always putting together travel plans.  Whenever I think about looking for a job I know I won't be able to find employment since I am going to be away so much.  I said if Amazon opens up a second HQ in our city, I would apply to go work for them.  Well, the shortlist is out and we did not make the list.  I still have an occasional fantasy about going back to work...


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## geekette (Jan 18, 2018)

VacationForever said:


> I still have an occasional fantasy about going back to work...


Ew.  My fantasies run more towards the pleasurable tho I will admit to a few centered on revenge...


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## PigsDad (Jan 18, 2018)

vacationhopeful said:


> Now, if the ecomony EVER improves, I will cash out.


We have been in a bull market for 8 straight years.  Unemployment is at the lowest level in more than a decade.  Housing has recovered.  Interest rates are low.  There is hardly any inflation.  How much more "improvement" do you need?

These are the "good old days" that people will be talking about decades from now, IMO.  Personally, I have seen my retirement accounts double in the last 4 years.  I don't expect that to ever happen again in my lifetime. 

Sure, there are still some challenges out there, but implying that the economy has not improved is just crazy! 

Kurt


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