Author Topic: 54, can I use my savings in retirement if 4% won't do it?  (Read 2215 times)

1kickassgal

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54, can I use my savings in retirement if 4% won't do it?
« on: August 15, 2016, 07:58:06 PM »
So here's my thinking - tell me where it's flawed.....I'm 54, will work probably 4 or 5 more years (late bloomer)...and I'm self-employed and kind of like my job.  I'm struggling with the math.   If I'm skeptical that 4% will be a reality - what is the harm in calculating how much I will probably need to live on a year and multiplying that by 30 years and being sure I have THAT amount in savings?  So being conservative, I'm not counting on ANY return but figuring my savings will last for 30 years.  I know this probably doesn't make sense, but I'm not sure why.  I have a pension of $2850 a month starting next year.  This will last until I die.  In addition to that I will have my savings.   Is this thinking just way too conservative?  Thanks for comments.  Dj

nereo

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Re: 54, can I use my savings in retirement if 4% won't do it?
« Reply #1 on: August 15, 2016, 08:21:55 PM »
so ... to be clear, if I understand you correctly what you are talking about is having 30x your anticipated annual spending, though it's unclear whether you are factoring in inflation.  That is the same as a 3.34% WR, which historically has never been depleted after 30 years. 
Using such a strategy would be considered extremely safe, providing a good chunk of that money is invested to ensure you don't loose out to inflation.

Where do you intend to keep your money (as in: how much will be in savings accounts, bonds, stocks, etc)?

Ursus Major

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Re: 54, can I use my savings in retirement if 4% won't do it?
« Reply #2 on: August 15, 2016, 08:25:00 PM »
Your plan has a few problems:
1. You also need to account for inflation. The 4% SWR method is based on a calculation that you increase your withdrawal by the amount of inflation every year. If your pension isn't inflation-adjusted it is also worth less as the years go by.
2. Have you considered that you may need to pay taxes on the amount that you're liquidating each year?
3. You may live longer than 30 years, after you start your withdrawal.

1kickassgal

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Re: 54, can I use my savings in retirement if 4% won't do it?
« Reply #3 on: August 15, 2016, 08:27:48 PM »
Right now most of it is in Vanguard total stock market index, and about $100K in a savings account cause I was contemplating paying off my mortgage and still not sure about that.  So it's just sitting there right now, $15K of it makes 3.9, the rest 1.9%.  I have not really factored in for inflation, just beginning to figure out these calculations. 

nereo

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Re: 54, can I use my savings in retirement if 4% won't do it?
« Reply #4 on: August 15, 2016, 09:40:48 PM »
The only "flaw" I see in your plan is that it's at the extreme end of conservative.  The only downside is that you'll likely have far more money (and work much longer than necessary) then you actually need

You didn't specify how much you anticipate your spending needs will be, but the $2850 monthly pension is a pretty solid floor to have.  Is there SS on top of that?

Feel free to do a full case study and people will be able to give you more detailed responses.

JLee

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Re: 54, can I use my savings in retirement if 4% won't do it?
« Reply #5 on: August 15, 2016, 09:45:16 PM »
The only "flaw" I see in your plan is that it's at the extreme end of conservative.  The only downside is that you'll likely have far more money (and work much longer than necessary) then you actually need

You didn't specify how much you anticipate your spending needs will be, but the $2850 monthly pension is a pretty solid floor to have.  Is there SS on top of that?

Feel free to do a full case study and people will be able to give you more detailed responses.

I agree.  If I had $2850/mo in perpetuity right now, I would be FI today!

1kickassgal

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Re: 54, can I use my savings in retirement if 4% won't do it?
« Reply #6 on: August 16, 2016, 05:28:57 AM »
Thanks.  Yeah, I know, that's a lot of money per month as a base.  I'll put the time into a case study this weekend.  I bring in about $120K a year and so when that pension begins in May I fully intend to bank that in addition to about $50,000 of my yearly salary.  I think I'm super conservative because I have a mom and brother who have not been as diligent with their resources as they should have and I fear their care will be something I need to contend with down the road.  We are in a very fast growth mode with my biggest client and this will really increase my income capability, as well as my stress level, so decisions will need to be made regarding this.  I'll post more this weekend.  Very interested in what you guys will all think.  Thanks.