Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (54) | Ignore Thread Prev | Next
Author: hjg0989 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5069  
Subject: Re: 8 years till ER Date: 10/12/2004 11:27 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Hi dsemmler,

"Can you please clarify that statement for me? If I am not mistaken, you indicated that you wanted to have an income of $70k annually. If you put 5 years worth of that into laddered CDs, that would be a rather large percentage of the $800k - $1million portfolio you were looking to have, would it not?"

Good point. You are correct, it would be a large percentage of $800k - $1 million. I switched trains of thought mid stream. Here is my logic, when I think of retirement savings, I try and consider all sources of income into one big pot. Therefore, I would quantify the value of the $20k+ pension to be worth over $500k since it would take $500,000 to generate $20k annually at the 4% withdrawl rate. Social Security would also generate about $20k per year between my partner and I (the real numbers from SS are $26k per year but I'm going conservative. This is if we stop working at 56 and start collecting at 62).

Between the ages of 56 - 62 we will need to draw $50k per year to supplement the $20k+ pension. So, 5 years times 50k = 250k.

If I count SS + pension + $1 million in savings I would have roughly $2 million dollars.

So 250k / 2,000,000 = 12.5%

However, your point was

250k / 850k = 30%

If I plug the numbers into FIRECALC at:

http://www.fireseeker.com

This is what I get for a 40 year survival, with 70% of $850k in the stock market and 30% in commercial paper:

*****

You have proposed a withdrawal of 8.24% of your starting portfolio.

We looked at the 91 possible 40 year periods from 1871 until 2002, and the 40 partial periods from 1962 until 2002, starting with a portfolio of $850,000 and taking out $70,000 the first year, and the same amount after adjustments for inflation (PPI) each year except as follows:

Starting in year 6, the withdrawal was decreased by $13,000 (your Social Security; adjusted for inflation).

Starting in year 6, the withdrawal was decreased by $7,000 (spouse's Social Security; adjusted for inflation).

Starting in year 0, the withdrawal was decreased by $23,000 (adjusted for inflation).

Your Success Rate is 99.2%

******

The interesting thing is that the outcome from FIRECALC doesn't vary if I use 250k/2 million for 88% in the stock market and 12% in commercial paper. Either way I get 99.2% a success rate.

Thank you for asking this question. I hadn't tried FIRECALC with different percentages of a stock/paper mix.

-helen

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (54) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Value Hounds

My Big Fat Greek Splat
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement