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Author: SUSIQ One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 734989  
Subject: Safe Withdrawal Rates for Dummies Date: 3/29/2000 5:53 AM
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A quick question:

All the discussion about individually developed spreadsheets is very impressive to me. That being said, I do not feel that I could develop one that would be reliable enough to be trusted.

However, I do have a lot of discipline, which is how I accumulated enough money to retire. If I have enough to follow the Safe Withdrawal guidelines, and follow them faithfully, can I just call the whole planning thing done?

Thanks!

Susi
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Author: dory36 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7099 of 734989
Subject: Re: Safe Withdrawal Rates for Dummies Date: 3/29/2000 7:01 AM
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However, I do have a lot of discipline, which is how I accumulated enough money to retire. If I have enough to follow the Safe Withdrawal guidelines, and follow them faithfully, can I just call the whole planning thing done?

It's ok with me!


More seriously, though, I think the whole idea of the safe withdrawal rate stuff is to give you just that -- a safe withdrawal rate that you can depend on, provided you follow the guideline, and provided the next 40 years (or whatever) is not worse than any 40 year period since 1871. Once you factor in your tolerance for rish, there just isn't that much more to do with the safe rate spreadsheets.

After doing a lot of work on many individual spreadsheets and trying to embed the safe rate spreadsheets into my own spreadsheets, I found that nothing changed from the safe rate perspective. 3.87% = 3.87% no matter how you slice or dice it!

What WAS important to me was looking closely at expenses after ER compared to now, looking at when some lump sums will become available, and making sure I have lots of cushion in the funds available before then. I must have checked these figures eighty-eleven different ways to make sure they were realistic. (That seems to be the hallmark of an INTP!)

Just my opinion, but I think we can all be really grateful to intercst and others here for researching and publishing these safe rate spreadsheets and related materials so that we could take advantage of them!

Dory36


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Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7113 of 734989
Subject: Re: Safe Withdrawal Rates for Dummies Date: 3/29/2000 3:04 PM
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Hi, Susi,

Short answer: Yes, I think you can be reasonably confident in following the conclusions from the safe withdrawal studies. Since I don't altogether rely on my own spreadsheet either, I use the safe withdrawal studies for validate my spreadsheet results. It may benefit you to save all your social security payments when they start (if they start) to pay your income taxes when they jump because of IRA withdrawals.

Long answer: My main caveat about using just the safe withdrawal studies comes from considering income taxes and, to a lesser extent, social security.

(Please pardon the repetition, I know I've posted this before . . .) If I take the same withdrawal rate throughout my retirement, my standard of living will jump when social security starts in five years and be severely squeezed starting five years later, when I have to start IRA withdrawals and pay sharply-higher income taxes. I don't want that to happen; I intend to provide myself with a constant standard of living in retirement, although it fact it has been climbing. Burning up the IRA while younger is no solution in my view because it squanders the tax shelter prematurely. Just as I don't want my standard of living to fall when those tax bills come due, I don't want it to rise when social security starts (as I bet it will in 2004).

The solution for me, found by my spreadsheet optimization, is to average 3% withdrawals in my 60's, letting the retirement accounts grow a little over that decade, and taking 4% withdrawals thereafter. This way, my standard of living is insulated from the government giving and the government taking away. Or, so I plan. The safe withdrawal rate studies seem to ignore these considerations.

Chips, who runs spreadsheets for the fun of it, while recognizing that some people don't

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Author: SUSIQ One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7141 of 734989
Subject: Re: Safe Withdrawal Rates for Dummies Date: 3/29/2000 8:41 PM
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Chipsboss said: I have to start IRA withdrawals and pay sharply-higher income taxes. I don't want that to happen; I intend to provide myself with a constant standard of living in retirement, although it fact it has been climbing. Burning up the IRA while younger is no solution in my view because it squanders the tax shelter prematurely. Just as I don't want my standard of living to fall when those tax bills come due, I don't want it to rise when social security starts (as I bet it will in 2004).


I didn't even THINK about that - I was so focused on not running out of funds that I haven't given much thought to the optimum usage of deferred vs. non-deferred assets (mine are about half and half).

Thank you so much for your willingness to answer these simple questions. I know you all must get weary (at times) answering the same things over and over again.

It's really scary to me sometimes, the idea of managing money effectively enough to last 30-40 years. But I am tired of being held hostage to advisors.

Thanks again for your insight and willingness to share it.

Susi

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Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7152 of 734989
Subject: Re: Safe Withdrawal Rates for Dummies Date: 3/30/2000 1:22 AM
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for Susi:

It is my pleasure to be of some help and encouragement. I rarely get tired of talking about these matters and, when I do, I just quit posting for a while and let the other people here handle it. As you've noticed, we have LOTS of volunteers here.

of deferred vs. non-deferred assets (mine are about half and half).

Mine were too when I retired. Since I haven't touched the IRA yet, it has grown from 46.1% to 62.5% of the total pot.

. . . optimum usage of deferred vs. non-deferred assets . . .

That's a pet subject of mine. There's no way I want to let that predictable income tax burden force my standard of living down in my 70's and 80's, or erode the retirement capital either. IMHO, the issue gets too little attention.

It's really scary to me sometimes, the idea of managing money effectively enough to last 30-40 years.

I know precisely whereof you speak. When I quit working in 1993, I kept reflecting that someone's salary -- my own or my parents' -- had supported me my entire 53 years to that point. It was scary, particularly since 1994 was such a flat year. I'm still somewhat uneasy, but being able to live on 3% withdrawals or, in a pinch, much less than that helps me stay calm.

Will Rogers (or was it Mark Twain?) said something like "Buy stocks and sell 'em when they go up. If they don't go up, don't buy 'em." In that spirit, I advise "Be sure to retire into a bull market, otherwise postpone your retirement."

Chips, who is no Will Rogers



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