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Does anyone have a good system for computing how much extra draw I could take on a 3 to 5 year basis before starting SS? Compute a present value for the Social Security, and add that to my current investment value, and then compute 4% on the new total (and subsequently when I start to draw SS, that would reduce what I take from my investments)?

That doesn't make sense.

Your Social Security benefit can't reasonably be reduced to a present value. Oh, you can do the math...but the answer is mathematically correct but logically nonsense. SS is just an income stream.

And here's an example of what I complained about the other day, that people have heard so much about "4%" that they try to apply it in situations where it doesn't apply.
The "4% rule" is the amount you can take annually--adjusted for inflation--from a annually balanced 60/40 portfolio, and have 97% probability that the portfolio will not run out of money for 30 years.

Here's how to figure what you asked about:
1) Your income need is (will be?) $X per month.
2) SS & pension will provide you $Y per month.
3) Therefore your necessary withdrawal from your retirement portfolio is $X-$Y. Call this $Z
4) Thus, your retirement portfolio needs to be 25 * $Z at the time when you start collecting your SS and pension benefits. Call this $P2 (read: portfolio value when you start collecting.) ($P2 * 4% == $Z)

5) Go to firecalc and plug in different draw percentages for a 5 year period. Then look at the range of ending portfolio values, especially the average. Such as this:

A 6% draw has an average value after 5 years almost equal to the starting value. Problem is, the low is 34%. How lucky do you feel? A 4% draw has average of 112% and low of 43%. It's up to you.

Another problem is that almost one-third (31%) of all 5 year periods have a lower ending balance than the initial balance. So 1/3rd of the time, 4% draw is too much. You need to decide if that's an acceptable risk.

6) In conclusion, figure out what your portfolio value needs to be when you start collecting (step 4). That's what the portfolio value needs to be 5 years before you start. (Call this P1).
Conveniently, at 4% SWR, P1 == P2 and _all_ portfolio withdrawals (both before you start collecting SS and after you start collecting) will follow the same 4% withdrawal rule.

So...the sad news is that you cannot (safely) take a larger draw on your portfolio before you start collecting SS and pension.

OTOH, if your P1 portfolio is much larger than P2, then you are fine. But you also don't need the extra draw. But people usually only ask about an extra draw if they actually need it.


Oh....and start SS at 62, don't defer to 70.
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