This is similar to what we did. I retired at age 63 and set aside funds (CD ladder) to my FRA of 66. However, I decided to wait to age 70 to claim my SS benefits. During that time, I added to that ladder so that the income was predictable. One key difference was that we partially annuitized our 401k portfolio (after rolling over to an IRA) using immediate annuities to create lifetime income. We used 1/3rd of the portfolio like a self-funded pension. If I claim SS at FRA (which was postponed four more years), that lifetime income was to cover our essential expenses. Two things that helped me was a part-time job (working one day per week) and getting spousal benefits at my FRA. That significantly reduced the withdrawal rate (for essential spending, at least). Because I was able to wait to age 70, that lifetime income covers almost all our expenses, except for major travel. After claiming SS, all IRA withdrawals would then be for discretionary spending and could be variable. I then used a guardrail approach to withdrawals, which allowed us to average 5.8% withdrawals for the first seven years of retirement. Part of this withdrawal also included Roth conversion taxes for roughly 40% of our portfolio. Once I started my SS at age 70, our withdrawal “needs” dropped to 3%. This spending level still covers about three major international trips each year. Since retiring 12 years ago, our portfolio (invested at 70/30 asset allocation) has grown beyond what we had at retirement (after annuitization). We did have a reasonably good sequence of return, though. We spend what we want (within reason) but have used the 4% rule as a gauge along with our guardrail criteria.
We lived in our house in MA for over 25 years. During that time, we also built a four-season lakefront vacation home about two hours north in NH. While it was our vacation home, we also envisioned it becoming our retirement home. We discovered quickly that retiring out in the middle of nowhere was not for us. Taking 30 minutes to get anything turned out to be more of an issue than we thought. It was fine when we wanted to “get away from it all” but different when you live there all year around.. We decided to live out the two years (as our primary residence) so that we could get some of the capital gains exclusion. We then used that time to find our “final” retirement house.
After looking for almost a year, our picky nature made it clear that we would not be happy unless we built from scratch and could specify what we wanted. We started to look at property only. In NH, property tax became a key factor in where we would consider buying since each town has its own tax rates and assessments. Our previous house was in the shade (which was nice during summer). For our final house, having great southern exposure was key to support both passive and active solar energy use. Property size was another factor in that we did not want to be so close to neighbors that sound becomes an issue. Proximity to our friends, relatives, stores, hospitals, restaurants, etc. also took on some priority. This would also give us a chance to build an “age in place” residence, all on one level with certain “enhancements” for seniors.
It took another year to find the lot (4.3 acres with excellent southern exposure) and custom build a single level house with all the features we wanted. In addition to relocating, this was also an opportunity to build in hopes that we will be able to live more comfortably as we age.
We’ve been in our house for 11 years now and have been very happy with our decision. All the amenities we want are a short drive away. Our children are within one hour’s drive and there are several medical facilities within 20 minutes or less. The solar panels have kept our utility bills in check and fuels our EV, too. The choice of the town we live in was such that our property tax has increased only 10% over that 11-year period (mostly due to new businesses taking on more of the town’s revenue requirements). Our car and house insurance has barely increased over the past 11 years as well. In fact, the year-to-year variations is typically more than the cumulative increase from 11 years ago (in dollar amounts). The property tax and insurance premiums are completely out of our control so luck also plays a part in all this. At the same time, I think it is also reflective of the area we live in, too.
Your situation sounds very similar to ours except we are 75/78. We built our custom-designed “age in place” house in 2014, one year after I retired. It is basically our dream house with cathedral ceiling, sun room, and all rooms are functional (no dining or living room that never gets used). Everything is on one floor, no transitions, all hardwood or smooth tile flooring with wider hallways and doorways. We built an oversized garage for a wheelchair lift or can accommodate a (10:1 slope) ramp inside the garage with no transition into the house. While we haven’t implemented it yet, we also allocated space to install a personal elevator (large enough to accommodate a wheelchair) to get to the walk-out basement Our previous house that we lived in for 25 years had a nice (small) garden with a 500-gal pond (goldfish only). I built a small gazebo facing the pond and added a solarium on the house so that we could enjoy the garden (with multiple bird feeders). When we built our new home, my wife wanted to recreate a similar garden. However, we overachieved. The pond is now about 5,000 gallons (with a five-foot cascading waterfall) and has over 30+ koi and goldfish. Our garden is roughly 1.5 acres and includes a 900 sq ft vegetable garden area. I designed it as a Japanese garden and also built an Oriental style (open-air) covered sitting area in the garden that overlooks the pond. There is even a rock garden. I have gravel pathways that wind through the various trees and shrubs. It is quite beautiful but controlling the weeds have definitely put a damper on having such a large garden. For the moment, I have hired a gardener to help with weeding (but it gets expensive). In the fall, I also get help with raking, although my zero-turn mower with mulching blades does most of the work. I just need help getting the leaves out between the bushes so they don’t find their way into the pond. I also get help with annual mulching, although I am systematically getting rid of mulching by planting more (controllable) ground cover and perennials. I do wonder what would happen if I am no longer able to do the simpler maintenance. For now, hiring help has been a solution. Working in the garden is also helping me stay in shape since I typically go out, at least, three times a week. I also suffer from arthritis and not sure how much longer I can do the simpler stuff. My wife and I have discussed what might happen when one of us passes. We both agreed that the surviving spouse will most likely move to a continuing care retirement community (CCRC). We had visited and interviewed several in our area. As we approach 80, we are seriously considering putting our names on a waitlist. If we get to the head of the list but are not ready to make the move, we can ask to be put on the bottom of the waitlist again.
One mental “trick” I used to get past the feeling of spending a “chunk of change” to buy our immediate annuities (back in 2013) was to view our retirement savings (mostly 401k) in two parts. The main part (roughly 2/3rd) would be used as an investment vehicle to permit flexibility and growth. The other 1/3rd would be treated as a self-funded pension, shifting the risk from the stock market to high quality insurance companies (with state guaranty association backing). That “pension” in combination with my SS benefit at full retirement age (FRA) would be targeted to cover essential expenses. I used “my” SS benefit (rather than “ours”) so that the coverage would also apply to a surviving spouse. Since I didn’t start SS immediately upon retiring, we also used a bond ladder to cover income shortfalls until my SS was claimed.
In our case, I didn’t claim SS until age 70 and consequently, increased the estimated SS benefit at FRA by another 32%. This delay allowed such lifetime income to now cover almost all our expenses (essential and discretionary) – leaving just major travel expenses as an income shortfall. This meant all IRA withdrawals are for such discretionary spending. The “extra” SS income can also be an inflation hedge (to cover essential expenses) for a surviving spouse in the future. Additionally, while we are both alive, we also have my wife’s SS benefit as supplemental income (available to use for discretionary expenses). Over the past 12 years being retired, the non-COLA immediate annuities plus our SS benefits continue to cover all our expenses except for travel. While I had considered a possible annuity add-on, I have not felt the need to further increase that self-funded pension given the growth of our SS benefits. Our current RMDs covers all our travel expenses. Given roughly half of our portfolio are in Roth accounts, our advisor has told us that we can comfortably spend twice our RMD (as they’re withdrawn from our T-IRA accounts) and still be considered conservative. Now that we are 75/78 and our portfolio, with an average asset allocation of 70/30, is larger than when I retired (after the annuitization), I’m not sure if the lack of COLA on that self-funded pension has had that much of an impact on us (so far).
I have been a proponent of SPIAs and MYGAs since I retired at age 63 (12 years now). For us, it provided the peace-of-mind that we wanted in retirement. The use of SPIA also allowed us to choose how much additional lifetime income we needed such that in combination with my SS benefit, it would cover our essential expenses. It was also important (to us) to limit the amount used for this annuity to be no more than 1/3rd of our portfolio. I thought of this as “setting aside” 1/3rd of our retirement assets to fund our own joint-survivor “pension.” I also wanted to minimize the amount used for this annuity income in order to maximize the investable assets. With this arrangement, all IRA withdrawals would be for discretionary spending and could be variable. This strategy, in turn, also mitigates sequence of return risk (SoRR) by supporting variable savings withdrawals, if necessary. In our case, we need roughly 3% of our portfolio to fund our annual discretionary spending. That led to setting up a “bond allocation” of 30% to cover up to 10 years of discretionary expenses. Half of that bond allocation is CDs and MYGAs. (covering the “next” five years of withdrawals). The other half is bond funds and buffered ETFs. Consequently, that leaves 70% of our portfolio to be invested for the long-term (>10 years). Over the past 12 years (in retirement), this asset allocation has allowed our portfolio to grow fairly consistently and is much higher today than when I retired (after annuitization). This long-term investment horizon can also help mitigate SoRR as well. All these “features” are based on having sufficient lifetime income (factoring SS benefits and annuity income). Another interesting benefit of using SPIA (purchased within an IRA) is the ability to use that annuity payout to further reduce your RMD (via Secure Act 2.0). In our case, our nominal RMD (for our initial 100% tax-deferred portfolio) started off around 4% of our portfolio. We then converted 40% of our portfolio to Roth over a six-year period. That reduced our RMD to 2.4% of our portfolio. If I then compute the revised RMD using “excess” SPIA payout to reduce the non-annuitized T-IRA RMD, the revised RMD drops to 0.9%. Currently, we use 3% for spending and have no need to use this revised RMD. However, when a spouse passes away (and now has to file as single), this revised RMD (at ~1%) can avoid the widower’s tax penalty by substantially reducing taxable income. Roth income (~2%) would then supplement any additional income needed – allowing the same 3% withdrawal rate while keeping taxes comparable to filing MFJ.
I’ve implemented a similar plan since 2020 as well. It was the Covid downturn that started it for me, too. In my case, I dynamically adjust my asset allocation between 60/40 and 80/20. I remember on Valentine’s Day (2020), I shifted my asset allocation from 70/30 (my normal asset allocation) to 60/40, in that I thought the market was overvalued. At the time, Covid was a distant epidemic but the market had not reacted to it as yet. Then in rapid sequence, it seems the market decreased dramatically as the pandemic took shape. I had shifted my asset allocation to 70/30 when the market was down 15% (had planned to do so at 10% but it ran past me too quickly). Then in late Mar 2020 (~30% down), I shifted to 80/20. In our case, we have sufficient income (SS benefits plus annuity income) such that all savings withdrawals are for discretionary expenses. Our minimum 20% “bond allocation” will cover about seven years of such spending, allowing us to maintain our lifestyle. When the market recovered (Nov 2020), I rebalanced to 70/30. Since then, I have gradually shifted my asset allocation based on market changes (after the fact) so that no guessing of lows or highs is involved (using percent difference as well). Most of the time, I am at 70/30. The worst case is that the market continues to grow (with no dips or corrections) and I’m “stuck” at 60/40 (which I’m happy to stay at). If that were to happen, then standard rebalancing will maintain that target asset allocation. At the same time, my minimum 20% bond allocation (mostly CDs) during "bad times" allows us to “stay the course” for seven years (while our 30% normal bond allocation will last us 10 years). During this period (2017-2022), I was also doing large Roth conversions. When a significant market downturn took place (~10% or more), I often did my asset allocation shift in conjunction with my planned Roth conversions (converting cash or bonds from T-IRA and buying equities in my Roth). I was at 60/40 last Oct 2024 and shifted to 70/30 a few days ago. If the market continues its downward trend, I will shift to 80/20 and hold until it recovers. Since we’ve achieved our Roth conversion goals, we do smaller conversions in Dec if the conditions (and income headroom) are right.
I wound up having a phased retirement transition, although it wasn’t planned. I went from full-time to part-time when my wife retired (three years before me), which allowed us to travel more while I was still working. When I did retire (at age 63 in 2013), I was offered a “too good to refuse” part-time job (working one day a week from home) that was supposed to last six months but lasted five years. We had traveled to over 20 countries before I retired, not wanting to “wait for retirement.” This was based on my experience of seeing my parents die early and never experiencing retiring together. In retirement, we have enjoyed traveling the world, having visited an additional 30 countries (not visited previously). This year, we spent five weeks in Hawaii, have plans for a four-week road trip to Orlando next month (where we are taking our grandchildren to Disney World for a week), and a four-week trip to the Azores and Portugal with friends in Sept. We planned and executed our safety-first retirement income strategy (in 2013) and have guaranteed lifetime income that still covers our essential expenses today. We partially annuitized our portfolio (1/3rd) to create a self-funded (joint survivor) pension since my company only had 401k plans and no corporate pension plans. The outcome of our retirement financial plan has matched or exceeded my expectations (partly due to a reasonable sequence of return since 2013). We also completed our travel bucket list and have started a new one. Next year, we are focusing on S. America and the Far East. I volunteer at Care Givers to give rides to those that are homebound and stay active at home maintaining a 1+ acre Japanese garden (with a 5,000-gal koi pond). We live in a three-generation household, where our upstairs is an independent apartment, which was not planned. Socially, things are hectic (two granddaughters age 6 and 9) but it keeps us active and engaged. We custom designed our “last” house (our 7th house) for senior living and energy efficiency. Eleven years later, we are very satisfied with our choices. I don’t think I had much expectations for our non-financial retirement activities other than travel but so far, so good.
We didn’t have a pension so we partially annuitized our IRA such that with my SS benefit at FRA, that combined income would cover our essential expenses. I was able to wait to age 70 to claim SS. That lifetime income (my SS benefit plus joint-survivor immediate annuity) covers all expenses except for major travel. We treat my wife’s SS income as a future inflationary hedge for essential expenses or to supplement our discretionary spending. Since 2018 (when TCJA became effective), we have converted 40% of our portfolio to Roth as well. For a surviving spouse, the remaining SS benefit plus the annuity income still cover all essential expenses. The RMD (which is 40% less due to the prior conversions) is sufficient to cover any additional income needs. If needed, we can also further reduce the RMD by applying the annuity income toward “satisfying” some of the RMD based on the non-annuitized end of year balance (a new Secure Act 2.0 feature). If needed, the surviving spouse can then use the Roth account to cover any additional needs without tax implications. This combination minimizes the widower’s tax penalty.
I’m curious as to what people think what “simplification” means from an investing viewpoint. For us, I’ve been trying to create an income stream (nowadays, to address our RMDs) that we can collect monthly with the appropriate tax withholding while reducing, if not eliminating, the what, when, and how much to buy or sell. In essence, my goal is to do away with the need to rebalance, especially as we enter our 80s and may have to deal with cognitive decline at some point. Presently, while my investment strategy is based on diversified low-cost index funds (simple in itself), I have a somewhat complicate tax planning and dynamic asset allocation approach along with a multi-year structured Roth conversion plan. Fortunately, our conversion plan is coming to an end and simplification is now becoming a priority for us. To explore this approach while I have the mental acuity to assess the outcome, I have set aside a $100K account with a 60/40 asset allocation to test out a concept. This account has 30% in S&P 500 for growth (fully reinvested), 30% in US Div 100 (dividend-paying equities) for growth and income, and 40% in 20-year Treasury bonds for income. Currently, this trial account has experienced (at an annualized rate) a 10% capital growth with a 3.6% dividend/interest “income” stream. The historical growth for this mix has been closer to 7% while the dividend/interest has been close to 3%. Since our RMD withdrawal needs is about 3% (due to 40% of our portfolio in Roth), this income stream seems like a good candidate mix for simplification (short of using an advisor). The actual mechanism is that the monthly withdrawals come from the cash reserve, which is the repository of all non-reinvested dividends and interest). Due to uneven deposits, the cash reserve can be seeded with sufficient assets to satisfy monthly withdrawals. Furthermore, if the cash reserve should be depleted, a backup account (S&P500 index fund, for example) can be used to address any shortfalls (automatically). One thing I'm looking closely at is the consistency of the "income stream" compared to the monthly market volatility (NAV vs dividends). Since you are not selling anything, all growth can be viewed as long-term. This assume that the dividend income is somewhat reliable on an annual basis. I know a “total return” strategy would result in a bit more gain but this seems like it could be a good trade-off if the “income” (over a year) satisfies the RMD withdrawals.
When I retired, I was also a bit frugal when it came to traveling. When my wife got cancer (rare, aggressive form), we were given a poor prognosis. After surgery and two rounds of chemo, she was “declared” cancer free. Before this "declaration" though, she was in the ICU and the doctor told us on one occasion that she would not make it through the night. So we had a lot of ups and downs. After the "good" news, we discovered that the cancer came back within nine months. Her oncologist told her that she had the “best” two treatments (Dana Farber Cancer Center) and didn’t feel that any further treatment would be fruitful (although they had some phase two trials that didn’t look particularly interesting). I couldn’t accept that and started interviewing other medical centers across the country that had clinical trials for this type of cancer and found two that looked promising. This was one time we were glad that we opted for regular Medicare with supplement (Plan F). After a few interviews, I managed to get her enrolled in a trial. One year later, she was cancer free and has been for the past nine years. It was soon after, that my “frugal” travel trends disappeared. Where previously, I would balk at spending three or four times more for business or first class (compared to economy), these days I don’t even look at what economy class cost (unless it is short flight). While we liked traveling, we hated the waiting in line, struggling for overhead space, sitting in cramped seats, dealing with center seat arm “wrestling,” and dealing with that five-year old behind you that likes to kick the seat back. Now traveling is much more comfortable and I don’t think about the cost. My criteria is that we spend a certain amount each year for travel (now that amount is our RMD). As long as we don’t exceed that amount too much, I don’t bother thinking about it. I typically use a travel agent and tell her to book business or first class and only look at the total cost. These days, we consider every trip we take might be our “last” trip. I know you have to worry about having sufficient funds for your heirs (so do I) but once you have that “under control,” why not splurge more.
Comments
This is similar to what we did. I retired at age 63 and set aside funds (CD ladder) to my FRA of 66. However, I decided to wait to age 70 to claim my SS benefits. During that time, I added to that ladder so that the income was predictable. One key difference was that we partially annuitized our 401k portfolio (after rolling over to an IRA) using immediate annuities to create lifetime income. We used 1/3rd of the portfolio like a self-funded pension. If I claim SS at FRA (which was postponed four more years), that lifetime income was to cover our essential expenses. Two things that helped me was a part-time job (working one day per week) and getting spousal benefits at my FRA. That significantly reduced the withdrawal rate (for essential spending, at least). Because I was able to wait to age 70, that lifetime income covers almost all our expenses, except for major travel. After claiming SS, all IRA withdrawals would then be for discretionary spending and could be variable. I then used a guardrail approach to withdrawals, which allowed us to average 5.8% withdrawals for the first seven years of retirement. Part of this withdrawal also included Roth conversion taxes for roughly 40% of our portfolio. Once I started my SS at age 70, our withdrawal “needs” dropped to 3%. This spending level still covers about three major international trips each year. Since retiring 12 years ago, our portfolio (invested at 70/30 asset allocation) has grown beyond what we had at retirement (after annuitization). We did have a reasonably good sequence of return, though. We spend what we want (within reason) but have used the 4% rule as a gauge along with our guardrail criteria.
Post: Is 4.7% the New 4% Safe Withdrawal Rate
Link to comment from August 23, 2025
We lived in our house in MA for over 25 years. During that time, we also built a four-season lakefront vacation home about two hours north in NH. While it was our vacation home, we also envisioned it becoming our retirement home. We discovered quickly that retiring out in the middle of nowhere was not for us. Taking 30 minutes to get anything turned out to be more of an issue than we thought. It was fine when we wanted to “get away from it all” but different when you live there all year around.. We decided to live out the two years (as our primary residence) so that we could get some of the capital gains exclusion. We then used that time to find our “final” retirement house. After looking for almost a year, our picky nature made it clear that we would not be happy unless we built from scratch and could specify what we wanted. We started to look at property only. In NH, property tax became a key factor in where we would consider buying since each town has its own tax rates and assessments. Our previous house was in the shade (which was nice during summer). For our final house, having great southern exposure was key to support both passive and active solar energy use. Property size was another factor in that we did not want to be so close to neighbors that sound becomes an issue. Proximity to our friends, relatives, stores, hospitals, restaurants, etc. also took on some priority. This would also give us a chance to build an “age in place” residence, all on one level with certain “enhancements” for seniors. It took another year to find the lot (4.3 acres with excellent southern exposure) and custom build a single level house with all the features we wanted. In addition to relocating, this was also an opportunity to build in hopes that we will be able to live more comfortably as we age. We’ve been in our house for 11 years now and have been very happy with our decision. All the amenities we want are a short drive away. Our children are within one hour’s drive and there are several medical facilities within 20 minutes or less. The solar panels have kept our utility bills in check and fuels our EV, too. The choice of the town we live in was such that our property tax has increased only 10% over that 11-year period (mostly due to new businesses taking on more of the town’s revenue requirements). Our car and house insurance has barely increased over the past 11 years as well. In fact, the year-to-year variations is typically more than the cumulative increase from 11 years ago (in dollar amounts). The property tax and insurance premiums are completely out of our control so luck also plays a part in all this. At the same time, I think it is also reflective of the area we live in, too.
Post: Let’s revisit the pros and cons of relocating upon retirement
Link to comment from August 2, 2025
Your situation sounds very similar to ours except we are 75/78. We built our custom-designed “age in place” house in 2014, one year after I retired. It is basically our dream house with cathedral ceiling, sun room, and all rooms are functional (no dining or living room that never gets used). Everything is on one floor, no transitions, all hardwood or smooth tile flooring with wider hallways and doorways. We built an oversized garage for a wheelchair lift or can accommodate a (10:1 slope) ramp inside the garage with no transition into the house. While we haven’t implemented it yet, we also allocated space to install a personal elevator (large enough to accommodate a wheelchair) to get to the walk-out basement Our previous house that we lived in for 25 years had a nice (small) garden with a 500-gal pond (goldfish only). I built a small gazebo facing the pond and added a solarium on the house so that we could enjoy the garden (with multiple bird feeders). When we built our new home, my wife wanted to recreate a similar garden. However, we overachieved. The pond is now about 5,000 gallons (with a five-foot cascading waterfall) and has over 30+ koi and goldfish. Our garden is roughly 1.5 acres and includes a 900 sq ft vegetable garden area. I designed it as a Japanese garden and also built an Oriental style (open-air) covered sitting area in the garden that overlooks the pond. There is even a rock garden. I have gravel pathways that wind through the various trees and shrubs. It is quite beautiful but controlling the weeds have definitely put a damper on having such a large garden. For the moment, I have hired a gardener to help with weeding (but it gets expensive). In the fall, I also get help with raking, although my zero-turn mower with mulching blades does most of the work. I just need help getting the leaves out between the bushes so they don’t find their way into the pond. I also get help with annual mulching, although I am systematically getting rid of mulching by planting more (controllable) ground cover and perennials. I do wonder what would happen if I am no longer able to do the simpler maintenance. For now, hiring help has been a solution. Working in the garden is also helping me stay in shape since I typically go out, at least, three times a week. I also suffer from arthritis and not sure how much longer I can do the simpler stuff. My wife and I have discussed what might happen when one of us passes. We both agreed that the surviving spouse will most likely move to a continuing care retirement community (CCRC). We had visited and interviewed several in our area. As we approach 80, we are seriously considering putting our names on a waitlist. If we get to the head of the list but are not ready to make the move, we can ask to be put on the bottom of the waitlist again.
Post: The Big Garden Dilemma: Aging in Places vs. Future Planning
Link to comment from July 5, 2025
One mental “trick” I used to get past the feeling of spending a “chunk of change” to buy our immediate annuities (back in 2013) was to view our retirement savings (mostly 401k) in two parts. The main part (roughly 2/3rd) would be used as an investment vehicle to permit flexibility and growth. The other 1/3rd would be treated as a self-funded pension, shifting the risk from the stock market to high quality insurance companies (with state guaranty association backing). That “pension” in combination with my SS benefit at full retirement age (FRA) would be targeted to cover essential expenses. I used “my” SS benefit (rather than “ours”) so that the coverage would also apply to a surviving spouse. Since I didn’t start SS immediately upon retiring, we also used a bond ladder to cover income shortfalls until my SS was claimed. In our case, I didn’t claim SS until age 70 and consequently, increased the estimated SS benefit at FRA by another 32%. This delay allowed such lifetime income to now cover almost all our expenses (essential and discretionary) – leaving just major travel expenses as an income shortfall. This meant all IRA withdrawals are for such discretionary spending. The “extra” SS income can also be an inflation hedge (to cover essential expenses) for a surviving spouse in the future. Additionally, while we are both alive, we also have my wife’s SS benefit as supplemental income (available to use for discretionary expenses). Over the past 12 years being retired, the non-COLA immediate annuities plus our SS benefits continue to cover all our expenses except for travel. While I had considered a possible annuity add-on, I have not felt the need to further increase that self-funded pension given the growth of our SS benefits. Our current RMDs covers all our travel expenses. Given roughly half of our portfolio are in Roth accounts, our advisor has told us that we can comfortably spend twice our RMD (as they’re withdrawn from our T-IRA accounts) and still be considered conservative. Now that we are 75/78 and our portfolio, with an average asset allocation of 70/30, is larger than when I retired (after the annuitization), I’m not sure if the lack of COLA on that self-funded pension has had that much of an impact on us (so far).
Post: A theoretical, simplified road to retirement income without a pension. I’ve learned it doesn’t exist.
Link to comment from June 28, 2025
I have been a proponent of SPIAs and MYGAs since I retired at age 63 (12 years now). For us, it provided the peace-of-mind that we wanted in retirement. The use of SPIA also allowed us to choose how much additional lifetime income we needed such that in combination with my SS benefit, it would cover our essential expenses. It was also important (to us) to limit the amount used for this annuity to be no more than 1/3rd of our portfolio. I thought of this as “setting aside” 1/3rd of our retirement assets to fund our own joint-survivor “pension.” I also wanted to minimize the amount used for this annuity income in order to maximize the investable assets. With this arrangement, all IRA withdrawals would be for discretionary spending and could be variable. This strategy, in turn, also mitigates sequence of return risk (SoRR) by supporting variable savings withdrawals, if necessary. In our case, we need roughly 3% of our portfolio to fund our annual discretionary spending. That led to setting up a “bond allocation” of 30% to cover up to 10 years of discretionary expenses. Half of that bond allocation is CDs and MYGAs. (covering the “next” five years of withdrawals). The other half is bond funds and buffered ETFs. Consequently, that leaves 70% of our portfolio to be invested for the long-term (>10 years). Over the past 12 years (in retirement), this asset allocation has allowed our portfolio to grow fairly consistently and is much higher today than when I retired (after annuitization). This long-term investment horizon can also help mitigate SoRR as well. All these “features” are based on having sufficient lifetime income (factoring SS benefits and annuity income). Another interesting benefit of using SPIA (purchased within an IRA) is the ability to use that annuity payout to further reduce your RMD (via Secure Act 2.0). In our case, our nominal RMD (for our initial 100% tax-deferred portfolio) started off around 4% of our portfolio. We then converted 40% of our portfolio to Roth over a six-year period. That reduced our RMD to 2.4% of our portfolio. If I then compute the revised RMD using “excess” SPIA payout to reduce the non-annuitized T-IRA RMD, the revised RMD drops to 0.9%. Currently, we use 3% for spending and have no need to use this revised RMD. However, when a spouse passes away (and now has to file as single), this revised RMD (at ~1%) can avoid the widower’s tax penalty by substantially reducing taxable income. Roth income (~2%) would then supplement any additional income needed – allowing the same 3% withdrawal rate while keeping taxes comparable to filing MFJ.
Post: RDQ Sorry folks, I still see annuities, including deferred annuities, as a viable option for creating steady retirement income.
Link to comment from April 26, 2025
I’ve implemented a similar plan since 2020 as well. It was the Covid downturn that started it for me, too. In my case, I dynamically adjust my asset allocation between 60/40 and 80/20. I remember on Valentine’s Day (2020), I shifted my asset allocation from 70/30 (my normal asset allocation) to 60/40, in that I thought the market was overvalued. At the time, Covid was a distant epidemic but the market had not reacted to it as yet. Then in rapid sequence, it seems the market decreased dramatically as the pandemic took shape. I had shifted my asset allocation to 70/30 when the market was down 15% (had planned to do so at 10% but it ran past me too quickly). Then in late Mar 2020 (~30% down), I shifted to 80/20. In our case, we have sufficient income (SS benefits plus annuity income) such that all savings withdrawals are for discretionary expenses. Our minimum 20% “bond allocation” will cover about seven years of such spending, allowing us to maintain our lifestyle. When the market recovered (Nov 2020), I rebalanced to 70/30. Since then, I have gradually shifted my asset allocation based on market changes (after the fact) so that no guessing of lows or highs is involved (using percent difference as well). Most of the time, I am at 70/30. The worst case is that the market continues to grow (with no dips or corrections) and I’m “stuck” at 60/40 (which I’m happy to stay at). If that were to happen, then standard rebalancing will maintain that target asset allocation. At the same time, my minimum 20% bond allocation (mostly CDs) during "bad times" allows us to “stay the course” for seven years (while our 30% normal bond allocation will last us 10 years). During this period (2017-2022), I was also doing large Roth conversions. When a significant market downturn took place (~10% or more), I often did my asset allocation shift in conjunction with my planned Roth conversions (converting cash or bonds from T-IRA and buying equities in my Roth). I was at 60/40 last Oct 2024 and shifted to 70/30 a few days ago. If the market continues its downward trend, I will shift to 80/20 and hold until it recovers. Since we’ve achieved our Roth conversion goals, we do smaller conversions in Dec if the conditions (and income headroom) are right.
Post: What to do as the Bear Approaches
Link to comment from April 12, 2025
I wound up having a phased retirement transition, although it wasn’t planned. I went from full-time to part-time when my wife retired (three years before me), which allowed us to travel more while I was still working. When I did retire (at age 63 in 2013), I was offered a “too good to refuse” part-time job (working one day a week from home) that was supposed to last six months but lasted five years. We had traveled to over 20 countries before I retired, not wanting to “wait for retirement.” This was based on my experience of seeing my parents die early and never experiencing retiring together. In retirement, we have enjoyed traveling the world, having visited an additional 30 countries (not visited previously). This year, we spent five weeks in Hawaii, have plans for a four-week road trip to Orlando next month (where we are taking our grandchildren to Disney World for a week), and a four-week trip to the Azores and Portugal with friends in Sept. We planned and executed our safety-first retirement income strategy (in 2013) and have guaranteed lifetime income that still covers our essential expenses today. We partially annuitized our portfolio (1/3rd) to create a self-funded (joint survivor) pension since my company only had 401k plans and no corporate pension plans. The outcome of our retirement financial plan has matched or exceeded my expectations (partly due to a reasonable sequence of return since 2013). We also completed our travel bucket list and have started a new one. Next year, we are focusing on S. America and the Far East. I volunteer at Care Givers to give rides to those that are homebound and stay active at home maintaining a 1+ acre Japanese garden (with a 5,000-gal koi pond). We live in a three-generation household, where our upstairs is an independent apartment, which was not planned. Socially, things are hectic (two granddaughters age 6 and 9) but it keeps us active and engaged. We custom designed our “last” house (our 7th house) for senior living and energy efficiency. Eleven years later, we are very satisfied with our choices. I don’t think I had much expectations for our non-financial retirement activities other than travel but so far, so good.
Post: Meeting Expectations?
Link to comment from March 8, 2025
We didn’t have a pension so we partially annuitized our IRA such that with my SS benefit at FRA, that combined income would cover our essential expenses. I was able to wait to age 70 to claim SS. That lifetime income (my SS benefit plus joint-survivor immediate annuity) covers all expenses except for major travel. We treat my wife’s SS income as a future inflationary hedge for essential expenses or to supplement our discretionary spending. Since 2018 (when TCJA became effective), we have converted 40% of our portfolio to Roth as well. For a surviving spouse, the remaining SS benefit plus the annuity income still cover all essential expenses. The RMD (which is 40% less due to the prior conversions) is sufficient to cover any additional income needs. If needed, we can also further reduce the RMD by applying the annuity income toward “satisfying” some of the RMD based on the non-annuitized end of year balance (a new Secure Act 2.0 feature). If needed, the surviving spouse can then use the Roth account to cover any additional needs without tax implications. This combination minimizes the widower’s tax penalty.
Post: How have you financially protected a surviving spouse or dependent?
Link to comment from August 10, 2024
I’m curious as to what people think what “simplification” means from an investing viewpoint. For us, I’ve been trying to create an income stream (nowadays, to address our RMDs) that we can collect monthly with the appropriate tax withholding while reducing, if not eliminating, the what, when, and how much to buy or sell. In essence, my goal is to do away with the need to rebalance, especially as we enter our 80s and may have to deal with cognitive decline at some point. Presently, while my investment strategy is based on diversified low-cost index funds (simple in itself), I have a somewhat complicate tax planning and dynamic asset allocation approach along with a multi-year structured Roth conversion plan. Fortunately, our conversion plan is coming to an end and simplification is now becoming a priority for us. To explore this approach while I have the mental acuity to assess the outcome, I have set aside a $100K account with a 60/40 asset allocation to test out a concept. This account has 30% in S&P 500 for growth (fully reinvested), 30% in US Div 100 (dividend-paying equities) for growth and income, and 40% in 20-year Treasury bonds for income. Currently, this trial account has experienced (at an annualized rate) a 10% capital growth with a 3.6% dividend/interest “income” stream. The historical growth for this mix has been closer to 7% while the dividend/interest has been close to 3%. Since our RMD withdrawal needs is about 3% (due to 40% of our portfolio in Roth), this income stream seems like a good candidate mix for simplification (short of using an advisor). The actual mechanism is that the monthly withdrawals come from the cash reserve, which is the repository of all non-reinvested dividends and interest). Due to uneven deposits, the cash reserve can be seeded with sufficient assets to satisfy monthly withdrawals. Furthermore, if the cash reserve should be depleted, a backup account (S&P500 index fund, for example) can be used to address any shortfalls (automatically). One thing I'm looking closely at is the consistency of the "income stream" compared to the monthly market volatility (NAV vs dividends). Since you are not selling anything, all growth can be viewed as long-term. This assume that the dividend income is somewhat reliable on an annual basis. I know a “total return” strategy would result in a bit more gain but this seems like it could be a good trade-off if the “income” (over a year) satisfies the RMD withdrawals.
Post: Why Wait?
Link to comment from July 6, 2024
When I retired, I was also a bit frugal when it came to traveling. When my wife got cancer (rare, aggressive form), we were given a poor prognosis. After surgery and two rounds of chemo, she was “declared” cancer free. Before this "declaration" though, she was in the ICU and the doctor told us on one occasion that she would not make it through the night. So we had a lot of ups and downs. After the "good" news, we discovered that the cancer came back within nine months. Her oncologist told her that she had the “best” two treatments (Dana Farber Cancer Center) and didn’t feel that any further treatment would be fruitful (although they had some phase two trials that didn’t look particularly interesting). I couldn’t accept that and started interviewing other medical centers across the country that had clinical trials for this type of cancer and found two that looked promising. This was one time we were glad that we opted for regular Medicare with supplement (Plan F). After a few interviews, I managed to get her enrolled in a trial. One year later, she was cancer free and has been for the past nine years. It was soon after, that my “frugal” travel trends disappeared. Where previously, I would balk at spending three or four times more for business or first class (compared to economy), these days I don’t even look at what economy class cost (unless it is short flight). While we liked traveling, we hated the waiting in line, struggling for overhead space, sitting in cramped seats, dealing with center seat arm “wrestling,” and dealing with that five-year old behind you that likes to kick the seat back. Now traveling is much more comfortable and I don’t think about the cost. My criteria is that we spend a certain amount each year for travel (now that amount is our RMD). As long as we don’t exceed that amount too much, I don’t bother thinking about it. I typically use a travel agent and tell her to book business or first class and only look at the total cost. These days, we consider every trip we take might be our “last” trip. I know you have to worry about having sufficient funds for your heirs (so do I) but once you have that “under control,” why not splurge more.
Post: Looking Different
Link to comment from July 6, 2024