We use a variable percentage withdrawal rate that is based on Monte Carlo risk-based guard rails. Every six months or so we run a Monte Carlo analysis and look for a withdrawal amount that results in a 70% rate of success. We have a five-year bond ladder in place which provides an income floor for us to use to cover fixed expenses and a small amount of discretionary spending. When the market is performing well, we effectively roll maturing rungs into our checking account and withdraw from our portfolio up to the guard rail limit the amount indicated and use it to replenish rungs on the bond ladder.
What’s that Dick was saying about how for the life of him he can’t understand why people don’t just read their 200 page brochure and figure it all out - because, you know, it’s all right there and really not that difficult? Yeah, right. Clear as mud says I. I guess if you spend your career working with these plans and reading the plan descriptions every year because you’re paid to, after a decade or two it all starts to make sense and seem pretty straightforward. As for the rest of us I can aver that it is most definitely not straightforward at all. And more to the point, for the all the money we collectively spend on healthcare in the US, it should all be free to everyone. Yet it’s not. Oh, and DB pensions in the private sector are highly unusual.
Think of inefficiency as simply the cost of doing business at large scale. In some industries, scale is a prerequisite to existing. Think retail banking (like Citi Group, Wells Fargo, etc), steel making, federal and state government, military, etc etc. Even though technology continues to make inroads into all of these in terms of improving productivity, at this stage there isn't a clear way for technology to replace people in these industries entirely. As long as that's the case, there will be inefficiency. Why? Because large organizations are actually a miracle of productivity and efficiency. They're able to generate outstanding results using only the average inputs of average people. Many large organizations deliver truly outstanding results. IBM, Apple, Amazon, Walmart, CostCo, Intel, Ford. These behemoths continue to innovate and generate huge revenues and decent or better profits. Sure, plenty of money is lost to inefficiency in all of them. Yet they consistently deliver.
Speaking of QCD's, another way of reducing the IRA balance exposed to RMDs (and therefore taxes) is to buy a QLAC (qualified longevity annuity contract). This allows you to use up to $200,000 of IRA funds to purchase a deferred annuity contract inside your IRA, and set the annuity payment start date to as late as age 85. In the mean time your RMDs are only calculated on the remaining IRA balance. There are a few more details to understand before diving into one of these, but for some they could make sense. There are various brokers for them on the web - google around and you'll find them. (I like stantheannuityman.com - I've bought MYGAs from him, but not a QLAC).
Here's a little trick I use that you might give a try. It's for when you have a two-factor authentication request from a website or app you're logging into, and it asks you to input a six digit code that it just sent to your phone or email. I got tired of trying to simply remember it and then switch over to the login screen to enter it, only to find I'd transposed digits, or otherwise messed it up. So my trick? When the text comes in with that six-digit number, I say it out loud. Not in my head, but actually speak it. For some reason this has been a game changer for me - I don't think I've missed one since I started doing this (other than that one time when my wife overheard me saying a six digit code and she started absent-mindedly repeating them. Doh!).
Really like PV. Great value got money with access to eMoney and 1:1 calls with tax or investment specialists anytime I have a question I’d like some help with.
I was suprised that your opening list of three arguments didn’t include a fourth one: The best strategy is to maximize your benefit, which means waiting until age 70 to claim. I hear this one an awful lot on the various personal finance forums and blogs, to the point it seems like it has become conventional wisdom. Except I don’t fully agree with it.
There’s a behavioral finance aspect to this decision that some may overlook. Even though my wife and I are both in good health and have longevity in our family histories, and we have saved enough to hold off claiming until 70, I still will feel a lot better with a monthly “paycheck” rolling in from SSA sooner than later while we’re still in the early part of our go-go years. After running a few scenarios on opensocialsecurity.com, I discovered that the amount of money ‘left on the table’ by me claiming at 65 and younger wife claiming at 70 over the course of both our lives has an NPV of 5% less than the sum of the payments we’d both receive if I waited until 70. Conclusion: I’ll claim earlier and spend a little more freely now, and not worry about the relatively small amount we’re missing out on.
And yes, I agree it is a highly personal decision that depends on a variety of variables some of which are very qualitative in nature.
I am in a very similar situation - 64, just set up a 4 year MYGA ladder. Due to the size of the rungs and other sources of income, I’m not concerned about IIRMA. However will be watching this thread to see what others have to say about your question. You may want to try your question over on Bogleheads forum. That’s where I first learned about MYGAs. Lots of discussions about them over there.
Comments
We use a variable percentage withdrawal rate that is based on Monte Carlo risk-based guard rails. Every six months or so we run a Monte Carlo analysis and look for a withdrawal amount that results in a 70% rate of success. We have a five-year bond ladder in place which provides an income floor for us to use to cover fixed expenses and a small amount of discretionary spending. When the market is performing well, we effectively roll maturing rungs into our checking account and withdraw from our portfolio up to the guard rail limit the amount indicated and use it to replenish rungs on the bond ladder.
Post: Spending It
Link to comment from January 11, 2025
What’s that Dick was saying about how for the life of him he can’t understand why people don’t just read their 200 page brochure and figure it all out - because, you know, it’s all right there and really not that difficult? Yeah, right. Clear as mud says I. I guess if you spend your career working with these plans and reading the plan descriptions every year because you’re paid to, after a decade or two it all starts to make sense and seem pretty straightforward. As for the rest of us I can aver that it is most definitely not straightforward at all. And more to the point, for the all the money we collectively spend on healthcare in the US, it should all be free to everyone. Yet it’s not. Oh, and DB pensions in the private sector are highly unusual.
Post: Quinn’s last rant for 2024. Misinformation is frustrating. No, your wife is not a car!
Link to comment from December 21, 2024
Think of inefficiency as simply the cost of doing business at large scale. In some industries, scale is a prerequisite to existing. Think retail banking (like Citi Group, Wells Fargo, etc), steel making, federal and state government, military, etc etc. Even though technology continues to make inroads into all of these in terms of improving productivity, at this stage there isn't a clear way for technology to replace people in these industries entirely. As long as that's the case, there will be inefficiency. Why? Because large organizations are actually a miracle of productivity and efficiency. They're able to generate outstanding results using only the average inputs of average people. Many large organizations deliver truly outstanding results. IBM, Apple, Amazon, Walmart, CostCo, Intel, Ford. These behemoths continue to innovate and generate huge revenues and decent or better profits. Sure, plenty of money is lost to inefficiency in all of them. Yet they consistently deliver.
Post: Too Big to Succeed by Jonathan Clements
Link to comment from December 14, 2024
Speaking of QCD's, another way of reducing the IRA balance exposed to RMDs (and therefore taxes) is to buy a QLAC (qualified longevity annuity contract). This allows you to use up to $200,000 of IRA funds to purchase a deferred annuity contract inside your IRA, and set the annuity payment start date to as late as age 85. In the mean time your RMDs are only calculated on the remaining IRA balance. There are a few more details to understand before diving into one of these, but for some they could make sense. There are various brokers for them on the web - google around and you'll find them. (I like stantheannuityman.com - I've bought MYGAs from him, but not a QLAC).
Post: A Taxing Retirement
Link to comment from November 16, 2024
Here's a little trick I use that you might give a try. It's for when you have a two-factor authentication request from a website or app you're logging into, and it asks you to input a six digit code that it just sent to your phone or email. I got tired of trying to simply remember it and then switch over to the login screen to enter it, only to find I'd transposed digits, or otherwise messed it up. So my trick? When the text comes in with that six-digit number, I say it out loud. Not in my head, but actually speak it. For some reason this has been a game changer for me - I don't think I've missed one since I started doing this (other than that one time when my wife overheard me saying a six digit code and she started absent-mindedly repeating them. Doh!).
Post: Try to Remember by Andrew Forsythe
Link to comment from November 16, 2024
Really like PV. Great value got money with access to eMoney and 1:1 calls with tax or investment specialists anytime I have a question I’d like some help with.
Post: Finding a flat-fee financial advisor
Link to comment from October 27, 2024
Two comments:
- I was suprised that your opening list of three arguments didn’t include a fourth one: The best strategy is to maximize your benefit, which means waiting until age 70 to claim. I hear this one an awful lot on the various personal finance forums and blogs, to the point it seems like it has become conventional wisdom. Except I don’t fully agree with it.
- There’s a behavioral finance aspect to this decision that some may overlook. Even though my wife and I are both in good health and have longevity in our family histories, and we have saved enough to hold off claiming until 70, I still will feel a lot better with a monthly “paycheck” rolling in from SSA sooner than later while we’re still in the early part of our go-go years. After running a few scenarios on opensocialsecurity.com, I discovered that the amount of money ‘left on the table’ by me claiming at 65 and younger wife claiming at 70 over the course of both our lives has an NPV of 5% less than the sum of the payments we’d both receive if I waited until 70. Conclusion: I’ll claim earlier and spend a little more freely now, and not worry about the relatively small amount we’re missing out on.
And yes, I agree it is a highly personal decision that depends on a variety of variables some of which are very qualitative in nature.Post: Just the Facts by Jonathan Clements
Link to comment from October 19, 2024
I am in a very similar situation - 64, just set up a 4 year MYGA ladder. Due to the size of the rungs and other sources of income, I’m not concerned about IIRMA. However will be watching this thread to see what others have to say about your question. You may want to try your question over on Bogleheads forum. That’s where I first learned about MYGAs. Lots of discussions about them over there.
Post: How to unwind a 3,4, and 5 year MYGA ladder.
Link to comment from June 22, 2024
Jonathan - My heart sank as I read this. Thank you for sharing your news and your perspective. You continue to teach us.
Post: The C Word
Link to comment from June 16, 2024
Or as I like to say, repeating one of my all time favorite quotes,
Post: Don’t Be a Hero
Link to comment from June 5, 2024