Hi Chris,

I work for a national lab, which may last longer than a typical
private company. But you are right, they can change the policy anytime.
I'd better plan for the worst scenario just in case. The social
security may not be there in 30 years, so does this subsidy from my
lab.

Thanks for the reminder!


Chris Cowles wrote:
- quote -

"Chris Cowles" <spam_magnet[at]remove-me-bellsouth.net> wrote in message
news:9ylWf.49$Q8.15[at]bignews4.bellsouth.net...
- quote -

That's my plan. If I have a bad year, with respect to investment returns, I
plan on a whole lot of "belt-tightening" for the next year or three. To
blindly
keep taking money out without respect to the current situation is not really
a wise choice, now is it? Gotta think ahead, gotta have the information you
have at hand, and gotta have a contingency plan.

<kasnem[at]yahoo.com> wrote in message
news:1143586916.981444.184580[at]v46g2000cwv.googlegroups.com...
- quote -

What legal obligation does your company have to sustain that subsidy after
your retirement? Little or none, I imagine. Also, even if management
intended to do so, that assumes the company remains as a going concern.
Mergers and failures will affect that likelihood.

Don't bet the farm on it.
--
Chris Cowles
Gainesville, FL

<BreadWithSpam[at]fractious.net> wrote in message
news:yobhd5i7e71.fsf[at]panix2.panix.com...
- quote -

So each year you set your withdrawal goals for the coming year, based on
the previous?

Allan,

You're right. The disability plan terminates the day I stop
working (retire from work). The one I was thinking is actually a "long
term care" option that I can choose under the general health plan,
which my company continue to subsidize after our retirements. The
earlier we enroll, the cheaper the base rate. Thanks!

I will definitely purchase
- quote -

Why would you need disability coverage in retirement?
Disability coverage is to replace earned income. What would your earned
income be in retirement? ( plus employer-sponsored disability plans are
infamous for poor or not-at-all payouts).

<BreadWithSpam[at]fractious.net> wrote
E
- quote -

Actually, you misread the meaning of "precise" above.

- quote -

Please post them. I will be happy to critique them just as
you are critiquing (nitpicking?) others' solutions here.

Though in the final analysis, a failure to recognize the
meaning of "rule of thumb" may cause a lot of wasted time.

The moderators are gone. Time to rein it in. ;-) Last post.
We disagree.

"Elle" <honda.lioness[at]nospam.earthlink.net> writes:

- quote -

[Dangerously simplistic equation attempting to take taxes into effect]

- quote -

The equation posted, while interesting, was wrong to the point of
uselessness. It may even have been dangerous inasmuch as
it simply never applies anywhere and could distract
from real issues like loading up IRAs (where internal rate of return
is entirely tax free and taxes only apply to the distribution -
and even then, only to the distribution as much as it's taxable -
which varies from zero to, in the case of a total income of $40,000,
zero for most of the way and then a low marginal rate
at the end.

- quote -

Actually, as a formula, it's quite precise. Precision
isn't the problem here. suitability and accuracy are.

If folks want to use it as a rule of thumb (and I recommend against
doing so for this particular example - there are other rules of thumb
which are quite useful), they need to know just how bad a rule
of thumb it is - what assumptions are made and what issues have
been swept under the rug.

Don't make or take any of this personally. It's not.

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<BreadWithSpam[at]fractious.net> wrote
- quote -

I am sure I understand your intention, but I think you are
misleading people somewhat at the same time. You make it
sound like there is no solution. Fact is, there isn't,
because no one can predict the future. Does that mean we
don't try to model what a person's best bet will be for
allocation, drawdown rates, etc.?

Sure we do. We just make clear it's only a best bet, and
it's only as good as the assumptions on which it's based.

That's true of any problem's solution.

You seem to like to disparage any person's solution to most
financial problems, because it can't be precise. Solutions
can still be right, or optimal, even though they're
imprecise.

<BreadWithSpam[at]fractious.net> wrote
- quote -

(1) It's very high with Monte Carlo simulations using past,
historical performance as input; and (2) it's not 100% with
any model, given the assumptions.

John,

I am getting incredible advices here. I will definitely purchase
the disability insurance through my company before I retire. The
medical expense is the X factor in retirement planning that can wipe us
out.

Indeed the children might need financial assistence more before
they retire. I should adjust my planning a bit based on this
recognition. Co-owning properties with our children is an good idea to
think about too.

I'll also try a few different tax schemes to fit my goal. Thanks!

BreadWithS:

This newsgroup is incredible. It's nice to share this planet with
many intelligent and generous people. Most newsgroups on the internet
do not have the same spirit of sharing and helping, consequently can
not sustain the optimism that once filled the internet.

I think this newsgroup shows the power of internet the best.

- quote -

BreadWithS:

Thanks for the additional information!

It is good to be reminded about difference between general solution
and specific solution. A first order equation is normally a general
solution to a problem. It provides a framework so that the relationship
between major factors can be understood. It does not provide a perfect
fit, but it provides a model that can guide us in the right direction.

Like approximating a random curve with polynomial equation, we can
never find an equation that can fully describe the curve, but we can
normally find a equation and have 80-90% of fitness. And in most
applications, this high degree of correlation is good enough,
especially with a pair of careful eyes checking any discrepencies along
the way.

If we need a detailed analysis after we get a overview of the
problem-solution through a generic equation, we can run a commercial or
home-made program to plug in specific data. This is a second order
solution that is more particular and useful, but not many people are
able to get. Many financial planner probably provide this level of
analysis too.

On the internet I anticipate advice on a more general lelve. A
general equation like speednxs' and some reminders like yours can help
a novice like me tremendously. Thanks!

"speednxs" <speednxsticket[at]earthlink.net> writes:

- quote -

The assumptions there are also hairy. It's not necessarily
the case that the full investment return is taxed. If the
investment is in an IRA, or much of the gains are unrealized
capital gains, or if there's a mix, it's much much more
complicated.

Also, that tax rate is not applied uniformly to income, either.
We have graduated tax rates, exemptions, phaseouts, etc.

It's a hideous problem, really, and everyone's situation is
different.

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kasnem[at]yahoo.com writes:

- quote -

While an interesting example, that algorithm can screw you
up pretty good during years when your portfolio does not
grow at inflation+4%. During those years, that algorithm
is effectively telling you to dip into principal - which
shortens your likely investment lifetime.

If you modify it so that this year your drawdown is
the lesser of (last year's drawdown + inflation) *or*
4% of the current portfolio value (which may be substantially
less than last years drawdown!) you last a lot longer.

- quote -

Exactly. The modifier assures that in some years, your buying
power *will* go down. Tighten those belts - better than running
out of money completely!

- quote -

Probably left out volatility, too. That's a huge factor.

- quote -

It's a complex topic that does not lend itself well to
soundbites or even rules of thumb. But folks need things
like rules of thumb, so we need to, every once in a while,
take a look at those rules of thumb and examine their
shortcomings. That's one of the things this newsgroup is for.

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"Elle" <honda.lioness[at]nospam.earthlink.net> writes:

- quote -

Assuming they grow at that rate with no volatility.

Add volatility and you start looking at running monte carlo
simulations which will tell you the *likelihood* that that
at that drawdown rate you will last that long. It's not 100%.

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If one objective is to leave money for your daughter then some tax
planning might change the mix substantially.

You also need to consider the relative ages. Leaving her a pot of gold
when she is coming into her retirement years might be less helpful then
jointly buying a house or something similar.

So, get clear on the sustainable level you can draw down your
retirements funds. Separately try to figure out what your lifestyle
will cost and the possible medical. Understand that if you need long
term care the state expects you to deplete your assets before it will
pay the bills. Hence you might have nothing left if the assets are in
your name when you enter care (BTW - They go back a few years looking
for transfers).

It could be best to buy something that appreciates with your daughter
as a co-owner and then pass the assets to her over time or at the end
in a way that is tax efficient.

So, the topic is much more complicated in some ways and you are very
likely to have nothing to pass on if you run into medical or longer
term care issues with $1M in your name.

John Corey

Mark,

Anyone went through the Nasdaq crash in 2000 definitely understand
the essence of this example. Thanks!

- quote -

speeddnxs,

Beautiful equation. I don't understand it yet, but I'll figure it
out. Thanks!

- quote -

Michael:

These additional adjustments can be very useful in all kinds of
scenario -- withdraw 4% yearly (to use up the nest egg at the end ) or
acquire the self sustaining investment rate calculated with the
equation provided in speednxs' article (to sustain the nest egg).
Thanks!

- quote -