Live off returns of 401(k)?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I plan to spend 4% of it a year. If it's returns, good. If it's principle, good too. Likely I'll end up with a lot left. Maybe not, but who cares, I'll be dead.

Same. With 4% withdrawal in the first year, and then indexed to inflation, the Monte Carlo simulators say it’s very likely not to run out.

The simulators say you likely won’t run out of money at 4% withdrawal rate, but it does *not* assume you never touch principal. It says you have high odds of not spending all your money in 30 years if you retire at 65. You might, or might not, have much money left at the end of 30 years. If you retire before 65, your safe withdrawal rate is lower.

Yes and no. 4% is likley much too low. The right number is likely 5 or 5.5 or some would say 6. So if you go with 4 and be smart about things it should last. How to be smart? Take 3 or lower if you can in down market years. put in small but meaningful reductions in spend at some point when older -- like reduce spend 2% per year for 5 years from 75-80. Run the numbers and see what this does to your chances of making it. It is amazing. If you retire at 65 ---- take some time off but do some compensated work if you can from 67-73ish. Not a lot and not full time but every dollar you make --- take less from stash. You need to do something in any event.

[Anonymous]

Have budgeted to receive the same dollar amount every year (not percentage), no matter how the market performs. Can always adjust upward, if needed in the future, since it's a conservative figure.

[Anonymous]

Anonymous wrote:

Anonymous wrote:For those of you who have saved at least a few million in your 401(k) (congrats!), are you planning to just live off the annual returns and preserve the entire principle for your kids, or is your plan to live very well and spend down a good amount of the principle? If you do plan to live off the returns, how much did you save?

DH and I just retired (both 55) and are predicting a 33-year life expectancy in retirement. We’ll withdraw 3% this year, all pre-tax, and then index that amount for inflation / COLA every year after. Don’t expect to have anything left at the end. We’re even planning to sell our house and use the proceeds to take a few extravagant around-the-world cruises to make sure our kids won’t be able to inherit anything from that.

We currently have $16M and plan to withdraw $480K this year, $495K in 2025, $509K in 2026, etc… This replaces about 75% of our working years’ HHI (was $622K last year), but we’re also not needing to save any more, so hopefully we’ll be okay.

Doesn’t include SS or small pension of $9K per month. Probably just use those income streams for fun money, Starbucks, etc….

Kids are on their own and, quite frankly, by design. We’ve raised them all to be hardworking self-starters. Nothing would be more embarrassing for or offensive to our kids than receiving an inheritance handout, so we do our best to spare them from this – one of life’s greatest signs of failure.

Typical boomer mentality. Me, me, me!

The irony is that boomers like you only amassed so much wealth because you voted yourself massive tax cuts as well as big increases in Social Security and Medicare benefits. So you're basically putting it all on the national credit card to fund your lavish luxury cruises while leaving the bill to your kids.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For those of you who have saved at least a few million in your 401(k) (congrats!), are you planning to just live off the annual returns and preserve the entire principle for your kids, or is your plan to live very well and spend down a good amount of the principle? If you do plan to live off the returns, how much did you save?

DH and I just retired (both 55) and are predicting a 33-year life expectancy in retirement. We’ll withdraw 3% this year, all pre-tax, and then index that amount for inflation / COLA every year after. Don’t expect to have anything left at the end. We’re even planning to sell our house and use the proceeds to take a few extravagant around-the-world cruises to make sure our kids won’t be able to inherit anything from that.

We currently have $16M and plan to withdraw $480K this year, $495K in 2025, $509K in 2026, etc… This replaces about 75% of our working years’ HHI (was $622K last year), but we’re also not needing to save any more, so hopefully we’ll be okay.

Doesn’t include SS or small pension of $9K per month. Probably just use those income streams for fun money, Starbucks, etc….

Kids are on their own and, quite frankly, by design. We’ve raised them all to be hardworking self-starters. Nothing would be more embarrassing for or offensive to our kids than receiving an inheritance handout, so we do our best to spare them from this – one of life’s greatest signs of failure.

Typical boomer mentality. Me, me, me!

The irony is that boomers like you only amassed so much wealth because you voted yourself massive tax cuts as well as big increases in Social Security and Medicare benefits. So you're basically putting it all on the national credit card to fund your lavish luxury cruises while leaving the bill to your kids.

But unless you’re their kids, why do you care if they spend their assets instead of leaving them as an inheritance? The rest of us are probably better off if they’re putting that money back into the broader economy anyway.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For those of you who have saved at least a few million in your 401(k) (congrats!), are you planning to just live off the annual returns and preserve the entire principle for your kids, or is your plan to live very well and spend down a good amount of the principle? If you do plan to live off the returns, how much did you save?

DH and I just retired (both 55) and are predicting a 33-year life expectancy in retirement. We’ll withdraw 3% this year, all pre-tax, and then index that amount for inflation / COLA every year after. Don’t expect to have anything left at the end. We’re even planning to sell our house and use the proceeds to take a few extravagant around-the-world cruises to make sure our kids won’t be able to inherit anything from that.

We currently have $16M and plan to withdraw $480K this year, $495K in 2025, $509K in 2026, etc… This replaces about 75% of our working years’ HHI (was $622K last year), but we’re also not needing to save any more, so hopefully we’ll be okay.

Doesn’t include SS or small pension of $9K per month. Probably just use those income streams for fun money, Starbucks, etc….

Kids are on their own and, quite frankly, by design. We’ve raised them all to be hardworking self-starters. Nothing would be more embarrassing for or offensive to our kids than receiving an inheritance handout, so we do our best to spare them from this – one of life’s greatest signs of failure.

Typical boomer mentality. Me, me, me!

The irony is that boomers like you only amassed so much wealth because you voted yourself massive tax cuts as well as big increases in Social Security and Medicare benefits. So you're basically putting it all on the national credit card to fund your lavish luxury cruises while leaving the bill to your kids.

So first off this is a joke.

To your comment on boomers, investing in the market over time can result in a decent sized brokerage account or 401k. Why does this anger you so?

[Anonymous]

Anonymous wrote:

Anonymous wrote:For those of you who have saved at least a few million in your 401(k) (congrats!), are you planning to just live off the annual returns and preserve the entire principle for your kids, or is your plan to live very well and spend down a good amount of the principle? If you do plan to live off the returns, how much did you save?

DH and I just retired (both 55) and are predicting a 33-year life expectancy in retirement. We’ll withdraw 3% this year, all pre-tax, and then index that amount for inflation / COLA every year after. Don’t expect to have anything left at the end. We’re even planning to sell our house and use the proceeds to take a few extravagant around-the-world cruises to make sure our kids won’t be able to inherit anything from that.

We currently have $16M and plan to withdraw $480K this year, $495K in 2025, $509K in 2026, etc… This replaces about 75% of our working years’ HHI (was $622K last year), but we’re also not needing to save any more, so hopefully we’ll be okay.

Doesn’t include SS or small pension of $9K per month. Probably just use those income streams for fun money, Starbucks, etc….

Kids are on their own and, quite frankly, by design. We’ve raised them all to be hardworking self-starters. Nothing would be more embarrassing for or offensive to our kids than receiving an inheritance handout, so we do our best to spare them from this – one of life’s greatest signs of failure.

The most likely result of your plan is that at death you have more than you started with in today's dollars.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For those of you who have saved at least a few million in your 401(k) (congrats!), are you planning to just live off the annual returns and preserve the entire principle for your kids, or is your plan to live very well and spend down a good amount of the principle? If you do plan to live off the returns, how much did you save?

DH and I just retired (both 55) and are predicting a 33-year life expectancy in retirement. We’ll withdraw 3% this year, all pre-tax, and then index that amount for inflation / COLA every year after. Don’t expect to have anything left at the end. We’re even planning to sell our house and use the proceeds to take a few extravagant around-the-world cruises to make sure our kids won’t be able to inherit anything from that.

We currently have $16M and plan to withdraw $480K this year, $495K in 2025, $509K in 2026, etc… This replaces about 75% of our working years’ HHI (was $622K last year), but we’re also not needing to save any more, so hopefully we’ll be okay.

Doesn’t include SS or small pension of $9K per month. Probably just use those income streams for fun money, Starbucks, etc….

Kids are on their own and, quite frankly, by design. We’ve raised them all to be hardworking self-starters. Nothing would be more embarrassing for or offensive to our kids than receiving an inheritance handout, so we do our best to spare them from this – one of life’s greatest signs of failure.

Typical boomer mentality. Me, me, me!

The irony is that boomers like you only amassed so much wealth because you voted yourself massive tax cuts as well as big increases in Social Security and Medicare benefits. So you're basically putting it all on the national credit card to fund your lavish luxury cruises while leaving the bill to your kids.

Someone who is 55 is not a boomer, so your comment doesn’t really apply here.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I plan to spend 4% of it a year. If it's returns, good. If it's principle, good too. Likely I'll end up with a lot left. Maybe not, but who cares, I'll be dead.

Same. With 4% withdrawal in the first year, and then indexed to inflation, the Monte Carlo simulators say it’s very likely not to run out.

The simulators say you likely won’t run out of money at 4% withdrawal rate, but it does *not* assume you never touch principal. It says you have high odds of not spending all your money in 30 years if you retire at 65. You might, or might not, have much money left at the end of 30 years. If you retire before 65, your safe withdrawal rate is lower.

Yes and no. 4% is likley much too low. The right number is likely 5 or 5.5 or some would say 6. So if you go with 4 and be smart about things it should last. How to be smart? Take 3 or lower if you can in down market years. put in small but meaningful reductions in spend at some point when older -- like reduce spend 2% per year for 5 years from 75-80. Run the numbers and see what this does to your chances of making it. It is amazing. If you retire at 65 ---- take some time off but do some compensated work if you can from 67-73ish. Not a lot and not full time but every dollar you make --- take less from stash. You need to do something in any event.

So then the pp is correct — you can’t assume that you can take a steady 4% withdrawal and not touch principal. There will always be downturns, and a lot depends on when those downturns occur. If it’s early in your retirement, it’s much more damaging if you dip into principal and not get the benefit of compounding on the money that was withdrawn (even if your long term return is well over 4%).

[Anonymous]

When you reach age 71 or so you have a required minimum distribution that is calculated based on your life expectancy. This means you have to use some of your principal and not just leave it for your heirs.

[Anonymous]

Anonymous wrote:When you reach age 71 or so you have a required minimum distribution that is calculated based on your life expectancy. This means you have to use some of your principal and not just leave it for your heirs.

Not a smart comment. You have to take it out of a tax deferred account to a taxable account but you don’t have to spend (other than the taxes) you can still leave to your heirs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:When you reach age 71 or so you have a required minimum distribution that is calculated based on your life expectancy. This means you have to use some of your principal and not just leave it for your heirs.

Not a smart comment. You have to take it out of a tax deferred account to a taxable account but you don’t have to spend (other than the taxes) you can still leave to your heirs.

Correct -- you do not have to spend it. You pay taxes and the rest you can keep for heirs, give it away, invest it. Not really sure the fear of RMDs. Other than you have to pay taxes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I plan to spend 4% of it a year. If it's returns, good. If it's principle, good too. Likely I'll end up with a lot left. Maybe not, but who cares, I'll be dead.

Same. With 4% withdrawal in the first year, and then indexed to inflation, the Monte Carlo simulators say it’s very likely not to run out.

The simulators say you likely won’t run out of money at 4% withdrawal rate, but it does *not* assume you never touch principal. It says you have high odds of not spending all your money in 30 years if you retire at 65. You might, or might not, have much money left at the end of 30 years. If you retire before 65, your safe withdrawal rate is lower.

Yes and no. 4% is likley much too low. The right number is likely 5 or 5.5 or some would say 6. So if you go with 4 and be smart about things it should last. How to be smart? Take 3 or lower if you can in down market years. put in small but meaningful reductions in spend at some point when older -- like reduce spend 2% per year for 5 years from 75-80. Run the numbers and see what this does to your chances of making it. It is amazing. If you retire at 65 ---- take some time off but do some compensated work if you can from 67-73ish. Not a lot and not full time but every dollar you make --- take less from stash. You need to do something in any event.

So then the pp is correct — you can’t assume that you can take a steady 4% withdrawal and not touch principal. There will always be downturns, and a lot depends on when those downturns occur. If it’s early in your retirement, it’s much more damaging if you dip into principal and not get the benefit of compounding on the money that was withdrawn (even if your long term return is well over 4%).

Pretty much the only way you can be in real trouble with a 4% rate is if the downturn happens early. But yes -- anyone who is smart will not just blindly take the 4% in a downturn. Even going to 3.5 will help.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For those of you who have saved at least a few million in your 401(k) (congrats!), are you planning to just live off the annual returns and preserve the entire principle for your kids, or is your plan to live very well and spend down a good amount of the principle? If you do plan to live off the returns, how much did you save?

DH and I just retired (both 55) and are predicting a 33-year life expectancy in retirement. We’ll withdraw 3% this year, all pre-tax, and then index that amount for inflation / COLA every year after. Don’t expect to have anything left at the end. We’re even planning to sell our house and use the proceeds to take a few extravagant around-the-world cruises to make sure our kids won’t be able to inherit anything from that.

We currently have $16M and plan to withdraw $480K this year, $495K in 2025, $509K in 2026, etc… This replaces about 75% of our working years’ HHI (was $622K last year), but we’re also not needing to save any more, so hopefully we’ll be okay.

Doesn’t include SS or small pension of $9K per month. Probably just use those income streams for fun money, Starbucks, etc….

Kids are on their own and, quite frankly, by design. We’ve raised them all to be hardworking self-starters. Nothing would be more embarrassing for or offensive to our kids than receiving an inheritance handout, so we do our best to spare them from this – one of life’s greatest signs of failure.

Typical boomer mentality. Me, me, me!

The irony is that boomers like you only amassed so much wealth because you voted yourself massive tax cuts as well as big increases in Social Security and Medicare benefits. So you're basically putting it all on the national credit card to fund your lavish luxury cruises while leaving the bill to your kids.

Someone who is 55 is not a boomer, so your comment doesn’t really apply here.

Don’t let the facts get in the way!!

[Anonymous]

Once you hit the RMD age, you will be forced to out increasing larger withdrawals that will exceed 4% over time.

[Anonymous]

Anonymous wrote:We are thinking that if we have 9M @ 65 yrs old. All of it is in index fund. Dividend is 1.55%. We can use just 1.55% = $139k ( tax & health care 40%, spending 60%). We can keep index fund & not worry about the up & down of the market. We don’t think about RMD yet. If the money can double every 7 years, we hope that we can reach the goal 9M. 15 more years to go...

In theory, money doubles every 7 years. But in actuality, the way the stock market works is let's say you have 3M. If you're lucky, over the next 7. years you could hit 6M. But it's very likely that you'll have a correct and the 6M could easily be 4M or even 3M. If you stay the course, once you've hit bottom, say at year 9.5, then you have another 7 years from there starting with the 4 or 3M, and so on.

People who think it will simple double every 7 years sequentially are in for a rude awakening if they are dependent on that.