Here’s a question for those of you with a FA who have run a Monte Carlo analysis: What is the success percentage with which you are comfortable? >99% 85%? 70%
I ask because my bff and I were talking, and we were shocked at each other’s numbers. lol
I think that our FA told us that 95% is good, but we have been running at 100% given our current & expected withdrawals. Hopefully, this will allow us to weather anything the economy & our health might throw our way.
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I don’t think that we can even get 100%, just a >99%. I figured that was a CYA move that FAs use. 
Oh, and I should’ve asked … until what age do they have you living? That’s why my bff is fine with a lower number – not a lot of longevity in her family.
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Ah, I just realized that the 100% is what I get when I run our numbers through Firecalc (which means we didn’t run out of money in the simulation; I use age 95 for both of us). I honestly don’t know what our Monte Carlo results are currently. When we originally set things up with our FA, he told us what our results were, and he said that anything over 95% is good from his POV - I think we were around 97%. This was a number of years ago, and now that we take distributions, we actually draw a net of $1,000/month less than we originally thought we’d need.
I think we asked him to use early 90’s for life expectancy.
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DH’s is very insistent that we have to consider 95% for living to 95. FA suggested that working u til we are 70 is a great idea. I watched my parents save and save and go without things for decades, beyond necessary, out of this kind of abundant caution. DH hopes to work until 65 or 66. I am already out, having quit my job for caregiver duty.
My dad passed away at 88 and has left my mother with more money than she could ever spend in what’s left of her lifetime. Her AL is paid for, still owns a house, still gives to charity in huge amounts and has a hefty income she cannot outlive. So much better it would have been, for her to have a new TV at 70, or a trip at 75, or a new kitchen, car, or any sort of creature comfort. There’s a point at which I am unwilling to forego Right Now for Maybe Later.
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Ours was close to 80%, but we are young and I took a slightly unplanned voluntary severance. Will definitely be reviewing each year. If the number doesn’t go up towards 90%, we are prepared to supplement the income as necessary. We have a 12 year old still, so it’s pretty certain our discretionary expenses could go down in 6 years if needed.
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Same here. I wasn’t comfortable below 95%. And, we could live quite comfortably on SS alone if we sold our main house for our Maine cabin, so we also have a “disaster” plan in our mix.
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Answering my own question … I don’t want to get below 97%, and FA has us living until 100.
My parents died in their 90s so I believe that 100 is possible for me, if not preferred. Dh’s parents died in their 80s, and one sibling already has died, one has had a heart attack and another has had a stroke and a kidney transplant and things like gout and was in the hospital with e coli poisoning for eight days and just generally feels like in not great shape so we don’t think dh will live to 100 by any stretch.
us too – house and cars all paid off, 12 month emergency fund in the bank, and if all else fails, we’d sell this house and rent or downsize. But we intend to move to senior living well before that – it’s always a guesstimate about what may befall us as we age.
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About Monte Carlo… We also aren’t comfortable below 95%. We have zero debt but do live in a very expensive COL area (our taxes are crazy high) and still have quite a large home which I worry, with time, will incur expensive fixes. We also own a beach house which also needs regular maintenance - that salt air isn’t forgiving!
We talk about downsizing all the time but doing that in this area is difficult. And, our entire family is here (kids and grandkids) so leaving for a less expensive state isn’t going to happen. Our "disaster’ plan also involves selling our main house and renting or moving a little further/out of this zip code.
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Since we receive no pensions, and our expenses will exceed social security, like most, we will need to rely on savings to make up the difference. Monte Carlo analysis suggest we will be ok – provided our assumptions are valid. But a few additional questions for those of you already in retirement who must also rely on savings + SS only:
- How much “safe” money do you keep readily available (as a percentage of your yearly budget expenses – not dollar amount since it varies for each person).
- What length of time should be set aside in “safe” investments? (i.e. if the market crashes tomorrow, do you have income readily available for 2,5,10 years without dipping into investments?)
- What are your preferred “safe” money products (CD’s, MM, I-Bonds, etc.)?
Past advice was always to maintain a diversified portfolio of stocks, bonds, and cash, in whatever proportions meet your risk tolerances and timeline. Income is then generated from a combination of portfolio returns and principal reduction (or if you’re fortunate just the returns). But the last few years showed that bonds and stocks did not act like they normally do, and cash returns were also awful.
One advisor suggested we always keep two years of readily available “safe” funds to meet our budget difference, understanding the safe funds will likely be eroded by inflation, but only for a limited time.
Another suggested 6 months of emergency money set aside, and then use annuities to generate the minimum income needed above SS. Any other savings is invested and used for the wish list items (travel, gifts, etc.), and longer-term inflation protection.
Another suggested to use investments to generate dividends needed for the difference – but obviously that income will be subject to the market, and not guaranteed.
We’ve never been a fan of annuities, and past advisors always discouraged them as well. If already retired, I’m not sure there is enough time to have them work properly. But the “guaranteed income” is enticing, if willing to live with the expenses.
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We had our meeting with PlanVision yesterday, to make sure our inputs to eMoney were correct and to answer any questions we had. For people who prefer to do things themselves and don’t want to pay an advisor, this seems really worthwhile. Only $299 the first year, less after that, and eMoney is a powerful planning tool.
We were really impressed with the advisor, as he was very sharp and helpful. He thought our 90% equity/10% money market allocation was aggressive but fine for our situation, though the program recommends a much lower equity position, higher bond ratio for our ages. He showed us that we should be fine, even if we start gifting our kids every year. Next is a meeting where they go over the Monte Carlo program, that he thought we would like because eMoney only assumed a 3% annual return, and the Monte Carlo offers so many other different scenarios. So overall, I’m definitely impressed with them, giving us access to such an amazing tool for retirement planning.
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I hope all of you are enjoying Thanksgiving, hopefully with family. We have ShawSon and wife and ShawD and partner and no one else (several folks asked to be included but we really wanted to just spend time with the kids/partners).
We feel really grateful. We have a careers we love, a great marriage (celebrated our 40th this summer), great kids who are launched on their careers, a wonderful house, per the purpose of this post, enough money to retire (I think) etc., and a semi-wild Muscovy duck who climbs up from the river every morning (and afternoon) asking to be fed.
Sounds like a good FA @busdriver11.
We assumed that ShawWife was living until 94 and I was living until 92. Not sure where that came from. Maybe we should extend to 95. Under base case with bad economic assumptions, we are 97% likely to be OK. It goes to 91% if we need extensive LTC. We have a second house but they added a case where we get a third house (I assume this is a Florida or other warm weather house) also and in that case, it drops to 87%. If we needed to cut costs, we could sell our 2nd house and move to a smaller main house.
This assumes that I will retire at 80 and ShawWife in the same year. In the interim, it assumes a lower income from 72 to 80 than I expect to be making. And, it does not include the change I have made in my business model to look for lower current income and higher success fees. So, I have a prospect for a few significant fees. These would definitely make up for any shortfall in the worst case.
In more normal cases, we will accumulate lots of assets.
@kjofkw, we also have no pension. I don’t know how if we have a plan for much is in safe investments. For my main company (which is an LLC), we use very highly rated short-term munis. I’m also not a fan of annuities.
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DH and I do not have pensions. We are both 68, and started working with our FA a few years before we purchased our first annuities, and that was with two. About 27% of our overall portfolio is now in 5 insurance annuities which range in dates for start/end and what they generate – but essentially we obtain the maximum amount w/o penalty from each annuity. The first year is where there has been no draw. on annuity. We had two 10 year annuities that were replaced in 2023 with another company’s 10 year annuity. We have one 7 year annuity and two 12 year annuities. Since the stock account has gone up, our portfolio % in annuities has gone down (at one check point it was 31.17% of our portfolio assets).
We were a little nervous on turning on the cash flow, but once I retired 11 months after DH, and we spent down our liquid assets and set up the cash stream from annuities (w/o DH’s income, we really were not spending down as much as we had projected). We delayed DH’s SS a little; I drew right at 65. Since full SS retirement for us was 66 and 8 months, neither of us is at full SS - but delaying DH by some months was a help for more payment. I was out of the job market for a lot of years, and his has been our primary income and his 401k was our large nest egg until more diversification.
These annuities are doing what they are intended to do - provide us a cash stream in retirement while maintaining the value of the annuity. Each annuity ranges in value from $92,980 to $250,000.
We have spun most annuities out of DH’s 401k when that became so big as to be too risky with stock investments. Always was when there was a good product on the market for annuity purchase.
As far as expenses in an annuity, we have choices on certain things year to year, and the cash value at the end is there as long as the insurance company has not gone belly up – there are expenses of course, but it has not negatively affected our return.
We didn’t have the opportunity to put a lot directly into Roth IRA until did some later conversion of IRAs, so about 11% of portfolio is in Roth IRAs. We don’t expect to ever draw off of the Roth IRAs.
Due to some expenses this year, we do have a larger amount of money liquid than we normally have.
Any ‘emergency’ outside of what we have cash, we can obtain the 401k funds within a relatively short time.
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Has anybody bought an annuity just for investment growth (with deferred taxation), without doing any withdrawals? I have an elderly friend with some kind of investment (I think it’s an annuity), which grew a lot over the past decades…. mentioned that she has Tax concerns when/if she starts withdrawals. But I thought the idea of purchasing an annuity is to generate cash flow.
sounds like life insurance to me.
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Some people who want to give a major gift to a college or non-profit, and they need cash flow on the funds until they die – these kind of places do set up what is essentially a lifetime annuity, so so much cash come to the gift person each year, and when they die the fund value goes to the institution.
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@Colorado_mom, early on, I created what I think was called a 412i plan. According to investopedia, " It was classified as a tax-qualified pension plan, so any amount that the company contributed to it could immediately be taken as a tax deduction by the company. The employee could also deduct their contributions. Guaranteed annuities or a combination of annuities and life insurance were the only things that could fund a 412(i) plan." I think the law that allowed this must have been written by the insurance company lobby as it assumed an artificially low insurance rate to reach the definted benefit number and thus allowed me to save a surprisingly large amount each year. At some point, I had to change it into a 415i (not certain) and then roll it into a 401k when I had maxed out total allowed accumulation. At one point, I think on the rollover, I discovered there was a fairly large annuity in there. So, yes but by plan design rather than choice.
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Jan 2025 Kiplinger has an interesting article “How Couples Can Manage Differing Retirement Time Lines”.
“While more than 1/4th of workers say they expect to retire with their spouse, only 11% of current retired couples left their workforce at the same time according to a survey by Ameriprise Financial.”
This was true of us, as DH had a difficult boss and he saw we had plenty for him to retire 11 months prior to my retirement.
“Given increases in longevity, there’s a good chance that at least one spouse “will live an exceedingly long life” says Abrin Berkemeyer, a CFP with Goodman Financial in Houston.”
“More than half of retirees say their overall spending is higher than they expected”
“More than one0thinrd said they spent more than expected on travel and leisure.”
I really enjoy checking on articles when we receive our Kiplinger Personal Finance issue.
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I posted earlier that we had signed up with PlanVision, but what is interesting is that I just found a retirement analysis that we had done with Schwab almost six years ago. I compared what the spending goals and asset level were predicted to be six years ago, to what it is in actuality and what the PlanVision program shows.
We ended up retiring almost two years earlier than we had told the Schwab advisor in 2019. Our spending is much higher than the spending goals we made after retirement. Our portfolio is way ahead of the Schwab model, and is what they had estimated it would be in 2030. Surprising all around, that both our spending and investment assets would go up. We thought we had made high estimates for the spending, but they were low (partially because it didn’t include taxes). It is obvious that the major factor is what investment returns are, and these plans put in low estimates, because who really knows? I also noticed that estimated health care costs were over 50% less than they are in reality. Medicare will be helpful!
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