I’ve been doing some rough projections on when to take CPP: it only shaves about a year off the date that I run outta $ completely. Nevertheless, I am still targetting 65 or so.
@T-roy : Please keep me on your mailing list for your B&B - and no dirty, nasty, smelly, disgusting, vile, eeeeevil, puppy-kicking, nasty, dirty rai-SIN toast /scone/pancakes/etc. for brekkie!!! 
google tells me that is canadian social security?
Yup!
There’s a 0.6%/month reduction in payment before age 65. I’d like to keep working a few more years, but it’s nice to know my retirement savings will hold out even if I decide to retire earlier.
They have this in Brazil as well.
We are headed down to Paraty for Easter and they have the gringo price for boat rentals and the locals price.
I just let my wife do the negotiating (saves a lot of $$$)
Can she do so in Portugues?
Yes. She is Brazilian/Portuguese.
Bill Bengen is back, now saying with a slightly different portfolio he thinks you can do a 4.7% withdrawal rate. I’ve thought about the 4% rule a bit, and I think that in my case since I’m likely only facing a ~15 year gap until SS kicks in, I don’t need to be as conservative as the 4% rule and will likely notch up to 4.5%.
Aren’t you US folks concerned that SS won’t be running as you expect (in terms of your expected benefits) when you plan to retire?
for myself and the model I use, I’ve started adjusting the projected benefit to 75% of full benefit as currently stated. I am 12-15 years out?
“model” is too strong. it’s a spreadsheet with relatively simple assumptions and no projected variance from those assumptions
For sure. But I don’t expect it to go to zero, that’s political suicide. Even if they cut it, I expect to get enough to help out a bit.
Voter pressure will force Congress to maintain the benefits level when current law would otherwise force Social Security checks to take a haircut.
The future growth of benefits and the tax rules regarding those benefits are less certain.
Even more uncertain is the future real value of those benefits or general tax levels when the feds are finally forced by millions of unhappy retirees and soon-to-be-retirees to act.
For my household, the gap between (when our retirement finances would run out at “normal” SS benefit levels) and (when our retirement finances would run out at automagically cut SS levels) is probably similar to the gap between (the longevity assumptions normally assumed for financial planning) and (our actual longevity assumptions given our chronic health issues).
(FWIW, we’re in a position where in theory I could retire today. However, given our health issues, I much prefer having someone else pay for much of our health insurance…and I enjoy my work…so I intend to keep working until my doctors force me to retire.)
Is Social Security a frustrating concern? Yes. Sadly, I think the US has more immediate concerns.
I don’t factor in SS in my planning, but I don’t think it will be zero. Pensioners vote and terms are too short for any politicians to take this on in any meaningful way.
When I was a young man, I marked SS zero. Now that I am getting closer to becoming eligible to claim benefits, I think I’ll get something. Could be a decent sized haircut, but I doubt I’ll get nothing. I’d guess at least half, but I am not counting on anything in terms of planning. Once I actually start collecting, I think it gets a lot tougher for the government to take that benefit away. If I was a young person, I would definitely still mark it zero.
At this point, given the massive deficits created by the current spending+tax cut combo, I think we are in for some major pain down the road in terms of both higher taxes and cuts to entitlements.
I think my current plan is to “sell” our house to our kids who will then let us rent it (or part of it) from them. By essentially having them pay the mortgage. 20 years or so from now. I need to check when our mortgage is finished. Or, they move in with us and pay the mortgage. In essence, we’d set up a private reverse mortgage with them instead of some shit company.
Buried in this particular propaganda is an asset allocation that is foundational to his conclusion:
Any thoughts about this?
I kinda think 45% to bonds & money market is too risk averse for a long term plan.
My personal modelling begins with about an 5% annual cash out on the assumption of a 6% long term asset return, so for a few years, the balance actually grows. Then, inflationary pressure on the annual cash needs begins to overwhelm the asset return, leading to a slow fall of net worth (net of occupied real estate) toward 0. I figure if I become desperate for cash after age 80, there’s always a reverse mortgage option.
Definitely depends on the length of the plan, most seem to use 30 years. For me, I’ve got 15 or so until I hit SS so… plus I plan on making some money in retirement, I don’t need to hedge every bet.
If you retire at 35 then you will have a different plan, I think more weight on equities and a lower withdrawal rate.
And the goal in this case is basically minimize the chance of ruin, and I suspect that drives the added bond weight. It’s being safe in case SHTF the day you retire. In the vast majority of cases you’ll be better off with less bonds.
Well, the OASDI system is in a world of hurt.
At some point, within the next decade, things will have to change. Either or both benefits will have to be cut or taxes will have to be raised.
I personally think that the only solutions will recognize that both modifications are necessary to some degree.
Raising taxes seems obvious. But so few people understand the taxation and benefits that are currently in force, that there will be fights about how to proceed with tax increases. The universal feeling is that every single American feels he/she is taxed sufficiently but is 100% behind any tax increase that affects other people that make more dollars than him/herself
People don’t understand the tax cap. They don’t generally understand that the benefits fall off precipitously for higher income people, which achieves the same social equity of a progressive tax structure via a declining benefit. The truth is that a low income worker gets about 4 times the benefit per dollar of taxes paid than someone at the tax cap.
Benefits will have to be reduced. The only question is how those reductions will be spread across the taxpaying populace, and how leveraged against higher income or higher net worth individuals the changes will be.
In both cases, the longer the congress waits to make decisions, the harder both tax hikes and benefit cuts will be.
OASDI is a social insurance program. It’s not welfare. It’s terribly wrong to ever have to tell some people that they don’t get their benefits because they reach FRA with an asset base. I really hate the idea of means testing, but at the bare minimum any means testing should be based off of lifetime earnings, not net worth at FRA. The system should not be redesigned to encourage people to avoid personal saving. It should do the opposite. And there should be no encouragement for a cottage industry for people trying to hide their assets from the government. And as actuaries, I think we should be spreading this particular gospel according to Deep Purple.
How are you coming up with 4x? I thought the formula bends were 90 on the low end and 30 on the high end, so like 3x.
This.
Consider that on the high end the 30% becomes taxable at 85% of high marginal rates so net retained by the recipient is less than his/her 30%. So as a general rule, at the high end you may get 30% but you have to give back about a quarter of it., so you end up with 22.5%, which is about 1/4 of 90%. Correct me if I am wrong. I’m here to learn, too.
On the lower end, the recipient keeps every penny