HomerJ wrote: ↑Thu Jul 22, 2021 10:38 am
First off, don't count your house if you can help it.
Yes, if you run out of money near the end, you can sell your house or get a reverse mortgage (which is usually a terrible deal, but something you could do if desperate), but normally the equity in your house is hard to access for living expenses...
The normal "rule of thumb" is 4% withdrawals of your LIQUID assets. (25x your retirement expenses) But that's generally for 30 year retirements, although your money will likely last longer.
I'd be comfortable retiring at 60+ with 4% withdrawals, 55+ if you have a good chunk of discretionary expenses built into that 4%, and could cut back on a vacation or two during bad return years.
50-55, I'd probably want 3.5% (28x your retirement expenses)
Retiring before 50, I'd want 3% (33x your retirement expenses). 3% is usually considered a "perpetual" withdrawal rate, where so far, in the past, you could pull 3% a year and never run out of money, even in 60 year retirements.
But we don't have a lot data points for 60 year retirements...
Anyway, those are what I would consider "back of the napkin" calculations.
Pensions and Social Security lower the amount of money you'll need to pull. If your expenses are $60k, and you're going to get $20k in Social Security, then you only need to pull $40k a year from your retirement accounts.
Of course, if you retire early, you have to account for the gap years before you get SS.
If you're 35, should probably just ignore Social Security, and see it as a extra security blanket (You have to make it through 30 years without SS anyway)
If you're 50+, I'd definitely calculate in SS, by calculating the money you need until SS kicks in, and the money you need after SS.
For instance, if your expenses are $60k, you retire at 55, and your SS at 70 is $40k, I'd plan around two buckets. 15 years of $60k = $900k, then you'd need to pull $20k from 70-on... So figure 25 (4% withdrawals) times $20k, or another $500k,
So $1.4 million or so...
Well, sorry... my back of napkin math turned into a full notebook page or two...