It sounds like you are talking about having no further income and doing a nine year bridge to Social Security on a nest egg of $550k? Unless there is more to it than this I don’t like the odds that you’ll make it for nine years with much of a portfolio left to supplement your modest SS and pension income at age 70 and beyond.
If you could keep your half of current living expenses to $20k/year, you’ll have to pull around $200k from your portfolio to live on. That could possibly leave enough of a portfolio drawdown + SS + pension to live on after age 70 - fairly modestly. Unless the market has a bad nine years, in which case your portfolio could be down quite a lot, leaving you with little safe drawdown. And if current law stands, Social Security is due to take a huge hit right about when you hit 70, so there's that.
You would need all the money required for the next nine years, figuring for inflation over that time, moved to fixed income now in order to be sure to protect it and have it available in case of a bad market crash. Unless you have a couple hundred thousand in already-taxed cash now, that would mean large drawdowns from your portfolio soon, possibly triggering substantial tax losses. Anyway, you could put that bridge money into something like CD ladders to help protect against inflation and live off it the next nine years.
You’ll spend that nine years watching the markets every day because your income, once you are done bridging to 70, will depend very much on how well your portfolio does between now and then. You’ll be very tied to the market and won’t be able to tear your eyes away from it. If it drops sharply you may be prone to portfolio behavioral errors.
If it were me I would be breathless for those nine bridge years. I know because I am in a situation not too different from this. And then the rest of your retirement could also be constantly watching the stock market, worried about a 35% crash that could heavily impact your drawdown income that you will be heavily relying on.
Unless there is something you did not mention in your initial description, I would say your situation puts you far too dependent on a positive market for your nine years of bridging, followed by retirement needs at 70 and beyond. You would need about twenty years of a bull market to avoid poor sequence of returns risks. An uncomfortable bet since we are currently already in something like fifteen years of more or less bull market. We’re probably not due for another twenty.
If it were me I would grind out that new long term contract and spend a bunch of my free time gaming out my retirement strategy in great detail. I think your SS bridge is currently too long and your dependency on the market too great with only $550k currently - unless there is more to your story.
If you could keep your half of current living expenses to $20k/year, you’ll have to pull around $200k from your portfolio to live on. That could possibly leave enough of a portfolio drawdown + SS + pension to live on after age 70 - fairly modestly. Unless the market has a bad nine years, in which case your portfolio could be down quite a lot, leaving you with little safe drawdown. And if current law stands, Social Security is due to take a huge hit right about when you hit 70, so there's that.
You would need all the money required for the next nine years, figuring for inflation over that time, moved to fixed income now in order to be sure to protect it and have it available in case of a bad market crash. Unless you have a couple hundred thousand in already-taxed cash now, that would mean large drawdowns from your portfolio soon, possibly triggering substantial tax losses. Anyway, you could put that bridge money into something like CD ladders to help protect against inflation and live off it the next nine years.
You’ll spend that nine years watching the markets every day because your income, once you are done bridging to 70, will depend very much on how well your portfolio does between now and then. You’ll be very tied to the market and won’t be able to tear your eyes away from it. If it drops sharply you may be prone to portfolio behavioral errors.
If it were me I would be breathless for those nine bridge years. I know because I am in a situation not too different from this. And then the rest of your retirement could also be constantly watching the stock market, worried about a 35% crash that could heavily impact your drawdown income that you will be heavily relying on.
Unless there is something you did not mention in your initial description, I would say your situation puts you far too dependent on a positive market for your nine years of bridging, followed by retirement needs at 70 and beyond. You would need about twenty years of a bull market to avoid poor sequence of returns risks. An uncomfortable bet since we are currently already in something like fifteen years of more or less bull market. We’re probably not due for another twenty.
If it were me I would grind out that new long term contract and spend a bunch of my free time gaming out my retirement strategy in great detail. I think your SS bridge is currently too long and your dependency on the market too great with only $550k currently - unless there is more to your story.
Statistics: Posted by TheEleven — Thu Oct 24, 2024 11:14 pm — Replies 5 — Views 731