Thanks for the catch. I edited my original post, $200k in income, not spending.Maybe you're just using words casually here, but your wife's salary is going to be taxed and so are any withdrawals from your portfolio that have capital gains. $200k in spending will require more than $200k in income.Using round numbers, say we want $200k of spending. Her salary is $85k. So for five years we need a $115k from the portfolio. Then her pension is $70k, for seven years we'd need $130k from the portfolio. Then say (again just round numbers, my SS is $30k per year), going forward we'd need $100k from the portfolio.
In any event, I'd think about this a bit differently than you have. The years before your wife retires have fixed (albeit estimated) expenses. I'd prefer to have that amount in a portfolio (lets call it A) that would be completely depleted at the end of those 12 years. Depending on risk tolerance this could be fully funded in bonds such as TIPS or with some savings for the latter years allocated to stock which also could allow retiring with A not fully funded. Over a 10-year period the market with dividends reinvested usually has positive returns.
Then in year 13 I'd want to have a portfolio (let's call it B) ready that could support a draw using a withdrawal rule (4%, 3.5%, etc) of your choice. The value of B at age 55 could be something less than the full amount calculated depending on what growth rate your assume for portfolio B over the 12 years after you retire and/or if you'd be willing to re-enter the workforce for a while. In this framework, then, you can trade off risk vs amount needed at age 55.
Just to clarify, there are only five years before my wife would retire, not twelve years. Twelve is when I'd be at full SS age of 67.
Interesting way to think about it as two portfolios. Since the first period is only five years, we'd need $575k ($115 X 5 years and assume in a safe asset that can hold pace with inflation).
For SS and beyond, $2.8M + ~$600k for inflation protection on the pensions gets me to $3.4M. Another $100k supplement for the years between her retirement and my SS. About $4M portfolio. This is funny because the way I was calculating it had between $4 and $4.3M as pretty safe!
Statistics: Posted by berg — Tue Jan 09, 2024 8:27 pm — Replies 5 — Views 421