1. Hi Fritz,
   Enjoyed waking to this post this morning! Great information. One question—if a couple, are there any scenarios for when the lower earning spouse should start SS? The delay for the higher earner makes perfect sense to help protect a future surviving spouse since one SS is basically lost at a spouse’s death, but I would like to see recommendations for SS for couples who both retired by age 60. Thanks for the insightful post. Enjoy another fabulous day in retirement!

   1. Good question, Karen. I don’t recall seeing that discussed in the report, but there has been much written about optimizing SS strategies for lower earning spouses. It’s beyond the scope of this post, and not something I’ve studied in detail. I’d suggest a Google search to get started, I suspect there’s some decent content on a strategy for how to maximize the spousal claiming strategy for the lower earning spouse.

   2. In case it helps, my favorite Social Security optimization calculator is from Financial Engines – simple enough to run quickly, but give a nice overview of the best way to maximize for the long run (assuming maximizing is one’s most important factor.)

      For some reason the links on the tools page of FE is not leading to the tool any longer, but this direct link I had bookmarked still works.

2. The point about delaying SS until 70.5 is incorrect. There is no benefit to delaying past your 70th birthday. Also, you don’t say whether withdrawals are made at the beginning or end of the year, but I think there may be something wrong with that table. It appears that either the first year incorrectly displays the assumed 5% return or the rest of the table does.

   1. Thanks for the sharp eye, Steve. You are correct, SS deferral to Age 70.0 is the recommendation (I revised the bullet point, obviously I had 70.5 on the brain due to the RMD issue).

      Here’s my logic for the math in the table:

      $1M starting balance – $17.5k (assumes $35k withdrawal is taken monthly) * 5% = $49k earnings. Then, take $1M – $35k (withdrawal) + $49k earnings = ending balance of $1,014,125.

3. Thanks for providing this info. It’s the info I find myself seeking most these days. Quick correction under your bullet points: You state that RMD starts at age 70, not 70.5. Then you say to delay SS claim till age 70.5. Don’t you mean age 70, as there’s no advantage to waiting past 70?

   1. I love it when the readers keep me honest! See my response to Steve above. You are correct. I had RMD/SS dyslexia, it seems. Fortunately, the text version was correct, but the bullet point had them reversed. Fixed now. Thanks for taking the time to point it out!

4. I like dynamic models as I strongly believe that the SWR must respond to market conditions. I have personally used a CAPE-based formula (1.5/0.5) since retiring at 36 in 2015 based on my own spreadsheets/calculations. Using a CAPE of 30, the SWR is 3.2%. I am happy with it and sleep well at night.

   1. J, I’m also a fan of CAPE-based calcs, but find the Spend Safely Strategy is easier for most folks to implement. Clearly, Wade Pfau and team would have included the CAPE approach in their 292 other methodologies. Ironic how close your 3.2% is to the recommended 3.5% (I would argue 3.0% would be a more likely recommendation in the Spend Safely Strategy if they were dealing with someone who retired as early as you have. As you’ll have seen above, I’m using 3.0% and I retired in 2018 at Age 55). You’re on a great path, congrats on your early retirement!

      1. Thanks Fritz. I agree that for most folks a “CAPE-based SWR” will sound like…Klingon. About 0.5% of my 3.2% is 100% discretionary so I can cut that easily for a year or two without pain should I need to. That’s another point for early retirees: have some wiggle room baked in and be ready to be flexible.

5. The only quibble I have with your example is she is wasting time (i.e. better health and mobility) in the early years. Bump up the wd% in the first 5 years and a little less in the later years and it still works.

   https://pbs.twimg.com/media/D0VneSEXgAUuK_k.png:large

   1. This is a concern of mine also. Would like to travel more in my sixties as I know health and mobility will be a greater concern later. So what w/d percentage do you suggest is safe during the first five years?

      1. Depends on your assumption for future inflation. Wade Pfau & Co are pretty smart guys, I’d be pretty hesitant to go against their advice without putting a lot of thought into it. See my “inflation” data elsewhere in these comments. Someone spending $50k/year at Age 60 would spend $197k (inflation adjusted) at Age 95 at a 4% inflation. Long term inflation averages 3.2%. What will the future hold in terms of inflation & market returns & health care needs? The great unknowns…

   2. I agree with Mr. Smyth. What a waste of youth. There is way to much money to spend in the later years unless she is paying for a nursing home. What is a 90 year old spending $123k on? A new Tesla?

      1. Let’s talk about inflation – I did the math, and if you’re spending $50k at Age 65, that equates to…

         …@ 2% Inflation: $100k
         …@ 3% Inflation: $141k
         …@ 4% Inflation: $197k

         …at Age 95. I put a spreadsheet together, but not sure how to attach it in the comments. Long term inflation has averaged 3.2%. From 1970 – 1990 (20 years) it averaged 6.25 (see here). The great unanswered questions are:

         1) What will inflation be?
         2) What will market returns be?
         3) What will your spending needs be? (e.g., health care)

         There’s a reason it’s called the “Safe” Spending Strategy. What withdrawal rate you decide to use is 100% a Personal decision. I’m using 3% in my early years of retirement (I retired last June at Age 55). I’d rather have too much money when I die, than not enough. But…that’s just me. 🙂

         1. You missed the point, you reduce your w/d when SS kicks in. So it is not a straight line from 50k at 65 to 90, it is 50K (plus inflation) until 70 then it drops back down to 36k. So at 70 SS is covering 40% of needs and in theory has inflation protection. If you have a 50/50 allocation you have a pretty decent chance of covering your inflation needs for the remainder.

            1. Fair enough, Fred. I was simply applying the “math” of the strategy to calculate how much Jane could “safely” spend by year. Straight formula.

   3. Fred, to be fair, the increased spending in later years would be towards a nicer assisted living facility, not vacations or other splurges. Having helped 4 loved ones cross over in recent years, having the money to spend for better facilities and staff attention makes a big difference (all 4 had completely different options, and money made a big difference).

      1. I agree but multiple studies show spending slows way down when you get older – I see it with my aging father and in-laws. They are in their 80s and limited mobility, but still living independently, and spend very little outside of necessities.

6. Fritz, thanks very much for your post this morning. This is exactly the timely information I’m seeking.
   Best regards from Galveston and Houston.
   Cynthia

7. Another great Blog Fritz!
   In the past I have been frustrated with the complexity of proposed Safe Spending Strategies. The better the proposed strategy, the more complicated they seemed to be.
   This plan seems to align with most of the current research which points to a safe withdrawal rate of 3.5% in our suspected low return environment going forward. Also, this plan seems to incorporate sequence of return risk automatically by using a percentage of the total portfolio instead of annual withdrawals of a constant fixed amount plus SS COLA additions.
   Without realizing it, I also have been moving towards this type of withdrawal plan. I had already settled on 3.5% of portfolio value each year, and delaying SS until age 70. I had not considered using RMD tables for withdrawals after 70, but this makes sense also, and has historical perspective.
   All in all, a comprehensive plan that makes sense, and will be much easier to implement.

   1. Amazing minds think alike!

      1. That might be stretching things a bit.

8. That really is the silliest thing I have seen in awhile. The lady basically lives on minimum wage for the first 5 years of her retirement only to die with over 600,000 dollars in the bank. Plus she has an inflation adjusted income of over 100,000 dollars per year for the last 11 years of her life when all the studies show that people spend a lot less in their later years of life.

   So while she is young and can get out and do things, she lives off of $35,000. When she is old and does not drive or travel she gets $123,000, does that make any sense to anyone??

   The margin of safety on this one is out of whack.

   I must be missing something.

   1. Rick, one thing you might not be thinking of is increased spending in later years towards a nicer assisted living facility, not vacations or other splurges.

      And those first few years, one must be careful how much is spent. It can deplete your nest egg quickly if you have some down years in the stock market.

   2. I agree. It would be hard to live on $35k anyway but then leaving 600k on the table. Not so sure I want to do that.

      1. 35k would pay for essentials. Then I’d just sit in a chair every day.

      2. Retirement withdrawal strategies are tricky, right!? Spend too much early, and risk eating cat food in your old age. Spend too little early, and leave a pile. Tough needle to thread.

         I wish we call all tell what Market Returns, Spending Needs and Inflation were going to be over the next 30 years, it sure would make retirement planning a lot easier.

         1. That and knowing exactly when you and your spouse would die. That would make retirement withdrawals a lot easier…

   3. See my response above to Rick H, first part is copied again here:

      “Let’s talk about inflation – I did the math, and if you’re spending $50k at Age 65, that equates to…

      …@ 2% Inflation: $100k
      …@ 3% Inflation: $141k
      …@ 4% Inflation: $197k”

      …at Age 95.

9. I think you’re probably right. I saw something from a source I trust that says you can withdraw 5% (of your portfolio balance) safely if you skip the inflation adjustments, provided you are sensibly diversified. Not too aggressive and not too conservative, and across global geographies. Of course, this means your income will fluctuate, but if you’re okay with that, you’ll probably be in great shape.

10. Great post and good rule of thumb for withdrawal strategies. As mentioned, the key to a successful withdrawal strategy is to have a reasonable withdrawal rate (I recommend 3.5 – 4%), a diversified portfolio that can handle the up’s and down’s of the market, and discipline along the way.

    I agree with several members, I would prefer a little higher percentage of withdrawal to have more money in the early years while lowering the amount of savings at age 95. In this example, having 600k leftover is very conservative unless your goal is also leaving an inheritance.

    1. I’m glad somebody liked it! Seems a lot of folks are throwing rocks at me on this one! Ah well, the life of a blogger…

11. The strategy is safe in terms of not outliving your money, but I’d like to live on more than $35k when I first retire. Delaying SS is a good strategy, but starting SS allows me to not use as much of my own money from savings. I don’t really need it as an add on – I’m not waiting to 70 to start doing vacations or doing better wine tastings.

    Now, If I anticipated that I’d be starting tuition payments when I’m 70, the situation would look different to me.

    1. That’s why it’s called “Personal” Finance, right Kev? Thanks for stopping by! I’m disappointed that you won’t be going to college in your 70’s, tho. Wink.

12. Great post and great framework for establishing a SWR. In addition to the unknowns you highlight (inflation, market returns, future needs), the other big sort-of-unknown is the size of your SS. For someone with a 30+ year work history with a high salary (https://steveark.com/2019/02/17/i-won-the-social-security-lottery/) SS could be substantial. In this case, I would be more comfortable bumping up my pre-70 spending. All very personal aspects of personal finance and a SWR.

13. I retired early (56) and I have a higher than normal spending rate until I am 70, when my SS kicks in. I track my spending and investments and can cut out about 25%, if necessary. But as I mentioned before (and others in this thread) you can’t get health back! I would rather take a chance and live in a small trailer in my 80s than than die when I am 90 with $1 million in the bank wishing I had gone and done things. Here is good article on the sequence of risk and the historical odds of not outliving a 5.4% wd rate (i.e. pretty good)

    https://www.kitces.com/blog/url-upside-potential-sequence-of-return-risk-in-retirement-median-final-wealth/

    1. Thanks for sharing the link, Fred. I came across that one yesterday, great post. This stuff is tough, and by definition must be a PERSONAL decision after much thought. That’s why it’s called “Personal” Finance! Personally, I like Kitces view on variable spending and suspect we’ll be doing that as the years progress and we know more about our Sequence Of Return reality. Variable spending is more complicated than the Safe Spending Strategy, which was the focus of this post. Lots of great info on the topic, thanks for your involvement on today’s post.

14. Thanks for the post Fritz. I agree with some of the other folks that the complexity of spending strategies can be quite daunting. We are in our early 50’s and contemplating retirement in the near future, so I was pleased to see that you shared your plan of withdrawing 3.0% for the time being. I took a slightly different angle and used Excel to get a decent matching equation for the IRS table data you provided in the link. With that equation, then extrapolated backwards to age 52 to get w/d rates for each year. As it turned out, the w/d rate at age 52 is 2.0% and grows at ~3.0% per year (2.0%, 2.06%, 2.12%, 2.19%, …..). It’s a bit more conservative, but allows us to take the plunge with more certainty.

    1. Interesting analysis, RMD for ER (with a nic like that, I wouldn’t expect anything less!). I shudder to think the RMD calculation for super ER, like someone in their 30’s!

15. One more reply on your article. What is the consensus from the study on asset allocation for this RMD method? I realize that the actual dollar value withdrawn each year will fluctuate based on portfolio value, but there may be a recommended allocation such as 40-70% equities, 20-50% fixed income, and the remainder in cash. This will help offset the continual erosion of purchasing power due to inflation. Of course, each person can tweak their asset allocation depending upon their risk tolerance AND their need to take risk (aka when you’ve won the game….QUIT!)

    1. There was some discussion in the actual study, but I don’t recall a specific allocation recommendation (note my comment about “target date, balanced and/or stock index funds” all being viable options, I think they deferred an allocation recommendation due to the need to understand personal risk tolerance).

16. As usual Fritz, a good topic which generated great discussions in the comments thread. I do like the simplicity of the approach. As I have discussions about this subject with my siblings (who are not interested in reading blogs like yours), I have advocated Evan Iglies “Feel Free” approach where the withdrawal % = age/20. Super simple, safe, allows increased withdrawals in the future like the RMD calculation, and will likely leave some money in the end for their kid’s inheritance.

    1. Wow, I’ve never come across the “Feel Free” concept. Simple, for sure, and very easy to understand. Thanks for sharing. At my age (55), it says I can pull 2.75%, not far off the 3% I mention in the post. Cool.

17. Our spending strategy in retirement is not based on SWR but safety first by flooring (with TIPs and CDs). The Spend Safely Strategy is certainly authored by esteemed folks whom I respect and is probably useful for many people. That said, it has come under some challenge. Here is a nice piece by a couple of pension actuaries which points out a few minor shortcomings (of course it promotes their own spending ideas). http://howmuchcaniaffordtospendinretirement.blogspot.com/2018/12/top-10-reasons-why-smoothed-actuarial.html#more
    I think it is useful to read all viewpoints and educate oneself.
    It sounds very simple but one of the most important things about figuring out how much you can spend in retirement is to fully understand your expenses now, what your incomes sources will be in retirement and what your priorities are for retirement.

    1. “I think it is useful to read all viewpoints and educate oneself.”

       Thanks for leaving the best comment in this thread!

18. Hello All,

    I’ve been on the sidelines for some time now plotting my retirement * Love the blog Fritz ). I have 2-5 years before I pull the trigger. I must say this puts a capital S on ” Safe “. Have a huge income in ones 90s and leaving a large endowment is nice but at the expense of living well in one’s 60s? Not for me.

    The Great Great Grandchildren are really going to like the Birthday Gifts from people in this scenario because they’ll have plenty money to burn. i’m with the majority here. We all know how this ends… you don’t get younger, healthier, stronger as you age.

    1. Congrats on getting off the sidelines. This stuff is so much more fun if you’re on the field.

       I appreciate the Love. Good luck on your journey!

19. I added two comments yesterday and they are still not posted.

    1. Sorry, Bob. I’m retired! Went mountain biking, got behind on “releasing” comments from new folks. Priorities. 🙂

20. Thanks for the post Fritz. I also liked Mike Piper’s take on this strategy on the Oblivious Investor blog. He suggests addressing the shortfall in the early years by setting aside a part of your total portfolio to bridge the gap between retirement and age 70. This amount would be invested in very conservative assets due to the short time frame and immediate need for the money. Well worth a read as supplement to your post.

    https://obliviousinvestor.com/an-ideal-retirement-spending-strategy/

    1. Thanks for sharing, David. I’m a fan of Mike’s work, missed that one. Sounds a bit like my bucket strategy, and avoids sequence of return risk. Heading over to read it now…

21. I don’t agree with waiting until you are 70 to take SS. In my case, I don’t have to rely on SS to pay my expenses and I realize everyone has a different situation. Here is my example of why I’m not delaying SS:

    I will get about $2k at age 62, $2.8K at full retirement age 66 years 8 months. So I would be waiting 56 months to start collecting. That’s a 56 month x $2k = $112K deferment that can be used to invest, vacation and use for ‘fun money’. So by dividing the extra $800 dollars I would get at full retirement age into the $112K deferment, it will take me almost 12 years to get to the break even point. That’s age 78 !! The first 10 years of retirement are go years, next 10 slow go years and last 10 no go years !

22. Hi Fritz:

    Thank you for the article, like you I am conservative and leaning heavily toward this strategy, I retired early this year, January 18th to be exact at 55. My wife will keep working as she is a teacher and needs to work 6 more years to get her pension, since she is an a educator she wont get Social Security, this leads to my question: I could delay to get SS until I am 70 years old with this strategy but, if I pass she wont get anything is it worth it to wait?

    Thank you in advance and great postings!

    Edwin

    1. Edwin, I believe that a wife would get her husbands SS if he dies. Whatever that amount is at that time. Check the SS site and check for sure. A woman that never even worked can apply for 1/2 of husbands at 60 I believe. (Or she can collect husbands at her age of 60, if he dies) (Don’t think THAT is fair though, and I’m a woman! Of course I worked for my ss) Makes me wonder if I should’ve worked at all!

23. Looks like way too much money left at 95.
    Personally, I think it’s better to spend a bit more in the early years.
    Would I care if the nursing home is a little nicer when I’m 95? Probably not.
    I’d rather have more adventures when I’m 65.

    1. Retirement spending is a tough needle to thread, Joe. It’d be SO much easier if we knew market returns, health needs, inflation and how long we’d live. I agree on the adventures while young enough to enjoy them, but I also want to be able to cover late life health needs. I’m hoping to do both! Thanks for stopping by.

24. I’m so happy to have discovered your blog. My husband and I hope to retire within the next 5-6 years. We have a slight age difference, I’m six years younger than him. Do you have any posts or resources related to strategies with couples with age differences? Thanks!

    1. Hey Mom! I’m glad you discovered my blog, too! I’m afraid I don’t have any specific posts written on planning for retirement with an age difference, may be something I need to address in a future post! Thanks for joining The Retirement Manifesto team!

25. Great article generating plenty of discussion. In Australia we are ‘forced’ to drawdown a minimum of 4% at 60, then 5% at 65, then 6% at 75, from our tax free retirement savings (superannuation). So you need to have a portion ‘outside’ super. To understand and get the most out of the system, most people would need a planner to understand the everchanging rules, otherwise they may run the risk of outliving their retirement savings. I 100% there is way too much info about wealth accumulation and not enough about the retirement phase. This article is a great contribution.

    1. Dan, your Australian “rules” are similar to the USA’s “Required Minimium Distribution” rules, which require a higher % withdrawal each year after age 70 1/2. Glad to hear my articles are of help to you, I often wonder how well the “USA-focus” translates into other regions. It sounds like withdrawal strategies are one area where, fortunately, there is some overlap.

26. You address some very important concerns here. Thank you for putting this together. My mom is thinking about retiring next year. I’m collecting some articles to send to her right now addressing the important elements she doesn’t seem to have thought about yet. I’m not sure how well she is planning. Yikes!
    Thanks!

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28. The Word “Safe” has to include the possibility of health care needs which this solution does. That is the reason for potential additional spending needs in latter years. Many have had the need for assisted, memory care or even skilled care. To believe you have no exposure as you age is more than naive. I know I want better care vs running out of funds and forced to Medicaid substandard facilities which currently leaves senior with $30-$90/mo from social security. I am currently providing some additional funds to a few that find them in that situation. Not to mention watching family members having this experience. FIRE needs a serious discussion on this reality or is everyone hoping for the best and/or ignoring the repercussions on this type of spend down on themselves and/or a surviving spouse. Maybe you will be lucky and have kids to pick up the gap of “poor” planning or at least unrealistic planning for those later years. Maybe Suze is right, shoot for 5 million.

29. Not sure the argument is made here. The ‘conservative 5% return pa is net of platform costs and fees. Even with the lowest cost arrangements the real required return might well be 6%+.

    Also, if a variable SWR is to be applied, then why does it only ever go up ?

    But the model does show how an above inflation income raise can be achieved which is sure to be needed with elderly care costs although I do wonder if there were a bull market why taking more earlier to enjoy and decreasing when the SS kicks in might not work equally as well

30. I am 45 and retiring this year, using a 3.3% WR.

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32. Great article! I’m always interested in that last number at the bottom of the chart. “Final balance”. Obviously it’s not a good idea to aim for zero, but is there a rule of thumb? The example indicates that 67.3% of the original balance is left at time of death. Is that a reasonably safe target amount? I genuinely don’t know….

    1. Excellent question, Jim. I’m as interested in how many rows there are in the chart as much as I am about the “Final Balance”. Since we never know how long we’re going to live, it’s impossible to target a “final balance”. I think each of us have to determine what level of risk we’re comfortable with, and how much of a legacy we wish to leave behind. I’ve not seen anything on a rule of thumb, or % of original balance, as a methodology for determining your targeted balance. There are just SOOOO many variables between now and then that I think it’s a factor of risk tolerance. The lower your risk tolerance, the higher you’d want to target as an ending balance. Good question, without a good answer!

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