The question arose what about disinterested spouses and the DIY portfolio. Here is a quick 15 years of projected retirement starting at age 70, married and single
The assumptions are a WR inflation adjusted to 120K/yr. A TIRA of 600K with a return of 4%. A married net SS income of 44K/yr or a single SS income of 35K/yr. Residence in FL. The taxes are for married filing jointly or single. I did not include cap gains on the portfolio since that is not easily predictable but absolutely needs to be considered. This portfolio is for WR only. It is the portion of a greater net worth that provides yearly income. It consists of SS income as described both non taxed gross inflation adjusted and inflation adjusted taxable, it includes the projected TIRA annuity payout, It includes the amount needed to be taken from a portfolio like a post tax portfolio which makes up the difference between need and the annuities of TIRA and SS. I only did the taxes for the first 5 years so a trend can be established, You can use the chart to compare circumstances. For example, you can easily see how a single gets hosed in taxes. You can easily see how a single needs to stress the portfolio more since the SS is less and the taxes are more. For example at age 75 for the same total 132490 WR, a married has 48580 of SS money available and need only tap the portfolio for 57600. A married pays only 4539 in taxes. A 75 yo single would make only 38643 in SS and need to tap the portfolio for 67537 and the single’s tax bill would be 5962. So you have to pull another 12K out of savings to live the same 132K lifestyle as a single as your married counterpart. If your non TIRA nest egg is 1,500,000, the single is pulling out 4.9% from the nest egg when you count taxes, while the married is pulling out only 4.1%.
This is the kind of granularity you need to survive in retirement and it’s only a part of the story. You also have to worry about health care inflation. It works a bit opposite for health care. If there are 2 of you twice as much medicare payment will be extracted monthly from your SS and twice as much supplemental insurance cost. With this kind of personalized chart you can ask and answer questions like what happens to the old lady’s income when the old man dies at 75? What happens when RMD forces us into a new tax bracket? How does going from married to single affect the tax bracket? What happens if we get a cap gains bill after the tax loss harvest runs out? If there are 2 of you different income cliffs exist where if you make too much money they charge you double or triple for Medicare. There are all kinds of progressive soak the rich fees built into retirement by the government which are hidden from simple minded formulaic predictions. It gets even more complicated tax wise if you happen to have made a post tax contribution to a IRA or SEP and you better have the supporting docs so you can make the calculation. I get about a 6% tax break each year because I saved the paper work. 6% compounded over a couple decades ain’t chicken feed. I’m doing a dance with how we take SS. My wife is younger and as of this year I am filing her as retired. She will take SS at her age 62 for 80% of her FRA income. I will take spousal. So for example if her FRA is 1000/mo her SS will be 800 at 62 and I get 50% of that or 400 for a net 1200/mo payment. My SS will continue to grow till 70 @ 8%/yr. At age 70 she will continue and I will take about 43K/yr for a net 52,600 in SS between us of which only 44710 is taxable. If I RMD 25K/yr at age 70 my portfolio need is only 42,400. I will get a 6% tax break on my 25K RMD and a 15% tax break on our SS plus I will pocket several years of 1200/mo from my wife taking early plus my spousal. At my death she will claim survivor which will pay her about 3500/mo or more depending on inflation. In the end this scheme will generate 150K extra money if I live a normal life span because of the SS growth and it’s subsequent easing on my portfolio need. 150K free money pays for an extra year of retirement by the time you work through the doe see doe. More SS = less from the portfolio = safer WR and better immunity from SOR. This should result in a larger portfolio at the time of my death which translates into safer WR and better SOR immunity for my wife as well.
If you listen to the shuckers who claim “easy math” or reading those same damn 10 bullet points month after month you get what you pay for. I don’t seem how you do this kind of analysis using 4th grade fractions. Also you can now see the utility of doing a low risk high risk portfolio in the WR aspect of your money. In my portfolio I have WR money and disaster money and I consider them separately in my NW. WR money comes from an open portfolio made from SS, TIRA and post tax brokerage and disaster money is closed in a Roth. The open portfolio is liable to SOR the closed is not since nothing is being extracted from it. It is in this kind of SOR sensitive open portfolio that 2 tiers of risk should shine. More to follow.