Very interesting retirement plan balance history

[disneysteve]

My cousin retired in 2010.
He took his first IRA distribution in May 2011. Prior to that distribution, the account balance was $373,430.
Every month since then he took out the same amount, $1,565 per month. That continued until his death last month, exactly 10 years later.

The account balance when he died in May 2021 was $445,319.

So he withdrew $18,780/year. That represented 5% of his balance at the start. He continued that same withdrawal for 10 years and still ended up with almost $72,000 more than he started with.

Obviously, the last 10 years were a great time to be invested and that greatly contributed to this outcome, but it's still informative to see how someone's numbers actually played out in real life rather than just an online calculator projection. Plus this account was with a paid investment firm that charged him 1% AUM and he still ended up with more money 10 years later. Had he done it himself, he would have had over $100,000 more after 10 years.

[srblanco7]

My cousin retired in 2010.

Obviously, the last 10 years were a great time to be invested and that greatly contributed to this outcome, but it's still informative to see how someone's numbers actually played out in real life rather than just an online calculator projection.

In effect with the payment to the investment firm, he started with a 6% withdrawal rate. The outcome he realized, with that initial withdrawal rate, certainly speaks to the performance of the markets over the last decade.

[LivingAlmostLarge]

My parents the same thing. They had $511k in 2012 and it is now $1.050M after taking out $24k/year since and paying 2% AUM.

[ua_guy]

That's some great data, recent too. Thanks for sharing. So much of what we talk about with regards to retirement is future planning, hypothetical situations. This appears to be a real track record of retirement planning that turned out better than expected!

[Singuy]

My cousin retired in 2010.
He took his first IRA distribution in May 2011. Prior to that distribution, the account balance was $373,430.
Every month since then he took out the same amount, $1,565 per month. That continued until his death last month, exactly 10 years later.

The account balance when he died in May 2021 was $445,319.

So he withdrew $18,780/year. That represented 5% of his balance at the start. He continued that same withdrawal for 10 years and still ended up with almost $72,000 more than he started with.

Obviously, the last 10 years were a great time to be invested and that greatly contributed to this outcome, but it's still informative to see how someone's numbers actually played out in real life rather than just an online calculator projection. Plus this account was with a paid investment firm that charged him 1% AUM and he still ended up with more money 10 years later. Had he done it himself, he would have had over $100,000 more after 10 years.

People complain about getting screwed if the market crash therefore you should derisk ASAP when you retire. I bet your brother's balance was much higher than 373k 3 years prior, maybe by as much as 60% higher. So he retired and not withdrawing everything like those who are fearful, at the bottom of the market. Because he didn't pulled out everything and stuffed it under his mattress, he ended up with more money than he had.

Still in the camp who thinks derisking is a waste of opportunity even on the day you retire.

[TexasHusker]

My cousin retired in 2010.
He took his first IRA distribution in May 2011. Prior to that distribution, the account balance was $373,430.
Every month since then he took out the same amount, $1,565 per month. That continued until his death last month, exactly 10 years later.

The account balance when he died in May 2021 was $445,319.

So he withdrew $18,780/year. That represented 5% of his balance at the start. He continued that same withdrawal for 10 years and still ended up with almost $72,000 more than he started with.

Obviously, the last 10 years were a great time to be invested and that greatly contributed to this outcome, but it's still informative to see how someone's numbers actually played out in real life rather than just an online calculator projection. Plus this account was with a paid investment firm that charged him 1% AUM and he still ended up with more money 10 years later. Had he done it himself, he would have had over $100,000 more after 10 years.

As you say, the last 10 years have been a time of unprecedented gains in the equities markets. But four out of the last nine decades, the value of the S&P 500 has actually declined, inflation adjusted.

[Scallywag]

My cousin retired in 2010.
He took his first IRA distribution in May 2011. Prior to that distribution, the account balance was $373,430.
Every month since then he took out the same amount, $1,565 per month. That continued until his death last month, exactly 10 years later.

The account balance when he died in May 2021 was $445,319.

So he withdrew $18,780/year. That represented 5% of his balance at the start. He continued that same withdrawal for 10 years and still ended up with almost $72,000 more than he started with.

Obviously, the last 10 years were a great time to be invested and that greatly contributed to this outcome, but it's still informative to see how someone's numbers actually played out in real life rather than just an online calculator projection. Plus this account was with a paid investment firm that charged him 1% AUM and he still ended up with more money 10 years later. Had he done it himself, he would have had over $100,000 more after 10 years.

Interesting!

Was he able to live solely on $18K / year? I'm assuming he had other sources of income as well?

Secondly, IF your annual rate of withdrawl is LESS than rate of market return, I'm assuming you will AT LEAST conserve principal (at least nominally speaking, not counting inflation into the equation)?

Am I missing any math on that?

[disneysteve]

People complain about getting screwed if the market crash therefore you should derisk ASAP when you retire. I bet your brother's balance was much higher than 373k 3 years prior, maybe by as much as 60% higher. So he retired and not withdrawing everything like those who are fearful, at the bottom of the market. Because he didn't pulled out everything and stuffed it under his mattress, he ended up with more money than he had.

Still in the camp who thinks derisking is a waste of opportunity even on the day you retire.

You're assuming something here - that he was heavy in stocks and remained so the entire 10 years.

I haven't (and won't) dug into his allocation or how it changed over time but I know he had a chunk of his portfolio in bond funds to generate income. I don't know if the AA in year 10 was different than in year 0 though.

[disneysteve]

Interesting!

Was he able to live solely on $18K / year? I'm assuming he had other sources of income as well?

No he didn't live on 18K. He also had an IRA at another firm and drew about $1,300/month from that (where he also ended up with more than he started with). He had a $400/mo pension. And he owned 2 individual dividend-paying stocks. He also began collecting SS at 62 when it became clear that he was terminally ill so there was no point in waiting. But he retired at 55.

[Nutria]

He also began collecting SS at 62 when it became clear that he was terminally ill so there was no point in waiting. But he retired at 55.

I thought there was a strict income limit when working while receiving SS.

[disneysteve]

I thought there was a strict income limit when working while receiving SS.

He wasn't working. He retired at 55 and began taking SS at 62.

[Nutria]

He wasn't working. He retired at 55 and began taking SS at 62.

I need to clean my glasses...

[Singuy]

You're assuming something here - that he was heavy in stocks and remained so the entire 10 years.

I haven't (and won't) dug into his allocation or how it changed over time but I know he had a chunk of his portfolio in bond funds to generate income. I don't know if the AA in year 10 was different than in year 0 though.

HA! Your brother WISH he was all in stocks.

Based on the historical return the past 10 years of the market, if your brother withdrew $18,780/year with that starting balance of 373k. A 100% S&P portfolio would have your brother with $1,016,614 left in his balance today, not $445,319. The fact that he didn't go all bonds the market threw him a small bone.

[disneysteve]

HA! Your brother WISH he was all in stocks.

Based on the historical return the past 10 years of the market, if your brother withdrew $18,780/year with that starting balance of 373k. A 100% S&P portfolio would have your brother with $1,016,614 left in his balance today, not $445,319. The fact that he didn't go all bonds the market threw him a small bone.

It was my cousin, not my brother.

But yes, you're correct. An all stock portfolio would have done far better over the past decade.

[LivingAlmostLarge]

It was my cousin, not my brother.

But yes, you're correct. An all stock portfolio would have done far better over the past decade.

But you can only that retrospectively. As Texashusker points out there are many decades where it was flat.