You Might Be Ready to Retire…Who Would You Rather Be?

One of my friends is hitting 73 in August and we were discussing his need to do an RMD this year.  I'm older and have been doing them for some years already.  Our financial affairs have one major difference; he has a significant pension and I do not have any pension.  I'd say that we are both comfortable.  I think he likes his situation, and I like mine.

 

I thought it might be interesting to create a possible scenario where two people might arrive at the same retirement income through different routes.

Joe has a pension, SS and some savings split between taxable and tax deferred (25/75).  He makes around $138,000 per year.

Bill has no pension, he has SS and savings split between taxable and tax deferred(25/75).  He makes around $138,000 per year.

They are the same age, are retired receiving SS.  The both receive $48000 per year in SS.  Joe has a $5,000/Mo no COLA pension, and takes 4% of his $750,000 savings each year to reach his $138,000 income.  Bill takes 4% of his $2,250,000 savings each year to reach his $138,000 income.  Of course, as Bill ages, he will have to take larger RMDs, but he can lower what he takes out of his taxable account to try to keep his income the same as Joe.

Both have a reasonable allocation to equities in their financial assets.  They both own a home without a mortgage.

I suspect that Joe had some kind of government job and that Bill worked for a corporation.  Bill might have had a higher income while he was working.

We might be discussing Sally and Elizabeth instead of Joe and Bill....the names are just for convenience.

So, which might you like to be and why?

 

 

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