How Much Can I Spend?

It’s been 17 months since I last computed how much I can spend per month without depleting my taxable accounts before reaching 59 and a half. I don’t want to pay the 10% penalty of drawing funds from retirement accounts before that age. Yeah, I know about Substantially Equal Periodic Payments, but wish to avoid that.

Before leaving the workforce I used a couple calculators to estimate how much I can spend each month and still have a 98%+ probability of not running out of money before reaching 59.5. That gave me a target number. I later reduced that number by 15% because of that whole global economic mess. Living in the Philippines was kind to my projections because it was easy to live on less than my targets. Way less. As in spending 52% of my target.

Between changes in the market value of my portfolio, taking some profits and making a wash sale on something that rebounded nicely I have about the same amount as when I started this adventure in Nov 08, but 17 less months over which to calculate the spending. That means I can adjust my targets higher. Before I do that I’m examining my premises to see if they still make sense. More importantly, I’m looking at myself to see if I’ve gained any insight to my relation to my assets.


* Ignore any Social Security benefits in my calculations, but collect them if and when they are available.

* Have a fudge factor of six months of living expenses, that is, calculate assuming I can withdraw the money and 60 instead of 59.5

* If the shit hits the fan I can return to the work force as a computer programmer.

* Hope I die before get old (just kidding).

One of my motivations for retiring early was that I didn’t want to get hit by a bus before I had a chance to spend my savings. Now I have to look at the future through the combination of logical financial probability calculations, emotional uncertainty about not having an income and wondering just how much of my assets will survive a global economic implosion. This is the context for my last assumption:

* Money is for spending, not saving.

I’ve been working on acting like I believe this one for decades. This addresses the issue of how much I want to spend and what I want to spend it on, not how much I can spend.


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