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52 Yr old Californian , Looking for retirement advice. and a look at my plan.
Old 04-05-2015, 03:21 PM   #1
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52 Yr old Californian , Looking for retirement advice. and a look at my plan.

I am 52 , single,never married,have significant other. No kids. I live in No. Calif. I work full time , make ~$120k yr. I am planning on working until 55. Sept 2017.

The only debt I have is $260k left on a $475k mortgage at 2.4% interest .
I have will have $250k in 401k , balanced allocation.

$100k in rollover ira, balanced allocation

$20k Roth IRA balanced.

$640k cash, in laddered CDs.

I do not plan on selling my house. Possibly reverse mortgage at some point since I have no beneficiaries. For now I am not figuring it into my plan.
I would like $60k a year to live on. Figuring current expenses at most $45k.
I will not have health insurance, hopefully will be able to get covered california.
I will get $1270 month small pension will take at 55.
I will get $2000 month SS will take at 62.
I am planning on resources lasting until 85.
I want to spend every penny.
Plan seems to work using Firecalc. What do you all think?
Will plan work? If it was your portfolio what might you do different ?

Thanks in advance!
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Old 04-05-2015, 03:42 PM   #2
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Hi, and welcome to the forums.

How long are you expecting your resources to last? One of the first things I'd do is begin reallocating the cash into assets with higher rates of return. You have little right now for protection against inflation.

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Old 04-05-2015, 03:55 PM   #3
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Originally Posted by Marketwatcher View Post
Hi, and welcome to the forums.

How long are you expecting your resources to last? One of the first things I'd do is begin reallocating the cash into assets with higher rates of return. You have little right now for protection against inflation.

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Thank you for reply.

I am planning on 30 years in retirement.
So ,I should take some cash and open a taxable account at Fidelity or such and buy mutual funds with AA 60/40?
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Old 04-05-2015, 04:04 PM   #4
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Have you run firecalc assuming you live to 100? That would be the first step to see whether your portfolio would last. Assume 3% inflation and whatever the current returns are now on your portfolio. That's should give you more good information.


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Old 04-07-2015, 09:29 PM   #5
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Anyone else have advice, help,hints comments. Thank you!
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Old 04-08-2015, 08:46 AM   #6
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I notice you have a "figuring 45K expenses" note - have you tracked that number carefully or is it a guesstimate? I'd strongly recommend carefully tracking expenses for at least a couple years. That way you have solid numbers for expenses and a good idea how much of your budget is fixed expense and how much is flexible if you need to adjust costs in the future.

Check out websites now and get actual numbers for what your future medical expenses will be - that is an important part of the equation.

And I'd echo the suggestion to run firecalc. At first glance this seems tight, especially with so much in cash but firecalc would give a better view than my "quick glance"
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Old 04-08-2015, 10:50 AM   #7
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Originally Posted by Katiek View Post
I notice you have a "figuring 45K expenses" note - have you tracked that number carefully or is it a guesstimate? I'd strongly recommend carefully tracking expenses for at least a couple years. That way you have solid numbers for expenses and a good idea how much of your budget is fixed expense and how much is flexible if you need to adjust costs in the future.

Check out websites now and get actual numbers for what your future medical expenses will be - that is an important part of the equation.

And I'd echo the suggestion to run firecalc. At first glance this seems tight, especially with so much in cash but firecalc would give a better view than my "quick glance"

I agree with this assessment exercise. I did a 2 full year tracking of my current expenses. I see that many expenses are not accounted for because of payroll deduction.

So, my real ER expense would need to include:
1. tax
2. ACA health care
3. Travel budget
4. etc

My estimated expenses therefore doubled to what I actually spend before ER. YMMV. I suggest OP do the same exercise and see how much more needed without payroll deduction in the future.
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Old 04-08-2015, 08:15 PM   #8
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Quote:
Originally Posted by Katiek View Post
I notice you have a "figuring 45K expenses" note - have you tracked that number carefully or is it a guesstimate? I'd strongly recommend carefully tracking expenses for at least a couple years. That way you have solid numbers for expenses and a good idea how much of your budget is fixed expense and how much is flexible if you need to adjust costs in the future.

Check out websites now and get actual numbers for what your future medical expenses will be - that is an important part of the equation.

And I'd echo the suggestion to run firecalc. At first glance this seems tight, especially with so much in cash but firecalc would give a better view than my "quick glance"
Thank you for your reply.

I did run through firecalc and it said I had 100% success.
My expenses have not been tracked , but I will start doing so immediately . I do have a sense of what I spend because my paycheck goes into two accounts one a savings and one to pay bills. I mostly stay within my pay bills budget. My hopeful retirement of 60k gives me $12k for what-ifs .

As far as cash, is it being suggested i invest it in a brokerage account ? I know I am Cash heavy but i really like the safety of knowing i have safe money.

As far as medical, that is the big driver if covered Ca is in place until I hit 65 I would be okay, but without it , there may be a problem.
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Old 04-08-2015, 08:21 PM   #9
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Originally Posted by fh2000 View Post
I agree with this assessment exercise. I did a 2 full year tracking of my current expenses. I see that many expenses are not accounted for because of payroll deduction.

So, my real ER expense would need to include:
1. tax
2. ACA health care
3. Travel budget
4. etc

My estimated expenses therefore doubled to what I actually spend before ER. YMMV. I suggest OP do the same exercise and see how much more needed without payroll deduction in the future.
Thanks for your reply. Tracking expenses for sure starting now.
I guess I am confused about the tax part of it and that was not built into my plan. I am ready now! Don't know if i could stand to have to work another few years . Thanks for advice.
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Old 04-08-2015, 08:42 PM   #10
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Quote:
Originally Posted by fh2000 View Post
I agree with this assessment exercise. I did a 2 full year tracking of my current expenses. I see that many expenses are not accounted for because of payroll deduction.

So, my real ER expense would need to include:
1. tax
2. ACA health care
3. Travel budget
4. etc

My estimated expenses therefore doubled to what I actually spend before ER. YMMV. I suggest OP do the same exercise and see how much more needed without payroll deduction in the future.
Ps. What does payroll tax have to do with anything? Now I am really confused.
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Old 04-08-2015, 10:01 PM   #11
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The might not have meant payroll tax -- but perhaps income tax and/or property taxes.
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Old 04-09-2015, 09:24 AM   #12
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That is a high percentage of your savings in cash, and it's almost guaranteed to lose purchasing power over the years due to inflation. However, if it makes you feel secure, and you're able to afford your expenses (which will rise with inflation) with the money invested in cash, then I wouldn't switch to an asset allocation that will make you feel insecure. It sounds like you've done the calculations to make sure your asset allocation works for you, but I would check those numbers a few times and then make adjustments (if any) that you think may be appropriate.

There is no one "correct" allocation - it depends on what you need from the money you have invested and what your own preferences are.
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Old 04-09-2015, 11:04 AM   #13
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Hello RothR2R,

I took the liberty of entering your information in to the Basic ESPlanner calculator with a few assumptions that I had to make due to lack of information.

1. I used 25 years remaining on your mortgage and 3K annual property tax and 1K annual homeowner's insurance.

2. I used 1.5% annual return on your CD ladder for the 640K cash. Really have no clue what your return is on the CDs.

All the numbers below are in today's dollars so you look marginally OK with the numbers that I entered. Bear in mind these numbers represent a -1.5% real return on the 640K. This should be easy to change by getting that money into a 50/50 AA with 50% in Total Market and 50% in Total Bond. Say VTSAX and VBTLX at Vanguard. This would change the numbers significantly to the plus side with a 2-3% real return.

Finally, when reading the numbers below, the second column, Non-Discretionary Spending, represents housing expenses (PITI) and retirement contributions for the first two years. Again, I had to assume you would max out your 401K and IRA contributions in the years before you retired.

If you would like to run the calculator with more accurate numbers, you will find the ESPlanner Basic here. https://basic.esplanner.com/ESPlannerBasic/family-info

Year Your Age Discretionary Spending Non-Discretionary Spending Total Spending
2015 53 34,490 40,898 75,388
2016 54 34,490 40,508 74,998
2017 55 34,490 16,629 51,119
2018 56 34,490 16,261 50,751
2019 57 34,490 15,904 50,394
2020 58 34,490 15,557 50,047
2021 59 34,490 15,221 49,711
2022 60 34,490 14,894 49,384
2023 61 34,490 14,577 49,067
2024 62 34,490 14,268 48,758
2025 63 34,490 13,969 48,459
2026 64 34,490 13,679 48,169
2027 65 34,490 15,192 49,682
2028 66 34,490 14,972 49,462
2029 67 34,490 14,762 49,252
2030 68 34,490 14,561 49,051
2031 69 34,490 14,369 48,859
2032 70 34,490 14,187 48,677
2033 71 34,490 14,013 48,503
2034 72 34,490 13,848 48,338
2035 73 34,490 13,692 48,182
2036 74 34,490 13,544 48,034
2037 75 34,490 13,404 47,894
2038 76 34,490 13,273 47,763
2039 77 34,490 13,150 47,640
2040 78 34,490 6,636 41,126
2041 79 34,490 6,715 41,205
2042 80 34,490 6,796 41,286
2043 81 34,490 6,880 41,370
2044 82 34,490 6,967 41,457
2045 83 34,490 7,056 41,546
2046 84 34,490 7,147 41,637
2047 85 34,490 7,242 41,732
2048 86 34,490 7,339 41,829
2049 87 34,490 7,439 41,929
2050 88 34,490 7,542 42,032
2051 89 34,490 7,649 42,139
2052 90 34,490 7,758 42,248
2053 91 34,490 7,871 42,361
2054 92 34,490 7,987 42,477
2055 93 34,490 8,106 42,596
2056 94 34,490 8,230 42,720
2057 95 34,490 8,357 42,847
2058 96 34,490 8,487 42,977
2059 97 34,490 8,622 43,112
2060 98 34,490 8,761 43,251
2061 99 34,490 8,903 43,393
2062 100 34,490 9,050 43,540
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Old 04-09-2015, 11:27 AM   #14
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As far as taxes.

You will not being paying SS or medicare taxes when you retire - but you will still owe federal and state taxes. You need to account for that.

For firecalc the "spending" number is the all inclusive number - so it includes taxes, health insurance, everything.

Is the pension COLA adjusted - most private pensions aren't - so you'll need to uncheck that box on the 2nd tab (other income).

Some other questions:
Is your SS figure based on your earnings to date - or an estimate that assumes you'll work till age 62? On the SS website you can input different incomes going forward (including zero) to show a more accurate SS benefit if you retire before SS age.

Also - you should play around with CoveredCA to get an idea of premiums. You want to be aware of the "cliff" and how much it can cost you if you go above it. I believe (but could very well be wrong) that $60/year for a single person is above the subsidized rate - so you'll be paying full freight for health insurance. Also - it's a good exercize to put in different ages. Health insurance goes up dramatically as you age - especially for men. In our household, my husband (age 63) pays the same insurance rate as myself and our two teen sons combined. That is based on gender and the fact that he's 10 years older than me. I played around with the numbers and mine goes up as I get older, also. You'll need to account for this in your budget.
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Old 04-09-2015, 11:38 AM   #15
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Hi, RothReady2Retire. Welcome to the ER.org.

Since you have some time to retire, you can use all that time to study this topic. By just reading retirement related posts religiously, you will become an expert at deciding your fate.

My immediate advice is put that cash to a good use. You mentioned 60/40. If you are comfortable with that, the next question is what would be the 60 and 40 be made of? Perhaps, people financially smarter than me can help you with that.

Good luck to ya.
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Old 04-09-2015, 02:13 PM   #16
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Quote:
Originally Posted by NanoSour View Post
Hello RothR2R,

I took the liberty of entering your information in to the Basic ESPlanner calculator with a few assumptions that I had to make due to lack of information.

1. I used 25 years remaining on your mortgage and 3K annual property tax and 1K annual homeowner's insurance.

2. I used 1.5% annual return on your CD ladder for the 640K cash. Really have no clue what your return is on the CDs.

All the numbers below are in today's dollars so you look marginally OK with the numbers that I entered. Bear in mind these numbers represent a -1.5% real return on the 640K. This should be easy to change by getting that money into a 50/50 AA with 50% in Total Market and 50% in Total Bond. Say VTSAX and VBTLX at Vanguard. This would change the numbers significantly to the plus side with a 2-3% real return.

Finally, when reading the numbers below, the second column, Non-Discretionary Spending, represents housing expenses (PITI) and retirement contributions for the first two years. Again, I had to assume you would max out your 401K and IRA contributions in the years before you retired.

If you would like to run the calculator with more accurate numbers, you will find the ESPlanner Basic here. https://basic.esplanner.com/ESPlannerBasic/family-info

Year Your Age &nbspiscretionary Spending Non-Discretionary Spending Total Spending
2015 53 34,490 40,898 75,388
2016 54 34,490 40,508 74,998
2017 55 34,490 16,629 51,119
2018 56 34,490 16,261 50,751
2019 57 34,490 15,904 50,394
2020 58 34,490 15,557 50,047
2021 59 34,490 15,221 49,711
2022 60 34,490 14,894 49,384
2023 61 34,490 14,577 49,067
2024 62 34,490 14,268 48,758
2025 63 34,490 13,969 48,459
2026 64 34,490 13,679 48,169
2027 65 34,490 15,192 49,682
2028 66 34,490 14,972 49,462
2029 67 34,490 14,762 49,252
2030 68 34,490 14,561 49,051
2031 69 34,490 14,369 48,859
2032 70 34,490 14,187 48,677
2033 71 34,490 14,013 48,503
2034 72 34,490 13,848 48,338
2035 73 34,490 13,692 48,182
2036 74 34,490 13,544 48,034
2037 75 34,490 13,404 47,894
2038 76 34,490 13,273 47,763
2039 77 34,490 13,150 47,640
2040 78 34,490 6,636 41,126
2041 79 34,490 6,715 41,205
2042 80 34,490 6,796 41,286
2043 81 34,490 6,880 41,370
2044 82 34,490 6,967 41,457
2045 83 34,490 7,056 41,546
2046 84 34,490 7,147 41,637
2047 85 34,490 7,242 41,732
2048 86 34,490 7,339 41,829
2049 87 34,490 7,439 41,929
2050 88 34,490 7,542 42,032
2051 89 34,490 7,649 42,139
2052 90 34,490 7,758 42,248
2053 91 34,490 7,871 42,361
2054 92 34,490 7,987 42,477
2055 93 34,490 8,106 42,596
2056 94 34,490 8,230 42,720
2057 95 34,490 8,357 42,847
2058 96 34,490 8,487 42,977
2059 97 34,490 8,622 43,112
2060 98 34,490 8,761 43,251
2061 99 34,490 8,903 43,393
2062 100 34,490 9,050 43,540
+10 Thanks for all of the work. I will digest this further tonight. Your assumptions were pretty darn good. My longest CD left is three more years to maturity. I will start moving into 50/50 allocations. I will look into the funds you mentioned. Yes, maxing out 401K and IRA until I retire. Plus saving another $2K a month in savings. 20 years left on morgage. $5K a year property tax. Ive been scouring the realtor sites, and am thinking strongly of selling my house, and taking the money in equity and buying a much smaller home that I can payoff. Decisions Decisions!

Thanks to all for such wonderful insights and help!
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Old 04-09-2015, 02:15 PM   #17
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Originally Posted by robnplunder View Post
Hi, RothReady2Retire. Welcome to the ER.org.

Since you have some time to retire, you can use all that time to study this topic. By just reading retirement related posts religiously, you will become an expert at deciding your fate.

My immediate advice is put that cash to a good use. You mentioned 60/40. If you are comfortable with that, the next question is what would be the 60 and 40 be made of? Perhaps, people financially smarter than me can help you with that.

Good luck to ya.

Thanks for replying. Yes, I am an obsessive lurker to this site for about a month now. I have learned so much! So as for 50/50 or 60/40, I also ponder what that would be made of. Any suggestions welcome!
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Old 04-09-2015, 02:20 PM   #18
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As far as taxes.

You will not being paying SS or medicare taxes when you retire - but you will still owe federal and state taxes. You need to account for that.

For firecalc the "spending" number is the all inclusive number - so it includes taxes, health insurance, everything.

Is the pension COLA adjusted - most private pensions aren't - so you'll need to uncheck that box on the 2nd tab (other income).

Some other questions:
Is your SS figure based on your earnings to date - or an estimate that assumes you'll work till age 62? On the SS website you can input different incomes going forward (including zero) to show a more accurate SS benefit if you retire before SS age.

Also - you should play around with CoveredCA to get an idea of premiums. You want to be aware of the "cliff" and how much it can cost you if you go above it. I believe (but could very well be wrong) that $60/year for a single person is above the subsidized rate - so you'll be paying full freight for health insurance. Also - it's a good exercize to put in different ages. Health insurance goes up dramatically as you age - especially for men. In our household, my husband (age 63) pays the same insurance rate as myself and our two teen sons combined. That is based on gender and the fact that he's 10 years older than me. I played around with the numbers and mine goes up as I get older, also. You'll need to account for this in your budget.
Thank You, more valuable information.
I will do more homework on the pension plan. And rerun SS numbers. So if my 60K comes from my cash, then this would not count as income ,correct? Only the portion which is interest would, or cap gains etc.
I will rerun CoverCA at differenat incomes and ages. Good Advice.
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Old 04-09-2015, 03:01 PM   #19
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Thank You, more valuable information.
I will do more homework on the pension plan. And rerun SS numbers. So if my 60K comes from my cash, then this would not count as income ,correct? Only the portion which is interest would, or cap gains etc.
I will rerun CoverCA at differenat incomes and ages. Good Advice.
Yes - if you're spending cash from taxable (vs IRA/401k/TSP/whatever) you have less income to show. (Still have interest/cap gains).

If your income is low enough - you'll get cost sharing in addition to premium subsidies... and even lower gets you on Medi-Cal with very little cost and out of pocket.
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Old 04-09-2015, 03:19 PM   #20
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Originally Posted by RothReady2Retire View Post
Thanks for replying. Yes, I am an obsessive lurker to this site for about a month now. I have learned so much! So as for 50/50 or 60/40, I also ponder what that would be made of. Any suggestions welcome!
I feel 60/40 today may be too aggressive for you given your starting point. The money has to last a long time, and there could be unplanned expenses along the way. Then, the market had a nice bull run so far and there is a little bit of doom and gloom in regards to the economy. Most notably, earning for US companies are coming down. Of course things can change in a few years when you actually RE. But if I were you (and I am not), I would have gone with 50/50 or even 40/60. If I have more to start with, I may take more risk and go to 50/50 or even 60/40. But that's me. There are others here who can give you better suggestions.
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