59 and feeling behind schedule for FIRE

[23window]

Greetings! I feel I’m behind schedule for FIRE. I’ve been investing in available 401Ks, IRAs, and some taxable accounts for 25+ years, but didn’t have a real clear plan in place in the beginning. I’m now paying much closer attention to asset allocation, expense ratios, etc. I’m debt free, have two homes (a city home in the desert and a cabin in the cool mountains), have about $700k in tax-deferred accounts with another $450k in taxable accounts, including a brand new Vanguard account. I need to calculate my overall AA, but I guestimate it is about 65% stocks / 35% bonds and cash. Overall expense ratio for mutual funds is about .80%, which I know is high. Have most of the taxable funds in Edward Jones account, but just opened up new Vanguard account, with $120K currently sitting in a market money account. I need to get that invested, but haven't decided where. I’m thinking about transitioning my EJ account to Vanguard in the future. With 2 - 3 more years of work I’ll get the maximum SS retirement benefit once I’m eligible. Longevity is in my genes (all grandparents lived until age 87 to 98). I’m now 59 and inclined to take SS at 70. DW, who is 4 years younger, would eventually get SS at ½ my rate. DW gets a small pension ($6k - $7k /yr) at 65 as long as she works until about 2019. I’ve used Quicken many years and have been studying my expenses closely. Due to helping kids through college and grad school, weddings, paying off mortgages, etc., my expenses have been high, but dropped a lot in the last couple of years. Annual expenses in retirement will probably be between $60k and $90k, with the wide range due to uncertainty about healthcare, taxes and travel expenses. I’d feel more comfortable in the $80k - $90k range. FireCalc shows a 95% success rate at $79,000 annual withdrawal starting in 2019 and ending when DW turns 100. I’m eager to hear any comments, ideas and advice.

 

[rodi]

Welcome 23window. Love the bus in your avatar.

There's always a learning curve and it sounds like you are tackling yours. As you seem to have figured out - spending is the key thing to figure out if you have enough to retire... Getting an accurate prediction of your retirement spending will give you a better handle on your nest egg requirements.

Keep in mind that firecalc's spending input is GROSS - so it needs to include taxes and health insurance.

You mention your wife taking 1/2 your SS when she reaches full retirement age (FRA). You also mention she has a pension. If her SS earnings are more than 1/2 of yours, she'll be collecting on her own record. If her pension is from a government agency she may be impacted by WEP or (forgetting the acronym) another SS reduction. You should be aware and plan for this if it applies.

For health insurance estimates, pre medicare, you can get quotes from healthsherpa.com. If your spend is as high as you suggest you will not qualify for ACA premium tax credits.

Feel free to dive in, ask questions, get familiar with the forum.

 

[Philliefan33]

Welcome 23window. Love the bus in your avatar.


You mention your wife taking 1/2 your SS when she reaches full retirement age (FRA). You also mention she has a pension. If her SS earnings are more than 1/2 of yours, she'll be collecting on her own record. If her pension is from a government agency she may be impacted by WEP or (forgetting the acronym) another SS reduction. You should be aware and plan for this if it applies.

.

Welcome.

I think rodi is trying to remember GPO...Government Pension Offset. WEP and GPO can get confusing, but I think I've figured out that WEP affects SS based on one's own earnings record and GPO affects SS one might collect based on a spouse's record.

 

[Senator]

FireCalc shows a 95% success rate at $79,000 annual withdrawal starting in 2019 and ending when DW turns 100. I’m eager to hear any comments, ideas and advice.

Do not forget you will need to pay taxes. Withdrawal 79K of a taxable income and you will only get to spend less than $60K.

 

[MBAustin]

Welcome! If you haven't seen them yet, there are two excellent resources here that might help you with your planning:

http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

and

Early Retirement FAQs - Early Retirement & Financial Independence Community

Most of us here would highly concur with your move from EJ to Vanguard. If you move it all, you would qualify for Flagship status which gets you a consistent person to talk with. I suspect they would also help you get your AA where you want it in low-cost funds.

Good luck with your planning and look forward to hearing more from you in the future.

 

[Katiek]

Welcome! Glad to see you're exploring Vanguard. Fees on investment accounts add up quickly. And you may feel behind, but your savings help position you nicely for a good future.

 

[phil1ben]

I will leave the financial analysis to others.

However, if you have a 23 window VW van in good condition I imagine you could add 30-45K to your number. I realize such vans have gone for higher amounts at Barrett Jackson but those were in truly pristine condition. Perhaps yours is in such condition.

 

[FreeBear]

Perhaps I'm missing something, but it looks like you have 700K + 450K + 120K = 1.27M
Without SS, this is about 16 years at 79K/yr or 17.6 years at 73K/yr (including pension). Although you'll get strong SS at 70, this is almost a decade after you start burning your egg nest. Are you planning to add at least a few hundred thousand $$ to your savings in the next couple of years and/or planning downsize some real estate? I know that you mentioned you're 95% in Firecalc, but just want to insure everything important was properly entered into the software. Also, the default Firecalc expense ratio is around 0.2, but you're at 0.8, so it's another non-trivial bite.

Overall, looks like you're getting into reasonable shape given that you're a few years out.

Couple of random thoughts

- Take care moving (selling) taxable accounts due to potential capital gains tax bite; no issue with moving IRA's. May be less of a bite if wait until income drops in retirement, if you keep income low enough.

- Consider running a couple of proposed retirement budget levels, ie dream, target, and just survival. Could help establish a level of confidence if you have to cut spending in a down market.

- Good to see you have substantial after-tax savings. Can be used to control income to capture ACA health subsidy (but need income in low 60K ish) or do IRA to Roth conversions to minimize RMD's at 70 yo.

- May want to consider how much cash (or near cash) you want to keep entering retirement. You still have a few years to make your move without having to sell in a down market.

- Most importantly, do you and DW plan to retire at the same time? I think in can help a good marriage get even better. What are you going to do with all your time in ER? Seriously, this can be a big challenge for some folks.

We were in a similar position, but we had less than a year to pull this all together. Now ER'd for year and loving it! You'll probably love it too

 

[pb4uski]

I don't see you being behind schedule at all... in fact it looks to me like you are very close. Have you run your situation through Quicken Lifetime Planner?

Also, if you plan to wait until you are 70 for SS be sure to include delayed retirement credits in your projections (generally 132% of your FRA benefit).

 

[travelover]

Vanguard will not send you birthday cards like Edward Jones.

 

[23window]

Appreciate the comments from FreeBear and others. I did plug in higher expense ratio in firecalc. Also calculate my AA which is about 60% stock, 35% bond, 5% reit. DW has an IRA at Ed Jones with about $65k. It is invested in 25 different funds. 25!! Is that crazy or what? I have no idea of the strategy behind that. Diversification gone wild I guess. At one point I hoped to retire by 55. That's one reason I feel behind.

 

[Sasset]

Can you take another look at your expenses? There may be things there that you can reduce $ and not really change your lifestyle. Also, as Senator mentioned, are you including taxes as an expense when you run FIRECALC? Are you sure you are done helping your children?

I think really knowing your expenses will be the key.

 

[pb4uski]

While you are looking at expenses, you can look at healthsherpa for the cost of health insurance before you are eligible for Medicare and look to Taxcaster for an idea of your federal income taxes (or tax-rates.org income tax calculator for federal and state income taxes).

 

[travelover]

............ DW has an IRA at Ed Jones with about $65k. It is invested in 25 different funds. 25!! Is that crazy or what?........

This is why mere mortals cannot do their own investing. Only the wizards at EJ can pick exactly the right 25 funds to maximize [-]their profit[/-] your returns.

 

[Markola]

Diversification gone wild I guess.

Hidden fees and commissions gone wild, more likely. But, you're on the right path now. One tip is the free (for now?) app/website Personal Capital. I was only guessing on my overall asset allocation until I plugged in all of our accounts there a few months ago. It also summarizes all of your expense ratios into one overall number, and other similar basic portfolio metrics, to give a more complete picture of everything you own. Pretty impressive app, I must say.

 

[papadad111]

What are the houses worth ? Plan to move ? Sell one ? Etc.

Big piece of info is missing ...

What's your net worth ? Including RE

 

[23window]

Houses probably worth about $650k +/-. Free and clear. Properties taxes aren't bad here ($3200 total). It is usually 65 - 80 degrees at one of the places at any time of year. I like the option of being able to live in near-perfect weather all year round. That is one part of my retirement plan that I decided many years ago. I don't plan to sell either one, but if I ever reach the stage where I can't live independently, I might sell one or both and move to some assisted-living place. That seems far away right now, but I supposed it could help fund the last decade of my life.

 

[papadad111]

Well... Looking at it from a net worth standpoint now,

750+450+650 = 1.85M net worth.

At a conservative 3 percent WR that's around $55K.

Figure another 35K for your SS and 18K for wife SS + 8 k for her pension.

That's $116 pre-tax. So figure. $90k per year after tax ...

Perhaps you consider selling the houses and downsizing to an idyllic location or as you say, hold on and eventually sell/ use the house proceeds to fund the last decade or so of assisted living etc .

I think you're about there.