Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Age 56 and Still Close to Ready (Update from Aug 2017 Post)
Old 05-21-2018, 11:41 AM   #1
Dryer sheet wannabe
 
Join Date: Aug 2017
Posts: 13
Age 56 and Still Close to Ready (Update from Aug 2017 Post)

Hi All -

So - it's about 10 months later since my first post (55 and Close to Ready - What Am I Missing?) and I'm still working, so I figured I would give a quick update and some new facts that will impact my situation and hopefully get some solid opinions or thoughts from you all. Things that have changed since my original post in Aug 2017 are showin in italics:

Updated situation:

Personal Situation:
  • 56 years old
  • Current Income about $165K + 30% target bonus (bonus can vary between 10 and 40% depending on company performance)
  • Assoc. Director in a Large Pharma Company
  • Two daughters 18 and 19 years old - Freshman and Sophomore in college this fall
  • Getting very tired of the corporate grind and ready to go now. Vacations are never, ever long enough and the last half of every one is dread about having to go back to work. Sometimes I suffer stress, but nothing too serious yet and I control via meditation (but not medication yet). However, I recognize that it's not healthy. I find myself getting irritated a lot easier at corporate nonsense. I am still considered a high performer, but that's not always a good thing because lots of stuff comes my way
  • Have plenty of hobbies and interests outside of work. Not worried at all about not working. I'm looking forward to exercising more, losing some weight, doing some volunteering, and maybe do some part time consulting work (I know I will be in demand) or another part time gig of some sort.

Current Savings/Retirement Income:
  • $1.25M in Fidelity 401k - maintaining about 30%bonds/70%Stock Index Funds. (NOTE: I keep this more aggressively positioned as I consider the lump sum pension to be my "safe" money)
  • Will receive Lump Sum Pension upon retirement - current estimate at $1.51M if I retire by YE2018 (This amount is now frozen and actually will drop with interest rate increases - see below). (So - total pre-tax $$ at year end would be ~$2.8M)
  • ~$50k cash
  • $25k in ROTH IRA (over the income limit to add more)
  • Have stock options for 3 years worth about $60k total (~$20k/year) plus a final year bonus of ~$40k
  • If I retire, I am eligible to withdrawal from 401k before 59 1/2 without penalty.
  • Social Security projection is $66k/year (me + spousal) if I delay taking it until age 70.
  • My wife has a part time job at the school making ~$8k/year and is enjoying it. I expect she may eventually get more hours the longer she works there.

Current Expenses:
  • Currently spend about $130k in expenses - ~$90k deemed as "essential" and ~$40k as discretionary. I feel pretty confident that we could lower the discretionary, and even some of the essential, by about $10-15k with no trouble if we had to.
  • Expenses include $20k/year in mortgage that will be paid off in 2025
  • We have 529's that will cover 1 more year of older daughter and first three years of younger daughter. Total I still need to come up with is ~$150k
  • In retirement, I will be eligible for retiree HC benefits, which will make my health insurance about $3-$4k more than what I pay now - total of around $8-$9k/year for a family of 4. It's a good plan with low deductibles and preventive care covered 100%.

Updated Plan and Open Questions:

My employer announced at year end 2017 that our pension plans are frozen - i.e. that the company will no longer contribute to the fund. So - basically my projected annuity is frozen at it's current value. The lump sum I would receive, however, will continue to change based on interest rate movement. With interest rates rising this year, the lump sum I would receive will drop as of Jan 1, 2019. (At the end of last year it also dropped $23k).

Bottom line is that with $1.51M due to me in a lump sum, I feel like having that money sit there with no growth has to be worth considering in my early retirement decision.

The Fidelity Planning tool puts my readiness rating at a 106 if I do not work at all in retirement (above 100 meaning "on track") and shows my money lasting until age 95 even in a "significantly below average market".

I also use a self-built tool to project spending vs. balances and am showing my money lasting to age 99 assuming a flat 4.2% growth (I got the 4.2% from reading something put out by John Bogle about what he thinks the future holds for growth). Withdrawal rate peaks at 3.6% at age 69 and doesn't approach higher than that until age 84. My model assumes an annual spending growth of 1.5% per year. (I recognize that this is less than projected inflation, but I figure our spending should slowly drop over time as well - especially considering that right now we are supporting a family of 4 adults).

Some questions for your consideration:

1 - For my social security, it's based on the projection on the SS web site which says "if you work until full retirement age". However - I am going to end up with about 3 years at <$5k in income counting against the "average of highest 35 earning years" that goes into that calculation. SO - I think my projection of the social security payment is definitely high, but I just can't tell how off it is. Anyone know how much you get dinged for those "zero years" and how to calculate the impact?

2 - Any thoughts about ways to get the additional $150k needed to cover the rest of undergraduate college costs for my daughters? If I show it as a withdrawal from the 401k, the tax hit is killer. I was thinking of a HELOC, but understand that is not deductible any more. Not really interested in a re-fi, as we are due to be paid off in 2025.

3 - What's the latest consensus around here for whether spending increases, decreases, or stays flat upon retirement? I've traveled overseas a ton for work the last 5 years, so am happy to not travel much for the foreseeable future, but someday I might want to travel again.


Thanks for any additional thoughts you might have.

- Travis Bickle
__________________

Travis Bickle is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-21-2018, 11:51 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 21,710
For 1 above, use this and your earnings history to calculate.

https://www.ssa.gov/pubs/EN-05-10070.pdf

On 2, I would do a re-fi and then pay off with tax-deferred withdrawals to spread out the tax bite.

On 3, our experience is flat, perhaps a slight increase at worst.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is online now   Reply With Quote
Old 05-21-2018, 11:59 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 3,606
Quote:
Originally Posted by Travis Bickle View Post
Hi All -


Some questions for your consideration:

1 - For my social security, it's based on the projection on the SS web site which says "if you work until full retirement age". However - I am going to end up with about 3 years at <$5k in income counting against the "average of highest 35 earning years" that goes into that calculation. SO - I think my projection of the social security payment is definitely high, but I just can't tell how off it is. Anyone know how much you get dinged for those "zero years" and how to calculate the impact?

2 - Any thoughts about ways to get the additional $150k needed to cover the rest of undergraduate college costs for my daughters? If I show it as a withdrawal from the 401k, the tax hit is killer. I was thinking of a HELOC, but understand that is not deductible any more. Not really interested in a re-fi, as we are due to be paid off in 2025.

3 - What's the latest consensus around here for whether spending increases, decreases, or stays flat upon retirement? I've traveled overseas a ton for work the last 5 years, so am happy to not travel much for the foreseeable future, but someday I might want to travel again.


Thanks for any additional thoughts you might have.

- Travis Bickle
The below link can be used with the concept of filling in zeros for your SS calc at various ages.

https://www.ssa.gov/benefits/retirement/estimator.html
__________________
TGIM
Dtail is offline   Reply With Quote
Old 05-21-2018, 12:57 PM   #4
Recycles dryer sheets
gamboolman's Avatar
 
Join Date: Sep 2012
Location: Spring, Texas...but in Nigeria till ER !
Posts: 184
TB

Ms. gamboolgal & I are near to your situation

Is your expenses of $130K Gross and then you deduct Income Tax? Or is that net?

Our estimated net is ~$10,800 per month and in Texas that puts us at ~$150K Gross

Just saying....you need to account for the only other sure thing in life.....
gamboolman is offline   Reply With Quote
Old 05-21-2018, 02:21 PM   #5
Dryer sheet wannabe
 
Join Date: Aug 2017
Posts: 13
Quote:
Originally Posted by gamboolman View Post
TB

Ms. gamboolgal & I are near to your situation

Is your expenses of $130K Gross and then you deduct Income Tax? Or is that net?

Our estimated net is ~$10,800 per month and in Texas that puts us at ~$150K Gross

Just saying....you need to account for the only other sure thing in life.....
I noodled that same question myself a bunch of times when projecting things.

The $130k is actual spending, so withdrawals would need to include taxes. this is accounted for in both the models I used - the Fidelity tool and the spreadsheet I built myself.
Travis Bickle is offline   Reply With Quote
Old 05-21-2018, 02:52 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 2,591
The 106 RPM score means you have 106% of your anticipated spending covered. That's only a 6% cushion.
I would look for ways to add to my income in retirement or decrease my expenses.
COcheesehead is offline   Reply With Quote
Old 05-21-2018, 03:11 PM   #7
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 9,920
Tell us about your mortgaged house and whether or not it can be downsized when daughters are out of school. A lot of us get into smaller, more manageable houses once RE.
__________________
Wear Italian, Kiss French, Drink Russian, Drive German
aja8888 is offline   Reply With Quote
Old 05-21-2018, 04:18 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 3,606
Quote:
Originally Posted by COcheesehead View Post
The 106 RPM score means you have 106% of your anticipated spending covered. That's only a 6% cushion.
I would look for ways to add to my income in retirement or decrease my expenses.
My RPM score is currently 104. I believe that Fidelity is one of the most conservative calculators out there and by using a Monte Carlo simulation, it can include many worst possible scenarios which don't have a true relationship to how the historical sequence of market returns work.
Having 100% for all calculators worked for me, but YMMV.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 05-21-2018, 05:16 PM   #9
Dryer sheet wannabe
 
Join Date: Aug 2017
Posts: 13
- We have definitely talked about downsizing houses and possibly relocating to somewhere with slightly lower property taxes. I probably have about $200k equity in the house that is not included in my calculations, but is included in the Fidelity calculator.

- Adding to income is definitely a possibility/likelihood. My company frequently hires back recent retirees under contract, and my discipline is one that is definitely in demand. Part of me wants to do something completely new though. Need to do some research in that area.
Travis Bickle is offline   Reply With Quote
Old 05-22-2018, 06:59 AM   #10
Recycles dryer sheets
 
Join Date: Aug 2009
Location: westerville
Posts: 250
on expenses in retirement after 5.5 years we spend more than when we worked however
that was our plan. Just prior to retirement went thru expenses line by line and asked what would change and by how much. Spending a bit less than planned due to a very flexible budget of non essential expenses. one interesting note unplanned or unforeseen expenses that arise every year total about the same just different stuff each year.
Trawler is online now   Reply With Quote
Old 05-22-2018, 08:10 AM   #11
Dryer sheet wannabe
 
Join Date: Aug 2017
Posts: 13
Quote:
Originally Posted by pb4uski View Post
For 1 above, use this and your earnings history to calculate.

https://www.ssa.gov/pubs/EN-05-10070.pdf

On 2, I would do a re-fi and then pay off with tax-deferred withdrawals to spread out the tax bite.

On 3, our experience is flat, perhaps a slight increase at worst.

Thanks again for this. Looks like the impact of the "near zero" years for me would drop our combined SS payment from ~$66k to ~$62k. Not as bad as I was fearing, but definitely a negative impact.
Travis Bickle is offline   Reply With Quote
Old 05-22-2018, 08:43 AM   #12
Recycles dryer sheets
 
Join Date: Sep 2017
Posts: 306
Quote:
Originally Posted by Dtail View Post
My RPM score is currently 104. I believe that Fidelity is one of the most conservative calculators out there and by using a Monte Carlo simulation, it can include many worst possible scenarios which don't have a true relationship to how the historical sequence of market returns work.
Having 100% for all calculators worked for me, but YMMV.
Are you referring to the calculator at the link below, or is there something else I haven't found?

https://www.fidelity.com/calculators...ent-score-tool

For us this basically just gives us 4% withdrawal rate plus SS, so want to be sure I'm not missing something more sophisticated/conservative!
tb001 is offline   Reply With Quote
Old 05-22-2018, 09:07 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 2,591
Quote:
Originally Posted by tb001 View Post
Are you referring to the calculator at the link below, or is there something else I haven't found?

https://www.fidelity.com/calculators...ent-score-tool

For us this basically just gives us 4% withdrawal rate plus SS, so want to be sure I'm not missing something more sophisticated/conservative!
That's not it. This is it. https://www.fidelity.com/calculators...tirement-score It is more robust than your link. You can build budgets, add in one time events, pensions, more of a complete plan to understand your retirement.
COcheesehead is offline   Reply With Quote
Old 05-22-2018, 09:11 AM   #14
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 2,591
Quote:
Originally Posted by Dtail View Post
My RPM score is currently 104. I believe that Fidelity is one of the most conservative calculators out there and by using a Monte Carlo simulation, it can include many worst possible scenarios which don't have a true relationship to how the historical sequence of market returns work.
Having 100% for all calculators worked for me, but YMMV.
It can be conservative depending on how you use and what inputs you have. If you fail to take into account some expenses, it will kick out results that may not match reality. I suggest using the built in expense work sheet to not overlook any expenses. I found it very helpful.
COcheesehead is offline   Reply With Quote
Old 05-22-2018, 09:12 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 3,606
Quote:
Originally Posted by tb001 View Post
Are you referring to the calculator at the link below, or is there something else I haven't found?

https://www.fidelity.com/calculators...ent-score-tool

For us this basically just gives us 4% withdrawal rate plus SS, so want to be sure I'm not missing something more sophisticated/conservative!
I use the link below. I believe one must have an account at Fidelity to use it.
It is the "Retirement Score - Planning and Guidance Center".
There is a lot of input of individual expenses/sources of income/investment portfolio (portfolio is automated if held at Fidelity).
The score shows your readiness for retirement.e.g. a score of 104 means you have covered 104% of your expenses.


https://www.fidelity.com/calculators...tirement-score
__________________
TGIM
Dtail is offline   Reply With Quote
Old 05-22-2018, 09:16 AM   #16
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 3,606
Quote:
Originally Posted by COcheesehead View Post
It can be conservative depending on how you use and what inputs you have. If you fail to take into account some expenses, it will kick out results that may not match reality. I suggest using the built in expense work sheet to not overlook any expenses. I found it very helpful.
Yes, I do use the detailed expense worksheet associated with the Fidelity calculator instead of the one line monthly expenses. I do include lumpy expenses too.
I actually run the calculator monthly, since it is my first full year of retirement and effectively put in 2019 as a retirement date, since the calculator (RPG) is really for pre-retirement.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 05-22-2018, 09:17 AM   #17
Recycles dryer sheets
 
Join Date: Sep 2017
Posts: 306
Ah, got it. Thanks for the links!
tb001 is offline   Reply With Quote
Old 05-22-2018, 09:19 AM   #18
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 2,591
Quote:
Originally Posted by Dtail View Post
Yes, I do use the detailed expense worksheet associated with the Fidelity calculator instead of the one line monthly expenses. I do include lumpy expenses too.
I actually run the calculator monthly, since it is my first full year of retirement and effectively put in 2019 as a retirement date, since the calculator (RPG) is really for pre-retirement.
Thumbs up
COcheesehead is offline   Reply With Quote
Old 05-22-2018, 09:27 AM   #19
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 3,606
Quote:
Originally Posted by COcheesehead View Post
Thumbs up
Actually I believe that Fidelity has another retirement type calculator for when you are already retired.
Are you familiar with this calculator?
__________________
TGIM
Dtail is offline   Reply With Quote
Old 05-22-2018, 09:56 AM   #20
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 2,591
Quote:
Originally Posted by Dtail View Post
Actually I believe that Fidelity has another retirement type calculator for when you are already retired.
Are you familiar with this calculator?
I haven't used it yet, but I think its called a Retirement Income Planner. It only works from my understanding when you are already retired.
__________________

COcheesehead is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Sold out of the market last Aug. ShustS6512 FIRE and Money 27 07-11-2012 10:02 AM
To close, or not to close? (No-interest credit card accounts). Amethyst FIRE and Money 6 05-24-2009 11:12 AM
Rate of return May-Aug 2008 David1961 FIRE and Money 11 08-05-2008 11:26 AM
ETFs that are "close" but not "wash sale close" FinanceGeek FIRE and Money 1 11-18-2007 10:08 AM
Yes!! RE this Friday, Aug 3rd settam Hi, I am... 4 07-29-2007 05:59 PM

» Quick Links

 
All times are GMT -6. The time now is 02:13 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.