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Counting Down and Looking for Input. Can we do it?
Old 04-28-2008, 11:08 PM   #1
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Counting Down and Looking for Input. Can we do it?

Hey, there.
We're 53 and want to leave ER at 55. We had intended to save like the devil and retire around now, but medical problems and my husband's disability retirement slowed us down. On the other hand, it's even more of an impetus to enjoy life now. As someone else said, illness and early deaths in the family make you reevaluate putting everything off.

So our thought right now is to wait till 2010 at my 25-year mark in government work, but I'm not sure we'll have enough. He's the blithe spirit; I'm the plodder, checking and rechecking. I don't really understand how to use Firecalc yet. I could use your input.

We have savings of $1M, half in Sep/401k/457, and half in taxable accounts. In the next two years I'll be able to add another $100k. It's 75% stock, 25% bonds/cash.

In two years, at my 55, we would have government pensions totalling $70,000 before tax a year, with medical included.

But how do I evaluate this? The cola on our pensions tops out at 2%/year, so it wouldn't keep up with inflation. And when I check or uncheck the cola boxes, it seems to make ALL the difference as to whether the numbers work. (If inflation is under 2, it would only match whatever that is, but I'm not holding my breath for that to happen.) But the boxes only say cola/no cola, not partial cola.

Also, the form asks about savings. Is it assuming it's all in nontaxable accounts? Ours is split.

Last, what do you think of our asset allocation? My thoughts are starting to be that, since we won't need much from our savings till later, we should stay aggressive, and maybe even more so, since our pension could be seen as pretty safe.

We aren't set in stone, can wait a while, maybe work some while retired (though in a more rural spot it would be hard in my field). I'd appreciate suggestions.

I'm enjoying everyone else's posts, though they make me feel like I flunked out of math!
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Old 04-28-2008, 11:44 PM   #2
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JCK welcome.

I'll let others that are better experts at Firecalc help with those questions. You left out one key piece of info out that will help with feedback: what are your annual expenses? Dependant on that I'd say you are in the ballpark especially with that partially cola'd pension and the medical. Congrats.

In terms of your AA you have a point about the time frame but do you need to take that much risk? What do you plan to use that money for?


DD
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Old 04-29-2008, 12:12 AM   #3
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Thanks for the quick response.
Right now our expenses are 80 after taxes/100 before, including a mortgage that will disappear when we retire and move. We can cut back, and have been starting to pay more attention to see what we'll need. But I really want to travel while we're young (doesn't everybody?)
I did forget to mention that when one of us passes away, that pension would be cut to a partial for the survivor, of course. I don't want to borrow trouble -- or ever lose him -- but if was soon, big differences, too.
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Old 04-29-2008, 07:09 AM   #4
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I suggest running various scenarios on a spreadsheet and seeing if you're comfortable with the results. You should do at least three: best-case scenario, most-probable scenario, and worst-case scenario. Be sure to build in plenty of margin in your calculations to allow for unexpected financial disasters.
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Old 04-29-2008, 07:18 AM   #5
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Welcome.... have fun here...

But... you must be a BIG worrier ....

Let's see... you spend $100K now and it will be going down... (let's say not)..

You will have a $70K pension that grows at 2%...

Your husband has a disability pension (you did not say how much)...

You have $1 million set aside.... which would generate about $40K per year..

You did not say... will you qualify for SS? If so.. another $17 to $24K per year...

OH... medical paid for!!!


You have NO problems.... you don't NEED Firecalc on this one...

Congrats...
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Old 04-29-2008, 07:21 AM   #6
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Because of the age of retirement you cited and the reference to limited COLAs I guessed that you are a federal Government employee. If so, you described the FERS COLA provisions incorrectly. The COLA is not limited to 2%. For inflation over 3% the COLA is limited to the CPI - 1%. So, if inflation goes wild, you would still get a substantial boost. You would slowly fall behind but nothing like what a flat limit of 2% would do. Of course, that COLA doesn't kick in until age 62 so that is a factor to account for.
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Old 04-29-2008, 09:25 AM   #7
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Janet, I think Texas Proud has it right -- congratulations!

Quote:
Originally Posted by JanetCK View Post
Also, the form asks about savings. Is it assuming it's all in nontaxable accounts? Ours is split.
FIRECalc does not care whether your savings are in taxable accounts or not, because it makes no calculation regarding taxes. But you have to be aware, and include an estimate of taxes you'll be paying as a part of your "spending".

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Old 04-29-2008, 01:12 PM   #8
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Welcome. I just read "Your money or your life". The book recommends keeping track and graphing monthly expenses. Also graph work income and investment income as separate lines. When your investment income alone exceeds monthly expenses, they figure you're ready to retire. (I would want a little income cushion over expenses.)

Also try FIRECALC as stated by others

Good Luck!
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Old 04-29-2008, 03:06 PM   #9
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Quote:
Originally Posted by Texas Proud View Post
Welcome.... have fun here...

But... you must be a BIG worrier ....

Let's see... you spend $100K now and it will be going down... (let's say not)..

You will have a $70K pension that grows at 2%...

Your husband has a disability pension (you did not say how much)...

You have $1 million set aside.... which would generate about $40K per year..

You did not say... will you qualify for SS? If so.. another $17 to $24K per year...

OH... medical paid for!!!


You have NO problems.... you don't NEED Firecalc on this one...

Congrats...
Texas said it all......just stay healthy for the next 2 years and you'll be fine.....better than fine....heck, i'm kinda jealous....what with that cola'd pension and all.....
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Old 04-29-2008, 04:08 PM   #10
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Quote:
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I would want a little income cushion over expenses.
What refer Dominguez and Robin to as "cache".
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Old 04-29-2008, 06:03 PM   #11
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What refer Dominguez and Robin to as "cache".
Good Point! I finished the book last Friday - I should have remembered that.
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Old 04-29-2008, 08:27 PM   #12
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You are fine . Pull the plug once you have the medical . I hope your husband lives a long time but if something happens with the one million and half the pension you'll be fine .
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Old 04-29-2008, 08:40 PM   #13
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Good Point! I finished the book last Friday - I should have remembered that.
Don't sweat it. While I find it very easy to recall what I have read, I can't remember more important things like people's names or birthdays.
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Old 04-29-2008, 10:16 PM   #14
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Everybody, THANKS!
I appreciate everyone's ideas. I AM a worrier, probably because I don't understand math at all. I figure out one idea, get it straight, find out about a new one, and have to figure it all out again.
Our pensions are $70 total for us both. We're not federal but county employees, so the flat 2% cola is slightly different (just went to a seminar on it). We will not get social security.
But I love that all of you think we can make it!
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Old 04-30-2008, 09:20 AM   #15
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Janet,

You might like the Fidelity retirement calculator (free) . It provides a spread sheet as an output of your spending, withdrawals, taxes and remaining nest egg year by year. I find it really helpful to visualize what is going on, including RMDs from tax deferred accounts.
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Old 05-01-2008, 04:11 PM   #16
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Thanks, everyone.
p.s. Is there a way to tweak the calculator to reflect the maximum 2% COLA?
(maybe I'll ask on the other forum, that might be a nerd. . . uh, serious math afficionado thing!)
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Old 05-01-2008, 04:41 PM   #17
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Hi Janet

If your COLA is limited to 2% and you estimate inflation to be higher, then take the higher number, subtract 2%, then factor in no cola for the calculation.
In other words, if you want to see what happens with 5% inflation, then use 3% with no cola. The numbers won't be exactly the same but good enough to tell you if you are close.

Good luck, Michael
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