Early or wait

[Alderman]

58 year old male. 61 year old wife. Current income $85K per year on the conservative side. Can be up to $95K depending on overtime pay.
Current savings of $700K between Roth IRAs, 401K and Roth 401K.
$100K cash savings and property sale income of $1.4K with 65K still due.
Currently saving 20% of income into 401K and living quite well on remaining income.
Will have monthly pension payment of 1.8K + SS payments due at retirement.

Looking to get out at 62 but could work longer if necessary.

Looking for some coaching.

At the present we are conservatively invested. I don't like the current state of the market as a buyer.

 

[rodi]

Hi Alderman -
Welcome to the ER community.

You need to *know* your spending. Use mint, quicken or some other method to track what's coming in and what's going out.

You need to include spending and health care in your spending.

What are your expected SS figures? Any pensions? Any other income streams? (You mention you hold a note on a property you sold.)

A good place to start figuring out if it's doable is outlined here:
http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

 

[aaronc879]

Are you eligible for the pension now or do you have to wait until 60 or 65? Is it Cola'd? Have you looked into exactly what you'll get for SS for both yourself and your wife. I know people who are getting $800/mo and i've seen people on here quote SS income of more than 3X that amount. That makes a big difference so you need to know ahead of time what to expect for your specific situation. Make sure the pension has a survivor benefit. If you pass early your wife could be left with just one SS check and whatever's left of the portfolio. Just one more thing to consider.

 

[Alderman]

Pension will start when I retire. 100% pay out at 62, less if I go earlier. Looking at $2000 SS combined for wife and myself at 62. Survivor benefit is included in pension. Can elect for 100%, 75%, 50%, or 10 year payment for survivor. Most likely will go with 75%.
My goal is 62 but may be longer as I will have to find health insurance as the company no longer provides that for retirees.

 

[kaushal4444]

Hi Alderman
I believe you should retire at 62 so that you can get 100% payout. And yeh if possible think of another source of income. Owning a restaurant or investment in bonds or stock or anything that can help you to make money even if you retire.

 

[Sunset]

I don't know why you want to short-change yourself by collecting SS at 62.
You (both) would get more by waiting to take it until full retirement age.

Are you currently putting 5K each into roth IRA in addition to your 401K contribution ?

Lastly, you are 4 yrs min, from your planned retirement, so when you say "conservatively invested." its unclear, and hopefully not all in bonds or cash.

Your "property sale income of $1.4K with 65K still due." is sort of misleading, as it will stop in 4 yrs, so its not part of retirement income, other than its possible you think you are living well on 85K, forgetting to include the ~17 property sale income as part of that living well income.

 

[Senator]

Owning a restaurant or investment in bonds or stock or anything that can help you to make money even if you retire.

Do not go for the restaurant. WAY too much risk, and even more work.

 

[Alderman]

Heck if I have to work I might as well stay where I'm at. 4 days on, 4 days off. 88 paid days vacation per year and add to the retirement pension.

 

[jfn111]

Hi Alderman
Firecalc is a good calculator to run some scenarios on how far your investments will take you.
FIRECalc: A different kind of retirement calculator

 

[38Chevy454]

Your approx $800K total savings now, is available for income. Not sure how much or how long you get the property sale money.

You have approx $5000/mo current spending if my math is right (20% savings off $90K) plus assuming about $1K for taxes, leaves $5K. With your $1.8K pension that leaves $3.2K. Assuming SS is around $2K for you and your wife, that leaves $1.2K/mo to get from savings.

Let's call it $2K/mo needed from savings to cover taxes. With $800K, to get $24K each year is 3% withdrawal. That is generally pretty safe rate and assuming your expenses are what I have estimated above, I think you are close. Of course this aalso does not take into account that you are increasing the savings between now and 4 years from now, which should add another roughly $80K base, plus any increases in the savings from investment growth.

As long as you have an accurate picture of expenses and can keep your spending within your safe withdrawal limits, I believe your plan can work. Key point is to have a good understanding of expenses and income streams.

 

[racy]

...Looking for or some coaching. At the present we are conservatively invested. I don't like the current state of the market as a buyer.

Hi Alderman,
I don't know what you mean exactly. But, when you read about "safe withdrawal rates" of 3-4%, it assumes equities are 40-60% of your retirement portfolio. Plan on investing in stocks and then staying the course no matter what the market does year to year; it's impossible for most of us mortals to time the market and come out ahead.

 

[Alderman]

Why at this point should I be concerned with matching the market? If I'm only going to be withdrawing 3 or 4%, why would I want to risk losing it? At this point I can accept a lower return for increased security.

 

[pb4uski]

You're forgetting abut inflation. In 15 years you'll need to have $150 to buy what $100 will buy today. So that 4% today will be the equivalent of 6% in 15 years.

 

[Alderman]

But if I have to rely on the stock market to perform then I can't afford to retire.

 

[nash031]

But if I have to rely on the stock market to perform then I can't afford to retire.

Something in your portfolio must account for inflation, or you must have enough money to make inflation moot. The latter is far more difficult, and if you ask me, unnecessary.

 

[38Chevy454]

But if I have to rely on the stock market to perform then I can't afford to retire.

Your opinion is counter to what most on here and general financial planning would say. I understand your reluctance to have risk and potential loss. But the problem of inflation must be addressed. Stock market as a portion of your portfolio is the way most deal with this. A common strategy is use stocks for longer term inflation protection, and thus able to ride the short term ups and downs of the market, to have good returns over the longer term. Use income type portion of the portfolio for the short term money to live on. Then you draw off some of the stock portion to supplement the money for living in the longer term.

If you can't do the stocks, then you need to find something to cover both inflation and your withdrawal rate. Right now that is kind of tough to find.

 

[racy]

Hi Alderman
Firecalc is a good calculator to run some scenarios on how far your investments will take you.
FIRECalc: A different kind of retirement calculator

+1

 

[pb4uski]

But if I have to rely on the stock market to perform then I can't afford to retire.

You are right. If you are unwilling to invest in stocks in retirement then you need a lot more to retire and have your portfolio provide for your living expenses after inflation. However, a modest allocation to stocks provides the growth that allows you to increase your withdrawals periodically to maintain your standard of living after inflation. Most of us here who are retired have 40-80% of our retirement assets in stocks.

The following link might be useful to you:

Ready Your Portfolio for Retirement

 

[Texconsin]

Franchise, maybe, but not a Mom and Pop

Do not go for the restaurant. WAY too much risk, and even more work.

Mom and pop restaurants open (for business) and close (forever) like clockwork. Plus, there's lots of cash and inventory for the taking - I mean by your employees - and inventory for the wasting, as well.

If you open a restaurant, be prepared to work longer hours for less income than ever.

Check out firecalc.com and see how you would fare in every possible (insert number of years you intend to live after retirement) cycle since 1871. If you can make it through cycles that end with the Great Depression, October 1987 and the burst of the housing bubble, you'll probably be okay.

 

[Alderman]

I'd work my present job until I die before I'd ever open a restaurant. Sounds like too much work for me. One of the guys I worked with always wanted to be the boss of something so he did open a restaurant. He's well into his 80s now, works nonstop and just loves it. To each his own.

 

[Alderman]

If somebody was hesitant about stocks, would bonds be a more stable source of providing inflation protection?
I realize I am on the low end of what most on here have therefore I don't have a lot of room to downsize after I retire.

 

[pb4uski]

More stable yes, but not so good on the inflation protection side. The unfortunate answer is that if you are not wiling to include stocks in you retirement savings that you will either need to work longer to have more funds or assume a higher risk that you will either run out of money or have to curtail your lifestyle for the effects of inflation.

 

[Senator]

I'd work my present job until I die before I'd ever open a restaurant. Sounds like too much work for me.

I actually had a bar/grill for a ~5 years. Everything about the long hours and short pay is 100% correct. My uncle and I went into business. He wanted to have a bar/restaurant to work in retirement.

On a busy night, it was great. But those were only ~2 times a week. I learned a lot about business though. And I did meet the DGF there.

 

[Meadbh]

If you are reluctant to invest in equities, another asset that produces inflation-linked income is real estate. There are many threads about real estate on the forum. It is not for the faint of heart, however.