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Early retired in western NY
Old 12-19-2011, 11:14 PM   #1
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Early retired in western NY

9 1/2 months ago at 59 1/2 I was early retired not by choice. I am single no dependents. Got one years worth of severance pay. My retiree medical/dental plan will be $55/month out of pocket (hi deductable plan). I have $350,000 in 401K plan $230,000 in after tax savings and a $33,000/year no COLA pension starting at 62, pension also be taken as a $420,000 lump sum. SS will be $20,000 at 62.
Was planning to retire at 62 or 63. But I am thinking why not retire now instead of trying to find a job for the next two or three years. Firecalc using the pension, SS and 401K/savings gives me a $63,000 income using a 30 year 3.0% inflation plan with the default portfolio or $59,000 income if I took the lump sum. Doing a retirement tax return shows me to have about $11,000 more in after tax income than when working.
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Old 12-20-2011, 06:49 AM   #2
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Sounds like you'll be ok, but how much do you need to live (including health care)?

An alternative would be to find a part-time gig doing something you enjoy for a couple years and ease into retirement.
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Old 12-20-2011, 06:57 AM   #3
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Welcome to the forum. Hope the cost of living is lower up your way than it is downstate.
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Early retired in western NY
Old 12-20-2011, 08:44 AM   #4
Confused about dryer sheets
 
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Early retired in western NY

My retiree health plan is $55/month due to allowance from employer. Then I have a $1,500 deductible with $5,000 total out of pocket. My basic expenses were $35,000/year for the past two years, housing, food, utilities, telephone, cable tv/internet, insurance. This was less than my after tax income while working so I will have money for discretionary spending.
The cost of living here is a lot lower than where you are justplainbll.
Just to be clear I have either a $33,000 pension or a $420,000 lump sum but not both.
My pension may be higher than $33,000 but not lower and I expect to keep any withdrawals from 401k/savings low for a few years.
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Old 12-20-2011, 04:45 PM   #5
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It sounds like you are all set. If I understand correctly, you can live off your severance until you are 60 1/2, then live off of after tax savings for a year and a half until you're 62, and then your pension and SS (if you chose to take it then) kicks in and more than provides for your cost of living.

So if you take SS at 62 then you would have $53,000 of income compared to ~$37,000 of annual expenses. While the expenses will grow faster than income since the pension isn't COLA'd you can at any time start withdrawals from your nestegg to provide for any difference.

If you're in good health, you may want to consider delaying SS beyond 62 and use withdrawals from your nestegg to fill in the gap.
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Old 12-20-2011, 05:25 PM   #6
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Just a couple of things to consider:

You have to do the math yourself, but typically, most folks do better with a pension than with a lump sum. A lot would depend upon your skills with investing but also with LUCK. The pension is more or less a "sure" thing. Growing a lump sum might not be as sure a thing. Not a suggestion - just a "to think about".

If it were me, I would consider using some of your "extra" taxable money to pay the taxes on a partial Roth conversion of some of your 401(k) money. We've had dozens of discussions here about this, so you might search. To me, the advantages of the Roth are enough to take the tax hit now, but you must decide for yourself. One advantage not always talked about is that converting to a Roth and paying the taxes with taxable money gives you a kind of "step-up" in value of the Roth. IOW, a $100K Roth is worth more than a $100K 401(k) because you will never have to pay taxes on the gain within the Roth. If you have questions about this or other Roth issues, try here:

Fairmark.com

Welcome to Early Retirement!
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Old 12-20-2011, 06:30 PM   #7
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Thanks Everyone for the welcome and responses
I have been thinking of opening a Roth IRA with some of my 401K plan since my income will be low and allow me to get money out of the 401K at a low tax rate for the next year and half.
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Old 12-20-2011, 06:53 PM   #8
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Welcome Harding. I am in a similar place in life where I am now 59 1/2 and my job came to an end with no severance in September. I have decided to just retire at this time. I have more than a few bucks in the bank and am eligible for Social Security Widow's Benefits at age 60. I will probably take early SS at age 62.

I feel that I have enough for the future and with unemployment the way it is, I should not take a job from some other person that really needs the work. I might find some type of income producing hobby, but that remains to be seen.
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Old 12-23-2011, 05:38 PM   #9
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Welcome ! My daughter lives in western New York . It is a very pretty area .Just too much snow for my tastes .
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Old 12-26-2011, 03:41 PM   #10
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Are you close to Chautauqua? I have a summer cottage there and spend the months of May--Oct there.
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Old 12-26-2011, 04:00 PM   #11
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Welcome to the forum, harding, and congratulations on your retirement! It sounds like you are doing just fine

Would you like to be included in The Class of 2011 ?

If so, just let us know what date this year that you officially retired, and we'll be happy to help you join the crowd!
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Old 12-27-2011, 02:25 PM   #12
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Quote:
Originally Posted by Koolau View Post
Just a couple of things to consider:

You have to do the math yourself, but typically, most folks do better with a pension than with a lump sum. A lot would depend upon your skills with investing but also with LUCK. The pension is more or less a "sure" thing. Growing a lump sum might not be as sure a thing. Not a suggestion - just a "to think about".

If it were me, I would consider using some of your "extra" taxable money to pay the taxes on a partial Roth conversion of some of your 401(k) money. We've had dozens of discussions here about this, so you might search. To me, the advantages of the Roth are enough to take the tax hit now, but you must decide for yourself. One advantage not always talked about is that converting to a Roth and paying the taxes with taxable money gives you a kind of "step-up" in value of the Roth. IOW, a $100K Roth is worth more than a $100K 401(k) because you will never have to pay taxes on the gain within the Roth. If you have questions about this or other Roth issues, try here:

Fairmark.com

Welcome to Early Retirement!
My parents are retired just outside of Rochester. How comfortable do you feel about the Pension? Some larger employers in the Rochester area might not be who I want managing my pension, YMMV.

My father also reminds me he pays no state taxes, and he has income from sources very similar to yours.
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