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Gonna jump..... but scared
Old 10-20-2018, 06:59 AM   #1
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Gonna jump..... but scared

Hello all, been reading and learning for a while now. We had a solid plan to RE in 2023, but life happens and it is changing to 2019. I am 49 and Hubby is 57. The plan was for child 3 to graduate HS in 2023 and call it quits. Our eldest is fully established in his career and younger son graduates PA school this December.
Now for the wrench. Our plan was always to move back to NY for retirement, but my Dad's recent passing has left us a paid for house on Long Island. We had always assumed we would sell it, but I cannot part with it. My entire family has passed in 5 years and I am reluctant to let it go now. So that is the situation and these are the numbers.
IRA 1,300,000
Inher. IRA 110,000 (rmd about 4,000 yr)
401k 25,000
investments 31,000
pension 6000yr
72t 6000yr
savings 178,000
NC home 300,000 (owe 80,000)
NY home 500,000
2017 auto ( owe 2,500)
No debt other than NC mortgage and car (82,500 total)

We have fully paid for health insurance from husband's retirement from first career that will become our supplement at medicare. There is a chance he can transfer his job in NC to NY but we are planning without that just in case. We don't want to touch our investments until he is 59 1/2, so the plan is to sell the NC home and use savings combined with the 16,000 (pen., 72t & rmd) to make the 60,000 (pre tax) we need to live on for 2 1/2 yrs. The savings would be 408,000 , but 130,000 of that is earmarked for home renovations that the NY house needs. So that leaves 278,000 in savings.
I know 60,000 sound low, but we have run the numbers over and over and with health ins. covered and no mortgage we calculate about 48,000 plus a cushion. So I figure if we use 110,000 of savings over 2 1/2 yrs, we still have a nice safety net of 168,000 left.
So some days I think this is very doable, but others I am very nervous. What do you think?
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Old 10-20-2018, 07:18 AM   #2
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Yes, your plan doesn’t seem to leave much room for extravagance, but you should maintain a comfortable lifestyle just fine. Keep an eye on your monthly expenses and good luck with the renovations. I think that’s your biggest risk. Try to do much of the renovation yourself, but stay within your competency, and maintain a clear and professional level of communication with the contractor(s).

Good luck!

And welcome!
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Old 10-20-2018, 07:41 AM   #3
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laura, I assume you've seen this?

Some Important Questions to Answer Before Asking - Can I Retire?
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Old 10-20-2018, 08:35 AM   #4
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Yes, I read it. Why do you ask, do you think I missed something? Please let me know if I did.
Thanks
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Old 10-20-2018, 08:43 AM   #5
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Yes, your plan doesnít seem to leave much room for extravagance, but you should maintain a comfortable lifestyle just fine. Keep an eye on your monthly expenses and good luck with the renovations. I think thatís your biggest risk. Try to do much of the renovation yourself, but stay within your competency, and maintain a clear and professional level of communication with the contractor(s).

Good luck!

And welcome!
We are never going to be extravagant people, we do enjoy eating out and built that and one vacation a year into the budget.
The renovation is actually set to be about 105,000, but I put a big safety net into it. Thankfully the house has already had an oil to gas conversion, updated electric and a brand new bathroom recently. We are just making it to our taste and comfort plus new windows and siding. I am lucky to know the contractor almost all my life, was a good friend to my brother. He did the other recent updates and is very good.
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Old 10-20-2018, 08:44 AM   #6
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...do you think I missed something?
No.

I just wanted to be sure you'd had a chance to go through all those questions to help you address the concerns you have about 'jumping'.
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Old 10-20-2018, 08:54 AM   #7
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No.

I just wanted to be sure you'd had a chance to go through all those questions to help you address the concerns you have about 'jumping'.
Ok, thank you.
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Old 10-20-2018, 11:48 AM   #8
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Lauradrops --

You may have done this already, but just in case...suggest you check the taxes in Long Island/New York. We sold our house in NY in 2006, and the property taxes and village, town, county, and state taxes were ridiculous at that time. I doubt they've gotten any cheaper.
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Old 10-20-2018, 12:35 PM   #9
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Is the 72t really worth the hassle? Penalties are steep if you get the numbers wrong, and you only need to cover the 2.5 years until your DH turns 59.5. If that 401k is his and with his current employer, you might be able to tap it penalty-free as soon as he "separates from service" since he is 55+ -- check his plan rules to be sure. You could also bump contributions way up between now and whenever he stops working to have a bit more in that pot to tap over the next 2-3 years.
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Old 10-20-2018, 01:23 PM   #10
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Is the 72t really worth the hassle? Penalties are steep if you get the numbers wrong, and you only need to cover the 2.5 years until your DH turns 59.5. If that 401k is his and with his current employer, you might be able to tap it penalty-free as soon as he "separates from service" since he is 55+ -- check his plan rules to be sure. You could also bump contributions way up between now and whenever he stops working to have a bit more in that pot to tap over the next 2-3 years.
The 72t was taken out when we took the 100,000 mortgage. He had retired from his first company and we relocated. Even though we put 60% down, he didn't have 2 yrs with the new job so they made us show other income. That has been in place for 5 yrs now which is a shame because we never needed it.
In rethinking things, we will really need to cover 2 yrs until 59 1/2 because we will not be moving until summer of 2019. The scenario I present would be our worst case scenario, which is how I always like to prepare. It is very likely he will still be working, but I like to what if it.
We will still be funding the 401k with his company match and our own investments with an online brokerage acct. I don't think we will need to touch his 401k, but know we can. We also plan to stash his 2 remaining bonuses in our savings. The idea is to let the IRA's keep growing before we have to touch them.
Thank you for your thoughts, I always have more to learn.
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Old 10-20-2018, 01:31 PM   #11
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Lauradrops --

You may have done this already, but just in case...suggest you check the taxes in Long Island/New York. We sold our house in NY in 2006, and the property taxes and village, town, county, and state taxes were ridiculous at that time. I doubt they've gotten any cheaper.
I have already gone to the Town of North Hempstead tax office. It is actually a funny story. Because my Dad did hospice in my house for the last 1 1/2 yrs., I figured I better double check he was up to date on his taxes. He was adamant about maintaining his own finances. The taxman looked it up and said he had never seen taxes so low for that area. Then he laughed and said my Dad had grieved his taxes every single year. He was actually in the process of grieving them when he passed. So they will go up 1,200 a year for me because we are not seniors. But they will still be very low at 7600 a year. The taxman said I do keep that rate.
It is also why our renovation will not change the footprint of the house. I don't need to rock the boat and at this stage. I am done with a big house. A 3 bed 2 bath will work fine for the 3 of us.
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Old 10-20-2018, 05:49 PM   #12
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I have already gone to the Town of North Hempstead tax office. It is actually a funny story. Because my Dad did hospice in my house for the last 1 1/2 yrs., I figured I better double check he was up to date on his taxes. He was adamant about maintaining his own finances. The taxman looked it up and said he had never seen taxes so low for that area. Then he laughed and said my Dad had grieved his taxes every single year. He was actually in the process of grieving them when he passed. So they will go up 1,200 a year for me because we are not seniors. But they will still be very low at 7600 a year. The taxman said I do keep that rate.
It is also why our renovation will not change the footprint of the house. I don't need to rock the boat and at this stage. I am done with a big house. A 3 bed 2 bath will work fine for the 3 of us.
That's good news. Remember to get the full picture you need to also check with the village, and county -- because they will tax you too, in addition to state....
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Old 10-20-2018, 06:41 PM   #13
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I understand the fear before leaping.... I certainly had it. And I wasn't moving and changing my housing expenses and tax expenses.

I would nail down your expenses - especially taxes. Some taxes go away (SS and medicare wage contributions for example) but others are likely to go up. (property, and local taxes.) You need to have an understanding of this.

Also - have you accounted for finishing your middle kids college, and getting youngest through college in your $60k/year?

Breaking out your post a little differently than you did:

Income:
- pension $6000
- 72t $6000*
- rmd $4000**

Assets towards nest egg:
- IRA $1300000*
- Inh IRA $110000**
- Investments $31000
- Savings $178000
- Home Equity from NC home: $220000

*being reduced by 72t
** being reduced by RMD.

(I didn't include the NY home equity since that will be where you live... can't spend your house.... but you can sell your NC house.)

So your assets that can be used to fund retirement are $1839000 - $130000 (remodel) = 1.7M

Your withdrawals would include the 72t and the RMDs... and you draw out the rest as needed in the most tax efficient manner.

Is the pension COLA'd?
What is your expected SS?

I would run your numbers through firecalc (link at the bottom of the page)... make sure you fill out all the tabs - including SS / Pensions... as well as asset allocations.

FWIW - I retired on a smaller nest egg, with 2 kids under roof, and a similar budget... But we have some rental income that offsets our expenses.
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Old 10-20-2018, 07:39 PM   #14
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I understand the fear before leaping.... I certainly had it. And I wasn't moving and changing my housing expenses and tax expenses.

I would nail down your expenses - especially taxes. Some taxes go away (SS and medicare wage contributions for example) but others are likely to go up. (property, and local taxes.) You need to have an understanding of this.

Also - have you accounted for finishing your middle kids college, and getting youngest through college in your $60k/year?

Breaking out your post a little differently than you did:

Income:
- pension $6000
- 72t $6000*
- rmd $4000**

Assets towards nest egg:
- IRA $1300000*
- Inh IRA $110000**
- Investments $31000
- Savings $178000
- Home Equity from NC home: $220000

*being reduced by 72t
** being reduced by RMD.

(I didn't include the NY home equity since that will be where you live... can't spend your house.... but you can sell your NC house.)

So your assets that can be used to fund retirement are $1839000 - $130000 (remodel) = 1.7M

Your withdrawals would include the 72t and the RMDs... and you draw out the rest as needed in the most tax efficient manner.

Is the pension COLA'd?
What is your expected SS?

I would run your numbers through firecalc (link at the bottom of the page)... make sure you fill out all the tabs - including SS / Pensions... as well as asset allocations.

FWIW - I retired on a smaller nest egg, with 2 kids under roof, and a similar budget... But we have some rental income that offsets our expenses.
Thanks for all your input.
So middle kid is done, graduating graduate school this December as a Physician Assistant. He will be staying in NC and starting his job in March. Youngest has money invested for college that I do not include in our numbers, so feeling good there.
We will definitely sell the NC house and use that money for 2 years instead of tapping our investments.
Property taxes all in are going to be 7600. I expect they will go up, but we will also qualify for senior star program when my husband hits 65, which means school tax is cut in half. Until then I will just grieve them every year like Dad did because it seems to work.
Pension is not COLA'd.
Firecalc has us at 100%, but I can never figure out how to add savings so I leave it out. I also don't factor in money from the sale of the house in NC. I also run it with just my husbands social security because I think of mine as extra.
I also run Firecalc as if we will not work again after 2019, but my husband will likely work a few more years. Our asset allocation is about 78/22.
I will look into taxes to see if I missed anything, but I have paid the second half of the year already and have viewed the first half of next years. So I feel pretty confident that's what it is.
Posts like yours are what I am looking for, other angles to think about that I may not have seen. Thanks again.
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Old 10-21-2018, 09:27 AM   #15
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Thanks for all your input.
So middle kid is done, graduating graduate school this December as a Physician Assistant. He will be staying in NC and starting his job in March. Youngest has money invested for college that I do not include in our numbers, so feeling good there.
We will definitely sell the NC house and use that money for 2 years instead of tapping our investments.
Property taxes all in are going to be 7600. I expect they will go up, but we will also qualify for senior star program when my husband hits 65, which means school tax is cut in half. Until then I will just grieve them every year like Dad did because it seems to work.
Pension is not COLA'd.
Firecalc has us at 100%, but I can never figure out how to add savings so I leave it out. I also don't factor in money from the sale of the house in NC. I also run it with just my husbands social security because I think of mine as extra.
I also run Firecalc as if we will not work again after 2019, but my husband will likely work a few more years. Our asset allocation is about 78/22.
I will look into taxes to see if I missed anything, but I have paid the second half of the year already and have viewed the first half of next years. So I feel pretty confident that's what it is.
Posts like yours are what I am looking for, other angles to think about that I may not have seen. Thanks again.
Bolded - in the "Not Retired" section, you can add your savings to your portfolio.
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Old 10-21-2018, 10:26 AM   #16
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Bolded - in the "Not Retired" section, you can add your savings to your portfolio.
Thank you, but I thought what I added there was for investment purposes only and not sitting in a savings account. Am I not understanding that correctly? I was looking for a way to reflect savings account which of course have almost no growth.
Maybe if I add savings into portfolio amount and change asset allocation to reflect amount in cash? Just not sure how to make that accurate.
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Old 10-21-2018, 10:42 AM   #17
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Thank you, but I thought what I added there was for investment purposes only and not sitting in a savings account. Am I not understanding that correctly? I was looking for a way to reflect savings account which of course have almost no growth.
Maybe if I add savings into portfolio amount and change asset allocation to reflect amount in cash? Just not sure how to make that accurate.
So this is what I tried- I put in portfolio value with savings and changed the AA to reflect the cash. I did it for 65,000 starting 2019, but left out SS entirely and it gave us 100%. So if that is accurate then that's good to know.
Also wondered, what do you think the value of the health insurance is? I would have to imagine it would cost my husband, myself and my daughter at least 15-20,000 a year for good insurance. I have always thought of that as a big benefit to our early retirement situation because we don't have to contribute anything at all to the premiums.
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Old 10-21-2018, 10:45 AM   #18
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Laura, sorry about your dad's recent passing. Based on your budget, assets, pension and future SS, I think you are fine. While I understand you don't want to move now, you do have the flexibility in the future to move to a lower cost area if you decide you need to cut back. I like plans that have a margin of safety and flexibility. It appears you have both.
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Old 10-21-2018, 01:53 PM   #19
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So this is what I tried- I put in portfolio value with savings and changed the AA to reflect the cash. I did it for 65,000 starting 2019, but left out SS entirely and it gave us 100%. So if that is accurate then that's good to know.
Also wondered, what do you think the value of the health insurance is? I would have to imagine it would cost my husband, myself and my daughter at least 15-20,000 a year for good insurance. I have always thought of that as a big benefit to our early retirement situation because we don't have to contribute anything at all to the premiums.
I misunderstood the savings vs. portfolio concept, but changing the AA to reflect the lower earning savings value is one way to do it, but leaving out the SS income is not necessary, but for ultra conservatism I understand.

Health insurance could indeed run 15-20k, but could also be less before Medicare if managing income for ACA purposes.
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Old 10-21-2018, 01:56 PM   #20
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Thank you flintnational. I think you are probably right. I hate that our plan got pushed up though. You know what they say, man plans and god laughs.
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