Hello from Leon

L

L Carlisle

Dryer sheet aficionado
Joined
Mar 21, 2019
Messages
34
Location
Bellingham
Hi and I really appreciate you accepting me into your community.
Like most of you I have been saving my whole life so I could retire early.

I have 3 children from the ages of 32 to 26, all grown up, college educated and out of the house. Now it is time to "Semi Retire". Home will be paid off in 2 years.

My question is "Do I have enough to retire"?

My wife and I will be 55 in a few months and eligible to retire from my Industrial Job. My plan is to retire in about 18 months when I am 56 and 3 months. My 401K is worth about 800K, our IRA's are worth $250K and my lump sum pension will be worth 250K.

My wife has been retired for about 2 years and receiving an annuity of about 1K a month. I think we can easily live on 6K a month in retirement. I also have a small business that will produce 2K to 2.5K in semi-retirement

I would also like to leave a nest egg for my children after we are gone.

My 401K allows me to utilize the "55 Rule" so my plan is to take out what I need minus my wife's annuity and my business income.

From what I have read it would be optimal that we have 1.7M to 1.8M to feel comfortable.

What are your thoughts, this is a very hard decision to make but I just don't think I can mentally handle working in my industrial job much longer.

Thanks
 
Last edited by a moderator:
You don't mention expenses so I wouldn't want to answer without knowing. Your house may be paid off, but you will have prop tax & insurance. We are the same age and our house is paid off. Our health insurance is subsidized for two years at $7k/year cost to us but I expect it will go to $15k/year in 2021, even this is a high deductible plan, so some years we may need to pay a few thou more. You don't mention any taxable accounts to draw upon. I generally believe a 4% withdrawal rate is safe, but I prefer to be able to live off as low as 2% during stormy times.
 
L Carlisle said:
Hi and I really appreciate you accepting me into your community.
Like most of you I have been saving my whole life so I could retire early.

I have 3 children from the ages of 32 to 26, all grown up, college educated and out of the house. Now it is time to "Semi Retire". Home will be paid off in 2 years.

My question is "Do I have enough to retire"?

My wife and I will be 55 in a few months and eligible to retire from my Industrial Job. My plan is to retire in about 18 months when I am 56 and 3 months. My 401K is worth about 800K, our IRA's are worth $250K and my lump sum pension will be worth 250K.

My wife has been retired for about 2 years and receiving an annuity of about 1K a month. I think we can easily live on 6K a month in retirement. I also have a small business that will produce 2K to 2.5K in semi-retirement

I would also like to leave a nest egg for my children after we are gone.

My 401K allows me to utilize the "55 Rule" so my plan is to take out what I need minus my wife's annuity and my business income.

From what I have read it would be optimal that we have 1.7M to 1.8M to feel comfortable.

What are your thoughts, this is a very hard decision to make but I just don't think I can mentally handle working in my industrial job much longer.

Thanks
Click to expand...

First of all, welcome to our wonderful forum.
Sounds like your expenses are 72k yearly less ~36k in income for a net expense of 36k.
Including your lump sum pension, your investment assets are 1.3mm.
Thus your WR% is ~2.8% which should be fine even for an early retiree.

A bunch of questions though.
Can you receive your pension immediately upon (semi) retirement?
How much of a nest egg do you wish to leave your children?
Have you accounted for large lumpy expenses i.e. roof replacement, car replacement, etc?
Does the 72k expenses include mortgage payments for 2 years?
How will you cover your medical expenses? I don't see any mention of taxable income which could be used to manage income for ACA tax subsidies?
Have you run your numbers through the Firecalc retirement calculator found on this site?
You didn't mention Social Security income. What is the estimate of this income?
How long do you estimate having your semi retirement business?
 
DSC800 said:
You don't mention expenses so I wouldn't want to answer without knowing. Your house may be paid off, but you will have prop tax & insurance. We are the same age and our house is paid off. Our health insurance is subsidized for two years at $7k/year cost to us but I expect it will go to $15k/year in 2021, even this is a high deductible plan, so some years we may need to pay a few thou more. You don't mention any taxable accounts to draw upon. I generally believe a 4% withdrawal rate is safe, but I prefer to be able to live off as low as 2% during stormy times.
Click to expand...

Property Taxes and Insurance are about 2.5K yearly, and my company sponsored medical Insurance is less than 400 monthly until age 65, then medicare.

Taxable accounts, I assume you are referring to Roth's. In an effort to maximize my 401k for the last 20 years, putting 3 children through college
on pretty much a solo income there wasn't much left to build my Roth IRA. I have about 40k in my Roth IRA, not much. The 4% rule seems like I would be cutting it close. I too want to stay below 3%.
 
Dtail said:
First of all, welcome to our wonderful forum.
Sounds like your expenses are 72k yearly less ~36k in income for a net expense of 36k.
Including your lump sum pension, your investment assets are 1.3mm.
Thus your WR% is ~2.8% which should be fine even for an early retiree.

A bunch of questions though.
Can you receive your pension immediately upon (semi) retirement?
How much of a nest egg do you wish to leave your children?
Have you accounted for large lumpy expenses i.e. roof replacement, car replacement, etc?
Does the 72k expenses include mortgage payments for 2 years?
How will you cover your medical expenses? I don't see any mention of taxable income which could be used to manage income for ACA tax subsidies?
Have you run your numbers through the Firecalc retirement calculator found on this site?
You didn't mention Social Security income. What is the estimate of this income?
How long do you estimate having your semi retirement business?
Click to expand...

I have a spreadsheet that has all my expenses for the last 2 years, it includes medical expenses, payroll taxes, union dues, home taxes and insurance of about 200 monthly, food, car insurance, cell phone, electricity, etc. It also includes quite a bit of extra money for unexpected costs. By using the calculations of what I have spent I was able to figure out a realistic expectation of my expenses post retirement. My medical will actually drop which is amazing they will be $362 a month based on 2019 rates, I assume a little more in 2021 when I retire. I am sure I make too much to qualify for ACA subsidies.

Because of my savings rate, right now, my wife and I live on about $5400 a month which includes 13% taxes and our Mortgage payment. Without a Mortgage payment our expenses now are less than $4000 a month/ We have no other debt.

Our combined income, my job, my wife's SSDI and my business nets 200K a year. My business will make about 70K profit this year but it is unrealistic to assume I can use all the profit to live on. I still need to reinvest some of the profits into new equipment. The business has zero debt and I plan on keeping it that way.

I have ran FireCalc and all the scenarios show a zero chance of failure with an end of retirement amount between 940K and 22M.

My wife and I turn 55 in a couple of months so Social Security is a long way off for me. My wife has been on SSDI for 3 years, that is the annuity payment she is receiving no pension.

I replaced my roof 3 or 4 years ago, but since I have been scrimping and saving for so long I haven't had the extra cash to do the much needed remodel needed on my home. I have managed to remodel about 4 rooms, one room at a time. I would like to remodel the rest including residing my home. The cost will be about 50k. I can and will do all the work myself after I retire.

My financial advisor wants me to give her all my money and invest 80% in bonds that produce 3.5 to 5% dividends and 20% in mutual funds. This seems very safe, but is it too safe to build a nest egg? I feel my wife and I are too young and healthy to be so conservative. I am half tempted to manage my money myself at Fidelity. If I give it to her she will start a 72t. If I manage it myself, I can leave 250k to 300k in my 401k and utilize the "55 Rule" the rest will be transferred into an IRA and I can invest 25% to 40% in bonds and the rest in index or growth funds. When I turn 59 1/2 I can transfer the remaining 401K funds into my IRA. Honestly I am tired of scrimping and saving and I want to make my house look great again. I don't want to be stuck with a limited amount of funds for 3 years. I like the flexibility the "55 Rule" gives.

Semi-Retirement will be great, only working one job, my business, but it is scary leaving a well paying job for the unknown.
 
I would suggest a provisional budget with more money for health costs just in case. We retired in 2010 with megacorp retiree insurance of $90/month but in 2014 the policy changed and retirees had to pay the full group cost and the premiums shot up dramatically. For this year the premium costs are $995/month. (I still get the annual elections each Fall even though I don’t use it any more).
 
My financial advisor wants me to give her all my money and invest 80% in bonds that produce 3.5 to 5% dividends and 20% in mutual funds. This seems very safe, but is it too safe to build a nest egg? I feel my wife and I are too young and healthy to be so conservative. I am half tempted to manage my money myself at Fidelity. If I give it to her she will start a 72t. If I manage it myself, I can leave 250k to 300k in my 401k and utilize the "55 Rule" the rest will be transferred into an IRA and I can invest 25% to 40% in bonds and the rest in index or growth funds. When I turn 59 1/2 I can transfer the remaining 401K funds into my IRA. Honestly I am tired of scrimping and saving and I want to make my house look great again. I don't want to be stuck with a limited amount of funds for 3 years. I like the flexibility the "55 Rule" gives.
Click to expand...

I think your temptation to 'manage yourself' is very, very good. We were wrestling with this issue a few years ago, and some good soul on this board suggested we look into a fee only planner, which we found here: https://www.napfa.org/ We only pay her when we need help rebalancing or have questions about taxes, Roths, etc. Her fee is less than a continental airplane ticket, which I'm happy to share rather than giving her a percentage on an ongoing basis.

I initially had so many questions on the mechanics of what our finances would look like after retirement. I share these often, but I've gotten lots of good, practical investing and withdrawal tips from a blog called Retirement Manifesto. Specifically, these gave me insight on how we wanted to structure OUR plan:

https://www.theretirementmanifesto.com/our-retirement-investment-drawdown-strategy/

https://www.theretirementmanifesto.com/how-to-build-a-retirement-paycheck/

I hope these help, and good luck. I'm sure it's been asked, but have you run your numbers through FireCalc? https://www.firecalc.com/
 
L Carlisle said:
I have a spreadsheet that has all my expenses for the last 2 years, it includes medical expenses, payroll taxes, union dues, home taxes and insurance of about 200 monthly, food, car insurance, cell phone, electricity, etc. It also includes quite a bit of extra money for unexpected costs. By using the calculations of what I have spent I was able to figure out a realistic expectation of my expenses post retirement. My medical will actually drop which is amazing they will be $362 a month based on 2019 rates, I assume a little more in 2021 when I retire. I am sure I make too much to qualify for ACA subsidies.

Because of my savings rate, right now, my wife and I live on about $5400 a month which includes 13% taxes and our Mortgage payment. Without a Mortgage payment our expenses now are less than $4000 a month/ We have no other debt.

Our combined income, my job, my wife's SSDI and my business nets 200K a year. My business will make about 70K profit this year but it is unrealistic to assume I can use all the profit to live on. I still need to reinvest some of the profits into new equipment. The business has zero debt and I plan on keeping it that way.

I have ran FireCalc and all the scenarios show a zero chance of failure with an end of retirement amount between 940K and 22M.

My wife and I turn 55 in a couple of months so Social Security is a long way off for me. My wife has been on SSDI for 3 years, that is the annuity payment she is receiving no pension.

I replaced my roof 3 or 4 years ago, but since I have been scrimping and saving for so long I haven't had the extra cash to do the much needed remodel needed on my home. I have managed to remodel about 4 rooms, one room at a time. I would like to remodel the rest including residing my home. The cost will be about 50k. I can and will do all the work myself after I retire.

My financial advisor wants me to give her all my money and invest 80% in bonds that produce 3.5 to 5% dividends and 20% in mutual funds. This seems very safe, but is it too safe to build a nest egg? I feel my wife and I are too young and healthy to be so conservative. I am half tempted to manage my money myself at Fidelity. If I give it to her she will start a 72t. If I manage it myself, I can leave 250k to 300k in my 401k and utilize the "55 Rule" the rest will be transferred into an IRA and I can invest 25% to 40% in bonds and the rest in index or growth funds. When I turn 59 1/2 I can transfer the remaining 401K funds into my IRA. Honestly I am tired of scrimping and saving and I want to make my house look great again. I don't want to be stuck with a limited amount of funds for 3 years. I like the flexibility the "55 Rule" gives.

Semi-Retirement will be great, only working one job, my business, but it is scary leaving a well paying job for the unknown.
Click to expand...

You should seriously think about managing your own money at Fidelity. Accounts over 1mm can have "Private Client Status" and thus you would be assigned an advisor who effectively can "assist" in the management of your monies without paying any advisory fees.
This setup is what I have.
Fidelity will answer many questions without any charges. Think about it some more.
 
Dtail said:
You should seriously think about managing your own money at Fidelity. Accounts over 1mm can have "Private Client Status" and thus you would be assigned an advisor who effectively can "assist" in the management of your monies without paying any advisory fees.
This setup is what I have.
Fidelity will answer many questions without any charges. Think about it some more.
Click to expand...

Thanks I really appreciate your advice.
 
Thanks, I didn't realize they would help out with investing when your account was over 1M. That's solid advice.
 
Alan said:
I would suggest a provisional budget with more money for health costs just in case. We retired in 2010 with megacorp retiree insurance of $90/month but in 2014 the policy changed and retirees had to pay the full group cost and the premiums shot up dramatically. For this year the premium costs are $995/month. (I still get the annual elections each Fall even though I don’t use it any more).
Click to expand...

Wow that's a huge jump in cost. I started at this company 20 years ago, retirees had a great retiree medical plan for all. About 10 years ago they cancelled all medical insurance for "Retired" employees. The retiree's were more than a little pissed. My company was bought out last year by a bigger company. The new company sent me a letter late last year stating since I will be 55 before 1/1/20 I qualify for their best retiree medical plan. Of course they can renig at any time, hopefully they won't but if they do I will have to utilize more of my retirement money to pay for it. My wife is on SSDI so if this happen I can get her on Medicare during open enrollment if our combined costs get too high. Right now my insurance is cheaper and better than Medicare.
Thanks
 
L Carlisle said:
Thanks, I didn't realize they would help out with investing when your account was over 1M. That's solid advice.
Click to expand...

To provide an example of what they will do and not do, here is one example.
If you ask them to put together a bond ladder whereby they pick the individual bonds and "ladder" them, they will charge a fee for this service.

However, if you ask them the pros and cons of using bond funds vs individual bonds (Corporate vs Muni vs High Yield) vs CD's, etc as a portion of your fixed income allocation, they will provide this type of information for zero fees.
 
L Carlisle said:
Property Taxes and Insurance are about 2.5K yearly, and my company sponsored medical Insurance is less than 400 monthly until age 65, then medicare.

Taxable accounts, I assume you are referring to Roth's. In an effort to maximize my 401k for the last 20 years, putting 3 children through college
on pretty much a solo income there wasn't much left to build my Roth IRA. I have about 40k in my Roth IRA, not much. The 4% rule seems like I would be cutting it close. I too want to stay below 3%.
Click to expand...

Taxable accounts are ones outside of 401K, IRA, Roth.

Examples would be bank account (checking, savings,etc), normal CD's, and stocks in a normal brokerage account that has zero tax favorable treatment.
 
L Carlisle said:
My financial advisor wants me to give her all my money and invest 80% in bonds that produce 3.5 to 5% dividends and 20% in mutual funds. This seems very safe, but is it too safe to build a nest egg? I feel my wife and I are too young and healthy to be so conservative. I am half tempted to manage my money myself at Fidelity. If I give it to her she will start a 72t. If I manage it myself, I can leave 250k to 300k in my 401k and utilize the "55 Rule" the rest will be transferred into an IRA and I can invest 25% to 40% in bonds and the rest in index or growth funds. When I turn 59 1/2 I can transfer the remaining 401K funds into my IRA.
Click to expand...

80/20 favoring bonds?! That's certainly conservative and with basically zero inflation protection. I doubt your firecalc results were based on this allocation either but I'm no expert with it. I myself expect to be breathing for another 30 years and my bond allocation is zero for the foreseeable future, equities only. As others have mentioned, Fidelity could be a good resource. Fidelity offered us their services at no charge, but I've declined. Whoever, make sure your advisor is a "Fiduciary" and not in it to make money off YOUR investments (ask your current advisor this question).
 
Welcome Leon.
Youre situation looks good to me. A couple comments though:
SSDI and no Medicare? My wife and I were in the same situation and I was told every year she stayed on my employer insurance would result in a penalty fee assessed when she did go on Medicare. Check out if that may be happening to her.
If you've told your advisor you want to leave a legacy and she came back with a 20/80 AA recommendation I would fire her then. Going it alone with the Fidelity private client advisor (really a retention specialist) worked for me and will probably be comfortable for you. It's easy to keep things simple and still have average gains.
 
GravitySucks said:
Welcome Leon.
Youre situation looks good to me. A couple comments though:
SSDI and no Medicare? My wife and I were in the same situation and I was told every year she stayed on my employer insurance would result in a penalty fee assessed when she did go on Medicare. Check out if that may be happening to her.
If you've told your advisor you want to leave a legacy and she came back with a 20/80 AA recommendation I would fire her then. Going it alone with the Fidelity private client advisor (really a retention specialist) worked for me and will probably be comfortable for you. It's easy to keep things simple and still have average gains.
Click to expand...

Thanks, I do remember reading about the SSDI and Medicare penalty. My wife has CP and gets Botox injections. Her doctor accepts my insurance not Medicare, so there really wasn't an option. Botox really helps her stay mobile and lessens the effects of her arthritis that is starting because of the CP. I probably should call Medicare and make sure we are not going to hit with a huge penalty. She just qualified for Medicare in January so the penalty shouldn't be too bad.
 
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