Hello - trying to decide when to pull the plug, or how much is enough

[tominboise]

Just joined the forum. Been running the FireCalc program for awhile. Current situation is I am 58, wife is 56. We make around $250k/year. We have around $3.5mil in assets. $2.5 mil in 401k/IRA and around $1mil in two houses we own (live in one, the other is our cabin) and a couple of pieces of bare land. We have zero debt. We have one son in college for another year, and a daughter who is in high school. We have enough in 529 plans to cover all the rest of the college tuition. And probably around $150k in cash/savings.

Our $2.5mil is split among Vanguard/Fidelity and company 401k's. A general allocation of around 70%stock/30%bonds+capital preservation. They vary some from institution to institution, but that split is the average.

We will get around $900/month in pensions from a large aerospace company when we file (in our 60's, I believe) and then if we both started drawing SS at 62, will get around $22700/yr in four years for me, and then an additional $22700/yr in six years when she is 62.

General question is, We are thinking about retiring when I am 60 and she is 58, when the daughter graduates high school. We would have to draw from our own savings waiting for SS to start for a couple of years. Lately, when I am sitting in the office or on an airplane for work, I wonder why I am I doing so and shouldn't we get out now. Main reason I stay working, besides the salary, is the health insurance benefit from my employer. My wife is eligible to retire from IBM and as part of the that, apparently we could buy insurance through their company plan at a discounted rate.

Having been raised by Great Depression parents, we both are nervous about quitting and walking away from good jobs.

 

[travelover]

Maybe I missed it, but what is your required spending in retirement?

 

[tominboise]

I am assuming that we need $100k per year. Will likely go down as time passes (relative to today's $$).

 

[MichaelB]

Welcome aboard, tominboise. You might find this post helpful http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html

 

[Golden sunsets]

4% of $2,500,000 is $100,000 and does not count your social security coming on line. How accurate is your $100,000 estimate of expenses? Does it include taxes? Closely monitoring expenses for the next two years to verify your assumptions would be a wise investment of your time. Are you certain that the HI will be a reasonable cost? Aside from that I would think you would be a good candidate for Roth conversions, once your income stops, keeping your income below certain higher marginal thresholds, in order to reduce the tax torpedo that will hit you with RMD's. You might consider delaying the SS in order to convert more Roth money at low rates, which would have the added benefit of increasing your monthly payments when you do claim.


Sent from my iPad using Early Retirement Forum

 

[CoolRich59]

Welcome aboard, tominboise. You might find this post helpful http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html

Welcome tominboise. I have been here 6 months and learned a wealth of knowledge in my short time here.

The link Michael shared is not helpful, it is invaluable. Until you know what you're current spending is there is no way to know what your future spending requirements will be. And knowing those future requirements is essential to determining if you have enough $$ to retire.

 

[FrugalLady]

Hi, neighbor! I live just down the road in Twin Falls. To me, it sounds like you have your ducks in a row to retire now. If you have access to affordable healthcare, that is a huge plus for ER. Also, you are in a low COLA area, which helps with the numbers. With no debt, you should have the flexibility to trim discretionary expenses in a worst case scenario. Flexibility is key if and when markets tank. I would suggest coming up with a minimum bare bones budget for a worst case scenario, a mid budget, and a high-end budget for retirement.

 

[Doc0]

How much are you spending now at your present income

 

[kimcdougc]

Welcome tominboise. I look forward to keeping up with your road to retirement.

 

[PoorOldCountryBoy]

If you can manage to live on a 3% withdrawal rate, it is pretty hard to mess up. With your pensions and SS, it sounds like you'd be down to a 2% or less withdrawal rate.


If you have future problems it will likely be on the spending side of things. If you have spending numbers for the last 3 years (real numbers not "I think I spent..), then you can do some serious consideration of whether all your family can live on that 100K figure. I have friends who will never retire because they or their families have such high spending requirements.

 

[DrRoy]

You are at 2.9% WR before benefits, and 1.6% after. Pretty close to my numbers. Absolutely good to go.

 

[BeachOrCity]

check the price of the health insurance from IBM. most likely your company fund for it will last about two years worth of premiums. After that aca might be cheaper.

 

[flintnational]

Welcome to the forum. Congratulations on a well executed plan. Yes, IMO, you have enough to retire now. That, "I've worked all my life" feeling goes away and is replaced with, "Why didn't I do this sooner".

 

[tominboise]

I have pretty good records on all spending for the last many years, so will do some data reduction and come up with a better estimate.

 

[Jerry1]

I have pretty good records on all spending for the last many years, so will do some data reduction and come up with a better estimate.

This is the most important thing. I ran a few calculators and figured I could spend about $80,000 per year and be safe. Then, I started really getting serious about my retirement budget. With a target of about $7,000 per month, I got really comfortable once I put in my expected numbers. I forget the exact numbers, but I think base living expenses were about $4K and then it almost got hard to come up with things to get me to $7K. When I ended up needing $2K in misc expenses/cushion, I felt I was good to go.

Point is, the effort to get serious about the expenses was the best thing for helping me decide to retire early (this year at 57).

 

[tominboise]

Another question is - how to best estimate what my tax rate might be, so that I can figure out if I should be doing some Roth conversions now.

 

[pb4uski]

It would be very rare that it would be beneficial to do Roth conversions while still working... usually the best time to do them is after you ER but before pensions and SS start since you are usually in a lower tax bracket during that time.

On your first question, you can do a pro forma tax return as if you were retired with TurboTax or TaxCaster to get an idea of what your tax rate might be... take out your earnings and make any other appropriate adjustments.

 

[Huston55]

Another question is - how to best estimate what my tax rate might be, so that I can figure out if I should be doing some Roth conversions now.

Two suggestions:

1. Use Fido RIP, it calculates taxes.
2. Try iORP, it also calculates annual taxes.

 

[Doc0]

http://taxplancalculator.com

 

[StuckinCT]

I think that the healthcare variable is the one that could possibly upset things, but it sounds like you have that nailed down. 4% is still the safe withdrawal rate, especially as you approach 60; whether it is 3.5% or 3% inclusive of taxes- they are both ultra safe and have held up under every possible market scenario including the depression. Some people like having extra cushion, money for heirs/charity which is the only reason to go below 3.25% IMHO if you are in low cost funds.

But it sounds like semantics in terms of retirement as you will be below 3% with social security. Since most of your money is in retirement accounts, you could have a higher tax rate, especially if you needed to take a lot out all at once in an emergency, but the recent tax law makes it more manageable.

 

[MBAustin]

Note that pre-Medicare retiree healthcare premiums are generally subject to the whim of the employer. Mine has doubled since 2014 after very modest increases from 2010-2014. Still cheaper than individual insurance, but just barely. However, their Medicare supplement benefit is decent and if I drop coverage at any point, I can't go back on it, so at this point I plan to stick it out.

You're in pretty good shape and have received a lot of good advice here already - I suggest that you and your DW start talking about details to make sure you are on the same page. Welcome!

 

[tominboise]

Well, I have been running the IORP and other calcs and it tells me I could withdraw up to $106k/yr. Ironically, working more years doesn't yield that much of an increase in WD rates. Like another $12k/year if I work until 60.

I must say that coming to the realization that I could retire at any time ad be OK, has given me a much better attitude at work. Although I spend a lot of my day on this forum now.....

 

[Doc0]

That compounding really makes a difference. The thing to do now is to start budgeting for one offs like a trip to HI or a retirement car since the compounding won't matter that much. I'm going to need a new AC this year... Already budgeted

 

[FreeBear]

Money looks more than good, nice job! So what are you going to do to fill all that time in retirement??

 

[tominboise]

Ride motorcycles and mountain bikes. Work out more. Refurbish our main house since we've been in it 18 years and really have done very little to it. Travel some. Sleep a lot more. Drink an occasional beer or fancy coffee. Volunteer some, somewhere.