Help me with my assumptions please! 53 and Retiring

[53anddone]

What a great forum! Really enjoy reading it.

I am about to leave a job of 27 years and working on a plan to get me from 53 - 65. At 65 I have a different situation with pensions and feel I am just fine at that point. In any event, because I know this is about the numbers, here they are:

Help me with my assumptions 53 - 65 please.

Age 53, Spouse 47, Kids 14 and 16.

Cash Assets: 5M (recently acquired through sale of company)
401, Etc.: 1.2M
House - Owe 350 on 750 value. 5 years left on mortgage.
Second home - 340k. Own outright.
Cars - own outright, nothing exotic.
Health - everyone good.
College - have funds to cover.

In my spreadsheet I am assuming monthly costs of around 15k which is pretty much what we spend now including mortgage. I upped healthcare to $18k per year under the ACA. To me this seems conservative as we wont spend as much monthly in retirement as now.

My primary question is what I should assume I can get for a return on my cash assets which will start to work for me in 2016. In my spreadsheet I have assumed a 3.4% dividend payment, a 4% average annual return (ex. dividend), and a cash withdrawal of 3.1% annually for 12 years. With these assumptions I easily make it to 65 (in fact the cash assets grow slightly) until I am 65 and then start collecting pensions, etc. Of course I might delay pensions at this point but we will see.

DO these three assumptions seem conservative to people, aggressive, etc.

Thanks for any thoughts, idea of what I might be overlooking.

Once I am comfortable plug is being pulled 12/31/2015!

Thanks

 

[MBAustin]

Welcome and congratulations, 53! I also ER'd at 53 and haven't looked back once! If you haven't seen them yet, there are two excellent resources here that might help you with some of the details:

http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

and

Early Retirement FAQs - Early Retirement & Financial Independence Community

Also, for detailed financial questions, the first response will generally be "What did FIREcalc say?" so you might as well put your numbers in there. There's a link on the right under Quick Links and another at the bottom of the page. I'm not one of the numbers experts, but you look like you're starting out with a very strong asset base.

We'll do our best to answer your questions also - lots of friendly and knowledgeable folks hang out here!

 

[53anddone]

Great to hear from another in my age bracket. I do fee the most difficult part is just making the decision. I looked at both the FAQ's and FIRE. The fire showed a success of like 99.1% or something.

I am wondering for the folks on the forum - maybe a more direct question. If you had a lump sum where you wanted a low risk approach to getting an annual income stream around 3.5% with modest growth in the 4% range what would be your approach be to that. I am looking at something like slowly buying into an ETF like DVY but wondering others thoughts.

 

[pb4uski]

.....My primary question is what I should assume I can get for a return on my cash assets which will start to work for me in 2016. .....

.....maybe a more direct question. If you had a lump sum where you wanted a low risk approach to getting an annual income stream around 3.5% with modest growth in the 4% range what would be your approach be to that. I am looking at something like slowly buying into an ETF like DVY but wondering others thoughts.

If you are just talking about 53 to 65, you are all set. Even assuming 0% income on your assets, you would only need $1.6m to carry you for the 8 years from 53 to 65 at $15k a month plus $18k a year for health care and you have way more than that.

In order to get a response to your first question, you need to tell us more about your intended asset allocation or your risk appetite. You are in the "won the game" zone where you have much more than what you need. One school of thought is that because you have much more than what you need that you can take some risk because even if it goes sideways you will not be ruined and if it goes well your kids and favorite charities will do very well. The other extreme is that you don't need to take any risk at all to cover the rest of your life but your legacy will be smaller as a result.

I have a 60/34/6 equities/bond/cash AA. Most early retirees here are in the 30/70 to 70/30 range and while Firecalc and other tools suggest that success rates don't vary greatly along this range, ending balances do vary.

From 1926 to 2014 a 60/40 portfolio has returned 8.8%. I believe that future returns will not be as robust and have haircut the return to 5.5% (nominal, 2.5% real) for my retirement planning.

If you are in the low risk end of the spectrum, then Vanguard Wellesley or other low cost funds with a significant bond component may be attractive to you.

 

[53anddone]

Thanks for this insight. I have also concluded that I have little risk in cutting the cord to the corporate world.

I would say I am on the more conservative side in terms of future investments. With 2 kids and (hopefully) another 30+ years to bounce around on this planet I would rather not be looking for income 20 years from now. We live a modest lifestyle and that's not going to change. Probably an allocation like 10 Cash, 40 bonds, 50 stocks or something is likely. As I will be getting a substantial lump sum I will be buying in slowly I think.

 

[travelover]

................
In my spreadsheet I am assuming monthly costs of around 15k which is pretty much what we spend now including mortgage. ..............

......... We live a modest lifestyle and that's not going to change............ .

Some of us even squeeze by on less than $15K a month, so you can probably do it .