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Hi We're Schroeder's Mom and Dad
Old 05-26-2012, 09:44 AM   #1
Confused about dryer sheets
 
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Hi We're Schroeder's Mom and Dad

My husband is retiring on July 31st, 2012, 1 day after his 61st birthday. I am pretty nervous about it. I would like to lay everything out there and get some feedback and suggestions.

He is 61 and I'm almost 45. I am a cancer survivor so the biggest issue is healthcare coverage. Cobra is $880 per month and will run out in 18 months so that's only a temporary fix. His company offers retiree/spouse health insurance for $1280/per month and that will only last until he turns 65. Once again, a temporary and expensive fix. Our solution was to get our CDLs and obtain school bus routes in our little town. We will make about $550 per month each driving buses but our insurance is only $38.00 each.

He has $470,000 in his 401k and we do not want to touch that money until he is 70. I have $130,000 in an investment account (scottrade) and another $130,000 in another account with Wells Fargo. I also have a SEP with $23,000 and a roth with $18,000. His pension with a 50% survivor benefit will be $4500 per month.

Our kids are grown and out of the house, the house is paid for, we have no car or bank loans and no credit card debt. Our land taxes are $1100 per year and our home insurance is $800 per year. When he turns 62 he'll received about $1500 in SS. I work from home and make about $2,000-$3,000 per month.

When he retires, he will get a Cash termination Indemnity of about $60,000 after taxes which will be split; 1/2 in one of our accounts and the other half will go toward his 1938 BMW 320 Convertible restoration fund. Hopefully this will complete the project that he's been working on for the past year.

We would like to take 3 trips per year, 1 to New York to see our son, 1 to seattle to see our daughter and maybe 1 to Europe to see his family. The local trips usually cost us about $2k and the trips to europe about $3500. We don't have to stay in 5 star hotels but we do like to splurge on nice wine and meals from time to time.

Do you guys think we'll be okay financially? I really do but I need some reassurance I guess.

We have a financial advisor who charges A 1% fee. Should we keep him? Our son in New York is an accountant and is willing to help.

Any comments and suggestions are welcome and appreciated.

Thanks Penny
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Old 05-26-2012, 10:00 AM   #2
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I'll leave it to others to respond to your other questions, but as to this one...
Quote:
Originally Posted by schroedersmomanddad View Post
We have a financial advisor who charges A 1% fee. Should we keep him?
...the answer is NO. (Disclosure: asking that question on this board is like walking into a vegetarian cooking class at a PETA convention and asking how everyone likes their steaks done.)

Although it doesn't sound like it on the surface, 1% of your nest egg is a lot to give up each year for something you can easily do yourself.
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Old 05-26-2012, 10:56 AM   #3
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I'd also suggest you go through the "Hi, I am..." forum and take a look at the introductory threads from many others in relatively similar (or much, much worse) situations. This is a recent example of someone who is taking control of their own investment destiny:

45 - Want to Retire - Nervous - Have Questions! (Vanguard, Insurance, Home)
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Old 05-26-2012, 11:06 AM   #4
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You and your husband seem like very interesting people. +1 on getting rid of the financial advisor. 1% does not sound like much but you will be giving him around one quarter of what your investments will earn. You did not work hard all your life to save so that you could give one quarter of the proceeds from your investments away? You can learn about investing and go slow and conservative as you are learning. You could check out the Vanguard website for a couple hours and then call them to talk about transfering accounts to them and they will guide you through a simple asset allocation that is probably as good or better than what your FA has picked for you. As you learn more about investing you can fine tune the accounts if you want. The school bus driving job sounds like a good idea to get insurance at a low price. I do wonder about how awful that job might be in some locations? After your husband reaches 65 and converts to medicare you can relook at insurance options for you to see if perhaps you can completely retire at that time with him. We cannot tell whether you have enough without information about your projected expenses but your numbers do look very good if your budget is not exorbitant. Try running scenarios through FIRECALC to see what it thinks about your situation. You might consider taking money out of retirement accounts for a couple years so that your husband can delay taking SS and get a larger benefit. There are lots of threads on this forum about when to take SS and it gets complicated for couples to decide so consider spending some time researching that subject before starting his SS.
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Old 05-26-2012, 11:30 AM   #5
Confused about dryer sheets
 
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Okay, I am overwhelmed now. I find this site not to be very user friendly. Why does my name at the top of this thread have "confused about dryer sheets?" And I tried the FIRE calculator and was totally lost. Should I just leave? LOL
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Old 05-26-2012, 11:40 AM   #6
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I totally support the recommendation of getting rid of the FA.

With a little Due Diligence, you can easily configure an appropriate Asset Allocation that you can put on auto pilot, and review/rebalance once or twice a year. Save yourself the fee, it's not worth it.
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Old 05-26-2012, 11:52 AM   #7
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I'm impressed by this
Quote:
Our solution was to get our CDLs and obtain school bus routes in our little town. We will make about $550 per month each driving buses but our insurance is only $38.00 each.
That's a nice, resourceful move.

Whether you'll be okay depends on how much money you plan to spend. Have you looked at your recent spending (last 3-5 years) to see what your lifestyle costs?

You didn't mention Social Security or whether the pension is COLA'd. Both of those would be important factors.
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Old 05-26-2012, 11:59 AM   #8
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Quote:
Originally Posted by schroedersmomanddad View Post
Okay, I am overwhelmed now. I find this site not to be very user friendly.
We're an acquired taste...

Quote:
Originally Posted by schroedersmomanddad View Post
Why does my name at the top of this thread have "confused about dryer sheets?"
It's a long-running joke..."What's the deal with the dryer sheets?!?"

Quote:
Originally Posted by schroedersmomanddad View Post
And I tried the FIRE calculator and was totally lost.
FIRECalc takes a bit of practice. Play with it a bit and ask questions on the FIRECalc support forum.

Quote:
Originally Posted by schroedersmomanddad View Post
Should I just leave? LOL
OK, but if you hang around I'll manage your portfolio for only 0.75%
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Old 05-26-2012, 12:09 PM   #9
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Stick around--you'll figure out those dryer sheets sooner or later . Also FireCalc will become easier the more you use it.

Smart move to do the bus driving for the insurance. Your earnings will pay for your vacations this year.
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Old 05-26-2012, 03:36 PM   #10
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will the insurance be in force all year around?
Have you checked other sources for individual insurance coverage? I too have a history of cancer but was able to get an individual policy since I had credible coverage for prior years. If the bus insurance is not a broad enough coverage to satisfy the insurance company you might not be able to transition to another policy. And 20 years is a long time to think you can drive a school bus. (ok 20 days would be beyond my breaking point)

Forgot to add my welcome to the forum-hope you enjoy it for years to come.
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Old 05-27-2012, 12:44 AM   #11
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Quote:
Originally Posted by schroedersmomanddad View Post
Do you guys think we'll be okay financially? I really do but I need some reassurance I guess.

We have a financial advisor who charges A 1% fee. Should we keep him? Our son in New York is an accountant and is willing to help.

Any comments and suggestions are welcome and appreciated.

Thanks Penny
Just curious here. What does your financial advisor have to say about your financial situation?
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Old 05-27-2012, 06:31 AM   #12
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You will have to determine your full expenses and compare to your income. So far you mentioned about 25k (employer ins, trips, home) for yearly expenses with an income of 78k (pension and your job). Need to include food, dining out, gas, gifts, home/car repairs, utilties, etc.

Question - pension is w/ 50% survivor's benefit, is there a 100% option? Since you are 45 and a cancer suvivor, this may or may not be a consideration if the option is there.

+1 on getting rid of the FA

FIRECalc and this forum offers a ton of knowledge. Be patient and invest time in learning. Ask questions and members will help where possibe.
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Old 05-27-2012, 07:17 AM   #13
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Welcome, Penny.

I'd comment on the finances, but this comment is too distracting for me...

Quote:
Originally Posted by schroedersmomanddad View Post
...half will go toward his 1938 BMW 320 Convertible restoration fund.
If it's anything close to this one, that's going to be a sweet ride.

Most here avoid Monday through Friday traffic after retiring. You and DH should consider occasional pseudo-commutes just so you can give hearty "Yea, we're retired" waves to all the jealous worker bees.

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Old 05-27-2012, 07:43 AM   #14
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Originally Posted by Htown Harry View Post

Most here avoid Monday through Friday traffic after retiring. You and DH should consider occasional pseudo-commutes just so you can give hearty "Yea, we're retired" waves to all the jealous worker bees.

I like the way you think...
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Old 05-27-2012, 10:14 AM   #15
Confused about dryer sheets
 
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Thanks for all of the replies. I already feel "at home" here.

What is COLA'd?

The bus driving job pay and insurance does continue during the summer. We thought it was a brilliant idea and there are several older couples that drive buses just for the insurance. We plan to deposit our checks into a savings account and during the summer we'll spend that money on our trips...just as bestwifeever pointed out. The insurance, from what we hear is pretty good and is sponsored by blue cross blue shield of Mississippi.

Our current, soon to be former FA since I called Vanguard yesterday, thinks we'll be okay. He suggested Tony work another year 'til 62 but he is just tired. He travels 36 hours by plane every 28 days to the Asia Pacific region to work and we just feel that the timing is right. He is totally excited about retiring and i'm just as excited to have him home.

HTown Harry - thanks for that picture. That's almost the same exact car. We're even using the same colour scheme.
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Old 05-27-2012, 10:22 AM   #16
Confused about dryer sheets
 
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We did qualify for insurance but the deductible was $7500 each and about $550 a month. We're going to try the bus driving gig and if we can't handle it, we'll take what we can get. We just cannot go uninsured. Hopefully by the time Tony goes to Medicare there will be something for me.
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Old 05-27-2012, 11:19 AM   #17
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Quote:
Originally Posted by schroedersmomanddad View Post
He has $470,000 in his 401k and I have $130,000 in an investment account (scottrade) and another $130,000 in another account with Wells Fargo. I also have a SEP with $23,000 and a roth with $18,000. His pension with a 50% survivor benefit will be $4500 per month.

When he turns 62 he'll received about $1500 in SS. I work from home and make about $2,000-$3,000 per month.

When he retires, he will get a Cash termination Indemnity of about $60,000 after taxes which will be split; 1/2 in one of our accounts

Thanks Penny
I ran your numbers through FIRECALC solving for what total spending level you could expect at a 95% success rate, but I hesitate to share the (reasonably encouraging IMHO) actual results because I had to make several assumptions. FWIW, I entered a portfolio of $801K, a duration of 50 years (based on your life expectancy), Soc Sec of $1500/mo starting 2013, (your) income of $2000/mo through 2022, a $4500/mo pension (non inflation adjusted - big assumption) and I fully retired you in 2022.

If you want help walking through FIRECALC, I'd we willing to try to help. FIRECALC can't guarantee anything (no one or tool can) as it's based on past history, but it is worthwhile to give you a sense of whether or not you're in the ballpark. From there, you can decide how much of a safety factor you need to be comfortable with your future expectations.
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Old 05-27-2012, 03:29 PM   #18
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Thanks for all of the replies. I already feel "at home" here.

What is COLA'd?
Cost of Living Adjustment. More correctly, Consumer Price Index Adjusted since that's the normal index. The benefit goes up when the CPI goes up.

Social Security, most federal gov't retirement plans, and some state and local gov't plans have COLA provisions. It's rare (maybe unknown?) in private pension plans.

As a very rough rule-of-the-thumb, if my pension isn't inflation adjusted, I should start out spending about half of it and saving the other half. Each year, as prices go up, I'll spend a little more and save a little less. Eventually, I'll find myself spending more than 100% of my pension, but I can do that because I can withdraw that money I saved in the earlier years.

So a non-COLA'd pension only supports about half the spending that a COLA'd pension does.

Again, Firecalc or some other calculation will give you a better handle.
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Old 05-30-2012, 09:43 PM   #19
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Who is Schroeder?

Someone famous, presumably; but I don't have television, so such cultural references generally escape me ...
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Old 05-31-2012, 03:44 AM   #20
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Quote:
Originally Posted by Milton
Who is Schroeder?

Someone famous, presumably; but I don't have television, so such cultural references generally escape me ...
Schroeder is our miniature schnauzer; the best dog on this planet. Lol
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