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Hoping to retire at 55
Old 01-09-2013, 11:14 AM   #1
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Hoping to retire at 55

Hello everyone. My DH and I have been getting serious about retirement planning lately and I was hoping to get your perspective on our situation.

Here are some of our stats:

DH age 57, me age 48, both computer programmers and frugal.

Hope to retire in seven years when I am 55 in 2019 with retirement medical benefits from my employer. Plan has dental, prescription, and supplement to Medicare after age 65. I would want to retire earlier if not for these retiree medical benefits.

2 teenagers, college savings put aside already and not included in savings numbers below. Both kids will be in college when I plan to retire. We also have three adult children that are doing well and live on their own.

We both have been semi-retired for years. I have been part time since my two children were born. DH has been part time running his own company since taking the retirement plan from his old employer during the telecomm blow up. We work four days a week and have our wonderful Fridays together.

DH, pension $56K/yr, non-COLA. No survivor benefit for me.

Retirement savings: Currently $850K, estimated $1.8M when I am 55

Plan to sell current home right before retirement and move to smaller home that we can buy outright. Property taxes are outrageous here so this is the only way to get expenses down. We don't need this huge house after the kids are off to college anyway and we want to move closer to DH's family.

Bad news is that DH has a life threatening illness. We do not know if he has 2 years or 20 years to live. The reality is that I will probably be widowed for a very long time. For me, I am more scared of running out of time with DH than with running out of money. I want to enjoy those happy years together before my lonely years as a widow begin.

DH has a $700K insurance policy that we plan to keep at least until I am 60. If DH survives that long, we can gradually decrease the policy amount depending on his health and the state of medical progress on his disease. It sounds harsh but with DH's illness, we probably won the insurance gamble and it would be stupid to cancel it unless it becomes cost prohibitive. The premiums greatly add to our expenses but are pretty important with our situation. In addition, expenses go down after DH passes, due to his high medical, insurance, and other costs. If I were to pass away, DH would receive a $400K policy on me.

If DH passes away before retirement, I could switch to full time to save more if needed and delay retirement. I also have the possibility of working very part time after retirement if I want to, to keep my foot in the door and my skills up.

We have been doing detailed expense tracking with Quicken for the last year. Using these numbers our estimated expenses after retirement and downsizing homes is $100K/year, including property and income taxes and including allowances for increased medical costs and some other factors. If it is just me, my expenses would be $70K.

After retirement, we plan to travel a little more and do more camping and have included that in our budget. I am looking forward to having the time to do more of those simple things like reading, playing games, and doing our other hobbies.

DH has suggested that we might downsize and buy a fixer upper at retirement and spend time fixing it up since we are both skilled at home repair. I wonder if this is realistic because because of H's age and illness. I don't know if we would have the physical ability to continue to do these projects at that time.

We created several detailed spreadsheets. Assuming 3.5% inflation, a SS COLA of 1.5%, and investment returns of 6% we are ok. We performed several what if analyses assuming DH passes at different ages, and assuming that I live to 95. We think the best approach would be for DH to delay SS until 70. If he passes early, I would start widow survivor benefits at 60 or 62 and then switch to my SS when I am 70 (9 years later). The life insurance would cover me until I started collected SS.

I ran things through FireCalc and it said we were at 100%, but I did not go into details on the asset allocations. I was glad that I was able to model the pension and SS factors correctly in FireCalc, unlike the other calculators I tried.

What do you all think?
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Old 01-09-2013, 03:00 PM   #2
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I think you done some solid analysis and have a good plan.

1. You have health insurance covered. That's a big one for many of us.
2. Savings set aside for your kids' education outside of your analysis.
3. Estimated savings of $1.8 million when you retire. Lots of folks make it work with far less than this.
4. Life insurance which is particularly important given the health of your DH.
5. Detailed budget with plans to cut expenses where possible - such as downsizing your house.
6. Numbers run through FireCalc show 100% success.

I'm sorry to hear about DH's health problems. Hope you both have lots of time to enjoy the fruits of your labor.
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Old 01-09-2013, 04:39 PM   #3
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Have you used Quicken Lifetime Planner? If QLP and Firecalc both say you are good then you should be fine. I ran a half a dozen different tools that all said the same thing to different extents before I decided to ER.

In fact, if your plan at 55 is solid perhaps you should look at scenarios where you retire earlier but still with confidence in your finances so you and DW can enjoy your remaining years.

Are you sure that DH's pension has no joint life alternative? That would be very unusual in my experience. In fact, my plan requires that DW sign off if we decide to take my pension just on my life.
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Old 01-09-2013, 04:59 PM   #4
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Welcome. Sorry to hear about your husband's health.

I'm in a similar situation to you - my husband is 9 years older, we both work 4 days a week and have our wonderful Fridays. And like you, I'm hoping to retire at 55. (Currently 51.)

I'd like to second pb4uski's suggestion of quicken's lifetime planner as a sanity check on firecalc and your spreadsheet. It's deterministic (you input the rate of return, inflation, etc.) but it allows a lot of granularity for lifetime expenses/events.
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Old 01-09-2013, 06:26 PM   #5
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Actually the exW gets the pension when DH passes. (They were divorced a year before we met.)

I will try the Quicken lifetime planner.

If I could retire today and still get the medical I would do it. The rule is 15 years and 55 years old. I have 25 years but have to wait until I am 55 years old. I am working 28 hours a week and have considered going down to 21 to have more time off. My job is very flexible. DH works around 20 to 30 hours a week and loves his work and may not ever really retire. Since he is his own boss, he can set his own hours. DH doesn't feel the same urgency to retire and spend more time together that I do.
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Old 01-10-2013, 01:59 AM   #6
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Welcome. Your plan sounds good to me.
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Old 01-17-2013, 11:08 AM   #7
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I have been playing with Quicken Lifetime Planner pretty intensely and believe we can be ok if we can keep our living expenses on budget. I think I have found ways to model a lot of the expense and income changes we are expecting.

Can anyone give their opinion on these assumptions? I am assuming 3% inflation, a SS CPI adjustment of 1.5%, and a 5% rate of return on investments. By default, Quicken adjusted SS with inflation which is unrealistic to me, so I instead added SS as if they were pensions. If you tweak these numbers even a bit, there is a reasonably large fluctuation in the results.

I ran what ifs on different life expectancies and we have a better idea of how much life insurance we need to keep at different ages. Also, our plan makes it without selling our house and without working part time after I am 55, so we have those as back ups. Right now, we are thinking that we might both decide to work half time for a few years to be able to afford some of the big ticket vacations we have dreamed of (Australia, England, Germany, France, Italy, and Hawaii). If the economy doesn't participate, we can instead use the extra income from part time work or downsizing to shore up our investments.
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Old 01-17-2013, 11:50 AM   #8
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Regarding DH life insurance policy, some have a waiver of premium payments based on disability. Check it out. If he becomes too ill to work that policy will not become endangered by a reduction in cash flow. Your plan, as described, is solid. If I were you, I would even consider retiring now if for some reason you are unable to cut down your hours to the level you wish. Having the financial resources behind you as you do is a powerful amount of confidence to assert smartly in almost any workplace negotiation. I too hope you both have many wonderful years. Best, Joe
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Old 01-17-2013, 12:44 PM   #9
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I will check out the insurance policy in more details. Thanks for the suggestion.

I can't quit yet because of the medical benefit. Luckily, my job is very flexible regarding number of hours.
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