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I guess I'd still qualify as a "early retiree."
Old 02-14-2016, 12:16 PM   #1
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I guess I'd still qualify as a "early retiree."

New guy here.. Worked as a company sales rep or sales Mgr my entire career. Mostly in healthcare marketplace. All big companies, no pensions, so my retirement will all be self funded. (Old IRAs, 401Ks, employee SPP, SS) I've got it spread around a bit. Most of its in IRAs now. No Roth, I've been fortunate to make a decent living.
Sitting on the fence now. I'd love to call it a career. Nice house in the suburbs, will be paid for next March. Bought a small farm a few years ago, it's paid off. No other debts. I love spending time at the farm working, and I also love riding motorcycles. Have ridden thousands of miles on long trips to every part of US including up to Prudoe Bay AK.. I don't think I'll have trouble keeping busy. Three kids all put through college, weddings done, all off the payroll. In fact, watching 5 grandkids grow up, is a big part of what we like to do.
61 yrs old, 38 yrs married, good health.
I've always heard I needed X percentage of my current income to retire. I won't live long enough to grow my savings to put me on a 80 percent of current income stream.
I'm in the one more year mode also. The good news is my mom & dad 90 & 89 respectively, are still kicking. They are failing a bit, but still on their own. (Despite Mom's Alzheimer's)
Talking to some higher income producers, brokers, executives over the years they always talk like they needed $5 million to cover retirement. That is not happening for me. I hope to have about one..
I'm trying to figure out SS.. When, who claims, my wife is same age, but hasn't worked outside home in 30 yrs.. What a complex quagmire that looks like.
So,, long intro.. A few questions.
1) is there a website where I can do a lot of my own financial planning? To see if i can actually pull this off?
2) what in the heck is everyone doing with their savings. Mine are going down. I'm still in the market, for about 50%. I don't want to try now to get into real estate rentals. What can I do that will provide some income or appreciation, but not be at huge risk? Or, just let it ride in very conservative market positions, and try not to worry?
3) if I wait 4 years and don't claim SS until I'm 66, I could have yearly income of about 80K. Any place/website I can go to for tax strategy during retirement. Naturally if Uncle Sam is taking half, that's going to really, really determine lifestyle.
Hope this isn't too long, I just don't have anyone I can bounce this stuff off of. My wife has faith I know what the heck I'm doing.. Any help appreciated. Thx
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Old 02-14-2016, 12:28 PM   #2
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Great first post. And, no, it wasn't too long. What's going to happen now is that you will be getting a bunch of good feedback from a bunch of good and knowledgeable people who enjoy helping others regarding various financial situations.
Welcome aboard and Happy Valentine's Day.
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Old 02-14-2016, 12:44 PM   #3
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Welcome MoPops.

If you haven't already seen this FAQ - it answers some of your questions.

Some Important Questions to Answer Before Asking - Can I Retire?

The key is understanding what your spending will be. Spending includes taxes, health insurance, etc. Accurate spending estimates drive retirement planning.

As far as a percentage of your gross income... that is a very rough guideline and doesn't make sense in many cases. For example - I was saving 23% of my gross in 401k, I was saving another chunk in taxable, I was paying payroll taxes (medicare and SS). I was taking home less than 50% because of these payroll deductions - many of which went away in retirement. But I also had employee subsidized healthcare I'd need to replace. When I paid off my mortgage a big chunk of spending went away. Equivalent to my new, post retiree, health insurance.
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Old 02-14-2016, 12:52 PM   #4
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Oh - and to answer a few of your specific questions.
Quote:
1) is there a website where I can do a lot of my own financial planning? To see if i can actually pull this off?
There are several very good calculators. firecalc.com was crowdsourced by the original members of the er.org community. It looks at historical market returns (including the inflationary 70's and the extended down market of the great depression.). Be sure to enter ALL the tabs - that includes the one where you input your SS and/or pensions. Spending is GROSS spending - so it should included income taxes, healthcare, etc.

Quote:
2) what in the heck is everyone doing with their savings. Mine are going down. I'm still in the market, for about 50%. I don't want to try now to get into real estate rentals. What can I do that will provide some income or appreciation, but not be at huge risk? Or, just let it ride in very conservative market positions, and try not to worry?
There are some good books about asset allocation out there - most of us have 50% or more in equities. The rest in bonds, cash, real estate, etc. If you wanted to keep it super simple you could go with Vanguard's Wellington or Wellesley funds. Those handle rebalancing for you. I'd suggest reading up about couch potato portfolios that use index funds to create a diversified portfolio.

Quote:
3) if I wait 4 years and don't claim SS until I'm 66, I could have yearly income of about 80K. Any place/website I can go to for tax strategy during retirement. Naturally if Uncle Sam is taking half, that's going to really, really determine lifestyle.
i-orp.com can help you model ROTH conversions. The big tax thing that many of us worry about is the RMDs at age 70... when you're forced to withdraw from the tax preferred. For some folks the RMD/SS/Pension combo can push them into a much higher marginal tax bracket... so they have started doing Roth conversions earlier in the retirement.
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Old 02-14-2016, 01:46 PM   #5
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Welcome. One important step in determining how ready you are is to make sure you have an accurate measure of what your spending is and how the spending is split among different categories. This helps you really determine what costs may go up or be eliminated in retirement, and lets you do a more accurate measure for fire calc.
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Old 02-14-2016, 02:28 PM   #6
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Thanks everyone. I'll go to fire calc, but I imagine I need to get a ton of information together before I even start to fill it out.
I've been living on less than half my gross for several years. Maxing out every possible way to save. The wife is against any kind of a move, so I'll factor in the current higher property taxes and insurance.
I'm toying going to a retirement specialist, but he takes a percentage to manage it.
However, if he can save me a lot on tax planning, it more than covers his fee.
I'd like to think I can do everything he can do, find out the correct strategy for every aspect of retirement, but it looks like eating an elephant right now. Where to start..
Anyone know of a book, or kit, or anything, that takes you through everything from A-Z?
I went through a bunch of the FAQs, but felt like I was bouncing all over.
Regrouping time.
Thanks again..
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Old 02-14-2016, 02:47 PM   #7
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Originally Posted by MoPops View Post
Anyone know of a book, or kit, or anything, that takes you through everything from A-Z?
I went through a bunch of the FAQs, but felt like I was bouncing all over.
Regrouping time.
Give yourself a year to get up to speed. It's not rocket surgery, but you'll have to learn some new vocabulary. It will begin to make sense soon.

For starters, read a few of the easier books. Millionaire Teacher by Andrew Hallam is a great one to start with, and will lead you to others. Your local library should have a number of them.

Welcome to our world!
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Old 02-14-2016, 02:57 PM   #8
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Originally Posted by MoPops View Post
...........
I'm toying going to a retirement specialist, but he takes a percentage to manage it.
However, if he can save me a lot on tax planning, it more than covers his fee.
I'd like to think I can do everything he can do, find out the correct strategy for every aspect of retirement, but it looks like eating an elephant right now. ..........
I'm a fan of the Bogleheads and think this book would be a good start for you. Also if you have not found the Bogleheads forum, there is a lot of good reading there, including their wiki.

You will find few fans of "retirement specialists" here, though it may be worth your while to pay once for a consultation. Once you educate yourself, you will probably realize that you way over paid for some boiler plate recommendations and an overstuffed report. The common wisdom here is that by the time you have self educated enough to properly choose an adviser, you no longer need an adviser. It really isn't rocket science.
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Old 02-14-2016, 04:41 PM   #9
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For many of us, 1% is like a quarter to a third of our income. .1% is much better. That is one of the many reasons why we steer clear of FAs.

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Old 02-14-2016, 04:56 PM   #10
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Welcome, MoPops! You've had some good answers already here, and it certainly is overwhelming if you haven't done any detailed planning yet. Most here would recommend to start by tracking your spending in detail if you aren't doing that already, so you know what you need to cover. Then you can use the various calculators out there (ESPlanner is another one) to run some basic scenarios to see how close (or not) you are to a comfortable point of covering expenses.

I would second the motion to take the time to do at least most of the analysis yourself - first, you will understand it much more than if you turn it over to someone else, and second, you're essentially paying yourself 1% of your investments every year, which adds up. A one-time or occasional fee-only consultation as already suggested can validate your assumptions and give you someone to bounce ideas off of.

Happy planning!
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Old 02-14-2016, 05:10 PM   #11
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Hey guys. I wouldn't be here, if I wasn't interested in doing it myself. I don't have $$ to burn, that's for sure. Thanks again for all the answers so far. I've ordered the Boglehead book. Will get a system in place to track spending. I think I can do quite a bit of it in a retrospective analysis. We don't pay cash for that much. Just using credit card bills (all with 0 balance) and the check book will give us a good idea of expenditures.
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Old 02-14-2016, 06:40 PM   #12
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Originally Posted by MoPops View Post
.....So,, long intro.. A few questions.
1) is there a website where I can do a lot of my own financial planning? To see if i can actually pull this off?
2) what in the heck is everyone doing with their savings. Mine are going down. I'm still in the market, for about 50%. I don't want to try now to get into real estate rentals. What can I do that will provide some income or appreciation, but not be at huge risk? Or, just let it ride in very conservative market positions, and try not to worry?
3) if I wait 4 years and don't claim SS until I'm 66, I could have yearly income of about 80K. Any place/website I can go to for tax strategy during retirement. Naturally if Uncle Sam is taking half, that's going to really, really determine lifestyle. ....
1) Firecalc is pretty easy. Another relatively easy and comprehensive planner is the Lifetime Planner included in Quicken Deluxe and higher versions. You run through a bunch of input screens and it does a year-by-year projection of the changes in your retirement assets. It also allows you to do what-ifs to compare results with certain changes in your assumptions.

2) I think stocks and bonds are your best bet. While like many others our balances have been declining lately, in most cases we are just giving back some paper gains. Focus on your investment performance over 3, 5 or even 10 year periods... even one year is way too short to be relevant. Most of us here prefer low-cost index funds from Vanguard or Fidelity. 50/50 is a common asset allocation for many here.

3) If you hang around here you'll get lots of good information on tax strategies. Many of us have large tax-deferred balances from IRAs and 401ks and are deferring SS and pensions, living off of taxable accounts and doing Roth conversions at a very reasonable rate (8-9% in my case).

You did hit on one of my pet peeves where you said "if Uncle Sam is taking half".... from what you have told us it is MUCH less than half. For example, let's say that you are retired, have 50k of SS income, 10k of interest income, 20k of dividend income (80k in total) and are married filing jointly and take standard deductions. Your federal tax bill is a whopping $226.... that's it. You can get a good idea of what your future tax rate will be by entering your information into Taxcaster or the tax calculator at TaxRates.org. I think you will find it is closer to 0-10% than 50%.
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Old 02-14-2016, 07:03 PM   #13
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At first glance it all seems quite daunting, but take it piece by piece and you'll be an expert in no time. Spend time to learn about asset allocation and low cost, passive investing. None of this is rocket science or even medical science

One suggestion : start tracking your expenses so you know exactly what you need. Everyday expenses, a feel for occasional expenses, etc. imho, it is essential information to base your plan on.

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Old 02-14-2016, 10:01 PM   #14
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As for asset allocations, many here would recommend having a year or two in living expenses (net of annual income) in cash so that you don't have to cash out investments in a down market. Knowing that we won't have to sell too quickly in a down market, gives more confidence to keep your money invested in your preferred asset allocation.
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Old 02-14-2016, 10:40 PM   #15
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All good advice. I will add that taxation in retirement, especially early retirement, is likely significantly less than in working years. Boggleheads forum, wiki, and books provide a valuable education on this. The post below opened my eyes to these opportunities and provided the insights and strategies to execute my FIRE last Dec. The second link provides a complementary illustration of the low tax opportunities in the 15% bracket for capital gains, qualified dividends, and Roth conversions with minimal earned income, SSI, or pensions in early retirement.

https://www.bogleheads.org/forum/viewtopic.php?t=87471

https://www.kitces.com/blog/understa...p-up-in-basis/
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Old 02-15-2016, 07:54 AM   #16
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One suggestion : start tracking your expenses so you know exactly what you need. Everyday expenses, a feel for occasional expenses, etc. imho, it is essential information to base your plan on.
That is great advice - I was surprised how many of my friends had no idea what their monthly expenses are, but watched every stock movement avidly.

I am using a retirement calculator that is built around expenses.
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Old 02-15-2016, 09:00 AM   #17
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All good stuff again guys. Checking out links, when I can. This is a workday for me, unlike the rest of you..
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Old 02-15-2016, 09:36 AM   #18
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All good stuff again guys. Checking out links, when I can. This is a workday for me, unlike the rest of you..
This is why we need to retire like the bulk of the most active posters. As the saying goes, everyday becomes a Saturday (albeit without Saturday traffic at the stores!).

You've got some good suggestions here. #1 is know your spending now and from there, figure out what it is going to be in retirement. Sounds like you've got the records available to do it with some elbow grease, which gets you off to a good start.

Look carefully at whether you should draw social at FRA. If you have 1,000,000 m/l as your first post suggests, it is likely to be worth it to spend higher percentage from that each year to bridge to an age 70 claiming (particularly given your family history and the fact that your wife will be relying on your Social for the rest of her life if she out lives you.).

Nice to see another person from near the old stomping grounds; I remember "Gumbo" and the old bridge from St. Charles County to Chesterfield. On my last visit to see family in St. Charles, it looked a slight bit different!
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Old 02-15-2016, 05:44 PM   #19
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2017ish.
They just finished the new bridge across, and are taking the original one down.
That valley has certainly changed since the big floods back in 93. Must be a billion dollars invested there now. Two more outlet malls went in a few years ago. What a transformation.
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Old 02-15-2016, 07:49 PM   #20
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2017ish.
They just finished the new bridge across, and are taking the original one down.
That valley has certainly changed since the big floods back in 93. Must be a billion dollars invested there now. Two more outlet malls went in a few years ago. What a transformation.
Tell me about it. I left Saint Charles in 1977 to join the Navy. When I occasionally go back to visit my mom (who now lives in O'Fallon), it seems like an entirely different country.
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