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I think I can.....I think I can....
Old 01-17-2019, 03:09 PM   #1
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I think I can.....I think I can....

Greetings from rural north Iowa.
I have been visiting this site for quite some time, picking up valuable advice and living vicariously through the RE adventures of others.

Am hoping that folks can review my RE plan and let me know if it makes sense and if you feel there are any changes that I can make to better my chances of success.

About myself:
Currently 54, DW is 54. Plan on RE the end of 2020 at the age of 56. DW doesn’t work outside the home.
2 grown children, both through college and successfully launched and self supporting with no student loan debt.
I do enjoy my work, although after 30+ years I am finding that I have other things that I’d like to do with my remaining years, such as travel, volunteer coach, walking/hiking, and just doing what I want to do when I want to do it. DW is fully on board with my RE.

Current assets:
House is paid for
Cars are paid for
Will have a non COLA pension of $47,000/yr, spousal survivor benefit at 100%
$200,000 in high quality dividend paying stocks that reliably pay out $8,000/yr
Plan on taking SS at 65 @ 16,000/yr and spouse SS @ $8000/yr
$200,000 in 401K, fixed rate account
$100,000 CD that will mature a few months prior to RE
$100,000 in taxable target date (2030) mutual fund
$20,000 traditional IRA in index fund
$50,000 Roth IRA in index fund
$50,000 in assorted money market accounts, etc.

I have calculated our budget to be $55,000/yr which includes local/state/fed taxes and out of pocket medical expenses. This budget could easily be reduced by $10,000/yr if need be.
So far so good….income equals expenses.

I will qualify for a year of paid family health insurance through my employer once I retire. We plan to move to an ACA plan after that, so that will be 8 years on ACA. Subsidies at current levels should make that very low cost, if not free. However, I have calculated 8 years of full health care cost into a few Firecalc scenarios and those still come back at 100% success rate.

We are not counting on receiving our currently quoted SS payouts, but figure worst case scenario these would be $10,000/yr and $5,000/yr each. Still 100% success per Firecalc.

We do not have long term care insurance. However, the more I look into that, the more I’m convinced that isn’t a viable product for most people. Guess we are rolling the dice there.

I understand that by having a non-COLA pension, my buying power will erode over time, but we have cash in hand to cover any shortfalls or unexpected expenses until SS and Medicare kick in.
Am guessing that once we get into our later 70s, our spending will probably slow down anyway (if our health remains good)
Also, there is no promise that our traditional dividend paying darlings will continue to pay at their current rate.

I also understand that the ACA structure may change significantly with little warning. Hopefully I’ve sufficiently considered the consequences of that.

Our goal isn’t to leave our kids millions each, but rather to help them out here and there and enjoy our retirement and not have to worry about making ends meet or becoming a burden to our children.

So, there it is……what glaringly obvious things am I missing?
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Old 01-17-2019, 03:18 PM   #2
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Assume taxes includes prop tax on house and vehicle reg fees (not sure if Iowa has high fees??). Also other insurance costs like vehicles? What about dental, optometrist, that are other related medical type expenses? At some point you will need to replace vehicles, is that budgeted or planned?


If you are confident in the budget, then retire and have fun doing what you want to do. The pension is great, it covers most of your budget, so you only need a little from your savings. Is your pension stable and confidence in it not being cut? That would be a concern. Once SS kicks in you are even better shape and less risk of problems.
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Old 01-17-2019, 03:25 PM   #3
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Welcome to our wonderful site.
At what age does the pension kick in?
IMHO, some version of ACA will be around for awhile with the current state of affairs.
How long have you been tracking expenses?
It sounds like you are good to go overall.
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Old 01-17-2019, 04:17 PM   #4
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Welcome and congrats!

Just some comments on the LTC insurance....

We also "opted out" as the deductibles, co-pays, caps, etc just seemed too restrictive compared to the policy premium. I had angst over this for some time. However, we decided that even if it cratered our nest egg, we (one or the other) would have pensions and SS to get by on. Based on family history, I am likely at higher risk than DW, but no one knows what lies ahead.

I am considering a modest "gifting" to our only DS, so it isn't subject to a five year look back etc. But yeah, I'm not letting our legacy get in the way of our living.

Don't fret over it. It is what it is.
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Old 01-17-2019, 05:18 PM   #5
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Assuming you've accounted for taxes and inflation, and can take the pension when you retire, you look to be in good shape.

AA comment: It looks like nearly 57% ($400 out of ~$700K, assuming the 2030 fund is 40-60% bonds) of your retirement assets are in fixed rate investments. This seems overly conservative given your potential retirement horizon of some 30+ years, and may keep you from keeping up with inflation down the road. Your pension not being COLA'd compounds this problem. I'd consider diversifying to 60 to 80% equities in diversified mutual funds or ETFs.
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Old 01-17-2019, 05:28 PM   #6
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I agree with HNL Bill that you may be too conservative, but I think 80%equities at the time you go out is a little high. If you make any move in allocation, maybe bump it up to 50/50 and see how that feels for a few years. You can always take more risk when you get a few years under your belt and find that your plans for passive income are working.

Congrats,

VW
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Old 01-17-2019, 05:40 PM   #7
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Quote:
Originally Posted by VanWinkle View Post
I agree with HNL Bill that you may be too conservative, but I think 80%equities at the time you go out is a little high. If you make any move in allocation, maybe bump it up to 50/50 and see how that feels for a few years. You can always take more risk when you get a few years under your belt and find that your plans for passive income are working.
$47/55K is coming out of a pension, so the withdrawal rate (not accounting for taxes) is $8K/$720K, or 1.1%. I think the OP could take a little extra risk, but to each his/her own comfort level!
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Old 01-17-2019, 09:00 PM   #8
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Thanks for the quick feedback.

The pension does kick in 30 days after I leave employment and continues until my or DW's death, whichever occurs last.

I have added into the budget all property taxes, insurances and licenses. Plan on paying for dental and eye care out of pocket.

We have been tracking our expenses ever since we had a rude financial awaking centered around credit card mismanagement about ten years ago. That was really a wake up call and started us down the road to FI.

I have not factored in a major purchase such as a vehicle, although we do need to consider that. We usually buy one nicer vehicle for travel (used) and then try to get 8-10 years out of it.

You are correct about my conservative investment allocation. I do want to be a bit more aggressive, around 60/40. At one point I was actually about 70/30, but while building up the 401k balance things got a bit unbalanced.
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Old 01-17-2019, 10:03 PM   #9
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Welcome!

I think your retirement finances look very solid. With a pension covering about 80% of your needs, I’d be comfortable with all other assets in stocks. But you know you best.

Best of luck!
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Old 01-18-2019, 02:57 AM   #10
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Is your 401k fund in a Stable Value type fund? If so and the rate is decent enough, I would think about keeping it there instead of potentially rolling it over to an IRA type account when retired.
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Old 01-18-2019, 04:12 AM   #11
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My only thought is inflation. After 25 years at 2.5% you would need $55K over your pension per year. Your starting WR is only 1% so may be OK.
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Old 01-19-2019, 12:51 AM   #12
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I keep reading about pensions being underfunded and cities that have gone bankrupt, etc. How does anyone build that kind of risk into their model? You have already made a worse case estimate for cuts in SS programs, so I have to ask - How solid is the pension fund/company behind your key income source?
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Old 01-19-2019, 01:41 AM   #13
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How much travel do you plan on? What's your annual budget for travel? Inflation would definitely be a problem for a 30 plus year retirement.

I would imagine on your budget any change in ACA subsidies would hurt significantly.

Personally in HCOL area and plans for annual travel I couldn't make it on your budget and live comfortably but people have different needs. Our travel budget will be 10-20k annually. I guess it all depends on the type and amount of travel you plan.

If the numbers work for you jump and enjoy!
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