I'm thinking of retiring this year... thoughts or comments?

[mistermike40]

Hi! I've been a member for a few years and have asked a few questions in the past (I appreciate the replies). I guess now I have the "big" question: do you guys think I can retire at the end of this year (budgeting for a 35-year retirement)?

My stats:
- current 401k (70% stocks/25% bonds/5% cash) is $520k
- two-tiered pension (non-COLA):
$4081 per month until 2022
$3107 per month starting in Jan 2022 (when SS eligible)
- Megacorp pays a large portion of my health insurance, dental, etc
- Social Security:
$1760 per month starting in Jan 2022
DW Soc Sec $740 per month starting in 2023
- two adult children, education paid for
- $150-$200k equity in house... will sell and use equity to pay cash on smaller house (no mortgage)

EDIT: I also have about $20k in mutual funds and $15k in emergency cash account

Note: I have the option to take a lump sum buyout ($718k) but will lose pension, health insurance stipend, etc

Expenses:

I've tracked all the numbers closely over the past few years... we can get by fine on $60k/year. $70k would be better but our real goal is $80k+ per year... that would give us more than enough (we don't travel much but I can see us spending more on entertainment than we do now).

Using FIRECalc (with Reality Retirement) I'm about $91k @ 100%, $100k @ 95%. With Constant Spending it's about $59k @ 100%, $65k @ 95%.

I think the Reality Retirement concept is correct (especially for me and DW) but I suspect Bernicke (and FIRECalc) are a bit optimistic. On my own spreadsheet I average the two "bookends" as I see it (best case, 3% inflation with 2% spending reduction per year from ages 61 to 75 and 8% market performance... worst case, 3.3% inflation with only 1% reduction 61-75 and 7% market)... this results in a starting retirement amount of over $84k, and a lowest (at 75 yrs old and beyond) amount of over $67k (80% of starting amount compared to Bernicke's ~50%). These are all in today's dollars.

The reason I'm posting (and going into such detail) is I've had a lot of personal/family issues the past couple years that have really burned me out... I'm ready to retire now (and Megacorp is offering a small incentive package) but the $59k Constant Spending from FIRECalc concerns me a bit. The people on this forum seem to be extremely knowledgeable and I appreciate any comments/advice/observations or insights. Many thanks in advance!

Mike

 

[rodi]

I guess it all depends on how confident you are in the spending. Does it include your share of the retiree health care? Does it include federal and state taxes?

How sure are you that you can find a place to downsize to for the equity in your home? (Be sure to account for transaction costs of selling your current home.)

We're a family of 4 (2 teenagers) living on 80k all in - and could easily live on the $59k if it was just DH and I. But we have a paid for home and moderate climate (so lower utility bills than Michigan - which is where your profile says you're from.)

I agree with your instinct to *not* take the lump sum, especially since healthcare benefits are tied up with the pension.

 

[Nature Lover]

Hi Mike,

I know how it feels to experience burnout, and the tone of your question leads me to believe you're more immediate need is to have some time to recover rather than ER. Looking at your numbers, and considering you're thinking about a 35 year retirement, I think you're right to be concerned a little bit about making the leap.

One of the key provisions of the various SWR scenarios ER's consider is the need to be flexible in spending (lower SWR methods reflect more certain uses of funds; higher SWR methods assume there is more flexibility in spending plans). It looks like, from your numbers, that ~$60k should be doable long-term, but it might mean having to make some adjustments if there are any surprises (unexpected big ticket spending, or higher than expected inflation). As a result, considering how much of your $60k spending plan is discretionary/easily adjusted is worth a review.

If $60k isn't really comfortable (or doesn't have enough 'cushion'), I'd explore other options. Do you like your work? Maybe your employer would agree to your taking a short sabbatical, or maybe a move to part-time?

If not, a more palatable long-term option might be to take the package and, after taking a break to recover from these past few years, finding another path for part-time work. Keeping a hand in will protect your options and provide you with some additional income, reducing your need to make withdrawals to support yourselves early on. That will give your investments a chance to grow a little more; and if you can find a way to avoid/minimize withdrawals until ss kicks in, you'll have a better chance of giving you the $70k or $80k options you prefer at that time.

NL

 

[mistermike40]

I guess it all depends on how confident you are in the spending. Does it include your share of the retiree health care? Does it include federal and state taxes?

How sure are you that you can find a place to downsize to for the equity in your home? (Be sure to account for transaction costs of selling your current home.)

We're a family of 4 (2 teenagers) living on 80k all in - and could easily live on the $59k if it was just DH and I. But we have a paid for home and moderate climate (so lower utility bills than Michigan - which is where your profile says you're from.)

I agree with your instinct to *not* take the lump sum, especially since healthcare benefits are tied up with the pension.

Yes it includes all taxes and my share of health insurance. There are places near our current home that are available (in our price range), though we are thinking of possibly relocating to a warmer climate

 

[mistermike40]

Hi Mike,

I know how it feels to experience burnout, and the tone of your question leads me to believe you're more immediate need is to have some time to recover rather than ER. Looking at your numbers, and considering you're thinking about a 35 year retirement, I think you're right to be concerned a little bit about making the leap.

One of the key provisions of the various SWR scenarios ER's consider is the need to be flexible in spending (lower SWR methods reflect more certain uses of funds; higher SWR methods assume there is more flexibility in spending plans). It looks like, from your numbers, that ~$60k should be doable long-term, but it might mean having to make some adjustments if there are any surprises (unexpected big ticket spending, or higher than expected inflation). As a result, considering how much of your $60k spending plan is discretionary/easily adjusted is worth a review.

If $60k isn't really comfortable (or doesn't have enough 'cushion'), I'd explore other options. Do you like your work? Maybe your employer would agree to your taking a short sabbatical, or maybe a move to part-time?

If not, a more palatable long-term option might be to take the package and, after taking a break to recover from these past few years, finding another path for part-time work. Keeping a hand in will protect your options and provide you with some additional income, reducing your need to make withdrawals to support yourselves early on. That will give your investments a chance to grow a little more; and if you can find a way to avoid/minimize withdrawals until ss kicks in, you'll have a better chance of giving you the $70k or $80k options you prefer at that time.

NL

Hi NL - you bring up a good point. Megacorp does offer a leave of absence option, one that I briefly considered... I'll think about it some more. I'm pretty sure they offer a part-time option as well.

After six months or a year (not sure which) I could return as a contract employee (still collecting pension and benefits)... that's my "fall-back" option if things get a bit tight financially (or if it turns out I miss work that much!).

 

[cnocmmz]

Hi! I've been a member for a few years and have asked a few questions in the past (I appreciate the replies). I guess now I have the "big" question: do you guys think I can retire at the end of this year (budgeting for a 35-year retirement)?

My stats:
- current 401k (70% stocks/25% bonds/5% cash) is $520k
- two-tiered pension (non-COLA):
$4081 per month until 2022
$3107 per month starting in Jan 2022 (when SS eligible)
- Megacorp pays a large portion of my health insurance, dental, etc
- Social Security:
$1760 per month starting in Jan 2022
 DW Soc Sec $740 per month starting in 2023
- two adult children, education paid for
- $150-$200k equity in house... will sell and use equity to pay cash on smaller house (no mortgage)

EDIT: I also have about $20k in mutual funds and $15k in emergency cash account

Note: I have the option to take a lump sum buyout ($718k) but will lose pension, health insurance stipend, etc

Expenses:

I've tracked all the numbers closely over the past few years... we can get by fine on $60k/year. $70k would be better but our real goal is $80k+ per year... that would give us more than enough (we don't travel much but I can see us spending more on entertainment than we do now).

Using FIRECalc (with Reality Retirement) I'm about $91k @ 100%, $100k @ 95%. With Constant Spending it's about $59k @ 100%, $65k @ 95%.

I think the Reality Retirement concept is correct (especially for me and DW) but I suspect Bernicke (and FIRECalc) are a bit optimistic. On my own spreadsheet I average the two "bookends" as I see it (best case, 3% inflation with 2% spending reduction per year from ages 61 to 75 and 8% market performance... worst case, 3.3% inflation with only 1% reduction 61-75 and 7% market)... this results in a starting retirement amount of over $84k, and a lowest (at 75 yrs old and beyond) amount of over $67k (80% of starting amount compared to Bernicke's ~50%). These are all in today's dollars.

The reason I'm posting (and going into such detail) is I've had a lot of personal/family issues the past couple years that have really burned me out... I'm ready to retire now (and Megacorp is offering a small incentive package) but the $59k Constant Spending from FIRECalc concerns me a bit. The people on this forum seem to be extremely knowledgeable and I appreciate any comments/advice/observations or insights. Many thanks in advance!

Mike

Mike looks like we are close, I am 57 and the wife is 63 and we plan to retire no later than 3 years. We will have $6,200.00 monthly guaranteed income (after tax & cola'd) if I walked away tomorrow. In 2022 I can take my SS and small gov pension total income, income then goes over 8K. 700K invested should bring us at 10-11K monthly, we also are retired mil so medical for the most part is taken care of. I think the biggest challenge you are facing is the none cola pension and medical. However, we all do what we must. Think about alternative work environments (part time or less stress)

 

[stepford]

Mike,

It looks to me like you are choosing to take SS at age 62. Given that your Megacorp pension is non-COLA'd does this give you the best return (or the highest success probability for a given spend rate)? I have a similarly structured pension and determined that the steady income option and delaying SS to 67 or 70 was a better choice than the accelerated income pension (higher until age 62, lower after) and taking SS as soon as available. This choice does mean spending down more of one's savings earlier in retirement in return for greater income later, so it's not for everyone. I just wanted to be sure you'd looked carefully at that option.

 

[mistermike40]

Mike looks like we are close, I am 57 and the wife is 63 and we plan to retire no later than 3 years. We will have $6,200.00 monthly guaranteed income (after tax & cola'd) if I walked away tomorrow. In 2022 I can take my SS and small gov pension total income, income then goes over 8K. 700K invested should bring us at 10-11K monthly, we also are retired mil so medical for the most part is taken care of. I think the biggest challenge you are facing is the none cola pension and medical. However, we all do what we must. Think about alternative work environments (part time or less stress)

Yes it does seem like we're close. I guess the way I'm looking at it is, if I work three to five more years... it will have a significant impact on my retirement funds but at the expense of the (theoretically) best three to five years that I have left. I'm finding it difficult to put a price on those 3-5 years. I still enjoy my job and my management/co-workers are great... but after the past couple years (personal issues with family members) I'm finding it difficult to resist saying "that's it, I've had enough". And while I won't be bringing in six figures I still have a very doable retirement.

 

[mistermike40]

Mike,

It looks to me like you are choosing to take SS at age 62. Given that your Megacorp pension is non-COLA'd does this give you the best return (or the highest success probability for a given spend rate)? I have a similarly structured pension and determined that the steady income option and delaying SS to 67 or 70 was a better choice than the accelerated income pension (higher until age 62, lower after) and taking SS as soon as available. This choice does mean spending down more of one's savings earlier in retirement in return for greater income later, so it's not for everyone. I just wanted to be sure you'd looked carefully at that option.

Thanks... I really hadn't looked too closely at that but it might be the best option. I'll look it over tonight.

 

[pb4uski]

A couple things to consider.

First, it looks like your spouse SS is based on her earnings record but she would also be entitled spousal benefits... generally speaking she would get the higher of the benefit based on her work record or 1/2 of your benefit... it gets tricky so check it out but there may be some pick up there. SSAnalyze - Bedrock Capital Management is a good tool to assess your SS strategy.

Second, do a pro forma tax return as if you were retired for a full year and see how that tax amount compares to whatever you currently have built into your expenses.

Like others I am delaying SS until FRA or possibly 70 but it is nice to know that if investment results lag or we have another 2008 that I can start SS whenever I feel that I want to.

 

[mistermike40]

A couple things to consider.

First, it looks like your spouse SS is based on her earnings record but she would also be entitled spousal benefits... generally speaking she would get the higher of the benefit based on her work record or 1/2 of your benefit... it gets tricky so check it out but there may be some pick up there. SSAnalyze - Bedrock Capital Management is a good tool to assess your SS strategy.

Second, do a pro forma tax return as if you were retired for a full year and see how that tax amount compares to whatever you currently have built into your expenses.

Like others I am delaying SS until FRA or possibly 70 but it is nice to know that if investment results lag or we have another 2008 that I can start SS whenever I feel that I want to.

We were planning for her to collect at 64 yrs old... getting 42% of my SS. She has been primarily a housewife so not entitled to very much on her own. Maybe deferring a few years would make a significant diference.

 

[Sunset]

OP - what does you pension do for your wife if you die first/early ? any suvivorship ?

If not, then consider delaying SS until 70 to maximize the payout for you and for the survivor.

In your budgeting, did you allocate for the long term things, like a replacement auto, new roof, furnance, water heater, A/C. All stuff that might not show up when tracking spending for even 5 years.

 

[jzajzz]

What do you do for a living... can you use that expertise part time?

 

[mistermike40]

OP - what does you pension do for your wife if you die first/early ? any suvivorship ?

If not, then consider delaying SS until 70 to maximize the payout for you and for the survivor.

In your budgeting, did you allocate for the long term things, like a replacement auto, new roof, furnance, water heater, A/C. All stuff that might not show up when tracking spending for even 5 years.

The pension has 65% survivorship. If we stay in our current house all of those things have been fairly recently replaced (except A/C). If we downsize (which is the plan) we will set aside equity from our current house to pay for any repairs at the new house.

 

[mistermike40]

What do you do for a living... can you use that expertise part time?

I'm an engineer with degrees in statistics and computer science... I should be able to get a part-time job if needed (there is also the option of returning to Megacorp as a contract employee)

 

[jzajzz]

I'm an engineer with degrees in statistics and computer science... I should be able to get a part-time job if needed (there is also the option of returning to Megacorp as a contract employee)

I don't know why I ask the question that way.. I meant to ask if you can use that expertise to start your own business or "side gig" ..

 

[cnocmmz]

I think I am right behind you next year DEC 2018

Hi mistermike40
I think I am right behind you? I have been part of this group chiming in a little, but mostly soaking up information lol.
Still have reservations and although (If I did it correctly) FireCalc has me at 100% at spending 125K annually with using 525K as a portfolio and lasting 35 years, in all scenarios leaving about 125K to family, I am nervous like everyone I suppose
I am retired Military and working as an civil service employee and would like to retire at age 58 in December.
Our stats are somewhat similar:
Age 57.
DW is 63. Both of us still working
DW and my guaranteed pensions as of now are:
- $ 67K (after tax)
-DW annual SS next year (if she takes) will be $8K (after tax)
4 year later at age 62:
-I should receive another annual SS $13K (after tax)
-I will receive another small government annual pension $8K (after tax)
Since I am retired Military, most medical is covered.

Investments as of today:
-240K in TSP
-DW has 225 in 401K
-100K in cash
We will add another 40K to investments prior to retirement in 2018
-150K in an annuity (did not put this FireCalc) because I will use this for Long term care. It has a doubler rider for LTC.

Would really love to walk away next year been working over 40 years now its time. I guess the biggest thing is to find something to keep me busy Thanks for listening and would welcome any scrutiny or suggestions.

Hi! I've been a member for a few years and have asked a few questions in the past (I appreciate the replies). I guess now I have the "big" question: do you guys think I can retire at the end of this year (budgeting for a 35-year retirement)?

My stats:
- current 401k (70% stocks/25% bonds/5% cash) is $520k
- two-tiered pension (non-COLA):
$4081 per month until 2022
$3107 per month starting in Jan 2022 (when SS eligible)
- Megacorp pays a large portion of my health insurance, dental, etc
- Social Security:
$1760 per month starting in Jan 2022
 DW Soc Sec $740 per month starting in 2023
- two adult children, education paid for
- $150-$200k equity in house... will sell and use equity to pay cash on smaller house (no mortgage)

EDIT: I also have about $20k in mutual funds and $15k in emergency cash account

Note: I have the option to take a lump sum buyout ($718k) but will lose pension, health insurance stipend, etc

Expenses:

I've tracked all the numbers closely over the past few years... we can get by fine on $60k/year. $70k would be better but our real goal is $80k+ per year... that would give us more than enough (we don't travel much but I can see us spending more on entertainment than we do now).

Using FIRECalc (with Reality Retirement) I'm about $91k @ 100%, $100k @ 95%. With Constant Spending it's about $59k @ 100%, $65k @ 95%.

I think the Reality Retirement concept is correct (especially for me and DW) but I suspect Bernicke (and FIRECalc) are a bit optimistic. On my own spreadsheet I average the two "bookends" as I see it (best case, 3% inflation with 2% spending reduction per year from ages 61 to 75 and 8% market performance... worst case, 3.3% inflation with only 1% reduction 61-75 and 7% market)... this results in a starting retirement amount of over $84k, and a lowest (at 75 yrs old and beyond) amount of over $67k (80% of starting amount compared to Bernicke's ~50%). These are all in today's dollars.

The reason I'm posting (and going into such detail) is I've had a lot of personal/family issues the past couple years that have really burned me out... I'm ready to retire now (and Megacorp is offering a small incentive package) but the $59k Constant Spending from FIRECalc concerns me a bit. The people on this forum seem to be extremely knowledgeable and I appreciate any comments/advice/observations or insights. Many thanks in advance!

Mike

Yes it includes all taxes and my share of health insurance. There are places near our current home that are available (in our price range), though we are thinking of possibly relocating to a warmer climate

 

[mistermike40]

I don't know why I ask the question that way.. I meant to ask if you can use that expertise to start your own business or "side gig" ..

Hi jzajzz - I don't think I can do consulting (in my field) but I should be able to get a part-time job crunching numbers for someone. I have considered putting money into an existing family business and being a part-owner... I'm not sure about that yet.

I realize it seems I should just stay at Megacorp but the allure of retirement is very strong. I know I can afford it, and I've been doing the same thing for over 30 years... my gut feeling says it's time for a change.

 

[mistermike40]

Hi mistermike40
I think I am right behind you? I have been part of this group chiming in a little, but mostly soaking up information lol.
Still have reservations and although (If I did it correctly) FireCalc has me at 100% at spending 125K annually with using 525K as a portfolio and lasting 35 years, in all scenarios leaving about 125K to family, I am nervous like everyone I suppose
I am retired Military and working as an civil service employee and would like to retire at age 58 in December.
Our stats are somewhat similar:
Age 57.
DW is 63. Both of us still working
DW and my guaranteed pensions as of now are:
- $ 67K (after tax)
-DW annual SS next year (if she takes) will be $8K (after tax)
4 year later at age 62:
-I should receive another annual SS $13K (after tax)
-I will receive another small government annual pension $8K (after tax)
Since I am retired Military, most medical is covered.

Investments as of today:
-240K in TSP
-DW has 225 in 401K
-100K in cash
We will add another 40K to investments prior to retirement in 2018
-150K in an annuity (did not put this FireCalc) because I will use this for Long term care. It has a doubler rider for LTC.

Would really love to walk away next year been working over 40 years now its time. I guess the biggest thing is to find something to keep me busy Thanks for listening and would welcome any scrutiny or suggestions.

Hi cnocmmz - yes we are very close... same age, though your DW has been employed while mine has been a (fantastic) housewife and mother over the years.

When you ran FIRECalc, did it indicate $125k using Constant Spending or with Reality Retirement? In an earlier post you mentioned $6200/month if you walked away today... is the FIRECalc number above reflecting Dec 2018 status?

The most important thing I've learned from this forum is to fully understand your expenses (your needs), and after that your wants/expectations in retirement. Last night I reviewed my past five years of spending (I keep a detailed monthly spreadsheet) and looked at worst-case for each category. I removed the mortgage (keeping the taxes/insurance) and put in my increased healthcare premium. It comes out to about $37k a year (this would be my "needs"). I'm confident I can start with $80k+ in retirement, decreasing slightly as I get older. This will net (after taxes using latest 2016 tables) over $65k post-tax... basically $30k discretionary income (more than I have today). Me and DW are frugal by nature (though we did spend a lot on the kids growing up... trips, camps, lessons, etc) and can adapt and spend less if required during bear markets.

I suppose everyone is nervous prior to formally snapping the string and entering retirement. To me, your numbers look very healthy (I suspect over 90% of the population would be envious of your financial position!). I think it boils down to whether your basic needs are covered (yours certainly would be) and then how you feel about the carrot of One More Year... your retirement situation will be better a year from now... even better in two years... better yet in three years. Only you can decide when "enough is enough".

I empathize with your 40 years... I've been doing the same job for well over 30 years. To me the OMY carrot isn't enough anymore... I've had several family and friends pass away very, very early in retirement. I'm in relatively good health but you never know. I'm planning for 35 years and trying to make sure that's covered... while at the same time not working longer than needed to cover that period.

I keep thinking, each additional year of working full-time at Megacorp is one less year of healthy retirement. Which if I need it, fine - it's the right thing to do. But I don't plan to work 5-10 years longer than necessary just to build a $5M+ nest egg that I will never spend. It's not a contest or competition

 

[flyingaway]

Does anyone thing an expected annual market return of 7~8% a little bit rosy?

 

[jzajzz]

Does anyone thing an expected annual market return of 7~8% a little bit rosy?

yes .. it's attainable.. but you shouldn't plan on a 7-8% .. always plan conservatively... if you do get a better return ..then great.

 

[cnocmmz]

Hi cnocmmz - yes we are very close... same age, though your DW has been employed while mine has been a (fantastic) housewife and mother over the years.

When you ran FIRECalc, did it indicate $125k using Constant Spending or with Reality Retirement? In an earlier post you mentioned $6200/month if you walked away today... is the FIRECalc number above reflecting Dec 2018 status?

The most important thing I've learned from this forum is to fully understand your expenses (your needs), and after that your wants/expectations in retirement. Last night I reviewed my past five years of spending (I keep a detailed monthly spreadsheet) and looked at worst-case for each category. I removed the mortgage (keeping the taxes/insurance) and put in my increased healthcare premium. It comes out to about $37k a year (this would be my "needs"). I'm confident I can start with $80k+ in retirement, decreasing slightly as I get older. This will net (after taxes using latest 2016 tables) over $65k post-tax... basically $30k discretionary income (more than I have today). Me and DW are frugal by nature (though we did spend a lot on the kids growing up... trips, camps, lessons, etc) and can adapt and spend less if required during bear markets.

I suppose everyone is nervous prior to formally snapping the string and entering retirement. To me, your numbers look very healthy (I suspect over 90% of the population would be envious of your financial position!). I think it boils down to whether your basic needs are covered (yours certainly would be) and then how you feel about the carrot of One More Year... your retirement situation will be better a year from now... even better in two years... better yet in three years. Only you can decide when "enough is enough".

I empathize with your 40 years... I've been doing the same job for well over 30 years. To me the OMY carrot isn't enough anymore... I've had several family and friends pass away very, very early in retirement. I'm in relatively good health but you never know. I'm planning for 35 years and trying to make sure that's covered... while at the same time not working longer than needed to cover that period.

I keep thinking, each additional year of working full-time at Megacorp is one less year of healthy retirement. Which if I need it, fine - it's the right thing to do. But I don't plan to work 5-10 years longer than necessary just to build a $5M+ nest egg that I will never spend. It's not a contest or competition

'Yes I used 125K as a constant, however, I will really only need 90K I think.
-$6200/month if you walked away today... is the FIRECalc number above reflecting Dec 2018 status? "Yes, I just put 2018 so I am hoping this is all correct". We Gross about 165K now but after the net it is barley over 100K and I would to live relatively the same and hopefully a less tax burden.
-My immediate thoughts on your situation is to be patient and go work everyday thinking it may be your last day and although your work is important I would NOT stress out and just take it week per week. If you could hold out 1-2 more years things may be a lot different financially?

 

[cnocmmz]

Does anyone thing an expected annual market return of 7~8% a little bit rosy?

Yes, I would expect a bit rosy, depending on how you use it ? For instance, I plan using a 4-5 % Growth in retirement just to be safe

 

[mistermike40]

Thanks to everyone who replied to my original post... I appreciate everyone's thoughtful opinions. I still have a month or so to decide but I'm almost certain I'm going to retire at the end of this year. I've accounted for every conceivable expense and I've run the numbers through many online calculators plus my own spreadsheets... and every scenario I wind up with at least $30,000 per year over my total expenses. Even if somehow I'm missing something big or if the market really underperforms I should still have enough cushion to be more than OK. Working longer will almost definitely only increase my children's inheritance... it will not change the quality of my retirement at all.

 

[cnocmmz]

Well, I see you have made up your mind to retire years end. Good for you[emoji3]
I just realized now that I have been tracking expenses that I made 184k last year and really only lived on about 75k. I guess between taxes and investments and savings there is the rest. Our retirement pensions is about that so we should be fine. I will track for a few more years to ensure we are good. Again, congrats on your decision to ER.[emoji3][emoji106]