Just Retired

[Silverton34]

I just now retired but bought the business I worked for only three years ago after working there for 20 years. I have 600k in 401k and 500k in other stocks. I will have a $350,000 salary for the next two years until I sell the business and will likely save an additional $300k net of this salary. So with investment growth I should have $1,650,000 ish in two years when it all stops. I know this is really not enough as I'm now 55 and my wife is 49, she works part time and every penny goes to my daughters college. She will retire as soon as the daughter graduates.

Here is the rub, I should be able to take $1 million tax free when I sell my business but it's never a sure thing until the money hits the bank. There is roughly another $1 million in inheritance heading my way in the next ten years.
We have no other debt with cars and home worth $400k paid for and can ride the company health insurance for several more years.

Thoughts?

 

[omni550]

Welcome, Silverton.

We need to know your annual spending before we can provide useful feedback on your situation for retirement.

omni

 

[rodi]

Spending is the key here. You can have a $5M nest egg - but if you spend $500k/year - you'll be at risk of running out of money.

General advice is to not count on inheritance... Nice if you get it... but better not to plan on it. Parents could have long term medical issues that eat into their money... They could decide to give it all to charity... you never know. It's their money they get to decide what to do with it.

 

[Silverton34]

We just completed a budget and $80k/yr is what will cover us.

 

[gauss]

A 5% WR resulting in $80k/yr would require a portfolio of 1.6M. Many around here would be uncomfortable with that high of a WR. On the other hand, I believe that the Financial Engines tool assumes 5%.

One thing not clear to me is how is any Social Security factored into any of this.

If you are assuming $0 SS for your $80k/yr, then introducing SS may significantly lower your WR.

-gauss

 

[Silverton34]

I'll likely take SS at 62 which is 6.5 years out. I've paid the max into SS for 20 years now but don't know what to expect at 62.

 

[omni550]

I'll likely take SS at 62 which is 6.5 years out. I've paid the max into SS for 20 years now but don't know what to expect at 62.

There's a SS estimator here:
https://www.ssa.gov/retire/estimator.html

omni

 

[rodi]

You can get accurate SS numbers by creating an account on ssa.gov.
https://www.ssa.gov/myaccount/
Or you can run the retirement estimator on the SSA.gov site
https://www.ssa.gov/retire/estimator.html

You can put in "0" for earnings for years between when you plan to stop earning SS income and when you collect.

 

[rodi]

BTW - welcome to the forum.

Have you considered running firecalc? (Link at bottom of page). You'll need to know your annual GROSS spending (including taxes, health insurance, etc)... You can put in your and your wife's SS estimates and years they'll start... Be sure to fill out all the tabs. Be aware that it defaults to a 75/25 asset allocation - so adjust that as appropriate.

 

[Silverton34]

Will it hurt my SS benefit if I have a low salary for 4-5 years before I start drawing?

 

[Ready]

Will it hurt my SS benefit if I have a low salary for 4-5 years before I start drawing?

The SSA calculators will tell you exactly how it will affect you. With 20 years of max contributions you should be in pretty good shape, but a perfect score would be 35 years of max contributions. Hopefully you have at least 35 years of any contributions though.

What may hurt you more is claiming at 62, rather than waiting until at least 67, and preferably 70. Take a look at all three payout figures on the SSA web site and see what you think. Generally, if you are in good health and can afford to delay to 70, it yields the greatest overall payout.