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Looking to Retire this summer – Am I missing something?
Old 02-23-2012, 03:50 PM   #1
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Looking to Retire this summer – Am I missing something?

Well after lurking for several months, I finally feel comfortable in trying to join the conversation.

First let me say thanks to so many of you for the wealth of information that has been shared on this site. It has been deeply appreciated. Now for a brief rundown of my current financial picture.

I’m 55, retired from the fire service, but still working in another profession and looking to fully retire this summer. DW is 61 and retired for the past 4 years with no pension. She will apply for SS next month and will receive approx. $14,000 annually. My pension from the fire service has started and is currently $40,000 annually with a yearly 3% COLA provision. I will be eligible for SS at 62 and it is estimated to be at about $12,000 taking into account the windfall offset. We have no dependents.

We own our home with no mortgage, have no debt and have roughly $720,000 in retirement savings with about $410,000 of that in pretax accounts. Current allocation is probably too conservative with a 50/50 bond – equity split especially after reading many of the posts that explain the idea of looking at the defined benefits of the pension/SS in a new light .

We are both healthy with no preexisting conditions, as we will have to provide our own healthcare until we are eligible for Medicare.

In reviewing our spending, it appears that we currently spend approx. $70,000 per year in after tax money to maintain our current standard of living. Recognizing that while my healthcare expenses will increase, I believe that it will be offset somewhat by the reduction of my work related expenditures and am anticipating needing between $75,000 and $80,000 per year as a starting point in retirement.

Now the big question Will it work?

I have used the FireCalc software and it appears that I should be OK but I’m not sure if I’m missing something.

Thanks in advance for your comments and insight, it’s a great forum!
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Old 02-23-2012, 04:05 PM   #2
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Welcome aboard FIsail!

If I read your info correctly, you'll have $66K in pension & Soc Sec income (all COLA'd!), all starting immediately or within a few years.

Based on $80K/yr first year spending (hopefully you've accounted for taxes as well), your $720K portfolio needs to generate an additional $14K/yr. That works out to a 1.9% WR. History would suggest that's very safe.

So if I have your numbers right, congratulations - you're there!

Having $310K taxable and $410K sheltered is very manageable. And a 50/50 asset allocation is not necessarily "too conservative."
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Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
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Old 02-24-2012, 12:23 AM   #3
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Welcome to the forum! I agree that your numbers are definitely do-able. However, I'd toss out the following for you to consider:

What is your (and/or your wife's) health and longevity prospects? If you think there's a decent chance one or both will make it into your 90s, might not be a bad idea to see what financial benefit there is to delaying taking your SS (and spend a little more of your portfolio in the meantime).

Given your reference to your Windfall provision, each year you delay SS might not yield as much of an increased benefit - but if I were in your shoes, I wouldn't expect future SS annual increases to be much to sneeze at. Given that, and if my/my spouse's chance of seeing 95 were fairly decent, I'd want to have a nice cushion of pumped-up SS benefits coming in in the later years.
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Old 02-24-2012, 02:46 AM   #4
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Hello and welcome. Your numbers look ok with me. Have you tried this free website:

Merrill Edge| See Where You Stand
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Old 02-24-2012, 07:17 AM   #5
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Quote:
Originally Posted by MooreBonds View Post
Welcome to the forum! I agree that your numbers are definitely do-able. However, I'd toss out the following for you to consider:

What is your (and/or your wife's) health and longevity prospects? If you think there's a decent chance one or both will make it into your 90s, might not be a bad idea to see what financial benefit there is to delaying taking your SS (and spend a little more of your portfolio in the meantime).

Given your reference to your Windfall provision, each year you delay SS might not yield as much of an increased benefit - but if I were in your shoes, I wouldn't expect future SS annual increases to be much to sneeze at. Given that, and if my/my spouse's chance of seeing 95 were fairly decent, I'd want to have a nice cushion of pumped-up SS benefits coming in in the later years.
+1 you look in good shape financially. I would suggest two things.

First, spend a couple hours refining the living expense budget, including medical insurance and medical deductible expenses and the reduced work related expenses.

Second, delay SS if possible as affordable longevity insurance if you or DW have good longevity factors. I'm thinking of this as something that I can play by ear once I reach 62 in that I can start it if the withdrawals from my nest egg get to a point of discomfort.

50/50 AA is within an appropriate AA for your ages, perhaps a bit conservative. We are around your age (56/57) and target 60/40.
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Old 02-24-2012, 07:20 AM   #6
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The only thing I would highlight is that you have 7 years until you begin SS at least and therefore if you want to create a "bucket" to use to equate that until you can draw it then your 720K will most likely be closer to 650K which would make your SWR @ 2.2% to get the extra 14K needed to be at 80K

Still a very doable situation if you can keep your cost under control moving forward....
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Old 02-27-2012, 07:15 PM   #7
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Thanks for all of the suggestions. I will definitely look at delaying my SS. I will hopefully have 6 years of retirement under my belt by then to make a better decision. Taxes will be one of the issues I will need to closely review to see what is the best way to convert my tax deferred accounts.

I look forward to continued reading of the forums and learning form all of you, thanks.
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