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Naval Aviator retiring soon, I hope
Old 04-11-2011, 09:47 AM   #1
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Naval Aviator retiring soon, I hope

I'm 58 married with twin 13 year olds. I got laid off about a year ago and haven't found anything. Getting unemployment benefits but that will run out in about 3 months. My wife has a job with health benefits and plans to work until about 2013.

In 2013 (when I'm 60) I will get a Navy pension of about $1500/mo for the first 3 years (I have to pay back a $25,000 bonus) and then it will bump to about $2800/mo in 2016. I plan to wait until 64 for SS (2017) and my wife will take hers at 62 (2019).

I have about $1.6 million in investments 74% stock, 21% bonds and 5% cash.

I think I should be able to retire now at 58 and take out about $20,000 a year until 2013 and then take out $75,000 for about 5 years until all the pensions and SS kick in. Then drop to about $50,000 a year coming out of investments for the remainder of retirement.

Is this a reasonable scenario?
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Old 04-11-2011, 10:02 AM   #2
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Dtbach, Congratulations on your strong financial position (by most standards). If you have been tracking your actual spending and you know you can live within the budget that you described, you seem to be in good shape. I suggest you run several scenarios through Firecalc (link is on this site) to be sure.
Again, congrats! Hope you enjoy.
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Old 04-11-2011, 10:08 AM   #3
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Thanks, I started investing when I was about 28 and always made the max contribution to 401K's and fully funded both mine and my wifes IRA's (just wish they had had Roth IRA's sooner). We lived OK, drove cars until they died and lived with carpet that was on its last threads.
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Old 04-11-2011, 10:12 AM   #4
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Sounds reasonable to me. With a 4% SWR from your $1.6M in investments you should average a withdrawal of ~$65K/year. Since you are starting with only $20K, then moving above with $75K then back to $50K, seems reasonable. Run several "what-if" scenarios through FIRE Calc to be sure. Make sure there is room to give yourself an inflation raise every once in awhile.

Seems like your portfolio is kind of heavy in stocks for being so close to retirement. Might be something you want to soon switch to more fixed income type assets.
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Old 04-12-2011, 03:03 PM   #5
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One of the things that I can't figure out is how to take the money from various assets. I've heard use up your taxable assets first, then IRA's and finally ROTH IRA's. But I think it would be best to utilize all 3 at the same time. And do most folks take dividends, CG payouts, etc. and then sell assets to make up the difference for the 4% a year? And is it best to just sell 1% per quarter or 4% all at once.

This has my head spinning. It was easier just saving it all away. . . .
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Old 04-12-2011, 04:51 PM   #6
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There are many post like yours. From the income side you appear just fine. However, you have said nothing about expenses.

I agree that your withdrawal strategy appears sound. However, without knowing what kind of expenses you plan on covering, I would not venture a guess one way or the other if you are in a good position.
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Old 04-12-2011, 04:57 PM   #7
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Old 04-12-2011, 08:57 PM   #8
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Originally Posted by dtbach View Post
One of the things that I can't figure out is how to take the money from various assets. I've heard use up your taxable assets first, then IRA's and finally ROTH IRA's. But I think it would be best to utilize all 3 at the same time. And do most folks take dividends, CG payouts, etc. and then sell assets to make up the difference for the 4% a year? And is it best to just sell 1% per quarter or 4% all at once.

This has my head spinning. It was easier just saving it all away. . . .
Congratulations for saving enough to be comfortable in your retirement . It looks like you had some practice watching your spending, so when the unemployment runs out, you can just replace that money with your dividend and interest income. Your $80k cash can be a nice cushion, since most stocks pay out quarterly dividends. You can switch some cash (from gains) to Closed end funds that pay monthly. Again, I think you are on your way.
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Old 04-12-2011, 09:51 PM   #9
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I'm in the same boat as you are (kind of a naval insider's joke). Anyway, I will retire very soon and need to figure out how to begin the withdarwal phase of my ER, from the accumulation phase. It's certainally different, especially since I have no pension. I'm going to use a couple of different strategies. First I'll start out with a couple of years of essential living expenses in cash. Then I'll use the total return strategy which states that you fund your cash position each year from the asset class that increased the most in the past year. If nothing increased, you can pull from the lowest loss category or just live on any leftover cash that hadn't been used, until things improve. Added to all of this, I'll rely on some dividend paying stocks and bonds to supplement my liquid positon.

Good luck and enjoy!
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Old 04-13-2011, 10:09 AM   #10
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One of the things that I can't figure out is how to take the money from various assets. I've heard use up your taxable assets first, then IRA's and finally ROTH IRA's. But I think it would be best to utilize all 3 at the same time. And do most folks take dividends, CG payouts, etc. and then sell assets to make up the difference for the 4% a year? And is it best to just sell 1% per quarter or 4% all at once.

This has my head spinning. It was easier just saving it all away. . . .
Welcome to the board, DT. Your spouse must be relieved to have someone at home to guide twin 13s through the "danger zone". You can finally put all those years of logistics training, crisis management, & weapons systems to good use.

If you haven't already then you should run your assets & budget through FIRECalc. The process helps you figure out if you're missing anything, although you seem to have everything covered.

We've finally elected to not reinvest the dividends & CGs. (It really hurt to reinvest in summer/fall 2007 and then watch everything come crashing down a year later.) It's a lot easier to pile up the cash and sweep it to a CD if necessary, and if the market drops 10% then you have plenty of time to decide whether to take advantage of the cheaper prices.

One issue with conventional IRAs is that if they compound "too successfully" then you're hammered with RMDs (and your SS is taxed to the max). I can't see any reason to withdraw money from a Roth IRA.

You might want to look at "optimal" withdrawals using ORP. Optimal Retirement Calculator and Retirement Decision Support System Again the value is in the time spent on the process (thinking about your income streams and how you want to use them) as much as in the answers.

Much of the material at this link was written by a Reservist who's been balancing military & civilian careers for a long time:
Retiring on multiple streams of income | Military Retirement & Financial Independence

You also have a SBP decision coming up, and this is hot off the presses:
Survivor Benefit Plan | Military Retirement & Financial Independence
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Old 04-13-2011, 10:18 AM   #11
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Nords,

That is exactly the type of info I need! Thanks!!!!

When it comes to Dividends and CGs, I started to think, "why reinvest when you will just have to sell some shares anyway to get the 4%"? I think you can even have some companies pull some money for the taxman also so won't have to bother with quarterly tax payments.

I will look through all of the links you kindly gave me. This should be a great start in developing a strategy!
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