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Old 12-20-2009, 10:16 AM   #1
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New member looking to retire next year

I am 54, wife 51, two boys 16 & 13. I am fortunate to have had a very well paying job and have saved diligently. I have $3 MM in assets, most in tax deferred accounts and $500K equity in my home. I also am fortunate to have a DB pension which would pay $70K a year, although I have opted to take part (about a third) as a lump sum. I have something called the Rule of 80 which says next year when I am 55 and have 26 years of service I can retire on a full pension (no actuarial reduction). I also have employee paid medical for all four of us until my wife turns 65. I will earn the max SS payment of about $24K in today's dollars and my wife about $14K.

I have used FIREcalc and Fidelity Retirement Income Planner extensively and it looks pretty good maybe about 80% success rate (to my wife's age 95). The principal issue I have is my wife has a very expensive hobby (show horse) which costs us over $25K a year or about 1/6th of my AT retirement budget. She gets a lot of joy from this hobby so I really don't want to rock the boat. She has offered to go back to work when I retire (she is a nurse and easily employed here in the Philly area) to help support her hobby. Issue there is the first 3 years after I separate from my employer I get payouts of $360K a year, representing the lump sum pension in year 1 and deferred bonus in years 2 & 3, so I expect to be in the 35% bracket and she would cede half her income to Uncle Sam.

As I have had 4 cancer diagnoses in the past (beat them all Thank God), I am really not expecting to live to 95 and am keen to retire at 55 to enjoy what I can of retirement before the chemo and radiation catch up with me. I had extensive radiation to my heart and lungs and although currently healthy I expect the treatments took their toll. I have worked very hard to get two advanced degrees and then to advance in my career and it is time to enjoy the fruits of my labors.

Any thoughts and suggestions welcome. I am thinking I will take the reduced pension option that gives my wife 100% of my benefit when I pass. Also forgot to mention she gets a small pension $9800 a year at age 65 and we were thinking of opting out on a 50% survivor benefit for me. Her two grandmothers lived to 93 and 99.

Oh forgot to mention my current asset allocation is 90% equities and 10% fixed. I was only about 60% in equities going into the bear market, had $1 MM+ in cash because I thought subprime mortgage / real estate bubble would end badly. Put $750K to work in the market between June and November of last year and now my net worth is back to within 5% of what it was at the market peak. I plan to reduce my equity exposure to between 50 and 75% in retirement.
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Old 12-20-2009, 10:59 AM   #2
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Sounds like you are good to go. Congratulations.

For me early retirement is like an extension to my life time - no way to put a dollar figure on it.
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Old 12-20-2009, 12:43 PM   #3
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I don't know how long the average show horseperson is active in that activity--perhaps you can cap that expense in 2025 or something?
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Old 12-20-2009, 01:47 PM   #4
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You do realize that the lump sum pension payment can be rolled into an IRA for tax deferral?

But really I think you are fine. My DH wants to pursue his somewhat expensive hobby in retirement (show dogs) and I've adjusted the budget to accomodate it (we don't have as much nest egg as you do but he is SS age and dogs aren't as expensive as horses).

An 80% success rate would, however, make me a bit nervous and I would be looking at how to modify the budget to up the success rate. Bear in mind, however, that you don't have to keep spending constant throughout retirement. The horse showing may be more of an expense now than, say, 20 years from now.
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Old 12-20-2009, 09:34 PM   #5
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Given you medical history I would be looking to get out and smell the roses whilst things are good.
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Old 12-21-2009, 09:13 AM   #6
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I would get out and enjoy family and life as much as possible.
With funds like yours it would be a shame if you do not benefit from them while you still can.

That being said, do you know exactly where your income goes to and are all expenses really necessary? Track expenses and try to reduce cost without reducing fun. I would also have a family conference on reducing expences and increasing happiness in retirement. It is a lesson from real life for your boys.

If you think about fully funding the boys education: there are many parents (also here in this forum) who say that the kids benefit if the parents tell them early that only a reasonable portion will be funded by them and that they have to find ways to come up with the rest, be it through scholarship or work + savings or all of it.

With a husband in your health situation I would probably not think about spending even less time with him by getting a job to finance an expensive hobby. If everything is ok in my marriage I would encourage him to ER asap.

All the best to you.
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Old 12-21-2009, 09:22 AM   #7
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Thanks all, for the comments and suggestions. This seems to be a nice friendly community.

On the horse expenese going away, I do remember now I did do that in Fido RIP when my wife is 75 but I need to do that in FIREcalc as well - I did make a contribution which I think gives me access to some other features...

On the Lump Sum Pension rolling over to an IRA - it is a NQP (non qualified plan) so I don't think I can do that or use forward averaging - but I will be sure to ask my CPA. Basically we get a pension on our base pay and that is a Qualified Plan but you can only take as an annuity. Then the top 300 employees in my company who are "bonus level" get a second, non-qualified pension based on base+bonus less what we get in the regular plan. My friend who recently "early retired" (was forced out) even had to pay FICA taxes on her supplemental pension's present value even though she opted for the annuity.

I would like to get to 90% chance of not outliving my money, and hopefully the markets do well in 2010 and get me there. I am a frugal guy and would love to cut the household budget but my wife is an issue - for instance I would like to let the cleaning lady go when I retire and I am not getting anywhere with my wife on that issue. I think she's had it pretty good, stay at home wife with a cleaning service. I think when I take over the grocery shopping I can cut at least 10% out of our $10K a year grocery budget even if my boys start eating more.

I also realize now as I am typing that in FIREcalc I am only looking at level spending overall, without regard to expenses going up for college then down when kids leave home etc. Fidelity RIP is somewhat more flexible wrt to detailed expense planning.
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Old 12-21-2009, 09:25 AM   #8
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I would also explore the possibility of rolling the lump sum portion over into an IRA.

Also, do you have a timetable for adjusting your allocation to reduce your equity exposure? Many folks consider a DB pension with a COLA as at least part of their fixed-income allocation. The fact that you have paid for health care for another 14 years would seem to give you an even greater ability to accept risk in equities. Not that I don't agree that you will want to eventually reduce your exposure in equities, but I'm not sure I would be in too big of a hurry.
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Old 12-21-2009, 09:27 AM   #9
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Quote:
Originally Posted by chemist View Post
I also realize now as I am typing that in FIREcalc I am only looking at level spending overall, without regard to expenses going up for college then down when kids leave home etc. Fidelity RIP is somewhat more flexible wrt to detailed expense planning.
You mentioned you'd made a donation which should allow you to access additional features on FIRECalc. One of those added features is to allow you to make annual adjustments to spending on the "Spending Models" tab. Be sure you are logged in to enable this option - the last button under that tab.
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Old 12-21-2009, 01:49 PM   #10
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Great news, based on REWahoo's tip I accessed the Manual Spending Plan on FIREcalc and my success rate was over 90%! Then puzzled as to why Fidelity Retirement Income Planner was giving me only 80% I went through my spending budget there and found out I never made my mortgage go away. When I corrected that to be paid off in 2018 I got very similar results for both planners. Which it should be since both use a Monte Carlo approach and I force FIREcalc to use 1926 as the base year since Fido uses Ibbotson data.

Thanks folks this has really helped me!
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Old 12-21-2009, 04:22 PM   #11
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Which it should be since both use a Monte Carlo approach ...
Just to be sure we're on the same page, FIRECalc does not use a Monte Carlo approach. Rather than random results, FIRECalc uses actual market conditions dating back to 1872 to test your chances of your portfolio surviving based on the worst history has thrown at us (yes, it includes what happened in 2008).

For a detailed description of how the program works, see this.
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Old 12-22-2009, 01:01 PM   #12
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Just to be sure we're on the same page, FIRECalc does not use a Monte Carlo approach.
Yes I knew that. Agreed that strictly speaking that is not Monte Carlo which implies random selection of market returns and inflation rates. (Although I believe there is an option to specify random returns about a mean with an accompanying std dev in FIREcalc - but the default is to use market cycles as you suggest).

I always switch the base year to 1926 as I learned in B school that equities were viewed very differently in the 1800's - dividend yields were higher than bonds as they were viewed as much more risky an asset. Plus most other programs use 1926 since that was the base year chosen by Ibbotson and Cinquefield in their landmark study.
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I did it!
Old 02-25-2010, 04:52 PM   #13
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I did it!

Told my boss my last day will be August 6th, 2010. I have 3 vacations scheduled between now and then and a week long conference so I am down to effectively 16 weeks in the office between now and then, not counting the last week when I expect to do very little work.

Logic is as follows: I turn 55 on July 10 which is a Saturday so July 12th is the absolute earliest I can retire without my DB pension getting reduced by 60%. From July 20th to August 1st I am attending the National duplicate bridge tournament in New Orleans, tournament bridge is my big passion in life. Then I come back for one week of w*rk to clean out my office and deal with COBRA and etc. Also I have been leaning toward this date for a long time and set my 401(k) withholding such that I hit my $16,500 limit that paycheck (plus of course the $5500 in catch up contributions I had withheld in Jan and Feb).

A lot of emotions running through me right now. I have been 26 years at the same company so this will be a big change for me. I have come to realize that I do not enjoy w*rk anymore and look forward to my Tuesday evenings when I play bridge.

Bob Clyatt's book and this forum have been very, very helpful for me. I am making plans to ease into retirement with lots of activity: going back to golf school in April down in Tampa, I have been to a few Nationals but this is the first time I am going for all 12 days, will do a Rim to Rim Grand Canyon hike in September. Plan to keep plenty busy with a fair amount of structure. Also will print up some business cards and send out some emails soliciting consulting gigs. I have a 2 year non-compete but some of the areas I have expertise in, my company has exited so I am free to consult in those areas until my non-compete expires.

Oh and I am interested in meeting up with some of you folk - I know W2R is from MSY and Rich in Tampa from TPA - so if you are interested in meeting up over some oyster poboys or whatever drop me a PM. In April I am staying in Brandon FL area and commuting down to Sun City Center to attend golf school. In July I will be at the Marriott on Canal Street. No car there though.
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Old 02-25-2010, 06:41 PM   #14
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Congratulations, Chemist. I pulled the plug at 54 1/2 so I know some of your uncertainty. Sounds like you are gonna do just fine.
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19 more days in the office
Old 06-28-2010, 12:37 PM   #15
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19 more days in the office

Wow they are going fast. My last day is August 6th but I am taking some vacation between now and then to attend a big duplicate bridge national tournament in New Orleans.

Lots of plans for after the big day: taking the family to Niagara Falls, going to an Heirloom Tomato tasting in Baltimore in August. Labor Day going with the family to Kansas City for my wife's sister's 50th birthday. Then off to the Grand Canyon to do a rim-to-rim hike, a lifelong dream of mine. October brings an investment conference (Bogleheads 9) then off to Chicago for a reunion of FlyerTalkers (people who travel a lot and know all the tricks - kind of like George Clooney in Up In the Air but nicer).

Filled with mostly excitement and a little bit of apprehension.
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Old 06-28-2010, 01:39 PM   #16
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It sounds like you'll be too busy to work !! Congratulations and enjoy your retirement.
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Old 06-28-2010, 06:40 PM   #17
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Congratulations on surviving cancer and retiring ! Enjoy your life now while you can !
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Old 07-02-2010, 04:22 AM   #18
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Congratulations! All the best for you and your family.
Please keep us updated how you enjoy your time from now on.
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Update on one year anniversary
Old 08-06-2011, 03:57 PM   #19
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Update on one year anniversary

Well it has been even better than I had imagined.

Took up running have run in many 5K's, a 5 miler and will run in a half marathon in Sep. Have lost 25 pounds and am off my meds for bp and GERD (actually went hypotensive on the bp meds).

Have settled on a long term asset allocation of 60/40 and sold equities down to 60% over the last year.

Did my rim to rim Grand Canyon trip with a buddy in September then in February went back on an Elderhostel trip where we hiked from the South Rim of the Grand Canyon down the South Kaibab to the river and back up the Bright Angel trail.

Got to take my 14 year old to volleyball nationals for a week in Minneapolis - could never have done that while working. Took my 17 year old to look at Pitt and Penn State last week - going to Maryland this coming week. Spending time with my sons before they go off to college - priceless. Way better than hearing my younger boy say I missed 3 of his last 5 birthdays due to business trips.
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Old 08-06-2011, 04:02 PM   #20
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Well it has been even better than I had imagined.

Took up running have run in many 5K's, a 5 miler and will run in a half marathon in Sep. Have lost 25 pounds and am off my meds for bp and GERD (actually went hypotensive on the bp meds).

Have settled on a long term asset allocation of 60/40 and sold equities down to 60% over the last year.

Did my rim to rim Grand Canyon trip with a buddy in September then in February went back on an Elderhostel trip where we hiked from the South Rim of the Grand Canyon down the South Kaibab to the river and back up the Bright Angel trail.

Got to take my 14 year old to volleyball nationals for a week in Minneapolis - could never have done that while working. Took my 17 year old to look at Pitt and Penn State last week - going to Maryland this coming week. Spending time with my sons before they go off to college - priceless. Way better than hearing my younger boy say I missed 3 of his last 5 birthdays due to business trips.
this is one of the best stories of retiring, and making the most of your time that I have ever read. If you do some dog rescue... I'd have a serious man-crush on you. :-)
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