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Plans are worthless but planning is everything - Dwight D. Eisenhower
Old 01-01-2016, 07:28 PM   #1
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Plans are worthless but planning is everything - Dwight D. Eisenhower

Iíve been lurking on this site for nearly two years, which is about the same time I started to seriously contemplate retirement. Iíve always been oriented more towards saving versus spending, but this site (and several others) has taken my thinking to a more specific level. Iím very grateful to the consistent contributors on this site. Thank you.

Even though I suggest Iím a saver, LBYM is not a tenet my DW and I have lived by - at least not consciously Ė until I found this forum. Since then, Iíve tracked our spending and shared the results with DW. Weíve made some adjustments in our spending, but still spend at - what I consider - a high rate. We have a great life: weíre healthy (insert wood-knocking sound here), solid dual-income earners and consider ourselves very lucky and blessed. Two grown kids out on their own, with the addition in 2015 of twin grandbabies for whom we just opened and funded 529 plans.

Here are our stats and planÖany and all feedback welcomed!

Me: 58 yrs old
DW: 50 yrs old

Me Qualified: $906k
DW Qualified: $484k
HSAs $ 13k
Non-Qualified: $513k
Home Value: $609k (mortgage paid off in Feb 2015)


Annual Savings
$68k pre-tax into maxed out 401ks, including employer match
$6.65k maxed into HSAs
$102k post-tax (just ramped up to this number after paying off mortgage)

Annual Expenses: $123k per year after tax (includes $25k in travel)

Asset Allocation: 62% equity; 26% bond; 12% cash (my target is 60%, 35%, 5% and Iíll be rebalancing over the next few months). Iíve recently made several moves Ė mostly within our tax-advantaged accounts Ė to drive down our overall expense ratio costs to ~ 0.12% and adjust our asset allocation to where Iím comfortable.

Equity holdings include $206k in 14 individual stocks with the remaining balance in low cost index funds. $83k of $206k in stocks is company stock from DWís former employer 401k. The stock has a cost basis of $13k, so Iím hesitant to move out of the stock because I want to take advantage of the NUA tax break when she begins to withdraw the stock out of the 401k after age 59 1/2.

I am targeting mid-2018 for retirement. DW has stated she will likely keep working for two to three years beyond that date, but possibly part-time at a much reduced comp level. Our plan is to not factor her potential employment in our retirement plan. So Iím going on the assumption that we will both pull the plug mid-2018. Neither of us has a pension available. Nor do we have access to sponsored health insurance, so Iím thinking $15k per year in health insurance premiums and using the HSAs to cover out-of-pocket costs for as long as the HSAs last. That $15k will bring our annual spending up to $138k per year post tax. The plan is to wait to my age 70 (DW age 62) for Social Security. I estimate $58k per year combined total for both of us beginning in 2027.

Since DW can work from anywhere, we plan on moving ďback homeĒ shortly after retirement, which is to a lower COL area (currently living in a high COL city for my j*b)). We will downsize (based on real estate cost differential) and should net approximately $150k in the home equity. While the primary COL difference is real estate, I believe there is another $5k to $10k annually in reduced budget costs by moving back home. Again, my preference is to not allow for this in the budget.

Iím working hard to convince myself that weíll be OK with a 5% withdrawal rate for the 9 years before SS kicks in and then reduce to 3% based on the contribution from social security.

OK, as Churchill said, ďA good speech should be like a womanís skirt; long enough to cover the subject and short enough to create interest.Ē Very interested in your (always) direct and insightful feedback!
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Old 01-01-2016, 08:02 PM   #2
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Just a quick comment: it looks like you could stash another $1000 into your HSA for the annual age 55 and up catch up.


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Old 01-01-2016, 08:11 PM   #3
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Not much to comment on, other than to say Dwight would be proud.
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Old 01-01-2016, 09:56 PM   #4
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Seems sensible. It is very common to have a higher than prudent WR in ER and have it decline later.
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Old 01-02-2016, 08:11 AM   #5
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Welcome to posting! I also agree that a higher withdrawal rate to be reduced later can be fine, but make sure you've planned for "unexpected" one time expenses that may come up over time. On the plus side, you have a big travel budget and I'm assuming if necessary that could be adjusted in a given year if necessary.
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Old 01-02-2016, 12:10 PM   #6
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It seems you have a good handle on your planning. I don't think you need to make any real changes except I might suggest less in cash while you are both working. No real need for the excess cash, out it to work getting higher returns while you have the income and are saving a bunch. Worse case if you needed a big cash amount you could liquidate something.
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Plans are worthless but planning is everything - Dwight D. Eisenhower
Old 01-02-2016, 03:26 PM   #7
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Plans are worthless but planning is everything - Dwight D. Eisenhower

Doing the math and assuming very modest returns between now and 2018, adding in projected 3 years of savings, some home equity that you will pull out due to downsizing etc, and then paying some eventual taxes on your tax deferred money, I estimate you will be at between 2.6-2.8 m not including house remaining equity and SS...

During years before SS, A 4 percent WR nets about 100K per year and a 5 percent WR gets you around 125K

If your lower col area reduces other expenses then your withdrawal rate of 4% seems reasonable.

I would be more concerned with a younger wife by 8 years - stats are on the females side ... She may outlive you by several decades - perhaps getting an old age annuity (forget what they are called exactly) now is a consideration given no survivorship pensions other than SS. it's just a thought anyway. That would protect her beyond the typical 25 years that a 4 percent WR usually can sustain. Or use the equity of the home to pay eventual care (assisted living etc...self insuring in effect)!
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Old 01-02-2016, 06:02 PM   #8
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Love the Eisenhower quote!
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Old 01-02-2016, 07:40 PM   #9
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I kind of like Iron Mike's quote “Everyone has a plan ’till they get punched in the mouth.”
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Old 01-03-2016, 08:39 PM   #10
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Thank you for all the input!

Accidental: Good catch! Unfortunately, the HSA eligible plan is through my DW's employer, and since she has not yet reached 55, we can't take advantage of my advanced age!

Katiek: Yes, I probably have my head in the sand a bit regarding unexpected one-time expenses, but there is some room in the discretionary portion of our budget, so we'll adjust as necessary.

Chevy: I agree I have too much in cash. I'll be moving some of it into the market over the next several months.

Papadad: Thanks for diving into the numbers. I agree the age difference creates concerns. However, I'm more concerned about your 2016 Dow and S&P predictions...if those come to fruition, I've got more to evaluate than just out age difference!

Ed and Frayne: I love that Tyson quote as well; much more direct and explicit. I'd expect Eisenhower to be a bit more subtle than Tyson, but I think both of them would understand and appreciate exactly what the other meant!

Thanks again to all.
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Old 01-03-2016, 09:18 PM   #11
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Quote:
Originally Posted by Tallman4123 View Post
Thank you for all the input!



Accidental: Good catch! Unfortunately, the HSA eligible plan is through my DW's employer, and since she has not yet reached 55, we can't take advantage of my advanced age!



If you have a family plan, can you not not open your own HSA just for your catch-up contributions? My husband and I have a family plan but have our own HSAs so that we can each contribute our own catch-up funds.

We're on the individual market. Is it different with employer-paid insurance?
It would seem if you had your own HSA, you could put in $1000 for 2015 and $1000
for 2016.


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Old 01-04-2016, 06:26 AM   #12
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Quote:
Originally Posted by frayne View Post
I kind of like Iron Mike's quote ďEveryone has a plan ítill they get punched in the mouth.Ē
Ah yes, the wit and wisdom of Mike Tyson.
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Old 01-04-2016, 07:55 AM   #13
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Another good quote is one we used often in the military:

Quote:
No plan ever survives first contact with the enemy.

Claimed to originate with just about every famous military leader you can think of, but generally attributed to Helmuth von Moltke, a 19th century Prussian army field marshal.
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