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Preparing for blast off......
Old 12-14-2014, 10:45 AM   #1
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Preparing for blast off......

My journey to ER began at age 28 when I bought my first house and started saving via a 403b. Between meeting my savings goals and choosing to work only part time, I have had a pretty flat standard of living over the last 25 years but haven't lacked much along the way. I get a lot of vacation time and my only regret is that I've not had more money for travel. On the other hand I did spend two years traveling overseas in my early twenties before I settled into my career so I guess I shouldn't complain.

I didn't marry until 40. DH is a great match for my interests and he is admirably frugal in the right ways and I no longer have any need for a handy man as he can build or fix almost anything!

So, on 6/1/17 I am planning on taking ER with a DB pension without Cola. I plan to take this with full survivor benefits so the pay out will be $2400/mo. If I opt to get a 15% lump sum it would be only $2024/mo plus $75,000 lump. We are no longer given the option to get a lump sum for the whole amount. I am inclined to take the lump sum to hedge against something happening to the pension down the line. I also figure that with a 3% increase on the $75,000 over 31 years I would be about $50,000 ahead at that time. I have a high likelihood of reaching at least age 85 as none of my female relatives have died before age 87. Fortunately they have also all stayed at home and pretty healthy and with it until that age as well.

DH and I and we will both have almost identical SS payouts. He plans on quitting his job a few months after me once the pension checks have at least begun. We will be 56 at the time. Neither of us are opposed to working some in the future but we are both more than ready to say goodbye to our current careers. I plan on leaving enough in my work based 403b that we can supplement our income with that from 56 to 70. It is my understanding that I will be able to make withdrawals from that account without penalty starting at 56 when I retire. We currently have $750,000 in work 403b/401k and another $140,000 in Roth accounts. DH has no pension from his work and actually no longer has a 401k at work either. At this point our plan is for me to continue to do the max + catch up to my 403b ($24,000 in 2015) and for him to direct all all of his savings to emergency fund and available savings which has always been a weak spot in our financial picture.

About 4-8 months after leaving work we plan on selling our house. We own two lots in front of our house as well. We may either sell them along with the house if the cumulative price is right or may hold on to them with the thought of perhaps building a "tiny house" there later and living in it for two years before selling. Regardless I expect us to have somewhere between $200,000 and $400,000 in cash when we hit the road after selling the house/land. My plan is to put that in tax free bonds to keep on hand for either buying another house when we are ready to settle down again or for investing in some small business for us to work in until age 68 or 70.

Once the house is sold we want to spend a year on the road exploring the USA and Baja. The following year we'd like to spend in Europe biking and hiking. Our plan after those first two years is to then pick a spot and reestablish a small home and likely some form of part time work or something to keep us engaged and contributing.

The program I ran on SS suggested DH apply for SS and then suspend at age 67 years and 8 months so that I could get spousal benefits of $1,044/mo at age 67. He would then file at age 69 and get $2,560 and I would file at 70 and get $2,814. I am planning on keeping our yearly income below $62,000 in order to get ACA in the years from 56 to 65. We currently live on around $60,000/year. I have traditionally been aggressively invested in stock index funds. Over the last 6 months I have rebalanced and am now at about 80% stocks and 20% bonds. It is hard for me to do the bond thing but I am feeling the need to start hunkering down as I approach the finish line. My current 403b money is being directed 70/30. I have thought I might invest the $75,000 lump sum in an IRA with the LendingClub as a way to further diversify.

Okay then! Them's the facts. Sorry it is so wordy but I wanted to include enough of our reality, our thoughts and our plans to give some grist. I would love any feedback, thoughts, guidance that any of you might have.
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Old 12-14-2014, 12:01 PM   #2
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Your plan and planning sound wonderful. Congratulations and best wishes for your success.

The only comment I would add is to check your 403B plan information regarding early distributions after retiring at 55+. While laws & IRS rules allow this, not every plan does.

DW was laid off in 2014 and met the 55+ rule, but her 401K plan (through Vanguard) doesn't allow any options for monthly or yearly distributions. We're waiting until 2015 (2014 income is already high as it includes severance) then we're doing a three-part action, all at once:
1. After tax funds rolled into a ROTH tax-free;
2. About $50k pre-tax funds distribution will be taxed at regular rate (low next year); and
3. Balance of pre-tax funds rolled into a traditional IRA.

Your plan might be more flexible, but better to know for sure than get taken by surprise when you are counting on the money.
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Old 12-14-2014, 12:04 PM   #3
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Congratulations. I have one question. Why are you taking your pension with survivor benefits, since, statistically, it is more likely that DH will die first?
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Old 12-14-2014, 12:16 PM   #4
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Thanks BrianB,
I just got hold of the Summary Plan Description and it does say that benefit payment may begin after you terminate employment if you were 55 or older at the time. What I don't see is anything about how one does so and whether this can be a monthly vs yearly withdrawal. I thought I would gradually covert to Roth whatever we don't need in order to get by, while still staying below ACA limits. Since I've got such a large portion in 403b currently, I figure we might as well whittle away at that rather than the Roth's or cash, in order to minimize RMD in the future.
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Old 12-14-2014, 12:24 PM   #5
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Meadbh,
I originally proposed taking single survivor but DH feels less ready to gamble on the odds than I am. It is only a couple hundred a month more so I guess we decided it was worth the peace of mind for him. Though I also think he would still be okay financially if I did up and die first as he would then have the whole portfolio for one person. The main problem for him then would be getting to age 59 without having to go back to work.
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Old 12-14-2014, 01:44 PM   #6
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Welcome to the forum.

I think it's the plan administrator, or in my case that information came from my old benefits department.

Your on to something, I've read too many posters saying the SPD had the verbage but very limited ways to withdrawl. I'd check with benefits/hr.

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Old 12-14-2014, 05:06 PM   #7
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Welcome!

Being knowledgeable and prepared is worth a lot when paired with a LBYM lifestyle. Looks like you have both well in order. We look forward to hearing more from you!
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Old 12-14-2014, 08:34 PM   #8
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Quote:
.....I am planning on keeping our yearly income below $62,000 in order to get ACA in the years from 56 to 62.....
Is the "62" a typo? Did you mean "from 56 to 65" when medicare kicks in?
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Old 12-14-2014, 09:15 PM   #9
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Calico,
Thanks for noting the typo. Yes, I meant 56 to 65.
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Old 12-14-2014, 09:55 PM   #10
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Calico,
Thanks for noting the typo. Yes, I meant 56 to 65.
Darn it! I was hoping maybe medicare eligibility had been changed to 62, and I had just missed the memo!

Welcome to the board. Your plan looks very well-thought out to me. Best of luck to you as you move forward with it.
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