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Ready with questions
Old 09-08-2019, 05:15 PM   #1
Confused about dryer sheets
 
Join Date: Sep 2019
Posts: 1
Ready with questions

I've been enjoying the forums since 2013. I'm probably within 5yrs and finally posting!

=================
Basics:

Age: 49
Retirement age: 55?
Death age for planning : 95
Location: Oregon, west of Portland
No kids, no spouse, no dependents

=================
Assets: 2.6M

Allocation: 62% equities, 17% bonds, 21% cash


401k: $114k (S&P 500 index)


Cash: $334k (Savings/Checking/Currencies)


Vanguard: (stock/bond index funds)
  • Total: $1,637k, 72% equity, 22% bond, 6% cash(TIPS)
  • IRA: $981k, 76% equity, 24% bond,
  • Roth: $106k, 90% equity, 10% bond,
  • After-tax: $551k, 61% equity, 39% bond, 18% cash(TIPS)

House: ~$450k (paid off)

Income
- Pre-retirement: $200-250k/yr engineer @Megacorp
- Early retirement: Live off after-tax savings
- Once SS starts: Rough estimate shows I'll have an additional $2100@62, $3100@67, $3800@70 per month.

=================
Liabilities/Expenses:

No debt.
Typical annual expenses measured one year a couple years ago: $45k/year (did not include healthcare)

=================
Firecalc: 45 years

- 100% with 80k spending
- 99% with 85k spending
- 96% with 90k spending

=================
Questions

Q: Can I retire at 55 (or now)?

Well, I suppose the answer is yes. Just a matter of spending/expenses I guess. I'm still enjoying working currently. I took a couple years off earlier (2014-2016). Traveled some, but generally felt I wasn't doing much. But am really enjoying working again (teamwork, big goals, ...).

Q: Long-term-care insurance? When do people buy LTC? How do you get info about LTC?

Q: Asset usage order?
Early retirement: obviously I'll be living off after-tax assets. But which first? Cash/Roth/Index-funds?
Once I can access retirement accounts, what order?

Q: What to do with cash?
I feel I'm pretty cash heavy. Kinda waiting for the "big dip" (yes - marking timing == bad) to invest some of it. But... when I retire early, I'll need some cash. That said, I could definitely be doing more with it. Maybe a CD ladder (ugh such a pain), or a Betterment savings account (over 2% interest currently), or maybe some safe-ish bonds?

Q: Tax optimization?
Need to understand "tax torpedo" better. Will I be affected? Is there anything I can do about it?

Q: When to start SS? Early? Late?

Q: Roth conversions?
Did one while I was off work (2014-2016).
Currently avoiding them since my income is high.
Maybe should do more once I stop working?
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Old 09-08-2019, 07:01 PM   #2
Full time employment: Posting here.
Markola's Avatar
 
Join Date: Nov 2013
Posts: 800
You look pretty bullet-proof financially. How would you spend your time?
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Old 09-08-2019, 11:05 PM   #3
Dryer sheet wannabe
 
Join Date: Aug 2019
Posts: 14
You look pretty good to me...
i am 45 male. single, no kids.. I am looking at $1.9M and drawing $70k per year. The old fuddy duds on this site are super conservative.. I think youre a bit heavy in the cash realm.. hope youre on the coast.. portland is super pricey... "much further" west is better... i am NOT retired so take my advice with a grain of salt
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Old 09-09-2019, 03:58 AM   #4
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,181
Q: Can I retire at 55 (or now)? Yes

Well, I suppose the answer is yes. Just a matter of spending/expenses I guess. I'm still enjoying working currently. I took a couple years off earlier (2014-2016). Traveled some, but generally felt I wasn't doing much. But am really enjoying working again (teamwork, big goals, ...).

Q: Long-term-care insurance? When do people buy LTC? How do you get info about LTC? There are plenty of LTC salespersons out there, Google search. We bought LTC about 3 years ago at age 54. IMO there are three "groups" that a person could fit in regarding LTC. 1) The poor cannot afford it 2) The rich can self-insure and don't need it 3) The people in the middle may benefit from it...depending on circumstances

A few tips related to LTC.
1) The longer you wait to buy, the more expensive it gets...but the shorter you pay into it...difficult to say exactly when to buy but I'd say 50-55 is a good age.
2) Check to see if your state has "Partnership Policies". These protect a portion of your assets from Medicaid in the amount of the coverage you purchased. For example, let's say you bought a $400k LTC policy and then had to use it. Let's say you went in the nursing home and eventually used up all $400k of benefits. You would then (if you wanted to) be able to go to a Medicaid facility and they could only take your savings and investments to the point where you had $400k remaining...then all remaining costs would be covered by the state. In order to get this protection, Indiana (where I live) requires that you have a policy with at least a certain amount of inflation protection. These policies are very expensive, so we opted NOT to do this...but wanted you to be aware of this feature. (Instead of inflation protection, we simply bought WAY MORE insurance than we need...eventually inflation will drive this down to an amount that we hope will cover enough years to satisfy us...but certainly there is no guarantee of this)
3) LTC programs have different rules state by state. If you buy a plan in one state and move to another later in life, you may not be able to transfer the plan. Check to see if the state you may move to has a reciprocity agreement with your state whereby they might honor it
4) Go to your local library and get some books on LTC
5) Check the financial stability of the insurer...you don't want to pay in for 15 years and have them go bankrupt...check their bond rating as one indicator, but there are others too



Q: Asset usage order?
Early retirement: obviously I'll be living off after-tax assets. But which first? Cash/Roth/Index-funds?
Once I can access retirement accounts, what order?
It depends on your situation. For me, I take money from TIRAs up to one of the lower tax brackets, then any more that I need I take from Roths...this minimizes taxes. Most advisors will tell you to take money out of taxable savings/investments first, then tax-advantaged bonds, then TIRAs, and leave Roths for last...but I find this to be too simplistic for me. See my other comments below on taxes

Q: What to do with cash?
I feel I'm pretty cash heavy. Kinda waiting for the "big dip" (yes - marking timing == bad) to invest some of it. But... when I retire early, I'll need some cash. That said, I could definitely be doing more with it. Maybe a CD ladder (ugh such a pain), or a Betterment savings account (over 2% interest currently), or maybe some safe-ish bonds?

CD ladders are not a pain if you have an account with Fidelity...it took me 5 minutes with their laddering tool...and they even split it up by banks so you are not exposed to the $250k FDIC insurance limit

Yes, cash doesn't pay much now...not much you can do except look for the best rates. If you buy bonds, I suggest planning to hold to maturity or you may suffer the price fluctuations at a time you need to sell. I like to keep 2 years of spending in cash-equivalents for liquidity purposes, but even more than that for risk-management purposes (makes me nervous having too much in equities when the market is near all-time highs) I will never again have over 40% of my money in the market...I don't sleep well if something goes wrong when we have too much in stocks. If you only have 40% in the market, and the market drops 35% (like it did in 2008), then you've only lost 14% of your savings...I can stomach that.



Q: Tax optimization?
Need to understand "tax torpedo" better. Will I be affected? Is there anything I can do about it?
Tax optimization is too complex to guide you on fully here...and each person is different...but my advice would be to get as much into Roth accounts as you can...this will allow you to make withdrawals later from that account and "manage" your taxable withdrawals.


Q: When to start SS? Early? Late?

Well opinions vary...but I recommend at least waiting until FRA (which for you will be 67), as you get a sizeable cut if you take it before then.


Q: Roth conversions?
Did one while I was off work (2014-2016).
Currently avoiding them since my income is high.
Maybe should do more once I stop working?
If you can, then yes...see earlier comment on taxes.
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