Retiring in first week of July on my 52nd Birthday in less than 90 days

[Andru]

Greetings from Seattle.

I am looking forward to my exit from work life in less than 90 days.

I gave my notice just over a year ago on the day I received my 10th year longevity award in October of 2016.

I was planning to retire at 50 but delayed it for two years because I wanted to give myself the option of applying for citizenship while I am still working. However, at this stage I am having second thoughts about remaining in the US due to the political climate.

I will be retiring with around 1.8m in assets that will be mostly based in stocks (87%), and some cash (10.6%) in my portfolio which excludes the value of my home, (if you include it, then my net worth is just north of 2m,) with the remainder in alternatives and bonds. If all goes well, then I hope my portfolio will be closer 2m again by the time I retire in July. I was 20K short of 2m in March before the correction.

My annual pay is 72K plus another 16K in annual bonuses that go directly into my 401K. I have been maxing out my contributions to my 401K since I hit 50, so my take home is fairly small. Especially this year when I get done in July.

My annual expenses rarely go above 38K a year. The rest of it usually goes into my Roth and my investment account. I have been maxing out my Roth since I started working 12 years ago. This year however, I won’t be able to contribute to my Roth for next year due to a lack of funds as I have barely enough to live on after maxing out my 401K.

My main concern now is how do I generate income without touching the principal going forward after I am retired.

What is the best way to keep that 2m intact and growing whilst providing me with a reasonable income of 3K a month? Will dividends generated from about 230K in my Roth be enough? What sort of taxes will I be contending with?

I plan to rollover my 401K into an IRA sometime in mid August. I have about 280K in it for now.

Is it possible to generate dividends inside of my Roth that can be drawn out for income?

Any advice would be most welcome.

Thanks in advance.
A.

 

[racy]

First of all, welcome! In reading your post I thought that you might benefit from reading this article on Total Return vs Income Investing:
https://www.mcleanam.com/total-return-vs-income-investing-same-but-different/

Quote from the article, "...whether you are meeting your spending needs from income investing or total return investing, it’s an exercise in semantics – the money is coming from the same place."

(Full disclosure: I'm a total return guy. Others will disagree!)

 

[joeea]

I am having second thoughts about remaining in the US due to the political climate.

So where will you go?
How can you estimate your expenses without knowing where you will live?

I will be retiring with around 1.8m in assets that will be mostly based in stocks (87%), and some cash (10.6%) in my portfolio

My annual expenses rarely go above 38K a year.

My main concern now is how do I generate income without touching the principal going forward after I am retired.

You will have around $180 - $200k in cash. So at $38k/year you won't need a whole lot more income for a while.

Will dividends generated from about 230K in my Roth be enough?

Is it possible to generate dividends inside of my Roth that can be drawn out for income?

That depends. What kind of dividends are your investments generating these days?

 

[flintnational]

Welcome to the forum. I would not let the political climate deter me from living in the US. Like the weather, if you do not like the political climate today, just wait awhile and it will change. And you would be in good company. Depending on the election cycle 50% of Americans don't like the political climate either.

 

[slv1]

38 K

Greetings from Seattle.

I am looking forward to my exit from work life in less than 90 days.

I gave my notice just over a year ago on the day I received my 10th year longevity award in October of 2016.

I was planning to retire at 50 but delayed it for two years because I wanted to give myself the option of applying for citizenship while I am still working. However, at this stage I am having second thoughts about remaining in the US due to the political climate.

I will be retiring with around 1.8m in assets that will be mostly based in stocks (87%), and some cash (10.6%) in my portfolio which excludes the value of my home, (if you include it, then my net worth is just north of 2m,) with the remainder in alternatives and bonds. If all goes well, then I hope my portfolio will be closer 2m again by the time I retire in July. I was 20K short of 2m in March before the correction.

My annual pay is 72K plus another 16K in annual bonuses that go directly into my 401K. I have been maxing out my contributions to my 401K since I hit 50, so my take home is fairly small. Especially this year when I get done in July.

My annual expenses rarely go above 38K a year. The rest of it usually goes into my Roth and my investment account. I have been maxing out my Roth since I started working 12 years ago. This year however, I won’t be able to contribute to my Roth for next year due to a lack of funds as I have barely enough to live on after maxing out my 401K.

My main concern now is how do I generate income without touching the principal going forward after I am retired.

What is the best way to keep that 2m intact and growing whilst providing me with a reasonable income of 3K a month? Will dividends generated from about 230K in my Roth be enough? What sort of taxes will I be contending with?

I plan to rollover my 401K into an IRA sometime in mid August. I have about 280K in it for now.

Is it possible to generate dividends inside of my Roth that can be drawn out for income?

Any advice would be most welcome.

Thanks in advance.
A.

Congratulations.

38K is around 2% of 2 million. I don't think you are at risk for losing much principal. Your asset allocation is 87% stock. You want to re-think that once you retire.

 

[Dtail]

Have you checked out the COL in other countries including medical and LTC options?

 

[urn2bfree]

I retired on my 52nd birthday also. Not by plan, that's just the way the schedule worked out.
I would think that your expenses, while low for your current portfolio size, could be considerably higher once you have to buy your own health insurance. (At least if you stay here in the US.) Your (federal) taxes should be low to zero. I don't know what your local tax burden will be and given that you aren't sure where you will live, neither do you right now. I would want to have a better understanding on those expenses before pulling the plug.
Finally, with 87% in stocks, are you prepared for a drop in portfolio value of 40% or so at some point during your retirement? If not, a more conservative asset allocation might be in order.

 

[joylesshusband]

Any advice would be most welcome.

Both the nature, and the specific verbiage of your questions convey a very clear indication that you have not done your homework and in result are unsure about the "what now" aspect.
You lack a good grasp of both the aspects of actual expenses in retirement, and of nest egg preservation during decumulation.

The only advice I can give you at this point is to better educate yourself, and do it quick, as the timer on your ticking bomb has been set.
This forum is a place where you can get help to further develop, hone, and optimize your tactics, but should not be your main source of self-education.

I could have given you my granddad's favorite advice he loved to dispense left and right, had you asked earlier, but now it seems too late for that... It went something like this:
"One should make sure that the pit would pass through one's nether regions before - and not after - swallowing the whole cherry!"

 

[pb4uski]

First of all, welcome! In reading your post I thought that you might benefit from reading this article on Total Return vs Income Investing:
https://www.mcleanam.com/total-return-vs-income-investing-same-but-different/

Quote from the article, "...whether you are meeting your spending needs from income investing or total return investing, it’s an exercise in semantics – the money is coming from the same place."

(Full disclosure: I'm a total return guy. Others will disagree!)

+1 I had exactly the same thought where the OP said:

... My main concern now is how do I generate income without touching the principal going forward after I am retired.

But since his WR will be about 2%, it is unlikely that he will need to invade principal in any given year, but it could happen.

.... What is the best way to keep that 2m intact and growing whilst providing me with a reasonable income of 3K a month? Will dividends generated from about 230K in my Roth be enough? What sort of taxes will I be contending with?

I plan to rollover my 401K into an IRA sometime in mid August. I have about 280K in it for now.

Is it possible to generate dividends inside of my Roth that can be drawn out for income?
...

How much do you have in taxable (savings, brokerage accounts, etc.), tax-deferred (401k/IRA) and tax-free (Roth)? A common issue for those who retire before 59 1/2 is penalty free access to their money. Taxable accounts can be accessed without penalty. Contributions to Roths can be accessed penalty free if the account is more than 5 years old. Tax-deferred money can be accessed penalty free through a SEPP (substntially equal periodic payments).

Given that you have 7 1/2 years until you are 59 1/2 and will need ~$285k at $38k a year where your money is located is important to your planning.

Also important, what will you do for health insurance and how much will that cost?

 

[Andru]

So where will you go?
How can you estimate your expenses without knowing where you will live?

——
Well, as far as I see, I do have an option of moving back to my home country Malaysia where expenses run even lower and where public healthcare is free or very affordable if going for private. Malaysia is famous for healthcare tourism because healthcare is excellent and very affordable there. The exchange is currently 1USD to 4RM.

I won’t have to worry about getting a new home as I already have one there.

Another option is moving to Portugal or the south of Spain where expenses are low as well, and that would allow me to travel around the EU easily.


——

You will have around $180 - $200k in cash. So at $38k/year you won't need a whole lot more income for a while.

——


I intend to use the cash in the Roth to go in and about of dividend stocks, mostly REITs like UNIT. 200K in cash would generate around 6K in cash per quarter from UNIT.

The thought is to buy before the ex-dividend date grab the dividend and dump the stock after the value goes back up and pick the next REIT that pays a fat dividend, rinse and repeat every month.

I intend to do the same with the funds from the 401K after I rollover it into an IRA. With north of 500K in cash in total, I think I’d be able to generate more than enough money through dividend investing for 7.5 years until RMDs?
——

That depends. What kind of dividends are your investments generating these days?

——
Right now AAPL which lives in my investment account generates around 12K of qualified dividends a year. Not much, but it’s something.

I am not adverse to selling my investments or working part time remotely to generate cash if I have to.

I am single with no liabilities except for my small mortgage ($917/month.) I will remain single for the remainder of my life.

My fixed expenses are my mortgage payments, HOA($375/month) and utilities ($45/month), food, some entertainment ($500/month) and some miscellaneous like my gym membership ($22/month). That totals to a little less than 2K a month.

Yes I am very frugal, but that doesn’t mean I live like a pauper. I have already accumulated all the nice things in life that I want. I live in a condo that has been remodeled to feel and look like a suite at the W with a 200” projection screen. All the lights, switches, AV system and lock are controlled with smart assistants.

Aiming for 3K a month would give me lots of flexibility in terms covering other expenses that might come up, like some travel. Which I plan to do a lot of going forward. However, I will need to think about healthcare coverage going forward, so I’m still trying to figure out what I need for that if I remain in Seattle. I will most likely only be in Seattle for about 180 days in a year. The rest would be spent mostly traveling and living in Asia and my home country Malaysia where expenses are really low but where life is just as good as it is in Seattle or even better, except for the heat and humidity that I detest. However, that is easily managed with A/C.

I am a very healthy person who rarely sees the doctor. I work out very regularly and try to stay ripped most of the year. I eat very healthy too. My diet is mostly vegetables. My usual visits to the doctor are mostly for minor things like coughs and colds and my annual physicals. I intend to stay as healthy as I can for my time left here, so I think I won’t need more than catastrophic and dental care for coverage. Correct me if I am wrong.

I also have a DNR in place. For me quality of life is important. If I am bed ridden I have no desire to live.
——

 

[joeea]

I am a very healthy person who rarely sees the doctor. I work out very regularly and try to stay ripped most of the year. I eat very healthy too. My diet is mostly vegetables. My usual visits to the doctor are mostly for minor things like coughs and colds and my annual physicals. I intend to stay as healthy as I can for my time left here, so I think I won’t need more than catastrophic and dental care for coverage. Correct me if I am wrong.

Sounds like you have a plan.

You might want to think a bit more about that health care though. It's nice to plan on staying healthy (who would plan to be unhealthy?), being "ripped" and eating "healthy", but nature goes its own way.

I was healthy too until I was diagnosed with cancer last year.

I also have a DNR in place. For me quality of life is important. If I am bed ridden I have no desire to live.

We all make our choices.

It might make sense to check how your travel destinations deal with DNRs.

 

[Andru]

Sounds like you have a plan.

You might want to think a bit more about that health care though. It's nice to plan on staying healthy (who would plan to be unhealthy?), being "ripped" and eating "healthy", but nature goes its own way.

I was healthy too until I was diagnosed with cancer last year.


We all make our choices.

It might make sense to check how your travel destinations deal with DNRs.

I am sorry that you have cancer. That blows. I hope you beat it.

Yeah thanks for that reminder. I need to see about that and also have an attorney draw up the necessary papers, and make sure I wear a medical tag on me at all times.

 

[HI Bill]

If you leave the US, your assets may be subject to the Expatriation Tax levied by the IRS. I don't know any details, and whether your stay qualified you as 'long-term resident', but I'm guessing it did!

 

[davebarnes]

Get the US citizenship.
You can always drop it later.

 

[aida2003]

Andru,

Welcome to ER forums

For some reason nobody has asked you yet about the SS and if you might have a pension. These can also be another one or two legs of a stool for your retirement.
I'm guessing you're a GC holder if you're rethinking your wish to apply for the citizenship. If I'm correct, you should remember to check immigration rules regarding being outside the USA for an extensive period of time while having a GC.

Yes, indeed, we're blessed to be healthy for many years until a cancerous surprise hits you in the face unexpectedly.
Joeea, I hope you have very high chances to beating the beast!! You work so hard to save for retirement and do your best to stay healthy just to be shocked before the best part of the journey (retirement) on the Earth starts...

 

[joeea]

I am sorry that you have cancer. That blows. I hope you beat it.

Thanks. It's only lymphoma (SMZL). It's amazing the kinds of treatments they have these days. I'm lucky enough to live close to a terrific facility for my infusions.

I'm sure I'll be fine.

 

[Andru]

If you leave the US, your assets may be subject to the Expatriation Tax levied by the IRS. I don't know any details, and whether your stay qualified you as 'long-term resident', but I'm guessing it did!

Thanks for the heads up. I just went to the IRS website to learn more about it and I would only be liable for it if my net worth is 2 million and above. And for now it’s not

 

[Andru]

Thanks. It's only lymphoma (SMZL). It's amazing the kinds of treatments they have these days. I'm lucky enough to live close to a terrific facility for my infusions.



I'm sure I'll be fine.

Good to know that. I wish you the best of health going forward.

 

[Andru]

Andru,



Welcome to ER forums



For some reason nobody has asked you yet about the SS and if you might have a pension. These can also be another one or two legs of a stool for your retirement.

I'm guessing you're a GC holder if you're rethinking your wish to apply for the citizenship. If I'm correct, you should remember to check immigration rules regarding being outside the USA for an extensive period of time while having a GC.



Yes, indeed, we're blessed to be healthy for many years until a cancerous surprise hits you in the face unexpectedly.

Joeea, I hope you have very high chances to beating the beast!! You work so hard to save for retirement and do your best to stay healthy just to be shocked before the best part of the journey (retirement) on the Earth starts...

Yes I checked my benefits for SS. As I’m retiring long before 62, my benefits will only be around $940 a month. It’s just about enough to cover payments for my mortgage. I still owe about 140K.

I have decided that it’s not worth paying it off due to the fact that my interest rate on it is so low.

The SS benefit I’ll be getting is not much, but it’s better than nothing.

Also I am highly aware of how much time I am allowed to stay outside the country. I have taken that into account. It’s 180 days to maintain my residency.

Thank you for bringing that into focus.

Staying outside the US for half a year or less might dramatically cut the cost of living by half or more or stay the same but give me a much better lifestyle.

 

[Zorwarrior]

Welcome Andru. $38k in expenses is quite good. All the best for the day you pull the pin!