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Think I'm OK, but not overly confident
Old 03-26-2016, 11:10 AM   #1
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Think I'm OK, but not overly confident

Hi all,
I am 62 (will be 63 in three months) and my wife is 62 as well (several months younger than me). I am currently working (my wife stopped working over a decade ago). We have three children (one fully launched and two currently in professional school).



I have been working for about 38 years and am really mentally ready to move on to my next chapter (I also may not have an option in a few months due to some recent company reorganizations). My current compensation is about $180k per year.


I think I am in reasonable shape to move on (i.e., retire), but some second opinions are always welcome.


A summary of my current situation follows:
  • · $276K in taxable accounts ($31k stocks, $61K bonds, $184K cash/low interest checking accounts)
  • · $481K in a Roth IRA
  • · $2.8M in Tax Deferred accounts (401K and traditional IRAs)
  • · The asset allocation in the Roth IRA and Tax Deferred accounts is roughly 60% equities, 25% fixed income, 15% cash
  • · I have a house with an approximate market value of $760K (free and clear – no mortgage); our plans are to downsize in the next year or two
  • · Whenever I retire, I will have immediate access to a $50K per year pension (no COLA)
  • · In 2.5 years an additional $16K per year pension will be available (no COLA)
  • · Our plans for social security will provide $39K per year three years from now and then jump to $69K per year four years later (when I am 70 years old)
  • · Our expenses for the next 3 years are quite high ($135K per year) since we are trying to help our two kids in professional school as much as possible
  • · In the longer run, we believe our expenses will be more like $80K per year, but we would like to spend $100K per year while we are still active
  • · We have no known health issues at this point, but paying for healthcare prior to Medicare is a concern
I have run my plan through both FireCalc and Flexible Financial Planner and they both say that my plan has 100% probability of success. For the Flexible Retirement Planner I am assuming a 92 year life expectancy for both me and my wife, 3% average annual return on investments (with 10% standard deviation), 3% inflation, and 22% effective tax rate.


While I think we are OK and the planning tools support that, I am not overly confident and really appreciate some input from others.


All the Best,
ready53
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Old 03-26-2016, 11:17 AM   #2
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Looks good to me; I retired at 61 2 years ago with about $2.8 million, a small mortgage and only $10k/year pension. Main difference is that DH is 15 years older so he's got a shorter life expectancy.

We're doing fine, even with a major trip every year (revisiting Iceland in August), having to replace the heating system last year and the A/C this year (both over 20 years old) and going through the expenses of downsizing.

Unless your hobby is collecting Maseratis or you have maintenance expenses on a Learjet you should be fine.
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Old 03-26-2016, 11:29 AM   #3
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I think you worry too much, looks good to me.
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Old 03-26-2016, 11:34 AM   #4
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+1 What you might do is to use the sensitivity tools in Firecalc to see how much you could spend and still be at a high success ratio... I suspect that it will be much more than you think you need and perhaps that might make you feel comfortable.

When I was making the decision I ran just about every retirement calculator that I could find using the same, conservative assumptions and they all gave me various versions of a green light and I then became more comfortable with pulling the trigger.
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Old 03-26-2016, 11:41 AM   #5
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Ready53, you look to be in good shape. If you want to hold out a few months to see if the reorganization might result in a nice severance package, that might make sense, but otherwise I think I'd start the countdown clock. Have you started shopping for health insurance? You might be pleasantly surprised that it's not as big a hit as you feared, particularly if you are willing/able to go with a high deductible policy.

Good luck and keep asking questions!
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Old 03-26-2016, 12:02 PM   #6
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+1 Looks like you are in great shape.
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Old 03-26-2016, 02:04 PM   #7
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Your situation looks good to me as well. You mention planning tools. What dies FireCalc say?
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Old 03-26-2016, 03:13 PM   #8
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Thanks to all for your responses. This is my first time on the Early Retirement forum.Very useful to exchange views/perspectives/information... in the retirement planning domain.

Someone asked about what the planning tools were telling me. As I stated in my original post, I have used both FireCalc as well as Flexible Retirement Planner. I believe I put in reasonable inputs into Flexible Retirement Planner (92 as projected lifespan for both my wife and me, 3% average return on investment portfolio with a 10% standard deviation, 3% annual inflation, 22% effective tax rate). I just let FireCalc do the simulation using histrical return and standard deviation data. Both tools say the my plan has 100% probability of success. But even with that, I am not overly confident.

I am certainly mentally ready to retire (I've had enough after 38 years), but don't want any money worries during my retirement.
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Old 03-26-2016, 03:27 PM   #9
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You are fine.
Especially if that Pension is in addition to your savings... get off the treadmill.

In fact I'll bet you saved too much, look ahead to age 70.5 when you have to take RMD + SS + your dividends probably will find yourself paying a lot of taxes.
With today's values your RMD will be $102,189 the first year.
Add in your SS + Pension and you will be at: $237,189

You might want to look into spending down some of that IRA or converting it to ROTH before SS kicks in.
A nice problem to have.
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Old 03-26-2016, 04:59 PM   #10
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Honestly, given the income streams, I think you'll be leaving your children a very sizable inheritance.
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Old 03-26-2016, 06:21 PM   #11
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Looks pretty spectacular. Wouldn't you be close to 100% even with a life expectancy of 100?? I bet could could spend significantly more than you project. Congrats on a financially secure retirement.
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Old 03-26-2016, 06:44 PM   #12
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You are in great shape.

Give notice when you go to work Monday -
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Old 03-26-2016, 06:47 PM   #13
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Thanks to all for the additional inputs. Very helpful and much appreciated.

Sunset, the approximately $66K of pension income is in addition to the savings. I have thought about the RMD, and your suggestion to execute some Roth IRA conversions before SS sets in is a good one. By far, most of my savings are in retirement accounts that will be taxable when I eventually need the funds. I have completely depleted any taxable saving putting three kids through private colleges and professional schools (but well worth it). I will likely need to draw on the retirement savings well before the 70.5 RMD requirement age.

Any best strategies for how to convert to Roth IRAs? BTW, I have a fairly sizeable amount of pre-tax (non-deductable) funds in my wife's and my traditional IRAs.

Thanks,

ready53
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Old 03-26-2016, 07:27 PM   #14
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Quote:
Originally Posted by ready53 View Post
....3% average return on investment portfolio with a 10% standard deviation, 3% annual inflation, 22% effective tax rate....
I think that you will find 22% tax rate to be too high. Do a pro forma tax return as if you were retired and I suspect you will find that your taxes will be much lower, which means your success rate is higher.

Taxcaster is a good tool to test this. Or if you want to include state taxes too try tax-rates.org tax calculator.
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Old 03-29-2016, 07:12 PM   #15
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Quote:
Originally Posted by ready53 View Post
Hi all,
I am 62 (will be 63 in three months) and my wife is 62 as well (several months younger than me). I am currently working (my wife stopped working over a decade ago). We have three children (one fully launched and two currently in professional school).



I have been working for about 38 years and am really mentally ready to move on to my next chapter (I also may not have an option in a few months due to some recent company reorganizations). My current compensation is about $180k per year.


I think I am in reasonable shape to move on (i.e., retire), but some second opinions are always welcome.


A summary of my current situation follows:
  • · $276K in taxable accounts ($31k stocks, $61K bonds, $184K cash/low interest checking accounts)
  • · $481K in a Roth IRA
  • · $2.8M in Tax Deferred accounts (401K and traditional IRAs)
  • · The asset allocation in the Roth IRA and Tax Deferred accounts is roughly 60% equities, 25% fixed income, 15% cash
  • · I have a house with an approximate market value of $760K (free and clear – no mortgage); our plans are to downsize in the next year or two
  • · Whenever I retire, I will have immediate access to a $50K per year pension (no COLA)
  • · In 2.5 years an additional $16K per year pension will be available (no COLA)
  • · Our plans for social security will provide $39K per year three years from now and then jump to $69K per year four years later (when I am 70 years old)
  • · Our expenses for the next 3 years are quite high ($135K per year) since we are trying to help our two kids in professional school as much as possible
  • · In the longer run, we believe our expenses will be more like $80K per year, but we would like to spend $100K per year while we are still active
  • · We have no known health issues at this point, but paying for healthcare prior to Medicare is a concern
I have run my plan through both FireCalc and Flexible Financial Planner and they both say that my plan has 100% probability of success. For the Flexible Retirement Planner I am assuming a 92 year life expectancy for both me and my wife, 3% average annual return on investments (with 10% standard deviation), 3% inflation, and 22% effective tax rate.


While I think we are OK and the planning tools support that, I am not overly confident and really appreciate some input from others.


All the Best,
ready53

I think you should have retired a few years ago.


Sent from my iPhone using Early Retirement Forum
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Old 03-30-2016, 09:57 AM   #16
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Quote:
Originally Posted by ready53 View Post
Any best strategies for how to convert to Roth IRAs? BTW, I have a fairly sizeable amount of pre-tax (non-deductable) funds in my wife's and my traditional IRAs.
Be sure to check out I-Orp at: Optimal Retirement Planner - Parameter Form This tool has helped me immensely.
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Old 03-19-2017, 03:54 PM   #17
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Sorry for the long post. Part of it is anxiety venting on my part for sure.
It’s been about 1 year since my original post, and to tell you the truth, not much has changed other than being 1 year older and even more anxious to move onto my next chapter.


I am now 63 (will be 64 in three months) and my wife is 63 as well (several months younger than me). I am still working (my wife hasn’t worked outside of the home for over a decade). We have three children (one fully launched and doing great, and two still in professional school).



I have been working for 38½ years and am really mentally ready to move on. The corporation I am working for is still going through a lot of reorganizations, and I am likely to be let go in the near future regardless. It’s also a quite toxic environment as you might imagine. Like a lot of other posters on this forum, I am apprehensive about giving up a steady income that I have been fortunate to have all of my adult life (I suspect this is more of an emotional issue than a financial issue). As a result, I’m hanging in hoping to leave on my own terms or at least have them pay me to leave.



We think we are in reasonable shape to move on (i.e., retire), but we're still not overly confident.
A summary of our current situation follows:
  • $254K in taxable accounts ($34k stocks, $58K bonds, $162K cash/low interest checking accounts) (small reduction from original post)
  • $525K in a Roth IRA (modest increase from original post)
  • $3.078M in Tax Deferred accounts (401K and traditional IRAs) (modest increase from original post)
  • The asset allocation in the Roth IRA and Tax Deferred accounts is roughly 63% equities, 22% fixed income, 15% cash (A little heavier in equities –haven’t rebalanced since the recent run-up in the stock market)
  • We have a house with an approximate market value of $760K (free and clear – no mortgage); our plans are to downsize in the next year or two (Same)
  • Whenever I retire, we will have immediate access to a $50K per year pension (no COLA) (Same)
  • In about 1.5 years an additional $16K per year pension will be available (no COLA) (Same)
  • Our plans for social security will provide $39K per year 2¼ years from now (1 year moved out from original post) and then jump to $69K per year four years later (when I am 70 years old)
  • Our expenses for the next 2 years are quite high ($143K per year) since we are trying to help our two kids in professional school as much as possible. (higher anticipated expenses over the next 2 years than in the original post)
  • In the longer run, we believe our expenses will be more like $80K per year, but we would like to spend $100K per year while we are still active and maybe more like $120K during the first several years of retirement. (slight change of view from original post)
  • We have no known health issues at this point, but paying for healthcare prior to Medicare (and after) continues to be a concern and is something we really need to start to investigate.
  • We also have no firm plans for Long Term Care which is also a concern we need to further investigate and address (any advice here is most welcome)
We have run our plan through both FireCalc and Flexible Retirement Planner and they both say that our plan has 100% probability of success. For the Flexible Retirement Planner we are assuming a 95 year life expectancy for both me and my wife, 3.5% average annual return on investments (with 6% standard deviation), 3% inflation, and 23% effective tax rate. Not sure if a 3.5% average annual return with a 6% standard deviation is a reasonable assumption given our current asset allocation. This is something else we need to investigate further. (any opinions here would be welcomed)


While we think we are OK and the planning tools support that, we are not overly confident and really appreciate some input from others. Are we overlooking something? We anticipate that a common reaction is that we are extreme “worry warts” and overly cautious. We understand that we are better prepared than many, but we don’t think it is a slam dunk given potential higher inflation, healthcare costs, potential long term care costs, higher taxes when RMDs kick in, etc.


Any insights, comments, opinions are most appreciated.



This forum is really an incredible resource.

All the Best,
ready53
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Old 03-19-2017, 04:05 PM   #18
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...........I have been working for 38½ years and am really mentally ready to move on. The corporation I am working for is still going through a lot of reorganizations, and I am likely to be let go in the near future regardless. It’s also a quite toxic environment as you might imagine. Like a lot of other posters on this forum, I am apprehensive about giving up a steady income that I have been fortunate to have all of my adult life (I suspect this is more of an emotional issue than a financial issue). As a result, I’m hanging in hoping to leave on my own terms or at least have them pay me to leave. .........
You are one year closer to dead. You have more than enough money to walk and start enjoying a stress free life.

Do it.
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Old 03-19-2017, 04:08 PM   #19
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Originally Posted by ready53 View Post

I am certainly mentally ready to retire (I've had enough after 38 years), but don't want any money worries during my retirement.
None of us do, but it appears that you are creating worries where none are likely to be necessary.

There are only two guarantees in life, and neither of them is freedom from monetary worries. All any of us can do is to plan our financial future within reason - the future will be whatever it is.

Were I in your shoes I'd have retired several years ago...
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Old 03-19-2017, 04:25 PM   #20
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Sorry for the long post. Part of it is anxiety venting on my part for sure.
It’s been about 1 year since my original post, and to tell you the truth, not much has changed other than being 1 year older and even more anxious to move onto my next chapter.


I am now 63 (will be 64 in three months) and my wife is 63 as well (several months younger than me). I am still working (my wife hasn’t worked outside of the home for over a decade). We have three children (one fully launched and doing great, and two still in professional school).



I have been working for 38½ years and am really mentally ready to move on. The corporation I am working for is still going through a lot of reorganizations, and I am likely to be let go in the near future regardless. It’s also a quite toxic environment as you might imagine. Like a lot of other posters on this forum, I am apprehensive about giving up a steady income that I have been fortunate to have all of my adult life (I suspect this is more of an emotional issue than a financial issue). As a result, I’m hanging in hoping to leave on my own terms or at least have them pay me to leave.



We think we are in reasonable shape to move on (i.e., retire), but we're still not overly confident.
A summary of our current situation follows:
  • $254K in taxable accounts ($34k stocks, $58K bonds, $162K cash/low interest checking accounts) (small reduction from original post)
  • $525K in a Roth IRA (modest increase from original post)
  • $3.078M in Tax Deferred accounts (401K and traditional IRAs) (modest increase from original post)
  • The asset allocation in the Roth IRA and Tax Deferred accounts is roughly 63% equities, 22% fixed income, 15% cash (A little heavier in equities –haven’t rebalanced since the recent run-up in the stock market)
  • We have a house with an approximate market value of $760K (free and clear – no mortgage); our plans are to downsize in the next year or two (Same)
  • Whenever I retire, we will have immediate access to a $50K per year pension (no COLA) (Same)
  • In about 1.5 years an additional $16K per year pension will be available (no COLA) (Same)
  • Our plans for social security will provide $39K per year 2¼ years from now (1 year moved out from original post) and then jump to $69K per year four years later (when I am 70 years old)
  • Our expenses for the next 2 years are quite high ($143K per year) since we are trying to help our two kids in professional school as much as possible. (higher anticipated expenses over the next 2 years than in the original post)
  • In the longer run, we believe our expenses will be more like $80K per year, but we would like to spend $100K per year while we are still active and maybe more like $120K during the first several years of retirement. (slight change of view from original post)
  • We have no known health issues at this point, but paying for healthcare prior to Medicare (and after) continues to be a concern and is something we really need to start to investigate.
  • We also have no firm plans for Long Term Care which is also a concern we need to further investigate and address (any advice here is most welcome)
We have run our plan through both FireCalc and Flexible Retirement Planner and they both say that our plan has 100% probability of success. For the Flexible Retirement Planner we are assuming a 95 year life expectancy for both me and my wife, 3.5% average annual return on investments (with 6% standard deviation), 3% inflation, and 23% effective tax rate. Not sure if a 3.5% average annual return with a 6% standard deviation is a reasonable assumption given our current asset allocation. This is something else we need to investigate further. (any opinions here would be welcomed)


While we think we are OK and the planning tools support that, we are not overly confident and really appreciate some input from others. Are we overlooking something? We anticipate that a common reaction is that we are extreme “worry warts” and overly cautious. We understand that we are better prepared than many, but we don’t think it is a slam dunk given potential higher inflation, healthcare costs, potential long term care costs, higher taxes when RMDs kick in, etc.


Any insights, comments, opinions are most appreciated.



This forum is really an incredible resource.

All the Best,
ready53
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