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…thinking I’m ready to pull the ripcord -
- but need to check that I’ve packed my chute properly.
I’m soon to be 57, DW is 70 and retired. Only debt outside of our mortgage ($1,250/mo, including tax and insurance) is a 401(k) loan of $13K. Current salary of $125K; maxing out 401(k) contributions with 3% Megacorp match. Last year’s after-tax spending was $7.2K/mo, and we agree there’s about $1K/mo that can fairly easily come off that. We live in the Midwest, so COL is moderate; we wouldn’t be opposed to relocation to a warm-weather, low tax state, though. We have $10K/yr built in for travel; DW is starting to have some mobility issues so that will likely decline as time goes on. This is a big reason for thinking about ER sooner rather than later. HI costs have been factored in at current exchange premium rates.
Assets: 401(k), my Roth, his and hers IRAs total $1.06M; AA is 70/30. DW will need to start taking MDs from her IRA ($45K balance) this year. HE is ~$100K, and this is *not* included in any calculations. I’ll have about $700/mo in corporate pensions (non-COLA). DW’s SS is $700/mo after Medicare deduction; my SS estimates are $2K/mo at 62 and $2.6K/mo at 67. I’ve used the Bernicke spending model in FC, set for age 40 so we’ll have 16 years of level spending before age-correlated decreases kick in. Assumed .35% investment load.
No kids together – DW has two from her previous – and if there’s anything left at all it’s a bonus; leaving an estate isn’t important to us.
For ER at 58 FC shows 3 failures with maximum deficit of under $100K, so it looks as if minor spending tweaks could prevent failure if it appears things are going pear-shaped. If I wait until 59 there are no failures with the minimum balance well above zero. I still have some questions, though:
· Regarding SS, I understand that DW can apply for spousal benefits as soon as I apply. If I apply at 62, this means her benefit would go from $800/mo (pre-Medicare) to $1K; at 67 from $800 to $1.3K. Is there a maximum family benefit, and would we bump up against that?
· By waiting until 59 I become fully vested in current Megacorp pension of about $300/mo (on 31 Dec they froze further accruals, moving to a DC (4% of salary contribution) approach. Good for younger ees and those with many years of service, bad for me). I don’t see this as a reason to stay two years instead of one.
· However, at 59 I’ll also become eligible for pre-65 retiree HI. It’s not subsidized and the rates are nothing special, but it would be a continuation of current coverage until 65. I’m debating as to whether this is a reason to stay.
· I currently direct my own 401(k) allocations, using M* research to pick from our relatively limited universe of funds. I’d be very interested in hearing how folks go about making investment selections from the much broader universe outside of an employer-sponsored plan. Yes, I do this now for our IRAs but those are less than 10% of the portfolio, so risk of poor choice is mitigated.
· We also have a couple capital projects upcoming (replace 17-year-old car, replace carpet, possibly upgrade kitchen). Staying an extra year means another year of bonus to cover these without dipping into asset pool. To me, this is perhaps the most compelling reason to stay 2 years instead of 1.
It seems as if I’ve covered most of my bases, but I’m certain there will be more items to address; TIA for all guidance and assistance!
~ears
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