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We're both 50 and need a sanity check.
Old 08-17-2014, 09:50 AM   #1
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We're both 50 and need a sanity check.


Hey all, thanks for all the great advice. I’d like to introduce myself and try perhaps to get a reality/sanity check on our ER plans.

Me: 50 next month, about 100K/Yr
She: 50 next month, 125K-135k/Yr plus 4K gross/mo. pension from State job after 26 years in.
I would like to stop working in three years though figure I would work PT doing something fun to bring in about $1K /Mo. until at least when she wants to stop working at about 57-58.
We have:
· $275K Mortgage. Bought last year, 4.375% 30 years.
· No children, no other debt whatsoever.
· Expenses are about $7K-8K per month but expect it to drop to about $6.5K in retirement.
· $325K in her 457 deferred comp plan which we could tap without the IRS 10% penalty
· $125K in an Indexed Deferred Annuity that can be tapped at about age 60 for about $2K per month. (probably not the smartest move; long story).
· By 53, when I want to stop, we should have $100K savings in an after tax brokerage account, (Mutuals, ETF’s, maybe MLP’s)
· Maxing out our current 401(K) plans, including the catch-up, we should have another $350K-400K by the time she stops working at 58 and depending on what the market does.
Our tentative plan is:
· Pay $1000 additional mortgage payment so we can pay off the mortgage by about age 62. (or sell and move and maybe downsize but regardless have no mortgage after age 62).
· Roll-over $200k of her 457 plan into an IRA and perhaps use Fidelity’s Blackrock Income ETF program. This keeps $125K in her 457 which can be tapped at any time penalty free to fund any gap, (perhaps from 58-59 ˝ if needed.
· Use the 100k after tax $ in the brokerage account to also fund that two year gap until 59 ˝ (If she still works FT until 58, and I earn $1K/mo PT, we should not need to tap much if anything to augment during that gap; mostly because of her pension).
· Once we hit 59 ˝ , the Blackrock money can kick in, as would the 401(k). Annuity kicks in at 60. SS at 62 for me, maybe 66 for her.
Does this sound do-able? Any moves I should be making or not making? I feel like we have one chance to get this right so any insight is most appreciated.
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Old 08-17-2014, 10:36 AM   #2
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Some questions:
- How confident are you with the spending number? Is that after tax - or does your spending include the funds to pay taxes on any retirement account withdrawals, cap gains, dividends, etc.

- have you accounted for health insurance?

- is she currently collecting the $4k pension? - the wording is ambiguous.


When I first joined ER - I figured out really quickly that managing spending and maximizing savings was going to be my key. By saving the max in my retirement accounts, as well as paying extra to the mortgage, I got used to spending less (since a big percentage was diverted to these savings.) I was able to adjust pretty quickly to a reduced spending level - and still lead a full, upper middle class life. The bonus - my nest egg grew quicker, my debt (mortgage) reduced quicker, and I ended up retiring about 2 years earlier than I'd originally planned.

But - you have to account for taxes and health insurance.
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Old 08-17-2014, 11:07 AM   #3
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Hi and thanks! She already collects her pension and will for life. Our expenses are after taxes. We get almost free healthcare with her pension; about $45 per month.
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Old 08-17-2014, 11:50 AM   #4
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If you can live on $6.5k/m, you will need $30K more each year after her pension. Is this before tax or after tax?

4% WD will require a $750K portfolio
3% WD will need 1M.

Not sure if you will have that in 3 years.
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Old 08-17-2014, 05:27 PM   #5
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You gross 278K a year and spend 90..where is the rest of your money going?

Your savings don't really reflect that.. your net worth is 450 minus the 275 mortgage + any equity you might have in your home. Are you missing some assets, if not then your spending could be off by a larger number.
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Old 08-17-2014, 05:38 PM   #6
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You will have additional 350k saved, plus 325k = 675k; That is a little short to support the 2500/mo (6500-4000) expenses; but the addtional $2k from annuity kick in at 60, then SS at 62; that will cover all your expenses, right?

so by 62, if you have mortgage paid for, and 500k in the bank, you are good to go.
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Old 08-18-2014, 05:05 AM   #7
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Thanks much. We practice LBYM in a big way so the extra income now will be going to pay down the mortgage and every other penny going into our after-tax accounts so we can fund the gap. I think we earn too much for anything else tax-advantaged and we will both max out our 401(k)s including the catch-up. We'd have a lot more saved but her pension just kicked in, and I had a "not the most successful business" from 2000-2006 so though she was maxing her 457(b), I had nothing. Been playing a little catch-up these last several years.

I think since we have no one to leave anything to and are pursuing a "Die Broke" strategy, we should be ok later as ultimately no principal needs to be preserved, including the house. My biggest concern is what best to do with her 457(b) money now to maximize gains and how best to invest after-tax money to fund the gap.

Thanks much again. Getting feedback from those who have been there is invaluable.
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Old 08-18-2014, 06:37 AM   #8
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Track your spending in a little more detail. Your business was done 8 years ago.I see no number for a 401 or IRA in your name. What do mean when you say you have been playing catch-up for the last several years?

It's fine to say you don't care if you leave any money behind when you expire, more then a few people that do have children have the same attitude. However to "Die Broke" is harder then you think unless you both die at the same time. Do you want the last remaining elderly grieving spouse to have to make big money decisions out of necessity, or to feel pressured and panicked over money problems?

You say her 4K pension is for life, what happens when she dies, will you continue to collect the same amount?

Another red flag, your spouse is to contribute full time work and her pension for at least the next 8-9 years while you go to a part-time fun job at least 5 years sooner. What if she falls ill or decides she's done enough to support the 2 of you? I think you are kind of winging it here...you need to put a lot more planning in this before you bail out.
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Old 08-18-2014, 07:52 AM   #9
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Quote:
Originally Posted by mbnj77 View Post
Thanks much. We practice LBYM in a big way so the extra income now will be going to pay down the mortgage and every other penny going into our after-tax accounts so we can fund the gap. I think we earn too much for anything else tax-advantaged and we will both max out our 401(k)s including the catch-up. We'd have a lot more saved but her pension just kicked in, and I had a "not the most successful business" from 2000-2006 so though she was maxing her 457(b), I had nothing. Been playing a little catch-up these last several years.

I think since we have no one to leave anything to and are pursuing a "Die Broke" strategy, we should be ok later as ultimately no principal needs to be preserved, including the house. My biggest concern is what best to do with her 457(b) money now to maximize gains and how best to invest after-tax money to fund the gap.

Thanks much again. Getting feedback from those who have been there is invaluable.
This is none of my business but since you posted here, I assume you want comments. Here's mine: With your household salary, if you really practiced "LBYM in a big way", you would have WAY more saved already than you do. Something isn't adding up to me.
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Old 08-18-2014, 08:13 AM   #10
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Originally Posted by utrecht View Post
This is none of my business but since you posted here, I assume you want comments. Here's mine: With your household salary, if you really practiced "LBYM in a big way", you would have WAY more saved already than you do. Something isn't adding up to me.
I've noticed similar things when I used to watch the "Can I Afford it" segment on the Suze Orman show, where you'd see a big salary, fairly low expenses, but not a whole lot saved up so it made you wonder where the excess was going.

However, could it be possible that they only reached those high salary levels fairly recently? Or perhaps living expenses had been higher in the past, but are lower now? Or a combination of it? So instead of having that particular financial situation for years and years, they might have just gotten that way fairly recently?
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Old 08-18-2014, 10:04 AM   #11
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Yes, indeed. She just retired from government and began receiving her pension 18 days ago and began a new private sector job as well. I had my own 401(k) from early career that I rolled into a deferred fixed annuity. I mentioned that for 6 years or so when I had my business, that I was unable to put anything away though her 457(b) was maxed out. I had mentioned this all before so hopefully it "adds up". Our savings rate was modest and now can go into hyper-drive.

It is her decision to continue to work because she enjoys her work. I am good at what I do but dislike it. No conflict there though it seems like someone out there wants to create one.
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Old 08-18-2014, 10:08 AM   #12
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Oh, and there is little doubt she will outlive me based on family histories. I will get a pay-out of her pension if she pre-deceases me. Should she live to her 90's, her pension, SS, my annuity which continues upon my death, and no mortgage will keep her in plenty of luxury.
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Old 08-18-2014, 10:26 AM   #13
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I ER'd 3 yrs ago at 55 yrs of age. My DW will ER next year. We have about a similar amount of savings and spending. The difference for us is that we paid off our mortgage last year and our combined COLA'd pensions are on the order of 10k/month (when she retires next yr). No kids. No debts. We are doing just fine financially.

However, before I ER'd I put together an income/expense spreadsheet with quite a bit a detail. I tracked my expenses during the first year and didn't really need to change much in my spending habits. Whether you have enough to live on will depend on the lifestyle you are comfortable with. Try living on your retirement income now to see what it will be like. I'm a big believer in transitioning into retirement without suffering big changes in lifestyle (other than the huge lifestyle change of not w*rking).
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Old 08-18-2014, 10:44 AM   #14
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How is that trying to create a conflict by asking what your plan might be if she decided she wanted to quit work sooner or becomes medically impaired and can't work? Car accidents and other nasty things can happen to anyone, no one is guaranteed a nice healthy life into their nineties. You will find more then a few stories on this forum about one half of a couple retiring and the remaining spouse deciding they wanted to join in the ER fun sooner rather then later.

The red flag comment simply means it's not always wise to put all your eggs in one basket...meaning if your wife did want/need to quit working is your plan still doable?
Good luck on adding to your nest egg now that you have more income to work with. Another year or 2 with saving and tracking expenses should help you both decide how things will work out.
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