When to pull the plug

[jerryo]

Hi all,

What a wonderful website! It's really great learning from others coping with similar choices and decisions.

Anyway, I'm a single, widower, about to turn 56, and I'm trying to decide whether (or when) is the right time to pull the plug on work and take ER.

I have two kids, who have just finished their first years of college and law school. I have a girl friend/partner who's almost 9 years younger than I am and who works for a big international bank I have a house in Virginia and an exorbitantly expensive apartment in Manhattan (for which I share expenses with my girlfriend since we rent a large space to accomodate my two kids. My girlfriend has spent most of her life living and working overseas and there's a good chance we could move overseas again (most likely to Asia) in the next 1-3 years. Her income (a little higher than mine) more than pays for her own expenses, but I need to be presume that I'll have to be responsible for mine.

I'm currently living on about 150k/year NET, including about 20K/year towards my kids tuition and figure I'd need about $130-140k net in retirement.

I'm a federal worker covered by the FERS retirement system. I could retire immediately with a reduced annuity of about $20k year (cola'ed at age 62) or I could retire in 4 years with an annuity of about 30K a year, with an immediate cola, and about $9k year in lieu of social security (which disappears when I turn 62). I also receive a widower's annuity of about k20k/year (with cola), and will be eligible for social security of about 15k/year (I believe) at 62.

I also have about $800k in after tax assets, $1million in pre tax (retirement fund) assets, and about $700k net in equity in my house which I'm about to put on the market (since I think real estate process are a bit fluffy).

Question: what should I do? Should I continue working until 60 (to maximize my defined benefit pension? If my girlfriend wants to go back overseas (or if I decide to join her full time in NY) can I affort to retire now?

Thanks for the help!

jerryo

 

[Mr._johngalt]

Hi all,

What a wonderful website!  It's really great learning from others coping with similar choices and decisions.

Anyway, I'm a single, widower, about to turn 56, and I'm trying to decide whether (or when) is the right time to pull the plug on work and take ER.

I have two kids, who have just finished their first years of college and law school.  I have a girl friend/partner who's almost 9 years younger than I am and who works for a big international bank  I have a house in Virginia and an exorbitantly expensive apartment in Manhattan (for which I share expenses with my girlfriend since we rent a large space to accomodate my two kids.  My girlfriend has spent most of her life living and working overseas and there's a good chance we could move overseas again (most likely to Asia) in the next 1-3 years.  Her income (a little higher than mine) more than pays for her own expenses, but I need to be presume that I'll have to be responsible for mine.

I'm currently living on about 150k/year NET, including about 20K/year towards my kids tuition and figure I'd need about  $130-140k net in retirement.

I'm a federal worker covered by the FERS retirement system.  I could retire immediately with a reduced annuity of about $20k year (cola'ed at age 62) or I could retire in 4 years with an annuity of about 30K a year,  with an immediate cola, and about $9k year in lieu of social security (which disappears when I turn 62).  I also receive a widower's annuity of about k20k/year (with cola), and will be eligible for social security of about 15k/year (I believe) at 62.

I  also have about $800k in after tax assets, $1million in pre tax (retirement fund) assets, and about $700k net in equity in my house which I'm about to put on the market (since I think real estate process are a bit fluffy).

Question:  what should I do?   Should I continue working until 60 (to maximize my defined benefit pension?  If my girlfriend wants to go back overseas (or if I decide to join her full time in NY) can I affort to retire now?

Thanks for the help!

  jerryo

Welcome aboard! I was just talking about you earlier this morning.
I hope my good friends here are suitably impressed as I can even comment on
posts before they appear. Yep, it's a gift

JG

 

[Dawg52]

Welcome aboard!  I was just talking about you earlier this morning.
I hope my good friends here are suitably impressed as I can even comment on
posts before they appear.  Yep, it's a gift 

JG

That is funny!   I was thinking about your post from this morning as I read this.

 

[cute fuzzy bunny]

How eerie...I had a dream about this two nights ago. Apartment building full of sharks last night...

 

[Spanky]

Assuming that you sell the house and invest the proceeds into a diversified portfolio, your total portfolio will be $2.5 million (800K+1M+700K). At 4.0% withdrawal rate, your income from the portfolio is $100K. Thus, your total income is $140K if retired now ($200K + $20K). Therefore, your net flow is negative $10K (140K-150K). If retired later, your net flow will be in the positive territory. It is possible that you can retire now if you can lower expense by $10K.

Good luck.

Spanky

 

[jerryo]

Thanks for the advice.

And, with social security kicking in at about 15k in another 6 years, I might be able to draw an extra 10k a year fairly safely in the interim.

I'm a bit worried, though, that I might have to pay a larger share of my kids education (or help them repay loans).

Also, while ER would be pretty easy so long as my partner kept, she's thinking she may want to quit too. While she's got a good retirement package (60-80k per year (with some increase for inflation) when she hits 60 even if she were to quit today) that still won't kick in for more than a dozen years.

It may seem awfully risk averse, but if I had a larger defined benefit pension I'd be a lot more comfortable. I guess I could buy an annuity though with some of my savings though. What do people think of that?

 

[Spanky]

I am amazed that there are so many parents feel that they are obligated to pay for their kid's college education. They can always take out a student loan and pay it off as they start earning income. Make them responsible for their own finance so that they can realize the importance of not wasting money on unnecessary expenditures. They can also work part-time or as TA while attnding college. We have 5 kids in our family. Our parents did not pay a dime for our college expenses. We took out loans and worked part-time to support our education. Why can't kids do the same thing nowadays. Perhaps they can, but their parents either insist on paying or feel obligated to do so.

Have you ever considered living in more affordable areas? You can live very comfortably in another metropolitan area, e.g., Portland, OR, Denver, CO. I guess you might have a some personal tie to NY.

Spanky

 

[cute fuzzy bunny]

Obligation? I made him*, I can surely afford to make sure he gets the best education available. Why wouldnt I want to? Granted some thing are best done on ones own. I'll encourage him to pay for things himself when he can and feels thats important. When he cant or understands my will to help, then I'll gladly fill in the gaps. Will that make him better or worse? On its own, who knows. As a part of bringing him up 'right', it wont make any difference.

* - My wife actually made him. I've established an analogy that my participation is akin to giving her 5 quarts of good motor oil and her building a porsche and then pouring the motor oil into it. Clearly the oil is an important part, but it comes nowhere near the effort involved in building the car.

 

[P.S.]

Absolutely agree th. My parents raised us that way, and that's how we'll do it. Especially if we can afford it. Everybody has their own perspective on how to live and how to raise offspring. I'm very thankful that I was born to parents that felt the most important thing in their life was raising their children in the best way that they could. My mother loves kids and often said she wished she could have 5, but could only afford 3. So what other people would have spent on fancy cars, boats, exotic vacations, jewelry, you name it...my parents spent on feeding their three kids with the best food they could find, providing for the best education, and helping their kids in every way they could imagine to find a successful life. That doesn't mean we weren't familiar with secondhand clothes, leftovers, etc. What it does mean is having three kids who are so grateful to their parents, that they will do everything possible to insure their parents are happy and comfortable for the rest of their lives.

 

[greg]

Obligation? I made him*, I can surely afford to make sure he gets the best education available. Why wouldnt I want to? Granted some thing are best done on ones own. I'll encourage him to pay for things himself when he can and feels thats important. When he cant or understands my will to help, then I'll gladly fill in the gaps. Will that make him better or worse? On its own, who knows. As a part of bringing him up 'right', it wont make any difference.

* - My wife actually made him. I've established an analogy that my participation is akin to giving her 5 quarts of good motor oil and her building a porsche and then pouring the motor oil into it. Clearly the oil is an important part, but it comes nowhere near the effort involved in building the car.

Of course, the other argument is that you were just creating another potential income stream for your retirement. So, anything you do to enhance that stream after hand 8) (pay for colllege?) is a good thing.

 

[cute fuzzy bunny]

Shhhhh....you're giving the secret away!

 

[cute fuzzy bunny]

Ok, well the 'modify topic' button went away again, so its galtian self replies for afterthoughts.

While I will send him to college if he has the desire and knows what he wants to do in school, I'll also consider other options. Besides teaching him what little I know about building and fixing things, I'll probably 'apprentice' him with my home building brother in law for a summer or two. My BIL is nothing short of an artisan when it comes to building homes. If my son takes to that and wants to get his contractors license and get into that line of work, I'll buy him a truck and his tools and put some money into his first few projects to help him get started with that.

Or maybe he'll turn out to be a good for nothin' bum and i'll just salt the money away and let him have it when we pass on. He'll hopefully be in his 40's or 50's by then...

 

[jerryo]

Actually, I paid/am paying for about half my kids college costs. The rest came from their savings, earnings, a small inheritance, etc. But my older son is paying for all his law school expenses (savings, earnings, loans, and scholarship). That doesn't mean I wouldn't help out later, though, if needed.... Don't see anything wrong with that... But I'm not counting on my kids helping me out in my retirement!

 

[brewer12345]

It may seem awfully risk averse, but if I had a larger defined benefit pension I'd be a lot more comfortable.  I guess I could buy an annuity though with some of my savings though.  What do people think of that?   

I am not a particular fan of annuities. What you get to hedge by buying an annuity is longevity risk: you lay off the risk that you will live a loooong time by sticking it to the insurer. In return, you pay up in the form of a pretty modest income stream for the assets you give up. Since the safe withdrawal studies indicate that you are very likely to do just as well (or better) by taking the 99% safe withdrawal from your port and you retain control over the assets, I don't see the attraction of buying an annuity. If you really are desperate for a steady income strem, buy an annuity certain with a chunk of your assets. These things payout for a set period of years rather than the rest of your life, and they are essenially like buying a very safe bond that pays out principal in monthly bits along with interest. Shop around, because this is a commodity product.

 

[retire@40]

I'm not counting on my kids helping me out in my retirement!

A parent can take care of many kids, but many kids can't take care of one parent.

 

[Spanky]

m very thankful that I was born to parents that felt the most important thing in their life was raising their children in the best way that they could.

We are very thankful also even though our parents could not afford to support our college expenses. Without them we could not have been fortunate to enjoy so many wonderful things in life.

Spanky