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Is this enough?
Old 10-06-2004, 08:47 AM   #1
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Is this enough?

I will speak frankly. DW and I have a home worth $225,000 and other assets totalling 1,600,000. Of those assets, 1/3 is cash or cash equivalents and the rest 80% bonds and 20% stock. The cash is from a recent inheritance. We have one child, no longer at home, who is disabled and on SSI. We give him small amounts to help out, but don't want to jeopardize the SSI and especially his medical coverage.

DW and I are both 51 with chronic health problems. DW is insulin dependant diabetic. She does not work. I work and wish to retire. Both of us are on various medications. You all talk about living to 90 or 100. I am being generous if I estimate we both live to 78 to 80.

We have no pensions and no retiree benefits at all. We can buy health insurance currently for 500 per month with a 2000 deductable, and which covers 80% of costs. Premiums can go up once a year. They also go up at age 55 and every five years after that.

Our estimated expenses, including the health expenses which are a good part of the budget, are 50,000 per year.

What do you think? Do we have enough to retire? We want to have time together to do things while we are healthy enough.

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Re: Is this enough?
Old 10-06-2004, 08:53 AM   #2
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Re: Is this enough?

Oh, I forgot to say that we don't have any debt, having paid off our house with part of the inheritance.
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Re: Is this enough?
Old 10-06-2004, 09:02 AM   #3
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Re: Is this enough?

Sounds to me like there is no time like the present.
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Re: Is this enough?
Old 10-06-2004, 09:11 AM   #4
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Re: Is this enough?

From what you described, it certainly sounds like enough. You might want to consider a somewhat higher stock allocation to keep better pace with inflation than cash or bonds will do.

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Re: Is this enough?
Old 10-06-2004, 01:09 PM   #5
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Re: Is this enough?

One way to think about it is to assume, for a moment, that inflation does not exist. $1.6M would then last 32 years at your estimated expense level of $50k per year.

Therefore, if your portfolio does nothing more than keep pace with actual inflation, you should be OK for your estimated lifespan. Equity in your home could be considered as a fallback source of funds.

One catch here is that your actual inflation rate may be quite a bit higher than the CPI, so the assumption that you can keep pace needs careful consideration.

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Re: Is this enough?
Old 10-06-2004, 01:14 PM   #6
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Re: Is this enough?

Quote:
We give him small amounts to help out, but don't want to jeopardize the SSI and especially his medical coverage.

DW and I are both 51 with chronic health problems.*DW is insulin dependant diabetic. *I work and wish to retire. *Both of us are on various medications.
We have no pensions and no retiree benefits at all. *We can buy health insurance currently for 500 per month with a 2000 deductable, and which covers 80% of costs. *Premiums can go up once a year. *They also go up at age 55 and every five years after that.

What do you think? *Do we have enough to retire? *We want to have time together to do things while we are healthy enough.
It seems that you do have enough, but speaking for myself only, unless I really hated my job, I wouild not quit if I were in your shoes. Too many special needs, that while they cannot be fixed with money they can be alleviated. I wouldn't want to add money worries to health worries.

Also, other posters have back-up plans, like live in the third world. Third world living can be fun, but it doesn't seem that it would likely fit your or your wife's needs.

I have a couple questions about your health insurance. It sounds very cheap, considering your health status. Does this insurance continue with you if you retire? Is it a group ploicy, or individual?

Also, what size social security payments will you receive?

Mikey
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Re: Is this enough?
Old 10-06-2004, 01:34 PM   #7
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Re: Is this enough?

Quote:
DW and I are both 51 with chronic health problems. DW is insulin dependant diabetic.
You have plenty of money for ordinary living expenses, but health insurance is very important. Don't assume you can get a policy, apply before you retire, and make sure you and your wife are accepted before quitting. Investigate the insurance company carefully before you trust them. The policy you list sounds too good to be true, unless it is guaranteed by a government agency. If the health care is employer based, be very cautious. Many employers drop retiree health care, and you might then be uninsurable. You do not have enough money to pay all health care costs yourself at the rates charged the uninsured.

Medical expenses are rising much faster than the CPI, so your policy will get much more expensive as you get older. Medicare is a long ways away. I see this as the critical issue for your plans. Make very sure of your medical coverage before quitting.
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Re: Is this enough?
Old 10-06-2004, 03:08 PM   #8
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Re: Is this enough?

If not for the medical issues, the answer to your question is a fairly definate, "yes, you can retire and have a very high probability of living the lifestyle you want." The medical issues are enough to make many of us nervous, but may not be insurmountable. The details of your family's medical/insurance issues are very important.

Another issue to evaluate is your specified $50,000 per year expense number. How accurate do you think that number is? Could you scale back if you needed to and still live comfortably? If you could comfortably reduce that number by 10% to 20% if something unforseen happened with your insurance or with the markets, then you might increase your confidence level with the retirement decisions significantly.

You also might want to consider what your social security and medicare benefits will be worth when they do kick in. You might find that these benefits increase your present net worth by a significant amount.

Finally, as another poster mentioned, you may want to consider increasing your equity position.

Good luck.
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Re: Is this enough?
Old 10-06-2004, 03:44 PM   #9
 
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Re: Is this enough?

I agree with salaryguru, "If not for the medical issues"
it would be a slam dunk. Actually for me, it would be a
slam dunk anyway (I'd be gone). But, that's just me.

I also thought your health insurance was "too good to be true!" Man. I would hang onto that if possible.
I don't have the kind of problems you have dealt with
but I would surely hate to go back into the health insurance market now.
I plan to keep my current health insurance until Medicare
(5 years) and perhaps beyond.

I know I repeat, but whenever I hear, "We have
1.6 million or 1.2 million and no debt, can we retire?",
I have to smile. I have not worked a lick in over 6 years
now and it appears I will not have to. And............
I will never have anything close to a million bucks in
assets or net worth. How much do you want it?
That's the key.

John Galt
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Re: Is this enough?
Old 10-06-2004, 04:00 PM   #10
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Re: Is this enough?

Those of us with working wives DO need to make a note of that fact from time to time...
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Re: Is this enough?
Old 10-06-2004, 06:33 PM   #11
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Re: Is this enough?

kbt,
On a pure financial basis and for the average person at your ages I would say you have enough to RE.

Considering your health issues (as you mention life expentency)I would say you have enough to retire financally.

Buy financially is not the issue. Do you want to enjoy your life?

This is how I view my life and retiring early: I'm 49, single, and in good, if not great health (I'm getting checked out now).
50 - 60 great life - healthy - can do anything I want
60 - 70 Very Good Life - I'm slowing down some, but I'm independent and can enjoy the simple things
70 - 80 Good Life - I'm limited what I can do
80 - 85 Ending - I'm not expecting much more from here - I hope I'm not just watching TV and drinking Yellow Tail wine.
Others on this board will dispute my vision. But we all need to make assuptions for what the future holds. I want the "great life" very much. I do not want to be looking back and thinking what if, or I could have, should have, would have... I will not be proud of talking about what I did at work from 50 - 60. I will be proud of learning and meeting new people.

So don't look at what you don't have or might not have.
Look at what you do have and realize that you are one of the weathiest persons on the face of this earth.

Someone once said that most people in the USA are richer than Ceasar. Why? Because Ceasar for ruling all of the known world could not buy a airline ticket to Mexico, go to a doctor and get cured of an infection... you get the idea.

Good luck
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Re: Is this enough?
Old 10-06-2004, 10:08 PM   #12
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Re: Is this enough?

Quote:
. . .*How much do you want it?
That's the key.

John Galt

I was trying to think of a good way to express this same thing. That is the key.
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Re: Is this enough?
Old 10-07-2004, 07:09 AM   #13
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Re: Is this enough?

Thanks for all of your comments. The health insurance is through the state risk pool. We are both eligible for coverage on the risk pool when I retire. We have choices for a 1000, 2000, 5000 or 10000 deductable. A low deductable makes sense for us because we will definately go through the deductable.

I really am ready to leave work. There is 4000 of "fluff" in the budget that can be trimed if things go bad. I would like to retire January 1 because I will receive extra 401k money if I wait until year end.

I am risk adverse so I am uncomfortable increasing the stock allocation a lot. I do know we have to at some point invest the inheritance we just received.

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Re: Is this enough?
Old 10-07-2004, 12:07 PM   #14
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Re: Is this enough?

Quote:
The health insurance is through the state risk pool. *We are both eligible for coverage on the risk pool when I retire. *We have choices for a 1000, 2000, 5000 or 10000 deductable. *A low deductable makes sense for us because we will definately go through the deductable.
Could you tell what state that is? That seems a very equitable amount, considering what I pay for insurance in the individual market. And so far at least I have reasonably good health.

To me, since that is handled, you do have enough money for your apparently frugal lifestyle.

Also, unlike some posters, I would say that there is really no hurry to buy stocks, or to do something definitive with your inheritance.

You describe yourself as risk averse, and in your situation that certainly seems prudent. If you were to invest a meaningful amount in equities, and they were to go south, you might get very nervous and sell incurring permanent loss of capital.

Mikey
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Re: Is this enough?
Old 10-07-2004, 12:39 PM   #15
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Re: Is this enough?

Or if you don't like thrills and chills - look into the more conservative offerings of Vanguard's Target Retirement Series. Then you have time to read/reread - Bogle/Bernstein/Swedroe and other authors mentioned on this forum.

Done well - you could buy one mutual fund - ignore the market - and have a happy retirement.

However - tweaking - at least for me is incurable - so I try to cap it at around 15% or so - even though I 'know' - I could get one of the Vanguard Target Retirement Series - 2015 or 2025 in our case and find something else to do.
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Re: Is this enough?
Old 10-07-2004, 12:50 PM   #16
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Re: Is this enough?

Truly risk adverse? - Vanguard Target Retirement Income?
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Re: Is this enough?
Old 10-08-2004, 05:09 AM   #17
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Re: Is this enough?

Mikey, the insurance is through the Minnesota risk pool. The deductables I reported were actually per person. I double checked this morning and the costs for one person who is 50 to 55 are:

1. 500 deductable, 381 per month
2. 1000 deductable, 315 per month
3. 2000 deductable, 250 per month

There also are 5000 and 10000 deductable policies, but I didn't check the monthly premium. Premiums are higher for smokers.



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Re: Is this enough?
Old 10-08-2004, 06:09 PM   #18
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Re: Is this enough?

Quote:
Mikey, the insurance is through the Minnesota risk pool.
Thanks, KBT. Minnesota as usual leads the pack.

Mikey
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