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Old 06-06-2011, 04:19 PM   #21
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OK, I get the message and agree you can't give advise on minimal info so
1) expenses in retirement. Right now we have about 4500/month expenses, including $1600 mortgage, $250 utilities, $1000 insurance (home, auto, health), $650 food, and the remaining $1000 for gas, clothes, etc. Toss in an extra $6000 a year for auto repair, dining out, etc. and we get to about $60K/year. For retirement (Mar 2013), I'd like to figure on $85K/year since we will have more time to travel. I'd like to buy an RV so would add on $12K/year in payments for that, 1 cruise a year at $7K and add $6K for additional travel costs and some hobbies. I would plan on 10 years of this in early retirement.

At retirement, I start getting a Naval Pension of approx. $15K/year. I would also get the Tricare health which is about $600/year (that saves about $9000/year in health insurance). The mortgage is paid off in 2016, and at the same time my Naval Pension jumps to $29K/year w/ COLA increases thereafter.

2) SS for me at 62 is $1700/mo, 66 is $2190/mo and 70 is $2930/mo. SS of DW is 62= $835/mo, 66.5 = $1120/mo and 70=$1445/mo

3/ My TIRA= $590K, Roth= $130K; DW TIRA= $251K, Roth=$101

4) Total cash avail at ER (my TIRA and ROTH, plus taxable accounts) = $1195K

5) Summary, 2013-2016 income is $15K Naval Pension plus income from #4
After 2016 $29K Naval Pension, no mortgage.

Other info: 2015 I'm 62, 2019 I'm 66 and DW is 62, 2021 DW is 66.5, 2023 I'm 70.

Let me know if other info is needed. I really appreciate the advice here.
thank you for the more complete picture. first, a few comments on your expenses. 1) the way you stated them i am concerned you are guesstimating some instead of having actually tracked your expenses. hopefully i am mistaken about this. 2) i see no income taxes in your expenses which means your true expenses will be higher. 3) i also see no expenses for college for your children. if you are planning on funding any of this you should add it to your expenses analysis.

my next concern is does your pension have survivor benefits for your wife? if the answer to this is no then i wouldn't use her retirement accounts for your expenses. you should still convert her TIRA to her roth (paying the taxes with other funds) but save them for her as a kind of insurance policy. seeing as you have both a higher SS and the pension you would be ok if she dies before you. oh BTW, this is another good reason for you to put off taking your SS till you are 70, it will increase the amount of SS she gets if you die first.

all that being said, it looks like you are good to go at the expense level you stated (and even higher) and except for the change i made above (re. your wifes TIRA) my earlier advice holds on how to fund it. i would definately not do a 72t with your wifes ira!
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Old 06-06-2011, 04:41 PM   #22
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thank you for the more complete picture. first, a few comments on your expenses. 1) the way you stated them i am concerned you are guesstimating some instead of having actually tracked your expenses. hopefully i am mistaken about this. 2) i see no income taxes in your expenses which means your true expenses will be higher. 3) i also see no expenses for college for your children. if you are planning on funding any of this you should add it to your expenses analysis.

my next concern is does your pension have survivor benefits for your wife? if the answer to this is no then i wouldn't use her retirement accounts for your expenses. you should still convert her TIRA to her roth (paying the taxes with other funds) but save them for her as a kind of insurance policy. seeing as you have both a higher SS and the pension you would be ok if she dies before you. oh BTW, this is another good reason for you to put off taking your SS till you are 70, it will increase the amount of SS she gets if you die first.

all that being said, it looks like you are good to go at the expense level you stated (and even higher) and except for the change i made above (re. your wifes TIRA) my earlier advice holds on how to fund it. i would definately not do a 72t with your wifes ira!
jdw, I appreciate the response. I don't track our expenses down to the penny but our expenses per month at this point are about +/- $100 of $4500/mo. I added $6K as a cushion for the unpredictable car repairs, house expenses, etc. Also, taxes will take their cut and we will have to live with what is left. We can do that.

The Naval Pension does have a survivor benefit and the $ amount I quoted was after paying the premium. As far as a SWR, should I figure it on the whole amount, even though we are just withdrawing it from my IRA and taxable funds? i.e. Total is about $1500K, so at 4% we should be able to take out $60K/year? This would give us $75K/year. I might take out an extra $10K for the first 3 years (a 4.7% rate) and then throttle back to a 3.5% rate after since I will gain about $25K w/ pension and lack of mortgage.

This is also about the time the kids will go to College. I have approx. $15K each put away in a Fidelity College program for each. Will try to encourage one to go military first LOL! I figure if they work and we contribute $5K each a year we can work it out.

Hopefully I'm being realistic here. Taking a bit of a chance early on but life is risky anyway. At worst, Pension and SS will cover the basics if armagedon happens. . . .
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Old 06-06-2011, 06:04 PM   #23
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I think you are in in good shape. You withdrawal strategy is pretty straightforward take money from your traditional IRA when you retire. If you have any room left in the 15% tax bracket (it looks dicey since your gross income will be 85K and the bracket ends at 70K) than convert a small amount of DW IRA to a Roth.

After you retire you'll have some time to look at the college situation. In general colleges expect a higher contribution from a families taxable assets than IRAs. So this may encourage to spend down your taxable assets first. I'd also think long and hard about taking out a loan for the RV, I would think in almost every scenario you'd better either buying it with cash, or even doing HELCO while you are still working.
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Old 06-06-2011, 06:23 PM   #24
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jdw, I appreciate the response. I don't track our expenses down to the penny but our expenses per month at this point are about +/- $100 of $4500/mo. I added $6K as a cushion for the unpredictable car repairs, house expenses, etc. Also, taxes will take their cut and we will have to live with what is left. We can do that.

The Naval Pension does have a survivor benefit and the $ amount I quoted was after paying the premium. As far as a SWR, should I figure it on the whole amount, even though we are just withdrawing it from my IRA and taxable funds? i.e. Total is about $1500K, so at 4% we should be able to take out $60K/year? This would give us $75K/year. I might take out an extra $10K for the first 3 years (a 4.7% rate) and then throttle back to a 3.5% rate after since I will gain about $25K w/ pension and lack of mortgage.

This is also about the time the kids will go to College. I have approx. $15K each put away in a Fidelity College program for each. Will try to encourage one to go military first LOL! I figure if they work and we contribute $5K each a year we can work it out.

Hopefully I'm being realistic here. Taking a bit of a chance early on but life is risky anyway. At worst, Pension and SS will cover the basics if armagedon happens. . . .
taxes can be a big expense so just letting them take their cut and you adjusting could be a hardship on you, however when i looked at your numbers i multipled your projected expenses by 1.1 to help compensate for your lack of including taxes in your expenses.

i am thinking you are getting too hung up on a SWR. over an 11 year period you are expecting your expences to go from $85k down to just under $41k (in constant dollars). if you do wait to start your SS at age 70 (like i suggested) then when your expenses get down to $41k your income, just from your pension and SS, will have gone up to just under $82k. therefore, as long as you have faith in the US government to continue paying those, at that point you wont be withdrawing, you will be accumulating. so your assets only have to support 10 years of WDs. when i ran your numbers (with your expenses being 10% larger than you said) i only used your TIRA to make up the difference between your expenses and your income and after that 10 years there was still money left in your TIRA. when a person's income and expenses change greatly (in real terms) over their retirement the analysis is more about cash flows than about SWRs. just take the withdraws you planed and watch your investments so they dont take a big hit. since you are going to use your assets more in the near future than later on in life you should probably be more heavly invested in cash, cash eqs, and short term bonds. all you really need these investment to do is keep up with inflation.

i am thinking you arent taking much of a chance here. have you rerun your numbers starting SS as i suggested? i think it would be comforting for you. as i said above, when you start taking SS (at age 70) your pension plus SS will be about twice your projected expenses then.
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Old 06-06-2011, 08:44 PM   #25
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taxes can be a big expense so just letting them take their cut and you adjusting could be a hardship on you, however when i looked at your numbers i multipled your projected expenses by 1.1 to help compensate for your lack of including taxes in your expenses.

i am thinking you are getting too hung up on a SWR. over an 11 year period you are expecting your expences to go from $85k down to just under $41k (in constant dollars). if you do wait to start your SS at age 70 (like i suggested) then when your expenses get down to $41k your income, just from your pension and SS, will have gone up to just under $82k. therefore, as long as you have faith in the US government to continue paying those, at that point you wont be withdrawing, you will be accumulating. so your assets only have to support 10 years of WDs. when i ran your numbers (with your expenses being 10% larger than you said) i only used your TIRA to make up the difference between your expenses and your income and after that 10 years there was still money left in your TIRA. when a person's income and expenses change greatly (in real terms) over their retirement the analysis is more about cash flows than about SWRs. just take the withdraws you planed and watch your investments so they dont take a big hit. since you are going to use your assets more in the near future than later on in life you should probably be more heavly invested in cash, cash eqs, and short term bonds. all you really need these investment to do is keep up with inflation.

i am thinking you arent taking much of a chance here. have you rerun your numbers starting SS as i suggested? i think it would be comforting for you. as i said above, when you start taking SS (at age 70) your pension plus SS will be about twice your projected expenses then.
I'll try to wait until 70 ("if you do wait to start your SS at age 70 (like i suggested)") but I have this nagging feeling that at that point, SS will be means tested and I might get only half of the published number. I think this could be a real possiblity and perhaps those who say, "get it while you can" might be onto something. Regardless, I'll have at least 7 years to watch things before pulling the trigger.

As far as expenses, heck, I want to take as much as I "reasonably" can from my assets. I think I can easily figure out what to do with any "extra"

I'll run a number of scenarios in firecalc to see what happens.

Again, thanks for your thoughts and suggestions!
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Old 06-06-2011, 09:59 PM   #26
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I'll try to wait until 70 ("if you do wait to start your SS at age 70 (like i suggested)") but I have this nagging feeling that at that point, SS will be means tested and I might get only half of the published number. I think this could be a real possiblity and perhaps those who say, "get it while you can" might be onto something. Regardless, I'll have at least 7 years to watch things before pulling the trigger.

As far as expenses, heck, I want to take as much as I "reasonably" can from my assets. I think I can easily figure out what to do with any "extra"

I'll run a number of scenarios in firecalc to see what happens.

Again, thanks for your thoughts and suggestions!
if SS is means tested when you are 70 then it will be means tested whether you start taking it at 70 or you start taking it at 62 or any other age. it is likely that if SS is means tested then part or maybe all of the SS payment itself wont be counted in the test. if you wait till 70 to start taking your SS, your TIRA will be smaller at age 70.5 (because if you followed my suggestion you will be using yours for living expenses and converting your wifes to a roth) and your RMD will be smaller and if SS is means tested, WDs from your TIRA probably will be counted in the test. so if that is what you are worried about then waiting till 70 to start SS is more likely to avoid the means test than if you take it earlier and dont spend down your TIRA.

and remember, the longer you wait to start SS the better it is for your wife if you die first.
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Old 06-07-2011, 12:32 PM   #27
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also check this out Need suggestion on SS
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Old 06-07-2011, 02:21 PM   #28
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jdw thanks for your advise. I will seriously consider holding off on my SS until 70 and have DW take hers earlier.

DW and I have saved all of our lives for retirement. We did have fun in the runup but always lived beneath our means. Now we want to reap the benefit and do some traveling and more dining out. Don't need to "Summer in the south of France" or anything like that. Just enjoy traveling about and sampling the local cuisine.

So if I can take only 60k, So be it, if I can take 80K, all the better.
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Old 06-07-2011, 03:36 PM   #29
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jdw thanks for your advise. I will seriously consider holding off on my SS until 70 and have DW take hers earlier.

DW and I have saved all of our lives for retirement. We did have fun in the runup but always lived beneath our means. Now we want to reap the benefit and do some traveling and more dining out. Don't need to "Summer in the south of France" or anything like that. Just enjoy traveling about and sampling the local cuisine.

So if I can take only 60k, So be it, if I can take 80K, all the better.
well like i said, when i worked thru your numbers i added 10% to the expense numbers you said you wanted to use and making up the income shortfall of the 1st 10 years with just your TIRA didnt even expire it. and that was with you delaying the start of your SS till you reached 70. enjoy your retirement!
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