Can we retire now?

[bellhead]

Income: $8400/month (gross & fixed, no cost-of-living increases in that) from various pensions & fixed annuities for life.
Assets: $920,000 in 401Ks/IRAs, $30,000 elsewhere, about half in stocks,
half in stable value at ~3.5% interest/year.
Mortgage debt: $370000 ($3200/month including $850/month property taxes+insurance).
House worth about $600,000.

Our age: mid 50s;
social security estimate: about $1600/month times 2 at 62 if we retire now.

We seem to spend about $8500 a month for everything but income taxes,
but I could probably cut that down somewhat by living cheaper.
(Just to be clear, that $8500 includes the $3200 mortgage payment.)

We have retiree health insurance and long-term care insurance.
No other debt.

[I actually had $40K more 2 weeks ago before the current market meltdown, LOL, or maybe crying out loud...]

Thanks for any advice on how to proceed.

 

[TheWizard]

$8500 a month is high.
I'd like to see if we can get that down a bit...

 

[REWahoo]

Bellhead, welcome to the forum.

Two questions: does the $8,500 per month in expenses include income taxes?
Have you run your numbers through FIRECalc (link near the bottom of this page) to see what it tells you?

 

[bellhead]

No, the $8500/month expenses is net, so that is about $10000 gross.

 

[Midpack]

It appears you're in pretty good shape except for accounting for 30-50 years of inflation. Like REW mentioned, best that you start with FIRECalc: A different kind of retirement calculator.

 

[Midpack]

$8500 a month is high.
I'd like to see if we can get that down a bit...

Take off his mortgage payment and he's at about $64K/yr in living expenses. Not that far from many here who own their homes outright (no mortgage)...

 

[Beryl]

Looks good to me, also.

Your retiree healthcare - is that for life for both of you and accounted for in your expenses?

 

[Aiming_4_55]

Looks good.

Can you save any by refi your mortgage? Rates seem to be lower but depends on your mortgage details.

 

[TheWizard]

Take off his mortgage payment and he's at about $64K/yr in living expenses. Not that far from many here who own their homes outright (no mortgage)...

OK, so run the numbers again assuming the mortgage gets paid off from available funds.
Also, how much of the $8500 a month is firm expenses (including an amount for vehicle replacement) and how much is for those frivolous discretionary expenses we all look forward to?

 

[rescueme]

Also, how much of the $8500 a month is firm expenses (including an amount for vehicle replacement) and how much is for those frivolous discretionary expenses we all look forward to?

Well, I'm retired and I never had the idea to cut back on "frivolous discretionary expenses" in retirement.

I (along with my DW) prefer a certain lifestyle. We are not about to give up anything just to be able to retire at an earlier age. Assuming there was no need to retire (e.g. health, company rules, etc.) I would have continued to wo*k, and continue to increase "my number" to ensure that I could retire on my terms - not dictated by giving up my (or DW's) desired lifestyle in retirement. Remember, you are planning not just for next month or next year, but for the remainder of your life.

I'm with the OP in the fact that our required retirement income would be considered by a lot of folks to be excessive; however it is at a level that supports our desired lifestyle.

In your words, if we can't "look forward to" (and plan for) those expenses that some would think frivolous, what's the use of retirement?

Just my POV...

 

[TheWizard]

Well, I'm retired and I never had the idea to cut back on "frivolous discretionary expenses" in retirement.....

Oh no, cutting back on that is not at all the point.
The point is simply to make some distinction between your baseline expenses and your discretionary ones.
Your baseline expenses will inch upward most years but your discretionary ones could vary widely depending on foreign travel and available funds to support that.

My last spreadsheet on base expenses, for instance, ran about $45K a year for my unmortgaged house and two vehicles. When I retire in a year or two, I'm thinking a good $20K in addition to that (after taxes) may allow sufficient frivolousness...

 

[rescueme]

Your baseline expenses will inch upward most years but your discretionary ones could vary widely depending on foreign travel and available funds to support that.

In our case, no.

Using your expense item (travel), it is our highest expense in retirement, and has been so for many years, while we were both still in our accumulation years.

We've forecasted our travel expenses based upon actual expenditures over the last 15+ years (includes a lot of international travel) and have carried that expense forward into retirement. While we understand that our travel will be reduced as we age, we also know that it will not be totally eliminated, but changed (e.g. strictly US rather than global) but total expenses will remain the same, with expected increases related to aging in place (e.g. keeping our home), along with increased health care expenses.

BTW, our travel "habits" have already changed over the past few years. Before, we would travel to the airport (75 miles away) using our own car, paying for extended parking and in most times traveling home after many hours of travel (i.e. Australia). Rather than do that (and risk an accident due to lack of sleep) and struggling with luggage, we just pay for a limo.

We also reject Bernicke's scenerio for reduced spending primarily for the reason that our respective parents did not reduce their total expenditures (although spent in different areas) as they aged.

BTW, our actual travel expenses have dropped over the last 12-18 months due to the travel bargains (a lot of "twofers") available. If you have the cash, it's a good time to take advantage of the economic reality of the travel industry and the difficulties they currently face.

 

[TheWizard]

Similar here for travel expenses for last few decades while employed and subject to a 4-6 week effective annual limit. But when that limit is removed in due course, I expect that expense item easily to double.

Let's see if the OP chooses to clarify his expense profile...

 

[obgyn65]

Hello bellhead - did you run your number in this free online too ?

Merrill Edge| See Where You Stand

 

[bellhead]

Hello bellhead - did you run your number in this free online too ?

Merrill Edge| See Where You Stand

I ran firecalc with my 50% equities portfolio, pension, annunities, and social security for my wife & me and it said this for spending $102,000/year:

FIRECalc looked at the 111 possible 30 year periods in the available data, starting with a portfolio of $950,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 111 cycles. The lowest and highest portfolio balance throughout your retirement was $903,863 to $12,478,320, with an average of $3,565,683. (Note: values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

 

[bellhead]

I'm not sure if the "spending amount" in firecalc is gross or net. I assumed net after taxes.
I also didn't see anyplace to estimate inflation (maybe it uses its own assumptions).
I wonder if any of the scenarios include things like 2008-9 or the entire 2000-2009 decade.

I did run it using my data and it said I had a 100% success rate over 30 years with this:
The lowest and highest portfolio balance throughout your retirement was $903,863 to $12,478,320, with an average of $3,565,683.

 

[bellhead]

Similar here for travel expenses for last few decades while employed and subject to a 4-6 week effective annual limit. But when that limit is removed in due course, I expect that expense item easily to double.

Let's see if the OP chooses to clarify his expense profile...

I'm not sure what you mean exactly by clarifying my expense profile.
Thanks again for your help.

 

[bellhead]

OK, I ran it again with 35 years (not 30 as before) and using gross expenses of $113,000 (including income taxes based on my tax returns, assuming somewhat higher taxes than now) and got this:

FIRECalc looked at the 106 possible 35 year periods in the available data, starting with a portfolio of $950,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 106 cycles. The lowest and highest portfolio balance throughout your retirement was $-363,621 to $14,564,244, with an average of $3,362,388. (Note: values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 35 years. FIRECalc found that 5 cycles failed, for a success rate of 95.3%.

 

[bellhead]

Thanks for everyone's advice and directing me to firecalc. (I made a donation to it since it cheered me up!)