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Do we have enough?
Old 09-11-2011, 10:32 PM   #1
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Do we have enough?

Colleagues, I was referred to this forum from a fellow Boglehead after posting the following early retirement question. I received highly valuable input from many esteemed Bogleheads colleagues but thought it would also be beneficial to gain some of your ER forum thoughts with this group's specific emphasis on early retirement. I must also confess that I have lurked from time-to-time on this forum and want to say thanks to all as I do appreciate all of the valuable information that has been provided to date.

In my particular case, recently I became unemployed at age 51 and am now considering retirement from Corporate America life but am still unsure whether I realisitically can or not at this point. I am married (wife is a homemaker) and have two teenage children (13 shortly and 16).

Personal finances are as follows:
$880K in TIRA in Vanguard Target Retirement Income fund
$2.3M in after tax accounts broken out as follows:
~ $1M in low withdrawal penalty 5 year CDs
~ $1M in liquid savings accounts earning 1.65%
~ $260K in liquid savings account earning 1.05%
$40K in iBonds
Home worth ~$500K (paid off)
No debt

Additional factors:
From a risk perspective, as evidenced by my portfolio allocation above, I have become a very conservative investor over the past few years as my willingness to take risk has decreased as my net worth and savings have increased.

Children college expenses (likely at a public university) will be starting in the latter half of 2013 estimated around $300K total (hopefully) to be funded out of the above after-tax savings.

I am eligible to start receiving a pension (non-COLA) valued at $60K per year at age 55 (4 years from now) and my wife who is 48 will begin receiving a COLA-based pension worth $8K at age 60 (12 years from now).

My wife and I are both eligible for SS at 62 if we choose to begin taking at that point with my latest SSA estimation at $18.6K and my better half's valued at $8K per year. From a healthcare perspective, I am presently bridged in my ex-company's pre-retiree healthplan and eligible for subsidized retiree health insurance at age 55.

Our annual living expenses are roughly $90-$100K (provided average on high side at this point) but I am presently only generating roughly $50K income from my "after tax" savings accounts above so we will have to dip into these savings accounts for the next four years until my pension kicks in to bridge the gap.

My Request:
I am looking for some colleague advice on whether we have enough to consider retirement at this point and your specific thoughts on what other "income-producing investments" we should consider in lieu of / in addition to the what we have as listed above to narrow the gap and assist in increasing our probability of success. A sincere thanks in advance for your valued input.
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Old 09-11-2011, 10:49 PM   #2
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Run your numbers through this online calculator and see what it tells you: FIRECalc.com
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Old 09-12-2011, 06:39 AM   #3
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It certainly sounds doable but wouldn't it be prudent to set aside $300K for the kids college in liquid accounts, set aside a few years expenses in liquid accounts, and diversify the remainder to get some equity exposure? At 51 you have a lot of years of inflation ahead of you. I agree with Yahoo that you should run those numbers through Firecalc, entering the future income streams. It is possible (likely?) that with SS and the pensions you could fund your estimated expenses with no equities but...
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Old 09-12-2011, 07:28 AM   #4
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I think you can make it work, but your conservative portfolio may work against you. I agree Firecalc should be very helpful. Try a couple of different investment allocations when you run Firecalc- a portfolio of perhaps 25% - 35% equities should significantly improve your chances of long-term success.
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Old 09-12-2011, 09:13 AM   #5
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Seems very reasonable to me that you can make it. The wildcards are always health...so make sure you have good protection such as LTC. You mention your current health care is bridged...if there's anyway they could do away with that, consider an option. If you pass away, is your wife still covered under that bridge?

Good luck.
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Old 09-12-2011, 10:58 AM   #6
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Matix,
"Try Firecalc" +1.
In the meanwhile, I think Early Retirement for you is a slam dunk yes!
Your financial assets right now are $3,190k. subtract $300k for college (way too much) and $990k for eleven years spending at $90k/ year for 11 years. Net result, $1,890k financial assets at the time you start SS. This should generate 4% or $75k . Your combined SS and pensions will generate about $87k. So your annual income should be around $162k. That leaves you a $72k cushion. Plus it totally assumes your assets will grow at the same rate as inflation for the next 11 years...very conservative.
Sweet!
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Old 09-12-2011, 01:20 PM   #7
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Quote:
Originally Posted by CFPMatt View Post
I think you can make it work, but your conservative portfolio may work against you. I agree Firecalc should be very helpful. Try a couple of different investment allocations when you run Firecalc- a portfolio of perhaps 25% - 35% equities should significantly improve your chances of long-term success.
Oh, one other thing. Try putting your age 70 Social Security benefit in firecalc to see how that affects the results. With a potentially long retirement, a significantly higher benefit could act as good insurance. Keep in mind that if you die before your wife, she receives your monthly benefit, whatever the amount. And FYI, when you both apply for benefits, if your wife's benefit is less than half of yours, she still gets 50% of your benefit (whichever is greater). You may also want to consider reducing your monthly benefit by some percentage in the projection to address the solvency issues of the Social Security Administration.
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