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Help Streamline My Finances
Old 08-25-2014, 04:56 AM   #1
Dryer sheet wannabe
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Help Streamline My Finances

Here's my financial situation.

$350K - Cash
$500K - After-tax; invested 60/40; re-balanced quarterly
$240K - IRA; Variable Annuity (MetLife)
$270K - IRA; Variable Annuity (MetLife)
$40K - Spouse IRA; Variable Annuity (MetLife)
$340K - 401k; invested 60/40
Primary residence paid for; not included in equation.

Annuities should spin off $32K in cash annually starting 3 years from now which is when I'd like to FIRE. Haven't completed my due diligence yet, but back of the envelope calcs show that we'd be okay with $60K/year.

I'm 56.5, DW is 51... just in case our ages play into the equation.

Any advice on restructuring my allocations to optimize my financial situation?


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Old 08-25-2014, 05:41 AM   #2
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What jumps out at me is VA's in the IRAs. Very expensive products and the tax characteristics would be duplicative in the IRAs. Did a salesman recommend these?

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Old 08-25-2014, 06:13 AM   #3
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Originally Posted by goneboarding View Post
Any advice on restructuring my allocations to optimize my financial situation?

You didn't give us any indication of your allocations except "60/40." There's a lot more to asset allocation than equities vs fixed income.

I'll second the comment about VAs inside an IRA. A VA is almost always a terrible financial choice but inside an IRA it's absolutely horrible. The agent appreciated your substantial commission. The $550K in VAs also represents almost a third of your assets and I'll assume your payout is the annuitized value. I recommend you find out how much it would cost to get out of these insurance products.

I absolutely hate variable annuities in all the forms I've ever seen except the ones I've seem made available to very senior managers. These come with very low fees and are primarily ways of sheltering assets from future legal actions. Think Ken Lay and the rest of the Enron brood. Various family memebers have purchased VAs and they were all expensive rip-offs. You won't find many VA fans on this forum. Check the archives.

You don't mention anything about pensions, health care or SS. Have you figured these into your "needs" of $60K/yr. Please get back with any info on these or if these are all included.

If the $60K is really all you need, I think you are borderline FI. You and your DW are looking at a nominal 40 year plan which threatens the nominal 4% rule which is based on 30 years.
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Old 08-25-2014, 06:25 AM   #4
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It appears that you have 1.2 million now AND will geet 32k from your annuities when you retire in 3 to 4 years. You should create your plan based on the investments you expect to make during that time. I'd average in the 350k, keeping a couple years living expenses in cash, so that can grow, I'd look at what could be saved in next 3 to 4 years, I'd start moving funds into a Roth IRA for lowering of your long term tax bill and I'd listen to the great advice you'll get here. You have to factor in SS, change in home ownership, health care costs, etc. so we don't have enough info to give you great advice. Your allocation looks great (60/40) but a major downturn just before you ER could slow you down....thus the 2 years funds in cash. Overall I think you can tentively move should be fine but be careful. Also, I'd invest as much as possible with Vanguard, then ask them for a financial analysis.....they'll give you a questionalre that asks good questions, looks at the cost of your financials and it really helped me when I did it in the past. Good Luck!
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Old 08-25-2014, 07:28 AM   #5
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Those annuities are very probably not COLAd, so I would enter those into FIRECalc as 'Other/pension Income' 'non-inflation adj'. Then enter your other savings per their AA (but don't enter the annuity amounts, they are accounted for in their pay-outs).

I think you'll be OK at $60K a year, but check that with against inflation, which FIRECalc will show.

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Old 08-25-2014, 08:25 PM   #6
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Thanks for all the advice... looks like I just have to keep digging round here and learning to be more financially savvy. Still don't have a well thought out plan in place to FIRE, but I'm working on it.

ERD50, thanks for the steer wrto FIRECalc. I will run the numbers as you mentioned... see what the results look like.

First order of business is to work on getting out of the annuities. What options should I be considering for at least a portion of my portfolio to generate a predictable income? That was what made me susceptible to annuities. And yes, an agent steered towards annuities.

In general, is it better to wait till "maturity" or bite the bullet and get out of the annuities now?

To answer some of the other questions...

My 60/40 allocation is broken up as follows - 40% Bond/Managed Income fund, 35% S&P 500 Large Cap US, 10% Foreign Stocks, 7% Emerging Market Stocks, 8% Small Cap US

No pensions coming my way. So the returns from our investments is pretty much it. I am eligible for SS when I'm 67 or thereabouts. At last calculation it was $30K/year.

Medical (till Medicare kicks in) for DW and me will be self-funded, over and above the $60K. DW and I are in very good health... no pre-existing conditions. I will be pricing out coverage for us in the next month or two and will adjust FIRE expectations based on the cost of health coverage.

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