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How is my Plan?
Old 08-21-2014, 02:58 PM   #1
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How is my Plan?

My wife and I are 59 and 60. I am on disability and my wife is about to retire, hence this post.
I have a lot of health problems such as diabetes since age 6 and kidney failure and, most importantly, vascular dementia, from the diabetes. I have over 16 real, Dr. issued prescriptions that must be paid for. I got a kidney and pancreas transplant in the mid '90s and cured two problems with one stone (no pun intended).
The vascular dementia has manifested itself as short term memory loss and cognitive difficulties. I was a real time microprocessor programmer. I used to be really smart and fast. Now I am only slightly smart and 4x slower. In other words, it takes me four times as long to do cognitive tasks like program and no one will pay me to program at that rate! My wife has a slew of medical problems herself but we think she'll go for another 30 years. I foresee a max life span of 20 years for me.
My wife is about to retire on medical disability. What a pair!
So we need the money stream to last for 20 years for both and 30 years for one so I used 25 years in Firecalc.
We had 100% S&P500 Vanguard Index Fund until about 2 years ago. We did not panic AT ALL during the market fall. Really. I just was sure it would come back and come back it did. So there's my tolerance for surviving market fluctuations. We don't like any more risk than the S&P500 index fund at Vanguard.
We have $2.4m in cash right now: $1.0m is in our 401Ks. When she retires we will put it all in 60% stocks, 40% bonds.
We have a paid off house worth about $650K.

I have been tracking expenses for three years. We want to spend $116K/year after taxes. We spend a LOT on medical care. More than $17K/year out of pocket.
I have Medicare and Medigap insurance plans due to being on disability and having kidney disease.
I think that we'll have to pay $20K/year for taxes (high estimate).
So we'll "need" $136K per year.
Firecalc says 100% success for both 25 and 30 years.

My thinking:
A WR of 4% of 2.4m is $96K.
We think SS will be there for us since I am presently on it giving us $25K.
When my wife gets SS disability she will get $31K/year from that.
I also get an additional $31K from company disability that will end in 5 years. I am not counting this as retirement income since it is ending soon.

$96K + $25K + $31K = $152K

We only want $136K so we have $16K wiggle room. So if I figure on taking $80K instead of the $96K I get a WR of 3.3%.

So if my wife gets SS disability I think we'll be set. If she does not we will have to wait 3 years for her to reach age 62 in order to go on SS. She will get less than the disability rate, approx $23K/year.

$96K + $25K + $23K = $144K or a WR of 3.67%

Please tell me what you think of my plan's chances for success. I have read other people's posts like this (I've been a member here for over 750 posts and since 2003) and realize I am spending a lot after retirement. We have no children and do not need to pass anything on to anyone.

If the plan fails, I think it will happen far in the future what with our starting amount. We or, most likely, my wife, would have the equity in the house to fall back on.

Thanks,
Mike D.
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Old 08-21-2014, 03:24 PM   #2
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You wrote about S&P500, but then hinted you are all cash now for the past 2 years while the stock market has been raging higher. Is that true? Can you please give us a hint about why that happened?

Also do you have $2.4M cash of which $1M in cash is in a 401(k)?

Nothing wrong with an asset allocation of 60:40 (or 50:50 or 40:60 or anywhere in between). Go for it.
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Old 08-21-2014, 04:24 PM   #3
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Originally Posted by LOL! View Post
You wrote about S&P500, but then hinted you are all cash now for the past 2 years while the stock market has been raging higher. Is that true? Can you please give us a hint about why that happened?

Also do you have $2.4M cash of which $1M in cash is in a 401(k)?
We thought we had enough to retire and got out while we had enough. It had raged for a while before we got out. I will probably wait until the S&P500 comes down and then get back in. This will be after my wife retires.

Yes, we have $2.4M cash of which $1M in cash is in a 401(k).

Thanks for reading my post and thinking about it. I am not a very good writer. I composed that in an editor and cut and pasted it into the post.

Mike D.
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Old 08-21-2014, 06:02 PM   #4
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Originally Posted by MikeD View Post

We thought we had enough to retire and got out while we had enough. It had raged for a while before we got out. I will probably wait until the S&P500 comes down and then get back in. This will be after my wife retires.

Yes, we have $2.4M cash of which $1M in cash is in a 401(k).

Thanks for reading my post and thinking about it. I am not a very good writer. I composed that in an editor and cut and pasted it into the post.

Mike D.
What if it takes 5 or 10 years to come down? Or, quite possible, what if it never drops below 1950 or so ever again? The problem with getting out, esp. totally out, is when do you get back in?

I recommend DCA'ing back in starting immediately.
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Old 08-21-2014, 07:02 PM   #5
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On the cash issue. I would dollar cost average back in.

On the firecalc/are you ready issues... Have you considered what happens if one of you dies before the 20-30 year mark. That impacts your cash flow since you'll lose SS at that point. It also impacts it because the surviving spouse will be paying taxes as an individual rather than married filing jointly... Please take some time to look at that.

I did embedded code for my entire career - so I understand the brain power behind writing real time microprocessor code.
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Old 08-21-2014, 08:50 PM   #6
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Originally Posted by rodi View Post
I did embedded code for my entire career - so I understand the brain power behind writing real time microprocessor code.
Coded in C or assembly?
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Old 08-21-2014, 08:59 PM   #7
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Coded in C or assembly?
C'mon, surely they coded on the bare metal like the rest of us.

As for the portfolio, I recommend that one not worry about any losses and invest 50% right away to get to the desired asset allocation and the rest in 10 monthly increments so that one is fully invested in 10 months. If the market drops, accelerate the monthly investing.

I will let you and everyone know if the market drops enough to acccelerate in the "LOL!'s Market Timing Newsletter" thread.

It didn't make sense to go to 100% cash just because you had enough. It did make sense to go from 100% S&P500 to 60:40 though (including US, foreign, and bonds).
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Old 08-21-2014, 09:02 PM   #8
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Mike D,
First of all, I am sorry to hear about your health issue and that of your spouses. It's quite unfortunate. As others have pointed out, 100% cash (2.4M) is too conservative. It's very difficult, if not impossible, to time your entry into the market. Is it possible to reduce your expenses if required? Your projected case flow (from the portfolio, SS, disability) seems reasonable. Thus, your chance of running out of money is low.
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Old 08-21-2014, 09:28 PM   #9
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I too am sorry to hear about your struggles with your health, and I have a son with Type 1 since he was 15, he is 19 now, but makes me wonder if I will be around to help him when he is 60.

You have done a great job with your finances and should be proud!


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