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Looking forward to retirement
Old 11-22-2015, 06:08 PM   #1
Confused about dryer sheets
Join Date: Nov 2014
Posts: 6
Looking forward to retirement

Hi All, I have been reading posted here now for several months and love to hear the advice provided from people who have already experienced many of the things I am trying to learn that will benefit me in retirement. I am hoping that we are in decent shape and can retire early.

A little background. I live in Texas. My wife and I have 4 kids. The oldest was just married off in Sept. Currently One in college, one a senior in HS and one a freshman in HS.

Current Networth (excluding $600k in home equity) is just shy of $1.6M.

Both wife and I are 50 yrs old and we hope to retire at or before 60.

Savings is as follows:
$470,000 in former employer 401k (money is still at prior company)
$455,290 in former employer pension plan ( can be a lump sum that adjusts each year for Cola or annuity that would pay out approx $2,700 per month)money is still at the prior company.
$165,000 current employer 401K with Fidelity
$32,361 prior employer 401k with Merrill Lynch
$290,000 wife's prior and current employer stock value and 401k
$185,000 wife's prior 401k at JP Morgan

I have a COLA pension from my current job which I stay at until 60 the annual pension should be about $70,000 based on years of service and income.

Both wife and I will get ss. Payouts for wife and self per the SS Govt website:
Me - at age 67 is $2,701 per month or $32,412 annually or wait until 70 $3,363 per month or $40,356.

Wife - at age 67 is $2,567 or $30,804 annually or wait until age 70 and the amounts are $3,303 per month and $39,636.

Stil a lot of expenses ahead of us. Three more kids to get through college. We fund approximately $10k per year per child. They fund the rest through scholarships and money they have earned. our plan is to get each one through college with no student debt and money remaining in their bank account to get them started in the real working world.
Plus another wedding in the future.

Income this year will be $315k plus a potential bonus for my wife of another $50k -$90k depending on how the year ends for the company results.

I think we are in decent shape if things continue with jobs that we have.
We will down size sometime in the next 4 years as the youngest goes to college. We were out looking today at some houses to give us some idea. We currently have a 4,500 sq foot house and the 2 kids that are still in high school are rarely home as they are involved in sports and school activities and we often wonder if we still need such a large house. However, the thought of downsizing and giving up the nice house we have is a tough one to accept.

A concern of mine is if we retire at 60 what kind of healthcare will be available until we are eligible for Medicare but since that is 10 years out I cant accurately project what that expense might be. I know our expenses will diminish as the last of the kids are done with school and out on their own. We will need to begin to really track the expenses as we get 5 years out from retirement to see what we can truly expect to spend in retirement each year.

We will continue to max out the 401k and get the company match as well as the additional catch up each year since we are 50. So this will add to our current savings for the next 10 years.

My wife and I have plenty of life insurance (term) currently in place through age 65. We are currently healthty and active and work out 3-4 time a week. We try and eat healthy too.

If we sell the house and downsize we will have some decent equity there. Our current plan will be to draw done and live off the 401k and cash from the home equity when we downsize from ages 60- 65. We may withdraw 5% to get us through these 5 years but Once the pensions kick in and we begin take ss I think we won't have to touch the nest egg much.

sorry for the long lost. Any thoughts or comments on how we're doing and what we might focus on the next 10 years that would really make a significant difference in having a nice retirement would be greatly appreciated.

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Old 11-22-2015, 08:38 PM   #2
Recycles dryer sheets
Join Date: May 2015
Location: Houston
Posts: 234
To my eye, things look good on the income side. For you to have a good handle on things, though, you need to know how much you will be spending during retirement, and how much you can save during the coming years.

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Old 11-23-2015, 06:20 AM   #3
Recycles dryer sheets
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Posts: 174
I think you're in great shape. Stay the course.

I would look at buying long-term care insurance. We did the same when we were your age. Lots of opinions here, pro and con.

All I know to do, re- healthcare costs is to plan conservatively (meaning estimate on the high side for the costs).

You can likely meet with a Fidelity counselor for free since you have an account with them. It's probably not going to change much for you, but it might shed some light.

Have you looked at FIRECALC? It's very helpful.
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Old 11-23-2015, 07:49 AM   #4
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Can you guys contribute to a HSA? After you retire you could use this for whatever healthcare premiums

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Old 11-23-2015, 08:17 AM   #5
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Originally Posted by bclover View Post
Can you guys contribute to a HSA? After you retire you could use this for whatever healthcare premiums
Careful with this. You can use HSA for medicare premiums, not ACA premiums. I think medigap is not allowed either.
The hsa can be useful for things like LTC also.

Make sure you ran your SS estimates with quitting work early and taking it at the ages you want. The generic estimates that are given are working until you take the benefit.

I did not catch a expected spending or any after tax investments/resources in your OP. One can not really provide any meaningful response without the second half of the equation (spending). If you want $100k income, you may be OK, but $250k (today's $) might be pushing it.. so run your numbers in firecalc or fidelity RIP.
Assuming all your IRA/401k are traditional, understand where your tax rate may be. You may want to do some roth rollovers after retirement.
I would also expect that 85% of your SS will be taxable based on current law, your pensions and expected retirement withdraws.
For health insurance (to get an idea of cost), look at your local ACA site and check out prices for 60 year olds. These will likely go up faster than inflation, but this will give you a first stab at the numbers and what will likely be covered.

I think others are looking at the SS, pension and nice nest egg. They do look very good. But you need to balance that with expected spending to know where you are at.
“Remember where you came from, where you're going, and why you created this mess you got yourself into in the first place.”
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Old 11-23-2015, 08:20 AM   #6
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Join Date: Jul 2014
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The likely pensions, plus your own savings, put you in very good shape. It does seem like there are a number of prior accounts, some with comparatively smaller amounts. You may want to examine if any of them can be rolled over into a current account (or at least consolidate the prior accounts together). If that's a good idea would depend on the fees, investment options etc, but it may be something to look into just to make things administratively easier for you.
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Old 11-23-2015, 08:32 AM   #7
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Hello JohnNTexas. A couple thoughts to consider.

1. Detailed finanical plan - Now is a good time to develop a retirement financial plan that helps you get situated exactly where you want to be when your retirement date gets here. We updated ours every couple years at your age. Running FireCalc, I-ORP (couple common ones used in this group) are great places to start. Then getting a retirement plan through your investment companies (Vanguard, Fidelity, etc) also is very helpful and often can be gotten for little to no charge. A detailed plan will clarify if the excellent progress you've made will get you where you want to go or if there are other steps you need to take.

2. Start tracking expenses now. You may find expense areas you wish to adjust. This could be tightening the purse in areas but also could be identifying areas you can spend more on if you wish and still meet your goals. Many folks here have found that relaxing expenses is possible once they really understood their situation better.

3. Define if you have the asset allocation you feel appropriate for the level of risk you accept. This is a key part of any plan and can take several years to adjust to the right allocation for you if current allocation is far off from what you want.

4. Ensure finanical plan considered location of assets and future tax implications of Required Minimum Distributions. Seems you will have the majority of your funds in tax deferred accounts. This might cause you to pay very high taxes when you reach 70 and are required to take RMDs. A good financial plan will pick up on if this is really an issue for you. It may suggest doing things like building more of a taxable account starting now. Or may suggest doing Roth conversions at some point. ....

5. College expenses - I like your plan. FYI - for public colleges in Texas, we ended up spending about $10-15k per child per year. This was "all in"costs of direct school related costs (only tuition, board, food, school supplies)

6, Wedding expenses - that's a fun one when it comes up. Costs can range wildly....maybe 15k at the low end of a church type wedding to 100k+. Good to get a plan and be on the same page as your spouse.

7. Health costs - tough to judge of course. One way to take a stab at it is just find today's costs through ACA and add some conservative multiplier...maybe account for the system working out all the current bugs.

8. Life Insurance - good area to question how long you really need to keep this expense. We only carried it on one of the two bread winners and even that we decided to drop as soon as our kids were all self sufficient. All depends on your situation and what your retirement plan shows your needs are.

9. Savings - final years leading up to retirement are typically the biggest saving years so take advantage as much as you can.

Hope this is helpful.
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Old 11-23-2015, 09:58 AM   #8
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Join Date: Jul 2006
Location: Denver
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In addition to the great advice already provided...

401-k plans usually have higher expenses (and sometimes ridiculously higher expenses) than an IRA at a firm like Vanguard. Research the specifics for your 401-k plans and see if it makes sense to consolidate the ones at ex-employers now in a single IRA at Vanguard or another low cost provider.

I highly recommend tracking your expenses. It is quite easy to do today using a program like mint or quicken. If you start paying most of your expenses by credit card (payed off in full each month, of course!), you can download and categorize those transactions automatically into the program. Tracking spending will give you great confidence in estimating your post retirement needs. We also found that the very act of tracking spending changes the way you spend. We lowered spending in areas where we didn't think we were getting satisfaction and increased it in other areas where we were. Example - we ate out less often and disconnected cable, but spent more on hobbies.

Welcome and all the best.

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