Poll: If you were in my situation, when would you retire?

[Tom52]

I think a lot of you like to ponder FIRE scenarios so here is your chance to take a whack at mine. I am trying to make this a bit of fun by making a poll. Of course your comments either good or bad are appreciated.

Here is the story as briefly as I can state it:
First and foremost I am tired of w*rking and ready to hang it up, the sooner the better. I really do not want to w*rk past 62 if I don’t need to. So far, I have w*rked 38 years full time employment plus another 7 years part time starting at age 14. I am 59 and my wife is nearing 58. DW and I are trying to exercise and eat healthy, we want to have as many active years as possible to travel and enjoy life.

Both DW and I are employed, gross income 2011 was about $150,000 and expect that to be more or less the same for the remaining years I w*rk. We have tracked spending VERY closely for the last three years.
2009 spent $37,000
2010 spent $39,000
2011 spent $44,000, about $4,000 of the total was for one time landscaping
2012 Estimated spending $41,000

Other than noted for 2011, these yearly figures do not include any major purchases such as new autos or major home repairs. Nor does it include more than maybe $1,000 in miscellaneous medical expenses. We have no mortgage and are totally debt free. No idea what the home is worth now-a-days but I am guessing about $275,000. If we ever decided to relocate to a warmer climate we would basically replace our house with another of similar value.

Vehicles: 1 pick-up 9 years old and will go at least 5 more years, a seven year old 4 door sedan that we plan on replacing within 1 or 2 years. This is the vehicle we use for long trips so we want something very reliable. In the future we would only replace a vehicle about every 8 years.

Health insurance is the big wild card. When I hang it up, we am totally on my own. DW is probably high risk due to breast cancer 3 years ago. All is fine now but I have no idea what health insurance will cost till we reach Medicare age. For health insurance I am guessing about $25,000/year for 7 years if we stopped working now until we qualify for Medicare.

I estimate my investments, at least for the next 3 years would grow by $100,000 per year between my savings and expected earnings so long as I am still working.

Currently our investments are very conservative.
$188,000 I-Bonds
$400,000 CD Ladder 1 to 7 year maturities
$1,112,000 various IRAs and 401K, invested fairly conservatively, Wellesley, Vanguard Target Retirement Fund, a tiny bit in Index 500

So as not to make this too confusing please assume that at retirement, I would theoretically invest this IRA & 401K money is something with asset mix similar to Wellesley.

Whenever we retire I expect to live on the CD ladder until our full SS retirement age of 66. I estimate our SS income would be $48,000/yr. in today’s $. Any years between retirement and start of SS will have basically minimal interest income from the CD ladder that I will be taxed on. I think I will have an opportunity to convert quite a bit of TIRA money to Roth IRA money.

Oh, we both have tiny frozen pensions that are non cola, both will total about $6000 per year starting at age 65..

I estimate we will need about $80,000/year in today’s $, from investments and eventual SS. I base this on our current yearly spending of approx. $40,000, plus $25,000 for a guesstimate of high deductible health insurance, plus another $15,000 for taxes. . Of course, the taxes would not be $15,000 in the gap between retirement and full SS if I am living only from CDs. And a chunk of the $25,000 for health insurance premiums should disappear when we reach Medicare age.

When I run firecalc and input $80,000 per year spending with $1.7 million portfolio and 34 years I get 70% success rate. When I add in SS at age 66 it says 100% success rate. However, I know I do not have the couch potato portfolio 75% stocks. It is very difficult for me really figure out how to input these kinds of variables in Firecalc.

I hope I have covered the important bits to give a clear picture. If you care to, please vote when you would retire if you were in my shoes.

[REWahoo]

Quote:

Originally Posted by Tom52 When I run firecalc and input $80,000 per year spending with $1.7 million portfolio and 34 years I get 70% success rate. When I add in SS at age 66 it says 100% success rate.

Yep, I'm sure it does.

Quote:

Originally Posted by Tom52 If you care to, please vote when you would retire if you were in my shoes.

Is it too late to turn in your retirement papers today?

[73ss454]

Tom, I retired at 57 with less than you have and things are going along fine. You said that you had enough of work so it's time to go IMHO. It's tough to take that first step but once you've made it things get easier every day.

[Bestwifeever]

Have you talked to any insurance folks? I might get the health insurance lined up before I pulled the plug given your DW's history (and so glad she's doing well now!).

[LOL!]

Why not fill out a sample tax return with your expected income in early retirement? There is no way you will be paying $15,000 a year in taxes if you are paying $25,000 for health insurance premiums. You probably aren't even paying $15,000 a year now in income taxes, so why would you pay more when not working?

[pb4uski]

Look at it this way. For simplicity, let's ignore both investment earnings and inflation, or in other words, real returns are zero. You have $1.7m today. From now until you are 66 you would spend $455k ($40 living + $25 medical + $0 taxes)* (66-59), so at age 66 you would have $1.25m left.

From age 66 your SS would cover your expenses (as the $48 is in today's $) and Medicare kicks in at age 65 so you are all set and the cash flow from the $1.25m nestegg is gravy.

As Bestwifeever suggests, it would probably make sense to verify the $25k insurance estimate with an agent before pulling the trigger, but it seems to me that you are in good shape.

Congratulations!!!

[REWahoo]

Tom, just for the heck of it I ran your numbers through FIRECalc using the Wellesley AA (35% equities), backed your SS at 66 down to $40k (to be conservative). Retiring at 59 I get 100% all the way up to spending $92K per year.

As suggested, do some 'what if' tax runs. Your $15k tax number is very high if you are talking Federal only.

You have a lot more padding in your numbers that I did when I retired at age 58. You're good to go - now.

[GrayHare]

Rather than quit now, I'd w*rk at least into July since that opens the door to COBRA that might carry you to universal health insurance options in 2014. Of course the laws might change by then, but IMO it's worth the chance for just a few more months of w*rk.

[pb4uski]

Tom,

I think you need to reconsider your "Hoping to retire Jan 1, 2015" by-line. What will the new by-line say?

[nun]

If I was Suze Orman I'd say "Listen girlfren, you don't have enough to retire, you must work until you are 70 because that's the new norm and what I'm selling right now.....and oh, you need a new debit card too"

Seriously you are good to go....I mean stop.

[jclarksnakes]

You are the perfect example of the millionaire next door. I think you should take tomorrow morning off to get a health insurance quote and if it is okay call your boss after lunch and tell him you retired yesterday.

[Ally]

If I was in your shoes and could line up some health insurance, I'd retire!

[PaddyMac]

I would retire now, but only after you are sure what your medical expenses will be. Some states have insurance for those who can't get a policy, although there may be a waiting period.

FWIW, your numbers now are what we are planning on for retirement at 59.

[Katsmeow]

Agree with many others. You have enough money. The wildcard is whether you can get health insurance particularly for your DW. I would get that insurance in place first and then retire....

[mh]

+ 1 w/ katsmeow -- get the insurance in place before doing any kind of notification & spend plenty of time shopping around.

[donheff]

I agree that the only question is health insurance. If your wife has a pre-exisiting condition why not lock down the insurance before retiring. Don't rely on some quote. If you are ready to pull the plug, apply for the insurance and lock in the policy. Then give notice. If your wife can't get a policy now then wait until ~ July when you will have a Supreme Court decision telling you more about what you can expect on the long term health insurance front (e.g. COBRA bridge per GrayHare)

[REWahoo]

Quote:

Originally Posted by donheff I agree that the only question is health insurance. If your wife has a pre-exisiting condition why not lock down the insurance before retiring. Don't rely on some quote. If you are ready to pull the plug, apply for the insurance and lock in the policy. Then give notice. If your wife can't get a policy now then wait until ~ July when you will have a Supreme Court decision telling you more about what you can expect on the long term health insurance front (e.g. COBRA bridge per GrayHare)

+1

Whatever you decide to do, please follow-up with us. Inquiring minds want to know...

[bizlady]

I assume no children, since you make no mention of this. I'd get the insurance quote and be done. Maybe you can ease out now, and spouse later if this makes you more comfortable. Know what you will retire to, and just do it! You might want to get with a financial advisor and bump up at least a bit your stock holdings, you are pretty conservative-- but good to go! LTC insurance might be a consideration as well.

[SJ1_]

Quote:

Originally Posted by REWahoo Yep, I'm sure it does. Is it too late to turn in your retirement papers today?

+1 (good luck)

[militaryman]

I said retire now and here's why

You will draw about $48k in SS @ 66 and $12k from pensions = $60k (slop factor incase of SS cuts and the fact that your pensions are non-cola'd) -- let's call it $50K at 66 which leaves a need of $30k to come from interest off investments --

So to make it easy set aside $300k in a "bucket" that is used to make up the shortfall between investment interest and draw of SS/pensions @ 66 yrs old. This means you will have 1.4 mil. @ age 59 spinning off 42k @ 3% interest and you will need to pull $38K from your "bucket" each year for 7 years ($38k x 7 = $294K )

After 7 years (age 66 ) your "bucket" is empty and your still using $42K from the 1.4mil @ 3% plus now you have the SS/pnsions @ $50K = $92K ----

Lots of slop in my scenario that gives you more than you indicate for you budget and use of 3% interest will preserve capital

You are more than ripe to go now

Trade?