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Retirement - now or later?
Old 06-02-2015, 06:15 PM   #1
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Retirement - now or later?

I would really like to retire soon, not sure if I can hang on 3.5 more years to be eligible for healthcare benefits in retirement - particularly now that the ACA makes healthcare available to early retirees.

Here are my details:

53, female, divorced.

$525K in taxable accounts (a mix of cash, bonds, CDs and stock index funds)

$675K in tax deferred or non taxable accounts. (Federal TSP, Roth IRA)

Total: $1.2M

I rent and do not own any real estate. Sold my home in the divorce and rolled the proceeds into taxable investments.

I have two pensions - one I am eligible for at age 55 in the amount of $600/month. This pension is not COLA'd.

I have a federal government pension that I can begin taking at age 62. Accrued value now is around $750/mo, obviously as each month goes by, this number grows - at the current rate, it is growing at about $130/month for each additional year of service. In 3.5 more years, I can exit with an immediate annuity and subsidized healthcare. Federal pensions are COLA'd.

According to Social Security, at age 62, I will be eligible for payments of about $1,900 - *if I continue working until then at my rate*. I was married for longer than 10 years - although given what I know about my ex-husband's salary compared to mine, I find it hard to believe that 50% of his will be greater than 100% of my own.

I estimate my retirement expenses to be $40K/year on the higher side, which gives me about a 4% SWR - although at some point, I will purchase a permanent home.

Thoughts on retiring now or 3.5 years from now - is the healthcare that valuable compared to what I can get through ACA? I checked and it appears I would be paying the same premiums as an employee - in retirement.

I realize I can make the decision without input, but appreciate it because I am concerned about any glaring omissions or that I am too close to the situation to be objective. Thanks
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Old 06-02-2015, 07:11 PM   #2
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I would think if you have $600 per month now you Would need $33,000 for like 9 years then should clear about your expenses of $40K (600 + 750 + 1900 = 39000).

What about drawing from retirement funds like TSP, IRA before 59.5 age, as I understand there could be penalties involved. I'd re cooed you nail that down first. If you plan to buy a home you would probably want to fund it from taxable accounts, and you would probably be using them for first 9 years of retirement.

I am 59 this year, have similar savings and expenses and have strong strong plan to retire in year and a half with a pile of just over 1 mil to live off. I'm going for it despite reservations. Finally said all my life I have been able to adapt to what happens. 4% draw may not be 100% secure if any list of things happen but I'll be able to adapt if needed.

You could probably find some part time work to pick up say half of the expenses at Starbucks or another place that doesn't leave you with same not sure I can take it at end of the day.

Your decision, but I suspect you would be ok if you watch expenses.
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Old 06-02-2015, 07:23 PM   #3
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Old 06-02-2015, 07:38 PM   #4
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Originally Posted by TresBelle65 View Post
Thoughts on retiring now or 3.5 years from now - is the healthcare that valuable compared to what I can get through ACA? I checked and it appears I would be paying the same premiums as an employee - in retirement.
Have you tried checking quotes for ACA? Health insurance plans through government employment tend to be heavily subsidized and usually, a comparable plan would cost you much, much more. Don't just look at the premiums, consider the benefits, too.

In your case, I'd probably stay the extra years for the immediate pension and health insurance.
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Old 06-02-2015, 07:51 PM   #5
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In your case, I'd probably stay the extra years for the immediate pension and health insurance.
+1
Someone would have to beat me with a stick, cause me bodily harm, and make me work 100 hrs. weeks before I left that benefit on the table. YMMV.

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Old 06-02-2015, 07:55 PM   #6
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To be able to draw from your TSP without penalty, you need to wait until the year you will turn 55 to retire. Also, I recommend you work long enough to have the option of keeping your FEHB. I'm a retired fed, those are my thoughts.

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Old 06-02-2015, 08:23 PM   #7
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Unless you hate your job, suggest you hang in there til 55. Hopefully, your investments grow and you can draw from the fed tsp.

If work is unbearable, leave now -life is too short. A conservative 3% draw from your savings would provide $36,000. Surely, you could find pt work for a couple of yrs to make the $4,000 shortfall per year. Once your are 55, you should be golden (another $7,200 per year).


Of course, waiting 3.5 yrs, you would be in great shape financially, at least.
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Old 06-02-2015, 08:45 PM   #8
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If work is unbearable, leave now -life is too short. A conservative 3% draw from your savings would provide $36,000. Surely, you could find pt work for a couple of yrs to make the $4,000 shortfall per year. Once your are 55, you should be golden (another $7,200 per year).
One thing to consider though is does the $40K per year include health insurance premiums and other health related costs? Loss of health benefits may well cost the OP an additional $10K a year or more. She might need to find part time work she hates even more than her current job just to make up the shortfall.
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Old 06-02-2015, 09:01 PM   #9
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I know the feeling oh so well. I had retirement medical at age 50 but did not retire until 54.5 because I wanted to have one more year of management salary. Our pension is based on the highest 12 months. I wanted to leave at 50 but I sucked it up for 5 more years, in a place I had grown to not enjoy anymore. I still did a great job but I was miserable every day until I knew I had what I considered enough money to buy my freedom.

But then my healthcare is 100% paid. If I had to pay for healthcare I would have had to stay longer.
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Old 06-02-2015, 09:06 PM   #10
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Originally Posted by hnzw_rui View Post
Have you tried checking quotes for ACA? Health insurance plans through government employment tend to be heavily subsidized and usually, a comparable plan would cost you much, much more. Don't just look at the premiums, consider the benefits, too.

In your case, I'd probably stay the extra years for the immediate pension and health insurance.
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Originally Posted by MRG View Post
+1
Someone would have to beat me with a stick, cause me bodily harm, and make me work 100 hrs. weeks before I left that benefit on the table. YMMV.

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+2
I have a similar situation and will not leave until I'm 55 in order to secure the retiree healthcare benefit. I've struggled too with the thought that I may be working toward something that won't have as much value now that there is the ACA, but I still think it's better to have someone else on the hook or at least partially on the hook for one of the biggest and most significant expenses I'm likely to incur in retirement. I'm 54, so I'm within a year and trust me, it gets easier as you get closer.
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Old 06-02-2015, 09:09 PM   #11
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I'm a recent federal retiree (early due buyout authority) at 55, which allows penalty free access to TSP and medical insurance (~$200 my share/month & ~$400 govt share/month).

I would wait until at least 55 for those 2 benefits, if possible.


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Old 06-02-2015, 09:52 PM   #12
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Several folks have mentioned 55, but that's probably not the important age for you. If you can retire with an immediate pension in 3.5 years, that's likely when you meet the "MRA+10" requirements (assuming you're not an LEO, firefighter, ATC, member of Congress, or some other special category). A couple things to keep in mind about an MRA+10 pension. First, there's a significant haircut: your annuity is reduced 5% for every year you're younger than 62. Looks like you'll be just over 56 (your minimum retirement age) when you hit 10 years service, so you'll have a reduction of about 30%. This reduction is permanent. (Texcurtis--and I--avoided this reduction because our agencies had voluntary early retirement authority when we retired, but it seems unlikely you'll have the years in service to take advantage of this, even if your agency has the authority.)

Second, while FERS pensions do have a "lite" COLA, it is only applied after you reach 62. The gross amount of your (reduced) monthly payment won't change during those first 5 to 6 years (the net will, due to inflation in health insurance costs, etc).

These might not matter enough to change your decision, but should be kept in mind. Like other commenters, if (when) I was in your shoes, I'd try to hang in there long enough to get immediate pension and keep FEHB coverage.
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Old 06-02-2015, 10:33 PM   #13
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If you can live the life you want on $40k a year then I think you are probably all set. You'll need $260k to get you from 53 to 59 1/2 and you can use taxable accounts for that. From 59 1/2 to when you want to start your pension or SS you can rely on the remainder in the taxable account and your tax-deferred accounts.

Check out health insurance costs through healthsherpa.com.

Do some work to validate that the $40k a year you think is enough is truly enough. Don't forget to factor in periodic car replacements, a home if you decode to discontinue renting, etc.

Run your plan through Quicken Lifetime Planner or Firecalc, but I think you'll be pleasantly surprised at the results.
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