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Some Advice Needed
Old 12-21-2007, 11:41 PM   #1
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Some Advice Needed

My porfolio currently looks like this:

IRA Portfolio:
210K in Diversified Stock Funds
280K in Diversified Bond Funds
20K in Blanced Stock Fund
= 510K

Taxable Porfolio:
140K in Total Stock Index Fund
140K in Money market Fund (parking place until I figure where to put it)
= 280K

Wife has already retired on COLA'd pension of 38K/year

I plan to ER in 2 - 3 years. I am 57. I figure if I wait until 66 to take SS I will receive approx 2K/month = 24K per year.

With wife's penion and my SS we will have COLA'd income of 62K/year. I believe this will be enoguh income for us to live on and we can use the IRA and savings to take care of unexpected expenses.

First, do you think I can ER at 59-60?

Second, if I retire at 59/60 I will need 24K per year from savings to "bridge" the gap until SS kicks in at 66. I hesitate to risk the cash in the MM since this can already provide the cushion I believe I need to bridge the gap. What do you folks think of this strategy and where do you think I should put the 140K currently in the MM account? Should I be more aggressive or should I bow to my conservative nature?

Thanks for the help.
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Old 12-22-2007, 12:18 AM   #2
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Location: Willamette Valley, Oregon
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Quote:
Originally Posted by potto0213 View Post
My porfolio currently looks like this:

IRA Portfolio:
210K in Diversified Stock Funds
280K in Diversified Bond Funds
20K in Blanced Stock Fund
= 510K

Taxable Porfolio:
140K in Total Stock Index Fund
140K in Money market Fund (parking place until I figure where to put it)
= 280K

Wife has already retired on COLA'd pension of 38K/year

I plan to ER in 2 - 3 years. I am 57. I figure if I wait until 66 to take SS I will receive approx 2K/month = 24K per year.

With wife's penion and my SS we will have COLA'd income of 62K/year. I believe this will be enoguh income for us to live on and we can use the IRA and savings to take care of unexpected expenses.

First, do you think I can ER at 59-60?

Second, if I retire at 59/60 I will need 24K per year from savings to "bridge" the gap until SS kicks in at 66. I hesitate to risk the cash in the MM since this can already provide the cushion I believe I need to bridge the gap. What do you folks think of this strategy and where do you think I should put the 140K currently in the MM account? Should I be more aggressive or should I bow to my conservative nature?

Thanks for the help.
IF you are sure $62k a year will be "confortable" for you and DW, YES, you can go at 59-60.

You will then have 6 or 7 years till you get your SS of $24k. For the 6 or 7 years the $140k MM should give you pretty close to the $24k you need to add to DW's $38k.

You will still have the $510k in tax-deferred untouched (Nice!), plus the $140k taxable stock investments untouched (double NICE!).

So, I think it very reasonable, prudent for you to keep the $140k now in MM to stay in MM. If you can earn 4% or 5% on that MM money, then you can likely make it last the full 7 years at $24k annual withdrawals.

The rest of your portfolio allocation also looks very reasonable and prudent. Excluding the $140K MM, the rest of portfolio is somewhere around 55%/45% stock/bonds.

Other questions:
Have you got source of health insurance after you retire at 59-60?
Is the health insurance adequately budgeted into your $62k goal?
Is your mortgage paid off or is it adequately budgeted in the $62K?
How will DW like having you around all day long?
Any kids, and are they out of the picture--no college expense looming?

I think you are right on track, you have a good plan, you can ER at your goal of 59-60 (assuming no surprises in the questions just above).

Go for it!! Congratulations.
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Old 12-22-2007, 12:19 AM   #3
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Welcome Potto!

I am sure others will be along soon to address the specifics of your questions but in the meantime here are a couple of things:

--Go to Firecalc and run the numbers for yourself to see when you can retire. Here is the link: FIRECalc: A different kind of retirement calculator

---You need to understand your expenses...now and when you retire. Your expenses drive how much income you need to cover them. Some folks spend more in early retirement than in the later stages; others more depending on health and personal choices.

---Do you have your Healthcare insuance covered?

---Keeping cash you will need in a year in a MM is not a bad idea; better than risking it to the whims of the market in index funds or individual stocks and better returns than most bonds. You could do a Jumbo CD for 90 days at a time to boost you return a bit but it might not be worth the trouble...you need to shop around for rates first.

---A Cola pension is like money in the bank...maybe better. Many folks could retire much earlier if they had one (like me ) since they would not have to save as much to make up the income for all those retirement years ahead.

---Good luck.
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Old 12-22-2007, 12:13 PM   #4
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Thanks for your responses so far!

To answer some of your questions:

House (valued at 225K) is fully paid off.
We are now empty nesters (1 child, college completed and paid for).
Health care is a concern, I admit. Wife's health care is partially subsidized through pension plan. I am on individual heath care insurance (I have an HSA, $4000 deductible at $145/month) I currently have $5000 in the HSA account that I did not include in the above amounts. I will add about 12000 more to this before I retire).

Thanks for all your help!
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Old 12-22-2007, 12:36 PM   #5
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Quote:
Originally Posted by potto0213 View Post
Thanks for your responses so far!

To answer some of your questions:

House (valued at 225K) is fully paid off.
We are now empty nesters (1 child, college completed and paid for).
Health care is a concern, I admit. Wife's health care is partially subsidized through pension plan. I am on individual heath care insurance (I have an HSA, $4000 deductible at $145/month) I currently have $5000 in the HSA account that I did not include in the above amounts. I will add about 12000 more to this before I retire).

Thanks for all your help!
You are looking good!!

House paid off, kid gone, DW already on retiree health policy (subsidized--NICE!), and you have HSA policy/account already going for yourself, funded, and more funding to come. Sweet.

I think you are in great shape!

I think your problem now is "what are you going to do in your retirement life!!" And how to make sure DW doesn't have a problem adjusting to having DH around the house all day long!
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Old 12-23-2007, 04:08 AM   #6
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A few factors we need to consider here.

The money that you invest in the stock market. How secure are they?
You might lose a lot of money if the market is going down

I don't feel it is secure to place your money in the stork market for your retirement plan unless you are an expert in the stock market.
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Old 12-23-2007, 02:25 PM   #7
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I don't feel it is secure to place your money in the stork market.....
Yeah, the stork market is very risky.....
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Old 12-23-2007, 02:41 PM   #8
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Meadbh, great laugh, looking at your joke, the stork, and Audrey's "I'm so sexy but innocent" face. I can just imagine that just before this picture ws snapped she got off a subtle zinger at Cary Grant.

By the way, the guy who wrote Moon River felt that Audrey is the only person who understood how to get the right feeling into his song. Here she is singing it in Breakfast at Tiffany's (with George Peppard).



Ha
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Old 12-23-2007, 02:44 PM   #9
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Originally Posted by haha View Post
Meadbh, great laugh, looking at your joke, the stork, and Audrey's "I'm so sexy but innocent" face. I can just imagine that just before this picture ws snapped she got off a subtle zinger at Cary Grant.

By the way, the guy who wrote Moon River felt that Audrey is the only person who understood how to get the right feeling into his song. Here she is singing it in Breakfast at Tiffany's (with George Peppard).



Ha
Thank you Ha.....sexy but innocent, eh?

Now let's get Outtahere before we are accused of feeding the commercial trolls....
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Old 12-23-2007, 07:13 PM   #10
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Quote:
Originally Posted by potto0213 View Post
My porfolio currently looks like this:

IRA Portfolio:
210K in Diversified Stock Funds
280K in Diversified Bond Funds
20K in Blanced Stock Fund
= 510K

Taxable Porfolio:
140K in Total Stock Index Fund
140K in Money market Fund (parking place until I figure where to put it)
= 280K

Wife has already retired on COLA'd pension of 38K/year

I plan to ER in 2 - 3 years. I am 57. I figure if I wait until 66 to take SS I will receive approx 2K/month = 24K per year.

With wife's penion and my SS we will have COLA'd income of 62K/year. I believe this will be enoguh income for us to live on and we can use the IRA and savings to take care of unexpected expenses.

First, do you think I can ER at 59-60?

Second, if I retire at 59/60 I will need 24K per year from savings to "bridge" the gap until SS kicks in at 66. I hesitate to risk the cash in the MM since this can already provide the cushion I believe I need to bridge the gap. What do you folks think of this strategy and where do you think I should put the 140K currently in the MM account? Should I be more aggressive or should I bow to my conservative nature?

Thanks for the help.
I just saw the post and have not read any responses.

On the surface, you could probably retire NOW and not wait. You could access the IRAs/401ks with 72(t) provision.

If you do continue to work the next 2-3 years, plan on using the IRAs/401ks... 510k, needing 24k for 9 years... 24k is a 4.7% SWR (starting withdraw rate). That is somewhat high (4% is recomended), but because your estimated SS benefit is 24k, the IRAs really only need to last for 7 years.

I would also look to convert some of the IRAs to Roth accounts each year. 62k appears to be combined income (38k wife, plus 24k for you). Assuming married filing jointly, the 15% bracket for you is capped at $65,100.

Reference Room

Withdraw $65100 each year, spending 62k, then converting 3100 to a Roth IRA. You will pay taxes on 3100, but then not pay taxes on further withdraws. In addition this will keep your tax bracket low in retirement, so IRA withdraws after a few years might be in the 10% tax bracket.
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