JoAnn of Colorado, please check in!
I think Suze went over the top tonight (4/23). Mid-50's couple, no debt except small mortgage balance, about 1 million in assets, not including their home. They get a military pension with no survivor benefit, but they do have term insurance good for another 20 years or so. And she told them they need to work until 67 or even 70. Whether they can retire in 3 years as they want may or may not be possible, but they sure as heck don't have to work 'til 67 !
Thanks for posting this!
I think Suze went overboard on the SBP risk and completely skipped the military pension COLA.
We have the episode on TiVo. It's very hard to tell from the screen shots but it looks like they're pulling down active-duty pensions as an E-8 (7? 9?) and O-4 (5?) while working at their bridge careers. They'll retire from those bridge careers in three years. Three kids graduated from college, two weddings paid for.
$6700/month (pre-tax) just in active-duty military pensions. A $116K mortgage on a $360K house. $477K in "retirement accounts" (of which $123K may be the TSP, but I'm not sure of that number), $320K in "emergency fund", $145K in investment accounts. If they paid off the mortgage and lived in their current house they'd have ~$825K in their tax-deferred/taxable accounts.
$6035/month in expenses, which probably includes the mortgage.
Let's say that they quit their jobs, keep the mortgage, and don't change their expenses. After-tax pension income is probably no worse than $5500/month, leaving them with a $535/mo gap. In other words they could withdraw less than $10K/year from their portfolio and be just fine.
I think Suze flunked the whole idea solely on the "What if somebody dies?!?" question. They elected no SBP and appear to be covering the next 15 years with term insurance.
I think (I'm not sure) that their plan was to delay SS until age 70, when their term life insurance expires, and then go uninsured after that under the theory that even her pension + SS (plus portfolio growth, and perhaps with the mortgage paid off by then) could handle his uninsured death (and loss of his pension). It's hard to assess that without actual numbers.
Suze didn't cover their COLAs and the portfolio growth. After 15 years at a 2% COLA, their pensions would have grown by over 30%. The portfolio would have grown as well, perhaps keeping up with inflation. They wouldn't easily be able to tap into the TSP before 59.5, if they even need to, but they could make a one-time rollover into an IRA and start up a 72(t). He's already 54 years old, so retiring at age 55 or later he'd be able to start 401(k) withdrawals (assuming it's indeed a 401(k)).
JoAnn does have a possible issue with long-term care. But she'd be able to buy the federal LTC insurance.
If the SBP someday does its 5th open enrollment (since 1972) then they could sign up and immediately retire. But with their current plans (including three years of additional savings) I think they could survive his death after age 70 without risking her portfolio survivability.
Instead Suze is telling them to use a belt, suspenders, duct tape, SuperGlue, and a nail gun. Spouse says that Suze does not like any retirement that eats into principal... it all has to be covered by pension & SS or dividend/interest income.
In Suze's defense, her shows provide at least an hour's conversation with our 18-year-old every time she's on. Our daughter clearly understands the rules for "Can I Afford It?" and has a big-picture grasp of "How Am I Doing?" Our daughter knows there's trouble when she hears the word "girlfriend", and "You are SO denied" is household vocabulary. Suze also has a tough challenge explaining a TSP and a military pension COLA, let alone a SBP, in 60 seconds. She says that she (and her staff) go much more into depth with each caller and just hit the high points on the show.
But if we're able to pick out these glaring deficiencies on topics we know about, then what other glaring deficiencies are going on in areas we don't know so much about? And if it's difficult to explain Joann's situation in 60 seconds, then why bother? I don't think she should have taken JoAnn's call, let alone stomped on her with those Suze-Smackdown combat boots.
I feel a blog post coming on, definitely a Dollar Stretcher post. So JoAnn, if you're interested in going over the numbers, then we'd like to show you how to make FIRECalc work for you.
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