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Would love to have some opinions on my $$$ health
Old 08-04-2007, 03:27 PM   #1
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Would love to have some opinions on my $$$ health

I was 60 yrs old in June and retired rather abruptly on 8/3/07 because I am taking care of a very ill parent. Between the b/s at work and the agony of dealing with eldercare, I just couldn't take it any longer. Had to retire to save my sanity! Can "un-retire" and return to work any time according to my former employer but I don't want to .

I retired from a low six-figure salary and I am going to attempt to live on my reduced non-Cola'd pension of $26K (first check 9/1). I will be paying $300/mo COBRA for 18 mos and then insurance will jump up to $500/mo. I'll get s/s of about $17K at age 62. My energy-efficient house is paid for, there is no debt of any kind, and I am single. The housing expenses, including phone/cell, internet, cable TV, utilities, house insurance and taxes will be $600/mo.

I only started reducing my expenditures just 2-3 months ago and that is why I am not comfortable yet on what I can and can't do, but I think I can live ok on $24K after taxes. When working I lived within my means, not below my means. Didn't realize I was going to retire before age 66. Never even thought of it.

I KNOW there are things that will come up that I haven't budgeted. If you were my financial advisor looking at these numbers, who of course is not selling a financial product . . . what would you tell me? Can I feel any sense of security or not? What am I missing?

$24,000+ after taxes needed for lifestyle (I am not married)
No state income tax in Texas

$26,000 non-cola'd pension begin 9/1/07
$17,000 s/s begin 6/1/09

$300/mo COBRA for 18 mos starting 9/1/07
$500/mo Aetna health ins until age 65 starting 3/1/08
Aetna is an expensive "retiree benefit", pays 100% of most things, no deductible
No debt of any kind, need to buy car in 2 yrs
Mortage free house built 1995

$327,000 401k plan (conservative investments)
$33,000 Roth IRA (conservative)
$45,000 non tax-deferred Emigrant/HSBC at 5.05%
Not trying to leave any estate when I'm gone

Both my parents lived to 90+. I have long term care insurance.

I know this is small potatoes to so many of you, but do these numbers look sufficient for my modest lifestyle? FIREcalc says ok, so does ORP, but I'd sure feel better if some of you chimed in (a couple of you did in the "Hello I am" thread so thanks).

One day I'm saying to myself "it feels great & I'm glad I retired" and the next day I'm saying "YIKES!".

Please tell this ole' Texas gal if my $$$ health looks ok or it is likely that I am going to have to either cut expenses or go to work at Wal-mart!

Tex
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Hi Tex
Old 08-04-2007, 04:17 PM   #2
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Hi Tex

Just found this forum site today. Your thriftiness and low expenses will certainly help. I retired 4 years ago and found that despite having a good health insurance plan, my out of pocket medical expenses seem to increase every year meds, tests, etc. The other big expense items comes from upkeep and repair of the house. Often these are unanticipated and take a big bite out of our budget.
How will you spend your retirement time? Hobbies, travel etc. also tend to eat up cash.
I wish you good luck.
Larry
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Old 08-04-2007, 04:37 PM   #3
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I think $26,000 is a bit low but if you add in the 4% of your savings it brings it to $42,000 which is doable plus you have only 2 years till social security which will bring it up to $59,000.You can do it ! Enjoy !
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Hi Larry
Old 08-04-2007, 04:54 PM   #4
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Hi Larry

Larry, welcome to the forum. I am new, too.

With the insurance coverage I have now and until Medicare, I'm hoping to pay reasonable copays and I do have prescription and dental coverage. Obviously, if something major happens to me, all bets are off. I'm in good health right now, but we all know that good health report can go downhill in a blink!

House expense . . . I can see having to buy a new air conditioning unit in the next 5 years. This is a relatively new home (1995) that has been well maintained and is small so won't need a mega a/c unit. Got new roof in 2001 from damage due to bad hailstorm so maybe that won't hit again for quite a long time. Will probably need to replace a wooden privacy fence in about 5 yrs. I know other unplanned things will come up though.

Between pension and s/s I figure that I have enough to live on ($43K pre-tax) without touching investments or savings for between 6-10 more yrs UNLESS that "something BIG" or catastrophic comes up. I even want to be able to add money to my savings once I start receiving s/s at age 62. I am hoping to just let my savings sit and grow for at least 6 yrs before beginning withdrawals.

Gardening, reading, hiking, computers, volunteering at the library and hospital are about the only interests I have at the moment aside from spending time with my 4 grandkids. Until my mother has passed (she lives with me and I care for her), along with almost 24/7 eldercare that is required right now, I will not travel anywhere and I have modest plans even then. It doesn't take much money to make me happy. It does, however, require some level of financial security for me to FEEL happy. This is all so new to me and happened so suddenly that I am not comfortable and don't feel secure at all yet.

Thanks for the input and again, welcome!

Tex
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Old 08-04-2007, 05:07 PM   #5
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Texasgal, You know your needs I guess. But frankly I'm stunned than you could flip the switch from a six figure salary to less than half. For example, two things stand out to me. One is your expense estimate of 26K. I'm betting that does not figure in much swinging singles time. But your hobbies list does not require a lot of money. But where was all that money going before you retired. Was the difference going to savings? I've noticed that financial advisors I've worked with ask you about current expenses, but then use your current cash flow to predict what will be needed. I guess they prefer facts to hopeful wishes.

The second thing is healthcare insurance with Aetna. My costs with them have increased 20-30% per year for the last few years. That may be unique to my plan, I don't know. But worth watching carefully. Also, does your LTC insurance have an inflation clause with additional premiums?

I hope it works out for you. I plan to make the jump soon myself.
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Old 08-04-2007, 05:14 PM   #6
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Moemg

Moemg,

I agree that $26K pre-tax is LOW and thank God that it only has to last for 1 yr and 9 mos! My pension would have almost been double that amount if I could have hung on 6 more years, but that is a moot point now. I will be struggling a bit to make it until I can begin getting s/s. I'm going to try to stay out of savings so stay tuned! Cost of living is very low here, housing/utilities and everything related to housing expense, including taxes & homeowners ins, is $7200/yr.

I could not live on either of them alone, but s/s and pension together will provide what I believe to be more than enough at $43-44K and I honestly think I can continue to save a few bucks if I am disciplined. But then I don't know for sure or I wouldn't be asking for everyone's opinion. I know I am missing something, but I can't seem to put my finger on it.

Thanks for your response! I'm going to stay close to the forum to gleen every bit of wisdom I can.

Cheers!
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Hi Tightasadrum!
Old 08-04-2007, 05:47 PM   #7
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Hi Tightasadrum!

Good question(s)! I can see the confusion.

The last several years I've put the max into 401k and Roth IRA and last year that was $25K with another $10K into after-tax. I've spent at least $25K per year on my family. Have been trying to help my very grown daughter (4 grandkids) through school. As some kids do, she didn't listen to mom about finishing school before getting married when it would have been so easy and she didn't work so that she could be a stay-at-home mom. Hubby dumped her 10 yrs ago and I've basically supported her. Things have changed. She is finished with school, got a job and remarried. I am FREE now of all of that support. I told her that I was glad to gift it to her because I could afford to do so, but she can't count on me in the future for much other than the typical retired granny stuff. I couldn't be more serious either. I'm done with supporting other people.

I also spent money on anything or anyone I wanted to. It was fun. But now I am done and have been for about a year. Nails and hair, plenty of clothes, a lot of big-city entertainment, regular massages, trips, etc. None of that made me happy. I hated my job so bad that I was STILL miserable, and no amount of money or promotions or bonuses made any difference. I moved to a tiny town in East Texas last fall, bought a pair of Wal-mart jeans and a black t-shirt and I haven't had my hair or nails done in 9 months. Yikes re the gray! I have not worked in 6 months even though I just officially retired 8/3. Used up lots of vacation time and short-term disability. I am happier now than I have been in years and years.

I have been tracking my pennies (even 50 cents for a newspaper) for years and my expenses have gone down from $6K/month to a big $1,418.74 in the month of July (I know the very penny I have spent). I can do anything if I HAVE to. The only thing I sort of regret is that I could have cut back significantly years ago and had a ton more in savings but there is no point in spending time in regret. I didn't do it and now I am here retired at 60. So the rest of my life begins today.

My ex-employer has 4 insurance companies that provide retiree insurance that I can subscribe to at any time as part of my retiree bene pkg, but I agree with you that the insurance costs will go up and up and up. I only have to deal with these high insurance costs for 3-1/2 yrs until Medicare (3-1/2 yrs after COBRA ends). I can always consider a high deductible policy to get by until age 65. I'll deal with Medigap at that time when I get s/s.

My 90 yr old mother requires 24/7 care. I made the commitment to her to let her die at home so she lives with me. I took care of my 90 yr old dad (Alzheimer's) until he died 3/30/07. I ran out of company-paid time off and had to retire so that I'd have some income. I like it so well that I want to NEVER go back to work.

I retired because I had to, but now that I am here, I want to stay here.

Thanks for your observations and good questions! Keep 'em coming!

Tex
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Old 08-04-2007, 06:07 PM   #8
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Tex, you got it made!

It's clear you are an extremely intelligent person, and you've devoted a lot of time and energy to figuring out how to make it happen. The calculators tell you it's OK, and your own figuring tells you you can do it.

Sure, something unforeseen could happen. But odds are in your favor, and you've got strategies lined up already to deal with most cases.

You're giving your Mom your time now, when she really needs it.

But most of all, "I am happier now than I have been in years and years."

Clearly you have your priorities right.

I'm jealous! You are doing it right and I think you'll be fine financially.

Coach
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Old 08-04-2007, 06:09 PM   #9
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The main question I have after reading your post is how you will offset future inflation, since only your SS will be COLA'd. Your 401k/Roth will need to provide enough income to help the 26K pension maintain its value in today's dollars, in addition to providing any additional inflation-adjusted income that you may need. You say it is invested "conservatively", but I don't know what you mean by that.
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Good question
Old 08-04-2007, 07:00 PM   #10
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Good question

Fire'd,
I KNOW my investments are too conservative but I want to wait a while before I even think about changing investment strategy. VERY conservative is all I can handle at the moment. I quit my job of 24 yrs, my dad just died, my mother is dying, I've moved to a tiny town from a big city. Lots of very stressful changes. BUT you have absolutely asked an excellent question and posed the right challenge for me to think about.

I am not going to take any money out of investments for several years (6-10) and I am going to take a minimum even when I start. I want zero estate left when I die. FIREcalc says I have 100% chance of success with $46K/yr adjusted for inflation. Other calculators tell me the same thing. Do I really trust calculators, even really good ones? Not so much . . or at least I know that I should not rely on them completely. They are just an approximation or indication that if all things come together aligned with the stars correctly, I can probably make it ok. FIREcalc is probably brilliant though and I'm glad I found it.

My 401k allocation probably doesn't even make sense to anyone here, but here goes (almost embarrassing with all you financial gurus here):

$327,000 total 401k with most of it in Vanguard Prime MM at 5.39% (.09% expenses for inst shares) and then I have about $42K of the total in Vanguard Energy (last 20 yrs 15%) and Vanguard International Explorer (last 10 yrs 15%). Energy and Intl Explorer seem like strange partners with Prime MM but they have paid quite well in the last few years, and oddly I am willing to leave my money in them for the time being. Maybe those 2 funds alone will push my % up high enough to just beat inflation by a tiny bit I'm thinking of Wellesley Income for a chunk of the Prime MM funds or perhaps instead of MM.

My $33K Roth IRA is also in Vanguard Prime MM, but I am going to move it to something else, just don't know what, perhaps Wellesley too. I like Vanguard so I'm not moving from that fund family.

I can't tell you how much I HATE volatility! And basically for me, volatility is anything that is not a steady upward trend. If there is much of a blip I start getting sick at my stomach. I know I am not like most of you here so I am here to glean some wisdom and perhaps some nerve. I am sure I will move S L O W L Y to make changes. . . . but I like your questions.

I'll hang around here with you guys and perhaps eventually get enough nerve to try AGAIN to invest somewhat more aggressively after my eyes can become uncrossed from reading all of the financial acronymns and fairly high-flying financial info. I know NOTHING about smart investing, but I'm sure that is obvious by now.

Back in 2001-02 I lost $100K out of my 401k in what seemed like almost overnight, 90% high tech stocks. I did what all lousy investors do, I got OUT. I wanted to sleep again. I wanted to NOT have a heart attack. I decided that slow and steady was just fine with me and I have never changed my mind.

I am totally committed to living "small". Today is the first day of the rest of my life, and I WILL learn to manage it well. Thanks in advance to you ALL for giving me your opinions, thoughts, and suggestions. I love it!

Tex
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Old 08-04-2007, 07:36 PM   #11
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Coach

Hi Coach, and thanks so much for the encouragement! I need that, too, in the midst of all of the cautionary advice. I need BOTH! Since I have retired and that decision is made, I'll make every effort to live as "small" as I need to in order to make it for a while. I've decided to view this as a new adventure . Am I crazy? Maybe. If I had to look at $26K forever, I'd just say shoot me now. But at 62 I'll feel like I got a raise with s/s coming into play. And then about the time my pension is worth about 50% of what it used to buy, I can start getting into my savings/investments.

I'll try to stay on top of this and seriously consider the advice I've received here. I'm sure I"ll keep checking in with questions. I really have nothing but questions. I am doing some pretty intense reading through old posts and I am blown away with the financial expertise that is here.

"I am happier now than I have been in years and years". That's worth a lot of cash right there and that is motivation for me to make it work!

Tex
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Old 08-04-2007, 08:35 PM   #12
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Well Texasgal,

I think I see most of the picture. I agree that you have enough on your plate right now. It's good to see someone who is so generous through the years with her time and money. Far more than I am capable of.

Fire'd@51 hit the nail on the head though. Your (and our) enemy is inflation. The 2-3% inflation rate we all hear about is understated by at least 1 or 2 points. In 30 years our expenses will probably quadruple, unless 1979-1980 madness comes again.Several books are recommended in these threads to bring you up to speed in understanding investing and, maybe harder, investing it for growth. I'll be the first to say that the market is scary right now. That 90% in one sector (high tech) was not diversification. Some would say that 90% in MM is the highest risk of all. It all but guarantees that inflation consumes your assets. The good news is you have a considerable amount of money to work with. You might even consider your new career becoming an expert at managing those assets. It will be the easiest job you ever had, maybe hour or two a month.

You have the non-COLA'd pension and SS for the very conservative sector of your assets. You can find annuity calculators on the internet, but I'd guess you're looking at nearly $500,000 net present value in that $43000 per year without COLA. Even if you put 100% of your savings in equities, you'd still have a pretty conservation asset allocation. I think this market wants to go down right now, and the housing and sub-prime mess is just starting to be felt. So you don't have to be in a hurry.

It sounds as if you come out of a great gene pool and probably can look forward to over 30 years to use your money.

It's nice to hear how much you are enjoying retirement. Hope I can learn that lesson myself soon.
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Old 08-04-2007, 08:57 PM   #13
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Texasgal,

I'm like you...I have trouble dealing with market gyrations and also lost quite a bit of money in the 2000 tech bubble burst. I can't sleep well at night if my portfolio has a lot of exposure to stocks. The past year or two, I've been moving from about 60/40 equities to mostly money market...skimming off the froth on a regular basis and parking it on the side until I feel more comfortable with market conditions. Granted, this has limited my growth potential over the past few years of bull run, but my returns have not been horrible either. I'd rather make a little than lose most. This is a personal character trait and will not make me rich, but it does help me sleep and keeps me content in down markets. The funny thing is, when markets are up broadly by 15-20 percent or more, I don't really regret losing out on the money...money does not drive me, but quality of life does and I'm happier not being fully invested in stocks, especially when markets are way up like I believe they are right now.

If markets tank like I think they will over the next year or so, I will have plenty of cash on the side to invest. If they don't, I still will make some money and continue to save while I'm still working. I say, if you're comfortable in cash right now, don't make any harsh moves until you feel better about equities. We're just now beginning to see the effects of the credit bubble bursting...we've got a long way to go and it ain't gonna be pretty.
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Tight Thanks for your comments
Old 08-04-2007, 09:10 PM   #14
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Tight Thanks for your comments

Tight,

Thanks for coming back to me again. It will be challenging for me to really learn how to "manage" my investments, and I am definitely not in a big hurry. I am sure that I'll be here regularly and will have many questions. I know I can count on you all for advice even if I am asking about boring old dividends and fixed income and moderate growth instruments.

I think my driver will always be trying to beat inflation in the least painful way I can, or perhaps I should say "least volatile" way. If there is such a thing. Volatility = Pain to me.

I never even thought of pension and s/s as an annuity or considering it as part of my investment allocation. Interesting point.

Thanks for the input! I know almost nothing at this point, so don't hesitate to share your insight with me. We all ultimately have to make our own decisions, but I like different points of view and good discussion.

Tex
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Old 08-04-2007, 09:27 PM   #15
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TexasGal,

Although I grew up elsewhere, I was born in San Antonio, so I have a soft spot in my heart for fellow Texans.

I have two comments for you:

1. Taxes, in my opinion, can be a big factor in anyone's budget. I know Texas has no income tax, and you've mentioned property taxes. What about federal income taxes? Have you done an estimate of those with your newly retired status to figure out how much you might owe? Normally taxes go down a lot in retirement, but if you're doing a budget, you should make sure it's included.

2. I'd read up a little more on how FIREcalc works. I personally would say that if you entered the data into it correctly and it says you're OK, then you're almost definitely OK. It sounds like you just have that surreal feeling that many newly retired people feel. It's probably all the more common in scenarios such as yours where you retired without having planned it for years and years.

Good luck to you,

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Delay SS and use savings?
Old 08-04-2007, 09:30 PM   #16
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Delay SS and use savings?

Some of the articles I have been reading lately talk about delaying SS and letting it grow because it is the only COLA'd income many people will have. Would it actually make more sense for her to tap some of her savings at 62 versus grabbing SS based upon how much the SS benefit "grows" by waiting and then the COLA is on the larger amount? I know there is a lot of controversy about this but it seems like she has longevity in her family and she might come out ahead with the SS delay. Just a thought.
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Old 08-04-2007, 09:31 PM   #17
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Wow kj . . . I am glad I am not alone in this feeling. I, too, will accept and BE HAPPY with less in order to avoid big losses. I just can't handle it. I've been feeling freaky just watching the market lately, and I only have a tiny percentage of mine in stock funds. Those funds haven't even really suffered that much either. I just keep thinking what if I had all of my funds in stocks. I know the big gamers will just smack their lips and rub their hands together and dive in to make another million. There is a part of me that wishes I could be that way. But thanks I'll just keep it in park for a while and then I'll coast and then maybe I'll get on a bit more of a roll. Not today though.

Have a great weekend!
Tex
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Old 08-04-2007, 10:03 PM   #18
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2Cor521

Hi and thanks 2Cor521 for responding!

Yes, taxes are a huge deal when I finally have some money coming in. I had a retirement planner through my ex-employer's website that was excellent. Didn't even know it existed until about a month before I told them I was retiring, but I used it day and night for that month!

It factored in pension, s/s, inflation and taxes, the exact date I was retiring, date I would take my pension, and then when I would begin s/s and exactly the date when I thought I would begin tax-def withdrawals. Taxes will be a big bite by the time I'm using all 3 legs on my retirement stool, pension, s/s, and investments.

I'm going to have to really consider tax consequences and will need to become knowledgeable about how to manage all of this!

I'm going to read some of the books that are suggested and I'll spend some more time with FIREcalc. When it comes to the question "what are you invested in", I had a little trouble deciding how to handle that. In my case, I wish there was another very simple choice, i.e. MM at x%. I know that is not real compatible with having a successful ER, but there are some of us who would use it.

Probably until I really start living my retirement there is no calculator anywhere that will make me feel secure. You are right, I didn't plan for years, but I sure did get busy with those calculators and picking the brains of some fine people once the decision was made. And I'm going to keep doing it.

Thanks again for taking time to respond, 2Cor.
Regards,
Tex
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Old 08-04-2007, 10:08 PM   #19
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Buckeye, I suppose delaying s/s is another option. I am trying to figure out how not receiving $17,500 for x-years and instead receiving MORE later will play out. I bet someone has a spreadsheet that would tell me when I'd go into the black on that deal. I'm thinking about that so I'm glad you brought it up. If anyone has guidance on that point, I'd love to hear it.

Thanks Buckeye!

Tex
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Old 08-05-2007, 03:56 AM   #20
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TG - This is my gut opinion. Take it or leave. It is based on the parents living in the 90's and that you may do the same. And it assumes that you do not stand to inherit a lot of money when the parent passes.

You need to do a financial plan (both expenses and assets/income sources).

A rough assessment is that you own $400k in assets and a house.

Plus you have some insurance expenses in addition to your normal living expenses.

Sorry to be the party pooper, but I think you are pulling the plug a bit too early. Again, my opinion.

The portfolio is invested to conservatively.

17k of income is low (that amount helps plus it is COLAd). I would be planning on returning to work once the parent passes or recuperates. It is likely that after the break from work, you will feel a little better about work. My goal would be to boost the pension. Plus, it will boost SS some as well.

I might even need to plan to work until full retirement at 65. Trading the annoyance of a job for the uncertainty of living standards (above a certain minimum) would not leave me with better peace of mind... It would just be trading one problem/worry for another.

If you are one of those people that do not want to take alot of market risk, then consider waiting to take SS untill your are 70. If you retired at 65, you could use the $400k and pension to fill the gap. Essentially @ 70 you could recieve aprox 75% more than retiring at 62. You would need to get on the SS site to verify the actual amount closer to $30k. That would make your SS around (COLAd pension from Gov). That plus your 17 k from your pension (both COlad) will give you a reasonable guaranteed income (or as close as a guarantee can be).

You can have the same income for 65 - 70 by drawing the 30k from your portfolio. That would mean that you would use approx $150k from the portfolio to fill the 5 year gap.

I would invest the remaining portfolio in a more aggressive portfolio (60/40 mix) of low cost index mutual funds like VG. This will grow and could provide an extra 4% per year of spending ($10k/year) or fund extraordinary expenses that occur from time to time and/or emergency money.

I would congratulate you on achieving what you have achieved. Plus bless you for looking after your parent. Consider using HOSPICE if you think the parent is dying. Medicare will pay for in-home HOSPICE care. Depending on the parent's situation, they may be eligible for other moeny and services in your local area. Contact a Social Worker. It will take much of the burden off of you. Just give them a call in your local area.


I can understand your feelings about work. But realistically, you need to boost your reliable income sources. You are almost there, just hang in there a little longer.
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