Would you retire, if it were you ?

[rkser]

I need your opinion about the situation I find myself regarding whether to retire. So here goes, please bear with me, as I try my best to explain

I am 55, DW is 50. We have a small business which has seen its better days. We have 2 children, a daughter is self sufficient & getting married soon, son leaving home for a state college.

I am disabled, and am on disability income of tax free $13000/ month till age 65 from 2 policies which I had bought 2 to 3 decades back when the business was going good.
DW & I work about 20 hrs/week each in our business & gross about $50k both combined. In addition we make about $60k after expenses from the rentals from commercial real estate we own including rent from our business & other tenants. We get our MEDICAL INS. from our business.

Taxable accounts with mostly Vanguard Stock funds & Cash -$ 1,100000
Retirement accounts with Vang & Fidelity - Bond,Tips funds -$ 1,400000
529s & Prepaid education accounts for our son -$ 200000

We own our house free & clear, which we want to downsize -$ 400000
The commercial real estate, mentioned above -own Free & Clear -$ 400000
For last 10 months we have been spending $10,000 a month, possibly this may come down some as son's expenses will be from the 529s soon.

Although nobody knows for sure, I expect my thigh to get weaker sooner than of a normal person, due to a weak leg to start with from the multiple Knee Replacements after the unfortunate road accident. I am afraid if I wait too long I may not be able to some travel & do things what I want to do in retirement.
I would like to volunteer & work a day a week ... or something like that & not be bound by a schedule, but at the same time I can see myself go crazy very easily, very fast if I am left idle. Although this may change I guess, as I pick up new hobbies & start talking it easy.
In my present business if I travel for say 3 months, the clients will soon find some other place to go & I may not have anything to return to, ie the business works & makes money only if I am physically there.

I have diabetes & hypertension, & our present Insurance sales person thinks I will not get a individual Health Insurance policy if I apply.
Firecalc, Fidelity income planner & few other calculators show it will probably(90 to 100%) be fine, inflation adjusted.I think we may be able to wing retirement financially, but do not have a clue about the medical expenses till age 65, i.e for another 10 yrs. What would you do? any & all comments, ideas & advice will be appreciated.

 

[REWahoo]

Maybe I missed it, but if you retire where/how are you planning to get medical coverage between now and age 65?

 

[rkser]

Hi Rewahoo,

That is one of the main question, I may have to self insure myself.

Thanks

 

[REWahoo]

That is one of the main question, I may have to self insure myself.

From my perspective that would make retirement now a no-go. Even for someone in perfect health, risking ten years with no coverage is a huge gamble. And with your health situation...

 

[DangerMouse]

Given your health issues I would say you should retire asap and enjoy life.

However, on the other hand I would say you need to stay with a job that is going to provide medical insurance until you are eligible for medicare.

What about moving to Mexico where costs are such that being self-insured is unlikely to cost you everything?

 

[lemming]

There are high risk pools in almost every state-spendy but you have the resources.Or coverage after you have had credible group coverage without rating per HIPAA rules.
Or high deductible policies that only cover the catastrophic events.
Start looking with the home state carriers then consider Massachusetts =Plymouth looks like a nice town.

 

[WilliamG]

Have you considered applying for SS disability?

 

[Gone4Good]

From my perspective that would make retirement now a no-go. Even for someone in perfect health, risking ten years with no coverage is a huge gamble. And with your health situation...

+1

 

[omni550]

Have you considered applying for SS disability?

+1

...and if you do, it's quite likely that it will get denied (as that's rather standard for SS)...and then you appeal...and have a better chance of getting it.


omni

 

[LOL!]

Wife could get a job elsewhere that has family health insurance benefit.

High-risk pool insurance seems to be affordable by you.

SS disability is not gonna happen since you are working now so it seems you are able to work.

It seems like your business could go on for years and years without any customers or profits just to keep your health insurance going. Have people done that?

 

[megacorp-firee]

...
I am 55, DW is 50. ...
... disability income of tax free $13000/ month till age 65
we make about $60k after expenses from the rentals from commercial real estate we own including rent from our business & other tenants.

Taxable accounts with mostly Vanguard Stock funds & Cash -$ 1,100000
Retirement accounts with Vang & Fidelity - Bond,Tips funds -$ 1,400000
529s & Prepaid education accounts for our son -$ 200000

We own our house free & clear, which we want to downsize -$ 400000
The commercial real estate, mentioned above -own Free & Clear -$ 400000
For last 10 months we have been spending $10,000 a month, .

I have diabetes & hypertension, & our present Insurance sales person thinks I will not get a individual Health Insurance policy if I apply.
Firecalc, Fidelity income planner & few other calculators show it will probably(90 to 100%) be fine, inflation adjusted.I think we may be able to wing retirement financially, but do not have a clue about the medical expenses till age 65, i.e for another 10 yrs. What would you do? any & all comments, ideas & advice will be appreciated.

So you will have
156K per year from disability insurance payment until you are 65 years old.
60K (assuming you can get a tenant to replace your business rent) per year from rental income, plus whatever inflation increase you may be able to get. This is forever I assume.

You have $2,500,000 in FIRE funds.

Your home and property come to $800,000

Your expenses are $120,000 and may be lower (I did not count your son's
529 plan funds). It seems that you are ok on the expense side (156k-120k = 36K). So you have 36K to fund your insurance.
Go to a local insurance broker and see what a policy would cost you with your existing conditions. ... and you can use your FIRE funds to finance your travel.

I don't see a problem. Good luck.

 

[chinaco]

It appears that you are in pretty good financial shape. Some of your expenses will reduce when you stop working. Were the expenses you listed net of taxes?

Keep in mind that no matter what your balance sheet looks like today, that could change if the assets are invested in risky securities. Plus, planning for 40 years into the future is at best moving in a direction. Be prepared to make adjustments.

Some of the numbers people cited may be a bit generous on the WR%. If the horizon is 40 years (remember your spouse)... 4% inflation adjusted might be too high... many studies show a WR rate in the 3% range for that length of time.... it all depends on how long you live and how you intend to setup and manage your income streams (the financial instruments you use to fund it) and how willing or able you are to cut your living standard if choose to take more risk.

You need to work on a complete financial plan before you make any decisions. Including how you intend to manage your money during the withdrawal phase (retirement). Be thorough... this should include managing your various risks (financial and life risks that can affect your financial situation).

Health care coverage is very important... it could be a risk to your families financial well being. Make sure you have a solid plan.

Health care reform options should be available before long (assuming the courts do not strike it down). Do you have the option to use some form of COBRA through your business to fill the gap?

 

[Dawg52]

There are high risk pools in almost every state-spendy but you have the resources.Or coverage after you have had credible group coverage without rating per HIPAA rules.
Or high deductible policies that only cover the catastrophic events.

This is what I would dig into. If you can get a policy through the state, I would retire and enjoy a few things before your health gets worse.

 

[jerome len]

Sell.......Sell......Sell!

Get the health insurance settled 1st. Can you get Cobra which would give you time to find new insurance. Look at where you want to retire, could you pick a State where you know you can get high risk insurance?

If your business is declining, get out and enjoy yourself. 13k until 65 should allow you to invest, save and have a great income with Medicare once you're eligible at 65.

Kids are taken care of......do you have family support for your retirement plan. Sometimes kids and DW will know what really will make you happy. You sound like you want to retire, if so, do so. You can afford it, you can do it.....if you really want to,

And, work on health. See a good Doc and get a plan for a return to health. You can do a lot about diabetics......change diet, excercise (join a gym with a swimming pool), walk, set a goal for health......I did and what a difference......and it can be fun, trying to cook, find restaurants with calory counts, trying veggies that will make you healthier. Watching CNBC to help with investments while walking on a treadmill.

You're at a point where you can do so much because of what you have earned in the past. You are very lucky and retirment will be work......fun work,,,,,,traveling, excercising, cooking, What an opportunity. Good luck!!!!!!!!!

 

[RunningBum]

Could you hire someone else to run your business, while staying employed but working minimally to keep your health insurance? Or just work minimally to keep the dwindling business alive?

 

[MichaelB]

Could you hire someone else to run your business, while staying employed but working minimally to keep your health insurance? Or just work minimally to keep the dwindling business alive?

+1

Your assets + income seems to be enough to allow you to retire, but they are not enough to self insure for 10 (and 15) years.

If your state has a high risk fund that is open and offers coverage that meets your basic needs, self insuring for 6 months is an option. I would keep this as a last choice option due to the unlimited financial risk during that 6 month period.

Cobra does not usually apply to very small businesses but every state has some form of required conversion plan from group to individual policies. I would suggest you speak with an insurance agent to see what conversion options exist and if there are any "guaranteed renewal" conversion options.

Can you keep the business open with minimum time and effort even if does not make any money - a kind of "mostly retired"? Most small business group policies are guaranteed issue - the price can go up but you can keep the policy, and if you can keep the business open this may be your best option for health insurance.

 

[rkser]

Thanks everyone for your much appreciated comments -

MichaelB - Can you keep the business open with minimum time and effort even if does not make and money - a kind of "mostly retired"?
- Yes that could be done easily, some money to keep the doors open & lights on, but yes that is easy.

RunningBum - Could you hire someone else to run your business, while staying employed but working minimally to keep your health insurance?
- This may be hard, as my line of business needs a skill set & whoever has them will be able to make more on his own than what he can get from running my business.

lemming - There are high risk pools in almost every state-spendy but you have the resources.Or coverage after you have had credible group coverage without rating per HIPAA rules.
Or high deductible policies that only cover the catastrophic events.
-Great idea, I will explore this with an health insurance independent agent.

chinaco - Keep in mind that no matter what your balance sheet looks like today, that could change if the assets are invested in risky securities.
- All the assets are in Mutual Funds in Vanguard & Fidelity, most of them are in Index Funds, & asset allocation is - 50% Stock /50% Bond - and it will go more in bonds as we age.

I am listening & learning, please keep chiming in. Thanks a lot

 

[chinaco]

Thanks everyone for your much appreciated comments -
...

I am listening & learning, please keep chiming in. Thanks a lot

The withdrawal phase is pretty complicated. A concise description of many of the conventional ways to plan and manage it are documented in Jim Otar's book: "Unveiling the Retirement Myth". His book provides a basic introduction to many of the methods (compare and contrast), the pros & cons, along with a framework to make certain decisions. It is a good place to start.

There are other books written by financial planners that tout their spin on specific approaches (i.e., their branded method)...

You will get opinions from people here (well intentioned)... but you will not know BS from good advice unless you have a basic understanding of topic.

And people will share their opinion liberally whether they know what they are talking about or not...

You acquired approx $3M in assets... are you really going to take financial advice from people off of the internet? Consider any comments from people as information that requires more research or possibly pointing you in a direction. Do not blindly follow it.

Do yourself a favor and find a good book on the topic and read it. Be patient and learn... there are no short-cuts! Even if you eventually choose to seek advice from a financial adviser, a little knowledge will help you to know what they are telling you (or if they are even on the level).

 

[RunningBum]

Someone who has made millions probably doesn't need to be told not to blindly follow advice on the internet either, don't you think? Isn't one of the main points of this board to ask questions, and to offer answers, opinions, and advice? I think everyone knows to take this all with a grain of salt. If you have a specific issue with the advice offered, why not say what it is? Or should we just shut down this board, because nobody here can give rock-solid answers?

Books aren't fool proof either...sometimes authors don't know what they are really talking about either.

It seems pretty obvious that the main issue here is health insurance in the bridge years. Does Otar cover this? I don't know the answer to that.

 

[MichaelB]

MichaelB - Can you keep the business open with minimum time and effort even if does not make and money - a kind of "mostly retired"?
- Yes that could be done easily, some money to keep the doors open & lights on, but yes that is easy.

Continuing coverage from your business based policy may be your best option for health care for the time being. In Florida you are assured of coverage when your business has at least 2 employees, although there is no limit on price increases. Even if your current insurance were to withdraw from the market you are assured access to a policy without restrictions due to individual underwriting or pre-conditions.

In addition, access to health insurance through your business makes you ineligible for the high risk pool.

 

[Ken11]

Well... I took the plunge last year at age 56 with significantly less savings/income than you describe. (FWIW- I've got an MBA in finance from a top business school.)

We are similar in some ways. DW and I are now truly empty nest and we just downsized. While I do not have your health issues neither do I have the disabilty income that can certainly cover the costs of insuring against a catastrophic loss.

In my plan I am budgeting significantly less in expenses than you.
However, I'm not feeling pinched and have not had to make any significant adjustments in my daily life.

So, I'd vote "yes". Enjoy.