Looking over the cliff

[Castaspey]

As a longtime lurker on this site, I have been impressed by the quality of advice regarding retirement finances that the members offer to one another. So while my decision to retire is a done deal (irrevocable and happening at the end of the month,) and I think I have things pretty well lined out, I might sleep better at night if there is some agreement that I have not missed anything important. So here goes…


DW and I have both just turned 60, emptynesters whose kids appear to have launched, are in good health, and can realistically expect to live into our 90’s, based on family histories.


Investment Assets
After tax accounts $950k
Trad. IRA or equivalents $1.54M
Roth IRA $125K
Total $2.615M


Liabilities
Mortgage $140k

Post-Retirement Income
Int. & Div. $55k
Pension annuity $37k
Early Retirement $21k (plus 90% of health insurance coverage, both until age 65)
Total $113K

Post Retirement Expenses
Budget $75k
LT care ins $8k
Taxes $22k
Total $105k

I have a significant portion of the investment assets in corporate bonds, preferred stocks, and high yielding stocks. The pension annuity comes from my retirement as being a state employee for more than a decade prior to 2000. The state allows retirees to take their annuitize their account balance and does so at an above-market rate, so doing so was a no brainer. The annuity is full survivorship and a 2% COLA.


It appears that there will be three periods to our retirement. From ages 60-65 the early retirement incentive from my current employer will provide sufficient income and health insurance coverage to about match our expenses, and give us some money for extravagances. From 65-70 we will have to draw down principal, but less 20% of our current assets. We plan on taking SS at 70 and expect to receive somewhere around $55k/yr, which will put us substantially back into a cashflow positive situation.


My wife wants to join me in retirement, leaving a job which she does not find to be fulfilling but is quite lucrative and allows her to work as few or as many hours as she wants. I keep suggesting that she could work OM.5Y just to give us a chance to get used to not having my paycheck.


So what am I missing? Why am I so unsettled about shifting from being an asset accumulator to an asset utilizer?


Thanks in advance for your thoughts.

 

[HI Bill]

So let me get this straight...from age 60 to 65, you won't have to touch your nest egg, and then from 65-70, you'll be taking $20K annually from what's now a $2.6M nest egg?

If I'm not misunderstanding what you've shared, the only thing you're missing is retirement! Go get 'em!

 

[Dtail]

Have you put your numbers into Firecalc, but just looking at your numbers from a high level, you are definitely good to go financially.
Time is more important than money, especially when the money battle has been conquered.

 

[Gumby]

I wouldn't call it "looking over the cliff." More like "cresting the summit" after a leg burning climb. The view is beautiful and you have a real feeling of accomplishment.

 

[liberty53]

If I understand correctly, when running firecalc you should not count your dividends and interest income as "income." This is because the dividend and interest should be considered a withdrawal from your portfolio.

Therefore you have expenses of $105k and income of $58k or a need of $47k.

That need has to be satisfied from your portfolio - which at 4% would be a withdrawal of $104k - so you are good to go. Even a hyper conservative 3% withdrawal of $78k is more than enough.

 

[Castaspey]

I wouldn't call it "looking over the cliff." More like "cresting the summit" after a leg burning climb. The view is beautiful and you have a real feeling of accomplishment.

"Cresting the summit" may be right, but I feel like my headlights are still pointed up and not giving me much of a view of the other side yet.


And my firecalc runs all turn out fine.

 

[jollystomper]

I retired at 60 end of June last year, with few assets and income than you have, but planning to spend more than you are. Six months into retirement, my assets were down due to the market, but due to planning to cash on hand it did not impact our spending plans. 18 months into retirement, our SWR is less than half of what we thought it was, we are just 5% over our intended spending (which we chose to do intentionally, see the "Blow That Dough" thread), and our investments assets (even with a conservative AA) are over $100K higher than when I retired. So... if I can do it, you certainly can!

My DW is continuing to work part time, I did not factor this into our retirement budget so that she could choose to stop whenever she wanted. She really wanted me to retire and felt her keeping working part time would help cushion things. But after seeing me have fun for the past 18 months, and how well we have managed financially, she is planning to stop next year. So do not be surprised if your retirement inspires your wife to retire sooner than later . Good luck!

 

[davebarnes]

Happy New Year.
What you are missing is: “Honey, quit on January 3rd”.

 

[FI_RElater]

"Cresting the summit" may be right, but I feel like my headlights are still pointed up and not giving me much of a view of the other side yet.


And my firecalc runs all turn out fine.

at the top of the "fourteeners" there's nothing for your headlights to bounce off of....
ages ago, when still living in CO, I'd gone up Mt Evans during the evening and ended up coming down after dark (this was ages ago when you didn't have to pay and it was open to visitors).... indeed, it's difficult to imagine your headlights really have nothing to bounce off except that small one lane (if that, sometimes) and there's a LONG way down if you mess up


we're in similar territory, but already retired with house paid off and already in deferral mode for SS.
We use a 3.5% wr as a upper limit of portfolio draw, and haven't come close to that yet. we still haven't used all the original values of the CD ladder originally set up... much less the other rungs added to it. But my pension isn't full survivor, like yours is (good for you), so you should have further confidence of a good retirement (we just had to plan on saving more for surviving spouse).

In your case, with a $105 k need, there's still a slight SORR but it's negligible given that even with a 40+% decline in equities you should be good (what's your allocation?... ours is 45% equities right now, could go higher after starting SS). I would agree with others that say that she should also be able to retire as long as you have accounted for health insurance, including all deductibles, in your numbers.

 

[DrRoy]

Only counting the pension against $105K need, you would be at 2.6% WR. Room for more if needed.

 

[mrfeh]

"Cresting the summit" may be right, but I feel like my headlights are still pointed up and not giving me much of a view of the other side yet.


And my firecalc runs all turn out fine.

Sounds like it's just the anxiety of transitioning from accumulation to living off your stash. It's not uncommon.

Financially, you have no worries.

 

[pacergal]

Welcome.
Looks like you and your wife could retire together without problem. If she wants to leave an unfulfilling job, why not?? Don't want any resentment building as she walks out the door and you are still home!
Retire together and get on with the rest of your lives

 

[Rianne]

Just to add a bit of humor. It's like learning to swim. The best way is to get pushed into the deep end. Once there, you'll learn to float on your back, look up at the sky and clouds. You'll realize how relaxed and peaceful you feel. Jump in, the water's wonderful.

 

[Castaspey]

Thanks for all of the input. This illustrates the cognitive and emotional components of retirement decision making. Cognitively I see the numbers as clearly as you all do, and they don't change regardless of the income forecaster (like firecalc) I plug them into. Mathematically, I got this. But that really does not extend into the emotional realm and allow me to be calm and comfortable just yet. It will be interesting to look back on this thread in 90 days and see where my head is at.

 

[MRG]

It's an amazing transformation that occurs. I think I was expecting the world to stop when I quit working. It was 2013 and I was expecting the next great recession only worse.

You'll be fine.

 

[HI Bill]

My cognitive dissonance is in looking at the 4% rule, and wondering, what if...what if the US hits a 20+ year recession like Japan? Even the 3.5% WR has some risk, but if you wait until you're overly safe, you've traded too many years for that extra margin of safety that likely won't be needed.