Hoping to Retire, am I on track?

[Gunni]

I may retire early, but not as early as most on this forum! My wife and I are 55, 56. Hope to retire at 60. 401K's are both at 400-420K, we have rollovers and Roths totaling 250K, I'll have a pension at about 1,700k mo. and my wifes will be about 1,200k a mo. Equity in our hose is around 300K as of now. Of course there's SS on the horizon. My employer will bridge Health Care until I am Medicare eligable.

We hope to retire out of the NW to the SE, specifically to North Carolina. Pinehurst/Fayetville area).

My wife thinks we have to work longer, I'm burned out, see the 5 year finish line. Oh, my question? Based on the above, I believe we have a plan and enough to make it? What say you?

 

[REWahoo]

Gunni, welcome to the forum.

I see information about assets, income and health care, but nothing about expenses. I don't think anyone can provide a decent response unless we know that side of the equation. Once you have an idea of your annual expense needs, run your numbers through FIRECalc (link below) to get an idea of what you can safely spend each year. If projected expenses don't exceed that number, then you are probably good to go.

 

[Gumby]

Welcome Gunni:

One important variable that you have not stated is your spending. From that number flows everything else. Try plugging your numbers into Firecalc (the link is at the bottom of the page) and see how you do.

EDIT: I see REW beat me to it. Anyway, welcome aboard.

 

[Dog]

Not sure if each of your 401k's are at $400-$420k or if that is both accounts combined? Almost $3k/month in pension and SS alone set you up with a better income than many working folks. Add to that the savings in your Roths and 401ks (plus 5 more years to add to the accounts). It all comes down to expected lifestyle and expenses.

 

[Bestwifeever]

Maybe your wife and you need to discuss what you'll be comfortable with in terms of retirement income--she may want your retirement income to match current income, you may be happy to accept a barebones budget that accommodates anticipated expenses? Following REW and Gumby's suggestions to run your numbers in FireCALC and to predict retirement expenses will help you both get an idea of where you stand.

Good luck and welcome to the forum!

 

[Gunni]

As to expenses, we have a house payment (1100.00), and a car payment (350.00)that I will have paid off prior to retirement. We carry no other debt, credit cards when used are paid off monthly. We have 2 401K's that are 400K +

Thanks for your replies!

 

[REWahoo]

Having no debt, no mortgage going into retirement is great. But in order to really get your arms around "can we retire?" you will need to have a pretty good idea what your entire annual expense requirement will be once you pull the plug. Otherwise your question is along the lines of "We have 100 gallons of gas saved up. Can we make it from Chicago to Los Angeles?" That's a 2,000 mile trip and unless you know what mileage you get out of your vehicle, you can't even guess at an answer. If your vehicle gets 30mpg you've got it made. If it gets 10mpg you better work to buy some more gas before you take off on your trip.

Substitute expenses for mpg and you see why you need to know what sort of mileage (spending) you have before you can answer your "can we retire" question.

 

[LOL!]

Yes, one needs to know expenses and then do a FIRECalc run.

The WSJ had this recent article about several different near-retirement folks which I found interesting: Do You Need a Financial Makeover to Save Your Retirement? - WSJ.com because the folks depicted were not all the uber-savers that we see on this forum all the time. The advice given to these various folks was from professionals. Note that the comments diss the pros quite a bit.

 

[FANOFJESUS]

Gunni both of you should be in good shape in North Carolina. That is a low cost area to live in. You have a little over a million with a pension and SS. With a 4% WR, 35k in pension and I am guessing about 30k at least in SS that would put you at about 105k a year in a low cost living area. You would be in high cotton. I am on your side I think you can retire today. Some people on this board are retired with a million and no pension.

 

[teejayevans]

As to expenses, we have a house payment (1100.00), and a car payment (350.00)that I will have paid off prior to retirement. We carry no other debt, credit cards when used are paid off monthly. We have 2 401K's that are 400K +

Thanks for your replies!

Assuming you have $300K in house equity, you'll need at least $200k of
that to buy a nice retirement house, I assume you want to spend you
days golfing since you mention Pinehurst, add $300/mon golf dues, NC
does have modest taxes, so I would take you expected income and do
a state tax return, figure out your tax liability.
Check link below for real estate info:
Pinehurst MLS,Pinehurst MLS Listings, Pinehurst NC Real Estate, Pinehurst Real Estate, Southern Pines Horse Farms for Sale, Fort Bragg nc Real Estate, North Carolina Homes, Condos For Sale
TJ

 

[Bikerdude]

Gunni, welcome to the board. How much income do you currently live on? Do you plan to increase or decrease your income in retirement? Until you put numbers to paper and run FireCalc it is difficult to project how you will fair in retirement. In addition, you will need something concrete to convince your wife.

 

[REWahoo]

In addition, you will need something concrete to convince your wife.

Yep. "I asked a bunch of folks on an internet forum and they said they thought I was OK" probably won't cut it.

 

[W2R]

Gunni, welcome to the Early Retirement Forum!

If you retire at 60, that will be younger than me. I finally retired a month ago, at age 61 (I will be 62 in June). It has been a dream come true.

I think you will have more than enough to live on IF your anticipated standard of living is about the same as mine. I live alone and this past year have spent somewhere around $21K and I am completely happy. But my wants and needs are simple, and as the others pointed out, we do not know if expenses like luxury cars, international travel, a McMansion, and such things are something you expect in retirement. You are smart to be planning to move to a low cost part of the country.

At any rate, glad to "meet" you and I hope that our inquisitive posts don't chase you away.

 

[Midpack]

I may retire early, but not as early as most on this forum! My wife and I are 55, 56. Hope to retire at 60. 401K's are both at 400-420K, we have rollovers and Roths totaling 250K, I'll have a pension at about 1,700k mo. and my wifes will be about 1,200k a mo. Equity in our hose is around 300K as of now. Of course there's SS on the horizon. My employer will bridge Health Care until I am Medicare eligable.

We hope to retire out of the NW to the SE, specifically to North Carolina. Pinehurst/Fayetville area).

My wife thinks we have to work longer, I'm burned out, see the 5 year finish line. Oh, my question? Based on the above, I believe we have a plan and enough to make it? What say you?

Since you didn't give us expenses to answer, I've instead worked backwards and provided the cocktail napkin equivalent of what you can afford to spend in retirement given your resources (and a boatload of assumptions). You have to do your own math (ie, you didn't say if the pensions were COLA'd as assumed below), but if you keep it below $7,500/month or even safer at $5,600/month - history would suggest you have a very good chance. Most of us could easily survive on that level of spending. Don't forget taxes and contingencies when you estimate your spending/expenses. See how simple it is

Source	Equiv Nest Egg
401k's	$ 400,000
IRA's	$ 250,000
DH Pension	$ 510,000	$ 1,700/mo
DW Pension	$ 360,000	$ 1,200/mo
SS	$ 750,000	$ 30,000/yr
Tot Equiv	$ 2,270,000
4% SWR	$ 90,800	$ 7,567/mo
3% SWR	$ 68,100	$ 5,675 /mo

 

[Gumby]

Many financial and investment firms push a "formula" approach -- i.e. you should plan for 80%, 70% (choose a number here %) of your current annual income. Don't believe it. The truth is that it is all about your own personal spending. You need to cover that amount, not some generic formula.

Something that I have found helpful is to track all of our spending on an Excel spreadsheet. I have been doing it for the last 4 years and I now have a very good handle on the "how much" and "where" of our spending. This allows me to make adjustments for spending that I am confident will change when I do retire. For example, I predict that my gasoline and dry cleaning bills will decrease. My vacation travel expense and health care will go up.

Obviously, my projections will never be 100% correct, but the use of my own actual historical data gives me a good enough yearly spend number to use for planning. And as I mentioned earlier, from that comes everything else.

 

[REWahoo]

Like Gumby, I began tracking our spending three years prior to retiring. Adjusting those numbers for expected changes after retirement - plus running FIRECalc over and over and over - gave me confidence that I had enough to pull the plug. I did - and I did.

It was also great to be able to show DW those calculations.

 

[LARS]

Since you didn't give us expenses to answer, I've instead worked backwards and provided the cocktail napkin equivalent of what you can afford to spend in retirement given your resources (and a boatload of assumptions). You have to do your own math (ie, you didn't say if the pensions were COLA'd as assumed below), but if you keep it below $7,500/month or even safer at $5,600/month - history would suggest you have a very good chance. Most of us could easily survive on that level of spending. Don't forget taxes and contingencies when you estimate your spending/expenses. See how simple it is

Source	Equiv Nest Egg
401k's	$ 400,000
IRA's	$ 250,000
DH Pension	$ 510,000	$ 1,700/mo
DW Pension	$ 360,000	$ 1,200/mo
SS	$ 750,000	$ 30,000/yr
Tot Equiv	$ 2,270,000
4% SWR	$ 90,800	$ 7,567/mo
3% SWR	$ 68,100	$ 5,675 /mo

Curious your reasoning behind the pension having a value of 25 times?

Personally, I would be circumspect at looking at a pension having the equivalent value of 25 times. I doubt you can monetize (i.e. borrow agaisnt the income stream) a pension at anywhere near that multiple (even in this current low interest rate environment). Second, you cannot rely on its being there in toto (I assume) if a spouse dies.

 

[Katsmeow]

Well another way to look at it is pensions are $2900 a month. Let's say SS is collectively $2500 a month. Those two together is $5400 a month (granted the pension may be non-COLA). Of course, SS not available until 62.

401K and IRAs are $650,000. Let's use withdrawal rate of 3.5%. That is $1895 a month. Total is $7295 a month or $87540 a year pre-tax.

Now to bridge the gap from 60 to 62 they would probably have to withdraw at a higher rate for those 2 years. Also, I don't know when the pensions start.

Total is

 

[Gunni]

So just to clear up the 401K situation, both my wife and I each have 401K's, current value is at 405K and 410K respectively. I ran Firecalc as suggested, data looks great! We are low expense creatures of habit. I tallied the basics, Long Term Health Care, Insurance, Home/Auto, monthly bills, Electric, Cable, Food, etc. I beleive it comes to 3800.00 a month at this point, subject to change.

 

[LARS]

So just to clear up the 401K situation, both my wife and I each have 401K's, current value is at 405K and 410K respectively. I ran Firecalc as suggested, data looks great! We are low expense creatures of habit. I tallied the basics, Long Term Health Care, Insurance, Home/Auto, monthly bills, Electric, Cable, Food, etc. I beleive it comes to 3800.00 a month at this point, subject to change.

It would seem that you are okay as long as SS and your pension are secure. The risks to SS are means testing (which you would most likely be okay on) and the credit worthiness of your pension (though of course you will have some coverage under the government's pension guaranty board).

 

[megacorp-firee]

As to expenses, we have a house payment (1100.00), and a car payment (350.00)that I will have paid off prior to retirement. We carry no other debt, credit cards when used are paid off monthly. We have 2 401K's that are 400K +

Thanks for your replies!

Welcome Gunni, I think that what some of the others are trying to tell you is to make your expense budget first. Otherwise you (or anyone else) cannot figure out if you are on track or not to retire. You seem to be more focused on the portfolio side of the equation.

 

[Midpack]

Curious your reasoning behind the pension having a value of 25 times? 4% WR (just getting the ball rolling...)

Personally, I would be circumspect at looking at a pension having the equivalent value of 25 times. I doubt you can monetize (i.e. borrow agaisnt the income stream) a pension at anywhere near that multiple (even in this current low interest rate environment).

Good grief, I did say "cocktail napkin!" And the OP has to put something into this as well. New "cocktail napkin" chart:

Source	Lump Sums	Annual Income	Monthly Income
DW 401k	$ 405,000
DH 401k	$ 410,000
IRA's	$ 250,000
Tot Nest Egg	$ 1,065,000
4% SWR		$ 42,600	$ 3,550
3% SWR		$ 31,950	$ 2,663
DH Pension			$ 1,700
DW Pension			$ 1,200
SS		$ 30,000	$ 2,500
4% SWR			$ 8,950
3% SWR			$ 8,063

So just to clear up the 401K situation, both my wife and I each have 401K's, current value is at 405K and 410K respectively. I ran Firecalc as suggested, data looks great! We are low expense creatures of habit. I tallied the basics, Long Term Health Care, Insurance, Home/Auto, monthly bills, Electric, Cable, Food, etc. I beleive it comes to 3800.00 a month at this point, subject to change.

You can give notice manana --- via phone...

 

[smjsl]

Welcome Gunni, with these kinds of numbers and the info you mentioned I would seriously consider retiring today or say in a year to get more comfortable with the idea, not in 5 years! You can adjust the suggestions here to your current situation and see if what you have is already enough...

 

[Bikerdude]

Welcome Gunni, with these kinds of numbers and the info you mentioned I would seriously consider retiring today or say in a year to get more comfortable with the idea, not in 5 years! You can adjust the suggestions here to your current situation and see if what you have is already enough...

I would say that depends upon when the pensions kick in.

 

[Katsmeow]

You should do a FIRECALC for your income you want (pre-tax) putting in SS for when you expect to take it and putting in pensions for when they will start. You will need a higher withdrawal rate until SS and the pensions kick in.