Zuma
Dryer sheet aficionado
Hello,
I would really appreciate a critique of our thinking about retiring at the end of this year. Here's our situation:
Age, Health & Longevity
At year end I will be 54.5 and DH will be 47. I have some relatives who have lived well into their 90s and even 100. DH's family's track record isn't so strong, but we are both in good health presently. My retirement forecasting has been built around assumptions that we will both live to 95.
Major Assets/Income Sources:
My 401k/IRA: $630,000 - I plan put this all into the IRA when I leave my job to lower expenses and not withdraw from it for 5 years, when I will be 59.5. Investments are largely in Vanguard and Schwab index funds and will continue to consolidate in this direction.
DH 401K/IRA: $375,000 - Same plan here. All into IRA at end of year, and leave untouched for at least 13 years when he will be 59.5.
Taxable Accounts (Cash/Brokerage): $300,000 - This is the pool of money we are planning to live on from Jan 2015 - Dec 2019. In this we will have 2 years of expenses in cash to protect against market volatility.
House: Estimated market value of $325,000.
Social Security: I can get partially-useful estimates from the SSA site. The estimates show $16,680/yr if I stop working at year end and begin collecting at 62. I actually plan to wait until later, but the calculator tool on-line doesn't handle that exact scenario, so I assume this is a conservative number. (I worked in state government for 9 years, which reduced what I paid in, but I won't have a government pension).
DH's SS estimate is $15,570/yr at age 62. Again, we would probably wait until he is 67 or 70.
Liabilities:
None. Mortgage was paid off last year. No CC debt or loans.
Budget:
I have been tracking our actual spending for a year. We have been "practicing" living on our targeted retirement expense budget for the last 4 months and have been pretty successful. We have cut out services provided by others, including snow removal, yard care, and house cleaners. We have eliminated cable TV and land phone line. Our data leaves me feeling pretty confident we can live on between $40,000 year (frugal level, including ACA Bronze plan) - $45,000 year (luxurious level, more spending on travel, hobbies).
With this spending level, and the $300K set aside for the first five years, we will have a cushion of somewhere between $75,000 - $100,000 before I reach 59.5 and start to draw on my tax-deferred investments. But, my back-up plan would be to return to work/do consulting if necessary during this period.
Family:
We have no children.
My mother/step-father: Living on a limited income, but are making it work with no debt, etc. They both have chronic health conditions which will probably mean that we will need to play a bigger role in helping them in the future, whether that is money, housing, or other types of care. Today I pay a home care service to clean their home every other week. They live 4 hours away and are in their 70s.
My In-Laws: Poor financial management. We don't know all of the details, but can see a mortgaged house, 2 leased cars, and suspect substantial credit card debt. In their late 60s and retired recently. My FIL had a decent income, but they lived at or above their means for years, and we haven't seen a reduction in spending since he retired. They live close to my parents.
Key Changes after Retirement:
We are planning to sell our home and build a small, energy efficient (solar/geothermal) home in a lower-tax community closer to the aforementioned family members. We pay $4,200 yr today in property taxes and I would like to cut that by close to 50%. We will avoid taking on a mortgage, assuming we can get around $300K out of the sale of our house.
In the building plans we are considering an additional living unit, MIL apartment or duplex design for a few reasons:
1. Expected need to provide help to one or both sets parents over the next 5 - 10 years as their age and/or financial condition deteriorates. We don't plan to ask for rent money from them, but will ask that they cover their food and utility costs.
2. Opportunity to generate a bit of income with a tenant when we don't have family members in the additional unit.
3. Opportunity to have a home care person live in the unit for free/low cost to help us out when we reach the point of needing assistance ourselves.
I am thinking of our retirement financial situation in three phases:
1. The first five years - live off the taxable accounts.
2. Years 6 - 13 - live off what is left in the taxable accounts, and begin drawing on my retirement savings.
3. Years 13 and beyond - DH's retirement savings become available to us as well.
SS becomes available to us during phases 2 and 3 as we both reach 67 or 70.
FIREcalc shows almost no chance of failure if I am understanding the output correctly.
Any thoughts on defects in this plan? I am trying to be very thorough in thinking this through, but this is (obviously) a big decision for us and outside perspective would be much appreciated.
I would really appreciate a critique of our thinking about retiring at the end of this year. Here's our situation:
Age, Health & Longevity
At year end I will be 54.5 and DH will be 47. I have some relatives who have lived well into their 90s and even 100. DH's family's track record isn't so strong, but we are both in good health presently. My retirement forecasting has been built around assumptions that we will both live to 95.
Major Assets/Income Sources:
My 401k/IRA: $630,000 - I plan put this all into the IRA when I leave my job to lower expenses and not withdraw from it for 5 years, when I will be 59.5. Investments are largely in Vanguard and Schwab index funds and will continue to consolidate in this direction.
DH 401K/IRA: $375,000 - Same plan here. All into IRA at end of year, and leave untouched for at least 13 years when he will be 59.5.
Taxable Accounts (Cash/Brokerage): $300,000 - This is the pool of money we are planning to live on from Jan 2015 - Dec 2019. In this we will have 2 years of expenses in cash to protect against market volatility.
House: Estimated market value of $325,000.
Social Security: I can get partially-useful estimates from the SSA site. The estimates show $16,680/yr if I stop working at year end and begin collecting at 62. I actually plan to wait until later, but the calculator tool on-line doesn't handle that exact scenario, so I assume this is a conservative number. (I worked in state government for 9 years, which reduced what I paid in, but I won't have a government pension).
DH's SS estimate is $15,570/yr at age 62. Again, we would probably wait until he is 67 or 70.
Liabilities:
None. Mortgage was paid off last year. No CC debt or loans.
Budget:
I have been tracking our actual spending for a year. We have been "practicing" living on our targeted retirement expense budget for the last 4 months and have been pretty successful. We have cut out services provided by others, including snow removal, yard care, and house cleaners. We have eliminated cable TV and land phone line. Our data leaves me feeling pretty confident we can live on between $40,000 year (frugal level, including ACA Bronze plan) - $45,000 year (luxurious level, more spending on travel, hobbies).
With this spending level, and the $300K set aside for the first five years, we will have a cushion of somewhere between $75,000 - $100,000 before I reach 59.5 and start to draw on my tax-deferred investments. But, my back-up plan would be to return to work/do consulting if necessary during this period.
Family:
We have no children.
My mother/step-father: Living on a limited income, but are making it work with no debt, etc. They both have chronic health conditions which will probably mean that we will need to play a bigger role in helping them in the future, whether that is money, housing, or other types of care. Today I pay a home care service to clean their home every other week. They live 4 hours away and are in their 70s.
My In-Laws: Poor financial management. We don't know all of the details, but can see a mortgaged house, 2 leased cars, and suspect substantial credit card debt. In their late 60s and retired recently. My FIL had a decent income, but they lived at or above their means for years, and we haven't seen a reduction in spending since he retired. They live close to my parents.
Key Changes after Retirement:
We are planning to sell our home and build a small, energy efficient (solar/geothermal) home in a lower-tax community closer to the aforementioned family members. We pay $4,200 yr today in property taxes and I would like to cut that by close to 50%. We will avoid taking on a mortgage, assuming we can get around $300K out of the sale of our house.
In the building plans we are considering an additional living unit, MIL apartment or duplex design for a few reasons:
1. Expected need to provide help to one or both sets parents over the next 5 - 10 years as their age and/or financial condition deteriorates. We don't plan to ask for rent money from them, but will ask that they cover their food and utility costs.
2. Opportunity to generate a bit of income with a tenant when we don't have family members in the additional unit.
3. Opportunity to have a home care person live in the unit for free/low cost to help us out when we reach the point of needing assistance ourselves.
I am thinking of our retirement financial situation in three phases:
1. The first five years - live off the taxable accounts.
2. Years 6 - 13 - live off what is left in the taxable accounts, and begin drawing on my retirement savings.
3. Years 13 and beyond - DH's retirement savings become available to us as well.
SS becomes available to us during phases 2 and 3 as we both reach 67 or 70.
FIREcalc shows almost no chance of failure if I am understanding the output correctly.
Any thoughts on defects in this plan? I am trying to be very thorough in thinking this through, but this is (obviously) a big decision for us and outside perspective would be much appreciated.
