Hi, I'm Bill, 58 yo in Alaska

[bada bing]

Hello all,
My first post. I've been lurking for a few weeks. In the last couple months I've been on a research kick, looking into retirement. I know I'm a little late with the new interest, especially around this community of retirement overachievers. Better late than never (I hope for my case).

I'm a happily single (divorced 12 years ago) male with no kids. I work in the oil patch and have a pretty stable and secure job in spite of the current turmoil in the oil biz. I started my "career" in the oil patch late, at 39. Prior to that I spent a couple of great decades in the boom and bust world of commercial fishing in Alaska. Made some good money occasionally back in those days but not much tangible remains. What I have now is the result of my most recent 20 years as a wage earner working for big, evil Megacorp Oil. I started realizing that my time with Megacorp oil is ending someday, most likely within 3-4 years if I go on my terms. Thus my sudden fascination with retirement planning.

What I currently have:
$850K total saved, 33% tIRA,33% Roth 401K and 34% taxable, all in 70/30 stock/bond indexes
$2000/month non-COLA pension at 65, less earlier, lump summable(~$250K value currently.)
Maxed SSI 35 years, current contributions gain nothing.
$20K in HSA + $60K in retiree reimbursment account for retiree medical costs
Paid for house - $300K value
$200K in side business assets, easily liquid
no debts, a few months expenses in a checking account

My "getting ready" plan for the next 3-4 years:
I discovered the "Mega backdoor roth conversion" recently. I will make after tax 401K contributions up to the yearly all source max $59K and convert the after tax portion yearly. My 401k allows all this.
I will make non-deductible IRA contributions of $6500 per year and convert them.
I probably can make $10K per year addition to taxable savings.

What I want to have happen:
I want to retire from the oil patch in either June 2019 or June 2020 (June is the best month for me to go, regardless of year)
I want to continue earning $25K/year from my side commercial fishing business until 2027, then sell out for $200K
I'll need to start withdrawals from my stash of (predicted) $1.2mm starting at retirement.
I'll need/want at least $70K per year from all sources steady income, so say $45K above my predicted part time side biz income until SSI and/or pension is elected. More spending $$$ is always better. I don't particularly want to leave much $$$ in an estate for my shiftless nieces and nephews.

Questions (If you've read this far):
1. Is my plan rational and conservative enough?
2. First impressions; should I consider lump summing from pension or annuitize?
3. I know this is a complex topic, but I think I should delay taking social security while I still have some earned income and maybe use the lower earning years to roll some tIRA money to Roth? The trade off is the heavier hit to my stash in the early years though. One offset is the sale of my business assets when I take SSI will put some $$$ back in.
4. Am I likely to be surprised, and if so to the upside or downside ?

I'd appreciate any helpful comments or even face punches. I need to be ready to leave work soon, because getting old in the oil patch will suck. But I'm also attracted to shiny gadgets, loud motors and aged scotch, so I "need" more than austerity to go voluntarily.

 

[Dd852]

I'm with you on the scotch!

There are many experienced heads who will have a more detailed view, but my eyeballing of your plan looks good. My worry would be relying on the commercial fishing for a big portion for several years when you'll be in your 60s - isn't that also a young man's game? How would you weather something like a slipped disk or hernia? Or could you just sell out quickly and be ok? My feeling on lump vs. annuity - you don't have a bad deal. If you take the lump sum, 250 @ 4% means you could easily pay yourself an inflation adjusted $10/year if you invest it yourself. They're giving you an uninflated $24. Given how low inflation is and is likely to be, it seems to me leaving it with them makes more sense...unless you worry about the safety of the trustees or if you think inflation is likely to take off. Best of luck


Sent from my iPad using Early Retirement Forum

 

[athena53]

You're in pretty good shape. I'd agree with taking the pension unless the hard knocks of commercial fishing and life in the oil patch mean you might not live as long as the average person. (Or you might be tougher!)

You may need all the $$$ in the retiree medical costs and HSA account till you qualify for Medicare, but you're in good shape there, too. I'm paying $650 per year for a $5,500 deductible plan but that's in the Lower 48 in a LCOL area. My out-of-pocket expenses have been minimal. It's one thing you should check out; I have no idea how costs would be in Alaska.

I retired rather quickly when politics got toxic but after decades of saving and investing; I find it helpful to monitor expenses because DH and I spend a surprising amount of money and I find it reassuring to see how much of it is discretionary and could be cut back if things got bad.

There are a lot of discussions on whether to take SS ASAP or delay it. That might also depend on whether you think you'll beat the average life span. There's no one right answer; I've chosen to delay because people in my family live forever (almost) and my only other annuities are 2 small pensions that add up to less than $2K and have no COLA. For me, it's reassuring to know that no matter what happens with my own funds, I can tap into SS at any time.

 

[gerntz]

Don't AK residents get like a $1500/yr kick-in from the state from oil taxes?

 

[Fermion]

At 65 you will have over $4000 a month ($48,000 a year) coming in from SS and the pension, and you currently have over $1,000,000 in investments and assets (home). Exactly why are you continuing to work at all?

 

[bada bing]

My biggest questions revolve around what to do with the pensions, The total $2000/month @ age 65 is actually comprised of 2 pensions. One still active and growing at my current oil megacorp employer worth ~$1250/month or $150K lump. One from a past oil megacorp employer worth 800/month or ~$100K lump. I received notice last spring of my former employer's intent to liquidate the pension and I will be offered the full lump sum or an annuity purchased from a private insurer mirroring their pension obligations. I don't have a detailed written offer yet, but should be soon. I'll need to decide what to do with it at that time, roll it over to an IRA or accept a private annuity.

My current active pension is handled by Fidelity and is 125% funded. I have the option to lump sum out or annuitize at any time. It should be worth $1500/month if I can get another 3 years in before retirement.

I don't check my investment accounts very often. They are set to 70/30 indexes and automatically rebalance quarterly. I feel that's an okay allocation given that my pensions could be considered a bond proxy making it more like 50/50.

 

[bada bing]

At 65 you will have over $4000 a month ($48,000 a year) coming in from SS and the pension, and you currently have over $1,000,000 in investments and assets (home). Exactly why are you continuing to work at all?

That's an interesting question. I hadn't looked at my retirement situation in any detail until just a couple months ago. It's been on autopilot for the most part. The questions brought up by the pension liquidation notice started me off on research which brought me here.

I guess I'm continuing to work because I still can, if that makes any sense. It is both a family trait and a trait of "company men" in the oil industry. The question first came to my mind a couple months ago and I came up with a 3 year exit strategy mostly because I didn't want to become hasty. I don't really get a whole bunch of satisfaction from work, but I do like the lifestyle that goes with it a lot. I have to replace that lifestyle and that needs a little consideration time. Once I leave, it is definitely a one way trip. A person my age won't be brought back on board after a year or more out. It isn't super strenuous but it definitely isn't an old codger's game. The best answer is the concept of leaving hasn't had enough time to set up yet. I'm liking it the more I consider it. Another answer is I'm composing a bucket list that has some costs and I want to make sure it's funded.

 

[MBAustin]

Welcome, bada bing! Have you run your numbers through FIREcalc (link at bottom of each page) or other retirement calculators? Also since you aren't in a rush, tracking your expenses in detail for a year would be a good move as well.

 

[Teacher Terry]

I would be leaving soon because no one knows how much time they have left. I have seen plenty of friends either die or become disabled in 50's and 60's. On that cheery note I would take the pensions or annuity. YOu have your p.t. business to keep you busy and happy. It looks like you have plenty of $.

 

[ABQ2015]

Welcome, bada bing. My older brother also works for evil megacorp oil but in the Texas oil patch and in oil services (i.e. drilling). He's been one of the few in his office that has kept his job and is finally eligible for immediate pension but does not plan to retire until 2018 at age 66. Although he does not need the money, his plan is to continue part time as a consultant so he must have that "company man" trait too. The family is hoping the consulting will at least slow him down and we can see him occasionally and are also concerned that his health could start to deteriorate.

 

[Gumby]

I know I'm a little late with the new interest, especially around this community of retirement overachievers. Better late than never (I hope for my case).

Welcome, Bill. Starting in on retirement planning is like planting an oak tree. When's the best time to do it? 20 years ago. When's the 2nd best time? Today.

You're on your way!

 

[Olbidness]

Welcome Bada Bing. Like you I'm a minion of Big Evil Oil. Our financial totals are similar but the mix is a bit different. I've sold my house in preparation for retirement and have no side business. The plan now is to travel and the fewer possessions the better.

You mention the RRA so it's my guess we serve the same master.
It's the RRA that interests me most now as I'll be meet the minimum time/service requirements in 5 days. I've avoided asking too pointed questions about the RRA as to not tip my hand, or jinx it. I'll soon be more aggressive in learning the mechanics of the RRA and in future how it integrates with Medicare.

I'll be 55 years old soon and have seen friends my age and younger pass away, so to me time is of more value than money. It's getting time to bail.

I'll welcome your input.

 

[38Chevy454]

Hi Bill. welcome to the forum. Just as quick observation you seem to be pretty good shape for your planned escape in 3 years. One thing that is required for you is to have a good understanding of your expenses and budget. With that you can decide when you have enough. In spite of not having such an active role you seem to have made some good choices, or maybe better worded as avoided bad choices, to get you to this stage in life.

 

[bada bing]

Hi Bill. welcome to the forum. Just as quick observation you seem to be pretty good shape for your planned escape in 3 years. One thing that is required for you is to have a good understanding of your expenses and budget. With that you can decide when you have enough. In spite of not having such an active role you seem to have made some good choices, or maybe better worded as avoided bad choices, to get you to this stage in life.

Getting a handle on what post-retirement expenses should be is going to be a bit more of a guess for me than it probably is for most people. I work a "2&2" (2 weeks work and 2 weeks off) and I live at a company provided camp while at work. Basically my expenses are zero for half the time. The half of the time I'm not a slave, I tend to spend at faster rate than I should. Retirement will bring spending adjustments both ways. I know I can not spend full time like I do just during my off time now. Not enough money for that by a long shot. How that's going to work will be interesting.

Welcome Bada Bing. Like you I'm a minion of Big Evil Oil. Our financial totals are similar but the mix is a bit different. I've sold my house in preparation for retirement and have no side business. The plan now is to travel and the fewer possessions the better.

You mention the RRA so it's my guess we serve the same master.
It's the RRA that interests me most now as I'll be meet the minimum time/service requirements in 5 days. I've avoided asking too pointed questions about the RRA as to not tip my hand, or jinx it. I'll soon be more aggressive in learning the mechanics of the RRA and in future how it integrates with Medicare.

I'll be 55 years old soon and have seen friends my age and younger pass away, so to me time is of more value than money. It's getting time to bail.

I'll welcome your input.

There seems to be lots of 50-something guys around the oil patch, lots of which are getting ready to bail. There will be a huge turnover where I work over the next 5-10 years, maybe 50% retirement in the next 5 years. The company offered an EOI package last spring and several of my peers took it. I second guess whether I should have taken it, but I didn't have my sh*t together well enough to know. I don't think there is another offer possible in the foreseeable future for my level, but if there was I would definitely take it.

 

[highlow65]

It seems your more than fine with your plan and likely your neices and nephews will love you $$$ some day with your current plans. My question on pension is how secure (well funded) are they? Do the math on what they are worth and the decision gets easier.

 

[bada bing]

It seems your more than fine with your plan and likely your neices and nephews will love you $$$ some day with your current plans. My question on pension is how secure (well funded) are they? Do the math on what they are worth and the decision gets easier.

The pensions are pretty secure as far as I know. The old employer's pension that is being dissolved has funds to pay out vested participants 100%. I'll have to see what insurer they select for the annuity option and that will be a factor on whether I select annuity or lump sum. It should be settled, one way or the other, before the end of the year.

My current employer's pension is audited every year. The most recent audit had the plan funded at 125%. They will pay out 100% lump sum settlements if elected until the plan is less than 80% funded. Below that funding level they reduce the lump sum option. So I should be good to take the money and run if I want.

I never realized how the elections for retirement could effect my tax status until I started researching. I plan on working a little until I'm 70 in my self employment gig for say $25K per year. That will put a base earnings that effects when I take social security. If I elect to annuitize my pension, that will further effect my taxable earnings. I would like to use the time between 62 and 70 to move as much of my tIRA into Roth, but the cost is influenced by my yearly taxable income. If I elect to lump sum the pension, that will lower my taxable income but also increase the amount of tIRA that could be advantageously moved.

There will probably be several posts here from me asking for advice as I try and wade through this puzzle.

 

[gauss]

Bada,

If I were in your shoes I would start tracking and categorizing all my expenses in a tool such as Quicken. With proper categories you should be able , after some time , estimate what expenses will be in retirement.

I had 15 years of this type of data when FIRE suddenly became a potential option. Having this existing data helped me to take the leap. I still track the expenses even after FIRE.

Welcome! and congratulations on approaching FIRE

-gauss

 

[bada bing]

I thought I'd update on my progress and bump the thread up. I ended up taking a lump sum from my previous employer after a lot of vacillating. My initial estimate was a little high for what I was offered. I took $98K for a non-cola annuity starting at 65 of $808/month. It probably would have been smarter from a % return standpoint to keep the annuity, but I didn't want to be forced into a private annuity contract. So I'm done with my former employer, last connection is cut. Still working for current evil MegaCorp, I'm getting a 3% wage cola starting Mar 1. . March is also bonus time, but my group has screwed the pooch a couple times this past year, so our bonus percentage may be disappointing.

The pension lump sum, additional savings over the last few months and a pretty good bump in investment returns has changed my numbers. Edit in the quote below:

What I currently have:
$850K total saved <now $1.115mm>, 33% tIRA,33% Roth 401K and 34% taxable, all in 70/30 stock/bond indexes
$2000/month <now $1300/month> non-COLA pension at 65, less earlier, lump summable(~$250K <now $150K> value currently.)
Maxed SSI 35 years, current contributions gain nothing additional.
$20K in HSA + $60K in retiree reimbursement account for retiree medical costs
Paid for house - $300K value
$200K in side business assets, easily liquid
no debts, a few months expenses in a checking account

Anyway, I'm making progress. I vacillate between thinking I'll pull the plug ln 2019 or 2020. If it was just leaving the job and paying for retirement living, I'm ready to go now, emotionally and (I hope) financially. I've put together a bucket list that looks like ~$200K of frivolous spending. I don't have that comfortably covered yet.

Comments, criticisms and face punches welcome.

 

[Bigdawg]

seems like you have the financial part solved. Now for the "what do I do all day" part. Good luck.

 

[street]

From reading your posts it sounds like your ready you are getting your signal to depart. I think your are in very good shape you may have to tighten the belt but go as soon as you can. You are ready.

 

[kimcdougc]

You might could pull the plug now. Do that $200,000 other things maybe one a year. Looks good to me. Life is short. Good luck with your decisions.

 

[Morgan22]

Pro-Rata Rule

What I currently have:
$850K total saved, 33% tIRA,33% Roth 401K and 34% taxable, all in 70/30 stock/bond indexes

My "getting ready" plan for the next 3-4 years:
I discovered the "Mega backdoor roth conversion" recently. I will make after tax 401K contributions up to the yearly all source max $59K and convert the after tax portion yearly. My 401k allows all this.
I will make non-deductible IRA contributions of $6500 per year and convert them.
I probably can make $10K per year addition to taxable savings.

If you are going to make non-deductible IRA contributions and convert to Roth please learn about the Pro-Rata Rule. (You want to avoid being taxed on your tIRA). If your 401k plan allows it, and many do, you should roll your tIRA into your 401k before you do any conversions.

I believe the Pro-Rata rule does not apply to Mega backdoor Roth conversions from your 401k. So I think you are good there.

 

[bada bing]

I thought I'd update my progress a little over a year after I initially decloaked
here on the forum and started working in earnest on getting my stuff organized
and plans on track. I'm still saying that June of 2020 is RE target date, but
it could be sooner. Definitely not later.

My purpose for this update is to have a document that tracks
my progress. As always, I appreciate any comments, criticism or
advice. This first annual update has the new data in red. I'll use
orange next year and green the year after.

Just looking below, 2017 is/was a banner year. The market has been
very kind and I managed to save more out of my salary than expected.
I decluttered quite a bit as well. So far, so good.

Since my first post 14 months ago I have:
1. Opened a solo 401K at Schwab and rolled all my tIRA balances into it.
This was to clean up clutter and most importantly to get rid of pro-rata
balances so I could backdoor convert a couple years of non-deductible
IRA money I had. Everything is all straight and uncluttered now and I can
do backdoor Roth contributions until I pull the plug and retire.
2. I took a lump sum offer for an old pension. $98K rolled into my solo 401K
balance. That reduces my expected total pension income by $808 per month
at age 65.
3. This is the second year I have made the maximum total 401K contribution
and completed the "Mega Backdoor Roth" on the post tax extra contribution.
I have tightened my belt somewhat and this year I maxed everything available
to me - $60K 401K + $6500 Backdoor Roth + $4400 HSA +$12K brokerage. It's
been a good year for savings and remarkably it didn't pinch my finances too much.
4. I nailed down what I actually spend in a year now. This is the first time
in my adult life I have an actually spending number. I have been rather bad
about budgeting and it is embarrassing that a 59 y.o. man has gone this long
without any grip on his finances. I spent in 2017 - $62,000 in after tax
money. So that is my minimum target for retirement with some adjustments
for things like health care needing some attention.

What I currently have:
$850K (now $1.25M) total saved, 33% tIRA (now solo401K),33% Roth 401K and 34% taxable, all in 70/30 stock/bond indexes
$2000/month (now $1400 after lump sum) non-COLA pension at 65, less earlier, lump summable(~$250K (now $177K) value currently.)
Maxed SSI 35 years, current contributions gain nothing.
$20K (now $25K) in HSA + $60K (now $69K) in retiree reimbursment account for retiree medical costs, not counted in NW
Paid for house - $300K (zillow says $325K now) value
$200K in side business assets, easily liquid
no debts, a few months expenses in a checking account

 

[flintnational]

bada bing, excellent post and congratulations on your progress. I particularly liked your comments about getting a handle on your budget. As you know, budget is the reverse of the 4% rule. For every $4k you can squeeze out of your budget, your needed savings total falls by $100k. It helps to work on both ends of the FIRE equation.

FN

 

[VanWinkle]

The pensions are pretty secure as far as I know. The old employer's pension that is being dissolved has funds to pay out vested participants 100%. I'll have to see what insurer they select for the annuity option and that will be a factor on whether I select annuity or lump sum. It should be settled, one way or the other, before the end of the year.

My current employer's pension is audited every year. The most recent audit had the plan funded at 125%. They will pay out 100% lump sum settlements if elected until the plan is less than 80% funded. Below that funding level they reduce the lump sum option. So I should be good to take the money and run if I want.

I never realized how the elections for retirement could effect my tax status until I started researching. I plan on working a little until I'm 70 in my self employment gig for say $25K per year. That will put a base earnings that effects when I take social security. If I elect to annuitize my pension, that will further effect my taxable earnings. I would like to use the time between 62 and 70 to move as much of my tIRA into Roth, but the cost is influenced by my yearly taxable income. If I elect to lump sum the pension, that will lower my taxable income but also increase the amount of tIRA that could be advantageously moved.

There will probably be several posts here from me asking for advice as I try and wade through this puzzle.

You can look at how much the lump sum would buy as an annuity on the open market for comparison. At your age, 100,000 would normally only buy about 525 per month so the 800 per month seems like a good figure. You can use the link to check the rates for yourself.
I made the same choice about 18 months ago, but my situation was different with a spouse and needing to protect her interest.

https://www.immediateannuities.com/...TT-PkDUlRB66od5-yfHJZqcr4EiNSiicaAn1JEALw_wcB