Gut Check

[Caligal611]

Hi. Appreciate any input and advice. Am embarking on a new life as a single woman after 31 years of marriage in So Cal. Empty nester too. A lot of major life changes over the last several months. Am a little shell shocked.

Retired from my legal position with megacorp in February 2018. 18 years w/ my last employer. 35 year career.

Alimony: $80k until Dec. 2020 . Drops to $42k a year commencing in Jan. 2021 when my pension kicks in @ 65. Lifetime alimony payments w/out COLA.

Pension: $80k commencing Jan. 2021. No COLA.
Social Security: $2886 per month commencing @ FRA based on SS website estimate.

Assets: $1,500,000 in IRA; $60,000 in cash . Plan to limit cash withdrawals until I receive pension.

Home: $430,000 mortgage balance @ 3.75%. Recent appraisal @ $1,300,000. Property taxes: $10,000 a year. (Note: my ex kept the 30 year family home in Pasadena w/ tiny mortgage; I am living in our beach cottage in So Cal that we purchased in 2010).

Expenses: $85,000 per year estimated . I love to travel and my mortgage and property taxes are obviously high. My adult daughters live in Cali and I don't want to move out of state. Cali native.

Thoughts?

 

[travelover]

..........Thoughts?

Welcome, I think you should put your numbers into Firecalc (bottom of page) and turn the crank.

 

[akck]

My thoughts are that you should be good. This is assuming medical is included in your expenses. You'll need to watch expenses the next 3 years, but not too stringent as you have cash to supplement if needed. You might want to start IRA withdrawals now (you don't have to spend it or can convert it to Roth IRA), as your income will be higher when your pension kicks in. Income of $156,632 should provide plenty of inflation protection on expenses of $85,000.

Your main concern is if your expenses of $85,000 is correct. Your travel expenses may end up being larger than planned. You do have options if they end up being over that amount. One option is to sell your house and move into a ~$900,000 house, which will make a big dent in your expenses. I have no idea if $900,000 house is possible in your area of California.

 

[joeea]

Social Security: $2886 per month commencing @ FRA based on SS website estimate.

We can deduce your age, but not your ex-husband's. And you haven't indicated your ex's Social Security benefits.

You should examine the combinations of spousal benefits and your own benefits before making your claiming plan. In particular, examine the effect of delaying until 70.

I've used https://maximizemysocialsecurity.com/. It costs $40/year, but it will give you an optimal claiming solution and could let you examine as many different scenarios as you like.

As you indicate, your housing expenses are high (although doable). You may want to consider if your beach cottage is too large for a single. If so, consider downsizing to something smaller and cheaper in the area, assuming that is possible.

Other than that you seem to be in good shape.

 

[Dtail]

Hi. Appreciate any input and advice. Am embarking on a new life as a single woman after 31 years of marriage in So Cal. Empty nester too. A lot of major life changes over the last several months. Am a little shell shocked.

Retired from my legal position with megacorp in February 2018. 18 years w/ my last employer. 35 year career.

Alimony: $80k until Dec. 2020 . Drops to $42k a year commencing in Jan. 2021 when my pension kicks in @ 65. Lifetime alimony payments w/out COLA.

Pension: $80k commencing Jan. 2021. No COLA.
Social Security: $2886 per month commencing @ FRA based on SS website estimate.

Assets: $1,500,000 in IRA; $60,000 in cash . Plan to limit cash withdrawals until I receive pension.

Home: $430,000 mortgage balance @ 3.75%. Recent appraisal @ $1,300,000. Property taxes: $10,000 a year. (Note: my ex kept the 30 year family home in Pasadena w/ tiny mortgage; I am living in our beach cottage in So Cal that we purchased in 2010).

Expenses: $85,000 per year estimated . I love to travel and my mortgage and property taxes are obviously high. My adult daughters live in Cali and I don't want to move out of state. Cali native.

Thoughts?

Does lifetime alimony truly mean until the ex passes? The rules in the Northeast were Lifetime Alimony meant until the normal retirement age unless the payer worked past that age.

 

[jwkde]

Under the new tax law, alimony income is not-taxable. I would look at IRA withdrawl or Roth conversions now because it looks like you have no other taxable income until your pension

 

[Dtail]

Under the new tax law, alimony income is not-taxable. I would look at IRA withdrawl or Roth conversions now because it looks like you have no other taxable income until your pension

Doesn't the new law apply only to divorce agreements after 12/31/2017?
It is not clear when the divorce was finalized.

 

[Bir48die]

Under the new tax law, alimony income is not-taxable. I would look at IRA withdrawl or Roth conversions now because it looks like you have no other taxable income until your pension

This is a HUGE development. Not only is it not taxable but it's not deductible on the payer side. Unbelievable. This is a $15%-20% immediate bonus. If this is the case you should have almost a fully subsidized ACA program if medical is not part of your pension program.

 

[Lsbcal]

Hi. Appreciate any input and advice. Am embarking on a new life as a single woman after 31 years of marriage in So Cal. Empty nester too. A lot of major life changes over the last several months. Am a little shell shocked.

Retired from my legal position with megacorp in February 2018. 18 years w/ my last employer. 35 year career.

Alimony: $80k until Dec. 2020 . Drops to $42k a year commencing in Jan. 2021 when my pension kicks in @ 65. Lifetime alimony payments w/out COLA.

Pension: $80k commencing Jan. 2021. No COLA.
Social Security: $2886 per month commencing @ FRA based on SS website estimate.

Assets: $1,500,000 in IRA; $60,000 in cash . Plan to limit cash withdrawals until I receive pension.

Home: $430,000 mortgage balance @ 3.75%. Recent appraisal @ $1,300,000. Property taxes: $10,000 a year. (Note: my ex kept the 30 year family home in Pasadena w/ tiny mortgage; I am living in our beach cottage in So Cal that we purchased in 2010).

Expenses: $85,000 per year estimated . I love to travel and my mortgage and property taxes are obviously high. My adult daughters live in Cali and I don't want to move out of state. Cali native.

Thoughts?

It looks like you have marginal liquid assets, is this right? If the assets are $1.5M with $60k cash and $1.3M house (less selling expenses if sold) then things don't quite add up.

Anyway, if you have liquid assets you apparently have a marginal amount for such a long work history. I would first go to the Vanguard site and look at their short questionnaire to determine your risk profile and ultimate AA. Here is the link: https://personal.vanguard.com/us/FundsInvQuestionnaire


For near cash 2 funds that I use are Vanguard Ultra Short Term Bonds (VUSFX) and Vanguard Short Term Bonds (VFSUX). I could go into more detail on these if you want that.


I know this is a tough time for you and I wish you the very best.

 

[MBAustin]

Welcome, Caligal! You've already received some good advice above. Obviously you are under a lot of emotional stress between retirement and what sounds like an unexpected divorce. Since your alimony and your expenses are relatively similar, you don't need to rush into any major decisions. Personally, I would focus on self-care for a few months: take care of your self physically, emotionally, and spiritually; assess what you want your life to look like for the next 20 years and what steps you might take toward that; explore (dip toe in the water) possible hobbies or activities that you might enjoy without making any major commitments, etc. You might also want to talk with a fee-only financial planner just to review all of your numbers and help with those decisions. We wish you the best in this time of transition and hope you'll keep us posted.

 

[king smoothie]

Doesn't the new law apply only to divorce agreements after 12/31/2017?
It is not clear when the divorce was finalized.

Actually only after Dec 31, 2018. Therefore, still taxable for OP. So anyone in the divorce process right now may want to speed up or slow down the process depending on whether they will be paying or receiving alimony.

 

[rodi]

Welcome.

Your story sounds very similar to my sister's except there's no alimony for her... Sudden, unexpected divorce, pension coming online, dealing with separating houses and mortgages from ex.... all in very expensive southern california.

I agree with MBAustin that your first step should be selfcare. Living at the beach consider small things like daily walks on the beach. (I started my sister on this when she retired last June and she said it changed her life. I started my daily beach walks as soon as I retired several years ago.) It is a wonderful way to center yourself, find solitude, and start the day with a good outlook.

When you feel ready - take a good look at your budget. Sounds like there are a lot of recent changes in your life that are potential impacts on your budget. Make sure your budget accounts for taxes, healthcare, home maintenance, car repair, etc. Again, using my sister as an example, she hadn't anticipated losing her ex's business loss deductions when she filed single so had a huge tax bill, followed in close order by needing a new roof.

Since you are apparently over 59.5 you can draw from your IRA if you need to... so that income can supplement your pension/alimony if need be. I would leave the $60k of post-tax money as an emergency fund. Others may disagree...

 

[HI Bill]

With that level of alimony, I'm guessing your husband's salary was higher than yours, and you might be able to claim spousal benefits if you were married more than 10 years. Might be closer to the max allowed!

 

[Moemg]

I agree with take care of yourself . I would also consider how to handle end of alimony payments if your spouse died . No one plans on this but it does happen and that would be a big hit to your budget .

 

[Caligal611]

Thank you for all of the valuable input. I will take things slowly over the next few months and meet with a fee-only financial advisor.
I am 62 and my ex is 60. He is a lawyer with a thriving practice and makes more than double my previous salary. I was blindsided by the divorce, particularly when I learned he became involved with a younger woman within weeks of the filing. Our divorce was finalized in March, one month after I retired. ( We had discussed my plans to retire a couple of years ago, so this was not a surprise to him). I am aware that I am eligible to receive Social Security benefits on my ex-spouse's record as long as I remain unmarried. I have a longer work record than he does, but will reevaluate when I meet with a planner and run the numbers. I have factored taxes, insurance and unexpected emergencies into my budget and have recently ditched cable and paid for my car in cash. On the personal front, one of the best things I did was to get a rescue dog a few months ago for companionship. We walk everywhere and he particularly enjoys chasing seagulls on the beach.
I will keep you all posted after things have settled down. Thanks again for all of the great advice.

 

[HI Bill]

I have a longer work record than he does, but will reevaluate when I meet with a planner and run the numbers.

It's not the length of the work record that counts, it's the average of the qualified income for the past 35 years. So, if his total qualified income over his work period is greater than yours, spousal may be the way to go. The only way to know for sure is to consult with SSA using his SSN.

 

[joeea]

Thank you for all of the valuable input. I will take things slowly over the next few months and meet with a fee-only financial advisor.

Makes sense to me.

I am 62 and my ex is 60. He is a lawyer with a thriving practice and makes more than double my previous salary. I have a longer work record than he does, but will reevaluate when I meet with a planner and run the numbers.

If he makes more than double what you made, your planner will scrutinize spousal benefits carefully. You may well end up with more than you expected. (Although I'm not sure it's possible to get much more than $2886/month at FRA no matter what).

On the personal front, one of the best things I did was to get a rescue dog a few months ago for companionship. We walk everywhere and he particularly enjoys chasing seagulls on the beach.

New dog, beach walks - sounds wonderful!

I will keep you all posted after things have settled down.

Please do. It's one thing to make suggestions. But it's good to hear how the ultimate results turned out.

 

[Scuba]

Thank you for all of the valuable input. I will take things slowly over the next few months and meet with a fee-only financial advisor.
I am 62 and my ex is 60. He is a lawyer with a thriving practice and makes more than double my previous salary. I was blindsided by the divorce, particularly when I learned he became involved with a younger woman within weeks of the filing. Our divorce was finalized in March, one month after I retired. ( We had discussed my plans to retire a couple of years ago, so this was not a surprise to him). I am aware that I am eligible to receive Social Security benefits on my ex-spouse's record as long as I remain unmarried. I have a longer work record than he does, but will reevaluate when I meet with a planner and run the numbers. I have factored taxes, insurance and unexpected emergencies into my budget and have recently ditched cable and paid for my car in cash. On the personal front, one of the best things I did was to get a rescue dog a few months ago for companionship. We walk everywhere and he particularly enjoys chasing seagulls on the beach.
I will keep you all posted after things have settled down. Thanks again for all of the great advice.

I wish you the best, and am sorry for your unexpected divorce. The beach house sounds lovely and I would not make a quick decision to sell it. Although the cost may be high, there is no substitute in my mind for an ocean view and for being able to walk on the beach every day.

You may not want to, but with your background perhaps you could do some part-time consulting/legal work and bring in a bit of additional income? That could allow you to build some cushion financially and also meet new people. I would think in your situation loneliness might be an issue as you’re living away from the community you were in for a long time and also you’ve retired. That is a lot of transition quickly, so meeting new friends one way or another might help.

 

[Red Badger]

Congrats on the rescue dog! Having a dog rescue you at such a traumatic time is truly a blessing.

Seriously, as an owner of a lovely, spoiled fur-kid, I believe every dog is a therapy resource. Godspeed in your journey towards inner peace.

 

[FREE866]

Congrats on the rescue dog! Having a dog rescue you at such a traumatic time is truly a blessing.

Totally agree