newbie needs your collective wisdom and insight

[ratface]

Hello to everyone. I found you folks last week and have been reading ever since. What a great place. I have provided my assets and plans in the hopes that you folks will dissect as necessary and offer your collective wisdom. Let me know if anything else is needed for evaluation. Appreciate all responses, thanks!

Pertinent Information: I dread going to work. Max muni pension is 75%. Multiplier is 2.5 X years of service. I'm at 70% in September 2009 at age 50 with 28 yrs.of service. I would really like to FIRE at that time. I will not qualify for SS benefits or Medicare since I have not paid into them. My DW will be eligible for both. I have 12 SS quarters from another job. My SS would be reduced by 2/3 of my annuity because of a windfall elimination provision. I have guaranteed medical until 2013 which I will pay 50%. Could have some form of reduced coverage after that or possibly none. If I stay until age 60, they pay medical until I become Medicare eligible? I can make 67 ½% of my salary now by staying home and am probably working for around $13.00 an hour since I became retirement eligible in November 2008. I have zero debt. Own a home in Chicago and a small farm in rural Illinois with no mortgages. My plan is to spend another 3 years in Chicago retired getting this home ready for sale for appx. $300,000. DW will continue to work those three years. At that time my daughter will be starting college which I am committed to fund at a State School. Appx. 100-120K for 4 years. My son is a sophomore in college and his tuition is saved in equities which are down about 38%. $70K left in equities-need 40K for his last two years. If the market holds it should leave me with 30K to start my daughter off. I can fund the rest with the sale of the house and have about 180K left. I then plan to move to my rural home eliminating all the expenses of the Chicago home. I think that it would be prudent to return to work either PT or seasonal to earn my remaining SS quarters. I have an MBA but really dislike business but wouldn't mind teaching at a community college or even driving a school bus. Would take me seven years to get those quarters and put me at 60 y/o. I have $500K in a 457b in a fixed account earning around 4% which I do not want to access if possible. This would change if health insurance is not offered after 2013. I could draw 2-4% if needed. Currently neither of us have any major medical issues.

Pension= 70 % 0f $93,276.00 = $65, 293.20
At age 60 an automatic increase of 1.5% kicks in for 20 years. In 2010 the legislature can vote on a 3% lifetime increase for those born prior to 1960?


Pension = $65,293.20
Spousal income = 20,160.00
85,453.20 gross

Federal Tax = 25% of taxable income (I plan to run taxable income through turbo tax soon, but for the moment calculations are based on gross income. I anticipate $8000 in child, college, and public employee insurance tax deferral exemptions. )

$85,453.20 gross income
- 21,363.30 taxes (no state tax in Il. on pension)
64,089.90





Annual


$64,089.90 after Federal Tax

$64,089.90
- 8652.00 medical insurance (only until 2013?)
55,437.90

$55,437.90
- 6000.00 property taxes (combined, both properties)
49,437.90 after property taxes

$49,437.90
- 2515.60 Insurance (yearly includes cars, both houses, and umbrella)
46,922.30

Utilities (gas, electric, phone combined for both houses.)​

Monthly
Water 18.00
Gas (both) 174.00
Electric(both) 225.00
Cable 110.00
Cell 102.00
Phone/DSL(both) 135.00
Groceries 500.00
Car gas 200.00
1464.00 X 12 months = $17,568.00

$46,922.30
-17,568.00 utilities
$29,354.30
- 10,000.00 High School
$19,354.30 disposable income divided by 12 = $1612.85 monthly divided by four =403.20 weekly.

 

[LOL!]

Maybe do that TurboTax run now because there is no way your taxes are gonna be that high.

 

[W2R]

I read through your information, and it seems like you are pretty well set up, depending on what you want, of course. But you did say

I dread going to work.

which is quite a motivator.

One thing that was missing, or else I just didn't see it, was an emergency fund other than your equity investments which (like everyone's these days) are down.

Also, I would suggest working out a contingency plan in case the housing market gets worse and you are unable to sell. In that case, how would you pay for your daughter's college education? These are a few of the things that came to mind.

In any event, good luck and I hope your plans work out!

 

[Moemg]

Welcome , It looks good but I would track every Penney I spent for awhile to see how it really goes . You seem to be missing entertainment expenses ,dining out ,travel, clothes , misc. ,home repairs,etc.. Your disposable income will probably cover it but I'd be sure .

 

[Coach]

hi ratface and welcome to the forum!

You do seem like you have a plan that sounds reasonable and prudent -- well done.

I am curious though about your status with regard to health insurance. You won't qualify for Medicare unless you get additional quarters in? What happens to folks on your pension plan who never work for another employer?

Glad to have you aboard.

Coach

 

[freebird5825]

Is there a politicallly correct way to say "Hello Ratface" ?
Welcome to the 'hood.

 

[Bikerdude]

Welcome RF. Seems like your biggest exposure are health care costs. You mention that you did not pay into SS/MC so are not eligible but then state that if you stay until age 60 they will pay HC until you can collect medicare I would assume that your budgeted cost for HC and the 10K used for HS could be combined to pay for future HC so you may be OK. Other than that it seems like you have a viable plan. Good Luck.

Oh BTW, I would keep any money I needed within five years (like college costs) out of the equity markets.

 

[Independent]

You didn't mention if the pension is COLA'd. If it is, and you will qualify for Medicare, it seems like you are in good shape. Martha has a discussion of individual health insurance in the FAQs section, if you want to get a feeling for how expensive it might be if you have to go that route.

Another thread mentions the Consumer Expenditure Survey. You may want to compare your expenses to theirs just to be sure that you are covering all the categories. CE Cross-tabulated Tables

I noticed on another source that the Illinois public employees pension is the least funded of all states. That shouldn't matter if they are willing to back it up with tax dollars, but I always wonder about how that will work out.

 

[CuppaJoe]

Hi, Ratface,

Love your avatar.

Looks like you're off to a good start with the planning. Keep us posted on your progress. Um, driving a school bus.

Bus Driver's Video Guide - Clips - South Park Studios

 

[ratface]

In response to some of your observations. I'm a simpleton, really. Has anyone ever read the "The Idiot" Thats me . Dw and I traveled before the kids came along. We are not extravagant folks. Entertainment expenses are not a priority. The COLA/NON COLA is somewhat of a semi cola, the 1 1/2% at age sixty. This is a City of Chicago Pension in which health insurance at retirement was the norm. Through years of contract negotiations health insurance eroded to its present state. Now we are in a catch 22 where we have not paid SS or Medicare but the City no longer provides health insurance. It is my understanding that anyone who is 65 and a US citizen can apply for medicare part A. Cost are graduated acccording to quarters worked. I would also qualify under DW, 1 year younger. DD's college could be leveraged if need be by home equity loan repayed at sale of Chicago home. The Illinois funding of pensions is indeed scary. Our pension is funded under 50%. It is guaranteed under State Law but is that really any protection? I'm almost at the point where I need to get some of it back now before it goes bankrupt? In retrospect things you should know: Widow's pension is only 1/2 of pension. I drive two somewhat older vehicles and would probably need to replace one of them within 3 years. I'm a jack of all trades and home repairs if retired, can be done for cost of materials in most instances. The farmstead would conservatively bring around 300K in todays market. House, two barns, and forty acres with natural springs and river frontage. The Chicago property appraised this year at $345K but again I would be happy with $300K in todays market. Residency is a requirement for many City positions which enchances property value in good city neighborhoods.

 

[RonBoyd]

$19,354.30 disposable income divided by 12 = $1612.85 monthly divided by four =403.20 weekly.

I didn't look at the rest of the math but you should know that there are more than four weeks in a month -- average around 4.3333 (or some such). In any event, there are 52 weeks in a year. Thus $19,354.30 divided by 52 equals $372.20 a week, a difference of $31 or a $1,612 annual under-estimation in your budget.