Opinion on finances, ER

[Deej]

Hello Wise Ones,

I’ve been reading ER for a few years and find the knowledge of the peeps here to be quite helpful so I finally gained the courage to post our financials with other details. DH would like to retire when 401K hits 1M, which is very close (may even wait till April 2021 - warm weather). How ready might we be is the question?

INFO:
DH, age 63; DW 61
DH current salary: $135,800
DW self-employed: profits go back into business. DW may retire with DH.

INVESTMENTS:
DH: 401K, $946K (60/40)
DH: after tax $37K
DW: SEP & IRA: $159K (60/40)
TOTAL: $1,142,000

DEFINED PENSION: DH: private pension, no cola (all company funded)
Non-union: $37K/yr. (3,083/mo.) with 75% J/S
Union: $8,868K/yr. ($714/mo.) with 55% J/S (he’ll use this as pocket cash, not for expenses), golf, beer, …
OR Lump sum at age 63: $491K; age 66: $556,662. We’re thinking of taking annuity vs lump. Thoughts?
TOTAL: $37K/yr. (not including union pension); with union: $45,868/yr.

CASH/OTHER:
Liquid: $110K (Includes funds toward vacation, repairs, car fund, general savings. Should first 3 be included?)
Company stock: $33K
E-Bonds: 10K
HSA: 32K
TOTAL: $185K

SSA:
Him: $36K at age 66.6
Her: $18K at age 66.10
TOTAL: $54K

Zero Debt . House paid off, worth $480K (paid $188K). Plan to downsize in next 2/3ish years to a 1 floor house in same area which will cost close to current home sale price due to the RE boom. Not wise, but, current house has too much landscape upkeep and pool that will keep us the wrong kind of busy during our elder years. Hired help = $ out the door; we prefer to keep it in our own pocket.

I’ve been tracking expenses for several years. Current annual expenses including taxes are $66K ($5,500/mo.). This also includes current LTCI premium of $5,100/yr. for both. As noted, annual expenses also includes savings toward new car replacement, car/home repairs, and travel. During retirement, I’m guesstimating with Medicare and supplemental health insurance for us, along with escalating LTC premiums, and more travel, yearly expenses may be approx. $88K+/yr. I may be high here but unknowledgeable with retirement health costs. Luckily, we live in a state that does not collect state tax in retirement.

Not necessary to leave an inheritance. I ran firecalc but don’t truly understand it yet. Will need to play around more.

What are your thoughts from the provided info regarding 28-30 years of retirement funds needed to live comfortably while we continue to question ourselves? Also, when is the best time to start backdoor Roth?

QUICK BREAKDOWN:
401/IRA/SEP: $1,142,000
Pension: $37K (not including union pension)
Stocks/Bonds: $33K
Liquid: $100K
HSA: $34K
TOTAL: $1,346,000
Current Expenses: Monthly $5,500 / Annually $66K
Guesstimate Retirement Expenses: $7,333/month; $88K/annually

Thanks.

 

[finnski1]

I think your numbers look really good and you really only have to bridge 3 years or so by withdrawing (88-46) about $42k per year which would be about a 3.2 % WR and then when SS kicks in you look like you'd be at a 0% WR.

 

[pb4uski]

+1 after SS starts your gap will only be $15 a year.... $88k spending - $19k pension (halved because it is non-colaed) - $54k SS (which is COLAed).

You'll need $230k to bridge from now until SS.... $36k * (66.5-63) + $18k * (66.8-61)... leaving you $1,116k .

So your WR will only be 1.3%...plenty safe. If you use a relatively safe WR of 3.5% you could probably spend as much as $112k a year and still be safe.

 

[Dtail]

Good to go for sure.

 

[Deej]

Thanks all. It's really nerve racking when so close to RE, and not sure when to pull the plug. It's hard to walk away from a decent salary, 401 match, and benes because it's final. I'm sure many have felt this way.

 

[Ready]

Regarding your question on doing back door Roth conversions, the goal would be to do them when you believe that you are in a lower tax bracket presently than you will be in the future.

So I probably would not do them while you are still earning a six figure income. But if you retire it might make sense to do them. It comes down to guessing whether you think tax rates will rise or fall in the future. Some of this comes down to guessing. You can run some numbers to see how much you can convert without increasing your income into the next tax bracket once you retire and just do a steady amount each year.

And if tax rates stay about the same, it probably doesn’t matter whether you do backdoor conversions or just pay the taxes each year as you make your withdrawals.

 

[Out-to-Lunch]

Thanks all. It's really nerve racking when so close to RE, and not sure when to pull the plug. It's hard to walk away from a decent salary, 401 match, and benes because it's final. I'm sure many have felt this way.

Yes, it is scary on the precipice! No further advice, but I get where you are coming from...

 

[Montecfo]

Thanks all. It's really nerve racking when so close to RE, and not sure when to pull the plug. It's hard to walk away from a decent salary, 401 match, and benes because it's final. I'm sure many have felt this way.

Indeed. You can't retire without leaving money on the table. But by continuing to work you are leaving life on the table.

Every year you don't retire is one less year of retired living. It is just math.

 

[Dtail]

Plus in general, these upcoming years will typically be your healthiest years out of your remaining years of life.

 

[ocdokie]

Plus in general, these upcoming years will typically be your healthiest years out of your remaining years of life.

YES! DH and I retired in 2010 at ages 59 and 52, respectively, with a financial situation very much like yours. Our love is travel, and being able to travel without having to limit the experience because of work commitments has been a joy. This is our 11th year of retirement, and we're slowing down a bit as our physical stamina isn't what it used to be. (Not to mention that we don't want to travel far during the pandemic.)

We have no regrets about retiring early, and it looks as if you're good to go.

 

[SALTedOut]

Is there value to your wife's business? Can she sell it to someone? If not, and she's putting all profits back into the business I'm not sure why she'd do that other than to keep busy.

 

[Deej]

Good to get feedback that we are in good shape. SaltedOut: The biz doesn't have much $ value and with covid it's at a standstill (entertainment). Will see what 2021 brings by year end and make a decision to close it or just continue for the loyal customers, and something to do.

Now to get up the nerve to establish an end date in 2021. Thanks Y'all.