Planning to Retire in January. Looking for Confirmation...

[mich1997]

I lost all interest in my job several years ago, so I have been gearing up to retire for the last several years. I think I am financially set to retire, but would appreciate a 2nd opinion from the people on this board. I will be turning 50 years old this fall, with no spouse or dependents. Here are my facts:

- I will have approximately $1.625 million in January 2014, split nearly equally between tax-deferred and after-tax money. 98% invested in cash.
- I own a home in Vegas free-and-clear that I will be moving into (currently I lease it out to a tenant). I have no debts of any kind.
- I have been tracking every dollar that has passed through my hands for the last 20 years using Quicken software, so I have a great idea of the expenses that I will face in retirement. My base living expenses (excluding travel, "fun money", etc.) will only be around $20K per year, including health care. (Thanks to the low interest-rate environment, my taxable income will be very small, allowing me to qualify for Obamacare health care subsidies).
- I will receive a non-COLA pension of $35K/year when I hit 65, plus $25K in social security when I hit 67.
- Having no dependents to leave an inheritance for, I plan to convert a chunk of my portfolio to single-premium immediate annuities when I hit 65. This should allow me to earn 7% for life on the amount I convert. I will only convert an amount necessary to cover any shortfall in my base living expenses.

Do you think I am financially ready to retire? Thanks for looking over my situation.

 

[REWahoo]

The best second opinion available: run your numbers through FIRECalc.

 

[mich1997]

FIRECalc said I had a 100% success rate (assuming I made the correct inputs), but I was looking more for confirmation from people who actually have experienced going through retirement and the ups and downs that can bring.

 

[travelover]

Your $1.6M only has to last you until the pension / SS kicks in, plus cover inflation after that point, if you can continue the spend rate that you project. $20,000 x 17 years - $340,000.

I'd consider investing some of it in stocks to better handle inflation.

 

[Midpack]

FIRECalc said I had a 100% success rate (assuming I made the correct inputs), but I was looking more for confirmation from people who actually have experienced going through retirement and the ups and downs that can bring.

As you can see from the FIRECALC results graph you got, your outcome can vary dramatically just based on past history. Couple that with future unknowns and the unique circumstances for each of us, and you'll know confirmation is not possible, only probability from the past. Each of us have to decide what "success rate" they can live with, some are comfortable with 75% and more AA risk while others hold out for 200% and a very conservative AA/lots of floor income, and everything in between. Some have robust plan B's too. You've done well, but only you can define what "confirmation" is for yourself...

 

[LARS]

If you can maintain expenses (before inflation) in the $20,000 arena it is a no-brainer.

 

[Independent]

If you can maintain expenses (before inflation) in the $20,000 arena it is a no-brainer.

+1

I did the same calculation as travelover:

Your $1.6M only has to last you until the pension / SS kicks in, plus cover inflation after that point, if you can continue the spend rate that you project. $20,000 x 17 years - $340,000.

I'd consider investing some of it in stocks to better handle inflation.

Or, look at it this way. You can spend $50k per year even if the best investment return you can muster is CPI + 0%.

($50,000 x 17) + ($25,000 x 33) = $850,000 + $825,000 = $1.675 million.

I hope the "98% invested in cash" is some sort of typo. If you are very conservative, you can lock in CPI + (a little bit} today by buying laddered TIPS.

Your biggest worry is taxes in your taxable portfolio on the investment "return" that is really just inflation corrections.

 

[Meadbh]

Welcome to the board Mich. If your expenses really are that low, your net worth should be more than adequate to cover them at least in the short to medium term. Two caveats. (1) You may pay very little income tax in the near future, but when you run into RMDs, watch out! (2) You are facing a potentially very long retirement. If you live to be 100, we are talking about half a century. I would be seriously concerned about the ability of cash to keep up with inflation over that period of time. If you are really averse to equities, annuities may be appropriate when you are older. It may also be worthwhile to read Jim Otar's book Unveiling the Retirement Myth and checking out his calculator, both of which you can find here: otar retirement calculator

 

[mich1997]

"98% in cash"...

I should have been more clear. When I refer to "cash" I mean assets with no risk of nominal principal loss (i.e. CDs, I-Bonds, Fixed Annuity, etc.). About 10% of my portfolio is in I-Bonds, which will help to offset any potential spike in inflation.

+1

I did the same calculation as travelover:


Or, look at it this way. You can spend $50k per year even if the best investment return you can muster is CPI + 0%.

($50,000 x 17) + ($25,000 x 33) = $850,000 + $825,000 = $1.675 million.

I hope the "98% invested in cash" is some sort of typo. If you are very conservative, you can lock in CPI + (a little bit} today by buying laddered TIPS.

Your biggest worry is taxes in your taxable portfolio on the investment "return" that is really just inflation corrections.