Request review of retirement plan

[Bimmerbill]

Hello everyone,
I'm thinking of retiring the end of the year at age 58 from my federal job. I'll leave a bit of money on the table not working until 60, but FIRECalc and other planning tools are showing a 100% chance of success.
I'll receive a federal pension upon retirement (with some reduction due to age) of $27,000 a year. Two years later at age 60 I'll receive a National Guard pension of around $12,000 a year. Then I'll be eligible for social security of around $26,000 a year at age 62.
Upon retirement I can continue my federal health benefits for $525 a month. I'll have to option of a Tricare plan at age 60 as well.
I have just over $800k in my TSP with 60% stocks/40% bonds allocation.
I plan to take out 60K at retirement to pay off my house and two late model cars.
When I run FIRECalc with a 80K yearly inflation adjusted budget for 40 years I get a 100% success rate. My federal pension is COLA adjusted starting at age 62. It's a diet COLA so a bit less than the CPI. The military pension has a COLA as well. Even if I don't select COLA for my federal pension in FIRECalc I still have a very high chance of success for a 40 year retirement (98%).
Average life expectancy for someone my age is 22 years. I ran FIRECalc for 40 years just in case. I'm considering delaying Social Security to offset longevity risks. I'll have to see what my portfolio is doing when I turn age 62.
I figure I'll be in the 20% federal tax bracket and my expenses are well under the $64k take home after taxes. I live in a modest home and live a modest life.
Seems doable and I'd appreciate any review or things I may have forgotten.
Thanks,
Bimmerbill

 

[TheWizard]

Delaying SS beyond age 62 is a great idea.
Make sure to set your Desired Retirement Income high enough to cover extra expenses and travel for all that free time.

Paying off house and cars at start of retirement isn't necessary and may result in higher AGI and tax that first year...

 

[latexman]

If your mortgage and auto loan rates are less than current portfolio returns, I'd recommend to keep making the payments. Let that money work for you.

 

[HI Bill]

From the numbers, it looks like it could work, but it's a bit on the tight side until you have all four income streams. My main concern is inflation, and whether you've planned for contingencies and long term care.

If I were you, I'd consider ER at 60 for a little added buffer, unless your home is in great shape, and your budget includes $ for eventual house repairs and car replacements. And you're sure you don't want to take up an expensive hobby like sailing or horse racing! And you're sure you won't want to buy a bunch of new toys in ER... I found I had lots of time, and wanted lots of toys to fulfill my time....

 

[pacergal]

Having the triple legged stool (pension, SS, savings) is golden. If firecalc gives you 100% and you have accounted for unplanned future contingencies (home maintenance, potential need for long term health needs, etc), it sound like you are good to go.
Have you answered the questions in the Early Retirement FAQ: Some Important Questions to Answer Before Asking - Can I Retire?

Congratulations on getting to where you are!

 

[Alex The Great]

In your situation, probably you will be OK but I'd recommend to wait till 60 due to the pension.

 

[Teacher Terry]

I would retire and do the things you want while you are young and healthy enough to do them. You are in good financial shape and life can be short sometimes.

 

[Sunset]

OP - Do you have 1.5 years worth of spending in non-retirement accounts or can you withdraw from the TSP without the 10% tax penalty (I don't know about TSP).

 

[bada bing]

It looks good to me, mostly because your "portfolio failure" number is ~$65K/yr in eventual pension/SS income. That's kind of the worst case scenario, barring .gov failures around SS/pension. How does that fit your needs/wants as a worst case ? An important planning consideration is that people generally reduce spending as they advance in age, so projecting reduced spending in the out years may not be as onerous as it first seems. If it even becomes necessary.

I'd do a couple evaluations. Run tax scenarios out past RMD age with good & bad market expectations. Number crunching around taxes on early withdrawals and maybe even Roth conversion opportunities might be worthwhile. I don't think you'll gain/lose much either way with Roth conversions though.

The second thing I'd look at is delaying SS filing. How's your health and family history ? Do you have legacy desires ? A bigger SS later makes the "worst case scenario" look better, but at the cost of depleting some portfolio value and reducing potential legacy.

But yeah, it looks doable. Quit and go have fun if that suits your fancy.

 

[jollystomper]

In your situation, probably you will be OK but I'd recommend to wait till 60 due to the pension.

+1. What would your pension be if you retired at 60? I faced a similar issue.

 

[Koolau]

Yeah, if FIRECalc says you're okay, you can go for it. Having said that, I think I'd be tempted to wait until 60 as some have mentioned. Can't give you a good reason while I feel that way, so you gotta be comfortable and not worry about what we all say since YMMV.

 

[goingtotravel]

We quit our Federal jobs at 57 (our FRA) after more than 30 years of service. Do you qualify for the FERS Supplement until age 62? Does your $27,000 figure include that or will you get a supplement in addition to that number? Have you had your HR department give you their retirement estimate? Make sure you do that so you aren't missing anything.

We have no regrets leaving before 62. As part of planning for FIRE I subtracted out from my salary what I would get with FERS + FERS supplement and realized I could FIRE and keep about 1/2 my gross salary but looking at the net number it was more than 1/2 since I was no longer contributing to TSP, FERS and paying FICA. Plus of course we had TSP accounts plus SS kicking in at some point in the future.

We figured if we could live within our 'floor' number, meaning FERS pensions, FERS supplement, eventual SS, and a VA payment that DH receives then the TSP money could cover extras like home repairs/updates, new cars, new hobbies, and increased travel expenses. So far it's worked out and we have more in our investment accounts today than when we retired even with annual withdrawals. Good luck, life is much better without the daily grind of w*rk!

 

[Midpack]

Delaying SS beyond age 62 is a great idea.

+1. If longevity runs in your family and you're relatively healthy, the longer you wait the better IMO. If you don't expect to live to be at least 81, waiting may not be the best choice. I wouldn't go on generic longevity tables, you know your family history and your health. I am starting SS this month at 70 yo, the $ amount is astonishing at almost $58K/yr - and COLA'd unless something changes!

Everyone should do their due diligence regarding when to take Soc Sec, there is no one right choice, but too many people take it earlier than likely optimal.

 

[sengsational]

If you're getting 100% on Fircalc, which I think is a dang conservative calculator, then I'd certainly quit sooner rather than later.

What most plans incorrectly assume is flat spending. But that ain't what happens. As you get more feeble, and it happens to everyone, you spend less. Sure, there's the long nursing home possibly, but that's really not all that likely. I'd bet if you retired sooner, you'd still have a pile of money when you croak. Personalities that love retirement calculations also tend to be conservative at every turn, but do you really think every chance thing that can go wrong will go wrong? Probably not. Of course nobody wants to run out of money, but course corrections are always available. Retire now and do what you want. Get some experiences. The day will come when all you'll be able to is sit in a rocking chair and reflect on the experiences...you don't want to go straight from work to the rocking chair.

 

[Bimmerbill]

Thanks for the feedback. I'll have 28 years in at the end of the year so my FERS pension will be reduced by about $500 a month for life. I won't qualify for the FERS supplement as I'm considering an MRA +10 retirement.

I'd get more money per month if I worked to age 60 and would get the supplement for ages 60-62. But I don't think I want to wait 2 more years. My friend and coworker of 15 years recently passed away after a battle with cancer and he was 68. He retired for a week, then passed.

I'm at the point where I'm thinking money vs time. It seems like I have enough money. Who knows how much time I'll have?

 

[Montecfo]

I think you are thinking the right way, Bimmerbill Enjoy!

 

[Car-Guy]

I would retire and do the things you want while you are young and healthy enough to do them. life "can be is short sometimes."

There, fixed it for you.

 

[Car-Guy]

I'm at the point where I'm thinking money vs time. It seems like I have enough money. Who knows how much time I'll have?

When I retired at ~60, I was optimistically planning for another 40 years. Now just a little over ten years later, I realize how bad my math was. (numbers is hard to quote someone here) Now I hope for 10 more years. And hopefully most (or at least some) of those will be good years. Read in that what you will!

 

[Teacher Terry]

Some of my healthiest friends that I thought would live to be very old died between 59 and 71 due to cancer. 2 of them had parents that were still alive. At this age nothing is more important than health and time.

 

[Dash man]

I retired at 56, and while I’m still alive at 68, these past few years health wise have limited my ability to enjoy life as we had hoped. Don’t get me wrong, I still love life, but travel is now limited, walking distance is limited, activities with grandkids aren’t what they used to be. I’m so happy I retired when I did and got to visit the world with my wife and enjoy the grandkids as they grew, though it’s more limited now. Life is still good. Retire when you can comfortably, even if it means a no brainer job a couple of days a week to offset spending for a couple of years.

 

[Koolau]

Yeah, I always advise that, no matter what FIRECalc or any other calculator says, be certain to have some back-up plans. Our main back-up is to move to a lower COL area if need be. We have lots of "slop" in our (I hesitate to use the word ) budget. But, we feel relatively confident that we will survive, financially, no matter what comes. Once you have that confidence, you are golden though YMMV.

 

[militaryman]

Hi BimmerBill,

I too am planning to retire at the end on this year (FERS). I will be just shy of 57. One thing I found difficult to exactly model with firecalc is the FERS pension. You will not get a "diet" cola until the Jan of the year AFTER your 62nd birthday. So since you turned 58 in 2024 then your first "diet" cola would not be until Jan 2029. This means your $27,000 FERS pension will have the inflation adjusted value of under $24,000 beginning in 2029 (at 3% inflation for those "zero" cola years)
Inflation calculator link

Further, if you reflect the effect of 20 years of the FERS "diet" cola, once it does kick in, on the ~$24,000 (which I always consider the "diet" cola to be about 1% under what true CPI is) then the $24,000 has the buying power of ~$20,000 by the year 2049.

So just something to consider as often the retirement calculators only allow you to choose
1. inflation adjusted or
2. not inflation adjusted.

Try running the calculator with a not inflation adjusted option and you'll see what a difference the "safe" spending amount decreases.

Also consider Social Security and the very real possibility that it might get means tested in the future or reduced by some sort of fashion. I am planning on a 25% SS haircut, although I hope that is over conservative and I will be surprised with closer to the full amount.

Funny thing how closely we are mirroring our journeys, I too will start a National Guard retirement that I estimate to be $12,000/yr at 60yrs old.

One more thing to add.... Consider suspending FEHB health plan at 60 and picking up Tricare. That should save you a few thousand in premiums.

 

[Paulz]

Thanks for the feedback. I'll have 28 years in at the end of the year so my FERS pension will be reduced by about $500 a month for life. I won't qualify for the FERS supplement as I'm considering an MRA +10 retirement.

I'd get more money per month if I worked to age 60 and would get the supplement for ages 60-62. But I don't think I want to wait 2 more years. My friend and coworker of 15 years recently passed away after a battle with cancer and he was 68. He retired for a week, then passed.

I'm at the point where I'm thinking money vs time. It seems like I have enough money. Who knows how much time I'll have?

I just turned 57 with 27 years of service and thinking along the same lines as you. I can do three more years, but every day is miserable. 3 years feels like 130 right now.

Let me know how things go for you!

 

[UpQuark]

I live in a modest home

If your house is not too modest you might want to include that in your plan. Before my retirement I intended to stay in my house, but within 2 months of retiring I put it on the market and eventually downsized to a condo of less than half the value of the house (the extra money went for a half year of travel as well as plumping up my investment acct). Plus the condo is perfect for aging (elevators, no yard work, located in a gated 55+ community that has tons of activity options, etc).

 

[Nords]

When I run FIRECalc with a 80K yearly inflation adjusted budget for 40 years I get a 100% success rate. My federal pension is COLA adjusted starting at age 62. It's a diet COLA so a bit less than the CPI. The military pension has a COLA as well. Even if I don't select COLA for my federal pension in FIRECalc I still have a very high chance of success for a 40 year retirement (98%).
Average life expectancy for someone my age is 22 years. I ran FIRECalc for 40 years just in case. I'm considering delaying Social Security to offset longevity risks. I'll have to see what my portfolio is doing when I turn age 62.

Congratulations, @Bimmerbill, and it's good to be more focused on your remaining time than your remaining money!

You can tinker with OpenSocialSecurity to see whether it makes much difference either way. Mike Piper has a good post on the lifestyle questions beyond the financial:

How I Actually Use Open Social Security — Oblivious Investor

obliviousinvestor.com

Once people step back from their earnings records, there's three issues to consider:
1. Take it at 62 and give it away / spend the extra money / advance some inheritance.
2. Take it at 70 and have the largest inflation adjusted annuity possible to help with longevity risk (especially the largest inflation-fighting income for private pay at a long-term care facility).
3. Take it at 70 for the largest possible spouse survivor benefit.