1st Post Wondering If I'm Prepared

[treemoney]

Hello everyone this is my 1st time posting. I am enjoying the posts I have read, especially from the younger people, glad to see them starting early.

About me, I will be 56 in January, looking to ER in the spring of 2017. My spouse just turned 54 in October and also retired in October.

Assets
1.6M Net worth
20K 401K 2016 Contribution
22K Spouse’s fixed pension (Starts Oct 2016)
22K My SS (Starts 2027)
24K Spouse’s SS (Starts 2028)

Liabilities
$120K 15 yr Mortgage@ 2.875% in 3rd yr on 300K house.

No other debt. Cars are paid for. Currently live in NJ where the taxes are very high, $9400 per year and climbing.

Our plan is to stay in NJ until 2020 then move to a warmer less expensive area. Florida is being considered. We both plan on buying new cars within the next 5 years, budget of 40k max each. We have budgeted 15K per year for Health Care. We figure our annual net expenses with mortgage, utilities, food, healthcare, auto, travel, entertainment and taxes that will be due on amount of withdraw to be 90K.

I’m starting to think our tax rate that we are figuring might be a little high because some of the money after my spouse and I turn 59-1/2 will come from a Roth IRA.

We have no kids.

When I put this information into Firecalc I get 96.4% success for 35 yrs. I have looked at other calculators and come up with similar results. We also have a FA who also comes up with similar results. While excited about this, I am also cautious.

I have worked in my field for the last 32 years. I am in a customer service field and have seen many changes in both the economy and the demands of people. My partner and I are young and healthy and have been planning this for many years. Well now the rubber is beginning to hit the road. I welcome any opinions or points of view.

[stepford]

It looks to me like you're OK, but with a fairly small error margin at $90K/yr expenses (with your wife's pension that means you have to generate about $68K/yr from your $1.6M nest egg until SS kick in). Again, this is doable, but I'd feel better about it if I had a good idea that I could cut down expenses in the future if I had to.

Balance that against the fact that you're still young and healthy enough to enjoy retirement right now, and who knows about tomorrow. In your position I might just go for it, but it depends a bit on your personal risk tolerance.

PS. I grew up in NJ. Getting out was the best choice I ever made.

[Hermit]

Welcome treemoney!

Congratulations on your ability to soon RE. If you haven't yet, you might want to look at http://www.early-retirement.org/foru...ire-69999.html in the FAQ forum for some good advice on getting ready to retire. If you would like a critique on your financial situation related to your retirement, post some of the numbers on your savings/investments and expenses. There are a lot of great people on this board that will be happy to look at your numbers and give advice.

[pb4uski]

Welcome. The more the merrier!

In Firecalc, did you include your mortgage in your expenses? If so, your success rate is probably a lot better than 96.4% because the mortgage outflows increase with inflation and never end. The better way to include your mortgage is as off-chart spending starting right away and then an offsetting pension starting in 12 years when the mortgage payments end..... in both cases not inflation adjusted and then reduce your $90k by your mortgage payments.

You can refine your taxes by doing a pretend tax return for a year as if you were retired using Taxcaster.

Finally, is your spouse's pension joint life or single life? While I know it is a bit morbid one thing to explore is whether you have enough if your spouse dies soon after you retire and vice versa. If that happened, her pension might go away if it were single life, her SS would go away, but your expenses might be a bit lower but your taxes would be higher.

[Alvin Tostig]

Hi Treemoney.


We should keep tabs on each other because we have a very similar situation. I joined recently and posted here. My NW is nearly $1.65 mill, and I'm looking to retire no later than Spring 2017, like you, (or 2016 if possible). We also live in NJ and perhaps by 2021-2022 we'd like to move to N. Carolina or if I could talk the wife into it Florida.. I'm 59 and wife is almost 56. I don't have a mortgage anymore, but you got that pension! Nice. Wife is not retired, she will work in her job for 4-5 more years; I'm going to do part-time teaching. I'm walking away from nearly 200K a year at that time, and combined we'd make about 45K (so maybe that's like your pension but just for a few years).


Yes, we ran Firecalc, and we were projected spending $85K a year and had a 100% rate of success. I think I'm going to revisit this at $90K or more and see what happens.


For some reason, I feel I need $2 million plus my house (now worth $450K), regardless of what Firecalc says. Sometimes I feel that it's not the target date - but when I hit that number, I'm ready to go. I hope it's not later than Spring of 2017.


You should read the responses I got and see other people's assessment. It looks good for me - so probably for you to. I'm rooting for you!!

[OrcasIslandBound]

Our situation is a little similar to both of you. However were planning on keeping two houses for a while, one in SoCal and one on Orcas island. We have a bit more investments but less pensions and we'll both be 58 when we retire in Sept 2016. Actually I will attempt to work half time remotely, but I doubt this will be approved.
Our expenses are also being planned at $90k/year. Fidelity and firecalc both say good to go.

Sent from my Nexus 4 using Early Retirement Forum mobile app

[DrRoy]

Hi, Tree. Your numbers look pretty good. If you want to get more of a margin of safety (and probably 100% Firecalc), you might target paying off the mortgage before you RE. That has such a great impact on the cash flow and income needed. The other thing that came to mind is that for me the budget for the new cars is too high. I would never consider paying 5% of my NW for 2 cars. That is 2/3 of your mortgage right there. Just a thought.

[OrcasIslandBound]

We also have a mortgage that we'll carry into retirement. $213k. Payments 1045 a month. Suddenly paying this off would require withdrawals of roughly 50% more to cover taxes as the withdrawals would have to come largely from pretax accounts. We've decided not to do this for that reason.

Sent from my Nexus 4 using Early Retirement Forum mobile app

[treemoney]

Hello everyone and thank you for your responses.
stepford I agree there is a small error margin, that is one of my biggest concerns. I'm hoping that when we move out of NJ we can cut our property taxes by a minimum of 50%. This will help offset the cost of healthcare.

Hermit I have read and answered "Some Important Questions to Answer Before Asking - Can I Retire?" and feel good about the answers.

Pb4uski our mortgage is included in our expenses in Firecalc. I will try your suggestion with putting it in off chart spending and offsetting the pension and let you know the out come.
DrRoy we keep going back and forth about paying off the mortgage. With our rate at 2.875% some people say its like free money. Which I can see their point. As for the cars, that is in there as a dream. In case we get bored with what we currently have. (2006 & 2010). Both are good cars that are meticulously maintained and can probably last at least 5 more years each.

[cyber888]

Looks ok. The $90K expenses could be a little high, but I think you're gonna make it if NJ taxes don't go up in leaps and bounds.

[walkinwood]

How much of your savings are in tax-deferred / tax-exempt / Taxable?

That split will determine how high your taxes will be. The more in tax-exempt, the higher the taxes. Try putting the numbers into a tax program.

Another NJ expat here. We moved out in 2011 and have not regretted it for a moment.

[Balance]

Our situation is similar to yours (we are 56 and 51) but we have 2 kids (1 college, 1 HS). Our NW is higher including a 500K house (no mortgage) but not including a passive business investment that throws off 25K per year. Also, have fully funded college expenses separately. We operate on 90K gross income and set aside around 150K cash for Capex (New roof, HVAC etc. plus cars, etc.) purchases over next 10+ years. Big difference is we do want, if possible, to leave a legacy for our kids. Not hung up on how much but hopefully enough that it would, say help accelerate them towards FIRE and provide a nice boost to college funds for future grand kids.

Bottom line, we know we are FI but we did not feel comfortable in the RE phase despite all the financial simulators, so wife and I cobbled together part-time consulting gigs that combined with the passive business interest income covers our annual budget. Our goal is to continue this until younger child is in college, thus allowing our NW to stay intact or grow (if possible) for the next several years.

Btw, why am I not comfortable? Well, I am concerned asset prices are high and that returns may be small at least for the next several years (Look at 2015). Additionally, I believe that inflation is higher than reported. What I am seeing is that prices are either increasing greater than core inflation on certain everyday needs (healthcare, other insurance, high end food) or that prices are staying controlled but the products are being cheapened such that life cycle costing for the products are ever higher going forward thus greater than core inflation rate is embedded. Lastly, I am concerned that SS may be somewhat reduced during the years we are eligible.

Nonetheless, you asked for opinions and if I am reading your post correctly your investment assets are a little more than 1.2 million when you deduct the house and future car purchases. When you move to Florida you will need to purchase a home/condo. How much of that 180K+ equity in current house are you going to use to make the new purchase? In terms of your annual income you are figuring 90k gross with 22k coming from pension thus need to generate around 70k for the next 10 years until SS kicks in. Your annual budget should be reduced once you eliminate the mortgage and reduce property taxes? If so, I can see how those adjustments would help your case. Might be a good idea to do your own simulation in simple form and think of it in phases. Phase 1 being now until move to Florida. Phase 2 Florida until SS and medicare kicks in fully. Phase 3 from start of SS until you hit life expectancy leaving some assets in tact for your assisted living years. You might want to look at Phase 3 with a reduced (say 67%) SS payout as a sensitivity analysis.

Sorry, if I come off conservative to the point of sounding negative, but it probably stems from having kids still in the house and having parents from the Greatest generation who grew up in the depression. That left a mark

[mydogwantsmetoretire]

Based on previous feedback posts and your own calculations, it seems like you are in good shape for ER. Another factor that seems to matter is your own ability to be comfortable with not having 100% surety you have enough. Half of this process is mental and having the ability to analyze factors, both your own situation and external factors, and pivot as needed.

There are always going to be changes from projections and as long you have enough to handle a Black Swan type of event (losing 30%-40% over a short-to-intermediate term) then you should be able to retire early and make adjustments.