Age 56 and Still Close to Ready (Update from Aug 2017 Post)

[Dtail]

Quote:

Originally Posted by COcheesehead I haven't used it yet, but I think its called a Retirement Income Planner. It only works from my understanding when you are already retired.

Thanks. That sounds correct. I will speak to Fidelity about it soon.

[Travis Bickle]

Th Fidelity tool I use is part of the "Planning and Guidance"functionality of the site.

Here's how it's described on the Fidelity site:

"Your Fidelity Retirement Score (FRS) represents the percentage of your average estimated retirement expenses your plan could cover, assuming an underperforming market. It's based on information you provided the last time you used a Fidelity planning tool or updated during this planning session, including the accounts and income sources you assigned to your retirement plan, your current or modeled savings rate, your current or modeled asset mix, your retirement time horizon, and your estimated taxes and expenses. "

I've been using the tool about the last 5-6 years, and will say the functionality in the tool continues to improve all the time. You can easily model more detailed spending as well as any "one-time expenses" - which is how I modeled in the future college tuition bills for us. If you guys have Fidelity 401k's and haven't used it it's worth checking out.

[Cobra9777]

Congrats. You seem to be well prepared and in pretty good shape overall for ER. Just some random thoughts, questions, answers:

1. Just curious about why lump sum instead of annuity? ...I like a 3-legged stool vs 2 if given the opportunity.

2. No taxable account at all except $50K cash? ...I'd want more.

3. Sounds like your $150K is for 3 years at $50K/yr/child. ...sounds high to me.

4. I'd use a combo of FIRECalc, RIP, i-ORP, c_FIRE_sim, Excel, etc. ...get a variety of perspectives.

5. Some of us youngsters like to discount SS in the plan. ...my current fudge factor is 0.7.

6. Spending... for us, total spending went down drastically when we retired. But that's mainly because we paid off the mortgage, college costs ended, kids went off the payroll (health ins, car ins, cell phone, laptops, $600/wk grocery runs, etc). Excluding those big discrete items, spending is about flat... we pay more for health insurance and travel, but this is offset with reductions in commute costs, other work-related costs (dry cleaning, clothes, lunches), and reduction in stuff like cutting the cord, shopping for insurance, and DIY most home repairs and maintenance.

7. I'd use the stock option proceeds to help close the college gap. Also save as much as you can in taxable before retiring. Also any/all part-time earning could help close the gap. I'd stay away from any form of debt.

8. Long range spending... to me, this is the key to solid retirement planning. Many people use current spending plus inflation. You're using a discounted inflation rate, which is slightly better. The online tools have other options like VPW. That's fine, but I want to know specific amounts and the timing profile, which is surprisingly easy to estimate. I have a spreadsheet with 19 categories of spend, with lots of history and 30 years forecast. Each category has a unique inflation rate. And each has a unique consumption factor or cost driver. For example, gasoline has a high inflation rate, but stays relatively flat in nominal terms because over time we reduce the number of cars, miles driven, and thus gallons consumed. This level of detail can be eye-opening, especially with medical "consumption" increasing in latter years and likely with a very high rate of inflation. We plan to downsize in about 10 years and it's amazing how many categories of cost go down sharply at that point. The result of this exercise is nothing at all like a smooth line.

9. Contracting... I thought I would do this also, and told Megacorp I was open to the idea. They called twice in the first year and I said no both times. Once I had a taste of freedom, the idea of putting on my clown suit, getting in traffic, and then sitting in a conference room looking at PowerPoint slides made me physically ill.

[Travis Bickle]

Quote:

Originally Posted by Cobra9777 Congrats. You seem to be well prepared and in pretty good shape overall for ER. Just some random thoughts, questions, answers: 1. Just curious about why lump sum instead of annuity? ...I like a 3-legged stool vs 2 if given the opportunity. 2. No taxable account at all except $50K cash? ...I'd want more. 3. Sounds like your $150K is for 3 years at $50K/yr/child. ...sounds high to me. 4. I'd use a combo of FIRECalc, RIP, i-ORP, c_FIRE_sim, Excel, etc. ...get a variety of perspectives. 5. Some of us youngsters like to discount SS in the plan. ...my current fudge factor is 0.7. 6. Spending... 7. I'd use the stock option proceeds to help close the college gap. 8. Long range spending... 9. Contracting...

Thanks for the comprehensive answers- I appreciate you taking the time to do that - some really great points to consider. Some additional info

1 - I did some calculating of lump sum vs. annuity last year and it seemed like the lump sum would be the better deal if I was going to be able to get 4.2% average growth out of it like in my model. However, my employer gives both options and I can run either version into the Fidelity tool. Will do that and see how it impacts risk and score. I am guessing it will probably show a benefit in "significantly below average markets" which is what I was using in the fidelity tool, but will negatively impact the scoring in the "average or above average markets" scenarios and in my consistent growth tool. With a lot of the prognosticators saying we should reset market expectations for the foreseeable future, then perhaps an annuity should be back on the table. Any other opinions out there?

2 - I'm assuming you mean "after tax savings"? If so you are correct that we run pretty lean here as we have been dumping as much after tax money as we can into 529's the last several years. We are working on tightening current spending, which should raise this number. Interested in opinions on if I should stop contributing to 529's and just instead put those savings (currently about $600/month) directly into cash. I don't see a huge difference with the exception that if we go into cash it can serve as emergency funds while I'm still working.

3 - The $150k is the total that is required to cover the gap from what is in the 529's now vs. what the total cost is for both daughters to get through undergrad - tuition+room/board. Current cost/yr after loans/financial aid/scholarships is $40k/year for first daughter (3 years left) and $38k/year for second daughter (freshman this fall). (I recognize a lot will have the opinion that in-state tuition offers the most value, but we have chosen to support their school choices at high quality out of state public schools and agree on their choices as being best fits for them and that I might need to work a little longer to cover that decision.)

4 - Already did Firecalc and showed 97% chance of success - will also do the others. Will also try discounting social security and see how that impacts results and more importantly how we might have to adjust spending to account for lack of full SS funding. I'm thinking that's where downsizing might be a nice fit to lower RE tax and utlities/house mainteance costs. That should also be well after both daughters are "off the payroll."

8 - Long range spending - I really like your idea here of modeling out long range spending. Gonna try to do that a little in my model. My $130k spending number has some spending that would be considered not "normal" (i.e. used car for daughters, new water heater, cost of wisdom tooth removal for daughter, etc.). I kind of left those in the spending budget as "essential spending" thinking that "every year it's something". However, I do think some - like car replacements, new appliances, contribution to weddings, etc. - can be planned out in advance. What other of these did you include?

9 - Contracting - you got that right - I go back and forth on that all the time. A lot of times - when I dislike my job the most - I can't imagine ever wanting to step back through that door after I go. OTOH - I always talk to the guys who do come back after going about what they are thinking - and one of the things I've heard from a few of them is that it's much different for them mentally because they don't feel as tied to the success and failure of everything going on. They know they can just go at any time and that makes them enjoy what they are doing a little better.

My initial thinking would be to take some time off and get my head right, and then look at options. I even thought about Uber driving as something interesting to do, until I read an article about how unfairly they are paid - lol.

Did you end up doing an part time work at all? Is there anywhere on these forums where people talk ideas for interesting/fulfilling part time work? I did a quick search through some of the forums and didn't find anything immediately.

[pb4uski]

I worked part-time for many years before I retired/quit. Our firm had an established program for part-timers.... generally speaking, everything was a % of FTE... so when I was 50% I received 50% pay for my position, 50% bonuses, 50% vacation time, etc. ... health insurance was all or nothing... all for 50% or more and nothing for less than 50%. Since we billed for our time and our billing rate was many times what they paid us it was a win-win for them... even as a part-timer they made oodles of money from my work... from their perspective 50% of pb4uski was better than no pb4uski.

I'm not a huge fan of 529s... to me the restrictions are not worth the tax savings so we used taxable account savings. Good thing as it turns out because DS decided not to attend college so I would have had a lot of money tied up in 529 for him. Or a couple nephews received substantial scholarships for college so if their parents had a boatlaod of 529 money then that woudl have been tied up.

On my pension, I looked at my lump sum decision as simply an opportunity to purchase an annuity at better than market rates and make a portion of our retirement income not dependent on investment returns so I chose the pension benefit over the lump sum. The pension makes 20% or so of our current spending... SS will cover another 50% or so.

[Travis Bickle]

Quote:

Originally Posted by pb4uski On my pension, I looked at my lump sum decision as simply an opportunity to purchase an annuity at better than market rates and make a portion of our retirement income not dependent on investment returns so I chose the pension benefit over the lump sum. The pension makes 20% or so of our current spending... SS will cover another 50% or so.

I took a look at this, and my employer's annuity would be about $80/month higher than what I could get from Fidelity for an annuity. I bet dollars to donuts that Fidelity is probably who manages their annuity programs anyway.

I also ran this calculator: https://www.calcxml.com/calculators/...um-or-payments

And it told me that with a 4.2% ROI and life expectancy of 85 it was pretty much the exact same.

Anyone else have a calculator or recommended way of evaluating lump sum vs. annuity?


In other "update" news, I am heavily leaning towards doing another year and firing at end of 2019 as long as the impact to my pension from the interest rate changes is not too bad. It just removes a lot more uncertainty and makes the decision a sounder one, including another year of college expenses in the rear view mirror. It also means barring a big market downswing after I go I probably won't have to work again unless I want to.

[pb4uski]

immediateannuities.com