Brand New

[Nomad4hire]

Greetings! I am 51 and ready to ER ( was ready a year ago). New on this site, but learning the lingo. I plan to be a regular user and hopefully contributor.

I need some feedback and guidance. Here is my situation:

My DW and I have no debt.
IRA and taxable combined of $1,100,000
No pensions
$75,000 in liquid cash
We plan to purchase health insurance - estimate $4800 annual
Our annual needs we think are well below $30,000
We plan to and have forecasted a $36,000 annual draw

I am nervous and we need some ideas!

 

[inky]

To me that seems like an aggressive withdrawal rate given your relatively young retirement age. Have you tried running your numbers through Firecalc to see what the success rates would be?

FIRECalc: A different kind of retirement calculator

 

[Nomad4hire]

To me that seems like an aggressive withdrawal rate given your relatively young retirement age. Have you tried running your numbers through Firecalc to see what the success rates would be?

FIRECalc: A different kind of retirement calculator

Yes, we ran the numbers through Firecalc. 100% success.

While we have estimated a 36,000 annual draw, our expenses, with insurance, is at the $24,000 annual range.

Thanks for the reply!

 

[heeyy_joe]

Welcome aboard! I was in your spot six years ago. I am glad I did not ER at that time. You can probably make it work so it's other things (not written by you) that will guide you.
And +1 on what INKY says.

 

[Nomad4hire]

Thanks Heeyy_joe!

When you were at the same point as me, did you hold due to finances, or because you were not ready mentally yo pull the plug?

I hope to make the final decision a bit later this year. We're living on what will be our ER budget and I must admit, it is really not bad. In fact, we are enjoying the challenge.

 

[ERhoosier]

Don't mean to be negative, but +1 on the caution signal. ER @ 51 leaves a huge cone of financial uncertainty given your (hopefully!!) decades of retirement.
BTW- Considering health care cost inflation your allocation for health expenses seems low even with ACA subsidies. Beyond HI premiums, deductibles & co-pays can really add up.

 

[bjorn2bwild]

Hello from a like minded nomad. I think your scenario can work if you are comfortable taking the low road. We are going to wait for implimentation of the ACA next year. This is the biggest wild card for us.

 

[bbbamI]

(snip)
I hope to make the final decision a bit later this year. We're living on what will be our ER budget and I must admit, it is really not bad. In fact, we are enjoying the challenge.

That makes me go 'hmmmm'. I think it's a great idea to live off what you plan to spend in retirement, however it's easy to do since you still have an income...

You'll want to enjoy your retirement by it not being a 'challenge' IMO. I have a yearly 25% buffer to take care of the 'uh ohs'.

Don't mean to be negative, but +1 on the caution signal. ER @ 51 leaves a huge cone of financial uncertainty given your (hopefully!!) decades of retirement.
BTW- Considering health care cost inflation your allocation for health expenses seems low even with ACA subsidies. Beyond HI premiums, deductibles & co-pays can really add up.

Yeppers. You'll also need to pay attention to your yearly max-out-of-pocket amount.

 

[heeyy_joe]

Don't mean to be negative, but +1 on the caution signal. ER @ 51 leaves a huge cone of financial uncertainty given your (hopefully!!) decades of retirement.
BTW- Considering health care cost inflation your allocation for health expenses seems low even with ACA subsidies. Beyond HI premiums, deductibles & co-pays can really add up.

+1
Answered as well or better than I could.

 

[Nomad4hire]

Thanks for the advice and input. Exactly what I am looking for.

Seems like I am a bit early given my financial situation.

 

[Ready]

Thanks for the advice and input. Exactly what I am looking for.

Seems like I am a bit early given my financial situation.

You didn't mention your housing situation. Do you own your own home or rent? If you own, do you have a lot of equity? If you do, you could always downsize down the road, or even take out a reverse mortgage later in life if you need to.

 

[Nomad4hire]

We downsized to a smaller and newer home. No mortgage. Eqity is about $200,000.

And no car payments. Our cash on hand is in money market account at our local bank.

If I stay employed another 3-5 years we should increase our cash to about $175,000.

 

[NanoSour]

you look good to go if you are comfortable with your planned spending. That's what it's really all about.

 

[Delaney]

I think you are good to go.

Health care costs are my biggest concern because of the uncertainty. You can get an actual quote now to be sure you've estimated those costs correctly or if you may want to wait to see what happens in 2014.

Once you quit, there's no going back. Is there any chance to cut back on hours or even to use up all your vacation to make it easier to stay working for a little longer and to test out ER a bit.

 

[Nomad4hire]

Our healthcare quotes were lower than we estimated our annual expense by about 20%. But a higher deductible.

Since we are close to the end of this year with plans to ER, it makes sense to wait for ACA to kick in and check HC costs then.

Thanks for the input!

 

[seraphim]

One major consideration is the possible need - sooner or later - for long term care. LTC Insurance will run us about $580 a month for two people (recent quotes indicate that would provide us a 385k account which was protected from the government over about 25 years). Prices are going up rapidly.

You and I are in a similar Portfolio boat, but we have two pensions (about $4800 month after taxes). My major concern is hanging onto that money if someone needs an 80k per year facility for three too five years, as my MIL did. Physically, she was in great shape. Alzheimer's took her mind, however and she needed care evn a full time family member could not provide.

Without insurance, that type of care will eat into your investment quickly and deeply. The government will come looking for reimbursement of any money provided by Medicaid/Medicare for such care.

If something serious were to (heaven forbid) happen earlier in life than than is encountered by the average person, one or both of you could end up with no finances and in Deep debt.

When emergencies start eating into the principle of your only income source, you are in trouble.

Just my $.02, but I think you need to make sure you have LTC covered...

 

[seraphim]

Also, we both have subsidized health care throu our employers better than ACA subsidies. Our costs are about $7200 a year. I'd plan on $8000 through Obamacare - bare minimum.

 

[seraphim]

One last thought - there's post retirement subsistence level existing, and and then there's living. Do you want to just subsist for 25 to 30 years, or have some extra to enjoy? We may be from different parts of the country, but I live in an area considered low cost, and I don't see how we could barely survive on $30k a year...

Again, just my thoughts...

 

[Packman]

Welcome Nomad. We also live in Denver - can you believe we may get another foot of snow in the next couple of days? Arizona is looking like a way better place to ER!

Anyway, what concerns me is how low your annual expenses are - under 30k? And $4,800 for HI for two people? Have you thought of income taxes, property taxes, major home repairs, OOP health costs, auto replacement, appliances, etc? I'm normally one that applaudes frugality, but...

 

[Nomad4hire]

One last thought - there's post retirement subsistence level existing, and and then there's living. Do you want to subsist for 25 to 30 years, or have some extra to enjoy? We may be from different parts of the country, but I live in an area considered low cost, and I don't see how we could barely survive on $30k a year...

Again, just my thoughts...

Great points! We will relook at our annual income estimates and consider long term care.

Given our current nest egg it is feasible to increase the annual draw if necessary.

Do you suggest we push closer to 59 1/2?

 

[seraphim]

OK - a LAST last thought. IF you go ahead and ER now, I'd look into asset protection strategies: perhaps an immediate annuity to guarantee your income for life, or an irrevocable trust which your funds from the government's 5 year look-back policy, in case of medical emergencies.

You need to confer with better minds than mine on those two issues, however.

 

[seraphim]

I'm not qualified to suggest anything. You just have all your eggs in one basket, income wise, and if that basket gets damaged you have no other source of income. An elder care attorney can offer advice about asset protection. Others here can offer advice about the protection an annuity may offer. I'm not big on annuities for investment purposes, but they may have a use for to offer protected, guaranteed income.

 

[militaryman]

I would echo many of the thoughts in the above posts.

My parents are making it on about what you are saying is what you are able to make it on however ** to me ** it is not an ideal situation. Retirement really opens up life for you and frees up your schedule for many things. While you may be able to
** deal with ** the income level now, consider that your mind and activity is substantially consumed by work day in and day out --- Will you still be as satisfied if all that time is freed up but you have no funds to DO anything that costs $$.

If so, then go for it! There are plenty of activities that cost little to nothing but for me --

I am hoping there is a substantial buffer to allow me to feel free to add things to my bucket list.

 

[Nomad4hire]

I would echo many of the thoughts in the above posts.

My parents are making it on about what you are saying is what you are able to make it on however ** to me ** it is not an ideal situation. Retirement really opens up life for you and frees up your schedule for many things. While you may be able to
** deal with ** the income level now, consider that your mind and activity is substantially consumed by work day in and day out --- Will you still be as satisfied if all that time is freed up but you have no funds to DO anything that costs $$.

If so, then go for it! There are plenty of activities that cost little to nothing but for me --

I am hoping there is a substantial buffer to allow me to feel free to add things to my bucket list.

Thank you Militaryman. The more I read and with the input here on this forum, I am thinking we need to get closer to 60. We actually might try to relocate to an area where cost of living is lower and we own a home with no mortgage. Taking a less stressful job might be the ticket to getting through the next few years.

Thanks for your input!

 

[obgyn65]

Welcome to the forum. If Firecalc says you are good to go, then you are good to go.