Checking in from SoCal after Long Hiatus

[Rowdy]

Hello all,

I haven't posted in, well, a long time. Looks like my last check in was 2012 - lots of changes since then!

Currently an executive in very, very small electronics company for about 6 years. Live in SoCal (rent), so housing is very expensive, but I can hear the waves at night and I ride my bike to work! Both my adult kids as well as grandchild live here, so we're staying in SoCal.

Stats:
- 59M w/ 55 wife
- Low $100s income (very small company, but product on the verge of potential large sales increases)
- Around $750k in retirement funds and $50k emergency fund
- Military (reserve) $32k/yr COLA retirement at 60, increasing to $52k/yr at age 68 (all PV)
- $10k non-COLA adjusted retirement from MegaCorp at 60
- Medical at 60; fabulous coverage with low deductibles through military insurance plan
- Plan to take SS at 62 (I know there are lots of opinions both ways on this)
- Planned expenses in retirement low $90k/yr (not including travel)

Our tiny company is on the verge of possibly taking off, so hanging on as long as I can. Our area of SoCal has seen some very significant housing price increases, so need to relocate to somewhere close, but cheaper before I get completely priced out of the house market.

Plan:
Purchase a house in the Coachella Valley (CV) Area (Palm Springs, CA) early summer 2021 before prices get out of hand and while interest rates are low (Edit: Will use $0 down VA loan). Yes, I know that it is hot there! For $400 - $500k, we can purchase a large house with pool and spa, all with a view of the mountains. I've run the numbers using "Flexible Retirement Planner", looks like I can pull the plug as early as 60, but might wait until 62 to retire. I'll commute weekly about 2.5 hours Monday mornings and return home on Thursday evening. Will either cut back to 4 days/week (20% pay cut) or work from home on Fridays. I can stay with my daughter Monday - Thursday.

Once in retirement, we plan on traveling July - August to escape the hottest months in the CV. Hawaii, SoCal, Europe, Caribbean, etc.

Questions:
- Has anyone ever done this long weekly commute? Doable?
- Struggling with hanging on longer at small company for the big payoff, which could be around the corner or maybe never...Could amount to hundreds of thousands to low millions, OR nothing. FYI, our Founder/CEO thinks everyone should work until the day they die...
- Thoughts on taking 20% pay cut to have 3 day weekends. Maybe I can hang on longer?
- Anyone live in the CV? How do you like it? Decent medical (Eisenhower hospital)?
- Question for Military Retirees: Commissary and exchange are currently < 1 mile away, but will be 1.25 hours each way when in CV. Will I miss the prices or are there other alternatives (e.g. Costco, Sam's, Trader Joe's, etc.)?

Edit: In addition to pensions, will use 4% withdrawal rate from savings, my SS will be ~$25k/year at 62, DW SS will be 1/2 mine when she is 62.

Thanks!

 

[Scrapr]

I did the long commute for a number of years. 3 hours each way. We had a branch operation that we were starting up. I would be up at 4:00 am to be at the dispatch at 7:00 am. Some weeks it would only be 1 night. Sometimes as many as 2 or 3 nights. Sometimes my wife & boy would meet me over there & we would have a mini vacation.

First of all you are going to put some miles on the car. So be prepared for that. I was going over a mountain pass so weather could be an issue. Although my wife got used to it she was single parenting for those years. She was a SAHM. But There were times it was hard. be prepared to have that talk.

I was much younger then. I don't think I would do it at my age anymore (64M)

 

[VungTau]

I hung around a small company that was going to explode anytime with a ton of options and hoping to hit a home run. Sounds similar to your situation. In the end it never did blossom and the options were under water when the company finally sold.


I never counted on that payday in terms of my financial plans so it didn't matter in the long run but it was disappointing at the time.


Hope yours works out better!

 

[WyomingLife]

Thank you for your service, and it sounds as if you are at a great point in life.

My sense is that your plan is to live off of your military pension, corporate pension and SS, as it seems that you intend to deploy the bulk of your savings on a house. I don’t know what your SS is.

You say that your “planned expenses” in retirement are in the “low 90K,” which doesn’t include travel. Your travel ambitions seem expensive to me. So I don’t know what your ultimate retirement budget is.

I would just make sure that you are tracking expenses and have run your numbers. It looks like you are going to largely deplete your savings on a house that is a long ways away. You have HC covered, which is a huge relief.

 

[Rowdy]

I would just make sure that you are tracking expenses and have run your numbers. It looks like you are going to largely deplete your savings on a house that is a long ways away. You have HC covered, which is a huge relief.

Thanks for your inputs. The plan is to use my VA loan with $0 down for the house purchase. Rates are so low (VA 30 year, 2.5%) that I think it is best to leave $$$ earning. Plan on a 4% withdrawal rate for the retirement funds. In addition to the pensions, SS will be around $25k for me at 62 and $12.5k when wife turns 62 (1/2 of mine).

 

[Lewis Clark]

- Question for Military Retirees: Commissary and exchange are currently < 1 mile away, but will be 1.25 hours each way when in CV. Will I miss the prices or are there other alternatives (e.g. Costco, Sam's, Trader Joe's, etc.

Savings from shopping on base compared to local grocery stores will vary widely from item to item, and depending on what's on sale for reduced prices each week. I'd recommend doing a price comparison among the convenient shopping options and the base. Then you can decide if the base saves enough to justify the trip.

We drive 45-60 minutes each way to shop on base depending on traffic. We make the trip about once every 4-6 weeks and stock up on non-perishable stuff. Supplement at local stores as needed and for fresh perishable items.

Price comparisons every couple of years have verified that for our purchases, the drives are worth it.

 

[Rowdy]

I hung around a small company that was going to explode anytime with a ton of options and hoping to hit a home run. Sounds similar to your situation. In the end it never did blossom and the options were under water when the company finally sold.

I never counted on that payday in terms of my financial plans so it didn't matter in the long run but it was disappointing at the time.

Hope yours works out better!

The plan does not require hitting it big, but would be nice!

 

[calmloki]

We do a long commute every year - from Oregon in the fall down to the La Quinta cove next to Palm Desert and then back around May. We really like the location - 4.5 miles from Costco and all sorts of shops, not in a gated community but in a cove surrounded by hillocks that are close enough to substitute for mountains. Our pool is mainly used as a reflecting pond for the mountains. Walking trails all over and maybe a mile from where the Bachlorette was filmed this season. Medical? When my eyes rolled back and the gal was doing chest compressions we had a fire/med team at our gate in 6 minutes. Good experience with Eisenhower on several occasions.

edit: Re base shopping, there is a big honking Marine base up in 29 Palms about an hour away that may have shopping - not something I've investigated.

 

[Golden sunsets]

Are you factoring the mortgage payment and other home ownership related expenses into the $90K? And does the $90k include income taxes?

 

[Rowdy]

Are you factoring the mortgage payment and other home ownership related expenses into the $90K? And does the $90k include income taxes?

Very good questions. The $90k does include up to a $3k/month mortgage, but I really fell more comfortable around $2.5k/month. I include $300/month for maintenance/improvements. Not planning to buy a fixer upper, although I'm relatively handy.

Income taxes are not included, here's why. I'm using the Flexible Retirement Planner for planning. I include the $90k in the "Annual Retirement Spending" entry, then in additional inputs I add the various incomes (Navy Retirement, Corp pension, SS, etc.) and indicate an investment tax rate (15%) and income tax rate (17%). So, the planner factors in taxes for the probability of success calculations.

Thanks, good questions. Wonder if $300/month sufficient and whether taxes are high enough. California does not tax SS, so that is a plus. Also, a small portion of my Navy Retirement is not taxed. Military medical insurance is super good, very low deductibles and low max out of pocket.

 

[volfan]

First, thank you for your service.

You’ve probably taken this into account but just to be sure—Do your pensions have 100% survivor benefits in case your wife outlives you?

Interested in following your progress as your numbers and ages are in line with ours except our state pensions have a 1% adjustment that could be taken away. In fact up until 2013 it was a full COLA and then changed to help save the pension fund.

High inflation could be so detrimental in our case. It’s one of the reasons I think only one of us should take early SS, so that the surviving spouse would collect a higher amount along with the pensions.

BTW the Open Social Security calculator is a great tool if your SS dates aren’t set in stone.

I’m jealous that you are by the beach. Trying to convince my spouse that we need to be much closer. It sounds like 2 hours isn’t that far but it’s not a daily day trip or even weekly for us and we are about that far away on the opposite coast. Are you certain you will be happy that far away from the beach?

 

[Rowdy]

First, thank you for your service.

You’ve probably taken this into account but just to be sure—Do your pensions have 100% survivor benefits in case your wife outlives you?

......................

I’m jealous that you are by the beach. Trying to convince my spouse that we need to be much closer. It sounds like 2 hours isn’t that far but it’s not a daily day trip or even weekly for us and we are about that far away on the opposite coast. Are you certain you will be happy that far away from the beach?

Military pensions are eligible for a 55% survivor benefit, so that is a good point. I do have 2 life insurance policies, however, the largest of which will end in 1.5 years. There's also a second policy that ends when I turn 68, which could provide $14k/yr (assuming a 4% SWR). As you suggest, might be a good idea to potentially delay DW's 1/2 SS benefit, since a surviving spouse gets the 1/2 plus the credit for the delay.

We are currently about 1/3 of a mile from the beach and live in an idyllic setting, however, we can't afford this in retirement. Our current rental house is a tiny cottage, however, S. Cal affords much outdoor activity (It's currently 70 and sunny).

I like to look at life in segments or chunks; we're in our beach segment, to be followed by our desert, surrounded my beautiful mountains segment. My plan includes generous travel from age 62 - 74, followed by a travel slow down 75 - 84; we are hoping to cover our love of the beach during these travels to include possible several week stays in some locations.

Thanks for your input and to everyone I haven't directly responded to.

 

[volfan]

Military pensions are eligible for a 55% survivor benefit, so that is a good point. I do have 2 life insurance policies, however, the largest of which will end in 1.5 years. There's also a second policy that ends when I turn 68, which could provide $14k/yr (assuming a 4% SWR). As you suggest, might be a good idea to potentially delay DW's 1/2 SS benefit, since a surviving spouse gets the 1/2 plus the credit for the delay.



We are currently about 1/3 of a mile from the beach and live in an idyllic setting, however, we can't afford this in retirement. Our current rental house is a tiny cottage, however, S. Cal affords much outdoor activity (It's currently 70 and sunny).



I like to look at life in segments or chunks; we're in our beach segment, to be followed by our desert, surrounded my beautiful mountains segment. My plan includes generous travel from age 62 - 74, followed by a travel slow down 75 - 84; we are hoping to cover our love of the beach during these travels to include possible several week stays in some locations.



Thanks for your input and to everyone I haven't directly responded to.

Our insurance policies also expire in a year and a half, and don’t know if we will try to get something new or a smaller one just to help with any final medical expenses. Something to consider.

I’d try playing with the calculator using your 55% benefit for a single, and also just one SS since it is reduced to one check also. See how that plays out for your spouse.

I keep saying if I can’t move to the beach or close to it, I need to have at least 12 weeks at my various favorite beach locations spread out throughout the year. At least for the next 10-12 years if I am around that long. That may be the frills our portfolio pays for!

I’ve only been to Southern California once, but loved the west coast. A two-three week trip up the PCH to see the various beach landscapes is on my bucket list. I have only been from Coronado to Encinitas but it was gorgeous. It sounds like you are at peace with your plan to move to the desert, and in the meantime enjoy the sunsets and those walks on the beach that many of us long for!

We just reached that 6th decade, spouse still working but says this year is it. So my planning is in overdrive. Have been tracking expenses closely awhile, but it seems lots of wrenches are always thrown at us, so need to plan for them also. I have used FireCalc and ******** and also a planner on our deferred Comp website. I need to check out the Flexible Retirement planner you are using to give another prospective. Thanks for the suggestion.

 

[volfan]

Rowdy, just thought of something else. Survivor benefit on the pension is 55% of 32k at age 60. Would she get the bump- up to 55% of 52k if you were to pass before age 68, and would she have to wait until she was 68 for that increase? Or would it be the year you would have turned age 68?

 

[Rowdy]

Rowdy, just thought of something else. Survivor benefit on the pension is 55% of 32k at age 60. Would she get the bump- up to 55% of 52k if you were to pass before age 68, and would she have to wait until she was 68 for that increase? Or would it be the year you would have turned age 68?

Good question, I believe it would be 55% of $52k when I would have turned 68. But it's something I need to check on. Perhaps I need to revisit more life insurance to cover any gaps.

 

[Nords]

- Question for Military Retirees: Commissary and exchange are currently < 1 mile away, but will be 1.25 hours each way when in CV. Will I miss the prices or are there other alternatives (e.g. Costco, Sam's, Trader Joe's, etc.)?

I don't think you'll miss the prices. You'll shop wherever it's most convenient, and if your routine takes you near a military base then you'll bring a list (and maybe a large cooler).

If you're too far away from a military base (the region contractor's definition of ~30 minutes or ~40 miles) then you'll probably opt for Tricare Select. Starting in January, that has a new $25/month premium.
https://tricare.mil/Plans/Enroll/Select/EnrollmentFees

- Military (reserve) $32k/yr COLA retirement at 60, increasing to $52k/yr at age 68 (all PV)

Good question, I believe it would be 55% of $52k when I would have turned 68. But it's something I need to check on. Perhaps I need to revisit more life insurance to cover any gaps.

I know a lot about Reserve pensions and SBP, but I don't see the connection between starting a Reserve pension at age 60 and having it rise by over 62% at age 68.

Is there something happening with your Reserve pension at age 68, or is the boost coming from some other source of funds?

Most Reserve retirees start their COLA pension at age 60, with Reserve Component SBP payouts to your survivor starting at a maximum of 55% of whatever you were getting when you passed away. You're paying 360 monthly installments of up to 6.5% of your pension (starting at age 60) so the dollar amount of the SBP payment rises with every COLA.

I could go on for another thousand words of advice on RCSBP, but you could also track down CFP Forrest Baumhover's excellent analysis:
https://www.amazon.com/Military-Transitions-Guide-Survivor-Benefit-ebook/dp/B01EPB5H1Q/

You (well, it's really your spouse's choice) might decide that you already have enough assets.

 

[Rowdy]

I don't think you'll miss the prices. You'll shop wherever it's most convenient, and if your routine takes you near a military base then you'll bring a list (and maybe a large cooler).

If you're too far away from a military base (the region contractor's definition of ~30 minutes or ~40 miles) then you'll probably opt for Tricare Select. Starting in January, that has a new $25/month premium.
https://tricare.mil/Plans/Enroll/Select/EnrollmentFees



I know a lot about Reserve pensions and SBP, but I don't see the connection between starting a Reserve pension at age 60 and having it rise by over 62% at age 68.

Is there something happening with your Reserve pension at age 68, or is the boost coming from some other source of funds?

Most Reserve retirees start their COLA pension at age 60, with Reserve Component SBP payouts to your survivor starting at a maximum of 55% of whatever you were getting when you passed away. You're paying 360 monthly installments of up to 6.5% of your pension (starting at age 60) so the dollar amount of the SBP payment rises with every COLA.

I could go on for another thousand words of advice on RCSBP, but you could also track down CFP Forrest Baumhover's excellent analysis:
https://www.amazon.com/Military-Transitions-Guide-Survivor-Benefit-ebook/dp/B01EPB5H1Q/

You (well, it's really your spouse's choice) might decide that you already have enough assets.

I prefer Tricare Select, in fact, I'm currently on Tricare Retired Reserve which is basically Tricare Select. I like the flexibility offered by a PPO.

My actual Retirement is ~$57k (O6, ~5,500 points), with SBP, that drops down to about ~$54k. However, I received the VSI when I left active duty, so I have to pay that back. They recoup the amount through a 40% reduction in retirement pay, resulting in about an 8 year payback. Hence the reduced amount of $32k/year for about 8 years; COLA adjusted of course. I received the VSI payments over a 20 year period starting in 1993, so the nice thing is I got a sizable loan, at zero % interest, paid in future dollars. I suspect this type of VSI situation is a little unusual.

 

[Nords]

I received the VSI when I left active duty, so I have to pay that back.

I suspect this type of VSI situation is a little unusual.

Ah, got it. Yeah, I haven't seen that question in at least five years. Well done.

I applied for VSI three times between 1994 and 1997 (as well as for TERA) but got turned down every time. In retrospect, it was more about the submarine assignment officer defending their billet structure (by stuffing it with guys like me) than it was about drawing down the excess personnel. I was at the wrong place the whole time.

 

[cnocmmz]

Hello all,

I haven't posted in, well, a long time. Looks like my last check in was 2012 - lots of changes since then!

Currently an executive in very, very small electronics company for about 6 years. Live in SoCal (rent), so housing is very expensive, but I can hear the waves at night and I ride my bike to work! Both my adult kids as well as grandchild live here, so we're staying in SoCal.

Stats:
- 59M w/ 55 wife
- Low $100s income (very small company, but product on the verge of potential large sales increases)
- Around $750k in retirement funds and $50k emergency fund
- Military (reserve) $32k/yr COLA retirement at 60, increasing to $52k/yr at age 68 (all PV)
- $10k non-COLA adjusted retirement from MegaCorp at 60
- Medical at 60; fabulous coverage with low deductibles through military insurance plan
- Plan to take SS at 62 (I know there are lots of opinions both ways on this)
- Planned expenses in retirement low $90k/yr (not including travel)

Our tiny company is on the verge of possibly taking off, so hanging on as long as I can. Our area of SoCal has seen some very significant housing price increases, so need to relocate to somewhere close, but cheaper before I get completely priced out of the house market.

Plan:
Purchase a house in the Coachella Valley (CV) Area (Palm Springs, CA) early summer 2021 before prices get out of hand and while interest rates are low (Edit: Will use $0 down VA loan). Yes, I know that it is hot there! For $400 - $500k, we can purchase a large house with pool and spa, all with a view of the mountains. I've run the numbers using "Flexible Retirement Planner", looks like I can pull the plug as early as 60, but might wait until 62 to retire. I'll commute weekly about 2.5 hours Monday mornings and return home on Thursday evening. Will either cut back to 4 days/week (20% pay cut) or work from home on Fridays. I can stay with my daughter Monday - Thursday.

Once in retirement, we plan on traveling July - August to escape the hottest months in the CV. Hawaii, SoCal, Europe, Caribbean, etc.

Questions:
- Has anyone ever done this long weekly commute? Doable?
- Struggling with hanging on longer at small company for the big payoff, which could be around the corner or maybe never...Could amount to hundreds of thousands to low millions, OR nothing. FYI, our Founder/CEO thinks everyone should work until the day they die...
- Thoughts on taking 20% pay cut to have 3 day weekends. Maybe I can hang on longer?
- Anyone live in the CV? How do you like it? Decent medical (Eisenhower hospital)?
- Question for Military Retirees: Commissary and exchange are currently < 1 mile away, but will be 1.25 hours each way when in CV. Will I miss the prices or are there other alternatives (e.g. Costco, Sam's, Trader Joe's, etc.)?

Edit: In addition to pensions, will use 4% withdrawal rate from savings, my SS will be ~$25k/year at 62, DW SS will be 1/2 mine when she is 62.

Thanks!

Hello and thank you for your service.
Question: Not sure how your figures match up? If you want to spend 90k annually (not counting travel) and from from 60-68 yrs old you guys are limited on funds. ( about 75k including SS) at 62? I would just just caution using a 4 % WR, seems to high. Overall, I do not see enough guaranteed income coming in, so, what am I missing in the numbers?

 

[Rowdy]

Hello and thank you for your service.
Question: Not sure how your figures match up? If you want to spend 90k annually (not counting travel) and from from 60-68 yrs old you guys are limited on funds. ( about 75k including SS) at 62? I would just just caution using a 4 % WR, seems to high. Overall, I do not see enough guaranteed income coming in, so, what am I missing in the numbers?

Thanks for your input. Note the following:

At 62, I'm adding up the income as follows:
- Navy Retirement: $32k (starts at age 60, increasing to $54k at age 68; see my earlier explanation to Nords)
- Corp Retirement: $10k
- My SS at 62: $25k

Total of the above: ~$67k. Subtract taxes of ~17%, leaves ~$56k.

Portfolio ~$750k. Increase by ~5%/year (could vary of course) for ~3 years = $868k.

$868k x 4% = $35k. After subtracting ~15% taxes (small % of investments are Roth) = $30k.

Total: $56k + $30k = $86k. So looks like we'll possibly be about $4k short, however, I didn't mention that my wife has a very small business that clears about $5k/year.

Agree, perhaps cutting it a little close. Interestingly, when inputting all the parameters into the "Flexible Retirement Planner" software, I get a 100% probability of success with an average spending shortfall of 14% at age 62. "Average Spending Shortfall" definition per FRP: The Average Spending Shortfall shows the average percent of total planned retirement spending that couldn't be funded in those simulation iterations that failed.

In summary, the back-of-the-envelope calculations show I'm cutting it pretty close, however, FRP shows that I'm in good shape. FYI, I even added in some additional expenses for travel, med, etc into FRP and am using a $92.5k yearly expense.

62: 100% with 14% Avg spend shortfall
61: 98% with 15% Avg spend shortfall
60 (with 2 year $5k/yr reduced spending): 98% with 15% Avg spend shortfall
59 (with 3 year $5k/yr reduced spending): 87% with 20% Avg spend shortfall

Anyone else using FRP and get similar rosier picture? FYI, FRP is using 8% Avg return with 9.9% standard deviation (this is the default for a "moderate" portfolio). This could explain some of the differences. FRP is a super powerful tool, so it's possible that I've got one of the parameters off, however, I've looked it over quite closely.

Thanks!

 

[Music Lover]

Will either cut back to 4 days/week (20% pay cut) or work from home on Fridays. I can stay with my daughter Monday - Thursday.

Have you considered some alternate scenarios, if your employer is willing?

- work 4 longer days with no reduction in pay...for example, instead of 5 - 8 hour days work 4 - 10 hour days?

- work 3 - 10 hour days (Mon - Wed?), stay at your daughter's, return home Wed and work 10 hours from home on Thursday. That way you're only away from home 2 nights a week and in your own bed 5 nights a week.

 

[Rowdy]

Have you considered some alternate scenarios, if your employer is willing?

- work 4 longer days with no reduction in pay...for example, instead of 5 - 8 hour days work 4 - 10 hour days?

- work 3 - 10 hour days (Mon - Wed?), stay at your daughter's, return home Wed and work 10 hours from home on Thursday. That way you're only away from home 2 nights a week and in your own bed 5 nights a week.

I like the idea. I'm already working about 10 hours/day, 5 days/week. Our CEO works 11 - 12 hours/day, 5 - 6 days/week, typically only takes off the major holidays and doesn't really take any vacation. Unfortunately, he's also not much of a fan of working from home and he says he will work until the day he dies at work. I may sound overly critical, but he would probably agree with everything I've said. So this is the mindset I'm up against.

I may just propose something like you're proposing anyway as I'm getting burned out. We may be on the cusp of some very large lucrative contracts, so I'm hanging on as long as I can.