Contemplating The Big Move

[Donner]

retire@40-- I think I will need to pull about 45K annually from he portfolio to augment 94K of annuiy and SS and to cover taxes.

Cut hroat-- My guess on food is about $100 weekly at the grocerey and $100 at a good restaurant. Not out of line around here. Phone is just a guess. Wife thinks is lower.

Zipper-- Wish I could drop the mortgage but I don't think that is in the cards.

My, my you all seem a bit perplexed with these numbers

[Donner]

retire@40-- I think I will need to pull about 45K annually from he portfolio to augment 94K of annuiy and SS and to cover taxes.

Cut hroat-- My guess on food is about $100 weekly at the grocerey and $100 at a good restaurant. Not out of line around here. Phone is just a guess. Wife thinks is lower.

Zipper-- Wish I could drop the mortgage but I don't think that is in the cards.

My, my you all seem a bit perplexed with these numbers

[Brat]

Donner, since both you and your wife are Feds you should EACH enroll in the health plan as individuals. Family coverage is significantly more expensive than two individual coverages. If you change coverage be sure to consult with your personnel office to make sure that each of you will retain your eligibility on your target retirement date. The advantage of BCBS is that it is fully portable across the country, even internationally. I am sure that you, like me, have done the math on the fee for service plans and find that the differences are marginal.

Until we moved out of the Kaiser service area they were my insurer of choice. They are/were great, particularly for working parents- they have evening clinic hours. I had an accident prone son, a neighbor was on staff - I just gave her a medical POA for him. Talk about service!! IMHO they do as well as any other group in dealing with health care problems, have excellent preventative care- a results oriented program. I know there are lots of folks who think that an HMO's purpose in life is to deny coverage, but that wasn't my experience. These days I am more concerned about aggressive intervention than under-treatment.

[Brat]

Donner, I just looked at your budget and I assure you that you can have a yuppy lifestyle for a lot less than you are budgeting.

I don't know where your kids are but you can move to the northwest, enjoy a moderate climate, excellant medical and cultural facilities for a lot less. My community is still trying to keep out Starbucks but they tip-toed into the Safeway store. *However, we have several good coffee shops and bookstores, top notch public schools, an excellant library, and a very low crime rate. *My neighbors have a stunning commute to the city on a ferry. *Eagles perch on nearby firs. *Now if those sea lions would only shut up!! *
And I almost forgot: *no income tax (~8.25% sales tax)

[Nords]

Quote:

Let's pretend your job is not to critique my projected retirement budget but to give me a few suggestions on how I can hit this targeted annual outflow and maintain this (extravagant, overindulgent, *bloated, crazy) lifestyle through 30 years of retirement.

Donner, you seem to have a lot of obstacles standing in the way of your retirement.

My suggestion on the most straightforward way to deal with those obstacles is to keep working. Keep saving in the TSP, keep adding to those IRAs, keep buying I bonds or whatever low-volatility investment gives you good sleep at night, and defer SS until at least age 65 (which will provide 25% more survivor's benefits).

Take a look at what the life insurance is providing. If one of you dies, do expenses stay as high? Would the survivor need as much income or could the insurance coverage be reduced? Would an extra 25% SS make a difference? I'm not saying that you have too much insurance, but as one approaches retirement the need for insurance generally drops.

You should reconsider refinancing that mortgage. If you're that volatility-averse in your investments, I doubt you're getting more than 5% (before taxes!) from any of it. You can improve your cashflow (drop your expenses) a heckuva lot more by paying down the mortgage than by investing in more of whatever low-volatility portfolio you're in now. Other posters will vouch that this is the first time I've EVER suggested paying down a mortgage.

I lived in DC in the early '80s, spouse grew up in the area, and brother-in-law still lives there. While I appreciate that there are plenty of restaurants & grocery stores that will cost you $200/week, there are a whole bunch of DC taxpayers who manage to spend a whole lot less on those budget categories. Other expenses appear to be discretionary (housekeeper) or not negotiable. You don't leave yourself many options, and the easiest choice is a few more years' savings.

If you're ready to retire then you'll find a way to match income & expenses. You'll know when you're ready.

Hi Donner. Your plans, circumstances and lifestyle
(present and future) are so far removed from anything
in my experience, I really can't advise you
(on your retirement). I do agree with Nords though.
You'll know when you are ready. At least I did.

JG

[sgeeeee]

Hi Donner,

Your problem is really the same as everyone else's. You choose a lifestyle you're comfortable with, figure out what it takes to support it, estimate the time it will take you to get there, and then iterate until you can find an acceptable balance between the lifestyle you want and the time it takes at work to get there. It sounds to me like your lifestyle choice is pretty non-negotiable. That's good. It means you know what you really want and I think there are a lot of people who don't. So the only solution is what Nords reccommends -- work till you get there. I guess you could consider holding up a bank or winning the lottery, but I don't see any other realistic solutions.

Good luck.

[ordway]

Donner, one thing I noticed in your posts is that several times you mention things like "this is the standard of living around here" and "this level of spending isn't out of line around here." I may be wrong, but it sounds a lot like you're measuring your "needs" based on your neighbors. Fine if you want to do that, but since I doubt many (if any) of your neighbors are planning on ER, emulating their spending may not exactly be the best move to secure your own ER.

It just looks to me like you have a lot of loose spending in your budget... things that you could spend less on without even really noticing. It may seem like not worth the trouble to you, but the way I figure it, if you manage to cut back even 10% of spending, that's the equivalent of a 10% untaxed return on your money!

I also think you have some fixed ideas about what spending less is all about, and they may be in your way... for instance, your alternative to spending $500/month on a car (a car loan, I assume?) is not just to drive a clunker. There are plenty of inexpensive cars you could buy for cash and maintain decently for many years. This is an easy choice for me, personally, as I am not emotionally invested in my car, and I have no problem parking my Hyundai Accent next to my neighbor's BMW - it may not be the same for you. But it's worth actually working out how much you are spending to keep up an image, and how much that image is really worth to you. If it's worth it, great! But then at least you will know what you are getting for your money.

Just my two cents!

[AltaRed]

My thoughts follow those of Holly. This lifestyle sounds more of an image thing to remain competitive with the neighbors and friends. That's obviously a personal choice, and if you choose to keep it, then stick with Nords advice and continue working until the numbers work.

I know you have not asked for comments on your lifestyle and that is fine. But I can't help but offer a few thoughts. FWIW, my family and I lived in the Langley area on the banks of the Potomac for 2 years in the early 1990's and my spouse and I did not have anywhere close to that level of expense. We lived in a nice 2 story executive on 1/3rd acre for less than 20% of the $3 million dollar homes and were the happier for it compared to the stress of high living neighbors. Also costs a heck of lot less to register a Nissan Maxima in FFX County than a BMW as well. Shopping in Tyson's Corner rather than the Galleria is a lot more satisfying.

If you can stomach it, downsizing to reduce or elminate the mortgage is a winner. Not to mention the knockon effect of reduced property taxes, utilities and housekeeper. On the day of retirement, Imy wife and I intend to drop life insurance completely - the spousal pension benefit will suffice nicely augmented by investment returns.

[Beachbumz]

I think you should reevaluate your need for Life and LTC Insurance at retirement. Without those in your budget, you would be down below 98K and going a little easy on the "like to haves" would put you down to the 94K level. At that point all you would need to withdraw is enough to pay taxes and you have enough now to more than cover that.

To look at it another way, your premiums of $10,927 per year are really costing $15,600 when you factor in taxes (if you can deduct the LTC it would lower the number a bit) This is equal to more than 10% of your total budget.

[FlowGirl]

Most people come here with the idea that ER is something they want to make happen as soon as possible, and thus are a little more flexbile when it comes to budgeting suggestions. However, if you don't mind working longer, and your very high standard of living is truly non-neogtiable then great! It just makes it hard for a lot of people here to relate, or give you very creative advice.

Anyway, I agree with the other comments. The life insurance is the first thing that jumped out at me when I read your expenses. Life insurance is to replace lost income, so if your pension plans have survivor's benefits I would drop it all together once you retire.

I also agree with paying off the mortgage. This close to retirement, reducing your fixed monthly expenses will probably get you further than saving more - especially since you mentioned that you are a conservative investor. Run the numbers and see if it makes more sense to pay off the mortgage vs. stuffing your TSP.

The comment about the phone expenses being an estimate made me wonder how much your projections are based on actual expenses. As you continue to work, using Quicken to keep track of every penny might give you more peace of mind.

Won't comment on your lifestyle choices except to say that there is a whole range of possibilities between $24K and the $108K budget you presented. Most people here FIRE somewhere in the middle of these two extremes, and they aren't eating dog food or driving around in clunkers.

[haha]

Quote:

Mikey, I regretfully must decline your invitation to dinner. *In advance. * For the forseeable future.

Damn! Just when my freezer is getting low on meat!

Mikey

No debt, no life insurance. Also, no "dog food" (except for the dogs) and no "clunkers" here. Since I've been posting
(a while) I have never seen a new poster so far out
of where I am living. But, I want everyone to be happy
(even liberals as long as they are far away), so I hope it works out.

JG

[haha]

Quote:

No debt, no life insurance.

No life insurance for me either. Mikey's Rule #1 is to always be worth more alive than dead!

Mikey

[Donner]

First, thanks to you all for taking the time to respond to my first post here. Your comments and observations have been quite interesting. In some ways they have been what I expected them to be and in other ways somewhat surprising.

It is no surprise to me that a lot of you think I need to keep working a bit longer to prepare to maintain our current lifestyle over a 30 year retirement period. After all, thats what I think, too.

I expected to get a lot more portfolio allocation questions. In particular, I thought Cut-Throat would checkmate me into a discussion of how I propose to handle risk in retirement. I dont want to put words in his mouth but he has impressed me in past posts with his appreciation that overall risk entails both market risk as measured by share price volatility but also inflation risk in the form of eroding purchasing power over time. I expected him to challenge me to choose my poison along the lines of you can protect against one or the other but probably not both. I expected to hear a lot more diversify, diversify, diversify admonitions. Believe me, I have been thinking long and hard about a 50/50 allocation with 30% S&P 500, 10% Small Cap, 10%International and 50% Govt Bond allocation. Another option is to throw the whole thing in the new life cycle fund the Govt TSP will soon be offering and just forget about it. Problem is, as you know, I just don’t like what the equity market has become over the years. We should have a whole thread on this topic alone.

I am truly surprised that nobody zeroed in on the $10k out of pocket health care costs that I have embedded in the projected retirement budget. I guess I just slipped that one past you all. This is no joke and is based on real experience. Wife and I both max out a Flexible Spending Account of 4K apiece and we blew through it by Oct of this year. When I spread sheet that out 30years at a 7% inflation rate the numbers would make you LOL. It is scary what it will do to a portfolio. This is the real dagger at the throat of our retirement

With a nod to Cut-Throat the effects of inflation on the portfolio are prodigious. Its interesting to observe the progression. At first the portfolio balance grows annually as the nominal earnings on the portfolio exceed the required draw for the first few years. Then that health care inflation catches up (not to mention property tax inflation) and passes both the less than COLAed annual income adjustments and the reasonably expected rate of return on the portfolio. As you get to the outyears the portfolio balance drops precipitously, portfolio income dries up, and annual draws start chewing great gashing holes in your stash. Pretty soon you are stuck 1500 feet from the summit of the Sierra Nevada, with 5 feet of snow falling. You are done, just like George Donner.

I am mildly surprised, but not totally shocked, at the life style cluck cluck clucking. I did warn many of you that we do indeed apparently live on different planets. For clarification, we live in a nice, but not too nice, neighborhood in Arlington, Va. which is inside the beltway. We live in a small 1952 2 bedroom brick rambler in near mint condition. We married late in life, my first, her second. Bought the place in 1990 for $280K. Today it has a $296K mortgage on it at 5 1/8%. Wont talk about the current market value. Its all illusory. We drive a 4 year old Chrysler. We dont consciously play keep up with the Jones. Dont wear fancy clothes or have expensive toys. Definitely not the yuppie type.
We both work, we both get hungry and we both like to go out to dinner when we can. Tell you what : 2 cocktails at $6.50 is $13; 2 appetizers at $6.50 makes it $26. 2 entrees at $25 makes it $76; Skip the dessert; add 8% tax (10 % in DC) makes it $84; add a 20% tip ( never on the tax friends, never on the tax) and bingo its $100. Now, if that is extravagant to you, well, we just have to agree that we are indeed on different planets. Dont you guys ever take your wives to dinner? No? Yes, but it costs you a lot less in your wonderfully scenic low cost area? What kind of ptomaine pits are you dragging the love of your life to anyway? You ladies let them get away with that?

Hey Donner. I must confess that it briefly crossed my mind
that you were not for real. I found your info so weird
that I thought it might be a big put-on. However, I now
accept you as a real "case", but I still can't help you much.

As far as how we treat our women, I still take my wife out to expensive dinners and venues, just not very often. My former spouse was very high maintenance, and that is why she is my "former" spouse.

JG

[Donner]

Brat Thanks for the suggestions. Will look into the single coverage on the health plan. A little bit of inertia on that. Have been on the family plan since we were married. Dont think we will be moving to NW though. Sounds nice I and I would love to visit some time.

[Donner]

JG Yeah, I am for real. You are one of my favorites on this board. Between you and me I am a pretty conservative guy. I would enjoy buying you a beer someday. You remind me a lot of my late dad. A real free enterpriser. You do it your way and he did it his and to hell with what anybody made of it. Just please allow me the same privilege. We are on different paths brother but aint diviresity great?

[Donner]

Nords Your suggestions are on point. A couple other posters have locked into the heavy insurance load I will be carrying into retirement. If I check out the wife will get 55 percent of my annuity and she will lose my SS payment. My expensive Fed term insurance will serve to replace most of that lost income. Yes her expenses will drop but she accounts for most of the expensive stuff anyway.No I dont think I am any longer insurable and what coverage I have is it.

[Donner]

Beachbumz See my response to Nords. I think people have to see our health care expenses, LTC insurance, Life insurance, Fee for Service health insurance, reluctance to leave our doctors to move to cheaper housing, our need for housekeepers etc as all related and as sort of on a continuum of needs as we enter ino retirement. Not everybody can afford to fly loosey goosey and self insure. I have to deal with what I have o deal with.