I would like to receive feedback please regarding my current financial plan and next steps (I will try and keep as concise as possible). Thanks in advance.
Age is 53. Current financial situation - Total NW: $2.92M as follows:
Current house paid off valued at $380k (do not consider part of my investment portfolio; but in an area appreciating nicely each year)
Rental house valued at $380k conservatively netting 4.5% (in an area that is appreciating each year)
$530k equities (VTI, VOO, VXUS and equity portion of VWIAX/VWELX - Wellesley/Wellington)
$345k bonds (intermediate muni-bond fund VWIUX and bonds portion of VWIAX/VWELX)
$560k CDs (max is 5 year maturity (many with only 6 mos early withdrawal penalty) - average: 2.5%)
$700k Cash (currently sitting in 1% fully liquid Ally and Compass banks); have been waiting for another 2.5-3% CD opportunity
$30k VNQ (REIT)
So, not including my residence: equity is about 20% of my portfolio, real estate about 15%, and cash/bonds/cd about 65%.
Very high likelihood of inheritance within the next 10 years likely to be at least $500k.
Small Non-colad Pension at age 65 - $15k/year
Social Security expectations ($60k/year at 70) - please let me know if any of the following logic is incorrect
in todays dollars at age 70 Social Security statement says $39,000 plus I believe DW gets 50% of mine at FRA for $16k for total of $55k (at todays dollars). DW is same age.
I am assuming 2% avg SS COLA, so SS would be $78k at age 70 (assuming I did my math correctly)
I am assuming worst case SS can only pay 78% due to shortages so, 78% yields $60k at age 70
Expenses (plan for $80k/year on average)
Typical yearly necessary expenses are $58k
We plan an additional $7k/year to cover out of the ordinary expenses (examples: I had back surgery 7 years ago that maxed out high deductible medical of $10k; had a house pipe burst 5 years ago that was not covered by insurance for $3,500; etc)
Travel plan: $15k/year (some years we will spend more and some less)
My current thoughts on a plan:
Before the end of this year, quit work (or ask if I can severely cut back hours to very part-time) expect to be close to $3M NW at that point
Take 1 year off no work (after that, consult maybe once every 6 months for 1-4 weeks to stay current in my field just in case; it is enjoyable to me in very small bits; and to bring in a little extra spending money; 1 weeks consulting will likely bring in about $4,000)
probably will only do this for a few years then stop (once I feel 100% comfortable that my plan is working)
Enjoy life travel, hiking, biking, partake in more local events, gardening, cooking, exercise (get in really good shape I have been exercising but want to do even more), maybe do some volunteering, blogging, etc.
I have the goal of leaving a large inheritance to my kids (who are now adults) so want a plan that will not need to dip into my principal (basically allows me to live off my investments)
My own thoughts of my risks - in anticipation of some of your comments
Inflation: I know I am taking inflation risk by only putting 20% in equities. However, I also know that if the market tanks 30+% in 1 year and I lose $160k that I can totally stomach that and expect it to rebound; but if I invested 50% ($1.3M) and I lost about $400k that I would panic and want to sell. I have been there/done that. So, this is my risk tolerance that allows me to sleep at night. I believe between the inheritance, Social Security and real estate that I will be OK and these will mitigate any inflation risk
This might sound odd, but the more savings I have, the more I am willing to add volatility risk and stomach market fluctuations. So, I believe I would be comfortable putting 50-100% of the expected inheritance in equities
I have a detailed spreadsheet with what-if scenarios and ran it through firecalc (assuming I did it correctly) and both tell me I am OK
I actually semi-retired several years ago and did part time work for several years and loved it. Somehow I got myself back into full time work partly because the job offer was work from home and partly to add enough to my portfolio to feel comfortable. I am now feeling financially comfortable but wanted to get your sanity check if you think my plan will work.
Thanks in advance.