Greetings! Great Site - hope to learn a lot here!

[BBQ-Nut]

Greetings - newbie to the forum here!

I found out about this site on another forum and started reading all the great threads.

Good to know there are some really knowledgeable folks here to help out.

I've been reading up on the FAQs - what a great source of info.

My plans are to retire early and have done my own number crunching as well as a CFP, some seminars, other on-line resources - and it looks like I'm on track.

But, still have some questions - I look forward to reading and hopefully contributing.

BBQ-Nut

 

[Turboslacker]

Welcome. I'm a newb too. Enjoy the site and the helpful contributors.

 

[Nodak]

Welcome aboard

 

[Walt34]

Welcome, and ask away.

 

[BBQ-Nut]

I’ve done some very careful planning and number crunching, used lots of the on-line retirement calculators and we even paid a FA for about a year’s worth of consultations and planning – all seem to indicate a ‘go’ for the DW and I to retire.

I thought I would summarize what are scenario is and get some seasoned opinions/recommendations from those actually in FIRE as this forum has proved to be a wealth of experience and ready advice!

Us:
Married couple(DH=55, DW=50), 2 kids, 1 started college this year, the 2nd will start in another two
Live in SoCal
House: Appraised $700K, 15yr 3% fixed mortgage w/ $100K left to go
No other debt: no cc balances, no car loans, no other loans

Me – plan to FIRE Jan 2015
55 in this October
Working at Megacorp
Contributing the max ‘catchup’ to my 401k with matching contributions
Plan does allow for withdrawals at 55 w/o penalties
Non-COLA pension will be $1,465/month at 55
Estimated SS benefits: 62=$1671/month, FRA 66/10=$2345, 70=$2940

After Tax Assets:
$247K (25% Calif double tax free munis, 68% US equities-various MFs, 7% Intl Equities)

401k Assets:
$620K (28% Bonds-index ETFs, 62% US equities-various MFs and ETFs, 10% Intl Equities)

Rollover IRA from previous job
$148K (56% Bonds & TIPS, 44% US equities-MFs and ETFs)

2012 Back door ROTH conversion:
$57K (2% Cash, 53% US equities-MFs and ETFs, 45%-Emerging Market ETF)

2013 Back door ROTH conversion:
$132K (0% Bonds, 78% US equities-MFs and ETFs, 22%-Intl Equities)

I also have about $18K in my credit union savings & checking account
Total Current Assets: $1.2M

DW – plan to FIRE in 2019
Works for CA State
Has enough time in service to continue full medical/dental benefits for all of us when she FIREs
Contributing $20K/$20K to 403b/457 plan per year
COLA Pension (with restrictions) will be $4776/month if she sticks it out to 55 J
Estimated SS benefits: FRA=$2492/month, 70=$3112/month

After Tax Assets (I don’t have the granularity…yet, of her asset allocations)
$136K Group 1 After Tax
$209K Wells Sharebuilder
$15K Fidelity Stock Investment Plan

Deferred Tax Assets:
$60K CAP Retirement
$632K 403b
$103K 401 after tax
$148K 457 Pre tax

ROTH IRA:
$45K

Total Assets: $1.3M

Kid's College:
We have saved $400K earmarked for college expenses, completely separate from above assets
$93K Cash
$58K 529 Plan - TIAA CREF
$255K Vanguard ETFs

The current son has yearly college expenses of $25K/year (in state college)

The second son (junior HS) is undecided on where he wants to go

Expenses:
I’ve been tracking our current lifestyle expenses for 2 years and we total about $80K per year.

We could cut back on some expenses, but we’d like to increase others – like travel! So, I’ve been using $85K for initial retirement expenses, then decreasing a bit later, and then increasing late in retirement for anticipated health care expenses.

I really want to get that final warm and fuzzy for both myself and my DW to avoid the OMY syndrome – I SO want to walk out the door and start this next phase of life.

Any red flags that you see or glaring imbalances or shortcomings, recommendations?

Hope to see you in FIRE in 2015!

 

[2B]

Welcome to the forum.

The obvious thing for you to do is run your numbers through FireCalc. At a glance you've go plenty of pensions and SS to cover your living expenses. You just need to bridge until they kick in. Not knowing all the details, I am somewhat concerned that your wife's pension may impact her SS due to the "windfall provision." Even without her SS you still look good. Your assets appear to easily cover this transition period with plenty left over. I'm assuming that you've included taxes and health insurance in your expenses.

I'm sure your DW will really love working 5 years after you retire.

 

[BBQ-Nut]

Welcome to the forum.

The obvious thing for you to do is run your numbers through FireCalc. At a glance you've go plenty of pensions and SS to cover your living expenses. You just need to bridge until they kick in. Not knowing all the details, I am somewhat concerned that your wife's pension may impact her SS due to the "windfall provision." Even without her SS you still look good. Your assets appear to easily cover this transition period with plenty left over. I'm assuming that you've included taxes and health insurance in your expenses.

I'm sure your DW will really love working 5 years after you retire.

** Not knowing all the details, I am somewhat concerned that your wife's pension may impact her SS due to the "windfall provision." **

How so? I am not following the impact you mention.

And yes, my DW may just decide to bail out soon after I do... we shall see.

 

[2B]

** Not knowing all the details, I am somewhat concerned that your wife's pension may impact her SS due to the "windfall provision." **

How so? I am not following the impact you mention.

And yes, my DW may just decide to bail out soon after I do... we shall see.

Some governmental pensions are subject to a Windfall Elimantion Provision. Here's a link.

http://www.ssa.gov/pubs/EN-05-10045.pdf

If it would impact your wife's SS, it is probably well known where she works. Ask her HR.

If you go into your own retirement assuming DW works to 55, she needs to be on board. It would probably be worth running the number on the case where she retires with you. If it doesn't work, you can see what each extra year brings. The "best" answer may be for you to keep tied to the plow until you can both leave at the same time.

 

[2B]

When I looked at your long post, I never added up all the accounts. I just saw the $1.3 MM at the bottom of your wife's accounts and assumed it was the grand total. I just noticed the $1.2 MM in your section. If you have $2.5 MM and expenses are really $85k, you are now amonst that august group of posters here that some less charitable participants may ask -- Why in the hell are you still working!!!

You and your DW are working because you choose to. That is assuming that your total expenses in retirement is $85k and covers your taxes, health care costs, maintenance, replacement costs of things as they need replacing and your travel. You should be able to ramp up your spending a good bit but you'll need to look over things more carefully.

 

[BBQ-Nut]

When I looked at your long post, I never added up all the accounts. I just saw the $1.3 MM at the bottom of your wife's accounts and assumed it was the grand total. I just noticed the $1.2 MM in your section. If you have $2.5 MM and expenses are really $85k, you are now amonst that august group of posters here that some less charitable participants may ask -- Why in the hell are you still working!!!

You and your DW are working because you choose to. That is assuming that your total expenses in retirement is $85k and covers your taxes, health care costs, maintenance, replacement costs of things as they need replacing and your travel. You should be able to ramp up your spending a good bit but you'll need to look over things more carefully.

My bad - the expense number I mentioned of $85k/yr I estimate for FIRE is before taxes.

I've run some calculations and yearly expenses to includ Fed and CA taxes brings the yearly total to $106K (which is based on estimated AGI accounting for my wife's job income, my pension, capital gains taxes on my liquidating after tax assets to pay for expenses, and some tapping into my 401k for incremental ROTH conversions.).

The expenses do include insurance costs, as well as a LTCI premium for both of us, maintenance, travel, and some 'margin'.

This past year we have both been discussing our respective plans for when to FIRE - so it really is a matter of getting my DW to let go of the OMY fixation.

 

[2B]

My bad - the expense number I mentioned of $85k/yr I estimate for FIRE is before taxes.

I've run some calculations and yearly expenses to includ Fed and CA taxes brings the yearly total to $106K (which is based on estimated AGI accounting for my wife's job income, capital gains taxes on my liquidating after tax assets to pay for expenses, and some tapping into my 401k for incremental ROTH conversions.).

This past year we have both been discussing our respective plans for when to FIRE - so it really is a matter of getting my DW to let go of the OMY fixation.

I still recommend you do some FireCalc runs but I suspect you have the ability to take close to $150k/yr (before taxes) and possibly more.

The easiest way to fix your wife's OMY fixation is to retire yourself. If she wants to keep working, you can be Mister Mom as necessary and do some traveling solo. She won't last long unless she has a really horrible case of OMY.

This comment could bring input from others but I think you have plenty of assets to self-insure for LTC. When you or DW is in the assisted living facility, you won't be traveling to Paris anymore.

 

[2B]

My plans are to retire early and have done my own number crunching as well as a CFP, some seminars, other on-line resources - and it looks like I'm on track.

Here's a note of caution. "Seminars" are frequently nothing more than thinly veiled sales pitches for some form of variable annuity. The products available to normal people are universally bad any way you look at them. There are fees upon fees with assets tied up with penalty clauses and the "great" returns "guaranteed" all require annuitization of withdrawls.

Some CFPs are good but you want to use a fee only planner. Be wary of anyone trying to sell you anything. I'm in the process of getting a financial review from a Vanguard CFP for no cost since I have enough assets in Vanguard to qualify. I've been an indexer for over a decade and I've decided Vanguard has the right products for me.

 

[BBQ-Nut]

I still recommend you do some FireCalc runs but I suspect you have the ability to take close to $150k/yr (before taxes) and possibly more.

The easiest way to fix your wife's OMY fixation is to retire yourself. If she wants to keep working, you can be Mister Mom as necessary and do some traveling solo. She won't last long unless she has a really horrible case of OMY.

This comment could bring input from others but I think you have plenty of assets to self-insure for LTC. When you or DW is in the assisted living facility, you won't be traveling to Paris anymore.

Have used FireCalc with several different scenarios - I'm getting 100% for all runs - which bakes in taxes into the expenses (as opposed to decrementing pension and ss by estimated withholdings).

The comment on self-insuring is one I have considered and still stuggle/waffle with. IF either myself or DW need the 'typical' LTC of just 3 years - then yes, I would agree - drop the LTCI premium and self-insure. It is the unknown outlier scenario where either I or my DW needs LTC over say 8-10 years. That may prove catastrophic to the other spouse. So keeping LTCI buys down the impact.

I don't know - ask me tomorrow and I'll be in favor of just dropping LTCI.

Here's a note of caution. "Seminars" are frequently nothing more than thinly veiled sales pitches for some form of variable annuity. The products available to normal people are universally bad any way you look at them. There are fees upon fees with assets tied up with penalty clauses and the "great" returns "guaranteed" all require annuitization of withdrawls.

Some CFPs are good but you want to use a fee only planner. Be wary of anyone trying to sell you anything. I'm in the process of getting a financial review from a Vanguard CFP for no cost since I have enough assets in Vanguard to qualify. I've been an indexer for over a decade and I've decided Vanguard has the right products for me.

Oh, the seminars were sales pitches, we got some hard sells to put our assets under management...walked away. The CFP we consulted was for fixed fee. Got some good advice, but nothing really concrete.

I asked for more detail -specifically a Withdrawal Policy Statement per Kitces article that I linked and sent to the CFP - I got some general guidelines but no details tailored to my exact situation.

I am not an expert...yet...but getting there and may take some mis-steps along the way, but I think we'll be good to go!

 

[rodi]

Hi BBQ-Nut.

I would say you're good to go. You have oversaved for your kids college - definitely use the 529's first - so the rest of the money can be used for other purposes without any penalty on the gains.

Is the $25k/yr accurate? Does your kid live at home or on campus? I ask because college is still in my kids' futures... so I'm trying to make sure I save enough. Is this a CSU campus or a UC campus. (I've been basing my target savings goals on the UCSD website published figures for an in-state undergrad who lives in the dorms. It's about $30k/year last I checked... $25k is a nicer figure.)

Good job on paying down your CA mortgage. Houses here are obscenely expensive - but it feels really nice when you get it paid off. I would imagine your spending will change when the mortgage is done, also.

 

[BBQ-Nut]

Hi BBQ-Nut.

I would say you're good to go. You have oversaved for your kids college - definitely use the 529's first - so the rest of the money can be used for other purposes without any penalty on the gains.

Is the $25k/yr accurate? Does your kid live at home or on campus? I ask because college is still in my kids' futures... so I'm trying to make sure I save enough. Is this a CSU campus or a UC campus. (I've been basing my target savings goals on the UCSD website published figures for an in-state undergrad who lives in the dorms. It's about $30k/year last I checked... $25k is a nicer figure.)

Good job on paying down your CA mortgage. Houses here are obscenely expensive - but it feels really nice when you get it paid off. I would imagine your spending will change when the mortgage is done, also.

Greetings rodi,
We got conflicting advice regarding the 529 vs cash. We decided to go cash first as that is not going to return much of anything and there are no tax impacts. We will let the 529 grow in the event that the older son decides to go out of state. The 529 balance is a smaller % overall compared to the Vanguard ETF -so for this year we are burning thru cash.

The $25K/year is for a CSU campus and he is living away from home -so that budget covers yearly tuition, on-campus room and board, student fees, books, pocket money, and travel costs to get him home for Thanksgiving, Christmas, and Summer break.

UC campuses have about double the tuition costs from my last estimates, so your $30K may be about right. But I factored the 'other costs' into our yearly estimates.

 

[nuke_diver]

I was going to say that it was going to be tight...but I missed the pensions. With those you almost are clear without anything else (assuming you convince the wife to work for 5 years while you don't). Since it looks like you have a good safety net and the kids education is already covered it looks like you are free and clear. Personally I would (and did) pay off the house. For me no debit is the safe bet but you have to consider all factors and they might not work for you.

 

[pb4uski]

I think you are good to go. In fact the both of you could go now if you want. The only thing is whether you have enough available without penalty to carry you both until you are each 59 1/2 but it looks at first glance like you would be ok.

Your main decisions will be when to start drawing on your pensions and SS, managing your tax situation to avoid onerous taxes when RMDs begin, etc.

Quicken Lifetime Planner could handle all of this (kid's college, pensions and SS starting at different times, etc) and is very user friendly once you spend a little time with it.

 

[38Chevy454]

I have to agree with the rest. Given your numbers provided, you are good to go. Both of you. You have kids college covered, and budget is under any safe withdrawal limits. So do your early 2015 retirement and then convince your wife to do soon also.

Your only real challenge is to bridge between now and SS. But with your assets in after-tax it is very feasible. The pensions help this out a lot.

 

[PhrugalPhan]

Your only real challenge is to bridge between now and SS. But with your assets in after-tax it is very feasible. The pensions help this out a lot.

I would add that the 457 plan funds are available penalty free right away, if your spouse decides to retire early. Just more money to help you bridge the gap years.