Hello, all... Soon to retire

[Puzzley]

I’ve been active on some other forums, but this one is new to me, and is certainly of a topic in which I have great interest. I’m 62, married, and will retire from corporate life in early February of 2009, having just turned 64. Not very early, but still a couple of years ahead of my full retirement age of 66. ( a little fire, anyway )Here’s my plan:

I’m close enough to give an accurate estimate of my retirement liquid assets on my final date. 401(k) $400,000 invested in blue chip stocks, a pension which I will take in a lump sum of $325,000 and roll to my IRA, which currently has about $7,500 in it, and is invested in the Vanguard Index 500. I have $275,000 in a deferred compensation account which pays out over 5 years, commencing the March after I retire. We also have $20,000 in The Vanguard Index 500 outside of my IRA, $35,000 invested in blue chips in a brokerage account, and company stock options worth about $5000.

So, roughly, I intend to live on the proceeds of the deferred compensation account, supplemented by withdrawals from our other assets without touching the 401(k) or the pension benefit for 5 years. My 401(k) also throws off $3000 quarterly in dividends, which I receive now, and will continue to do so. The first year will be the most expensive, since I’ll need to pay about $800.00 a month to continue our health insurance. The year after that, I qualify for medicare, so health insurance should drop some. The next year, I’ll be 66, and will begin SS, as will my wife on a spousal benefit. Our combined benefit should be about $31,000.

Year one, $50,000 (minimum) from deferred compensation, $12,000 from dividends, withdraw about $20,000 for a total of $82,000

Year two, same scenario, but health ins. Should be less.

Year three, $50,000 (min) from deferred compensation, 31,000 from SS, 12,000 (min) from dividends, total of $93,000

Year four and five, same as three.

After year 5, I will begin withdrawing 4% annually from my 401(k) and IRA, in addition to SS and dividends. I expect these two together to be around $1,000,000.00 by then.

We have a farm and house worth about $1M

We will still have about $150,000 left on a mortgage, which the rent on the farm covers every year. No other debt.

So, comments and suggestions are welcome, as are questions.

Does this seem workable to you?

Thanks, John

[FinallyRetired]

Hi, John, and welcome

Your numbers sound reasonable for the first five years. After five years, if I understand your situation, you expect to live on 4% of around $1M, or $40k, plus $31k SS, plus $12k (?) from dividends. Reason for my question mark is, I don't know if the $1M already included the dividends. So your income would be either $71k or $83k.

With a 4% withdrawal and SS your portfolio should last longer than you, so the question becomes whether you can live on that amount for everything, including taxes. FWIW, we live fairly comfortably on less than that, but others need more, so only you can answer that question for yourself. The one thing I would suggest is that you include inflation in your calculations. That $70-80k expenses in year 5 can grow to over $100k by the time you're 80. But with mortgage paid down, and the farm, I would think you could sell one or the other, and reduce your expenses as you age if you have to. That's pretty much where we are, our current burn rate can't be kept for longer than 10 years or so, and we will sell some real estate to reduce our expenses and generate cash within ten years. I figure by then the RE market should have done whatever it's going to do.

Good luck!

[Coach]

Hi John, and welcome to the forum. And congratuations on your upcoming RE!

I see lots of the cash in side in your post, but not much on the cash out side. Have you developed an expense budget for when you're retired?

I'm glad to hear you've got the heath insurance issue under control -- that can be a tough one.

Again, welcome!

Coach

[Puzzley]

Soon, first let me say I didn't mean to steal your username in the title of my post... Accidental coincidence...

The dividends are not part of the $1m, so the number would be $83K

I realize that inflation is one of the unknowns, and I'm hoping that the portfolio will grow at enough of a rate above my 4% to offset that, but I know that's a crapshoot.

I may work parttime for the first five years to bolster my savings, and try to make the $1m be more like $1.2m

Since it's a family farm that's been part of us for almost 200 years, selling it would have to be a catastrophic last resort...

Thank you for your post and observations.... John

[Puzzley]

Coach, I'm sorry, but I'm a little confused about the inside-outside reference. Sorry to be dense.

We do have a budget, based on what it takes for us to live right now. I've been fortunate to have a fairly quick increase in income over the last 10 years, and we've for the most part kept our living standard static, and saved the rest. That's where the deferred comp came from. The figures I tossed out above are a disposable income level a little above what we live on now...

[packrat44]

Quote:

Originally Posted by Puzzley I may work parttime for the first five years to bolster my savings, and try to make the $1m be more like $1.2m John

Watch your profanity using that four letter word.

Welcome to the forum.

[Puzzley]

Sorry, Rat.... I'll go wash out my keyboard with soap.

Is that a '40 ford in your avatar?

[FinallyRetired]

Quote:

Originally Posted by Puzzley Soon, first let me say I didn't mean to steal your username in the title of my post... Accidental coincidence...

No problem, I'm hoping to change my user name to Finally Retired any day now. If I can do that, not sure if we can change user names.

[packrat44]

Quote:

Originally Posted by Puzzley Sorry, Rat.... I'll go wash out my keyboard with soap. Is that a '40 ford in your avatar?

Yup.

Supercharged SBC with all the internal goodies. Ford 9" rear end with 4.11s. Built this one in the early 80s. Had 2 40 Ford coupes in the 60s. Got to meet a lot of new people when driving them. Unfortunately, many of those people wore a badge.

[Puzzley]

Nice ride, Rat!

Here's mine..... Sleeper with a 383 sbc stroker...

[packrat44]

Nice. Always liked 57 2dr hard tops.

Had a 56 convertible in 65. Built up a 301 - 11:1 forged pistons; .030-.030 Duntov fuelie cam and solids ;
3-2s (Rochester 2GCs); headers; balanced; aligned bored; Muncie 4 speed; etc. Ran various gear sets from 3.73 to 4.56. It ran very strong even though it was encumbeered by the additonal weight of a crossmember used in convertibles to stiffen the chassis. Also had a 55 2door that spent some time at the track.

[bssc]

Welcome to the board

As you can see, people who have retired early have lots of interests. Nice Ride.