Hi from Hawaii

[isabella]

Hi, I'm Isabella. I was laid off a couple of years ago and not sure if I'm going to retire or go back to work. From everything I've read on this site, I need more $ than we have, but we live very simply, so not sure if we can get by with less. We don't have a mortgage on our house in Hawaii and property taxes are so low it's hard to believe--about $200 a year (assessed value is low and then homeowner exemption brings the net taxable value down considerably from there). I worked for a megacorp over 25 years, so have retirement health insurance benefits with a premium that's just under $300 month for the two of us. Our total monthly expenses are on average $1,600 a month. Food and gasoline are expensive in Hawaii, but we drive very little and I cook from scratch, don't buy processed foods, which tend to be more expensive and less healthy. Utility rates are high, but we don't have to heat or cool our home, so gas, electricity, and water are on average just under $100/month. We have a gas dryer, but typically hang clothes on the line to dry. We don't pay for cable or satellite TV. Instead, we have bunny ears and get 6, or so, channels, which we find is plenty and free.

I've run the retirement calculators on several sites: bankrate, Fidelity, etc. and they all say we have enough to last us into our eighties, however everything I'm hearing on this site would lead me to believe we need far more than the $400K we have in our IRA. Is it that we live on less than others typically do, or what?

 

[RonBoyd]

You may find this article interesting:

THE FINANCIAL PHILOSOPHER: Who Needs Social Security? A Lesson in Defining Terms

How do you define the term retirement? How do you define financial freedom? To the detriment of many, retirement and financial freedom, which are often interchangeable terms, are defined (and achieved) solely by monetary means, ...

 

[Coach]

Hi Isabella, and welcome to the forum!

Your needs are modest, so I would not be surprised if the calculators say you are doing OK. I'd suggest giving another calculator, FIRECalc, a try too. You'll find a link at the bottom of every page.

Good luck, and I hope it's all good news!

Coach

 

[Nords]

E komo mai, Isabella!

I've run the retirement calculators on several sites: bankrate, Fidelity, etc. and they all say we have enough to last us into our eighties, however everything I'm hearing on this site would lead me to believe we need far more than the $400K we have in our IRA. Is it that we live on less than others typically do, or what?

In very broad timers the 4% "safe withdrawal rate" for 30 years means you only need to start retirement with a portfolio that's 25x your annual spending.

If you're looking at longer than 30 years then it could be prudent to drop your SWR to around 3% and boost your portfolio to 33x... but other research (just as credible) suggests that 4% may work for longer than 30 years because the vast majority of elders dramatically reduce spending in their 80s/90s. It isn't clear whether that spending reduction is imposed by mobility limits or coerced by unwarranted fears of impending financial disaster.

But as you've noted, it's not how much you have-- it's how much you spend. It's better to do the math for your situation.

If you're looking for more confirmation then you could enter your annual spending into FIRECalc and FinancialEngines. Both allow a little more flexibility for variable spending in retirement.

One caveat is whether your Megacorp will continue to pay your health insurance costs until you're age 65. You might want to consider the cost of having to fund your own insurance if Megacorp reneges on their implied promise.

Another question is whether you'll be self-insuring for long-term care or paying for a policy. Those prices have been rising drastically as insurers get smarter on their actual costs.

 

[aaronc879]

Isabella, what is your age? If you or your spouse are more than a couple years under 60 then i'd look to find a job at least part-time for a few years. If you are both 60-ish and are planning to take Social Security at 62 then I think you can make it work.

 

[unallowable]

aaronc879 Could you elaborate on your message. Is there a significant difference in SS if you retire less than two years under 62? I am looking at retirement in 25 mos at age 59.

 

[aaronc879]

aaronc879 Could you elaborate on your message. Is there a significant difference in SS if you retire less than two years under 62? I am looking at retirement in 25 mos at age 59.

I was just curious how close you were to getting SS. With your reasonabley low expenses it makes a big difference whether or not you'll have that extra income. Without SS I see no way that you could do it. However, with SS in a couple years and low health insurance costs until medicare, you should be okay if you keep your expenses at their current level.

 

[plex]

There is a small penalty in SS benefits to retiring early, but it is very small amount for each year before the normal retirement age.

I think the OP would be safer if they had 500k, instead of 400k, but depending on the OPs age, they may be able to get by just fine until SS kicks in.

 

[unallowable]

Aaronc879I think you are confusing me with someone. I have not posted anything about my finances.
Just wondered how much difference it makes if you quit working more than two years before age 62. I should be fine without SS with COLA pension, rental properties and investments. This has been one of my questions about SS. But do plan to retire before 62 collect SS asap unless I hear a good reason not to..

 

[isabella]

Thanks for all the input! To answer some questions: I'm 58 and my husband is 60. I'll most likely take SS at age 62. Megacorp health insurance is supposed to pay until 65, then medicare becomes our primary insurance and our present insurance becomes secondary. Of course, that's assuming megacorp makes good on their promise of coverage.

I'm thinking a part-time job will probably be a good compromise. Given that we have a small nest egg, I'd like to either defer using retirement funds, or need to use less, until we start collecting SS. For now, we're living on rainy day savings and severence and should be able to get by until I reach 59 1/2. I'm still a bit burnt out from my high stress marketing job at the megacorp and can't see myself doing that type of work again. Even part-time work doesn't sound that appealing at the moment, but I'm hoping I'll eventually feel like working at least a little again.

Thanks for the advice. I'll run the numbers again using FireCalc.

 

[Bestwifeever]

Welcome to the boards, Isabella. You had me at "property taxes are so low it's hard to believe"

I think your SS will cover your living expenses. You probably are okay to retire now, but psychologically, for me it would be nice to wait until SS kicks in and your nest egg's earnings could supplement that as need be.

 

[DangerMouse]

I would probably go with the part-time job if the option is readily available. My logic for this is you don't really sound comfortable with what you have, though I think it sounds like you are frugal enough to make it work.

Do you think it would be possible for you to find a part time job in Hawaii that will give you the income you need?

 

[Koolau]

Isabella, sorry I missed your introduction a few days back. E komo mai to the forum. I'm a little surprised at your monthly living expenses here in paradise. I agree that Hawaii's property taxes are considerably lower than I experienced on the mainland. Still, $200/year seems pretty low. Which island do you call home?

Additionally, we have the advantage that our SS and pensions (for the most part) are tax exempt. Having said all that, Hawaii is still one of the higher tax states when you put it all together. Our General Excise Tax is estimated by some to be near 16% by the time it gets to the end user - even though it's only 4.7% at the cash register. And wait until you start taking money from your 401(k)! I had to do that in '09 and it was a shocking tax-day in paradise.

No idea what your SS payments will be, but if you figure maybe 3.5%/year from your stash plus your SS, that should give you a pretty good idea of how much you have to work with in retirement. Perhaps a little part time w*rk until SS kicks in would ease your mind. Best of luck. Check back often. Folks on the forum are happy to bounce ideas back and forth.