It's time

[ChicagoGal]

My BS bucket overfloweth. It's been bubbling at the surface for a while, but now with my long-time boss retiring in April and my job being "reimagined" to work that I have no interest in doing, I think it's time. Would appreciate the collective wisdom (such as it is) of this crowd:

Me: single, 58 years old, no kids (heirs would be nieces and nephews - if there's money left, happy to help them out)

My stash:
401k: $1.1MM
IRA: $78.K
Brokerage: 311K
Company stock account: $151K (net of cap gains/income taxes due)
IBonds: $11K
HSA: $20K

Current asset allocation has crept up to about 88% stock/12% bonds - I haven't rebalanced in a while. Probably want to bump up the "bonds-as-ballast" allocation for a while, anyway.

Old school pension: $46K/year or $868K lump sum if I take it now. Estimated to grow to $55K/year or $960K lump sum if I wait to take it until my 62nd bday (Aug 2024). Pension is frozen, so working longer will not affect it.

Health care: Retiree medical through my company, which will cost about $5.6K/year until age 65, then $3K/year as secondary to Medicare.

Long term health care plan: self funding, using equity in my house (current value ~$600K), if needed.

Social Security: ~$35K/year at FRA (age 67)

Estimated expenses: $95K/year (excluding taxes). This includes $20K/year for travel, which would obviously be cut back as appropriate. The first 7 years would be an additional $27K/year expense until mortgage is paid off (unless I pull out $160K to pay that off now).

Life expectancy: Who the heck knows? Longevity runs in my family (3 grandparents lived into their 90s), although so does cancer (mom died at 37). I'm overweight, and recently diagnosed with diabetes, but it's well managed and I've lost 40 pounds as a start. For financial purposes, I've been assuming I'll make it to 95 ("only the good die young").

If I'm doing it right, Firecalc and I-ORP both say it looks good. I've interviewed a fiduciary financial advisor, and may end up paying her $1,750 for a more detailed plan. But I really don't even want to wait for that.

What say ye? What am I missing?

[Ready]

Between your pension and SS you have most of your expenses covered and you have enough in savings to cover you until both of those kick in. You don't mention if the pension has a COLA but at least SS does so you have some protection there.

I would not feel comfortable with 88% in equities going into retirement but that's just a personal decision regarding your comfort with risk.

Good luck with your decision!

[iblearning]

I am retiring at the end of the month with much less than you have. I think that you will be fine.

[Montecfo]

Hi ChicagoGal,

Just a couple of comments: are you rushing to pay off your mortgage?

Also, principal payments on your mortgage are cash flow obligations but not really "expenses" since they are neutral as far as your balance sheet is concerned.

You seem to have adequate assets but you should get a handle on your taxes as you go forward and work those into your budget, since you have a lot of tax deferred assets and taxable pension.

Don't let that BS bucket overflow! Just makes a mess

Best of luck.

[MRG]

Enjoy your new career of being retired.

[ChicagoGal]

Quote:

Originally Posted by Montecfo Hi ChicagoGal, Just a couple of comments: are you rushing to pay off your mortgage? Also, principal payments on your mortgage are cash flow obligations but not really "expenses" since they are neutral as far as your balance sheet is concerned. You seem to have adequate assets but you should get a handle on your taxes as you go forward and work those into your budget, since you have a lot of tax deferred assets and taxable pension. Don't let that BS bucket overflow! Just makes a mess Best of luck.

I'm in no rush to pay off the mortgage, as it's at a pretty low rate. But it's helpful for me to thing about a smoother expense stream without the mortgage that ends in 7 years. Even if I don't pay it off, that $160,000 is my mental "set aside" for paying the 7 years of payments.

I agree, taxes are going to be extremely important. I have an idea how they would work, but that's not remotely my area of expertise. Taxes and withdrawal strategy are the primary reasons I'm considering hiring the financial advisor to run a plan for me.

And thanks - it's already pretty messy from a BS standpoint. Trying to get out before I need waders!!!

[GTP2022]

you've planned well. When you think of the stress of the new "reimagined" job and the diabetes (good job on the 40lb loss) it's time to go. You have more than enough, don't you want to do other things for joy?

I'm very close also so I know the feelings you're going through. I say head to retirement knowing you are good to go.

[Dtail]

Is your pension cola'd, but even if it is not, you are good to go.
Retiree medical can theoretically disappear at any time, but you should still be good to go.
Come join us, the water is warm.

[pacergal]

You look good to go.
With a pension, you could probably let your investments remain heavy stock.
I personally reduced ours, even with a pension. What ever lets you sleep well at night.
Get ready to enjoy retirement life!.

[MBAustin]

Our mortgage was also at a very low rate so I didn't worry about paying it off, but did start making significant extra principal payments and paid it off early that way.

Does your $95K include allowance for "lumpy" expenses such as new vehicles, high medical deductibles, major home repairs, etc.?

Looks like you're ready - congratulations!

[ChicagoGal]

Good questions. Pension is non-COLA. Am thinking through how that may impact taking the annual payout vs. lump sum, given the time frame of (hopefully) a long retirement.

My expense estimate does cover lumpy expenses. In the past 2-10 years, I have replaced/repaired most everything in the house (including new furnace, air conditioning, roof, painting, etc.), so looking forward to pushing the next round of those out a while. Probably will be getting a new car soon, which will actually be an expense decrease (my current car costs way too much in repairs).

[davebarnes]

The most important decision is the pension vs lump sum.
While it is a financial decision, it is also emotional.
For my wife, we took the lump sum 20 years ago and are happy with that decision. We got more control over our money.

[Accidental Retiree]

Quote:

Originally Posted by Montecfo Hi ChicagoGal, You seem to have adequate assets but you should get a handle on your taxes as you go forward and work those into your budget, since you have a lot of tax deferred assets and taxable pension. .

Unless something has changed since my IL bestie retired in 2019, ChicagoGal is fortunate that IL won’t be taxing her retirement fund withdrawals, pension, or Social Security.

My IL friend did not know that and was gobsmacked. I invited her to run her retirement numbers through her Turbo Tax program. What a big smile she had after that. She then understood why I kept nagging her to load up her 401(k) and IRA the year before she retired.

Huh, she didn’t do it, though—but at least she finally understood.

“Numbers is hard.”

[Koolau]

Quote:

Originally Posted by davebarnes The most important decision is the pension vs lump sum. While it is a financial decision, it is also emotional. For my wife, we took the lump sum 20 years ago and are happy with that decision. We got more control over our money.

Yep! You are probably good to go.

I don't have a source for this, but I've read that most pension pay-outs are better than most folks can do with lump sum. Still, a very personal decision and I applaud your considering professional assistance in setting things up - all usual cautions apply (Certified Financial Panner, Fee only - no sales, check the math, let your gut guide you, on-and-on.)

SWAG from your name, you live in CHI. If so, you've got that nice $600K house you could sell and buy one for a quarter of that 100 mi west or south - just a thought.

Main suggestion: Check with your CFP about converting your tIRA and 401(k) (slowly) to Roth IRAs. Might not be a good idea for you, but something to consider.

One more thing: (I could NOT do this.) When the BS bucket got full, I considered, for about 60 seconds STAYING and being a royal pain until they either fired me or backed off the BS. You could pad the stash while you do your due diligence regarding ER. Then when it's no longer "fun" "punking the man" you could kick over the BS bucket and exit. I couldn't do it because I could not stand being "viewed" as less than doing my "best." BUT, I did consider it! YMMV

[ChicagoGal]

Quote:

Originally Posted by Accidental Retiree Unless something has changed since my IL bestie retired in 2019, ChicagoGal is fortunate that IL won’t be taxing her retirement fund withdrawals, pension, or Social Security.

That is still true, although lots of conversations and proposals around whether/how it should change. We'll see!

[ChicagoGal]

Quote:

Originally Posted by Koolau I don't have a source for this, but I've read that most pension pay-outs are better than most folks can do with lump sum. Still, a very personal decision and I applaud your considering professional assistance in setting things up - all usual cautions apply (Certified Financial Panner, Fee only - no sales, check the math, let your gut guide you, on-and-on.)

Yep, the planner is fiduciary, fee only, doesn't sell anything, CFA and CFP.

Quote:

SWAG from your name, you live in CHI. If so, you've got that nice $600K house you could sell and buy one for a quarter of that 100 mi west or south - just a thought.

Good guess I actually live in the Chicago suburbs. Since most of my family and friends are in the city and nearby suburbs, probably won't move anywhere too far, but it's always an option. And those other circumstances could change as well.

Quote:

Main suggestion: Check with your CFP about converting your tIRA and 401(k) (slowly) to Roth IRAs. Might not be a good idea for you, but something to consider.

Yep, Roth conversions are one of the specific topics I gave her for consideration.

Quote:

One more thing: (I could NOT do this.) When the BS bucket got full, I considered, for about 60 seconds STAYING and being a royal pain until they either fired me or backed off the BS. You could pad the stash while you do your due diligence regarding ER. Then when it's no longer "fun" "punking the man" you could kick over the BS bucket and exit. I couldn't do it because I could not stand being "viewed" as less than doing my "best." BUT, I did consider it! YMMV

lol, I actually have thought about that. They are paying me a very healthy salary, I work from home full time so my time really is more or less my own and will be even more so once my current boss retires. But man, every email that comes in annoys me to no end, so in addition to wanting to keep my reputation in tact, it's likely better for my mental health to walk away before I completely lose it!

[oiseux]

Congratulations, it sounds like you are set. The pension and retiree medical are a huge benefit to ER. It does seem as though you do have to work out the most tax-efficient draw down path to bridge the gap between now and 65/67, so you can enjoy your travel.