New to retirement I think

[JOEBEAU10]

Hi I’m new here and recently furloughed, now a severance package and I’m gone at age 62. Need some advice and understanding of my financial situation which hopefully is ok and that I can enjoy retirement without having to go back to work, so here goes. Married with combined savings of $1M. Wife still working for 2 years because of excellent health care coverage for both of us, she is also 62. We both have pensions which the combined amount is $51K before tax. Home is not paid for which is ok, same with vacation home. We currently make enough to cover all expenses but might need to start taking money out of something at age 63 to make ends meet. I know this sounds odd, but will we be ok?? And is it necessary that I go back to work??

 

[Golden sunsets]

Have you run Firecalc? A bit more info would help. Are the pensions cola'd? What will your SS be for you and your wife? And finally, what are your expenses?

 

[JOEBEAU10]

No on fire Calc. We will get well over $62k on SS at full age for retirement and average monthly expenses run around $10k per month which includes about $2k for entertainment.

 

[REWahoo]

Joe, please check this out: Some Important Questions to Answer Before Asking - Can I Retire?

 

[Midpack]

No on fire Calc. We will get well over $62k on SS at full age for retirement and average monthly expenses run around $10k per month which includes about $2k for entertainment.

Not enough info to answer meaningfully, so FIRECALC is probably the best place to start, then ask questions?

Here you go https://www.firecalc.com/

 

[Dtail]

No on fire Calc. We will get well over $62k on SS at full age for retirement and average monthly expenses run around $10k per month which includes about $2k for entertainment.

Does well over 62k in SS mean 62-63k?
Are the pensions COLA'd?
I would try the Firecalc retirement calculator which is connected to this site. Many of us can assist in handling questions about it.

 

[pb4uski]

You are probably close, but you have lots more work to do to confirm whether you are or not.

 

[The Cosmic Avenger]

No on fire Calc. We will get well over $62k on SS at full age for retirement and average monthly expenses run around $10k per month which includes about $2k for entertainment.

So after 70 you should be fine, as you'll have at least $113K in combined annual SS and pension income, and about $120K in annual expenses. The big issue is bridging the gap between now and then. FIREcalc can give you more insight into that part, but my guess is, since it sounds like you will have your wife's health insurance up until you both qualify for Medicare, you will not have to deal with private health insurance, one of the biggest issues with retiring before age 65 even despite the ACA (which has made it easier, but has not completely eliminated the health insurance "gap" for those retiring before age 65).

 

[JOEBEAU10]

63,500

 

[Dtail]

63,500

Are pensions cola'd, as that input in Firecalc can produce a larger difference of success rates.

 

[JOEBEAU10]

Not sure how to answer that question it’s a teachers pension at $48k and I get a small one from a previous employer which totals $4k

 

[Midpack]

Not sure how to answer that question it’s a teachers pension at $48k and I get a small one from a previous employer which totals $4k

https://firecalc.com/

You’re not likely to get a meaningful answer otherwise. What’s your FIRECALC probability of success?

 

[Dtail]

Not sure how to answer that question it’s a teachers pension at $48k and I get a small one from a previous employer which totals $4k

I played around with Firecalc a bit for you at the default settings and with a cola pension the success rate with retirement to 95 y.o. is at 100% and with a non cola it is at 90% success rate.
Though this doesn't include your wife working 2 extra years.
Sounds like you are right about there.

 

[JOEBEAU10]

Thanks for your help ��

 

[JOEBEAU10]

She makes $101k a year and is working for 2 more years, I will get about $50k total between now and next March then my severance is over.

 

[WhenIsItTime]

Home is not paid for which is ok, same with vacation home.

All the details matter, but I’ll comment on this one. Would seem appropriate to consider on expense/budget assumptions a provision for maintenance/furnishings/repairs of two properties. Maybe travel costs between two depending on location and if visits would change in retirement.

If you have equity in both it would give you some flexibility and worst case option to sell one.

 

[pb4uski]

Not sure how to answer that question it’s a teachers pension at $48k and I get a small one from a previous employer which totals $4k

I guess in that case that the teacher has a homework assignment to find out if those pensions are COLAed or not.

We're ready and willing to help, but you also need to be willing to help yourself.

 

[Bamaman]

Sounds as if you have spending issues rather than income issues. My idea of retiring is not thinking about taking on another job.

 

[The Cosmic Avenger]

Sounds as if you have spending issues rather than income issues. My idea of retiring is not thinking about taking on another job.

That's another good point; you should have a detailed budget rather than an estimate. That way you can make more informed decisions and think about questions like: Are you willing to cut or eliminate that $2K/month for entertainment, or is that worth going back to work for?

 

[obsessed]

It appears that you have a couple of mortgages including in your $120k spend. Do those drop off in the next ten years or so? That would help your numbers.

 

[JustVisitingThisPlanet]

^And of course dropping lifestyle down a notch if possible to below $100K/yr expenses would help. I cut back on things involving high maintenance (retired at 54 last year, waiting for 59.5 to raise lifestyle bar back up a notch as most in IRAs). I'd rather drop down lifestyle a bit than work again but if you love working...

 

[OldShooter]

One thing we all underestimate is the effects of inflation. Even 20 years at a very moderate average of 2.5% reduces the buying power of a dollar by 40%. Long term US average inflation is 3.11% IIRC and trailing 40 year average is over 4%.

My personal bogeyman is a decline in the value of the US$. Virtually every country in the world hates that the $ is the reserve currency and many of the larger economies like China and the EU would like very much to knock us off our throne. A 20% decline would cause huge pain and chaos as most internationally traded products like food, oil, and plastic would be 25% more expensive crossing the border. Not to mention clothes, consumer electronics, major components of cars, etc. It might take a decade for our economy to adjust.

 

[JustVisitingThisPlanet]

^Printing more money isn't helping value of US$. Apparently can only work if demand exceeds supply of printing extra, right? And doesn't GDP also need to grow? (I'm not an economist so not sure).

 

[pb4uski]

It appears that you have a couple of mortgages including in your $120k spend. Do those drop off in the next ten years or so? That would help your numbers.

Good point, and if you include mortgage payments in expenses in FIRECalc then FIRECalc inflates those expenes and they never end, so you get flawed success rates.

It would be preferable to exclude mortgage payments (P&I) from spending and reduce the portfolio input into FIRECalc for you mortgage balances... like you pay off your mortgages before retiring... that will provide a truer success rate.

Alternatively, you can include mortgage payments as fixed off-chart spending starting immediatelyand then offset it with a fixed pension entry of equal amount in the year the mortgage ends.... that avoids the inflation of the expenses and provides an end point.

 

[OldShooter]

^Printing more money isn't helping value of US$. Apparently can only work if demand exceeds supply of printing extra, right? And doesn't GDP also need to grow? (I'm not an economist so not sure).

There is ample fodder to feed anyone's growing paranoia. (That is actually this week's topic in The Economist." *) But the bottom line is that nobody, nowhere, has ever been able to forecast the world economy in any useful way.

"The only function of economic forecasting is to make astrology look respectable.” Often attributed to John Kenneth Galbraith but apparently actually from Ezra Solomon, a member of the Council of Economic Advisors during the Nixon administration.

*https://www.economist.com/weeklyedition/2020-07-25