lifeisgreat
Confused about dryer sheets
- Joined
- Apr 2, 2018
- Messages
- 2
Hi folks. Yet another lurker who's finally joining the board. You all are an incredible source of information and wisdom. I enjoy the lifestyle threads as much, if not more, than the financial planning threads. DW and I plan on FIRE-ing within the the next year. Here 's our situation.
Ages: Him 57. Her 56.
Our current investable assets (60/40 allocation):
401k/403b - $1.4M
Roths - $250K
Taxable - $150K
We are fortunate enough that each of us has a pension.
Him: $65000 immediately, life only.
$60000 50% joint survivor
Her: $63000 at age 62 life only
$59000 50% joint survivor
We expect to take the survivor options. So once either of us passes, the other receives ~$30000/yr, plus their own pension. I've read about the pension max strategies (buy life insurance in lieu of pension survivor option) and have convinced myself that we don't want to go that route.
I have an idea that I haven't seen discussed on this board, or any retirement finance sites (which probably means there's a fatal flaw, haha). Suppose we took out a joint immediate SPIA that would provide $30000/yr. Then each take the life only pension. The theory being that the SPIA covers any survivor pension we would get. Some preliminary research seems to indicate such a SPIA would require a $600K investment. We essentially get $35K/year for the first 5 years (SPIA + his increased pension). After 5 years, we get $39K/year (SPIA + 2 increased pensions).
I plan to bang this into the various calculators online. Only FIRECalc so far. FIRECalc says 95% spending level is $10K higher for 40 years with SPIA and lower portfolio.
Some Pros:
- Ability to take life-only pensions makes "effective" return on SPIA that much higher.
- More of our retirement income on auto-pilot.
- Firecalc and my own less sophisticated spreadsheets indicate we'd be better off.
Some Cons:
- Tieing up 1/3 of our investable assets in the SPIA gives me pause. I find comfort in having the "bigger pot".
- Reduced opportunity for Roth conversions in the coming years. We'd have additional taxable income of $35-39K/year.
- Seems like we'd be worse off if high inflation returned, though I have difficulty quantifying that risk.
- Reading the Kitces report on flaws in converting part of portfolio into SPIA. Need to reread a couple of more times to fully grasp his conclusions.
What else should we be thinking about? Thanks in advance for advice.
Ages: Him 57. Her 56.
Our current investable assets (60/40 allocation):
401k/403b - $1.4M
Roths - $250K
Taxable - $150K
We are fortunate enough that each of us has a pension.
Him: $65000 immediately, life only.
$60000 50% joint survivor
Her: $63000 at age 62 life only
$59000 50% joint survivor
We expect to take the survivor options. So once either of us passes, the other receives ~$30000/yr, plus their own pension. I've read about the pension max strategies (buy life insurance in lieu of pension survivor option) and have convinced myself that we don't want to go that route.
I have an idea that I haven't seen discussed on this board, or any retirement finance sites (which probably means there's a fatal flaw, haha). Suppose we took out a joint immediate SPIA that would provide $30000/yr. Then each take the life only pension. The theory being that the SPIA covers any survivor pension we would get. Some preliminary research seems to indicate such a SPIA would require a $600K investment. We essentially get $35K/year for the first 5 years (SPIA + his increased pension). After 5 years, we get $39K/year (SPIA + 2 increased pensions).
I plan to bang this into the various calculators online. Only FIRECalc so far. FIRECalc says 95% spending level is $10K higher for 40 years with SPIA and lower portfolio.
Some Pros:
- Ability to take life-only pensions makes "effective" return on SPIA that much higher.
- More of our retirement income on auto-pilot.
- Firecalc and my own less sophisticated spreadsheets indicate we'd be better off.
Some Cons:
- Tieing up 1/3 of our investable assets in the SPIA gives me pause. I find comfort in having the "bigger pot".
- Reduced opportunity for Roth conversions in the coming years. We'd have additional taxable income of $35-39K/year.
- Seems like we'd be worse off if high inflation returned, though I have difficulty quantifying that risk.
- Reading the Kitces report on flaws in converting part of portfolio into SPIA. Need to reread a couple of more times to fully grasp his conclusions.
What else should we be thinking about? Thanks in advance for advice.