Someone stick a fork in me!

[Omega]

I'm done!

Ok, I know I'm not done, but I can dream!

Hello everyone. I discovered this forum a few years ago and check in frequently, although I am a complete novice with my finances. I'm 54, recently separated (not sure if we will divorce), working at the same job for 31 years and I can't take it anymore! Please help put me on a path to be able to make a change. I work at a SMALL, family-owned business in a dying industry. I have a good salary and great benefits, but things in the office have gone south on a personal level and I hate going to work every day. I will never find a job making the same salary, and the benefits are excellent.

Salary: 90k
I don't keep track of spending, but basically I make $4400/month and my monthly bills are $3400.

My company pays 85% of full family health insurance.

Mortgage: Owe $150, worth 300
No car payment, car is 6 years old
500K in retirement profit sharing plan
1,500 monthly pension at 65
10k cash

One adult child who is completely independent.

Thanks for reading.

 

[Katiek]

Welcome, Omega! I'd definitely recommend tracking expenses carefully for at least a year. Having realistic amounts for various expenses will help you feel confident making definite retirement plans. But you've done a good job saving and it's nice to have some regular pension.

 

[Another Reader]

I'm pretty ignorant of retirement plans used by small businesses. What is a "retirement profit sharing plan"? Who controls the money and how is it invested? What happens if the company falls on hard times or is bought out?

Similar question on your pension? Who controls it? Is it in a pension plan administered by a third party? What happens to the pension if the company goes under?

How much Social Security will you likely collect? Did your wife work? How much will she collect?

To me, it's not just the estimated amount of your future income, it's how secure that income is.

 

[Walt34]

Welcome, Omega! I'd definitely recommend tracking expenses carefully for at least a year. Having realistic amounts for various expenses will help you feel confident making definite retirement plans.

Welcome to the forum!

I have to agree with Katiek - you can't know what you'll need to retire if you don't have a good understanding of what you're spending now, and how much of that you'd be willing to give up to be able to retire.

While it's a bit soon, you'll want to be headed in the direction of having solid answers to this list of questions:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[Omega]

I'm pretty ignorant of retirement plans used by small businesses. What is a "retirement profit sharing plan"? Who controls the money and how is it invested? What happens if the company falls on hard times or is bought out?

A distribution of profits placed into an account in my name, managed by Merrill Lynch, invested fairly conservatively. The money is mine, no matter what happens to the company.

Similar question on your pension? Who controls it? Is it in a pension plan administered by a third party? What happens to the pension if the company goes under?

Pension is administered by a third party, guaranteed by the PBGC. Not sure what happens if the company goes under.

How much Social Security will you likely collect? Did your wife work? How much will she collect?

I will collect $2,000 a month in todays dollars at 65. I am figuring everything as if I will be single, because I probably will be. My spouse is 6 years older than me and makes significantly more, if that matters.

To me, it's not just the estimated amount of your future income, it's how secure that income is.

Hope this helps.

 

[HI Bill]

Welcome!
-If you were to get divorced, have you determined what impact that would have on your finances? Would you receive part of your ex's assets, or would you have to give up part of yours?
-Do you live in a community property state?
-How much of your/your spouses assets are 'prior' assets?
-Now is the time to invest, invest, invest. If you see the writing on the wall, I'd suggest that you consider speeding up the divorce, so your future savings are not subject to splitting in a future settlement.

Best wishes!

 

[Skoach]

Do not make the same mistake a friend of mine did whose ex-wife made 4x what he did. He kept the divorce 'civil' and basically got half of CURRENT assets. He has no claim on any of her large retirement assets.

Make sure you talk to a good attorney who specializes in the male side of divorce. It cpuld impact your future plans significantly!

 

[imoldernu]

Your situation is not too far off from ours, 30 years ago...
FWIW, here:

http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251.html

 

[Omega]

Thanks for the responses. We have already taken care of the finances amicably and legally. What I have is listed is mine.

 

[Omega]

Your situation is not too far off from ours, 30 years ago...
FWIW, here:

http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251.html

I've actually already read this and I love it! Thank you!

 

[Omega]

Welcome!
-If you were to get divorced, have you determined what impact that would have on your finances? Would you receive part of your ex's assets, or would you have to give up part of yours?
-Do you live in a community property state?
-How much of your/your spouses assets are 'prior' assets?
-Now is the time to invest, invest, invest. If you see the writing on the wall, I'd suggest that you consider speeding up the divorce, so your future savings are not subject to splitting in a future settlement.

Best wishes!

The "invest, invest, invest" is what I need help with. I have no idea where to start. Call Vanguard and open...what? A Roth IRA? A target retirement fund?

 

[kgtest]

You can go online and open a Roth IRA, you can contribute $5500 and will need to pay the tax on that this year. Do that before end of the year.


Invest in VUG, VOT and VBK ETFs. (My personal opinion). If you had $100, 50 to VUG (LargeCap equities) 25% to VOT MidCap (mid sized) and 25% to VBK SmallCap.


I have no idea what you did with all your cash, but you need to save more. I save like > 35% of my gross household income.


Try and save 30k next year, $6500 in Roth immediately and the rest in a SEP-IRA if eligible or else the remaining $ in Brokerage with that same mix as the Roth IRA Vanguard account.



How stable is the pension?

 

[kgtest]

Reduce monthly bills by $500-550 to save more.

 

[Omega]

Thanks for being specific, it's just what I am looking for. A few questions...

You think I should take more than half of my cash and open a Roth IRA? And why would I have to pay taxes on that this year, if it's after tax money?

30K sounds like a lot! I don't know if I can do that, honestly.

The pension is extremely stable. How do I put a cash value on that?

 

[joeea]

Salary: 90k
I don't keep track of spending, but basically I make $4400/month and my monthly bills are $3400.

Does this mean you are taking home $4400/month? And that you are saving $1000/month?

Have you considered getting a different job - even if it is for less money?

At 65, you might barely be able to retire and squeak by. But it probably makes sense to pad your nest egg as much as possible until at least 65. You should start tracking your expenses now.

 

[Willers]

I second (or third?) the suggestion that understanding your expenses is critical. That was the key to our ability to retire. For the next several months try to track everything and understand how that might change when you are single again. Once you have that information, the calculators such as FireCalc do a nice job of modeling what a retirement might look like. They allow you to enter the pension and start date. Many on this board can help with specific questions once you get there.

Also, keep in mind that if you were married for 10+ years you can collect Social Security on your ex's record. You should check to see if this would help with funding your retirement.

Finally, make sure you know if the pension is fixed or has a COLA.

 

[Another Reader]

I do not agree the pension is extremely stable. You do not know what happens of the company goes bankrupt or is bought out and the buyer terminates the plan. In your shoes, I would get all that information before relying on that money.

Generally, there is no point in putting a cash value on a pension unless you are offered a lump sum to be bought out. Same as Social Security. Use your best estimate of what you will get and when, and subtract that from the amount of income you will need your assets to produce at that point. Some people use a higher withdrawal rate from their assets in the early years and drop that down when the pension and Social Security kick in. That increases your sequence of returns risk, but may be necessary in your case.

 

[Omega]

Does this mean you are taking home $4400/month? And that you are saving $1000/month?

I take home $4400/month and spend $800. Just being honest.

Have you considered getting a different job - even if it is for less money?

I would love to! The problem is that I don't have any marketable skills really, and I don't think going to school is the right decision at my age.

At 65, you might barely be able to retire and squeak by. But it probably makes sense to pad your nest egg as much as possible until at least 65. You should start tracking your expenses now.

I find this quite shocking! Barely able to squeak by?! Really!! At 65 with SS, my profit sharing, my pension, and whatever else I save, I will be squeaking by?

 

[Omega]

I second (or third?) the suggestion that understanding your expenses is critical. That was the key to our ability to retire. For the next several months try to track everything and understand how that might change when you are single again. Once you have that information, the calculators such as FireCalc do a nice job of modeling what a retirement might look like. They allow you to enter the pension and start date. Many on this board can help with specific questions once you get there.

I will start keeping track. It doesn't seem that hard as my bills are about 2/3 of my take home pay.

Also, keep in mind that if you were married for 10+ years you can collect Social Security on your ex's record. You should check to see if this would help with funding your retirement.

I can collect on my ex's SS even if I'm still working?

Finally, make sure you know if the pension is fixed or has a COLA.

It is fixed.

 

[Lukeee]

Will stick you when I’m done with the fork.



I personally break it down to 2 halves.

1st: with pension + SS + other cash/ income, will I have enough for after regular retirement age (when you can access SS and pension etc) . If not, I would 1st work towards that goal.

2nd: if you have enough for regular retirement, then I would work backwards into how much I currently have and need to bridge me to regular retirement age. Don’t forget, when calculating expenses, to include annual/bi-annual expenses like car tags, insurance, property tax etc.

 

[Aerides]

Since you are recently separated, does the $3400 per month in expenses include the full costs of your own residence? (assuming you no longer live together, marital home has been sold and/or assets divided, and you are now living somewhere new, or have split assets and staying put, your Ex-H having moved out fully).

Is $3400 expenses as in bills and "needs" or is that just what you naturally spend? Is that based on several months in your new living arrangement? It's hard to budget without a good year or three behind you, as certain things don't come up nicely on schedule (car repairs, home owners insurance, taxes, travel).

So the reason someone mentioned squeaking by at 65: ... 10 years from now, with inflation that $3400 is going to be more than $4000, and with a pension (fixed) of $1500 and $2000 in SS, (so let's call than $3k in 10-years-from-now-dollars) you're going to start needing to crack into your savings to cover that monthly deficit.

But I think you're putting the cart before the horse here - best first to figure out your divorce, living arrangement, and then job, keep saving more actively and then talk RE later.

 

[Omega]

Thank you. I have purchased my own home, in my name even though I'm still married. The $3,400 is needs, the balance is what I've been spending on wants.

I see what you mean about inflation, but why wouldn't I crack into my savings?? Isn't that what it's for?

 

[gauss]

Have you considered the possibility of taking on a roommate in your new home?

If you cut down you net expenses by 40% or so by taking in a roommate,that could be a game changer in enabling an ER for you.

 

[Omega]

Have you considered the possibility of taking on a roommate in your new home?

I have considered a roommate actually, but they are not easy to find in my area.

If you cut down you net expenses by 40% or so by taking in a roommate,that could be a game changer in enabling an ER for you.

I really don't spend a lot, but I will look at my statements and see what I can cut out. A few things come to mind but nowhere near 40% net!

 

[Aerides]

I see what you mean about inflation, but why wouldn't I crack into my savings?? Isn't that what it's for?

Depends how long you plan to live. Let's stay you stay employed and don't touch it till 65. You'd want a plan that left you financially secure for say 30 ish years. With that pension being non-cola, your income will technically decline over time.

If you started cracking into your savings too much, too soon, it won't be long before your withdrawals exceed your savings growth and then at some point you'll run out. - unless you have a really well researched plan and understand your investments and real needs and wants.

A healthy nest egg will return investments at least as good as your needed withdrawals, on average, over time. So your savings nut is really there to continue to work for you, not to be whittled away (at least not starting at 55 or 65).

This is the 10,000 foot view. Your mission at this point should be to get stable, study and learn a lot, over the next several months.