We're new - our plan is iffy?

[RHONDAVE]

Great site, ThankYou.
I am 61 and my wife is 56. We both have worked 35 years in Banking and State government. We commute only 1/2 mile to our jobs. But we want out of the weather in Nebraska.
1. We want to move to Phoenix or near there.
2. We are healthy and active.
3. We want to do this in 10 months.
4. Our nestegg then will be 1.4 mil
5. I will purchase company health insurance for $1400/mo for 3 years.
6. I will draw SS early to pay for above policy.
7. We need to gross 89K to supply 5K monthly budget.
8. We will pay around $200K cash for house.
9. We need to work enough to generate 33K per year.

Our biggest unknown now seems to be jobs, where? how many hours? how much? I know envision having to work in Walmart full time to make the needed income.

Also there is a 3 year gap that needs health insurance coverage when I turn 65. How much will that be?

Where should or could someone take their retirement plan for review and expert opinions? We have no need for financial advisors at this time.

Thanks for all the great information.

 

[Teacher Terry]

I think I would investigative p.t. consulting in your field or jobs in the area you want to move to in order to see if it is feasible to make 33k p.t. doing something that you would enjoy. WE are about the same ages as you and each consult p.t. in our fields and I also teach an online college class. For the insurance gap I would price plans on the ACA but expect the amount you pay to be more in 3 years. Most years we together pull in about 31k with some years more & some less.

 

[Pbkmaine]

Coming from state government, don't you have a pension?

 

[rodi]

Welcome RHONDAVE.

Have you run your numbers through firecalc? (see link at bottom of page). Make sure you investigate all the tabs (so any pension and SS get input, as well as your asset allocation.)

Does your 1.4M include your current home equity - net any transactions costs?

How certain are you on the $89k? Most of us found that when we stopped working, our expenses dropped. No longer paying SS and Medicare taxes, etc.

$1400/month for retiree medical might be more expensive that policies you obtain through the ACA websites or private insurance brokers. I would investigate this as well. For a data point, I paid $1100/month for a family of 4. Since it was a high deductible plan (and we had a catastrophic year) we also paid the full family deductible ($9k)... but I think the $9k is unusual - and I've budgeted $5k/year with hopes it will be less. (At this point last year we'd had a hospitalization, a broken arm... and were about to get hit with the broken arm kid breaking the other arm)

Also - taxes tend to be less when you're not working. There's a thread on that over in Fire and Money... While working we averaged 10-14% effective tax rate - and it's now in the single digits.

 

[Sunset]

Welcome,

Since you were both working, I'm a bit surprised you only have 1.4 M saved.

Have you considered that your best income opportunities are with the jobs you currently have.
To solve the weather issue, why not simply take longer vacations at the times the weather is bad (winter?), so break up the weather by spending 3-4 weeks somewhere warm.

Besides firecalc, there are other calculators and its always reassuring if they all say you can retire.

 

[hurricane harry]

If your in banking you know how to handle finances.
If you want to get new jobs your just moving, not retiring.
Give it a try you have plenty to live on. Lifes to short to be stuck somewhere you dont enjoy.

 

[Senator]

Where should or could someone take their retirement plan for review and expert opinions? We have no need for financial advisors at this time.

Fidelity has a tool you can key in all your information. That will give you one of the best reviews. Also, FireCalc is a good historical view. Do both.

The weather in NE is not that bad. Come here to MN, and you will think NE is like the tropics.

Keep saving. You are close, but if you take another $200K away, that is a sizable chink that you may need for income.

The best jobs you will ever have are the ones you have now. If you are going to work, stay where you are.

 

[tmm99]

Great site, ThankYou.

7. We need to gross 89K to supply 5K monthly budget.

Does this sound right to everyone?

 

[Another Reader]

In your shoes, I would buy a cute, inexpensive condo in Phoenix and vacation there for a couple of years. That means 115 degree summers as well as winter. See if Arizona really suits you year-round.

Meanwhile, keep filling up those retirement asset buckets until you are really comfortable with the numbers. Take the Social Security later and get a bigger check because you don't have to buy three years of your health insurance with it.

ETA: There are several Amazon warehouses in the area. I know a couple of 70 year-olds that are packing boxes full time year-round for about $12.00 an hour....

 

[Moemg]

Does this sound right to everyone?

I wondered about that .

 

[Pbkmaine]

In your shoes, I would not buy anything anywhere. Rent for a few years wherever you end up, until you decide you want to stay there for at least 10 years.

 

[pb4uski]

Does this sound right to everyone?

I wondered about that .

No, it doesn't sound right. Even if all withdrawals were from tax deferred and therefore ordinary income, $66k of withdrawals would result in ~$6k of federal income tax and a net of $60k/$5k a month. MFJ/std deduction.

 

[papadad111]

I don't know about your plan being iffy but if it's like the information you have listed then yes, your plan is full of holes and gaps.

Total NW is 1.4M ? Ex-home equity?

Is that In cash account or in an IRA or Roth ?

How much is current home worth
? Paid off? Mortgage?

How much SS expected ? For you ? and for spouse?

Any Pensions ? At what age. How much per person? Any Survivor benefit ?

Why are your taxes so high?

Who gets the health insurance for 1200 per month. Both parties ? What's annual Deductible ?

Why only buying 3 years with company health insurance. You'll need 4 years to get to Medicare age. Wife will need longer.

What's the health insurance rate after you go to Medicare at 65 for wife to have health insurance ? Did u compare company rate to ACA plans for Arizona and Nebraska ? Is she eligible to stay in company health insurance til she turns 65 Medicare age ?

Any living parents to take care of or Any Inheritances coming? Any dependents not yet off the payroll?

What field are you in ? How possible is finding new work or new jobs jn old age ? Consulting? Welcome to Walmart?

Jobs are tough to come by with so many people your age unable to retire and needing to work. Especially Arizona. It's sorta Get in line down there ...
....

Now if I had 1.4m investments and a paid off home and wanted to go to Arizona: I would swap my home for like home down south. I would probably be getting 25-30k per year from SS. I would not collect SS early. And the other 45k I would tap from that life savings. That would be around 3.2% percent withdraw on my 1.4M after SS .. That would leave me around 60k per year or 5 k per month and would figure out how to live within those means , not bother working, and enjoy life, get long term care policy or life instance to cover a big end of life medical situation so the remaining spouse isn't broke.

with zero real return money should last about 30 years. DW will be 86. You will be 91.

 

[MBAustin]

First, great that you are starting to firm up a plan. If you haven't seen them yet, there are two excellent resources here that may be helpful:

http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

and

Early Retirement FAQs - Early Retirement & Financial Independence Community

Keep the questions coming also!

 

[RHONDAVE]

Reason for moving is wife has moderate arthritis and Arizona should reduce some of those symptoms.
My company medical insurance can be extended for 3 years (I turn 65) and costs $1385/month.
Deductible is $600/single $1200/family and max out of pocket is $2400/single $4800/family.
Our house is paid off and will sell for $140,000 net at the end of this year.
Our Nest Egg: $235,000 Cash
$130,000 Taxable retirement investments
$325,000 Guaranteed5% ROI Annually retirement account
$760,000 Tax deferred retirement accounts$ 1.45 mil NEST EGG

Our Social Security is as follows: Mine $1431 Age 62 / $1966 Age 66, Wife’s $1204 Age 62 / $1752 Age 67

I have used many retirement calculators and planners but still rely on the flexible retirement planner due to its many variable inputs.
2017 Projected Income
$17172 SS Income (mine)
$33250 401K/IRA Withdrawal
$35720 Wages Earned (Both)
$3500 Interest/Dividend Income
$89642 Gross Income - $10751 Fed/State Income Taxes = $78891 Net Income
My projected budget for living expenses is $55294 annual.
Looks like we really have to consider if we can generate the wages at our ages or even find work that does not require us to work full time. Arizona jobless rate 13+ %??
Thanks To All

 

[FreeBear]

Reason for moving is wife has moderate arthritis and Arizona should reduce some of those symptoms.
My company medical insurance can be extended for 3 years (I turn 65) and costs $1385/month.
Deductible is $600/single $1200/family and max out of pocket is $2400/single $4800/family.
Our house is paid off and will sell for $140,000 net at the end of this year.
Our Nest Egg: $235,000 Cash
$130,000 Taxable retirement investments
$325,000 Guaranteed5% ROI Annually retirement account
$760,000 Tax deferred retirement accounts$ 1.45 mil NEST EGG

Our Social Security is as follows: Mine $1431 Age 62 / $1966 Age 66, Wife’s $1204 Age 62 / $1752 Age 67

I have used many retirement calculators and planners but still rely on the flexible retirement planner due to its many variable inputs.
2017 Projected Income
$17172 SS Income (mine)
$33250 401K/IRA Withdrawal
$35720 Wages Earned (Both)
$3500 Interest/Dividend Income
$89642 Gross Income - $10751 Fed/State Income Taxes = $78891 Net Income
My projected budget for living expenses is $55294 annual.
Looks like we really have to consider if we can generate the wages at our ages or even find work that does not require us to work full time. Arizona jobless rate 13+ %??
Thanks To All

So you are budgeting to spend $ 55K based on total income of $ 79K after taxes. Why the $ 29K difference? Are you trying to enlarge your egg nest??

In your 2017 budget, you'll pull only $ 33K from your savings, which is a tiny 2.2% SWR. Why so little?? Understand if you guys are nervous Nellies. Keep in mind that many folks here plan for long term WR of 3% or even 4%.

Eg: Yearly withdrawals on $ 1.45M:
3%: 43500
3.5%: 50750
4.0%: 58000

Seems like a 3% or 3.5% SWR off of your 1.45M savings and your 17K/yr early SS can cover your $ 55K "projected budget for livings expenses" and have something left for taxes & other stuff. Unless I'm missing someting, it seems like both of you can stop w*rking in 2017 and never w*rk again unless you want to.

Aside: you have non-trivial cash & after tax savings that be used to reduce IRA withdrawals for several years, taking the edge off of income taxes.

Where do you get a "guaranteed" 5% ROI retirement account?? I'd love to have that...

FB

 

[pb4uski]

+1 Why work? I'm looking at it this way. Let's say you hold $120k (2 years of spending) in cash and invest the rest of your taxable investments in equities. That would be $245k in equities and at a 2% yield would generate $5k a year of dividends that would be tax free at your income level.

If you withdraw $45k a year you would pay $7k in federal and state income taxes for net cash flow of $38k plus $5k of dividends plus $17k of SS gives you $60k to spend.

The $50k of withdrawals ($45k from IRAs and $5k of dividends taken in cash) would be 3.6% of your $1,390k nestegg after selling your house for $140k and spending $200k on your retirement home in Arizona. And things will get even better once your DW starts her SS.

That said, since you are married you might look into what your best SS claiming strategy is at SSAnalyze - Bedrock Capital Management

Finally, this "guaranteed 5% ROI" retirement account is a concern to me. What was the return of this account based on cash value (before income taxes) in 2015? 2014? I'm skeptical that you are really getting 5% guaranteed... 5% before fees perhaps, but 5% after fees is unlikely.

 

[ivinsfan]

What's your total household income right now? How much can you add to the nest egg yearly by staying where you are?

Drawing SS at 62 to pay health insurance cuts out a lot of options for future SS income. The more years you have company paid insurance the more things will swing in your favor.

 

[pb4uski]

Also, check out healthsherpa.com for health insurance prices. It looks like you could get a high deductible plan for both of you for ~$900/month and save $485 a month in premium. that $5,820 a year of premiums savings is about the same as the difference between the $11k deductible and the $4,800 maximum OOP but if you are healthy then you can pocket the $5,850.

 

[RHONDAVE]

The 5% Cash Balance Retirement fund has almost no fees. I pay less than $100 in fees for the entire nest egg. The $325,000 balance is added by my contributions every paycheck and then matched 156% by the company. The return is 5% plus options of dividends (last year we received another lump 8+%. Part of my withdrawal that I pulled out in the example, is then returned as earnings in this account that I just leave alone.
Our income this year was only $110K but I have tracked our savings for years and last year it was 36%.
I am allowing for some distance between annual budget and a good income figure. Is this not a good thing to do? THANKS

 

[pb4uski]

It sounds like it is an employer sponsored defined contribution plan where the employer matches contributions and pays 5% interest on the balance? If so, that is the most generous DC scheme that I have ever heard of, hence my skepticism.

Also, I'm sure you pay more than $100 in fees for the entire $890,000 invested as that would be an exceedingly low expense ratio.... perhaps you are referring to account level fees exclusive of any underlying expenses in the investments.

in terms of your last question, I guess it depends but not bad to just round up.

Was the 110k gross pay or take home pay? and was the 36% of take home or gross pay?

 

[athena53]

A couple of tax considerations although I'm not an expert: first, since you'd be receiving SS before your full retirement age, your SS will be reduced 50% for any earnings over a given threshold (was $14k annually in 2009 in article I read). So, if you make $30k in a year and the threshold is $16k, your SS will be reduced by 50% of $14k, or $7,000 a year. Even if that doesn't apply to you, up to 85% of your SS can be taxable if your joint income exceeds about $45k/year.

 

[RHONDAVE]

It was defined at one time and 3 times we were offered to convert to cash with guarantee. After the market came all the way back we cashed in on that portion. The fees are true. The income figures are base salary gross.

 

[pb4uski]

So if your gross was $110k than I'm guessing that your take-home (after taxes but before any savings) was ~$80 and if you saved 36% of that then you spent about $52k? Seems close to the $54k you plan to spend.

So you're claiming that your ER for your taxable retirement investments and tax-deferred retirement account is ~ 1 basis point? $960,000* 0.01% = $96 ~ $100. Please elaborate as many of us pay 10 to 20 times that or more and 1 bp is unheard of so I suspect that you are missing something.

 

[FreeBear]

A couple of tax considerations although I'm not an expert: first, since you'd be receiving SS before your full retirement age, your SS will be reduced 50% for any earnings over a given threshold (was $14k annually in 2009 in article I read). So, if you make $30k in a year and the threshold is $16k, your SS will be reduced by 50% of $14k, or $7,000 a year. Even if that doesn't apply to you, up to 85% of your SS can be taxable if your joint income exceeds about $45k/year.

+1 Good point, this is a disincentive to w*rk too much while collecting SS before FRA. Thanks for the reminder!

Seems wise to defer SS to at least FRA or beyond if you really want to w*rk!