Congrats... looks like you are in pretty good financial shape from an income perspective.
I can see why CALPERS is having funding problems. Apparently it is underfunded and CA other huge public debt overhang. Are you sure they will not change the pension on you (e.g., default and use the courts to make changes)?
No, I'm not sure. But then, they are the 'surest' bet I can think of for the foreseeable future. CalPERS and the state (I'm NOT a state worker, instead I work for a public electric company, a Municipal Utility District) would most likely affect future hires and leave current pension plans alone.
While I might not change my ER plans based on some unknown.... I would want to understand what it might mean to me. IOW - would we be ok or would I have to go back to work?
I figure I could 'survive' on $2500 a month income if need be and still be comfortable. I have worked part time as a ski instructor and could easily get seasonal work at the local ski resort during winter if I so chose to. The extra income isn't needed, I would just use this as a time-filler during winter and take an extra trip with that money during the summer.
Which... BTW... You did not discuss your income needs... that is critical in retirement planning.
I mentioned I'm currently taking home about $3000 and find it very adequate to cover all my expenses and pleasures. Is that what you meant? I figure I would 'need' $2500 a month to maintain that quality of life and anything extra would either be banked for some day special or piddled away on incidentals. (I enjoy fixing up my home, have 5 acres and enjoy planting and gardening, etc...)
Also, do you have known situations that will require a large amount of cash in the future... don't forget the unknown (things that just happen).
I don't have any 'known' situations of that nature, but it's that 'unknown' you speak of that has me hesitant to lock in a fixed amount to take home rather than the liquidity my savings is.
I agree $350k is not a lot if one considers the possibility that they may live another 40+ years. $200k is even less. I would be looking at that as emergency reserve money.
That is exactly what I'm concerned with too. If it helps, there is zero chance I will inherit anything from either my or my wife's family. We'll be lucky if our parents' passing won't cost us. (They aren't destitute, just live on pensions that will go away when they die and no real cash reserves as well as brothers and sisters to split inheritance with.)
I suppose you could always sell the home or get a mortgage if you needed to raise cash later in life. Do you have other assets other than the home?
I have quite a large equity in my home, even considering today's real estate market. Home next to mine sold this week in excess of $450,000 and my home is about 10% larger and at least 20 years newer. My only assets of any real value are the home, pension and 401K/457 accounts.
Does your wife have any retirement resources due to her (e.g., pension, 401k, etc)?
Not of any real amount. We were very traditional; stay-at-home mom, went to work when they were in high school and through college so we could continue to save for retirement and not go into debt for school, then quit after they graduated college. Maybe $10,000 or so in an IRA.
You are out of debt. That is good.
I'm uncomfortable with debt. Fear of someone else able to tell me what to do and not make my own decisions as I see fit and all...
How much do you actually spend each year?
I would estimate around $35 to 40K a year. But.... Let me take a moment to explain something;
I paid off my mortgage 10 years ago. 5 years ago I lost my home and everything in it to a wild land fire set by arson. The arsonist was caught and is in prison, but there is little chance the court's ruling on financial restitution will ever come to any real money, indeed if anything at all. However, I had an insurance broker who sold me 'The Gold Plan'. It's not the Platinum Plan but it was very good. The insurance company treated me better than family. They paid off every one of my policies in full, way too many itemization's to list them all here. Since it was a total loss, I was able rebuild anything I wanted with that payment and I rolled all the policy payouts; cars, boat, RV's landscape, personal property, home, outbuildings, etc all into building the one thing (at that time) I could consider an investment; the house. It took me almost 2 years to rebuild and another 2 years on the 'pay-as-you-go' plan to furnish and landscape. However, I now own a 3500 sq.ft. log home that looks like it came out of that TV show; 'Extreme Makeover' including the furnishings. People offer to PAY me to house sit when we go out of town. Ha! It was our plan to rebuild as our 'forever' retirement home. Prop 13 grandfathered my property taxes so I didn't take a big hit on that even though it's a bigger house. It's only been in the past year that I've been back on what I would consider a normal budget. I'm done buying, buying, buying. Everything is brand new from the appliances, roof, driveways, septic, all furnishings and so there should be little need to have to replace anything in the near future.
BTW, I would recommend anyone who insures their home to insure it not for it's appraised value, but have a contractor tell you what it would cost to build that home today. The two are no where near the same amount, I can assure you!! My insurance agent had me do that and I was covered completely and they were my partner and not adversarial in any way.
The home is very energy efficient so utilities are very low for my area.
What are your income needs now and in the future?
Now, $3,000 a month income is very comfortable. Future, same with anything extra to make retiring early worth the effort while I'm young; ski trips, travel, helping my kids and their young families, church and other donations, etc.
What happens if you or your wife die?? Will the survivor have adequate income.
The pension is for both our lifetimes. If taken estate planning measures; family trust for all assets, durable power of atty for medical and financial, wills, living wills, etc. My sons, I have two, are very grounded and very self supportive in their careers. One now lives in New Zealand, has for over 3 years and has permanent residency there. Their immigration laws allow for immediate family to automatically qualify for the same. Mom and Dad, (me!) are immediate family. I suppose if the USA goes completely to heck, that's my safety net; move to NZ.
Consider all of your options for all of your resources. How would the plan change if you waited till FRA (66.x) or 70 to take SS? Would it be better for your DW if you passed at say 75 or 80? Does it make your plan more solid?
Great things to consider. DW says if I pass away, 'Raoole' the pool boy will take care of things. (I mentioned we don't have a pool. She didn't see my point.) But seriously, she would probably move near one of the sons and live in condo-style senior center.
It seems that you already have a decent amount of guaranteed income resources due. Are those resources inadequate, enough, more than enough
I agree, it seems the pension as-is, is decent and very adequate to more-than-enough. That is what makes this decision hard for me; go with the surety of enhancing that COLA enhanced pension with a risk of having all the eggs in one basket and perhaps underfunding my liquidity, but maximizing my monthly income, or stay diversified in case of emergency with the knowledge my risk tolerance to investment is very low and that inflation will erode away that cash reserve as well as dipping into it as it suits my pleasure.
What happens if you get hit with an emergency situation that requires $500k? Would you sell your home?
I'm insured on EVERYTHING. After that devastating fire, I learned the value of having good coverage. I even have a liability umbrella for $1M just in case I inadvertently cause someone else catastrophic loss like that caused to me so that I might have the chance to not loose my home in a lawsuit. (Good reason to put a home in a trust and not as your own personal property BTW. Just ask yourself; how does OJ Simpson live his lifestyle with civil judgement against him that is uncollectable. HINT; all his assets are NOT in his name, they are in a trust fund..)
One final consideration: If I were in your situation... fair amount of guaranteed income and a moderate cash reserve.... I would mitigate any risk that seemed remotely likely that might take my cash reserve.
That's why I'm invested in a guaranteed savings for my 401K/457 plans and not in stocks or other markets.
An example would be flood. I would not want the repair to cost my remaining cash!
I'm well covered by insurance with a company that has proven itself with me to be responsible and accountable.
LTC would be another thing to consider. That could take both income and cash!
When we built our log home, I included an unfinished 900sq ft. 'apartment' in the attic off of a 400 sq. ft. loft. It's all preplumbed and prewired for bath, kitchenette, preframed for doors, etc. For under $5,000 a live-in health care provider can live upstairs while we live downstairs. The downstairs was built all ADA compliant; showers, counters, doorway openings, everything for wheelchair access. (But that loft and loft access to the future apartment living space.)
Our living wills are quite specific on end-of-life decisions based on quality of life expectancy. Neither of us have a desire to exist or drain the resources to the other's detriment. When the time comes, the plug gets pulled. That's not to say we don't realize we may someday need some sort of help if we live long enough, but being unable to do anything else of financial costs, paying for that sort of care shouldn't be impossible. We do have that house as the fall back if one or the other, as a survivor, gets put in the old-folks-home.
Make sure your plan is solid from the risk perspective!!!
Risk is my greatest concern....