Joining class of 2013... Do Finances stack up?

[SoReady]

Hi all! I have been enjoying this forum for a couple of years now. Having LBYM for years I’m hoping that my joining the retired class of 2013 is a permanent one. Or at least allows me the options to stay retired.

Mega Corp has given me notice and the end of May will be the last days here. It is a great, as I was hoping for this and the package that comes with it. But I would value other opinions on how the financials stack up.
I have everything on a spreadsheet and use FIRECALC, which shows 100% success.

Assests:
Me = 57, DW = 55
After Tax = $350k
Retirement Funds = $1.25M
Pension at 62 (Me) = $42k/yr
Pension at 65 (DW) = $5500/yr
SS (me) at 65 = $20k/yr
SS (DW) at 65 = $14k/yr
House is about $430k with a $50k mortg outstanding (no other loans or debts)
Severance Package gives me pay through Jan ’14, along with HI. After Jan ’14 I can get the HI through COBRA. I am also eligible for Retiree Health Insurance through previous employer at about $1k/month for the two of us. And, of course, changes in HI are in the offing, so who knows which one I’ll pick.
Annual income until Severance ends is $150k and DW is part time and makes ~$15k/yr.

Expenses:
Expenses have mainly been tracked through Fidelity Full View and the last year through Mint.
Essentials = $54k/yr plus an additional $12k/year until Mortg is paid off.
Non Essentials = $27k/yr. (This includes $10k/yr for travel)
Misc – We plan on some immediate renovations to the house that should be about ~$60k in 2013.

My son has graduated college and on his own. My daughter graduates this May and has found gainful employment and I expect her to be on her own too.

My plan is to use the after tax dollars to bridge the expenses until 60 and then tap in to the retirement funds. As I mentioned earlier Firecalc shows 100% success(providing I did it correctly) and my spread sheet assumes inflation at 2.5% until 60 and then 3% after that. It also assumes 5% return. So essentially a 2 – 2.5% real return. The results indicate I will run low on funds at age 99. I'm good with this!

I would love to hear how others feel my success may be given this data. I think my main concern, or item I need to research more on is the strategy to withdrawing the funds in the most efficient manner.

Thanks in advance!

 

[Tyro]

I think your estimates for inflation, particularly after the Fed stops printing money, may be a bit low -- historical average is about 3.25% and many here use 3.5%. Have you played around with FireCalc using other variables for inflation and RoR?

Tyro

 

[SoReady]

Thanks Tyro. I have played with 3.5% in Firecalc and seems to still be OK. I will need to play more with RoR though.

As for the RoR I'm mostly in index funds and hope to emulate the S&P 500. In using the chart here I hope to be able to top 5%.
As for inflation I realize this probably has nowhere to go but up. But for looking at historical numbers as a reference I am using this here.

 

[heeyy_joe]

I think you are golden. Bravo!

 

[jclarksnakes]

Your numbers look pretty good. It might work out better if your DW takes spousal SS benefit at 66 rather than full SS at 65. That way she would get 10K (half of your FRA benefit) instead of the 14K per year from age 66 to age 70. She could then start drawing her own SS which would then be quite a bit larger at around 20K in todays dollars. More importantly than the larger benefit at age 70 it would provide more protection against inflation in your later years.

 

[Tyro]

As for inflation I realize this probably has nowhere to go but up. But for looking at historical numbers as a reference I am using this here.

Not being a wiz at number crunching myself, I've been using Decade Inflation Chart. It's a little crude, but close enough for FireCalc et al purposes.

Tyro

 

[SoReady]

Your numbers look pretty good. It might work out better if your DW takes spousal SS benefit at 66 rather than full SS at 65. That way she would get 10K (half of your FRA benefit) instead of the 14K per year from age 66 to age 70. She could then start drawing her own SS which would then be quite a bit larger at around 20K in todays dollars. More importantly than the larger benefit at age 70 it would provide more protection against inflation in your later years.

Thanks for this. It is another area where a good strategy helps. I will investigate further. By her taking spousal benefits at 66 does that mean I can't take SS until sometime later?

 

[SoReady]

Thanks Tyro. I like this chart and think looking at the numbers by decades is helpful.

 

[jclarksnakes]

Thanks for this. It is another area where a good strategy helps. I will investigate further. By her taking spousal benefits at 66 does that mean I can't take SS until sometime later?

No, you could still start your SS at 65 or 66. Possibly an even better plan would be for you to file and suspend at age 66, DW take spousal benefit at 66 and both of you start drawing bigger SS at age 70. Downside would be less SS from age 66 to age 70. Upside would be more SS with the extra inflation protection that comes with it after age 70. Saving and investing phase of our life was much simpler. Deciding when to take SS and when to take money out of which accounts in retirement is much more complicated.

 

[SoReady]

Thanks-- you got that right! Once I am fully out of the office (May 17th - Yea!) then I will be able to fully dedicate myself to getting the withdrawal plan outlined. Thank you for your suggestions. I appreciate it. Especially as my pension is not CoLA's and SS increases would help.