Newbie needing help

[rocks911]

Hey all,

I'm a 51 YO male planning on retiring at 55. I am a fireifghter in Texas and a member of the Texas Municipal Retirement System.

In 4 years when I am looking to leave the job TMRS will pay me $4000 a month for life (and for the life of my wife should I die) after I pull about $240,000 in a lump sum. To the lump sum I have $125,000 currently in deferred comp to add. My wife has in the neighborhood of $95,000 in a 401.

I'm planning on combining the $240,000 and the $125,000 and moving it to a retirement account (USAA maybe?) and drawing on it to supplement my TMRS. My wifes money wont be available until the rules for 401's (not sure what that is) allow it to be drawn on.

A couple of questions:

Is there an online calculator that provides for these types of retirement funds? The FIREcalc asks for dollar amounts which I dont really have an answer for insofar as my TMRS is a monthly benefit and does not really plug into the calculator. So a calculator that assumes a lump sum plus a monthly benefit over time is what I really need to locate to help with planning.

Clearly medical coverage is the huge wild card and I dont even know where to begin asking questions about that.

Can anybody make a recommendation as to a financial adviser? One of the firemen at my department who is ooooooooold (for the fire service anyways) went to one who advised that he continue to work. I thought that was a no-brainer, pay a guy $300 for advice that culminates in "you need to keep working", I could have told him that for $50. My wife was visiting a financial planner years ago also and mostly I think it helped the financial planners bottom line more than my wifes, so is there any recommendation someone could make about a reputable, helpful financial planner?

And lastly, is USAA a good company to move my retirement funds to?

Thanks in advance for any help from an overwelmed fire guy.

 

[RetireBy90]

I would say that USAA is a very reputable company and has several available mutual funds they offer. Many on this site use them, perhaps they may comment. However, I would think before you select a company, you would have to know what type of investments you are looking for. Possibly stock and bond funds, some dividend stocks? International included in the fund, or many would put a % in US and a % in developed (Europe, japan, Canada), and a % in developing markets. Many on this board follow what they call Asset Allocation theory. In a nutshell, you put a% in different types of assets, and adjust once a year, to get your investments back to the desired %. Your Asset Allocation (AA) can be simple or more complicated, but I would suggest you take some time in the next years to become a student of AA and study what mix of investments would meet you needs of safety and return. Then you could look for what funds would meet your needs, be they USaA, fidelity, or Vanguard.

A financial planner can be of great help or can be great harm. Search the board there was a recent and awdetailed discussion on how to select a financial advisor.

 

[BigNick]

Is there an online calculator that provides for these types of retirement funds? The FIREcalc asks for dollar amounts which I dont really have an answer for insofar as my TMRS is a monthly benefit and does not really plug into the calculator. So a calculator that assumes a lump sum plus a monthly benefit over time is what I really need to locate to help with planning.

Have you explored the other tabs of FIRECalc ? You can include your pension, future SS, etc in there. Look at "Other Income/Spending", "Not Retired?", "Spending Models", etc, just below the green banner. There's lots of possibilities.

 

[ronocnikral]

you may also want to research if SS is an option and how GPO and the windfall elimination will affect your wife's (and possibly your) SS benefit.

I am not an advisor type of guy, but if you insist, find a fee only flavor. I would also recommend educating yourself a bit through the recommended reading list found in the FAQ section. I'd start with both Boglehead books. I know it takes time, but it's just your retirement we're talking about.

The good thing is, you have a few years for the dust to settle a bit more on the latest round of healthcare. certainly, bridging the gap to medicare should be a major concern.

welcome!

 

[Midpack]

Have you explored the other tabs of FIRECalc ? You can include your pension, future SS, etc in there. Look at "Other Income/Spending", "Not Retired?", "Spending Models", etc, just below the green banner. There's lots of possibilities.

+1, check out the tabs across the top. FIRECALC will accommodate the details of your situation, it's a great tool. Good luck...

I'm with Vanguard, but my parents and sister are with USAA, they are certainly reputable. I'd be very careful with financial planners. There are good ones of course, but there are at least as many very bad ones including some of the biggest names out there (starts with Ameri and ends with prise just one example). Most folks here invest for themselves, it's not that hard to learn to be an above average investor. Unfortunately, most people want to do much better than average, and end up doing (much) worse than average at great cost.

 

[Aeowyn]

I hold investments with both USAA and Schwab. I invest only in mutual funds. USAA is always a joy to work with and they have several no load/no fee funds to choose from, but Schwab (and other brokerage firms) have far more. I buy what I can from USAA and the rest from Schwab.

 

[rocks911]

Thanks for the replies.

I clicked on the FAQ section and all that was presented was a search box. I performed a search for "Boglehead books" and there were no results. Not sure where I'm supposed to be searching.

As for the Government Pension Offset and Windfall Elimination Provision, I'll look into it. My wife is private sector and I am public sector though both of us have always paid SS.

I would like to find the specific books that ronocnikral mentioned or maybe more like the exact place on this site where the mention of them can be found.

I have used the FIREcalc and found it useful, though being as simplistic as it is I had to think through how to plug in my numbers. In addition to defferred comp money and a lump sum payment which will be one source of retirement income I also had to convert my retirment annuity into a lump amount to enter both sums into the calculator. It's the only way I could figure to do it, butcertainly I will surf this sita for more info as I get the time.

Thanks to all

 

[ronocnikral]

I apologize, I should have added to begin with...

http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html

http://www.amazon.com/Bogleheads-Gu...7365/ref=sr_1_1?ie=UTF8&qid=1328123332&sr=8-1

Amazon.com: The Bogleheads' Guide to Retirement Planning (9780470919019): Taylor Larimore, Mel Lindauer, Richard A. Ferri, Laura F. Dogu, John C. Bogle: Books

I wouldn't buy them, rather check them out from the library.

 

[Midpack]

I have used the FIREcalc and found it useful, though being as simplistic as it is I had to think through how to plug in my numbers. In addition to defferred comp money and a lump sum payment which will be one source of retirement income I also had to convert my retirment annuity into a lump amount to enter both sums into the calculator. It's the only way I could figure to do it, butcertainly I will surf this sita for more info as I get the time.

Thanks to all

I just want to make sure you're seeing the tabs we're talking about.

1. You can enter any lump sums and investments you currently hold on the Start Here tab, just add them all together and of course enter your projected spending and years in retirement.
2. There's no reason you need to convert your annuity to a lump sum, you can enter that as a pension (essentially an annuity is a pension you purchase) in the Other Income/Spending tab. You can enter multiple pensions or annuities and select when themwill start and if they're COLA'd/inflation asjusted.
3. If you have another lump sum coming later that can go on the Portfolio Changes tab.
4. And there are other entries for Soc Sec, Spending Models, Your Portfolio or asset allocation.

I think FIRECALC may fit your needs prett well as a place to start. Good luck...

 

[rocks911]

O.K. gotcha, yes I was missing those tabs. Clearly it's quite comprehensive. So as I work through each tab the calculator takes into account the info provided under each tab....yes?

If that is the case I need to do some more information collecting and thinking. Thanks Midpack for the help, I greatly appreciate it.

 

[Midpack]

O.K. gotcha, yes I was missing those tabs. Clearly it's quite comprehensive. So as I work through each tab the calculator takes into account the info provided under each tab....yes?

If that is the case I need to do some more information collecting and thinking. Thanks Midpack for the help, I greatly appreciate it.

Yes, it will take into account anything you enter on any page. You can hit SUBMIT at any time, and it will provide a result based on what you've entered up to that point. It's a highly regarded calculator that most of us here use...

 

[Koolau]

rocks911, I just wanted to point out a limitation of FIREcalc (which they acknowledge). It sounds like a good percent of your retirement stash will be in tax deferred funds. FIREcalc does not take that into account in terms of "spendable" (after tax) income. Obviously, it can't because it doesn't know YOUR tax bracket at the time you will take the money (Hint: neither do you - exactly!)

My only point is to think of any of your tax deferred money (401(k), IRA, IRA from a pension lump-sum) as being fully taxable at the time you take it. That's very possibly state as well as federal. If you maneuver your tax rate to a very low level, it may not hurt. Since you will receive a taxable pension and (at least partially taxable) SS, tax planning could be problematic. In my case, a fair amount of my stash is in deferred accounts and my tax bracket is currently rather high (lots of reasons). So, realistically, I "discount" (mentally, at least) the dollar value of my deferred accounts by an estimated tax rate. That gives me an idea of what my "spendable" savings are. I might suggest you do a similar calculation and plug the "discounted" values into FIREcalc. Obviously, YMMV.

 

[rocks911]

Koolau,

Right! Hadnt thought about that.

 

[pb4uski]

Also, try OMP at www.i-orp.com

Similar to Firecalc but it differentiates between taxable, tax-deferred and Roth savings.

 

[Midpack]

Also, try OMP at Optimal Retirement Calculator and Retirement Decision Support System

Similar to Firecalc but it differentiates between taxable, tax-deferred and Roth savings.

I like ORP for thinking about tax efficiency, but I am not clear how they deal with probability of success, evidently Monte Carlo. From the ORP site:

On average ORP's ratio of first year's withdrawal divided by first year's assets runs a round 6.5% (I wouldn't be able to sleep!). This on the high end of the range recommended by financial planners and academic papers. ORP's results are expected to be high because its goal is to maximize retirement spending.

 

[Nords]

ORP's results are expected to be high because its goal is to maximize retirement spending.

I thought everybody had that goal...

 

[Koolau]

I thought everybody had that goal...

Perhaps you are correct. Perhaps everyone's goal IS to maximize retirement spending. I just never thought of it that way. My top goals are more along the lines of: Never run out of money (aka never need to go back to w*rk). Have ENOUGH money to spend (for my spending PLAN). Have backups to my backups (belt AND suspenders AND elastic waist band).

I have made many compromises which (almost by definition) "condemn" me to a lower spending level over the reminder of my lifetime. Exhibit 1: I have a relatively low equity position. Exhibit 2: I didn't consider myself FI until I was 51 and didn't retire until 58. Many on this forum, by being willing to take a higher SWR declared themselves FI/RE at a much earlier age - with a similar stash.

During my 6+ years of retirement, I don't recall thinking "How can I spend MORE from my stash?" I do recall thinking "How can I spend less from my stash?" YMMV

 

[pb4uski]

I like ORP for thinking about tax efficiency, but I am not clear how they deal with probability of success, evidently Monte Carlo. From the ORP site:

Agree and I have found that ORP has the highest recommended withdrawal of the various tools that I have used, but I set the estate at age 100 at zero. I wonder if the reason it is highest is because it somehow optimizes tax efficiency?

It is a little higher than the Financial Engines result.

Since my actual living expenses are about 50-60% of the ORP result, I'm .

Out of curiosity, what was the source of the quote in your post that "On average ORP's ratio of first year's withdrawal divided by first year's assets runs a round 6.5% (I wouldn't be able to sleep!). This on the high end of the range recommended by financial planners and academic papers. ORP's results are expected to be high because its goal is to maximize retirement spending."

 

[Midpack]

FWIW

Agree and I have found that ORP has the highest recommended withdrawal of the various tools that I have used, but I set the estate at age 100 at zero. I wonder if the reason it is highest is because it somehow optimizes tax efficiency? I don't know, thought someone here might know. Looking at the output suggests to me they use some constant average rate of return without worrying about probability of success or a less favorable period and/or sequence of returns. That would explain why their withdrawal rates are higher than other calculators. Seems useless but I must be missing something, maybe Monte Carlo is their answer for that.

Out of curiosity, what was the source of the quote in your post that "On average ORP's ratio of first year's withdrawal divided by first year's assets runs a round 6.5% (I wouldn't be able to sleep!). This on the high end of the range recommended by financial planners and academic papers. ORP's results are expected to be high because its goal is to maximize retirement spending." Right off the ORP website in "Questions?" except I added the comment in parents.

Now as I look at the ORP site again, I find this in Model Description. FIRECALC seems more useful IMHO.

Investment Strategies: ORP assumes a fixed, average investment return over the span of the retirement plan. Positive, average returns on investments can be achieved over the years, although there will be yearly fluctuations. Historically, common stocks have returned 10% per year while bonds returned somewhat less [8]. How this average return is achieved is investment strategy.