Should I retire? Advice and Opinion Wanted

[38Chevy454]

I am in a potential situation that I might retire before my planned date in 2-3 years. I am currently on off-site assignment for work, moved and bought house here. Sold my old house in CA, no family or other ties there beyond my employment. Problem is my off-site assignment may be ending 2 years early. Was hoping to work 2 more years and then retire. My wife also works here and likes living here. She is an RN, so getting a different new job is not concern if she had to move.

My job would have me return to CA. It would only be for shortest time until I could retire and then get out of that high tax and cost of living state. Problem is my wife wants to stay in NM, and for that matter so do I.

I think I could do the early retirement, but not without more concern for long term financial. I am only 50. My wife just turned 61 and could get her SS in 12 months if she wanted, I think about $1250/mo? Need to verify exact amount. I obviously have to wait considerable time for my SS.

One question: If she takes her SS, can I get the spousal benefit? Or do I have to be at least 62 to do that? I could not determine if there is an age requirement for spousal benefit. My SS will be more than hers, so no reversal of spousal benefit advantage.

We have about $400K in after tax investments. About $1M in pre-tax 401k/403b/457 accounts. This year has been very good to increases in accounts But we also have $230K in current mortgage, however it is at 2.875% so not a real burden. I could get about $1500/mo pension right now, and have some subsidized health ins coverage through the pension. Likely that health ins costs will only go up and become a bigger bite in future.

If I paid off the mortgage, I think we could get by without much sacrifice on $6K/month. My current thought is I would have her work up until her SS kicks in, and I could survive away for the year working in CA. So it puts us at a little under $3K income from my pension and her SS, and would tap the after tax money first to supplement. I would probably pay off the mortgage, the peace of mind with paid off house is comforting and worth it to me once not working.

No kids to put through college or living at home. Just wife and myself with dogs. I am very risk tolerant and have almost all of my investments in stock mutual funds now. Mix of large cap, small cap, international and even some sector specific. It is well diversified, but almost all stock market. I am a bit concerned I should maybe be more conservative.

I do old cars for hobby and can actually make some side cash with that if I had more time at home and less time at work I also have very small home-based side business related to car hobby that is mostly tax write-off, but allows some money to be generated, less than $500/month right now and foreseeable future.

I have probably $250K of asset value in old cars and other garage stuff that could generate money in a worse case sell off mode. However there is no intention to use that for living expenses.

Both wife and me want to spend more time going away in our motorhome and seeing more of the country. I could live in the motorhome for the year, or just rent something small. No more house purchases in CA. I want to maintain permanent NM residence. Besides weather and good old car scene, rest of CA sucks for me. No desire to be there any longer than I have to.

So the big question and where I am asking for advice and opinion: Would you retire now? Or wait about 12 months from now and have to live apart. Not sure the extra living expenses from being apart would ever be made back up?

If so, what funding plan would be recommended?

What account investment mix should I consider if I am in a distribution mode rather than putting in mode?

Is a fixed percentage withdrawl (ie 4%) or a fixed amount withdrawl better? I am trying to educate myself by reading here and kind of confused on merits of each method. I lean to the fixed amount, as that seems logical and is how we live with a generally constant amount each month.

Thanks for reading all of this and any advice and opinion. Terry

[REWahoo]

I'll respond to one of your questions and ask another:

No, you cannot get spousal SS benefits prior to age 62.

Have you run your numbers through FIRECalc to see what results you get?

[Running_Man]

$18,000 from pension
$15,000 Wifes Social Security
$52,750 from portfolio (3.75% withdrawl rate)

Total = $85,750 pretax

This would not be including your eventual social security. Have you included medical expenses and is the 6k per month included in your estimate? I think you are in the realm of possibility of making it work as your social security will offset the lack of inflation protection on your pension. You could also look at using the portfolio and delaying your wife's social security to increase her benefit.

[NanoSour]

Hi Terry,

First look is you do have the assets to retire depending on your expenses. Based on my lifestyle, if I were in your shoes, there is no way I would be separated from my wife for a year.

You might want to try some of the retirement calculator out there including ESPlanner Basic to see what your spending could be. Home | ESPlannerBasic Just click on "My Family" and enter as much information as you can.

As for how your funds are set up, it appears to be a little too complicated for my tastes. Simple is how I like to keep it. A 3-fund portfolio is appropriate for most people, Total Market, Total Bond, and Total International should meet 99% of your need and simplify your investments substantially. You can implement with any of several low-cost companies such as Vanguard, Fidelity and Schwab.

[gerntz]

Since you've decided on NM - nice place IMO - I don't see any advantages to you going to CA for a year & then coming back. Seems like the expenses negate the gain - as you state.

Do your employment skills transfer to being a contract worker either from NM or at various other locations where the travel/living expenses would be picked up that contractor?

Can one even get spousal benefits before FRA, 67 for you I think, if one's own benefits are higher?

[38Chevy454]

REWahoo and NanoSour, I do need to do some FIREcalc, ESPlanner and other tools to see what they provide or recommend. Thanks for reminding me of that. Still getting up to speed on all this since it is coming quicker than I had originally planned.

Running Man, my numbers were all gross, or pre tax. I neglected to cover tax bite and need to get more out to net the $6K/mo. For pension, it includes the health ins take-out that would be my co-pay. Your numbers have the pre-tax values needed.

For gerntz, only reason to go to CA for 1 year would be to increase my pension slightly, and have my wife work up to 62. Problem is the cost vs benefit, it may never pay off. I have no idea if my employer would do it next year, but if they offered a voluntary separation with some incentive, I would jump on that. Past couple times it was 1 week pay/year of service. Not sure if HR or anyone has an answer if that is possibility this year.

[sengsational]

The NM thing might just be a done-deal, since the better half wants it that way. The only question is if you can wrangle a deal with your current or other employer, or just throw in the towel. It seems to me that if they're shortening the original NM deal, you might have a bit of leverage to request a more favorable split between actually showing up at the office in CA 5 days a week and some remote thing.

[brewer12345]

A few thoughts:

- As others have suggested, have a look at firecalc results. I would play with several scenarios to see how things look.

- I would not pay off the mortgage. Is this rate fixed or variable?

- I would not go back to CA. If you go live there for a year while working the state of CA will consider you a resident and pursue you for the taxes it believes it is owed. Instead of getting into such difficulties, how about finding a way to generate some income in NM?

- What are you spending $6k a month on again? Have you scrubbed your budget for things that will go away or be reduced once you are retired?

[retiredatfifty]

Just at a quick glance of your initial post, I'd say you are good to go so long as your lifestyle expectations vs retirement income are realistic.

As someone else mentioned ---- I would not do the year of separation in Cali.

I would diversify to 60/40 - but that's a risk-tolerance thing and everyone is different.

Paying off the mortgage was a "peace of mind" decision I personally opted for prior to retiring.

Just my 2 cents.

[38Chevy454]

Finally chance to reply here. Found out my pension will be less due to an error in the calculation I was given, mainly the health ins will be a lot more cost than I was told. Makes it less unfortunately by about $700/mo. I still need to get full values for some of my other estimated numbers, so have not made decision yet. It is beneficial to get past July 2014 for my work, and may try to get through that date before making any changes. Still means being in CA for about 6 months though.

No matter what I have options, and the good part is still have a good job. Just that job may be away from home for a period of time.