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Understanding correctly?
Old 01-25-2017, 01:18 PM   #1
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Understanding correctly?

My initial thoughts and calculations did not take into account my husband’s pension as much as I think it should. We have budgeted expenses of $65-75K depending on travel. My SS estimates $25K at 63. He will be eligible for a university pension of $40K at 61 with a COLA. HE is also eligible for insurance to carry until 65. There is a cost, but it is low. We have $600K in investments and hope to have $1 mil by the time I retire in 2023. I will be 56 in 2023 and plan to retire. He will continue to work until 61 or 62 in 2024 or 2025.


I am using a 4% growth and 3% deduction from investments for budgeting purposes. (does that seem reasonable?) If I read all of the feedback on posts correctly, we only need the difference between budgeted expenses less his pension after his retirement. This is much less than I was thinking when you factor in SS when I turn 63. Not that it would lower our savings rate, but might help my transition to part time before 2023.


Is my understanding correct?

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Old 01-25-2017, 01:22 PM   #2
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Pretty much, your nest egg needs to cover what any other fixed income does not cover. Whether to use 2, 3, or 4% withdrawal rate is a personal decision and the lower you go the more conservative you're being, but 3% is likely plenty conservative if retiring around 60 imo.
Looks to me like ya'll are in really good shape with that much of a pension plus SS (which between them will cover all or most of your expenses).
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Old 01-25-2017, 01:43 PM   #3
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Quote:
Originally Posted by ecowtent View Post
My initial thoughts and calculations did not take into account my husband’s pension as much as I think it should. We have budgeted expenses of $65-75K depending on travel. My SS estimates $25K at 63. He will be eligible for a university pension of $40K at 61 with a COLA. HE is also eligible for insurance to carry until 65. There is a cost, but it is low. We have $600K in investments and hope to have $1 mil by the time I retire in 2023. I will be 56 in 2023 and plan to retire. He will continue to work until 61 or 62 in 2024 or 2025.


I am using a 4% growth and 3% deduction from investments for budgeting purposes. (does that seem reasonable?) If I read all of the feedback on posts correctly, we only need the difference between budgeted expenses less his pension after his retirement. This is much less than I was thinking when you factor in SS when I turn 63. Not that it would lower our savings rate, but might help my transition to part time before 2023.


Is my understanding correct?

Yes, with a caveat. Your portfolio will also need to fund non-budgeted expenses, which we all incur. A new roof, significant out of pocket health care for example.

When you say "4% growth and 3% deduction from investments" do you mean 3% portfolio withdrawal to fund expenses?
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Old 01-25-2017, 02:20 PM   #4
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Yes exactly. Our withdrawal rate would be 3%.
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Old 01-25-2017, 02:36 PM   #5
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Looks like you are in great shape. Will your husband get SS eventually?


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Old 01-25-2017, 03:00 PM   #6
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A simple way to look at it is that you will need $35k between when your DH retires at 61 ($75k spending less $40k pension) and when your SS starts (so for 7 years) and $10k a year after you start SS.

The $10k a year would be funded by $285k at a conservative 3.5% WR and the earlier years would need $245k of funding ($35k a year * 7 years) so at the time you retire $530k would be minimal funding... so you are on a good path.
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Old 01-25-2017, 03:55 PM   #7
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I don't think my DH will be eligible for SS since he has a state pension.


Thank you very much! I run the numbers through firecalc and others, but just wanted to be sure.
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Old 01-25-2017, 04:26 PM   #8
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It hardly needs to be said that you should look into this:

Quote:
Originally Posted by ecowtent View Post
I don't think my DH will be eligible for SS since he has a state pension.

And will you get his pension, or a portion of it, if he predeceases you?

.
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Old 01-25-2017, 06:15 PM   #9
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Quote:
Originally Posted by ecowtent View Post
I don't think my DH will be eligible for SS since he has a state pension.


Thank you very much! I run the numbers through firecalc and others, but just wanted to be sure.
If he ever worked where he paid any FICA look into the possibility of some SS. Also I assume that your husband's pension will be joint life or has some survivor benefit.
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Old 01-25-2017, 08:33 PM   #10
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Originally Posted by ecowtent View Post
I don't think my DH will be eligible for SS since he has a state pension.
It is not getting a state pension that is the problem. It is getting a pension from a job in which he did not contribute to social security. If he contributes to social security in his state employment, then he will get a social security retirement benefit. In my state, Connecticut, state employees contribute to social security, although the public school teachers do not. As Amethyst says, look into it.
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Old 01-25-2017, 10:14 PM   #11
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If he didnt contribute to SS at university, but did other work along the way at sometime he should get something. I worked minimum wage part time jobs in HS and college, along with a few summers in my 20s. Even after WEP whacking it, I will get over a $100 a month when I turn 62. Still running detailed analysis on whether I should hold off until 70 and collect.
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Old 01-26-2017, 04:50 AM   #12
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They need to be familiar with the terms. For example, my pension requires a 10% reduction to provide a 55% survivor benefit.

Quote:
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Also I assume that your husband's pension will be joint life or has some survivor benefit.
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Old 01-26-2017, 02:50 PM   #13
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Actually he worked and paid SS for a about half of his work time. He is a professor now and will have a state pension- Illinois which is riskier than some-but university pension isn't the same as the teachers pension. We will definitely look into survivors benefits and if SS applies.
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Old 01-26-2017, 02:56 PM   #14
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Ecowtent, he will get something then. Maybe more than you think. A friend of mine also retired with a non SS pension. He worked about 20 years in private world and even with WEP knockdown he netted over $1000 at 62. The more years he worked in SS the less penal the penalty. Especially if you get over 20 years I think.
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Old 01-26-2017, 05:15 PM   #15
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The key for SS is that you have to make what is considered substantial earnings for each year to get the most benefit. YOu actually can use a SS calculator especially designed to calculate the WEP based on your own record and it shows what substantial earning are for each year. I printed out my earnings for every year from the SS website and entered them and then it did the calculations. If you have at least 20 years of substantial earnings you get more $ then just having earning for 20 years.
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Old 01-31-2017, 06:43 AM   #16
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Ecowtent.....something that bothers me is that you "hope" that the $600k in investments grows to $1 million in just 6 years. I think this is very "optimistic" especially with equities being at all time highs. What is the current asset allocation of the $600k?

What is the back up plan if in 2023.....the $600k grows to only $750k......or remains at $600k ..... or becomes $400k? I think the only way you turn the $600k to $1 million in six years ( an increase of 67%) is if all or most of it is invested in equities and we do not experience a major correction along the way.

One positive is that you guys seem to have the healthcare angle covered before Medicare kicks in at 65. Good luck.
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Old 01-31-2017, 07:29 AM   #17
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Originally Posted by ecowtent View Post
My SS estimates $25K at 63.


Is my understanding correct?

I may be completely off base.... but are you sure of $25k at 63 years old for your SS? Just seems high for 63 to me. But then I'm not the highest of earners and don't have 35 years credit.
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Old 01-31-2017, 11:16 AM   #18
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Originally Posted by ecowtent View Post
I don't think my DH will be eligible for SS since he has a state pension.
.
As noted, this is not something you should assume or not.

In all things regarding finance in retirement, MAKE SURE about everything and that you fully understand it forward and backwards!
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Old 02-01-2017, 11:40 AM   #19
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MRloco- the majority of the increase between 600K and 1 mil is funded by investment and not by increase in value. We are maxing out 401K and investing in Vanguard.


We are currently allocated 68% stocks/21%bonds/11% cash and other. I am still working my head around what allocation would be best given our desire to retire and the accountant in me wishing to be conservative.


bingybear- my SS statement has estimated 1890 per month at 62. I estimated, based on the SS site, that I would earn $25k at 63. I am a high earner and have been for a while. I will have 35 years when I retire or at least work part-time in a few years. I don't know how that will be adjusted when I am no longer working in my late 50's. Any advice on how to calculate is much appreciated.


We are actually fairly recent at thinking about retiring and looking at our options. Life changes a lot when you have an incurable illness invade your life. Now I want to be prepared and hopeful that if I work it out correctly, then I can enjoy my retirement and MAYBE just maybe cancer wont take all of that away. I appreciate all the pointers I can get.
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Old 02-01-2017, 01:59 PM   #20
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Originally Posted by ecowtent View Post
my SS statement has estimated 1890 per month at 62. I estimated, based on the SS site, that I would earn $25k at 63. I am a high earner and have been for a while. I will have 35 years when I retire or at least work part-time in a few years. I don't know how that will be adjusted when I am no longer working in my late 50's. Any advice on how to calculate is much appreciated.
The statement assumes you work all they way up to 62 at your present high earnings. So losing those 7 years of highest contributions will put a dent in your projected income. One of the calculators on their site allows you to enter your year of retirement (55) and then it will assume you want to begin collecting at 62, there's no way that I can see to tell it you want to wait till 63.
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