ready for ER?

[Like2Hike]

Opinions, please?

I'm a 55-year old single guy considering ER. Here's my situation:

If I retire now, I'll collect a pension of $2000/mo (with a COLA).
In seven years, I'll be eligible for SS, which should be 1000/mo.

I'll have retiree health coverage, but will be paying a share of the premium. For this and other reasons, I expect my present living expenses of $2500/mo will increase in retirement, perhaps to $3000/mo

I'm not averse to occasional temping, but of course cannot count on anything from that, given the state of the economy.

Not counting after-retirement wages, or future social security, this works out to a 4.0% annual rate of savings withdrawal.

Good health, no debts, simple tastes, rent-controlled apartment.

What do people think? Am I "good to go?" Thanks for your opinions!

 

[ziggy29]

Welcome to E-R.org!

First of all, you say you'll have a $2000 COLA'd pension (MUCH congratulations there) and you expect expenses to be $3000. That means a $1000 monthly shortfall. How much of a cushion (in cash and other investments) do you have to draw from for the seven years when you'll be short of current income?

What do you have in savings, taxable investments and tax-deferred accounts?

 

[fritz]

I am new to this site myself, but have a similar situation currently. I am pushing 59 and looking at retiring next year. I've commented on the Hi I'm... threads for Realistic=no Hope!. It's been interesting to say the least (nothing left but the picking of the carcass scenario there).

My congratulations on taking care such good of yourself throughout life - not easy for most.

If I'm reading your post right:

B/4 retirement outgo (expenses) = $2,500.00/mos.
Retirement outgo (expenses) = $3,000.00/mos. (with health care coverage)

Will receive pension income at retirement (55/now) = $2,000.00 mos.
(SS w/b apprx $1,000.00/mos. pulling at age 62)

Your (+$900,000.00) current investments/savings "alone" will cover your anticipated monthly expenses after retirement (55/now) - withdrawing at the commonly given safe percentage rate of 4%

If these figures/assumptions are correct - you're in the catbird seat, financially.

Then, evaluating your situation comes down to - If the country goes to hell, glad to have gotten "some" retirement time under my belt - or If it doesn't - you'll probably have to deal with who you're leaving your money to......

 

[Like2Hike]

Thanks, Ziggy and Fritz.... asset-wise, I have slightly over 400k, about 2/3 of it in retirement accounts.

 

[ziggy29]

Thanks, Ziggy and Fritz.... asset-wise, I have slightly over 400k, about 2/3 of it in retirement accounts.

One more question: How much of the amount in retirement accounts is in an IRA and how much is in a 401K?

I ask because if you're 55 or older you can retire and withdraw from the 401K penalty free, but you can't get at the IRA without penalty until you turn 59.5 years old unless you invoke Rule 72(t).

 

[FinanceDude]

SO, you can get $2000 a month COLA pension right now. Your retirement needs are $3000 a month, leaving $1000 a month. So, you need an extra $12,000 a year, which is 3% of $400,000. It appears you are ok as long as your portion of the health insurance premiums don't skyrocket........

Have you considered a LTC policy? It might be worth it to get a quote from one of the big mutual insurers like NML. Seems like you are in pretty good shape, maybe you can pull the plug.........

 

[fritz]

You're still in the catbird seat

This final rule is an interesting one. It seems that the IRS did not want to really deny anyone access to their retirement money, as long as the money was truly going to be used for retirement. This is the basis for this final IRS withdrawal rule, and it is an early withdrawal that anyone can make without a penalty provided they follow the rules:

• Annuity Distributions - Withdrawals can be made from a traditional IRA that is part of a series of substantially equal withdrawals that will occur over your lifetime. You must use an IRS approved method to calculate these withdrawals. These equal payments must continue for at least 5 years or until age 59 1/2, whichever is later. That means if you start these withdrawals at age 57, they must stay the same until age 62. There is a one-time switch you can make to this process as far as the amount withdrawn is concerned.

 

[KB]

Here's an example of how my Health Insurance premiums have changed in the past 3 years. In 2007, I changed to an HSA so the premiums dropped from whatever they would have been with different coverage. This will be the third year with the same policy so the premium is increasing from general costs and my age. So while it is not a huge increase each year, my health insurance has increased almost 500 per year over the past 3 or so years.

Dec 2006 - 280 monthly, age 54
Dec 2009 - 291 monthly, age 57
Jan 2010 - 321 monthly

 

[Like2Hike]

The retirement $ are mostly in the 401k, but I plan to tap the taxable accounts first anyway, and hopefully not have to go into either the 401k or the IRA for some years to come.

Yes, Long Term Care is the wild card for many of us, isn't it?

 

[fritz]

You could roll your 401k over to an IRA (I personally don't like leaving any funds with a former employer's plan). You could then draw off the IRA (see my post/edit above) if you needed to...