57 year old celebrating first anniversary

[yakman]

Hello everyone, been reading the forum for awhile , thought it was time to tell my story. It was 1 year today that I walked out of the office never to return after 25 years. Received a sizable severance, rolled over my 401k and lump sum pension payment into an IRA in March and May respectively. That was a scary time with all the depression talk and the market tanking. I actually started to loose sleep. I couldn't go it alone so I hired a financial advisor and had him put 70% into stocks & closed ended equity ETFs and the remaining 30% into bond ETFs and cash. I continued to manage my wifes IRA and Roth and my Roth & after tax account. After that exciting year we ended up with a total of $1.25M. About $1.1M in the IRAs, $40k in both Roths and $110 in after tax accounts.


During the year we lived off my severance and unemployment benefits. Next month I will start taking a distribution from my IRA.( I elected to pay the 10% tax penalty for early withdraw instead of going with 72t option for flexibility reasons) I plan to withdraw $62,000 next year. I understand that is above the safe withdrawal rate of 4% but plan on reducing that when my wife and I both start taking SS at 62. We should receive about $32k per year. Additional income will come from my wife's part time job and the sale of cattle and hay from our small farm. This will total about $5000 in 2010.


I payed off the mortgage with part of the severance. The only debt is a $26k home equity line of credit which currently charges 3.25%. I can pay that off if needed. (currently making more than that from dividends)


Our after tax expenses are $4000 a month. That includes $600 health insurance. Also includes $200 for home maintenance and $250 for travel. It does not include home remodeling.


This first year of retirement has been a learning experience. Here is what I have learned so far:


you need to get one of those pocket calendars ( electronic or paper). People will learn quickly that you are home and have time to help (including your spouse). I had to intentionally carve out time to feel retired. It has been a very busy year. The wife and I are taking a vacation from retirement going to New Smyrna Beach FLA for the month of Jan.


Search out diverse connection points. I missed some of the people and the activity at work. That feeling didn't last long. I joined an investment club made up of people much older than myself. We talk a little about PE and Market forces but mostly they talk about their lives. Bill will start with how he purchased his MG after the War and had it transported to the states, then Noella will reminisce about walking to school down the main street in town when it was only a country lane and it goes on from there. I also started volunteering mentoring young teen agers. Talk about a generation gap. The point here is I'm beginning to feel more enriched now that when working.




Comments are welcome.

 

[Westernskies]

Congrats! Sounds like you have a good handle on your ER; I'd probably do much the same if I was in your shoes (hmmm... what size do you wear? )

Look forward to reading everyone else's take on your situation, and your follow up posts.

 

[Maurice]

Welcome, yakman. It sounds like a nice life you lead.

 

[travelover]

Welcome. Why no 72(t)?

 

[Moemg]

Welcome ! I used to belong to an investment club and really enjoyed it . It's on my to do list for 2010.

 

[yakman]

i looked at the 72t closely but decided against it. It sets your income for 5 years and I wanted the flexibility to adjust my withdraw. I have less than 2 years until I'm 59 1/2. thought it ok to give the government the extra 10% until then. maybe it will help to pay down the deficit.

 

[Raygun99]

Is it possible to take more from the after tax accounts over the next 2 yrs to avoid the 10%?

 

[yakman]

yes using aftertax cash to live on is an option. I may do that but right now I am thinking of a potential real estate investment and may need some cash for that.

thanks

 

[FUEGO]

Congrats on the successful transition to ER, you earned it! Sounds like you are well-capitalized.

So $62000 a year for maybe five years (until you start drawing SS at 62) from your IRA with no 72(t)?? If your financial adviser suggested this, that could be negligence depending on the circumstances.

That's going to work out to roughly $35,000 in 10% penalties over the course of 5 years if you maintain $62,000 withdrawals. You could definitely hire a real accountant to do the math and accounting for your 72(t)'s and break the IRA's up some to structure it the way you want that would still allow more withdrawals. And you can modify it at the end of 5 years.

It's never too late to reconsider a 72(t), and you are at the age where you won't be locked in for more than 5 years.

Maybe it makes sense in your situation, hard to say, particularly if you are going to use the proceeds for a real estate investment. Although you can do those within an IRA (see self-directed IRA I believe).

Please don't take this comment in the wrong way - just trying to help out if saving $35,000 is as easy as going to an accountant. As always, see my disclaimer.

 

[yakman]

thanks for the input-- it is appreciated.. yes i hate to pay the government anymore than i have to. I am approaching my 58th birthday so I am roughly a year and a half away from the 59 1/2 threshold. so the penalties would only be around $9300. your right , still a sizable amount. that could be reduced as well with the health insurance exemption. i could split the ira for 72t distribution and use the other part to withdraw to make up the difference. maybe a combination of 72t, some after tax and a straight ira withdraw as needed may be a wiser choice. i know the current interest rates have not been favorable for the 72t withdraw. I will give it some more thought. i have the name and number for a CPA that i do plan on calling.

thanks

 

[FUEGO]

thanks for the input-- it is appreciated.. yes i hate to pay the government anymore than i have to. I am approaching my 58th birthday so I am roughly a year and a half away from the 59 1/2 threshold. so the penalties would only be around $9300. your right , still a sizable amount. that could be reduced as well with the health insurance exemption. i could split the ira for 72t distribution and use the other part to withdraw to make up the difference. maybe a combination of 72t, some after tax and a straight ira withdraw as needed may be a wiser choice. i know the current interest rates have not been favorable for the 72t withdraw. I will give it some more thought. i have the name and number for a CPA that i do plan on calling.

That's right - I forgot that you only have to wait till 59.5 to take it out tax free. So the penalty isn't as bad as I thought.

 

[friar1610]

The point here is I'm beginning to feel more enriched now that when working.

That says it all. Congratulations and good luck. (I retired at 58 and haven't regretted it for a moment.)

 

[EARLYHOPES]

Congrats on your first year of happiness in early retirement.
Your numbers are very close to ours and I hope to RE in 2011.
Hope I feel as good as you after the first year.

 

[Milton]

I joined an investment club made up of people much older than myself. We talk a little about PE and Market forces but mostly they talk about their lives. Bill will start with how he purchased his MG after the War and had it transported to the states, then Noella will reminisce about walking to school down the main street in town when it was only a country lane and it goes on from there.

That lack of focus would drive some people crazy; but being a 'Type B' it sounds fine to me.

 

[chemist]

A little late now, but wouldn't you have been able to take distributions penalty free from your 401(k) at age 55?

 

[sailwc]

I too am reaching my one year anniversary of ER. I went out with a nice severance, 401k and pension while DW teaches 2nd grade two more years. No real money worries, just adjustment of rat race to doing what I want when I want. I have managed to keep pretty occupied with good projects, however have met most goals I set for myself quickly. I find it most helpful to set weekly goals and break them down to daily goals to keep happy. I also highly recommend book "How to retire happy wild and free" by Zelinski...I refer to it often.

 

[W2R]

I too am reaching my one year anniversary of ER. I went out with a nice severance, 401k and pension while DW teaches 2nd grade two more years. No real money worries, just adjustment of rat race to doing what I want when I want. I have managed to keep pretty occupied with good projects, however have met most goals I set for myself quickly. I find it most helpful to set weekly goals and break them down to daily goals to keep happy. I also highly recommend book "How to retire happy wild and free" by Zelinski...I refer to it often.

Just goes to show you that retirement is a tremendously individual experience. I am so glad that you are having a happy retirement, but the way you found happiness in retirement wouldn't work for me.

Weekly goals? Daily goals? That would drive me NUTS. I might as well be working. Yes, I have things that I plan to do, but they happen when I feel like doing them. I might not work on anything at all for days, and then I might stay up all night working on something when the mood strikes me. Also I am blissfully happy NOT to be continually occupied with good projects. I just do what I want, when I want to do it. I'll bet my approach wouldn't work for you, any more than yours would work for me.

 

[ziggy29]

Weekly goals? Daily goals? That would drive me NUTS. I might as well be working.

And don't forget to have those TPS Reports on my desk by Wednesday afternoon.

 

[yakers]

And don't forget to have those TPS Reports on my desk by Wednesday afternoon.

I'll staple them together for you. Hey, where is my red stapler?

Retired on March 08. First full calendar year of retirement is 2009 so I had to learn a bit, 59 now will begin IRA withdrawals in 2010. Looks like we survived 08 OK. Would have been nice to be working and buying stocks at low prices but the time was well used for travel and other desirable activities.

Yakers is a kayaker, are you with a name of yakman?

 

[sailwc]

Agreed. I'm just much better off mentally if I have things to do. Maybe this comes from 32 years of scheduling and my Franklin Planner.
I don't know about you, but for years I watched people retire from my company only to come back and need the structure and schedule only a full time job provides. I thought this was rediculous. On the other hand, I know of a few people who yearned for the freedom of retirement, left asap and lived seemingly happily ever after. I think I represent the latter group. I do love my life now, the only drawback is an occasional feeling of guilt, born by a society that believes we must slave away till we collapse, and, suspicion I feel from others who seem to think, something must be terribly wrong for someone like me to leave a very good career at 55. So there, I've beared my soul and it feels good!