Sounds like plan, Jan. (Sorry, I couldn't resist.
)
So you're working through a retirement cash flow spreadsheet, with income from your IRA account being a relatively small part of the puzzle. Social security and a 31-year employee's pension are a big part of it.
Beginning next June, you plan to live off several months of unemployment checks and your severance pay. That's Stage One.
Stage 2 is when you stop drawing on the Stage One funds and you begin drawing a pension
Stage 3: taking your SS payments beginning at 62.
Stage 4 starts in 2018, when your house is paid off and your monthly expenses drop.
Stage 5 (which you didn't mention) is when you turn 70-1/2 and must start taking minimum withdrawals from your IRA account.
All these income changes while keeping your spending relatively level in real terms, I assume. A piece of cake, right?
You might want to search for threads commenting on the many internet retirement calculators and plug your numbers into several of them. The very fine Firecalc program is referenced often here, but it is most helpful to folks who RE and must live off their savings and investments for many years before a pension or SS kick in.
It's been a while, but one tool I have used to prepare several different retirement income scenarios is this one:
Forecaster - Retirement And Estate Planning
I like it because it is sophisticated enough to take COLA adjustments, taxes, inflation and other important variables into account. But I especially liked that the calculated cash flows from each income source (or investment withdrawal) are individually presented. That helped me better understand how the numbers change over time and "stack" on one another. Bonus: that level of detail made it relatively easy for me to transfer numbers to my own spreadsheet.
Whatever tools or calculations you use, keep at it. I would think you want to be very detailed calculating the month-by-month cash flows and bank balances for the critical first few years, until you reach Stage 3.
Three critical "what-if's" you'll want to test:
- Your starting balance in an emergency fund, bank accounts and other liquid investments. You didn't mention this other than to say you are saving your overtime.
- Timing the start of the pension payments, especially if they are not COLA'd. If you start the pension before you fully spend your severance pay, for example, you could invest the remaining severance pay as a source of non-IRA funds available to cover inflation's bite on your pension in later years.
- Confirming that you want to start SS at 62
Planning for the "what will I do all day?" part of retiring will probably seem easier once you have your own version of a FI plan that you are ready to launch with confidence.
Jan
