I'm semi-retired, did I do the right thing?

[KevininIowa]

In May of 2011 I retired from teaching after 32 years with a monthly take-home pension of $3581 a month. My wife continues to teach full-time but will receive a take-home pension of approximately $3,000 soon. I am working part-time at a community college bringing home $2,200 a month. My wife plans to work part-time after retirement and should bring home about $1,000 to $1,500 a month.

Our take-home income when working full-time together was $7,800 a month. We are only in our mid-50s. We do have Roth's currently worth $56,000. Retirement 403B's around $200,000, non-retirement stocks worth $200,000 and a home which is paid for and worth around $250,000. Other liquid accounts with around $75,000 available.

Do we need more in retirement savings as we work part-time, or because of our vested pensions are we doing ok? We do have to pay our health insurance premium costs in full as retirees which will start at about $1,200 a month but will continue to escalate over the next 8-9 years until we reach medicare age. We are currently very close to debt free. We have a little left to pay on one car and a kitchen remodel ($25,000), we will be debt free by the time my wife retires.

 

[MichaelB]

In May of 2011 I retired from teaching after 32 years with a monthly take-home pension of $3581 a month. My wife continues to teach full-time but will receive a take-home pension of approximately $3,000 soon. I am working part-time at a community college bringing home $2,200 a month. My wife plans to work part-time after retirement and should bring home about $1,000 to $1,500 a month.

Our take-home income when working full-time together was $7,800 a month. We are only in our mid-50s. We do have Roth's currently worth $56,000. Retirement 403B's around $200,000, non-retirement stocks worth $200,000 and a home which is paid for and worth around $250,000. Other liquid accounts with around $75,000 available.

Do we need more in retirement savings as we work part-time, or because of our vested pensions are we doing ok? We do have to pay our health insurance premium costs in full as retirees which will start at about $1,200 a month but will continue to escalate over the next 8-9 years until we reach medicare age. We are currently very close to debt free. We have a little left to pay on one car and a kitchen remodel ($25,000), we will be debt free by the time my wife retires.

Hello kevininiowa, welcome to the forum. Do you have enough? Well, that depends on how much you plan to spend, not only how much you have. It would also be very helpful to know if your pensions are COLA'd or not.

In the meantime you can try FIRECalc and run your own numbers.

 

[jclarksnakes]

Michael is right. It depends on how much you want to spend in retirement and the big question of whether the pensions include cost of living adjustments. If the answer is yes to the question on COLA for the pensions and you are comfortable spending at your current level you are set. You could even quit working now and use money from your investments as a bridge to make up the difference between pension income and your spending including the cost of health care until SS starts. If you keep working you can continue adding to the investments. You will have to at some point even increase your spending so as to not end up leaving too much money to your heirs.

 

[pb4uski]

+1 It depends. If you can live on ~$6,600 a month then you are all set if your pensions are COLA'd. Do you have SS in addition to you pensions?

What you spend, including health insurance and health care costs, is an important number that you need to determine in assessing your situation.

 

[aida2003]

COLA is very important.
Depending on your family's spending, you're are in great shape on the income side, IMO. Any kids or anyone depending on you?

 

[KevininIowa]

As far as my pension having a COLA, yes it does until 2013 or 2014? The state of Iowa has not replenished the COLA after January 2014 and unless they do it stops for all public employees. My guess is it will be refunded, but with the state of the economy who knows. It amounts to about $400-$500 to each of us (takehome) the first year and then a multiplier is suppose to take effect each year after that. $800-$1,000 2nd, $1,200-$1,500 third and so on.

 

[ziggy29]

You don't mention this anywhere but... how much longer does your wife plan (want) to work full-time before collecting on retirement? I assume you probably have the health insurance beast tackled as two retired teachers, so with the COLA question (the younger you are, the more critical the COLA becomes) you can ask yourself about planned expenses both now and when she retires as well. If income exceeds expenses by a reasonably comfortable margin with both of you retired, it seems possible.

Apart from the COLA, to me the greatest risk here seems to be that if you need the part time jobs to make the retirement math work, you're at the mercy of state budgets -- if budget cuts eliminate some classes and some teaching positions (the part timers and contractors are often the first to go), it could be risky and stressful.

 

[MDJO]

Welcome Kevin and props to you for sharing your info. Agree with others that it depends on how much you want to spend. Sounds like health insurance, and whether or not your pensions are cola'd are the big questions. I'd be worried about potential future cuts in health coverage. But all in all, it looks like you will be okay - there is a lot of security in having those pensions.

 

[KevininIowa]

Followup

Both of us, at this time, will have a COLA if the state continues to fund the COLA. The COLA is a once a year payment in January of approximately after taxes of $400-500 each for my wife and I. It multiples each year. For example, my cola the first year is $400 next year $800, next year $1,200 and so on.

My fingers are crossed that the state will see fit to continue a COLA as it has been in place for 30+ years. This could be a real hardship on some Iowa public retirees who have had the COLA for over 15 years and all of a sudden lose that. Those who retired longer than 15 years ago are on a different mandatory COLA.

Our expenses at this time are approximately $6,000 a month (which includes savings payments to investments/money market accounts/Roth etc of around $2,000 a month). Which could be reduced as we so choose.

We have a guaranteed income of $6,600 a month from pensions when we are both are retired. My wife plans to retire in June of 2013. This DOES NOT take into account any COLA's, nor does it include Social Security when we decide to take that. If we wait until 66 to take Social Security it will be approximately $1,500 each. So after 66 we should have a guaranteed income of around $9,600, with a possibility of a once a year COLA payment (after 10 years retirement) in January of each year of $8,000-$10,000 if still in place by the state.

Health insurance will be a HUGE factor for us, upon my wife's retirement we will pay the entire health premium to our individual school districts of approximately $1,200 a month the first year and with escalating costs until we reach medicare eligibility.

 

[jclarksnakes]

Your thread question was "did I do the right thing" and I think you did. You are faced with the two very big questions. Both questions cannot be answered because they depend on political and legal decisions. The first question concerns health care costs from when you and your DW retire till you are 65. No way to know what will happen with health care or how much it will cost. The second question is whether your pensions will be COLA'd into the future. I think you could retire now if you want and use part of what you have in savings to cover the health care expenses. When one of you turns 62 they could start taking SS. When each of you turn 65 medicare "should" take care of the health care. When the one of you not yet taking SS reaches FRA (66 to 67 depending on when you were born) they could start taking the SS spousal benefit. When they turn 70 they could convert to their own full SS. Using your savings as a bridge from beginning of retirement until SS and start of medicare be careful to not use too much of it. The remainder could be kept in reserve in case the COLA decision does not come out in your favor and you would need that money to make up for buying power lost to inflation. You should be fine unless your pensions lose their COLAs AND inflation goes and stays extremely high. Of course the longer you and/or your wife work and save the better your financial situation and chances of having enough money.