Getting closer to RE (52/58 today)

[24601NoMore]

Hi, everyone.

I’ve been following the forum for a while, but am just now getting around to registering and introducing myself.

I just turned 52 and DW is 58, and we’re looking to RE ASAP after each putting 30+ years into our respective careers (me – software tech sales..DW – Director at F500 company).

We’ve been blessed to have paid off our home and have zero debt. Also no kids to plan expenses for.

Current portfolio assets consist of three ‘buckets’: a cash cushion (50%), a retirement portfolio (44% - Cash, Equities & FI that are mostly funds but also some individual stock) and ~5% in DW’s company stock (RSUs). Combination of 401K, IRAs and taxable investments. No pensions (unfortunately..am surprised by how many people still seem to have these..)

Retirement bucket (the 44%) is also heavy cash at 30%, 22% US stock funds + individual issues, 20% Foreign Stock funds and 25% Bond funds. Equities are mixed over L/M/S and Growth/Value.

DW’s entire team was RIF’d in September, after she worked 30+ years for the company (nice.. thanks, guys!). She will stay on another few months and is deciding to RE or look for another job. At 58 and with some health issues, the RE option is the most likely. I just joined a new company a few months back and am still determining if the gig will work out or not – it’s much different than expected. So, we will either be down to one income (most likely ‘best case’) or maybe even down to NO income – at 52 and 58 respectively.

We have a good handle on our expenses, and I’ve been looking at strategies to minimize our premium cost for “A”CA, presuming I can keep “income” under 400% FPL, which we would definitely do.

I built a pretty detailed Excel spreadsheet that projects out income & expenses to 90+. Income would be interest (CD ladder), dividends (REIT, MLP, FI - likely Muni Bonds), etc. It also determines max ACA premium based on AGI and includes expected out of pocket healthcare, although it might be understated for later years – 70s+. Expenses increase yearly with an assumed inflation of 2%. I haven’t factored in catastrophic things like LT care or “A”CA or SS going away at some point but all else looks pretty solid.

If I’ve done this right, I figure we can get to the point we’re both > 65 and only burn down <25% of the existing cash cushion with the retirement bucket untouched (aside from market fluctuations). That’s because the CDs and dividends will cover a good part of our expenses so we don’t have to pull significantly from savings – although we will have to pull ‘some’ from the cash bucket. Note this assumes I can get >=2.5% 5-year CDs after the Fed raises rates this week.

I’ve worked through the #s till my head spins, and “think” we are beyond fine to RE TODAY if needed. I do plan to work as long as I can and would like to get at least 3 more years, but the new gig is definitely not what I expected. And, I’ve switched jobs often enough that I’m not in any hurry to look for something else. I’m either going to do this, or probably RE to a nice cabin in the woods somewhere.

I know this a lot of info, but would appreciate any opinions on our plan.

Thanks, and I look forward to being an active contributor here as we enter this next (somewhat frightening yet exciting) stage of our lives.

- RS

 

[MBAustin]

Welcome and we hope you will be able to Retire Soon! If you haven't seen them yet, there are two excellent resources here that might help you with your decisions:

http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

and

Early Retirement FAQs - Early Retirement & Financial Independence Community

Also, have you run your numbers through FIREcalc or one of the other planners out there? This would be a validation of your spreadsheet calculations. IMHO, your cash position seems very high.

We look forward to your contributions!

 

[24601NoMore]

Thanks, MBAustin! I appreciate the warm welcome and the info.

I did previously read through both of those links and they were very helpful. Also ran FIRECALC and it told me we have a 100% likelihood of being able to RE.

The cash is intentionally high, and likely to go higher. We are both very conservative by nature, and the market is beginning to look increasingly detached from fundamentals and appears more driven by short-term trading, reactions to the latest "snowstorm in Ecuador" and other craziness. (Eg: Oil goes down and stocks crater? WHY? Oil = energy. Cheaper energy = INCREASED CORPORATE PROFITS. Yet, the market craters when oil dips. Go figure).

Basically, "this ain't our fathers stockmarket" IMHO. (If it WAS, I'd be far more comfortable - but I think the fundamental approach to investing has changed radically in the past 10-15 years).

I'm a big fan of Bernstein and have read most of his book on AA. That aside, I think the last 100 years are not going to be anything like the next 100. Way too much has changed - eg: being able to buy and sell instantly over the 'net, ETFs, etc.

I remember when Bernstein said "don't keep playing the game after you've won" (or something to that effect). We're at that point. I can convert 100% to Cash and live out the rest of my life with zero market risk. I realize we'd be leaving growth on the table and losing purchasing power year by year, but as I don't have any kids to pass an inheritance to, if I leave $1 to my name when I go into the ground, that's fine by me.

Work for both of us is not a good situation right now. Both jobs are cutting years off our lives. Quickly becoming "not worth it".

So, we're at a point of deciding to RE and get healthy / happy or continue beating our heads against the wall (not as attractive an option).

Keeping risk low is the name of the game for us at this point, as I am trying to avoid "sequence of return" risk (ie: the market doing a 2008 or worse - 1930s type crater right as we retire). I can forego some upside and sleep a lot better at night, though I do enjoy researching investments, putting together a good AA/portfolio, etc. It's a bit of a hobby for me, but when working with real money takes on much more than hobby significance..

Thanks again for the reply..looking forward to learning even more from all of you guys.

- RS

 

[24601NoMore]

PS - I'm also thinking of moving a fair amount of $$s into individual Muni Bonds for the yield. Probably 10 year duration or so. I plan to hold to maturity and am just looking to augment income so that I don't have to pull as much from cash. (Basically just looking for 4-5% fed tax free vs 2.25 - 2.5% taxable from a 5-year CD).

 

[Diver]

RetireSoon, since you are looking at ACA tax credits, take note that interest from non-taxable muni funds is added back in to calculate your MAGI for the ACA tax credit calculations.

My DH also has a detailed Excel spreadsheet to play with and track everything, although I do run several online calculators (FIREcalc, Fido RIP and Vanguard Financial Engines) so that we can compare results. I assume most of the folks like you and DH and others on this board with detailed personal Excel spreadsheets probably had technical j*obs (DH is an engineer). I do not understand how to program Excel, but I do like playing with DH's spreadsheet!

 

[24601NoMore]

Thanks, Diver. I did notice that non-taxable Muni divs are added back to MAGI for purposes of ACA premium subsidies, so am planning to keep combined Muni income (probably less than $10K), Divs and Interest < $45K combined. That'll still give us a good ACA premium limit and make it so we don't have to dig "so" much into our savings to fund RE..

Still wrestling with the concept of RE though..DW had a heart attack 2 years ago and I swore at that time that we were both done with all of the stressful corporate BS - yet, here we (still) are..my health is not good in other ways and I'm pretty sure the current gig is taking additional years off my life. I look at the spreadsheet and say "we can probably do this TODAY" but fear of a market meltdown (increasingly likely) and just moving from two W-2s every year to zero W-2s every year is very disconcerting..

PS: Good catch..I do have a tech background. Have been in tech sales pretty much my entire career. But I also have a natural 'knack' for numbers and am pretty good at Excel (including writing VBA code to do some pretty crazy things). So, the model is "very" detailed. Yet, even with a detailed plan that looks completely logical "on paper", it's still a frightening prospect to just pull the cord and go live out the rest of our lives hopefully healthier and definitely happier..

 

[pb4uski]

One question would be how much you have in taxable vs tax-deferred vs tax-free and your "tax torpedo" risk (high taxes once you have started SS and RMDs begin). For some of us, the benefits of ACA premium credits pale in comparison to the taxes that we save by dong Roth conversions between ER (at 56) and when my pensions and our SS start (~66 or 70) but it is very situational depending on the cost of unsubsidized health insurance where you live. In any event, that may be an angle to look into.

.....Still wrestling with the concept of RE though..DW had a heart attack 2 years ago and I swore at that time that we were both done with all of the stressful corporate BS - yet, here we (still) are..my health is not good in other ways and I'm pretty sure the current gig is taking additional years off my life. I look at the spreadsheet and say "we can probably do this TODAY" but fear of a market meltdown (increasingly likely) and just moving from two W-2s every year to zero W-2s every year is very disconcerting......

it's still a frightening prospect to just pull the cord and go live out the rest of our lives hopefully healthier and definitely happier..

Beyond that, it sounds like you are more than all set financially and have won the game, but fear of change keeps you chained to work that you no longer enjoy while your health is slowly declining. It sounds like you are in an analysis paralysis rut... though what you are struggling with is common as change is hard. When I decided we had enough I ran our situation through literally dozens of online retirement calculators using conservative assumptions and they all gave me various versions of a green light and that gave me the confidence to pull the plug and move on.

 

[38Chevy454]

I've said many times before, your decision is an emotional one, not a financial one. You know logically and by virtue of your excel spreadsheet and other calculators that you have the financial aspects under control. What you do not have is the emotional confidence to make the change. I agree it is a significant change and is hard to make that adjustment. You just have to let your logical side prop up the emotional side.