Want to retire -- now, please

[TwinkleToes]

Hello! I've been lurking for a while now and learned a lot. I am a little bit out of my element because I am too old to be considered as an early retiree candidate. However, considering the fact that a few years ago I didn't think we would ever be able to afford to retire at all, and I'm 62 and now considering retiring, that's kind of early...

So here is my story: DH and I have one grown and married daughter. For most of my working life, I was a "secretary" and my husband was a draftsman. I am a saver and DH is not; neither of us are numbers people. When our daughter was born, so I could be home with her, I quit going to work and started my own administrative services company. I set up a retirement plan and my own disability insurance with American Express. DH got laid off after 11 years with a large defense firm. He didn't have benefits for over a year and we got into some credit card debt for the first time in our lives (Cobra is expensive). At some point, when DD started school, one of my clients asked me to work for her so I started working at her office while DD was in school. My job morphed a few times and I ended up making more money and possessing a new skill set. One year, my boss (mom and pop shop) decided she would give everyone an incredible bonus, 75% of our salary. I paid off our debt immediately and put the rest in savings. Then the company established a Vanguard SEP plan, then we were purchased by another European company and we had a Vanguard 401k. (Sorry this is getting long). Somewhere along the way, I started learning about investments and dropped American Express -- my ignorance cost us some money from front-load funds and her commission.

Anyway, fast forward... in 2012 at 64, DH was laid off from retail megacorp after working there 17 years. He got a nice severance package and he has a small pension with the company AND a card for a percentage off purchases from the store for life. Not bad for a guy who never made more than 50k a year. He couldn't find another job, though, so he is now "retired" and 68.

So I now work for a very large defense firm and my salary has been a little over 100k for the last 3 years. I now max out my 401k and put in catch up $$. I also feed the HSA about 4k and put several thousand in a regular savings account. At the beginning of this year, my MIL passed away and DH inherited some cash and 6 annuities (variable deferred). We have sought advice from a couple of FAs. That has been interesting. The most recent one seemed like he was going to be good, but it turned out he was a charlatan. He was not fee only as he advertised. One guy was really good about advising us on all the aspects of retirement, except he wasn't all that great with helping me with investment choices and tax planning. That's what I really need now. We now have over $100k in taxable savings and 400k in IRAs and 80k in the 401k. We still live in our starter home and have refinanced 4 times for cash flow purposes over the years but our interest rate is 3.75 and I always pay some extra principal each month. We still owe 74k. (Almost what it cost to begin with when were at 12.5%).

Anyway, this has gotten really long so if anyone is still awake after this, thanks for being here and letting me join such an interesting and varied group of folks.

 

[gauss]

Best to learn and do it yourself (we can help!) but if you wish a FA, just ask them if they will manage your account to a "Fiduciary Standard" (they need to put your financial interest first) as opposed to the lower "Suitability Standard" (they can put their financial interest first).

If they aren't willing to put the "Fiduciary Standard" into a written contract with you then you should not consider the conversation further.

By referring to the "Fiduciary Standard", you will signal to them that you know what you want and it will quickly disburse the "fee only not but really fee only" type individuals who may be trying to play games with you.

I believe if they are licensed as an "Registered Investment Advisor" (RIA) that a Fiduciary relationship is required, but it is still good to confirm this separately

-gauss

 

[MBAustin]

Welcome TwinkleToes (nice username!!)! If you haven't seen them yet, there are two excellent resources here that might be useful as you decide when to pull the plug:

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

Have you run your numbers through a calculator such as FIREcalc?

The main thing to do to manage your own investments is to decide on an asset allocation you are comfortable with, and then find low-expense investments (usually mutual funds or ETFs) to implement it. Search "asset allocation" here and you'll find lots of threads on the topic.

As I'm sure you've noticed from other threads here, you'll generally get lots of opinions when you pose specific questions, so fire away!

 

[Sunset]

Welcome,

I'm going to talk about more savings that you didn't mention, in case you didn't know about it.

In your savings actions, even if you have a 401K and max it out (which is good) , you can still put money into a separate personal IRA or ROTH , as long as you earn more than the limit for each of you (which is $6,500 if over age 50.)

I'm being plain here, but if you earn more than $13,000 per year, you each can contribute $6,500 to each person's private personal IRA or ROTH

 

[ivinsfan]

So you haven't mentioned outflow which is the number one factor in when you can stop working. Do you track you expenses?

Is your DH drawing SS, I assume you are not because of income limitations before FRA.Do you know the amount of SS your each have coming at 62, FRA and 70.

Knowing how to invest is great, but knowing your expenses is crucial.

 

[TwinkleToes]

Thank you for the warm welcome and advice. Regarding additional savings, I did actually contribute another 500 to The IRAs last year but then decided to divert that to after tax savings instead. I considered a Roth but the FA didn't think we would have to worry too much about taxes in future years. I'm not sure I am convinced about that, though.

I watch our expenses pretty closely and enter detailed categories into Quicken. A good estimate for expenses now is 55-60k annual. I'm not sure why it isn't less, though, because we don't travel or have expensive hobbies. We do have Dish satellite and I would like to cut the cord but am frustrated by my lack of knowledge of electronics. It seems now days one must be an expert in many things. Fortunately I like to learn but it does take time. The other thing we pay for is lawn care. If I were retired, I would like to do the yard myself. My DH hates yard work but I really think if we both pitched in we could do it ourselves and save 1500 a year, although it can get hot in our region and it was hard work when we were younger. So I feel like I have a pretty good grip on expenses.

With the bigger salary that I mentioned in my previous post came a lot of stress and long hours. A recent thread on this forum talked about resentment where one partner is retired and the other is still working. I have to admit that I struggle with that. It wouldn't be so bad but my DH doesn't pitch in like I would if the situation were reversed. When I was home with our daughter, I still worked part time with my business and did all the cooking, cleaning, finances, shopping and yard work. But we have been married for almost 40 years and he is a good guy so you take the good with the bad, right? DH does help some with cleaning now and he can cook two dinners so we are making some progress. Oh, and he takes care of car stuff - that is a big help.

Plus, my mother is 93 and just wrecked her car in a one car accident. So we have been experimenting with me doing the driving for her. So in addition to working 50-60 hours a week, I take my mom to the grocery store and doctor appointments, etc.

Now I have a new boss who is micro managing from a distant location and I am beginning to have all the responsibility and no authority in my job. That isn't a good position to be in.

DH has not started taking his SS yet and neither have I. I have run FireCalc and other tools and even with me starting SS at 63 and DH at 69 beginning January 2017 it shows 100% success. The problem is healthcare. Those of you with retirement pensions and healthcare benefits by your own design and planning or by being in the right job at the right time are really fortunate.

I figure healthcare insurance and costs will be 1000 a month and that is with DH on Medicare and a medical policy and me on either Cobra or ACA. Is that a good guess? My 60k estimate of expenses does include healthcare at that 1000/month guess but it really is just a guess. Oh, by the way, we have no debt other than our mortgage and our cars are old.

It seems most people on this forum have a million or more in investments/savings or they have big pensions and maybe Corp health insurance or Tricare and a military pension, the houses are worth $400-500k, and there are other properties owned.

Are there others like me who have closer to half a million, a tiny pension (~400/mth), and no health insurance breaks and real estate only worth $150k? Is retirement possible for me?






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[pjigar]

Without going into specifics and keeping it high level for now:
1. You have about $500K (net after mortgage payoff) for investments
2. You have 55K annual expense.

Even if you consider SWR of 4%, you need $1,375K investable assets to sustain $55 expense so you are way off base for a retirement. But hold on, you can change that. Consider following:

1. Any other guaranteed monthly incomes current/future (annuity payments, SS)? What dates and amounts? This would put a big dent in you nest egg needs.
2. What expenses you can cut? Focus on big-ticket categories and recurring payment categories (death by thousand cuts). Take a hard look at every category in quicken, talk to DH and agree on category level limit. Do a trial run of living off reduced expenses for couple of years. You may not have a second chance once you quit such job at height of pay grade so you want to be sure when pull the plug.
3. What new expenses will be added once you retire? What expenses will go away when you retire?

I make a lot of money but I try to cut from at least one expense category every year. I tend to focus on categories that does not add much to my quality of life and were fads in the hind sight! My reasoning is very simple: For every $1 I can reduce from my expense I saved $1 more in my investment and my retirement nest egg need reduced by $25 (going by 4% SWR). That is a super deal! Don't get me wrong, we spend A LOT so I am not a saint but we manage to save 50% of my gross earned income.

 

[pjigar]

As I tell my daughter, you don't get rich by making more money. You get rich by saving and investing more money.

 

[pjigar]

By the way, you should maximize contribution to every tax efficient category you are eligible for: Roth IRA, 401K, HSA, etc. regardless of your decision to retire.

 

[ivinsfan]

By the way, you should maximize contribution to every tax efficient category you are eligible for: Roth IRA, 401K, HSA, etc. regardless of your decision to retire.

Not so sure on this one, at 62 the OP would need 3 years of insurance to close the gap to Medicare. Enough tax free income to cash flow those years would put her in a very good position to get large ACA subsidy amounts and drastically lower her monthly spend. With enough tax free money one of them could probably even start one SS payment and do pretty well on the subsidy end. Paying a little more tax upfront could pay off big time.

 

[ivinsfan]

OP if you track with Quicken you should know exactly where the money is going. Dig a little deeper.

Does your expense number include vehicle replacement.Sounds to me like your DH retired from all the hassles in life, not just his job. Why can't he drive your Mom if he's home all day. Have your told him flat out to put on his big boy panties?

 

[TwinkleToes]

Regarding future income streams. We both have SS - DH most recent SS statement shows his current age with ~24000/yr, mine at 62 would be a little less than 18000. So I have been using those amounts in my calculations because at the end of this year I will be 63 and he will be 69 and the actual amount should be more, right? I mentioned annuities and cash inherited this year...we put the cash, totally ping around 85k into savings and then I created a brokerage account wth Vanguard and am in the process of moving the entire amount to that account, except I don't know how to invest it. Since it is before tax money, I was thinking very safe, liquid and it would kind of be bucket one with at least 2-3 years living funds. Any advice on that would be appreciated. the annuities are all qualified except for one and are variable deferred well past the surrender fee. We had to take the RMD at my MILs life expectancy this year because she passed away before she took it. If we kept the as is, they would generate about 4K a year in RMDs at DH rate. Again, advice would be appreciated because I don't know if it would be more advisable to transfer the qualified into one annuity (fixed immediate) and the non qualified now or within 5 years, do the same thing. That would create a mini annuity ladder.

I have created spreadsheets for various scenarios:

One, if my company lets me, I would like to reduce my hours to 32/wk. They would have to hire someone to take my place in management but my current part time guy will be retiring completely and I would take his place. The only thing is, he doesn't get benefits so I will cost them more. It is hard to know if they will pay me the same rate of pay or not. So I am guessing here but it is a pretty good guess, around 75k/yr. A reduction in my hours to 32 (from the current over-than-40) and removing the main responsibility of management would diffuse my feeling of implosion considerably. And if I can retain health insurance, vacation and the 401k matches, it would be great. That is, if my new manager is not horrible. I get along with almost everyone so I am not too worried but you never know. I ran Maximize your SS and it said DH could/should take his SS at 69. So if he did that, we would be back up to 100k and I would maximize the 401k and add 6500 to the HSA and add to the brokerage account.

I would then put off my SS as long as I could do the part time gig. If it doesn't work out that well, if I quit the job altogether anytime after June 2017, I could go on Cobra for 18 months until I turn 65. DH could go on Medicare if that is less expensive. And I would either take SS or use funds from the brokerage account to bridge to 66 for FRA at which time I would get about 24k.

As for DH putting on his big boy pants and helping out...he has helped some during the week, fixing things at mom's house and taking her to run an errand. He even stayed with her at the hospital a couple of times in the past 3 years. But the fact is, she wants me rather than him. She can be trying and my tolerance level is better than his. Our DD helps out some, too, during the week but that is temporary because she is between jobs. My DH is who he is. We have been married almost 40 years and two of the most essential aspects of a partnership are missing; finances and responsibilities. We are friends, though, and share other values and a daughter and a history. He will do things if I ask him but he rarely steps up on his own. By the way, another thing feeding my desire to reduce my stress from work is that I suffered through some health crisis last year and I suspect I will take after my dad in longevity rather than my mother. He died at 76. So the clock is ticking on the book I want to write, the volunteer work I want to do, and the gardening and the healthy cooking, taking care of my mom, maybe grandchildren.

Once again I have been too wordy but I appreciate everyone's suggestions and comments.




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[ivinsfan]

So your comment about COBRA leads me to believe that you are not up to date on ACA health insurance.

IMO you should educate yourself about that before imagining long term employment scenarios in your head.Cobra is usually expensive.
What is your out of pocket costs for insurance now? Research Medicare and see how much it costs. Look at ACA subsidies and how they work, you could take your DH's SS, his small pension, the Ira money and still probably get a nice insurance subsidy. There is no benefit to your DH waiting past 70 so In a little more then one year his SS money will add to your tax burden if you are still working, he is very close to RMD which will add to your taxes too.

Work over these numbers and consider the stress you are under, with a little research you might be able to pull the plug now since it's what you want.
Sorry about the situation with your husband, even though you say he is who he is, I not sure you realize how stressed you sound juggling all these balls in the air alone.

Try to focus on one thing at a time it might be easier.

 

[Golden sunsets]

Twinkle Toes. You do sound as though you carry all of the burden and responsibility within your household and are also handling your Mother's diminishing capacities. It seems as though your combined SS's, and your DH's small pension get you most of the way to meeting your annual expenses. Do your expenses include taxes? You don't mention what your mix of investments is in your IRA/401k? Also you mentioned that your DH is not on Medicare yet. Why not? Do you realize that the only reason that one can delay joining Medicare after one turns 65, is if they are still employed? Being covered by a spouse's health insurance does not count as a reason to avoid signing up for Medicare. Nor does being covered by one's former employer's retiree health plan. Not having claimed SS yet is also not a reason. If one has not claimed SS yet, one is supposed to sign up for Medicare and the quarterly premium invoice is mailed to the recipient for payment or an automated electronic ACH transfer can be arranged. In such a situation, once one does sign up, at 69 in your husband's case, there is a penalty for each year that one delays signing up and that penalty, which is tacked on to your monthly premium, stays with you every year thereafter for life. I believe the penalty is 10% for each year that you did not sign up when you were eligible, so in your DH's case that penalty would be 40%. It is generally not worth it to defer signing up for Medicare once you reach 65 and no longer employed.


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[Corporateburnout]

Based on your numbers above it seems that retirement is doable for you. With a 42K in combined SS and a 5K pension you will need 13K from your portfolio to cover the 60K expenses. That's only a 2.6% WR from your portfolio.

As for investment I would move all investments to Vanguard or Fidelity and invest it in one balanced index fund. I'm sure the folks at these companies would be more than happy to assist you free of charge.

BTW $1000 a month for healthcare is a good estimate in retirement and may be slightly less when you're both on Medicare. Part A is free, parts B, D and a Medigap supplement will cost around $700 a month for both and the coverage is pretty comprehensive with the exception of dental cost.

 

[OneDay]

Twinkle Toes, if you nailed down your expenses and your future income " ss, withdraw rate, etc ", you could always do a trial run and see what the outcome is in say 6/12 months. Also with the income you have, another option would be going crazy on knocking out that mortgage, that would help tremendously. Best wishes for whatever you do.

 

[Ready]

TwinkleToes,

You sound like a very strong person with a good head on your shoulders. I'm sure your husband realizes how lucky he is to have you in his life. Thanks for sharing your story with us and best of luck with your ER plans.

 

[LostArk]

Dear All, your detailed comments are extremely helpful. I've read several introductory posts, and I am impressed how warm audience you have here. Glad to join myself, and welcome, TwinkleToes!

 

[Teacher Terry]

My DH does not do housework so I send him on all the errands, grocery shopping, etc. Perhaps you could have him do these things since they take a lot of time.

 

[Katiek]

Welcome to both Twinkle Toes and Lost Ark!

 

[pb4uski]

+1, the more the merrier!

 

[TwinkleToes]

Ivinsfan, thank you for your comments. Maybe I was doing something wrong but when I researched ACA, it said we didn't qualify for a subsidy and it looked like it would cost me about the same out of pocket as COBRA. I will look at it again and play with some of the numbers using different amounts of taxable income.

Golden sunsets, your comments concern me. DH enrolled in Part A just prior to turning 65, but because he is on my company insurance, it was our understanding he wouldn't be penalized for not signing up for Part B. I sure hope I'm not wrong. I do not believe COBRA counts as company insurance so he would have to enroll in Part B if he isn't covered on my insurance any longer.

My 401k is with Fidelity. The company has institutional funds with a requirement that at least 5% be invested in them. The rest can be invested in anything through a brokerage account. Transaction fees apply on non Fidelity funds so I have 5% invested in a small cap index fund on the 401k institutional side and then on the brokerage side I have 40% in FSTVX total stock and 55 FSITX total bond for a 45/55 equity/bond mix.

The other IRA investments are all in Vanguard. I'm less concerned right now with the IRAs because I'm pretty comfortable with the asset allocation there, but my immediate concern is what to do with the 80k my husband inherited. I opened a brokerage account and would like to move all of that money and much of our savings into that account. But I'm not sure in what to invest. Right now, in savings, it is earning a paltry interest. This is the money, though, that I would like to use as, as pjigar was perhaps suggesting, an aid to bridge the gap tax free till I get to 65. Also, this money plus additional savings are the funds we would use to purchase a car or other irregular large purchases. It will be a secondary savings account to the bank savings. It is essentially our first bucket and would be the cash bucket.

Should some be in a MM or should it all be invested in something like VFSTX or VBISX?

Corporateburnout, thanks for your comments - you and others give me hope!






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[EastWest Gal]

Bogleheads has a simple 3 fund portfolio recommendation that makes sense and keeps costs low. Check out their forum. They have a couple of read only information sheets on investing that are fantastic. We are 60:40 in equities and bonds. If you think you'll need the money in less than 5-10 years than you may want to skew toward bonds and money markets, but MM makes very little as well.

Your hubby situation is near mine except for age. We are indeed friends, married 32 years but have known one another 41 years. DH does very little around the house on his own initiative. He does a lot of music work and fills the house with gorgeous piano music quite a bit.

I have noticed, that as I do more that is visible, he does more. And I'm getting good at saying, "Honey, I need you to do this for me by such and such a time." Most of the time these guys just need direction.

I do most of the garden work but after doing some very visible yard cleanup DH's guilt kicked in and he suddenly started doing a lot more. It's getting better and better.

Last, welcome aboard! This is my favorite Internet forum. I've learned loads here.


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[TwinkleToes]

EastWest Gal,

Thanks for the welcome. You say your DH is a musician ... Mine is as well and a visual artist. He has been working on various pieces for the last two years, all digital art. But he has never printed anything. He is just perpetually learning. He could, I believe, sell his work but he doesn't have enough confidence. One of these days perhaps. He says that is his goal. At any rate, his artistic nature is what probably contributes to his lack of practical responsibility.


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[Golden sunsets]

Twinkle Toes; Good news-I believe I was wrong on the Medicare rules vis a vis your current insurance. Yey! Sorry for the scare. You have enough to deal with.

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