Retiring this year - I'm very nervous.

[retiringwiz]

Please tell me that we would be fine.

Turning 58 and wife will be 56 (my wife is not working)
Taxable saving: 1.9+M (pretty much all in cash)
IRA/401K: 1.1+M
No pension. No debt. Own home - fully paid.
One kid in college (2nd year) about 25K a year. Figured have to
pay another 50+K in the next 2 years.
One kid in high school - I figured we'll spend 150K on future
college cost. (State Universities, no Ivy league or private school)

Based on past 2 year expenditures.. we spent on average about
75-80K a year. Of course, this will go up since we need to pay
for health insurance, etc.. out of pocket. We are relatively healthy and
have little health expenses (so far). We are pretty thrifty.

 

[Walt34]

The thing that jumps out at me is the large all-cash position. Even a low inflation rate is going to take a big bite out of that in time so at least some needs to be in equities.

If you haven't seen this before here is a list of questions to have answers for before you pull the plug.

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[travelover]

You look good, but I question that much in cash, especially once inflation kicks in again.

 

[pb4uski]

What does FIREcalc say?

FIRECalc: A different kind of retirement calculatorthers

+1 with others... way too much cash. Why?

You should be all set though. ($3.3m less $0.2m for college) x 3% WR would be $93k a year to spend and that is ignoring SS, so it will likely be higher. But... the conservative WRs we refer to here are typically based on 30/70 to 70/30 portfolios... but with some repositioning you should be fine.

You'll need to include federal and state income taxes too.

 

[exnavynuke]

If you don't protect that $1.9M in cash from inflation, then you're likely to run into problems in the future as inflation erodes it.

If you shift to a more "standard" conservative portfolio (50/50, 60/40, etc asset allocation), then you should be able to get a 4% withdrawal rate to supply ~$112k/year ($3m - $200k for school leaves $2.8M * 0.04 = $112k). That should more than cover your current expense rate plus health insurance.

What about SS for you and/or your wife? That could make it even more comfortable (or closer to comfortable if you stay in cash, though I'm still not sure I'd want 2/3rds of my portfolio losing buying power to inflation).

 

[broadway]

You mention no pension.

How about Social Security?

 

[retiringwiz]

What does FIREcalc say?

FIRECalc: A different kind of retirement calculatorthers

+1 with others... way too much cash. Why?

I plugged in 90K expenditure and 3M Portfolio - got 100% with
1.67M lowest and 19+M highest.

Regarding the comments about having way too much cash..
The reason is simply the unique way I trade in
this account. The plan is to put them into Div paying equities
and bonds slowly.. Market is so high now, waiting for a pull back

Regarding SS, my last statement indicated that I can get
about 2.9K at 66.. - I guess my wife can collect 1/2 of mine.

 

[panacea]

It's just as possible you'll miss out on another 10% run-up as it is that we'll see a 10% correction. If I were you I'd dollar cost average $150,000 per month into equities and fixed income over the next 12 months.

 

[retiringwiz]

It's just as possible you'll miss out on another 10% run-up as it is that we'll see a 10% correction. If I were you I'd dollar cost average $150,000 per month into equities and fixed income over the next 12 months.

Yeah.. it is hard to dollar average when the market
is at crazy high. I am very interested in learning various strategies
to put say a pile of cash into the equities/bonds while avoiding
buying too high. I am looking into selling puts against stuffs
I want to buy.. e.g. PFF at $36 or some ETFs collecting $$ while
waiting.. I guess I am going off topic..

So looks like we will be OK. Thanks. I am feeling better.

 

[exnavynuke]

I plugged in 90K expenditure and 3M Portfolio - got 100% with
1.67M lowest and 19+M highest.

Regarding the comments about having way too much cash..
The reason is simply the unique way I trade in
this account. The plan is to put them into Div paying equities
and bonds slowly.. Market is so high now, waiting for a pull back

Regarding SS, my last statement indicated that I can get
about 2.9K at 66.. - I guess my wife can collect 1/2 of mine.

I'm pretty sure Firecalc assumes the entire portfolio is invested (no "cash" option in the "your portfolio" section that I'm aware of how to model), so I'm not sure the calculator works in your situation.

Assuming that's monthly SS $, that should provide a reasonable buffer for you.

 

[Earl E Retyre]

I'm pretty sure Firecalc assumes the entire portfolio is invested (no "cash" option in the "your portfolio" section that I'm aware of how to model), so I'm not sure the calculator works in your situation.

Assuming that's monthly SS $, that should provide a reasonable buffer for you.

I believe Firecalc allows you to enter different portfolio compositions.

Your numbers look pretty good to me.

 

[Sunset]

I plugged in 90K expenditure and 3M Portfolio - got 100% with
1.67M lowest and 19+M highest.

Regarding the comments about having way too much cash..
The reason is simply the unique way I trade in
this account. The plan is to put them into Div paying equities
and bonds slowly.. Market is so high now, waiting for a pull back

Regarding SS, my last statement indicated that I can get
about 2.9K at 66.. - I guess my wife can collect 1/2 of mine.

How long have you been waiting .....

 

[Sunset]

.....

Regarding SS, my last statement indicated that I can get
about 2.9K at 66.. - I guess my wife can collect 1/2 of mine.

That is NOT an accurate number. If you read your statement carefully it considers you will continue to work until age 66.

To get a really close number, use your statement and go to the ss website (it's on the statement) and they have a calculator.
You plug in the numbers on your statement and then put zero's for the years you won't be working and pick what age you want SS.

 

[Ronstar]

Don't be nervous- you'll be fine. I understand your reluctance to dollar cost average your cash into equities, but history has shown that equities outperform cash. I would DCA for a few years until you meet the AA that makes sense for you.

 

[pb4uski]

You might value average in. For example, let's say you decide you want to invest $1.8 million in equities (60% of your current $3 million) and value average in over 3 years. $1,800/38 is $50k a month.

Invest $50k... a month later add whatever is needed to increase the value to $100k... a month after that, add whatever is needed to increase the value to $150k, repeat until you get to 60% equities overall. You'll invest more when prices are relatively low and less when prices are relatively high... buy low of the addage buy low/sell high.

Given a long time frame you will likely need to make some mid-course corrections, but I think you get the idea.

 

[pb4uski]

That is NOT an accurate number. If you read your statement carefully it considers you will continue to work until age 66.

To get a really close number, use your statement and go to the ss website (it's on the statement) and they have a calculator.
You plug in the numbers on your statement and then put zero's for the years you won't be working and pick what age you want SS.

What Sunset says is true but in most cases plugging in those zeros for the remaining years doesn't make a significant difference in your benefit.

 

[retiringwiz]

That is NOT an accurate number. If you read your statement carefully it considers you will continue to work until age 66.

To get a really close number, use your statement and go to the ss website (it's on the statement) and they have a calculator.
You plug in the numbers on your statement and then put zero's for the years you won't be working and pick what age you want SS.

Yes I am aware of it. I tried using the calculator on the SS website and
it complained that I don't have access to this service. I guess it has
something to do about me blocking access to my personal info
in the past.. Anyway, I get about 1.9+K per month at 62, I don't
intend to touch SS until 66 or 70.. So I figure it will be about
3K between me and my spouse when we decide to claim SS.

 

[brucethebroker]

Welcome.

Let's play worst case scenario....

I see $200k in future college costs....surely, if things go south, that is one expense you can cut, adjust, (lots of options today) etc., if ABSOLUTELY necessary, right? Wouldn't that free up enough cash to get you through the rough spot? No house payment, and a huge reduction in spending, IF.....

It would sure make me feel better!

 

[brucethebroker]

And, you can always collect early SS, if needed. Looking good!

 

[24601NoMore]

Same here..

Wow..this is really close to exactly where we are..

I'm 53..wife 59. Also over-weight in cash for several reasons explained below. Expenses also ~$80K/yr and no mortgage. No kids in expensive schools.

Personally, being over-weight in cash as a % of assets helps me sleep better at night. Aside from the obvious (inflation), it's "guaranteed". And while I'm barely keeping even overall with inflation, at least I know it will be there to pull from if the market craters (which eventually it will - with my luck, right when we're in the early years of retirement). And, there are tactics (eg: I-Bonds) to at least keep pace with inflation, although you're obviously limited to how quickly you can move cash into those types of investments on a yearly basis.

Wife on many occasions wants to liquidate all equities and bond funds and go 100% cash. Her thinking is "at least we won't lose anything". I remind her constantly that you don't "lose" until you sell, and that best I can recall, there hasn't been any 10-year period in history where stocks lost money. Her response (which makes sense) is that "at this point in our lives 10 years is a long time" (agreed).

For us, as we get older, being conservative has it's appeal. There's absolutely no way on earth I'd be moving big sums of $$s into the market at this point - the bull is very old, and almost certain to crater at some point "soon" (all IMHO and just gut feel). It may have another several thousand point run ahead, but is it worth another possible 2008 (or even "lesser disaster" 20+% drop?) this close to ER to potentially get another 10% upside? To us it's not, but everyone obviously needs to do what's right for their own comfort level and financial situation..

Now, OVER TIME (5-10 years+), equities are very likely to go up..but look at your time horizon and need for the $$s every year between now and then also, and consider having to pull from a bucket of money that's decreasing in value instead of increasing. To us, that doesn't sound like a great situation to be in, so if we can pull from cash in down years vs pulling from equities, that appears to be a much safer strategy..

 

[24601NoMore]

Also - back to the original question of 'will we be fine'..you mentioned the increase in annual expenses to cover healthcare.

That's the ONE reason I haven't ER'd already. Super stressful job that I desperately want / need to get out of before it kills me, but priced out coverage on the ACA exchange at one point last year, and it was something insane like $18K per year premiums with $6K deductibles..(SERIOUSLY?!!)

Waiting to see what .gov comes up with on the new plan before we decide IF we can ER and if so, when..we could technically afford to, but $20K+/year for healthcare is going to be like a cannonball into the piggy bank every year..and that's the one thing that keeps me working OMY more than anything else..

 

[24601NoMore]

Suggestion to OP..

Since you know you need ~$80K/year, figure out how you're going to cover your expenses (adjusted for inflation) single year going forward. Include all income streams like dividends (presumably you have that cash in CDs or other dividend paying instruments), the amounts you're going to pull from both buckets (IRA/401K and cash), SS, etc. Basically figure out where you're going to get that $80K from every single year, from the point you retire on out.

You'll also need to model out how much each bucket decreases by as you pull from it..say you plan a 4% WR from your IRA/401K..that's $40K on a $1M bucket..you'd need another $40K plus to cover expenses, which you could potentially pull from cash. As long as you model out the "burndown" of each bucket, all should be good.

I did a similar thing and built an Excel sheet that shows expenses (increasing by inflation) yearly, healthcare costs, estimated taxes on our reduced income, etc. Really helpful IMHO to see "OK..I've got to cover $80K..plus healthcare..plus.." and then figure out how you're going to close that gap, on a year by year basis.

Hope that helps..

 

[pb4uski]

.....but priced out coverage on the ACA exchange at one point last year, and its something insane like $18K per year premiums with $6K deductibles.....

That is similar to what I was budgeting when I retired 5 years ago... I considered it part of the price of freedom... and I was willing to pay the price... as it turned out we were able to find coverage that cost us a lot less.

 

[Scout]

Also - back to the original question of 'will we be fine'..you mentioned the increase in annual expenses to cover healthcare.



That's the ONE reason I haven't ER'd already. Super stressful job that I desperately want / need to get out of before it kills me, but priced out coverage on the ACA exchange at one point last year, and it was something insane like $18K per year premiums with $6K deductibles..(SERIOUSLY?!!)



Waiting to see what .gov comes up with on the new plan before we decide IF we can ER and if so, when..we could technically afford to, but $20K+/year for healthcare is going to be like a cannonball into the piggy bank every year..and that's the one thing that keeps me working OMY more than anything else..

My premiums are also in the 18-20k range, but assuming (big assumption) things don't change as much as we anticipate, will your MAGI remain so high after retirement that you will not receive a substantial subsidy. I'm having difficulty predicting what my MAGI will actually be Year to year. I'm in the same camp as many others that I'm working 1-2 more years as things hopefully sort out.

 

[24601NoMore]

My premiums are also in the 18-20k range, but assuming (big assumption) things don't change as much as we anticipate, will your MAGI remain so high after retirement that you will not receive a substantial subsidy.

Wellll...actually, no. I HAD been planning to cover our yearly expenses primarily from cash savings until at least wife could get to Medicare..so that we would keep MAGI < 4X FPL and could get some subsidies to lower the premiums..BUT..no telling what in the heck is going to happen to H/C overall this year yet so am hanging tight until we know if that game can continue to be played or if the rules are going to change on us all..

Healthcare is my "OMY boat anchor" that keeps me toiling away. We could afford the $18-20K yearly but it'd be a heck of a hit every year also..plus, I'm a bit fearful that we may not be able to get coverage with all the big carriers pulling out of many markets..and wife had a cardiac event a few years ago so that may make getting h/c more difficult too depending on what happens to the rules going forward..

So, OMY..OMY..every year. Sigh...if there's one thing that prevents us from ER'ing, that'd be it.