Hoping to retire later this year. Need your thoughts.

[Stwicky]

Hi everyone. Been looking through lots of the posts and wanted to get opinions on our situation.


Our particulars…


Me: M, age 52

Wife: Age 58

I am still working, wife retired this month.

We are expatriates living in the middle east for the last dozen years. We intend to retire back to the U.S. The sooner the better.

Particulars:
Real estate: None
401K: $900,00
Lump Sum Retirement Payout (rollover to IRA): $1,500,000
Misc IRAs: $200,000
Cash instruments: $1,600,000
Other investments (mutual funds,etc.) $450,000
SS will only be about $1000 per month if taken at 62.


I have used the conventional tools (FIREcalc) and see that we are in a position to FIRE.

But, I have two concerns.

First, we have not lived in the U.S. for many years and I am not sure what things will cost. I have listed what I think our annual expenses will be but could use your help to look it over. We would probably pay cash for a house. We are not extravagant and do not expect to live a plush lifestyle.

I have intentionally tried to estimate my numbers high to be extra conservative. But how much too high are they? Intend to retire to suburbia, not NYC or SF but likely Washington state or Oregon outside of the big cities.

Second, I am not sure how to structure our investments to spin off enough cash to live. You can tell my predicament by the cash we have on hand.

I could use some help in both of these items.


Thanks for taking the time.

 

[broadway]

$4.6 Million for 2 people sounds pretty good to me

That means $120,000 at 3% withdrawal and $160,000 at 4%.

The main concern for early-retirees is the cost of health care insurance.

 

[Stwicky]

Fortunately, I get the option to buy subsidized health insurance for ~$500/month for the two of us.

 

[Stwicky]

$4.6 Million for 2 people sounds pretty good to me

That means $120,000 at 3% withdrawal and $160,000 at 4%.

The main concern for early-retirees is the cost of health care insurance.

This raises a good question. I had thought that the 4% would be calculated without the house, i.e. without my real estate asset when we buy. But should I consider all assets when thinking about withdrawal strategies?

 

[exnavynuke]

I can't see your attachment, not sure if others can.

That said, I'll mention that the cost of housing in suburbs of cities can vary wildly. I know people who tell me the suburbs of Seattle will run you at least $500k for a decent house, half of that will buy you a pretty darn nice here in the suburbs of Atlanta however.

 

[exnavynuke]

This raises a good question. I had thought that the 4% would be calculated without the house, i.e. without my real estate asset when we buy. But should I consider all assets when thinking about withdrawal strategies?

I would never count the value of your home towards your "withdrawal rate" as it isn't expected to be a source of income. Also, as you're in your early 50's, a 3-3.5% withdrawal rate is probably a better planning guideline than 4% as the 4% rule of thumb was based on a 30 year retirement and you (hopefully) will have longer than that so you should probably plan more conservatively.

 

[euro]

I can't see the attachment either - I assume that is where you list your (all important) expense estimate. So, what IS that number? I'm going to bet that for the vast majority of folks here, your assets would be more than sufficient (especially with subsidized healthcare), but different people do have very different spending expectations.

 

[justlikebike]

One of my favourite sites: https://www.numbeo.com/cost-of-living/

 

[Stwicky]

I can't see the attachment either - I assume that is where you list your (all important) expense estimate. So, what IS that number? I'm going to bet that for the vast majority of folks here, your assets would be more than sufficient (especially with subsidized healthcare), but different people do have very different spending expectations.

Yes, I dont know why my inserted spreadsheet doesnt show. I can see it in my original message.

Anyway, the number I have calculated for annual expenditure is $115,000 which includes $30K in taxes. That also includes no mortgage payment as we intend to buy the house for cash.

I have to believe that this is too much for a couple.

 

[exnavynuke]

Yes, I dont know why my inserted spreadsheet doesnt show. I can see it in my original message.

Anyway, the number I have calculated for annual expenditure is $115,000 which includes $30K in taxes. That also includes no mortgage payment as we intend to buy the house for cash.

I have to believe that this is too much for a couple.

As that's a bit over twice the average household income in the US (and most of those households are still paying for their housing), it should provide a quite comfortable lifestyle as long as you don't settle in a very high cost of living area.

Simple math says that to generate that income ($115k) with a 3% withdrawal rate, you need a portfolio of ~$3.8 million.

 

[Whisper66]

$4.6 million should allow you to "squeak by" in retirement. At your age, that puts you in the top 5% by wealth in the US (see chart in link below). So unless your yearly spending habits go well beyond what typical folks spend (say >4% of assets), you should be ok living where you want, doing what you want. Congrats!



2013 data (source = https://assetbuilder.com/knowledge-center/articles/chasing-the-big-dogs )

 

[Ready]

Do you have any thoughts on where in the U.S. you would like to live?

 

[Stwicky]

Do you have any thoughts on where in the U.S. you would like to live?

Considering Vancouver, Washington. We have a daughter in Oregon and we lived there before moving overseas.

Might also consider Tennessee or Texas. Lots of retiree friends there.

 

[REWahoo]

Might also consider ... Texas.

Sorry, we're full.

 

[NgineER]

$30k in taxes is way too high on $85k needed income from investments.
I would recommend Roth rollovers to reduce the RMD impact on the $2,4M in tIRA accounts.
With married filing jointly you should not pay more than about $10k in fed taxes on $95k in income.

 

[Ready]

Considering Vancouver, Washington. We have a daughter in Oregon and we lived there before moving overseas.

Might also consider Tennessee or Texas. Lots of retiree friends there.

These are all fairly low cost of living places to live. I think you will be fine in any of these locations.

 

[Bamaman]

Considering Vancouver, Washington. We have a daughter in Oregon and we lived there before moving overseas.

Might also consider Tennessee or Texas. Lots of retiree friends there.

Middle and East Tennessee are great places to retire. No state income tax and low cost of living also. The lakes are also pretty incredible too.

I especially like the central location--within a day's drive of 50% of the U.S. population.

 

[Hyperborea]

Yes, I dont know why my inserted spreadsheet doesnt show. I can see it in my original message.

It's likely a permissions issue. I'm not sure what the permissions structure of Office 365 is like since I don't use it. If you can set a view only permission to those with the link or something like that then that is the kind of permissions that you would probably need to set. If you play with the permission settings you can test it out by viewing this page (the message thread on this board) in an incognito browser window or in another browser that you aren't logged into Office 365 (so logged into 365 with Firefox and use Chrome to view this thread).

 

[wmc1000]

Even spending $500K for a house you willhave $4.1MM to invest to throw off cash for annual living expenses. A low 2.5%WR will put you at $102,500 which should be more than enough to pay for everything including taxes.

 

[DrRoy]

Considering Vancouver, Washington. We have a daughter in Oregon and we lived there before moving overseas.

Might also consider Tennessee or Texas. Lots of retiree friends there.

Vancouver has very expensive housing/real estate.

 

[pb4uski]

.....
401K: $900,00
Lump Sum Retirement Payout (rollover to IRA): $1,500,000
Misc IRAs: $200,000
Cash instruments: $1,600,000
Other investments (mutual funds,etc.) $450,000
SS will only be about $1000 per month if taken at 62.....

You are all set. You have $4.65 million.. let's say you spend $650k on a home so you have $4 million... $115k/$4,000k = 2.9%... a very reasonable WR for a 52 year old.

As others have said $30k for taxes is way too much and $115k is a lot of spending. You can plug your retirement income numbers into http://www.tax-rates.org/income-tax-calculator/?action=preload&ref=embed_refer_taxbrackets#undefined to get an idea of what you would pay in taxes... don't forget state taxes too.

 

[Walt34]

Sorry, we're full.

Well, he does try to discourage people from moving to Texas.

 

[planman]

I"m in a similar position 2+ million liquid another 2MM in real estate. What are your investment skills. You can have 20 MM but as the saying goes a fool and his money are soon parted. I made most of my money trading my own account for last 30 years but I have watched other with far more than either of us crash and burn.

 

[kimcdougc]

Vancouver, Wa has reasonable home prices imo.

 

[ready53]

I noticed that many are calculating an income stream based on a 3% or 4% withdrawal on $4.6M. I believe $2.6M of that will be in retirement accounts (401K, Rollover IRA, other IRAs) and won't be accessible for several years (until OP turns 59 1/2) without penalty.