OMY passed, Ready to retire!!!

[Born2Fish]

Update from several months ago.

I have relocated to the NC coast with a new job for 6 months but can't seem to rid myself of the "Retire Now" thoughts.

Away from work I have been living a much more relaxed life, spending time at the beach, fishing, running/walking in our new neighborhood. Life has been very good when I am home. Until recently.

The workload has increased over the past 3 months and I am spending more time working late days and now weekend assignments and occasional travel.

Over the past few weeks I find myself waking up after 4 hrs sleep trying to solve the problems I will be facing the next morning. This brings back some unpleasant memories from my previous job.

I think I can retire NOW, and look for part time consulting work as I enjoy a break from full time work.

I am ~61 1/2, DW 56.

$560k pre-tax with AA 55/40/5
$19k HSA
$50k post tax.
$7400/yr pension.

$18k mortgage (incl Insurance, taxes), 29 yrs remaining, 3.875%. I can accelerate the payments but am not in a hurry to pay this off given the rate.

Total annual expenses incl mortgage, income taxes: $55k

ACA for me and DW. We are in good health and aerobically very fit (run/walk/hike).
** $60/month premium for a plan that has reasonable copays for routine visits, $6k deductible, $16300 max OOP. Limited network.
** $0/month premium for HD plan, $13800 deductible, 13800 max OOP. Broad network. (I believe this plan will allow me to max out the HSA using 401k withdrawals, reducing my taxable income).

I plan to take SS at 65, ~ 30k/yr. DW at 65, ~ $14k/yr.

I am flexible on the SS dates. If the Bull runs a few more years then I will push out the date.

I have ran Firecalc using figures above and have played around with scenarios to see if I could handle additional unexpected expenses and am at 100% success.

DW survivor additional funds. I have a term life policy until age 65 and plan to start a new 500k term policy to cover from age 65 to 75. I believe DW would be ok without it but it seems pretty reasonably priced.

I know that my figures look very low compared to most that post here but I have a good handle on expenses, we are frugal, and willing to be flexible with spending levels as needed.

Thoughts?

 

[njhowie]

I do think that your numbers are a bit low, but since there are unknowns going forward, everything could be just fine...you just do not have as much flexibility as others should things go against you in the future.

You are clearly placing heavy reliance on SS to meet your annual $55k in expenses. I would double check your figures to be very sure they are correct and have a Plan B in place if things do not work out and you find the retirement savings dwindling faster than you anticipated.

I have a term life policy until age 65 and plan to start a new 500k term policy to cover from age 65 to 75. I believe DW would be ok without it but it seems pretty reasonably priced.

Instead of waiting for your current policy to terminate at 65 and getting a new policy then, you might want to look into getting a new 10 or 15 year policy now.

 

[Golden sunsets]

I would be a bit nervous on the health care premiums estimated at either $0 or $60 per month, lasting in this unknown healthcare market future. Also, the OOP maximums could change your expenses pretty dramatically if you or your DW's health changed before you are both on Medicare, and even then you'll need a supplemental policy.

I'd at least pay off the mortgage before retiring. 3.875% is higher than funds can earn at present in a savings account or CD, so your money would earn a guaranteed 3.875% vs current rates.

If it were me I'd try to stick it out for OMY with a definite retirement date. During that year I would shore up your finances with one last big push at stashing cash. Knowing you are a short timer should help buffer your spirits while you countdown.

 

[ckelly78z]

At 55 years old, I have many of the same/similar figures as you do projected to when I will be 65 years old (my pension will be about double yours, but SS will be less). If you are frugal, and living in a LCOL area, with no debt, you will be fine.

One thought (for your own piece of mind) might be to pay off the mortgage to save paying years of un-necessary interest, but retaining the $$ in investments will also pay off.

 

[Born2Fish]

I do think that your numbers are a bit low, but since there are unknowns going forward, everything could be just fine...you just do not have as much flexibility as others should things go against you in the future.

You are clearly placing heavy reliance on SS to meet your annual $55k in expenses. I would double check your figures to be very sure they are correct and have a Plan B in place if things do not work out and you find the retirement savings dwindling faster than you anticipated.



Instead of waiting for your current policy to terminate at 65 and getting a new policy then, you might want to look into getting a new 10 or 15 year policy now.

Good idea - I will check on this.

 

[Born2Fish]

I would be a bit nervous on the health care premiums estimated at either $0 or $60 per month, lasting in this unknown healthcare market future. Also, the OOP maximums could change your expenses pretty dramatically if you or your DW's health changed before you are both on Medicare, and even then you'll need a supplemental policy.

I'd at least pay off the mortgage before retiring. 3.875% is higher than funds can earn at present in a savings account or CD, so your money would earn a guaranteed 3.875% vs current rates.

If it were me I'd try to stick it out for OMY with a definite retirement date. During that year I would shore up your finances with one last big push at stashing cash. Knowing you are a short timer should help buffer your spirits while you countdown.

I added $13k/year spending in Firecalc to cover healthcare expenses until we both reach 65 and Firecalc showed 100% success. (Actual plan will be to add enough to HSA each year to cover 1.5 years of max deductible amount.)

In order to live at the coast I gave up a high paying gig. There is not really a lot of saving opportunity now but I am doing what I can.

I am going to look for contract/consulting opportunities.

 

[Born2Fish]

At 55 years old, I have many of the same/similar figures as you do projected to when I will be 65 years old (my pension will be about double yours, but SS will be less). If you are frugal, and living in a LCOL area, with no debt, you will be fine.

One thought (for your own piece of mind) might be to pay off the mortgage to save paying years of un-necessary interest, but retaining the $$ in investments will also pay off.

I feel pretty good about the numbers. It all comes down to time and money. Men in my family tree did not live long lives.

I am in a LCOL area and have a good handle on expenses. We are frugal!

No debt besides mortgage. I have been paying $500/month extra while working. If I find PT work then I will continue to pay extra.

Firecalc always shows better final results stretching out the mortgage and I would have to pull extra cash from pre-tax accounts after retirement to pay expenses with a much higher tax hit than the 3.85% mortgage.

 

[24601NoMore]

Any idea how much annual income you could generate via the part-time consulting work?

Running some quick numbers, you'd most likely need to bring in $26,250 after-tax from the PT work to cover expenses at a 3.5% SWR. That's of course only until you can start to pull SS.

Assuming a 3.5% WR, that'd get you $21,350 from the $610K portfolio. Then, you need to cover the gap from $21,350 to $47,600 ($55K expenses, less the $7,400 pension), which is where the $26,250 comes in.

Of course, with the market at all time highs, I wouldn't personally be comfortable that the current portfolio value is something that won't experience market-driven drawdowns over the next few years. For that reason, I'd add some buffer to the numbers above for sure..

 

[Born2Fish]

Any idea how much annual income you could generate via the part-time consulting work?

Running some quick numbers, you'd most likely need to bring in $26,250 after-tax from the PT work to cover expenses at a 3.5% SWR. That's of course only until you can start to pull SS.

Assuming a 3.5% WR, that'd get you $21,350 from the $610K portfolio. Then, you need to cover the gap from $21,350 to $47,600 ($55K expenses, less the $7,400 pension), which is where the $26,250 comes in.

Of course, with the market at all time highs, I wouldn't personally be comfortable that the current portfolio value is something that won't experience market-driven drawdowns over the next few years. For that reason, I'd add some buffer to the numbers above for sure..

I’d like to earn around 40-50k if possible.

I am hoping that we are just in a busy spell and things will settle down.

DW thinks maybe some of this may just be the stress of transitioning into a new job in a new home in a new town and reestablishing my new work role with company and customers. I have been in more senior roles for the past 15 years and part of me misses it.

She may have something there.

 

[cyber888]

18,000 mortgage ? why not pay it off ?

 

[CaliKid]

18,000 mortgage ? why not pay it off ?

I think they mean $18k per year.

 

[cyber888]

I think they mean $18k per year.

ok I see. So, about $1,500 a month

 

[atmsmshr]

Back of the envelop calling the game at 62

If work causes undue stress, your projected expenses are correct, and life expectancy is believed shorter than average - then retire, you have enough. However, consider your wife’s income in the event of your passing.

· Setting aside a fund to bridge until SS payouts.

You would have to cover ages 63 and 64 until collecting 30k/month. Set aside $60k

Your wife has to cover ages 57-64 until colleting 14k/month. (But spousal FRA benefit at 67 is 15k/month) Set aside 14K x 8 years is $112k.

Total bridge to set aside for SS is $172k.

• Using the 4% rule of thumb for remaining portfolio.

You have 4% x ($580k IRA + $50k brokerage - $172k bridge) = 4% of ($468k) = $18,320 / yr inflation adjusted spending. Realistictly, you need to set aside an emergency fund of some about. Arbitrarily select $68k for emergency fund and you have 4% of $400k or $16,000 / yr inflation adjusted spending.

· Pension swag.

Has pension started? If not, subtract annual pension in calculating 4% rule.

If pension is non-cola, swag real annual as $6000 / yr for simplification.

· Sustainable income considering the assumptions in 4% rule and no cuts to Social Security.

$30k your SS + $14k DW SS + $16k portfolio support + $6k pension = $66,000 / yr maximum.

· Stress tests

Does your pension have joint survivorship?

If your wife collects SS before her FRA can she access your full SS survivor benefit assuming you shuffle off the mortal coil when term life expires? (I think not)

If no, her income might be $25k SS + $16k portfolio = $41,000 / yr maximum.

In your case, the term life may be a good hedge for your wife, but the premiums will become unbearable with age.

Consider evaluating a scenario that postpones your collection of SS until age 70 versus premiums spent on term life.

· Odds and ends

Carrying a low interest mortgage could make sense in some cases. Mine is 3.25%.

Your AA looks satisfactory for someone whose stable income may not cover essential expenses. Don’t be like some pension funds and try stretching for yields – look how that has fared.

atom

 

[ivinsfan]

Random thoughts, as your spouse is younger is she working at all?

If not and you aren't planning to do a lot of traveling can she pick up even a part time job for cash flow reasons? Something seasonal and or flexible. You are rightfully concerned she is protected as the younger spouse, it seems reasonable that she could log some hours working to reduce your stress and let you actually retire from full time work.

 

[volfan]

If work causes undue stress, your projected expenses are correct, and life expectancy is believed shorter than average - then retire, you have enough. However, consider your wife’s income in the event of your passing.

· Setting aside a fund to bridge until SS payouts.

You would have to cover ages 63 and 64 until collecting 30k/month. Set aside $60k

Your wife has to cover ages 57-64 until colleting 14k/month. (But spousal FRA benefit at 67 is 15k/month) Set aside 14K x 8 years is $112k.

Total bridge to set aside for SS is $172k.

• Using the 4% rule of thumb for remaining portfolio.

You have 4% x ($580k IRA + $50k brokerage - $172k bridge) = 4% of ($468k) = $18,320 / yr inflation adjusted spending. Realistictly, you need to set aside an emergency fund of some about. Arbitrarily select $68k for emergency fund and you have 4% of $400k or $16,000 / yr inflation adjusted spending.

· Pension swag.

Has pension started? If not, subtract annual pension in calculating 4% rule.

If pension is non-cola, swag real annual as $6000 / yr for simplification.

· Sustainable income considering the assumptions in 4% rule and no cuts to Social Security.

$30k your SS + $14k DW SS + $16k portfolio support + $6k pension = $66,000 / yr maximum.

· Stress tests

Does your pension have joint survivorship?

If your wife collects SS before her FRA can she access your full SS survivor benefit assuming you shuffle off the mortal coil when term life expires? (I think not)

If no, her income might be $25k SS + $16k portfolio = $41,000 / yr maximum.

In your case, the term life may be a good hedge for your wife, but the premiums will become unbearable with age.

Consider evaluating a scenario that postpones your collection of SS until age 70 versus premiums spent on term life.

· Odds and ends

Carrying a low interest mortgage could make sense in some cases. Mine is 3.25%.

Your AA looks satisfactory for someone whose stable income may not cover essential expenses. Don’t be like some pension funds and try stretching for yields – look how that has fared.

atom

Great post! I appreciate reading such a detailed breakdown.

How comfortable are you with using 4%? I always used it when playing around with the numbers in the past, but lately have been using 3-3.5 as I keep hearing 3% has replaced 4. Without getting into the bones of the Trinity study etc, I am just asking for your opinion. No hesitancy using 4%?

 

[Born2Fish]

If work causes undue stress, your projected expenses are correct, and life expectancy is believed shorter than average - then retire, you have enough. However, consider your wife’s income in the event of your passing.

I have spent a good bit of free time this past weekend analyzing the moving parts that would impact DWs "survivor income", so your thoughtful response is very timely.

· Setting aside a fund to bridge until SS payouts.

You would have to cover ages 63 and 64 until collecting 30k/month. Set aside $60k

Your wife has to cover ages 57-64 until colleting 14k/month. (But spousal FRA benefit at 67 is 15k/month) Set aside 14K x 8 years is $112k.

Total bridge to set aside for SS is $172k.

I currently have $183k cash/Stable value in my pre-tax accts for expenses.

• Using the 4% rule of thumb for remaining portfolio.

You have 4% x ($580k IRA + $50k brokerage - $172k bridge) = 4% of ($468k) = $18,320 / yr inflation adjusted spending. Realistictly, you need to set aside an emergency fund of some about. Arbitrarily select $68k for emergency fund and you have 4% of $400k or $16,000 / yr inflation adjusted spending.

· Pension swag.

Has pension started? If not, subtract annual pension in calculating 4% rule.

If pension is non-cola, swag real annual as $6000 / yr for simplification.

· Sustainable income considering the assumptions in 4% rule and no cuts to Social Security.

$30k your SS + $14k DW SS + $16k portfolio support + $6k pension = $66,000 / yr maximum.

· Stress tests

Does your pension have joint survivorship?

Pension is $7400/yr and DW gets 100% but no COL adjustments.

If your wife collects SS before her FRA can she access your full SS survivor benefit assuming you shuffle off the mortal coil when term life expires? (I think not)

If no, her income might be $25k SS + $16k portfolio = $41,000 / yr maximum.

In your case, the term life may be a good hedge for your wife, but the premiums will become unbearable with age.

Consider evaluating a scenario that postpones your collection of SS until age 70 versus premiums spent on term life.

· Odds and ends

Carrying a low interest mortgage could make sense in some cases. Mine is 3.25%.

Your AA looks satisfactory for someone whose stable income may not cover essential expenses. Don’t be like some pension funds and try stretching for yields – look how that has fared.

atom

I ran Firecalc 35 years with $600k portfolio, and me taking SS at 66, 8mos FRA and DW at 67 (FRA). I added $10k/year extra for HC until DW reaches Medicare age, and the results are great as long as I live until until I'm 95.

So then I removed DW's SS - to simulate me "checking out" after LI policy expires but before she starts receiving her SS (worst case). I calculated again with $600k portfolio and got 100% success rate but the curves come pretty close to zero.

If I retire a year from now, with $600k portfolio, Firecalc gives me 100% success with low of $280k and avg of $1M.

Ideally I will find something part time or contract that will let me work enough to earn $40-50k/year.

 

[atmsmshr]

volfan - I am very comfortable using the 4% rule of thumb because we will have a decent non-cola pension and high wage earner SS benefit coupled with a spend down bridge that covers our essential expenses.

If I was retiring at an earlier age (longer retirement), or if DW and I did not have such solid guaranteed income, then I would scale back from 4%.

 

[atmsmshr]

Born2Fish - will your IRA or 401k plan holder help you with retirement planning? Your particulars sound close, but with little margin for error of unexpected / recurring expenses.

 

[Born2Fish]

Born2Fish - will your IRA or 401k plan holder help you with retirement planning? Your particulars sound close, but with little margin for error of unexpected / recurring expenses.

That's funny!!

I am not rich but I understand math and planning.

 

[atmsmshr]

That's funny!!

I am not rich but I understand math and planning.

But you are rich.

With more than half a mil IRA, you might qualify for a free planning session with someone like Fidelity.

 

[Born2Fish]

But you are rich.

With more than half a mil IRA, you might qualify for a free planning session with someone like Fidelity.

Yep, I have talked with them and determined that I don't really need a financial advisor.

I am an EE with very strong mathematical skills. I am VERY detail-oriented.

I have my own spreadsheets and can read the numbers.

I just wish I had more $$

Currently in OMY mode I guess...

 

[Born2Fish]

Retired 2 hours ago

First - I felt like my last post was a little bit snarky. I should have explained better.

So, I calmed down and read the responses again, without being defensive.

I hope this is a less snarky response.

Regarding using a Principal 401k advisor:
I spoke with a Principal advisor just before I accepted a lower paying job and relocated to the coast. He insisted that I would need 80% of my current salary to retire. I told him that my gross salary at the "new" location was going to be 40% of the old salary. He thought it was a huge mistake. (He was NOT a numbers guy).

At the previous salary I had been saving 41% of after tax income while paying off student loans for all 3 kids. When I finished the last one I was ready.

At the new, reduced salary I have been saving ~25% of after tax income.

So along comes the CoVID-19 pandemic. The service calls I make are often at crowded locations - dirty, oily, live animal processing, without regard to distancing measures. It scares the hack outta me.

This morning the Boss gave me a service call to one of those places, and I felt I had enough saved to retire. We had a professional conversation.

I negotiated a "Retire now with pay through April 30th" agreement.

Went to office and signed off, turned in keys, laptop, etc.

Said goodbye to all the guys in the office.

Left on good terms with option for 18 month COBRA med ins and current dental insurance at current costs. More expensive that ACA.

I need to figure out whether it would make sense to take COBRA for remainder of 2020 so I can transfer some funds from 401k into ckg in case I need to more cash to avoid the ACA Cliff in the next 3 years before I get Medicare.

 

[EastWest Gal]

Be sure to check if you have to continue Cobra for the full 18 months. Then do the math to see how it balances out.

 

[Born2Fish]

Be sure to check if you have to continue Cobra for the full 18 months. Then do the math to see how it balances out.

The "COBRA" med insurance offered was $23k annual premiums. Ugh!

I signed up for ACA HDHP with HSA. With full subsidy I pay $0 per month with $13.8k annual deductible/max OOP. ACA pays in full after deductible is met.

I will have $24k in my HSA after I deposit the 2020 prorated amount, and will contribute the max amount allowed to HSA while we are on ACA. I start medicare in ~ 3 years and DW in 8 yrs.

We are spending far less now than when I was traveling with the previous job.

I am loving it.

Nearest boat ramp is 10 minutes away, then a 10 minute boat ride to the inlet. We walk, fish, find shark teeth and a wide assortment of sea shells.

We can also drive 10 minutes to beach public access with good surfing areas.

I have no regrets from stepping off the merry-go-round.

 

[Golden sunsets]

Good for you. How are your investments holding up, in this down market? Will the new balances force an uptick in your WR?

And yes you did sound a bit snarky.