Age 67, retirement in progress

[GaryInCO]

Hi all, I'm 67 and in the process of retiring. Divorced, 2 kids in late 20's, roughly $2.1M net worth with $700k liquid.

Things didn't work out the way I planned (on several fronts), so I don't have quite the cushy retirement I hoped for, but I'm doing OK. Better than OK, really. But not due to my investing acumen -- I'm a comically bad stock investor (see e.g. https://www.early-retirement.org/forums/f28/stock-investing-120671-5.html#post3043683). Real estate and an inheritance are the only reasons I can retire at all. I think I'll be OK, but ... I'd like to run my "plan" by y'all.

I didn't intend to tap out of the w*rk market until 70 or so, but I've been self-employed since 1991 and my clients gradually faded away. In late 2022 my main meal-ticket client shut down the business I'd been working with. That happened right before I hit my FRA -- and just as I got two cancer diagnoses -- so I figured the universe was telling me something. Time to smell the roses and enjoy my sunset years. I still have occasional consulting gigs but not much, mostly just enough to keep my brain challenged.

Because I suck so badly at investing, I had almost nothing in retirement accounts. (I got tired of watching my IRA evaporate, so I quit putting money into it.) My net worth is mostly in my house and a paid-off rental property, and an inheritance from my mother.

SS and rental income (from rental house and an apartment in my basement) cover nearly all of my expenses. I've been drawing $1000 per month ($12k per year, about 0.5% of my net worth). In 3 years I'll pay off my 3.25% car loan and my expenses will drop $1000/mo, so then I don't think I'll have to draw any $$ at all. Meanwhile I can easily make 5% or more (mostly Tbills if I'm smart, some stocks if I can't resist playing with my money) with the liquid $700k in my accounts, which should be more than plenty for trips and toys and eating out. I'll stash the excess for DS and DD. (They've already started to benefit. I funded the down pmt for DS's first house last year, and I set aside an equal amount for DD. After that, everything splits 50-50.)

My major expenses (mortgage, car pmt) are fixed, while my income (SS, rentals) will scale with inflation. I installed solar on my house so I've cushioned the effects of power inflation. Might install a solar-powered heat pump next year.

So at least for now, I think I'm in good shape. This isn't quite the typical "Everything's in IRAs" plan, but that means I don't have to worry much about RMDs. Am I missing anything?

 

[Surewhitey]

The $700k should give you ~$30-35k if you get Treasuries @4-5%. Sounds like you have a simple life spending wise. Maybe hold back a bit for emergency items or health events. SS+$30k+rentals sounds pretty solid.

I'd be careful about giving too much liquid away. Your property inheritance to them should be more than generous, just delayed.

 

[pb4uski]

+1. I told my kids not to expect anything and if there is an inheritance then it was only estimating error on my part. That's not totally true in my case but you have a less funded retirement and can't afford to be giving away money. If it ends up leftover, the fine. You're objective should be not to ever be a financial burden to your kids rather than gift to them.

 

[mystang52]

One cautionary note: you have 3 years left on a car loan. Theoretically that frees up cash in 3 years, BUT: that car will be 3 years older, and in any event there will come a point where you'll need a replacement car. From a cashflow perspective, I suggest you not factor in some sort of bonus in 3 years.

 

[GaryInCO]

Thanks folks,

I agree I shouldn't give more away. Hadn't planned on giving what I did (not yet anyway), but basically my brother shamed me into it. ("You need to take some of that $$ you got from mom and pay it forward, or these kids will never be able to buy a house!" -- said **in front of** DS & DD. Thanks a heap, I intended to, but I would have liked them to think it was my idea... He wasn't wrong, just a bit of an a$$hole about it, but that's my big bro.) And now with better understanding of my finances, I'm real comfortable with what I gave them. I'm glad I can help them while I'm still around to see them enjoy it.

And I do want to leave them as much as I can. Long story, but DD in particular is very likely to need it. So I'm glad I'm in a situation where I can enjoy my retirement and still build the accounts for them instead of drawing them down 4% a year.

Re: car -- I drove my last car for 20 years, so I don't necessarily need to replace this one as soon as I pay it off. But I should be able to without too much difficulty if I choose to.

Re: not wanting to be a burden -- unfortunately I didn't start looking at LTC until I was 62. I was in the process of applying for an LTC policy when cancer #1 and then cancer #2 hit. Both are fully controlled and in remission, but the LTC companies don't want to talk to me any more. So I'll have to self-fund any LTC needs. But that's actually not too bad. If I remember right the expected LTC premium was over $1000/mo, so since 2019 I've saved about $60-80k in LTC premiums I didn't have to pay. I'll self-fund by not paying the LTC company.

 

[pacergal]

Looks like you have a handle on your income/expenses.
Enjoy your retirement!

 

[cyber888]

It may also depend on your yearly expenses. What is your yearly expenses? You have car loans. You mentioned about Eating out (I hope not a lot.)

 

[GaryInCO]

My annual income (SS, net rental income, and consulting income, not counting investing income) is about $87k.
My annual expenses (mortgage, car pmt, taxes, insurance, groceries, utilities, hobbies, etc) are about $91k.

So according to my 2023 Quicken report I'm about $4k short. I may have let some expenses fall through the cracks, but it looks close. Everything is still in flux (income gradually stopping, starting SS, starting Medicare, etc) but I feel pretty comfortable with it. I'll have no trouble covering the shortfall with investing income, and in a few years the auto loan goes away. Unless I buy another new toy.

My eating-out expenses have been as much as $4000/yr in past years, but that (meeting friends for drinks/dinner, etc) represents most of my social life. Then it took a real dive in 2020, to less than $1000, mostly before March 2020 and during warm weather when I could meet people on an outdoor patio. It's been $2-3k/yr for the past few years.

 

[GaryInCO]

Oh, question: I've never had a FA or similar advisor. Probably should have, given how badly I bobbled my accounts in the last 40 years. But now that I'm retired, have steady income from SS/rentals, and don't plan to do anything very crazy with my liquid $$... Is there any reason at all to hire a FA?

On my own I'd put a big chunk into Tbills or similar, and probably a big chunk into high-returning dividend stocks. I doubt an FA would do anything significantly different, other than charging me 1-1.5%.

 

[pb4uski]

Probably not.

 

[TheWizard]

Sounds like Gary is a bit close to the wall when it comes to doing retirement comfortably.
Perhaps the question should be: how much income from what sources will you be getting the first year you're fully retired?
The 4% rule of thumb should be the guideline...

 

[GaryInCO]

Sounds like Gary is a bit close to the wall when it comes to doing retirement comfortably.

Why do you say that? I thought it looked pretty solid.

* My current income (SS, rentals) nearly covers my current expenses (mortgage, car pmt, insurance, utilities, etc). I should need less than $5-10k a year from my liquid accounts.
* If I pick up a few training gigs (likely) I probably won't have to pull any from my accounts at all.
* In 2028 I'll pay off the car loan, and then I shouldn't have to withdraw any at all even without side income.
* Every year or two I can boost my rents a bit. That, and SS COLA, should keep me ahead of inflation.
* I have about $700k in IRAs & after-tax accounts. That should be plenty for cushion, extraordinary expenses (new car, extravagant vacations, medical emergencies), and whatever. I'll be very disappointed if I don't grow it pretty significantly.
* I could pay off my $500k mortgage, but it's only 2.75% so I don't see any reason to.

I think I ended up a lot better than I had any right to, given my embarrassingly bad investing history!

 

[MarieIG]

Maybe stop "playing" with your money, and look into some boring assets like CDs and treasuries. (Yes, I do play, but I keep the "playing" limited to a very small percentage.)

Watch out that a financial advisor doesn't divest you of a large portion of your income.

 

[cyber888]

Well, so you are $4000/year short.
Maybe in the next few days, you can think about how to cut your monthly expenses by $100-$150/month, because you said some expenses falls thru the cracks. Even $100 a month saved would be $1200/year in less expenses. Then you're down $2,800/year and that would not be so bad.
Maybe eat out less, or pay for cheaper streaming or maybe you do some some house chores yourself (like mowing the lawn?).

My annual income (SS, net rental income, and consulting income, not counting investing income) is about $87k.
My annual expenses (mortgage, car pmt, taxes, insurance, groceries, utilities, hobbies, etc) are about $91k.

So according to my 2023 Quicken report I'm about $4k short. I may have let some expenses fall through the cracks, but it looks close. Everything is still in flux (income gradually stopping, starting SS, starting Medicare, etc) but I feel pretty comfortable with it. I'll have no trouble covering the shortfall with investing income, and in a few years the auto loan goes away. Unless I buy another new toy.

My eating-out expenses have been as much as $4000/yr in past years, but that (meeting friends for drinks/dinner, etc) represents most of my social life. Then it took a real dive in 2020, to less than $1000, mostly before March 2020 and during warm weather when I could meet people on an outdoor patio. It's been $2-3k/yr for the past few years.

 

[rodi]

I agree with cyber. $4000 annually should be pretty easy to trim. When I retired I was worried we were cutting it too close. I looked at recurring bills as the first place to focus. Phone bill? Changed our land line to magic Jack (yeah we still had a land line). Changed our cell coverage from Verizon to Ting, and then later to t Mobile. Huge savings there. Looked at our streaming services and now rotate what we are watching and pause the ones that are not in the current rotation. Internet was pretty pricey through our cable company, switched to T-Mobile. Those changes saved around $3k/ year.

We also upped our grocery budget and cut our dining out. My husband and I got into a competitive thing with cooking better quality food. Net savings there

We don't hire out lawn or cleaning but will when we get more inferm. If you are retired you have more time to do these things.

You're of Medicare age, I assume you already have the savings (for most) compared to private health insurance. I'm looking forward to the $300 or so a month I'll save when I hit 65 for better insurance (currently on a HDHP and paying a lot.)

Look at your monthly expenses, you'll probably find painless ways to cut back.

 

[GaryInCO]

I'm impressed. Y'all are even more frugal than I am.

I'm not at all concerned about a $4000/yr withdrawal. That's 0.6% of my liquid assets, less than 0.2% of my net worth. And it should end in 4 years when I pay off the car.

And my "income" calculation didn't include any income from investments. If I just dropped my liquid assets into Tbills, I would make almost $40k per year. If I invest part of it in index funds & bond funds I should do better than that.

So my net worth is already increasing, even before I pay off the car. I see no need to clip coupons and pinch pennies. I want to leave as much as possible to my children, but I want to enjoy the fruits of my savings too. I want to have fun while I still can.

 

[cyber888]

I agree with cyber. $4000 annually should be pretty easy to trim. When I retired I was worried we were cutting it too close. I looked at recurring bills as the first place to focus. Phone bill? Changed our land line to magic Jack (yeah we still had a land line). Changed our cell coverage from Verizon to Ting, and then later to t Mobile. Huge savings there. Looked at our streaming services and now rotate what we are watching and pause the ones that are not in the current rotation. Internet was pretty pricey through our cable company, switched to T-Mobile. Those changes saved around $3k/ year.

We also upped our grocery budget and cut our dining out. My husband and I got into a competitive thing with cooking better quality food. Net savings there

We don't hire out lawn or cleaning but will when we get more inferm. If you are retired you have more time to do these things.

You're of Medicare age, I assume you already have the savings (for most) compared to private health insurance. I'm looking forward to the $300 or so a month I'll save when I hit 65 for better insurance (currently on a HDHP and paying a lot.)

Look at your monthly expenses, you'll probably find painless ways to cut back.

Great Job Rodi. Yeah, we also cut $200/month by not eating out much. Cooking and preparing food at home is healthier and cheaper. I lost 26 pounds just eating healthier food at home, eating organic. Eating out means eating a lot of processed food with sugar, carb, and salt.
Good job on rotating streaming. We're doing that now too. I ditched my $15/month HBO and actually just share Netflix with my brother's account.

 

[USGrant1962]

I'm impressed. Y'all are even more frugal than I am.

I'm not at all concerned about a $4000/yr withdrawal. That's 0.6% of my liquid assets, less than 0.2% of my net worth. And it should end in 4 years when I pay off the car.

And my "income" calculation didn't include any income from investments. If I just dropped my liquid assets into Tbills, I would make almost $40k per year. If I invest part of it in index funds & bond funds I should do better than that.
...

Yea, I think some of the commenters missed your statement of nothing from your $700K stash in your cash flow numbers. Or they want you to keep working to pay for their SS.

You would be good to go at 57, let alone 67.

And you could easily plan on some increase in spending, where it brings you joy and satisfaction, to fill your time.

 

[LateToFIRE]

Yea, I think some of the commenters missed your statement of nothing from your $700K stash in your cash flow numbers. Or they want you to keep working to pay for their SS.

You would be good to go at 57, let alone 67.

And you could easily plan on some increase in spending, where it brings you joy and satisfaction, to fill your time.

Agree, seems fine to me.

 

[Unpaintedhuffhines]

I don't know why people are asking you to cut back on the time you spend with friends (the $4K/year eating out part). If anything, I think you should step that up! You've got plenty.

 

[upupandaway]

I'm with the last few posters. There is no requirement for you to cover all your annual expenses with income streams. You are actually allowed to use your retirement funds for retirement. It helps that you have a good grasp on your expenses and that annual withdrawal rate is miniscule. I say no matter how you got there you have arrived at a good place. Perhaps if you have the urge to play in the market use a virtual portfolio. This way when history repeats itself you can laugh instead of cry.

 

[Retired Expat]

Hi all, I'm 67 and in the process of retiring. Divorced, 2 kids in late 20's, roughly $2.1M net worth with $700k liquid.

Things didn't work out the way I planned (on several fronts), so I don't have quite the cushy retirement I hoped for, but I'm doing OK. Better than OK, really. But not due to my investing acumen -- I'm a comically bad stock investor (see e.g. Stock Investing). Real estate and an inheritance are the only reasons I can retire at all. I think I'll be OK, but ... I'd like to run my "plan" by y'all.

I didn't intend to tap out of the w*rk market until 70 or so, but I've been self-employed since 1991 and my clients gradually faded away. In late 2022 my main meal-ticket client shut down the business I'd been working with. That happened right before I hit my FRA -- and just as I got two cancer diagnoses -- so I figured the universe was telling me something. Time to smell the roses and enjoy my sunset years. I still have occasional consulting gigs but not much, mostly just enough to keep my brain challenged.

Because I suck so badly at investing, I had almost nothing in retirement accounts. (I got tired of watching my IRA evaporate, so I quit putting money into it.) My net worth is mostly in my house and a paid-off rental property, and an inheritance from my mother.

SS and rental income (from rental house and an apartment in my basement) cover nearly all of my expenses. I've been drawing $1000 per month ($12k per year, about 0.5% of my net worth). In 3 years I'll pay off my 3.25% car loan and my expenses will drop $1000/mo, so then I don't think I'll have to draw any $$ at all. Meanwhile I can easily make 5% or more (mostly Tbills if I'm smart, some stocks if I can't resist playing with my money) with the liquid $700k in my accounts, which should be more than plenty for trips and toys and eating out. I'll stash the excess for DS and DD. (They've already started to benefit. I funded the down pmt for DS's first house last year, and I set aside an equal amount for DD. After that, everything splits 50-50.)

My major expenses (mortgage, car pmt) are fixed, while my income (SS, rentals) will scale with inflation. I installed solar on my house so I've cushioned the effects of power inflation. Might install a solar-powered heat pump next year.

So at least for now, I think I'm in good shape. This isn't quite the typical "Everything's in IRAs" plan, but that means I don't have to worry much about RMDs. Am I missing anything?

Looks good to me! But then I am not a big believer in IRA’s. My 401k even with some company matching and now in my IRA is still not even 20% of our invested NW. retired early and have yet to draw more than .5% from savings to live due to rentals and other side projects like flipping a house every few years. So your self funding retirement is exactly what I did and life is great! Good for you!

 

[GoBears]

In terms of what you may be missing, have you budgeted for ongoing maintenance and repairs to your home and the rental property? A leak from our upstairs tub just set us back $2,500 and my brother in law is looking at $15k or more to address a problem with his sewer pipe. Our furnace and a/c systems will need to be replaced sooner rather than later. For the rental, are you planning for periods of vacancy between tenants and the corresponding loss of rent and the costs to refresh the property to attract new renters?

Is your valuation of the rental property taking into account any depreciation that would need to be recaptured and the resulting tax hit if/when you sell it (you may not want the hassle of managing a property while in your late 60s, 70s or older).

Is your spending on hobbies, travel, or other spending categories likely to increase if your consulting work continues to decline or ends and you now need to fill that time?

Finally, I would be cautious with respect to investing in high dividend paying stocks. Many companies are high dividend paying because they are financially in trouble. There is also a tax hit since your dividend stocks will be held in a taxable account. Another option would be to invest in a broad-based index mutual fund or ETF tracking the S&P 500 or the total stock market index, rebalance annually so you hold your desired asset allocation between stocks and Treasuries, and sell stocks when you need cash and your stock holdings exceed your target allocation. If you just prefer dividend payers, look for a good ETF for the built-in diversification rather than investing in just a handful of stocks.

 

[Koolau]

Have you run FIRECalc yet? I think you're golden, but FIRECalc might give you a more tangible go-ahead with FIRE.

Best luck and keep us posted.