Greetings from itsagrind

[Itsagrind]

Hello...totally new to this site. Here’s my situation...put in context of the fact that I am a crazy worrier!

Almost 58, REALLY don’t like my very corporate job. Want to leave in the spring, post bonus. Wife is same age, public school teacher for 18 years who may need to quit soon due to a bad back.

We currently have about 640K in non-exempt money, invested conservatively. We have 1.32 MM in retirement funds, much of which I have moved into deferred index annuities with annual ceilings of 6 percent returns, but zero chance of losing any money. (Told you I was a worrier and view capital preservation as far more important than growth at this stage of the game...)

I also have a pension of $2000 per month already coming in for the rest of my life, and my wife’s. Biggest worry is, if I leave my job at 58, and then my wife has to retire at same age due to back, we would be spending a fortune on health care. Any thoughts on what health care could cost — I’m hearing it can be as much as 3K per month when you add in premiums and deductibles. Any other advice re: our financial situation? Oh, kids are grown and self-sufficient, and we have a house worth about 400K, and we still owe 50K on the mortgage, our only debt.

Thanks for any words of wisdom!!!!

 

[Dtail]

Welcome to our wonderful site Itsagrind.
What are your estimated yearly expenses?
Have you run your numbers through the retirement calculator FIRE Calc?
In terms of healthcare expenses, please see Healthsherpa.com and Healthcare.gov for various costs and scenarios.
You can qualify for an ACA tax subsidy if your MAGI is below ~64k. These subsidies can be substantial depending on where you live and your income.

See below for the MAGI rules.
http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

 

[Itsagrind]

Thanks very much, Dtail! Yeah, where we’ve always dropped the ball is on the “budgetary discipline” front. Having said that, we are not big spenders, and once I retire from corporate, I plan on taking up cooking as a major hobby, as eating out is currently too big an expense. And yes, the subsidies could be hugely important...we can keep our 600K in money market....generate only 12K in income, plus my 24K per year in pension income, and receive subsidies that will greatly reduce what would be easily our largest expense. Hoping my wife can get at least 2-3 years more out of her teaching gig, but that is not a given due to her bad back. Thanks so much!!!

 

[The Cosmic Avenger]

Also, capital preservation is important for short-term funds that you will need over the next 1-3 years, but if you value capital preservation above growth absolutely, your principle and the income it generates will be eaten away by inflation. Any money you want to preserve for 10+ years out IMO should be invested at least slightly aggressively, or you'll be leaving money on the table.

 

[Itsagrind]

Also, capital preservation is important for short-term funds that you will need over the next 1-3 years, but if you value capital preservation above growth absolutely, your principle and the income it generates will be eaten away by inflation. Any money you want to preserve for 10+ years out IMO should be invested at least slightly aggressively, or you'll be leaving money on the table.

Thanks, Cosmic. Here’s my thinking on the deferred index annuities. I still participate up to 6 percent upside...and in 7 years, when I’m 65, I can always redeploy a bit more aggressively. Think that late 50’s, early 60’s is the absolute worst time to take a big hit, particularly when I am looking to soon semi-retire. I appreciate the feedback!

 

[The Cosmic Avenger]

True, my biggest concern about my plan is the heavy withdrawal rate I might need early on when we're not eligible for Medicare and are getting out a lot of pent-up traveling! That time is a kind of in-between limbo.

 

[HI Bill]

We have 1.32 MM in retirement funds, much of which I have moved into deferred index annuities with annual ceilings of 6 percent returns, but zero chance of losing any money.

If inflation were to rear its ugly head, and exceeds 6%, you'll be losing spending power (although not actual $). My biggest concern is that you have no projection against inflation, which for me, means keeping 60%+ invested in broad market-based mutal funds or ETFs. We can't evaluate your situation without knowing your annual spend (w/or w/o health care), and what your wife's retirement income will be from her teaching job, and any debt you might have. In Hawaii, Kaiser runs about $1K/month for a couple, with no ACA subsidy. I understand in many states, it can be much higher. Best wishes!

 

[Itsagrind]

Thanks, Bill. To be more specific, of the 1.3MM in retirement $$$, about $430K is in an annuity that will guarantee my wife and I a minimum of 30K per year in income (purchased 4 years ago); that together with my pension, wife’s pension and my social security, we will have a minimum of a 100K gross in income guaranteed in 7 years at age 65. Remaining retirement money, roughly 870K, is half in deferred fixed annuities that cannot go down in value...remaining 435K is invested in stock/bond ETF’s, about 70/30 stock. If health insurance costs us 2K per month, we figure we can spend another 7K per month...or a total of 9K per month. No debt otherwise than 50K on our mortgage. So, let’s call it 10K per month for seven years. That’s 840K. We can spend the 640K in non-qualified until we’re 63...then dip into some of the 870K in qualified to bridge us to 65. If my wife works a few more years, and I can consult, etc., we should be able to leave our retirement $ untouched to 65...which would then give us the 100K gross annual guaranteed, and investment income from what should be around $1 million by 65. That’s the master plan!!!! Thanks!

 

[HI Bill]

Sounds pretty solid! Good luck!

 

[ProspectiveBum]

...about $430K is in an annuity that will guarantee my wife and I a minimum of 30K per year in income (purchased 4 years ago);

I admittedly don’t know much about annuities, but $30K per year seems like a great return from $430K, considering that a 4% withdrawal rate would only get you $17.2K. Is the $30K COLA’d, or is it fixed for the life of the annuity?

 

[Golden sunsets]

Itsagrind; You won't find much support on this forum for deferred index annuities. Have you analyzed the fees you are paying for these deferred annuities?


Sent from my iPad using Early Retirement Forum

 

[Itsagrind]

I admittedly don’t know much about annuities, but $30K per year seems like a great return from $430K, considering that a 4% withdrawal rate would only get you $17.2K. Is the $30K COLA’d, or is it fixed for the life of the annuity?

I put in 400K invested in a moderate growth portfolio back in 2014. So, they play with my money for 11 years...the investment returns themselves have been lousy due to the high annuity fees, etc...BUT...I knew that going in and essentially “sacrificed” that 400K for the guaranteed 30K annually for life me and my wife beginning at age 65 (early 2026). As you are noting, that 400K would have to go to 700K or so to generate 30K per year, and even that wouldn’t be guaranteed, pending performance. Now, a naysayer will argue that the 400K invested aggressively back in 2014 might already be worn around 700K...but I am always wary of the ill-timed bear market...and I have other money invested more aggressively. Good luck to all and wishing you the best!!!!

 

[calmloki]

OK. It's been several days and every time I see this thread my darn head starts up with "They're taking the hobbits to Itsagrind". Maybe this will get it out.

 

[Katiek]

Glad you found a plan that works for you and your goals, and it sounds like you knew the fee and other tradeoffs associated with the annuities.

 

[Omega]

I'm new this site as well. Congrats on your savings and giving yourself options at 58.

 

[Itsagrind]

Thanks, Katiek and Omega. Thanks for the feedback and support. I wish that I liked my job and could bring in the same income for many more years. But...I’m at a point where I have to put my physical and mental health first. Not I saying i’ll do nothing but sit in front of my tv/computer...i’ll do some consulting, etc., but if I can pull off semi-retirement at 58, why the heck not, right? Wishing you all the best!!!