Impending retirement.... probably

pook

Dryer sheet wannabe
Joined
Dec 26, 2024
Messages
15
Location
md
Hi everyone!


I have been reading about other's experiences here for about a year, and thank you to everyone who shared their thoughts, concerns, successes, and lessons learned. It has really made me think though some of my thoughts related to retirement, especially how common some of these concerns / thought processes are.

I will likely retire this year, or next year at the latest (unless something completely unexpected changes). I say likely, because we have one more meeting with our FA to run the numbers (yet again). Intellectually I feel confident that we are fine, but am very conservative in terms of financial risk, so have to get over that mental hurdle. Our FA has run our plan through their software and gave a 99% success rate (or as he said: “I am not allowed to say 100%, otherwise I would say 100%). I have also run Firecalc with similar results.

Personal background: Married 56yo, with 49yo wife and two grown children. DW is working full time for at least the next three years, and possibly for a few years after that. One of our children is out of the house already, enrolled in college and getting married this year. Other child is applying to colleges as I type.

Goals: Main goal is to finally relax, turn off that workaholic side of my brain (or at least reduce it to the things that matter to me, instead of the things that matter to my employer), and enjoy life. I love to travel and am planning several trips over the next few years to see parts of the world that I have not made the time to see previously.

Current Expenses: We are living off of my DW's paycheck for all monthly expenses. We shifted to this model a couple of years ago to test if we can actually pull this off when my income reduces by retirement (more on this later). My salary has gone into a separate savings account (mid-term savings) and has been used to fund 'big ticket' items such as house remodeling, vacations, etc. So far, this strategy has worked (living off of her income), and I have built out our spreadsheets itemizing monthly expenses, down to expenses that are optional vs necessary. The past six months, we have shifted to plussing up our short-term savings from this income stream (rather than from my paycheck) to see if her salary can handle the stress-test of unexpected expenses like major appliance repairs, vacations, etc. Short story: we are spending on average $10k/month in daily living, are running at a profit from DWs paycheck, and are planning on continuing this as a base plan for retirement expenses.

We do have several large expenses we are anticipating over the next several years:

1. We are helping our daughter out with her startup expenses for life / wedding. We have been funding this from our mid-term account (my salary), so the balance (~35k) will come from our overall cash savings (below). Her college is taken care of by her GI Bill.

2. Our son is about to start the college life. The balance of his expenses will be covered by my GI Bill, but the program he is interested in (Maritime industry) requires a summer work program to get the hours necessary for his licenses, which the GI Bill does not cover. This will be on the order of 15k/year for 3 years. He will receive a housing allowance as part of the GI Bill which can help fund the summer expenses. We have a 529 investment that we can use for these expenses.

3. Like with our daughter, we intend to help him with his startup expenses for life when he graduates. This will be funded by my pension (below).

Finances: Here is what has been psychologically holding me back from retirement until I have read the experiences of others, and really analyzed needs / wants / and where we are.

Emergency cash on hand: we currently have $340k in high interest savings accounts to keep it liquid. Yes, a lot of money earning a (relatively) low interest rate, but we intend to use a portion of this to potentially purchase a retirement property (if we can ever agree on where to retire lol) so keeping it sheltered from the volatility of the stock market is more important to us than maximizing growth. If things change, we will reduce this to 1 year of DW’s salary and put the remainder into investments.

Pension: I am receiving a (cola) pension of around $55k annually (after taxes). I also receive a VA disability payment of around $45k (COLA and tax free). This yields a little over 8k/month. This is currently not part of our spending plan as of now, and is used to build up our cash savings and investments. If / when I pass, DW will receive half of my pension (~ $25k in today’s dollars) annually.

When DW retires from her current job, she will get a pension as well, estimating at $60k annually (pre-tax), but will not start receiving this until she turns 55. We are not planning on any VA disability for her at this time, as we cannot predict how the voodoo science of VA claims will work in the future, but she will likely get something. With no VA figured in, she would pull in about $5k monthly (pre tax).

Combined, our pensions will be $13K/monthly minimum, so below our planned monthly budget.

Investments: I am quite happy with where we stand considering I did not get started saving for retirement until my 30s. Growing up, finances were never really a discussion in my family, so I didn't think of this in my early adulthood. Our kids on the other hand were required to start a Roth IRA as a condition of their first jobs while they lived at the house; so as long as they stick with it, they should be so much better off when they retire! Our plan is to leave our investments alone until at least after DW retires, and probably for a few years after this. Once we do start tapping into this, we will likely use a modification of the 4% rule, as we want to have a balance remaining upon our passing for inheritance and charity.

We currently have a little over $1,535,000 in investments, spread across 2 TSPs, 2 401ks, IRAs, Roth IRAs, and conventional accounts. I know I need to clean this up, and that will be a focus when I have the freedom of not working crazy hours.

TSPs: $242k: (My TSP will likely roll over to my IRA when I retire, hers likewise.)

401Ks: $360k (I intend to move mine over to our IRA once I retire.)

Roth IRAs: $190k

IRAs: $180k

Taxable Acct: $500k

529 acct: $70k

Investments are currently 70% stocks, and 30% bonds. We will start Roth conversions of 401ks and IRAs after I retire as my DWs taxable income is below her actual income, thanks to the way the tax code works.

Social Security: We intend to delay social security benefits as we don’t feel we are reliant on them to meet goals.

Other:

We have a rental property that breaks even yearly with an estimated equity of about $200k. Our primary residence has a mortgage due of $364k at a low interest rate, and has an equity of about $490k. If we end up moving after DW retires, we would sell our primary residence, and the rental.
 
Welcome to the Forum.

It sounds like you are well on your way to Financial Independence and will be ready to pull the trigger soon. I assume your DW is okay with continuing to w*rk?

IIRC MD is a high tax state. Any thoughts of relocating to a lower cost (and maybe lower COL state)?

Keep us posted on your progress. Glad to have you here.
 
I love seeing pensions. So incredibly helpful. Earlier in the post you said $10,000 / mth living expenses and you'll have $13,000 / mth with the pension. If that's accurate I'd say you're good to go. Wife is still plugging away, $1mil+ investments to withdraw gains from for travel money without touching the principal. I say happy trails! Go live your life.
 
Thank you. Yes, she is more than happy to be the Sugar Mom that she has always strived to be (lol). While she is able to retire from her current .mil career, she would not start receiving her pension until her late 50s. If she continues working for three more years, that will reduce the payout age to 55, which is her desire. After that, she wants to explore the corporate word for a bit. A few years ago, when I first started the conversation about setting a retirement date, she had that 'deer in headlights look of panic' and said that she had never really thought about retirement and it freaked her out even thinking about it because retiring is what 'old people' do. Since then, she relaxed and embraced the idea 'at some point.' That being said, when she sees me enjoying the freedom of retirement, it will not surprise me if she says "Corporate world... nope! Let's start travelling?"

Agreed with the Maryland expenses. Currently we are fortunate in another regard: due to the Military Spouse Residency Relief Act, we get to maintain our Texas residence, while she is stationed here and thus do not pay MD state income tax. After she retires, we will have to make some decisions. While I would love nothing better than to live in the middle of nowhere out west, the reality is that her extended family all live in the immediate area, and she is very attached to them.
Welcome to the Forum.

It sounds like you are well on your way to Financial Independence and will be ready to pull the trigger soon. I assume your DW is okay with continuing to w*rk?

IIRC MD is a high tax state. Any thoughts of relocating to a lower cost (and maybe lower COL state)?

Keep us posted on your progress. Glad to have you here.
 
I love seeing pensions. So incredibly helpful. Earlier in the post you said $10,000 / mth living expenses and you'll have $13,000 / mth with the pension. If that's accurate I'd say you're good to go. Wife is still plugging away, $1mil+ investments to withdraw gains from for travel money without touching the principal. I say happy trails! Go live your life.
Pensions ARE an awesome thing! I never realized how awesome they were until I got serious about my financial literacy. As for me, while I intellectually know the math adds up, it has taken me a long time to overcome the OMY syndrome. While I am part of a really good team of people, get along great with my boss, as well as his boss, work has become less fulfilling, and more stressful. I have been trapped in jobs that I disliked earlier in life, and vowed that I would not ever put myself into the position where I dread going into work again. With our plan to live on $120k/year, we can always adjust our living to accommodate a lower cost of living lifestyle, though I really do not see that as being required with our combined pensions.
 
A COL pension is even better - not that I have one. When I started FIRE, my pension was fairly significant. Now after 20 years, it's more like "nice to have."
 
What eliminated much of the angst from our FIRE decision was separating the financials from the 'am I ready discussion'.

I started reviewing our investments in my early 50's. Our income increased substantially at that time for a number of reasons. We were already engaged in tax planning. We spent about 2 years redoing our finances. Fired our stock broker, our bank, engaged an investment advisor, moved assets to my spouses names for various reasons, tax included. Our investment plan comprehended our tax plan. So, by age 55 or 56 we had our finances well organized for our next stage in life. That part of the stress and uncertainty was dealt with and we had a few years to accept it.

When we were ready to retire at 58/59, four years or so later the finanical angst part of the decision was not present. We knew we have enough assets to support a long term retirment and enough after tax income streams to support our estimated inflation adjusted annual COL. No second guessing.

It reduced the retirement decision to do I want to retire, am I ready to retire, and do we have a retirement life plan for the first two or three years. This was the easiest part.
 
Welcome to the Forum.
 
Congratulations! You should be good to go, especially with your wife continuing to work for a while. You mention a FA. Is this an AUM FA? If so, you should consider ditching him or her. Set it to whatever AA you'd like and then gain that 25% of your SWR that the FA is eating up.

Some people love having a FA for security and advice, but I've also encountered others that just like to tell others that they have a FA, because if they have one they must be wealthy, while in reality they are making their FA wealthy.
 
Thanks NginER,

We have in fact loved having our FA for the security and advice, and have been very satisfied with their results, Once retired, I will definitely be considering taking over that function myself potentially.
 
Thanks NginER,

We have in fact loved having our FA for the security and advice, and have been very satisfied with their results, Once retired, I will definitely be considering taking over that function myself potentially.
What can you tell us about your favorable relationship with your FA. I've been utterly and universally disappointed in my relationships with "FAs" over the years. So much so that I've "sworn off" of them. Of course, now at my advanced age, I think I could "put it all in a bank account" and be alright - thought I'm not gonna do that.

I've longed for a FA that I could simply "run stuff by" and see if my thinking was good - allowing the FA to actually run some numbers on a proposal or idea. But FAs either want to be paid by AUM (no way!) or they want to sell something. Neither appeals to me. I always say "I can lose my own money at no extra charge!" :facepalm:
 
What can you tell us about your favorable relationship with your FA. I've been utterly and universally disappointed in my relationships with "FAs" over the years. So much so that I've "sworn off" of them. Of course, now at my advanced age, I think I could "put it all in a bank account" and be alright - thought I'm not gonna do that.

I've longed for a FA that I could simply "run stuff by" and see if my thinking was good - allowing the FA to actually run some numbers on a proposal or idea. But FAs either want to be paid by AUM (no way!) or they want to sell something. Neither appeals to me. I always say "I can lose my own money at no extra charge!" :facepalm:
Our service has done very well (as compared to the S&P) for the 20 odd years we have used them. In my previous career, I travelled overseas constantly for most of the 2000’s. With that kind of schedule (and lack of communications as we have today),I felt more comfortable having my investments managed, even if I paid for the service. I view it as any other professional service like paying the dentist or mechanic. While I am pretty handy with a wrench, I dont always have time to do it myself. Maybe not the right thought process for some, but it was right for us at the time. We also get access to other expertise such as tax accounting services, estate advice, etc which is increasingly important as we age, our parents age, etc.
 
Our service has done very well (as compared to the S&P) for the 20 odd years we have used them. In my previous career, I travelled overseas constantly for most of the 2000’s. With that kind of schedule (and lack of communications as we have today),I felt more comfortable having my investments managed, even if I paid for the service. I view it as any other professional service like paying the dentist or mechanic. While I am pretty handy with a wrench, I dont always have time to do it myself. Maybe not the right thought process for some, but it was right for us at the time. We also get access to other expertise such as tax accounting services, estate advice, etc which is increasingly important as we age, our parents age, etc.
Thanks for the great reply.

I finally gave up. I assumed there must surely be a good FA out there someplace - and I guess you found her!!

I am happy for you. A good FA would be wonderful to have from time to time.
 
Update: had the talk with my supervisor and set an exit date of 1 Aug. He was super appreciative of me giving him the time to plan around my exit and how to shift my responsibilities around. Talked to my team so everyone now officially knows and the overwhelming response was ‘congrats!’. I have been putting together a list of things I want to focus on post retirement as I redefine my life.
 
Thanks for the great reply.

I finally gave up. I assumed there must surely be a good FA out there someplace - and I guess you found her!!

I am happy for you. A good FA would be wonderful to have from time to time.dr
We did a financial reset about four years prior to early retirement. Partly because we were both doing go forward tax planning, but very much because we were not longer happy with our stock broker (some churning) or his recommendations, our fee for service bank FA, or our bank.

We were were about to crystalize a gain that would have a significant (to us) positive impact on our net worth. The very last straw... when DW would ask a question the FA would look at me when responding.

The big surprise? I thought that I would ask a number of colleagues and friends in a similar situation for their recommendations for an FA. Not one seemed satisfied-either with the results or with the services. Yet not one seemed to be considering a change. I did not understand that.

We did the change. It took time. Stockbroker gone, bank FA gone, moved everything other than a free over 55 current account away from our bank of 35 years. It took some shopping and work to find an FA that we were both comfortable with and who provided the servcies that we wanted.

Bank seemed surprised and tried to keep the investment accounts, etc. We told them bluntly that this is what happens when you churn your staff, replace them with less talented, less professional, less expensive staff, when you no longer listen to your clients (told them three times over the previous18 months that we were not happy and why-in person and through client surveys). The cost/benefit intersections were in the wrong quadrant.
 
Last edited:
We did a financial reset about four years prior to early retirement. Partly because we were both doing go forward tax planning, but very much because we were not longer happy with our stock broker (some churning) or his recommendations, our fee for service bank FA, or our bank.

We were were about to crystalize a gain that would have a significant (to us) positive impact on our net worth. The very last straw... when DW would ask a question the FA would look at me when responding.

The big surprise? I thought that I would ask a number of colleagues and friends in a similar situation for their recommendations for an FA. Not one seemed satisfied-either with the results or with the services. Yet not one seemed to be considering a change. I did not understand that.

We did the change. It took time. Stockbroker gone, bank FA gone, moved everything other than a free over 55 current account away from our bank of 35 years. It took some shopping and work to find an FA that we were both comfortable with and who provided the servcies that we wanted.

Bank seemed surprised and tried to keep the investment accounts, etc. We told them bluntly that this is what happens when you churn your staff, replace them with less talented, less professional, less expensive staff, when you no longer listen to your clients (told them three times over the previous18 months that we were not happy and why-in person and through client surveys). The cost/benefit intersections were in the wrong quadrant.
Bravo! Good for you.

When I "fired" my last FA, she cried. It was tough.
 
Thank you. Yes, she is more than happy to be the Sugar Mom that she has always strived to be (lol). While she is able to retire from her current .mil career, she would not start receiving her pension until her late 50s. If she continues working for three more years, that will reduce the payout age to 55, which is her desire. After that, she wants to explore the corporate word for a bit. A few years ago, when I first started the conversation about setting a retirement date, she had that 'deer in headlights look of panic' and said that she had never really thought about retirement and it freaked her out even thinking about it because retiring is what 'old people' do. Since then, she relaxed and embraced the idea 'at some point.' That being said, when she sees me enjoying the freedom of retirement, it will not surprise me if she says "Corporate world... nope! Let's start travelling?"

Agreed with the Maryland expenses. Currently we are fortunate in another regard: due to the Military Spouse Residency Relief Act, we get to maintain our Texas residence, while she is stationed here and thus do not pay MD state income tax. After she retires, we will have to make some decisions. While I would love nothing better than to live in the middle of nowhere out west, the reality is that her extended family all live in the immediate area, and she is very attached to them.
If you intend to stay in the mid-Atlantic area, Pennsylvania is tax friendly for retirees. No tax on pensions, 401k/tIRA withdrawals or social security. It does have an inheritance tax of 4.5% for lineal descendants. More for siblings and others. Zero for spouse of course.
A lot of nice places along the Maryland border.
 
Congrats on the impending retirement.

Don’t forget the check taxes and insurance rates in DE, PA and NJ when selecting a new place to live. The taxes may change drastically depending on the town you choose. Both PA and NJ may impose separate school taxes depending on the town. There are no school taxes in DE and no sales tax, but income taxes are fairly high. Also check retirement tax exemptions for seniors, as well as property tax rebates.
 
Bravo! Good for you.

When I "fired" my last FA, she cried. It was tough.
Our new FA, our current one for the past 15 years, has provide excellent advice and direction.

I was of two minds on the exercise of some stock options. I had decided to wait...the 'greed' factor was setting in. And I was listening to a knowitall who in the end knew nothing.

DW suggested we ask to the FA for another opinion. He is a CPA with a tax specialty among other designations.

He put together a timely and a reasoned approach. Followed his advice-against my first inclination. Had we delayed as per my original plan we would have experienced a negative six figure opportunity cost. The stock was about to go south. .
 
Always been DIY and enjoy the spreadsheet modeling etc. and keeping it simple. I did finally breakdown and hired CPA to do the taxes as I have several LP investments that required out of state filings that I just felt it was easier to pay someone to take care of. Once those are played out I will likely take it back.
 
Welcome to the forum! We're in a similar situation where we are FI and I've left the full-time, but my better-half plans to continue in her career for several more years.

We were living on a budget based on her salary, and saving well over 50% of our combined income for nearly 7 years before getting to the point where I could walk away from my career.
 
Hi pook...some comments:

--Your FA saying 100% you can retire is 100% right. An engineer would say...BY INSPECTION of the numbers no need to even run a calculation. You can retire now.

--I retired with three kids at Penn State. It is doable. simply allocate the expenses for this.

--Your "emergency cash" holding is way too high. My, how did the old timers retire w/o any such "emergency designation"? Easy. You simply withdraw any cash needed from one of your several portfolios. And with your pensions exceeding expenses, what are these "emergencies?" Bet you cannot name one of over $3000 immediate costs.

--Suggest don't delay taking SS...Take at age 62. Invest all of it. A return exceeding 4% means a break even point into the age eighties. If you delay let's say to age 70, and you died at age 70, your family would rightly say: What were you thinking leaving all this money on the table with the gvt., as you would have received nothing.

-Lastly, you wrote: combined our pensions will be $13K monthly minimum, so below our planned monthly budget. I think you meant to say ABOVE (or EXCEEDING) our planned monthly budget.

---------------------
Best wishes in retirement..

R48
 
--Your "emergency cash" holding is way too high. My, how did the old timers retire w/o any such "emergency designation"? Easy. You simply withdraw any cash needed from one of your several portfolios. And with your pensions exceeding expenses, what are these "emergencies?" Bet you cannot name one of over $3000 immediate costs.
My suggestion would be to use some of the "emergency cash to pay the taxes on Roth conversions. Lots of discussions here about the reasons. Of course, YMMV.
 
... --Suggest don't delay taking SS...Take at age 62. Invest all of it. A return exceeding 4% means a break even point into the age eighties. If you delay let's say to age 70, and you died at age 70, your family would rightly say: What were you thinking leaving all this money on the table with the gvt., as you would have received nothing. ...
I think this is poor advice.

The table below shows the IRR of delaying from 62 to 70. Since the SS cash flows increase with inflation, the IRRs are real returns (after inflation). So if nominal return hurdle was 4% and inflation was 2%, the real return hurdle rate would be 2%, so the breakeven point would be 82.

Below the table is a screenshot from the American Academy of Actuaries and Society of Actuaries Longevity Calculator that suggests that a 62 year old male non-smoker of average health will likely live to be 86, 4 years beyond the age 82 breakeven point.

So assuming a 4% nominal return hurdle rate and 2% inflation if the OP his healthy he would be better delaying SS until 70.

SS at 62​
SS at 70​
Difference​
Real IRR​
62​
70​
-70​
63​
70​
-70​
64​
70​
-70​
65​
70​
-70​
66​
70​
-70​
67​
70​
-70​
68​
70​
-70​
69​
70​
-70​
70​
70​
124​
54​
71​
70​
124​
54​
72​
70​
124​
54​
73​
70​
124​
54​
74​
70​
124​
54​
75​
70​
124​
54​
76​
70​
124​
54​
77​
70​
124​
54​
78​
70​
124​
54​
79​
70​
124​
54​
-0.40%​
80​
70​
124​
54​
0.62%​
81​
70​
124​
54​
1.48%​
82​
70​
124​
54​
2.20%​
83​
70​
124​
54​
2.81%​
84​
70​
124​
54​
3.33%​
85​
70​
124​
54​
3.77%​
86​
70​
124​
54​
4.16%​
87​
70​
124​
54​
4.50%​
88​
70​
124​
54​
4.80%​
89​
70​
124​
54​
5.06%​
90​
70​
124​
54​
5.29%​
91​
70​
124​
54​
5.49%​
92​
70​
124​
54​
5.67%​
93​
70​
124​
54​
5.83%​
94​
70​
124​
54​
5.97%​
95​
70​
124​
54​
6.10%​
96​
70​
124​
54​
6.22%​
97​
70​
124​
54​
6.32%​
98​
70​
124​
54​
6.41%​
99​
70​
124​
54​
6.50%​
100​
70​
124​
54​
6.57%​

1748135602473.png
 
Last edited:

Latest posts

Back
Top Bottom