BrianB
Recycles dryer sheets
As they say in radio, "Long time listener, first time caller". After knowing for two years that my wife's job would be going away, it just became official that Jan 3, 2014 is her last day. We've been working to get finances in order and both FireCalc and Fidelity RIP are thumbs-up, but there's always that nagging fear. I like the supportive but blunt approach forum members have. I'll try to be concise and complete, but this will be a long post. So here goes:
I am 55 and own a small business that could be expanded but I've been content with the $2k/mo net I get for the limited time it requires. Unfortunately it requires just a couple hours EVERY day, making travel difficult. DW is 54 and been with the same company for 26 years. DD is 20 and a Jr. at State University. We have fully paid (modest) townhome, two fully paid late model cars, and zero debt.
Megacorp is being (we think) quite generous: 52 week severance, two months continuing insurance, $400 / mo pension starting 1/2015 & $500 / mo (for life)to pay for health insurance starting 3/2014. Neither of these is indexed for inflation. By putting her final date in 2014 the severance will not impact our 2013 taxes, and her separation date will be after her 55th birthday.
We want to be able to close my business, maybe work flexible or seasonal part-time jobs, and live off our earnings. We've got:
$435k TIRA (mine from previous career)
$360k 401k (DW's, will use the out-at-55 exclusion to tap this before 59.5)
$130k ROTHs (total both of us)
$100k after-tax investments, dividend stocks now DRIP'ping about $350 / mo
$20k cash
$18k HSA
We've always been frugal but not extreme. Our averaged per month spending based on Quicken history:
$850 fixed (taxes, utilities, insurance, association fees, etc)
$900 daughter's college (ends 5/2015!). We've told her we will get her through a BA without loans, then she is on her own!
$1650 everything else (groceries, gas, entertainment, dining out, etc)
$850 for ACA Health insurance (based on a quick scan of policies on our state-run exchange). Don't know if we will be under the cut-off for subsidy in 2014 - forecasting is difficult this year.
So, $4250 / mo expenses if we do not change our ways. I'm thinking as follows:
Net severance will be about $35k. Put $20k into more dividend stocks & $15k to savings. Goal is to get to $600 / mo dividends over coming months then ending DRIP and taking income.
Until 6/2015 that gives us my $2k plus $500 health care plus $600 dividends plus $1150 from savings to cover our expenses. The $400 pension after 1/2015 should reduce the burn rate further but if I close my business it could increase.
For 7/2015 & beyond our costs drop to $3350 (no college)and we get: $400 pension plus $500 health care plus $600 dividends plus $1850 from savings / investments. With low earned income I anticipate we can take $4k / mo from 401K at low tax rate with no penalty; half of that would be for current spending, and half into ROTH or after tax dividends account.
My TIRA and our ROTH's wouldn't be touched until 401k is drained. I anticipate taking SS in 2020 at age 62, about $1k / mo. DW will start in 2021 and get about $1.2k / mo.
Our dream is to travel several months each year with extended return visits. While selling the townhome would provide cash for more income, I don't think we are ready yet to be total vagabonds. Our travel style isn't 4-star, our cost to keep the townhome is relatively low. and our dream destinations are places that our money will hopefully go further than in the US.
So, are we crazy? Will we be eating cat food in our 80's? Are there glaring omissions or errors that we should correct before we start on this?
Thanks in advance for your comments; if there are questions I'll try to get back with clarifications.
I am 55 and own a small business that could be expanded but I've been content with the $2k/mo net I get for the limited time it requires. Unfortunately it requires just a couple hours EVERY day, making travel difficult. DW is 54 and been with the same company for 26 years. DD is 20 and a Jr. at State University. We have fully paid (modest) townhome, two fully paid late model cars, and zero debt.
Megacorp is being (we think) quite generous: 52 week severance, two months continuing insurance, $400 / mo pension starting 1/2015 & $500 / mo (for life)to pay for health insurance starting 3/2014. Neither of these is indexed for inflation. By putting her final date in 2014 the severance will not impact our 2013 taxes, and her separation date will be after her 55th birthday.
We want to be able to close my business, maybe work flexible or seasonal part-time jobs, and live off our earnings. We've got:
$435k TIRA (mine from previous career)
$360k 401k (DW's, will use the out-at-55 exclusion to tap this before 59.5)
$130k ROTHs (total both of us)
$100k after-tax investments, dividend stocks now DRIP'ping about $350 / mo
$20k cash
$18k HSA
We've always been frugal but not extreme. Our averaged per month spending based on Quicken history:
$850 fixed (taxes, utilities, insurance, association fees, etc)
$900 daughter's college (ends 5/2015!). We've told her we will get her through a BA without loans, then she is on her own!
$1650 everything else (groceries, gas, entertainment, dining out, etc)
$850 for ACA Health insurance (based on a quick scan of policies on our state-run exchange). Don't know if we will be under the cut-off for subsidy in 2014 - forecasting is difficult this year.
So, $4250 / mo expenses if we do not change our ways. I'm thinking as follows:
Net severance will be about $35k. Put $20k into more dividend stocks & $15k to savings. Goal is to get to $600 / mo dividends over coming months then ending DRIP and taking income.
Until 6/2015 that gives us my $2k plus $500 health care plus $600 dividends plus $1150 from savings to cover our expenses. The $400 pension after 1/2015 should reduce the burn rate further but if I close my business it could increase.
For 7/2015 & beyond our costs drop to $3350 (no college)and we get: $400 pension plus $500 health care plus $600 dividends plus $1850 from savings / investments. With low earned income I anticipate we can take $4k / mo from 401K at low tax rate with no penalty; half of that would be for current spending, and half into ROTH or after tax dividends account.
My TIRA and our ROTH's wouldn't be touched until 401k is drained. I anticipate taking SS in 2020 at age 62, about $1k / mo. DW will start in 2021 and get about $1.2k / mo.
Our dream is to travel several months each year with extended return visits. While selling the townhome would provide cash for more income, I don't think we are ready yet to be total vagabonds. Our travel style isn't 4-star, our cost to keep the townhome is relatively low. and our dream destinations are places that our money will hopefully go further than in the US.
So, are we crazy? Will we be eating cat food in our 80's? Are there glaring omissions or errors that we should correct before we start on this?
Thanks in advance for your comments; if there are questions I'll try to get back with clarifications.