Nervous, want to keep 2020 retirement plan. I am not objective, please comment?

[Dash man]

You can always quit your stressful job and find something less stressful if you’re still worried about your finances.

 

[mrfeh]

If you're $80K expenses per year is flexible, I would retire as planned and not touch the portfolio. You're already on the low side for equities.

 

[pb4uski]

Your health is more important than your job. You have enough. Stay the course... in fact, given the impact of your job on your health, one could advocate accelerating the plan.

 

[daylatedollarshort]

I was raised by low income, spendthrift parents and money was a constant stress factor - and we ended up losing our home to foreclosure when I was a kid....Obviously, even as a middle aged adult, I still carry an abundance of fear around with me.

Somewhat similar background here. I'm done worrying about money or the stock market. If you invest in TIPS, stable value, CD ladders or whatever, and keep up with inflation (zero real return), your safe withdrawal rate is 100 / retirement years. At 30 years of retirement, you could withdraw 3.3% without any stock gains as long as you just keep up with inflation (100 / 30 = 3.3%). That's $102K a year without stocks if you had all your portfolio in safe investments that at least kept up with inflation, plus pensions and Social Security. If it were me I'd trim the equities to whatever let me sleep at night and still covered my expenses and retire.

Actually, that is what we did. We have some stocks so we still see gains when the market is doing well, just not as much as others with larger holdings. But especially because we have a lot of TIPS, our total portfolio value actually went up this month over last even with the market correction.

 

[retire202052]

I have this picture in my office at home. Says it all.

 

[GravitySucks]

Fidelity has a simple to use bond Ladder tool.
I ended up buying, enough to cover my essential expenses, 6, 12, and 18 month CDs and Black Rock iShare target date bond funds that pay off every December. I think I went out too long at 8 years but it's not hurt too much. When they matured I've placed the money back to work in regular bond funds.

Thank you all for the outside looking in view points. I appreciate them at this time so much.

With respect to these two items - any suggestions for references to learn more about setting these up? Thank you in advance!

Then adjust your portfolio accordingly. Use a bucket approach or invest to produce an income stream, implement a rising equity glide path or build a bond ladder. Find a passive income source. There are so many ways to remove “scary” from investing.

I addressed some of my fear by building a CD and bond ladder. Having a safe investment that pays out every six months or so relieved much of my stress. I've been very lucky as everytime they mature

 

[SunnyOne]

I think you are ok to go with your plan, if you are flexible with your spending. Out of the 80k expenses, how much is discretionary vs essentials?

I would say it's about 50/50 - given that I do not own a home or any real estate, I rent. I am estimating $2K/month for rent since I try to stay in better neighboods and plan to continue. I could go lower there, if pushed into it. I have no debts, will need a new vehicle in a couple years.

You say you are divorced, however any kid expenses that can increase your budget? Any large planned purchases?

One adult child, who is mostly independent and on her own. Only large purchase is the car mentioned above. thanks

 

[SunnyOne]

I wouldn't sell the equities. You're on the low side of what has historically been successful.

Thank you for the comment. When you refer to "low side" are you referring to the percentage of equities required for an overall portfolio not to be depleted within X number of years?

 

[ziggy29]

I wouldn't sell the equities. You're on the low side of what has historically been successful.

Thank you for the comment. When you refer to "low side" are you referring to the percentage of equities required for an overall portfolio not to be depleted within X number of years?

I think that's it. Unless you are so wealthy that you don't need *any* of your retirement savings to live on (such as if you had a huge pension), most people need at least some growth from equities. To really get much of an overall impact on your portfolio, to allow for the growth to offset inflation-adjusted withdrawals in the long term. The "low side" for that equity concentration is often considered to be around 25-30%.

Remember also that at your age, it may feel more uncomfortable for a few years because you need to withdraw more. But once you start collecting SS your withdrawals will be considerably smaller and much more "survivable" through an Ursa Major.

 

[daylatedollarshort]

I think that's it. Unless you are so wealthy that you don't need *any* of your retirement savings to live on (such as if you had a huge pension), most people need at least some growth from equities.

I don't think you have to necessarily be wealthy, it has more to do with a low spending to retirement income ratio. And even if you need all or part of your retirement savings to live on in retirement, there's still the 100 / retirement years = SWR, or 3.33% for 30 years if you can get a 0% real return (or a higher rate SWR if you can do a bit better on the average real yield front). TIPS and other yields are very low right now after the recent correction, but the 20 - 30 years still have 0% - .09%, and historically have been closer to 2% + inflation.

 

[ziggy29]

I don't think you have to necessarily be wealthy, it has more to do with a low spending to retirement income ratio. And even if you need all or part of your retirement savings to live on in retirement, there's still the 100 / retirement years = SWR, or 3.33% for 30 years if you can get a 0% real return (or a higher rate SWR if you can do a bit better on the average real yield front). TIPS and other yields are very low right now after the recent correction, but the 20 - 30 years still have 0% - .09%, and historically have been closer to 2% + inflation.

IMO, if you don't have a pension and you don't need any of your retirement savings to meet your income needs (remember that's how I prefaced my remarks), you are wealthy by most objective standards. Even more so if you can do this before collecting SS.

Though I should have said "OR if you have a big pension" rather than "SUCH as if".

 

[ChicagoGal]

I think you are ok to go with your plan, if you are flexible with your spending. Out of the 80k expenses, how much is discretionary vs essentials?

I would say it's about 50/50 - given that I do not own a home or any real estate, I rent. I am estimating $2K/month for rent since I try to stay in better neighboods and plan to continue. I could go lower there, if pushed into it. I have no debts, will need a new vehicle in a couple years.

Given your total portfolio including your cash position now, your pension and the fact that up to half of your estimated budget could be flexible, you are in fantastic shape. I like to think I wouldn't hesitate to retire in your position.

My situation is fairly similar, however my non-COLA pension is a higher percent of estimated expenses and my asset allocation is quite a bit heavier into equities. But I still think I will be making the jump some time next year at age 58.

Good luck!

 

[daylatedollarshort]

IMO, if you don't have a pension and you don't need any of your retirement savings to meet your income needs (remember that's how I prefaced my remarks), you are wealthy by most objective standards. Even more so if you can do this before collecting SS.

Though I should have said "OR if you have a big pension" rather than "SUCH as if".

I am not clear what you mean by "don't need any of your retirement savings to meet your income needs" part. With the method in the above posts a retiree could need all of his or her retirement savings and still withdraw 3.33%. The 3.33% assumes depleting the portfolio at the end of 30 years.

 

[GravitySucks]

Yes. The 4% rule starts to fall apart somewhere less than 30% equities. However your planning an even lower withdrawl rate so it probably doesn't matter much.
But why sell into a loss? You can live for years on your cash and pension.

I wouldn't sell the equities. You're on the low side of what has historically been successful.

Thank you for the comment. When you refer to "low side" are you referring to the percentage of equities required for an overall portfolio not to be depleted within X number of years?

 

[walkinwood]

If you haven't read Bengen's paper that was among the first detailing the 4% rule, you should.
http://www.retailinvestor.org/pdf/Bengen1.pdf

His advice near the end of the document.

Despite advice you may have heard to the contrary, the historical record supports an allocation of between 50- percent and 75-percent stocks as the best starting allocation for a client. For most clients, it can be maintained throughout retirement, or until their investing goals change. Stock allocations below 50 percent and above 75 percent are counterproductive.

He has revisited this a number of times and it is worth looking for those articles.
Here's one from a reddit session he did
https://www.reddit.com/r/financiali..._bill_bengen_and_i_first_proposed_the_4_safe/

 

[SunnyOne]

I am not planning to leave a legacy of any kind...I was thinking of some kind of deferred annuity at some point. What do they call the three phases of retirement? go go years, slow go years and no go years? you know, for the no go years.

 

[GravitySucks]

^^
Probably best to leave SS till 70 if your looking at annuities.

 

[Retired Expat]

Different way of doing your numbers

but the $2M portfolio is dropping and many are predicting troubled times ahead...that is the point.

I am not seeking for someone to make any decisions for me (as I stated in the original post)...but I do see value in various thoughts and opinions.

I input your numbers into Firecalc assuming a 20 or 25% decline in starting value, say 1.6 million. After SS and pensions your expenses are more like 50k per year, assuming a 35 year retirement you have a 100% success rate.

My situation is not all that different than yours and I am not worried. You may find your retirement spending less or make that a goal or game to save money which will give you greater assurance you can make it.

My spending dropped in retirement but then I haven’t worn a suit or been to the dry cleaner now in years, I drive much less with no commute, eat lunch at home and not out everyday, and have the time now to do the things I used to pay others to do (maid, gardener, pool guy, repairs) Just those saved me 10k a year easy..

You can build the life you want now and make it work for you. Best of luck.

 

[JJpop]

I did not see whether you rent or have a mortgage/ no mortgage?

If you are such a spendthrift how can you have expenses of 80,000 a year?

You are fine.Quit worrying and enjoy your life and use common sense on your spending.

 

[Toocold]

I would be comfortable in your position, but ultimately it's your personal feelings. If I felt that way, I'd probably work for a bit until the market is more stable. The last thing you want to be is nervous when you first retire.

I stopped working and I don't have any issues with the market so far.

 

[FREE866]

You're in a fantastic position and depending on your time frame you should probably have more in equities.

Retire Monday.

 

[doxiemama]

I think it is better to be retired and living off a pension and/or social security and savings/investments than to be working and 100% dependent on a paycheck in these crazy times. How many people in the travel industry are going to lose their jobs and potentially lose their homes etc. if the virus keeps spreading and the media is covering it 24/7. I feel safer now with my pension, savings, and work at a part-time "retired" job than I ever did when I was 100% dependent on a paycheck living month to month, barely covering mortgage and all essentials. Even if I lose my "retired" job I have 5 years of that income in a stable value fund and can begin collecting social security in 2.5 years if I wish so don't need to worry about needing to cashing out investments. I also left a high stress job to retire, I was only 53, people thought I was nuts and I am 100% healthier and happier now. Health = Wealth!

 

[SunnyOne]

Wow, what a difference 3 weeks can make...I've sat tight, in spite of the predictions of doom and end of times. My stomach sinks however to see the losses.

I am clinging to the post above (thanks jazz4cash):

Not only are you good to go, you’ve made some savvy moves to reduce equity exposure leading up to your planned retirement. With your heavy cash allocation you can wait several years for the equities to recover from whatever the bottom turns out to be. You can also probably afford to cash out now if and only if the risk keeps you up at night. It seems like retiring as planned from a difficult job is most important of all. Congrats on a job well done.

 

[Unpaintedhuffhines]

This too shall pass. As others have said, you're in a good spot, even with the recent events.

 

[Lakewood90712]

good to go. no need to delay imo.