Ready for RE ?

[ttvjef]

Hello All,
Wanted to introduce myself, I've been reading the forum for a couple months and appreciate all the information here.

My spouse and I are planning to RE and are hopeful and anxious, as I guess most folks are when approaching this stage. Our situation is as follows:

Net worth is 1.6m of which are 40% stocks, 50%MFunds, 5% cash, and 5% other. Out of this there is 750k in taxable accounts and the remaining 850K is in tax deferred accounts. We also have about 200k equity in our home.

I will be receiving a 22k /year pension beginning in October 2016, and we are planning to take SS at 67 or perhaps a little later depending. SS estimates: me 26k and spouse 24k.


I’m 53.5 (October birthday)
Spouse 55 (January birthday)

We have been tracking expenses for about 20 years, so we have a reasonable idea of what they were with the exception of health care. Fortunately we are both in good health so far. We will probably downsize after a few years and are considering relocating to a lower COL area, as we currently call South New Jersey home.

$50,000 housing - food - utilities- car
$15,000 medical
$10,000 travel - entertainment
$10,000 pocket

$85,000 Total net Expenses

I have run lots of retirement calculators and get financial assistance from a financial advisor, as I will be the first to admit that I’m overwhelmed with all the numbers and projections. We have been advised that we can draw 8k a month net out from nest egg about 105K/year and then reduce the amount needed as we start getting ss, and our money will last till we are 90 & 91.

Desired gross income 109k
Fixed income 22k
Needed from saving 87K
Till we draw SS which should reduce the amount we need from saving to 37k at about year 15 of retirement.

We do not have children and do not necessarily plan to leave an inheritance of any magnitude.

I would appreciate any feedback, positive or negative about our situation. I’m so burnt at w*rk these days and would love to retire at the end of 2015 and spouse retire end of 2016.

 

[robertf57]

Welcome to the forum and congrats on the accumulation of assets! I am alittle concerned about your withdrawal rate. YOu are projecting 87K from 1.6M. That is a withdrawal rate of 5.4%. You are projecting to offset this somewhat with your social security income stream down the line; but, that is many years away. I haven't modelled the cash flows in detail (but you should); but I would be concerned with withdrawing more than 3.5 to 4% from the nest egg given the long retirement period you face.

 

[MBAustin]

Welcome ttvjef!

If you haven't seen them yet, there are two excellent resources here that might help you feel more comfortable with your preparations:

http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

and

Early Retirement FAQs - Early Retirement & Financial Independence Community

At first glance, your spending looks like it has lots of slack in it which could give you a nice cushion if you need it down the road. If you aren't tracking in more detail, this is a good time to start just to see what your real spending is.

Lots of folks use ER as an opportunity to downsize and move to a lower cost of living area, so starting to scout those out should be a priority.

Figuring out health insurance is important - ACA of course makes it much easier since the pre-existing condition rules are gone, but you still have lots of options. High deductible plans are pretty much standard, so having a buffer to pay that is important.

Look forward to having you participate with us here!

 

[Koolau]

Sorry for double post. My bad

<SNIP>
At first glance, your spending looks like it has lots of slack in it which could give you a nice cushion if you need it down the road. If you aren't tracking in more detail, this is a good time to start just to see what your real spending is.

Lots of folks use ER as an opportunity to downsize and move to a lower cost of living area, so starting to scout those out should be a priority.
<SNIP>

I would emphasize these issues as well. In an $85K budget there should be lots of room for cutting. If you have a mortgage, you could "easily" get rid of it by downsizing. Some areas of the country are MUCH less expensive than others.

Since you can cut your withdrawal rate when you take SS, it appears you may have the situation well in hand. Just try to stay "flexible" in case things don't quite go to plan. Good luck and remember that YMMV.

 

[ttvjef]

Thanks for the replies. I did notice that my withdraw rate was higher than what I have seen on the forum. On one calculator I use (fidelity) my withdrawal rate goes over 7%

We do have a bit of play built into our expenses, and can probably count on them being less. We wanted to figure on the high side to be safe.

Year age portfolio expenses withdraw
2026 65 $1,318,846 $118,088 $102,518


The above is from a spreadsheet that outlines cash flow. In my 11th year of retirement, it has my portfolio at ~1.3m and expenses growing up to 118k.

What do you think about that? The options I selected for this calculator are conservative as far as investing is concerned. This is where I really wonder. I have run FIRE calc and T Rowe Price calculators and they seem to agree.

Could a 1.6m portfolio land at 1.3m or so after 11 years withdrawing ~90k a year?