Reintroduce myself

[JayNak]

Hi,
My name is Jay and I am retiring on 1/31/20. My background and retirement plans are enclosed. Looking for anyone's thoughts with regards to my situation and plans. Here I go....

Just turned 59.5. Got 1.1mil in 401k, about 160K of it is Roth/after-tax. About 60k in savings/ira. I get a pension of about 2100/month. Wife gets SSI and a small pension and is on Medicare.

Live in Central Wisconsin. No mortgage or car payments. No kids. I've been tracking expenses for a year, minus some 1 time expenses for retirement (trust setup), we spent a touch less than our take home pay. About 5900/month vs 6050/month. My wife and I spend money like water and could cut back in a lot of areas such as I go out to lunch every day (8/day avg), eliminate cable TV and just keep internet (would go from 190/month to less than 60/month), go from 3 vehicles to 2, etc.

I also have a 40 acre woods that I use for hunting and firewood. Would plan on selling it some day, (10-20 years from now). Should be worth around 100K.

Our thought is to keep taxable income under ACA limit and take about 2500/month out of Roth until I'm 65 and then collect SSI. I can get ACA health for myself at less than 200/month.

We don't plan on traveling much. Do have a trip planned for New Orleans and possibly some driving trips to visit relatives. Wife would like to do some house updates, new flooring, redo the master bath, etc. Some of these I am skilled enough to do. I have a number of projects to do around the house and in my shop, so I won't be bored for awhile. I also hunt, fish and golf.

I have thoughts about cash work, such as maintenance/handyman for folks and firewood selling (we live next to a campground).

I'm also negotiating with my currently employer for 2 days a week at a very high hourly rate (not sure I want the headaches). I've worked in IT for over 30 years and am a senior technical person for them currently.

Bottomline, I think I can swing ER without having to work. But MAY work part-time. If I work part-time, then we would plan on living beyond the ACA limit and my health care would be about 500/month.

What are everyone's thoughts? Do you think we can swing ER? Reading some of your experiences where you spend more money in retirement than when you were working, makes me a bit nervous. I don't think this would happen to us, but until I'm retired, I won't know for sure.

 

[Walt34]

Offhand, it sounds like you're good to go but here are some questions that you'll want to have solid answers for before giving notice:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[frayne]

Welcome again and I'd say at first pass you have a pretty good plan and shouldn't have any issues. Have you run firecalc ? What is your AA ? My other thought is if you have to change your lifestyle to accommodate ER, do you really want to do that ?

 

[JayNak]

Yes

Although I haven't run my calculations through FireCalc in a few years, my financial planner has run the numbers and indicates we should be good to go. Not sure what AA means.

 

[JayNak]

Firecalc

How do folks calculate their portfolios for firecalc? Should I add my pension of $2100/month * 30 years, should I add the value of my house and land? How is firecalc taking into account my SSI? Only running the calculations based on spending and portfolio for 30 years seems too inaccurate to even get a warn and fuzzy.

 

[frayne]

Although I haven't run my calculations through FireCalc in a few years, my financial planner has run the numbers and indicates we should be good to go. Not sure what AA means.

Asset allocation/investment strategy

 

[pb4uski]

How do folks calculate their portfolios for firecalc? Should I add my pension of $2100/month * 30 years, should I add the value of my house and land? How is firecalc taking into account my SSI? Only running the calculations based on spending and portfolio for 30 years seems too inaccurate to even get a warn and fuzzy.

What you put in for your portfolio is your $1.1m of financial assets. Leave out the house and the land since that isn't income producing (at least not regular income).

If you really want to you can add in a one-time addition under the portfolio tab for the after-tax proceeds from the sale of the land but I'm not sure that I would bother.

Your SS (not SSI) will go on the top section of the Other Income/Spending tab and put your pension on the bottom section.... amounts are annual, not monthly.

In 30 years, you'll be 90.... so if 30 years makes you nervous, change it to 35 or 40.

On nice thing about being retired is that you have time to consider other options to that $190/month cable tv/internet bill, etc.

Welcome back and good luck.

 

[Scrapr]

My one thing that makes me go hmmm is what happens if one of you passes. $6k goes to $3k/mo?

Your pension safe? Really really safe?

40 acres gets $100k? Wow. That's affordable

 

[EastWest Gal]

FireCalc and ACA thoughts

For FIRECALC:

There are tabs at the top where you put in details of your income and spending.

Your portfolio will be your 401K.

On the Other Income/Spending tab, there is are separate lines for you and your wife's social security, as well as places to pension income. On the Portfolio changes, you can put a one time lump sum for the sale of your land, and the year you guess that might take place.

Do not include your house unless you plan to move into a tent.

Regarding part-time work,

If you are looking at part time contract work, where you aren't eligible for benefits, set yourself up as an independent contractor, where the company issues you checks and you get a 1099 at the end of the year. You will be considered self-employed for tax purposes. You will need to pay both the employer and employee portions of FICA. But, as someone self-employed you can also deduct the mileage of your commute as a business expense. There is also a line item deduction for all health insurance premiums when you are self-employed (but it can't exceed you 1099 income). This does not require itemized deduction; it's on the 1040 Schedule 1. You can also deduct a portion of your long term care premiums if you have LTC insurance this way as well.

It could be possible to keep your income under the ACA cliff, which for 2020 is $67,640. If you are close to the cliff, you could open a health savings account.

You must be getting excited. I hope you have figured out health insurance, since you're close to the end of the month.

 

[pb4uski]

.... You must be getting excited. I hope you have figured out health insurance, since you're close to the end of the month.

While I agree the OP needs to get health insurance sorted quickly, he is protected by the 60-day COBRA window.

 

[ut2sua]

How do folks calculate their portfolios for firecalc? Should I add my pension of $2100/month * 30 years, should I add the value of my house and land? How is firecalc taking into account my SSI? Only running the calculations based on spending and portfolio for 30 years seems too inaccurate to even get a warn and fuzzy.

FireCalc is pretty good. Use the other income/pending tab to put in your pension and SS $. Play around with it. FireCalc's most important result is the worst case scenario, so don't be surprise if your number will come out better if you choose to take SS earlier. The "investigate" tab can guide you on what a stock/bond ratio would be best to make your $ last. Good luck

 

[JayNak]

Thanks everyone for the replies. The more I experiment with firecalc, the better my retirement looks. I think I have 2 viable options for health care (less than ACA and greater than ACA limits) so I'm not overly concerned about it. I did find it interesting that I can deduct all my health care premiums if I am self-employed; I thought it was only a certain percentage. I also may investigate the LTC insurance if I continue to work. As far as my pension goes, I believe it is safe as it is over 98% funded (might be higher) and is managed by transamerica.