Welcome to the boards & sorry for your loss.
To answer your headline question, yes, you could retire. Should you instead heed the advice of your doctor? I don't know.
DennisTheMenace wrote:I’ve been working on a budget for a couple of months. Based on past expenses and with a generous (perhaps outrageous) boost for retirement travel & hobbies I estimate my annual expenses will be $47,000. My current income is about $80k (employer: 60k / military retirement: 20k).
It sounds like your estimated future expenses largely mirror your current expenses plus some. Nice job on going through that important exercise.
DennisTheMenace wrote:Emergency funds: I have enough for about 4 years. $100k in savings at fnbodirect.com paying 0.85%.
This was our emergency fund and is my ‘bail out’ fund if I decide to pull the plug & retire very early.
No debt: House & car paid for.
Age: 55 (56 this summer)
Not clear if the 4yrs=$100k or if there is something else going on here. Guessing you mean $47k expenses minus $20k military retirement = $27k remaining expenses, which is ~1/4 of $100k. Good to see no debt.
So let's focus on existing income streams and see what's left:
DennisTheMenace wrote: Military retirement (currently receiving): $1700 monthly
Social Security Survivors Benefit: $1571 monthly (@age 60, mid-2018) (assuming I don’t remarry before age 60)
Total: $3271/mo or ~$39k/yr (so only $8k/yr short from age 60 onward)
I've avoided looking at the pensions that you are heavily penalized to withdraw from at 60 because you get a great guaranteed return of ~8% to leave them alone if you can.
DennisTheMenace wrote:One question I’m pondering is whether I should delay taking my pension or my wife’s pension beyond 2018.
Yes, per above.
So how do we cover the $8k/yr from age 60 to whenever you start taking one or more pensions or your SS?
DennisTheMenace wrote:Taxable: $432k
Yup, that's the one. If you simply draw $8k from the taxable account every single year, with no asset appreciation or dividends, it will take you 54yrs to draw down. Since I don't know many 114 year olds, let's try something else.
Let's back up and say you wanted to keep the $100k emergency fund intact as a "just in case fund." Instead you know you've got a series of large pension items that are going to show great growth until you're 70 and you will have RMDs. So let's try an experiment where we spend down the taxable between 56 and 70. Simple math (basically assuming the portfolio only keeps up with inflation as do your withdrawals): $432k divided by 14yrs = $30.9k/yr Hmm… If we took the $30k from taxable each year and added that to your $20k pension, you're covered.
Using this methodology (& if I'm reading your pension info correctly) and assuming none of your assets do any more than keep up with inflation (including pensions) your income by age:
55-59: Military Retirement [MR] @ $20k; Taxable Account [TA] @ $30k; TOTAL $50k/yr
60-64: MR @ $20k; TA @ $30k; SS Survivors Benefit [SSSB] @ $19k; TOTAL $69k/yr
65-69: MR @ $20k; TA @ $30k (final year); SSSB @ $19k; His Pension [HP] @ $7k; Her Pension [HRP] @ $19k; TOTAL $95k/yr
70+: MR @ $20k; SSSB @ $19k; HP @ $7k; HRP @ $19k; His SS @ $26k; IRA RMD @ $13k (first year); 401k RMD @ $10k (first year); TOTAL $114k/yr
So we've just found a way to start you at $50k/yr and bump it up ~$20k every 5yrs finishing at $114k/yr in today's inflation adjusted dollars
. And note that you've never touched your emergency fund. (I'd probably suggest using ~$10k/yr of the efund in the 55-59 timeframe to increase & smooth early retirement income at $60k/yr.)
You should definitely clean up your tax advantaged accounts. As for your taxable, if you do decide to slowly liquidate it over the next couple of decades, I would focus on simply selling your highest expense ratios first. You don't have any huge gains. Also, a portion of these gains would not be taxed at all if you haven't filled the 15% tax bracket yet. To keep your desired allocation in balance, you can make up for it in your tax advantaged accounts.
I would also recommend continuing to fund your ROTH every year to the maximum possible that you have earned income. Remember that the ROTH does not have RMDs and has some significant survivor benefits - if that is important to you. If leaving a bequest is not important that I certainly wouldn't wait until RMD's kick in on the 401k & tIRA. Instead I'd start withdrawing 4% each year (~$25k) starting when you turn 59.5.
In short, you've got enough money to retire at a lifestyle you would be fine with. The bigger question has to do with social ties, long-term activities, and the big "what's next."
Best of luck in you decisions.