end of year layoff, can I retire?

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end of year layoff, can I retire?

Postby gdm129 » Wed Dec 12, 2012 11:21 am

just got the news, had been anticipating it for last 2 years seeing many colleagues let go

age 56, single no dependents
1.1M in mutual funds 30% equity, 65% fixed, 5% cash
ss estimates if I stop work now and claim at:
62-1544
66-2105
70-2722
small pension of $430 at 65
expenses of 1850 per month including health care premium of 500. I am pretty low maintenance, my sport of choice is running where my main expense is 2-3 pair of good running shoes yearly.
six months severance
condo paid off, 500k equity
longevity in my family Dad died at 88, Mom is now 91!

I may want to keep working and choose to job search but would like to know if I have the option financially to retire. It looks good to me but I seek the wisdom and support of the Bogleheads. am I missing something?
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Re: end of year layoff, can I retire?

Postby Call_Me_Op » Wed Dec 12, 2012 11:31 am

If you anticipate little change in your expenses, you seem to be in good shape for retirement, in my opinion. I am no SS expert, but waiting until 70 would seem wise.
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Re: end of year layoff, can I retire?

Postby Cherokee8215 » Wed Dec 12, 2012 11:48 am

You may want to consider selling the 500k condo and relocating to a less expensive area if you do decide to retire.
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Re: end of year layoff, can I retire?

Postby swong » Wed Dec 12, 2012 11:53 am

GDM129,
Like yourself I too was let go after working almost 38 years with this one corporation after being discharged from the service in late 1973. Been collecting unemployment benefits since March 2011 which is due to cease at the end of this year. Been unsuccessfully trying to find reemployment w/o much success which is why I will finally apply for my pension 1st qtr 2013. I took note you are presently 56 years of age which might work in your favor....as for me I suspect when prospective employers peruse thru my resume they make the determination hiring a person at age 63 is not in their best interest. Won't go into extreme details but your financial profile is eerily identical to mine. Wife and I live frugally, been savers almost all our adult lives and hope to survive on just pension and SS leaving our savings and investments untouched until such time it becomes inevitable to draw upon.

Our parents having come into this country dirt poor have instilled upon all us kids to always save a little of each paycheck, and ....."watch your pennies so that the dollars will mind themselves". Be advised even though your numbers show retirement is do'able there is always something which goes awry which screws up your planning. You alluded to the fact you pay for retiree medical however this is not guaranteed nor fixed. My first year as a retiree I paid just $245.67/month to get a high deductable medical plan for me and wife. Lo and behold my former employer bumped up this month premium to $567.48 which seriously screws up a budget no matter how hard you plan.
Only words of wisdom I can offer is to eat healthy, exercise, and continuously to invest wisely. No matter how muchyou have it will never ever be enough....everything goes up, your personal vehicle will break, you will eventually get old age ailments .... all non catastrophic but expensive. My last 1 week stay at a hospital for kidney stones would have set me back over $100k had it not been for my subsidized retiree medical plan
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Re: end of year layoff, can I retire?

Postby SecretAsianMan » Wed Dec 12, 2012 11:59 am

Cherokee8215 wrote:You may want to consider selling the 500k condo and relocating to a less expensive area if you do decide to retire.

There's no reason to suggest this since it insinuates you're even close to possibly not having enough to retire, which is definitely not the case.

At a withdrawal rate of just over 2% now and a combined SS/pension benefit that should cover your expenses starting at age 70 in only 14 years, you easily have enough to retire now if you so desire. Congrats and good luck no matter what you decide.

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Re: end of year layoff, can I retire?

Postby ObliviousInvestor » Wed Dec 12, 2012 12:07 pm

SecretAsianMan wrote:At a withdrawal rate of just over 2% now and a combined SS/pension benefit that should cover your expenses starting at age 70 in only 14 years, you easily have enough to retire now if you so desire. Congrats and good luck no matter what you decide.

I agree with SecretAsianMan's conclusion. (Though I would add that it looks like the Social Security and pension could actually cover expenses somewhere around age 65 -- not that that necessarily makes it a bad idea to wait longer to claim Social Security.)
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Re: end of year layoff, can I retire?

Postby johnep » Wed Dec 12, 2012 12:17 pm

gdm129 wrote:just got the news, had been anticipating it for last 2 years seeing many colleagues let go

age 56, single no dependents
1.1M in mutual funds 30% equity, 65% fixed, 5% cash
ss estimates if I stop work now and claim at:
62-1544
66-2105
70-2722
small pension of $430 at 65
expenses of 1850 per month including health care premium of 500. I am pretty low maintenance, my sport of choice is running where my main expense is 2-3 pair of good running shoes yearly.
six months severance
condo paid off, 500k equity
longevity in my family Dad died at 88, Mom is now 91!

I may want to keep working and choose to job search but would like to know if I have the option financially to retire. It looks good to me but I seek the wisdom and support of the Bogleheads. am I missing something?


You look to be in good shape. Some form of employment, even parttime would help and may be something you want to do anyway.

Financially you are in good shape. Otherwise are you ready for retirement? There are other aspects to retirement aside from finances. Something to think about. Best wishes.
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Re: end of year layoff, can I retire?

Postby archbish99 » Wed Dec 12, 2012 12:19 pm

ObliviousInvestor wrote:
SecretAsianMan wrote:At a withdrawal rate of just over 2% now and a combined SS/pension benefit that should cover your expenses starting at age 70 in only 14 years, you easily have enough to retire now if you so desire. Congrats and good luck no matter what you decide.

I agree with SecretAsianMan's conclusion. (Though I would add that it looks like the Social Security and pension could actually cover expenses somewhere around age 65 -- not that that necessarily makes it a bad idea to wait longer to claim Social Security.)

Remember that SS is generally actuarially fair. Waiting becomes a substantial benefit when married, because your joint life expectancy is longer than that used to determine "actuarially fair." If you don't think it likely that you'll marry in the future, there's no reason not to claim at 62, really.... If you think marriage might be somewhere in your retirement plans, then definitely delay.
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Re: end of year layoff, can I retire?

Postby KyleAAA » Wed Dec 12, 2012 12:25 pm

Looks like you can get by on close to a 2% withdrawal rate. Is that pension inflation-adjusted? I would almost definitely wait until 70 to start drawing SS. You are in excellent shape to retire so long as you don't anticipate your expenses going up dramatically in retirement. Then again, at ~2%, you'd be fine if they did go up a bit. I would be comfortable withdrawing 3% in your situation.
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Re: end of year layoff, can I retire?

Postby ObliviousInvestor » Wed Dec 12, 2012 12:26 pm

archbish99 wrote:Remember that SS is generally actuarially fair. Waiting becomes a substantial benefit when married, because your joint life expectancy is longer than that used to determine "actuarially fair."

I agree with the general thrust of that statement, but I think it's important to add the qualifier, "when the expected return on your portfolio is equal to the return built into the Social Security calculations." (According to my math, that number is approximately 2% real.)

For example, for an unmarried person today, delaying is much more advantageous than it would be if real interest rates were, to make up a number, 4% higher.
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Re: end of year layoff, can I retire?

Postby Hub » Wed Dec 12, 2012 12:35 pm

Factoring in nothing but the $1.1MM in mutual funds you have enough for a monthly income of $4000 for 30 years assuming the money compounds at 2.00% annual, not accounting for taxes.

With your very modest $1850 monthly expenses and the pension and SS coming down the road it appears to me you're all set to retire if you so choose. Waiting until 70 for SS benefits also appears to be very doable in your case.
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Re: end of year layoff, can I retire?

Postby SpringMan » Wed Dec 12, 2012 12:40 pm

Same thing happened to me in 2004 at age 57 married with grown children and with just a little more dollars. I collected unemployment insurance for 6 months and then put in for my small pension. One option for my pension was called the level income option, I took this option. It payed more up front then dropped down at age 62 when SS was available. It did not matter if SS was postponed or not, it dropped down. My wife was employed in a clerical job paying 25K per year plus health benefits for both of us. I half heartedly looked for a job with no luck, being in information technology and 57 years old. Went through the bear market of 2008-9 losing 1/3 of our net worth (60/40 allocation). Held on and everything came back and then some. We delayed SS until my wife retired in June this year, both of us age 65 and now using Medicare+Medigap. Got more conservative, now 35/65. Knock on wood but we have been just fine financially. Our house was paid off and some recreational property paid off (cabin in the woods).
Good luck, I think you should be able to retire.
Best Wishes, SpringMan
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Re: end of year layoff, can I retire?

Postby mur44 » Wed Dec 12, 2012 12:56 pm

You need to find out Health Insurance costs.

From 2014, you will have the right to buy health insurance.
Therefore, you may want to go for COBRA which will cover
health insurance for 18 months. Ask your employer for details.
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Re: end of year layoff, can I retire?

Postby JDaniels » Wed Dec 12, 2012 1:09 pm

gdm129 wrote:expenses of 1850 per month including health care premium of 500.
condo paid off, 500k equity


You look in good shape. Question - Does the $1850 cover your condo insurance, taxes and association fee (if any)?
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Re: end of year layoff, can I retire?

Postby ResNullius » Wed Dec 12, 2012 2:02 pm

You got it made in the shade. If you want to substantially increase your level of spending, as in substantially, then you might consider selling and buying a condo at half the price, plus make sure you live in a low tax state. Regardless, it looks like you've got it made. If you want to use belts and suspenders, then maybe do something you like on a part-time basis.
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Re: end of year layoff, can I retire?

Postby gdm129 » Wed Dec 12, 2012 2:02 pm

thanks to all for all your input/help!

pension has COLA
$1850 includes condo fees, insurance, etc
my Cobra health will be a little less than $500 and because I live in MA it looks like when Cobra runs out I can get a similar plan at similar rate (altho I am sure those rates will go up)

I appreciate the time and effort you each took to assist a fellow Boglehead! and the expense ratio for all this unbiased, thoughtful help you've provided me is 0.0%
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Re: end of year layoff, can I retire?

Postby englishgirl » Wed Dec 12, 2012 2:08 pm

mur44 wrote:You need to find out Health Insurance costs.

From 2014, you will have the right to buy health insurance.
Therefore, you may want to go for COBRA which will cover
health insurance for 18 months. Ask your employer for details.


Just to amend this slightly, from 2014, you will be able to buy health insurance on the private market even if you have a preexisting condition. If you don't have any preexisting conditions (or just have minor issues), you may find that individual insurance is cheaper than going through COBRA, so don't just assume that COBRA is the only option until 2014.

For me, private insurance worked out at $182, while my COBRA cost would have been $518 (on a plan that I had been paying $60 a month for through my employer). Admittedly, the private plan I picked had a slightly higher deductible, but both were comparable HDHP plans. Now, I'm younger than you, so my monthly cost is probably less than you can get, but I thought an illustration with actual numbers might help.
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Re: end of year layoff, can I retire?

Postby thebogledude » Wed Dec 12, 2012 2:09 pm

you're probably going to be limited to consulting, contract or part-time/seasonal work. I would continue with that until 62, rather than to retire now.
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Re: end of year layoff, can I retire?

Postby Watty » Wed Dec 12, 2012 2:15 pm

age 56


ss estimates if I stop work now and claim at:
62-1544
66-2105
70-2722
small pension of $430 at 65
expenses of 1850



So if you start social security in ten years at the age of 66 you will have $2105+430= 2535 in income each month and be spending $1,850 so you can actually save $715 a month in retirment? If so then that means that your nest egg onely needs to last you ten years, and to provide a safety net in retirment.

The big question is if your $1,850 a month figure is accurate. It sounds sort of low when you consider taxes, healthcare, property taxes, condo fees, replacement cars, travel, etc but plenty of people do live on that.

If that number is even near being in the right ballpark then even without crunching the number you should be fine but it would be good to obsessively track your spending for at least the first few years.

One thing to double check on is to make sure that you are using the right social security numbers that are taking into account that you are going to stop working now. Often the social security numbers are quoted as if you work until you retire.
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Re: end of year layoff, can I retire?

Postby RenoJay » Wed Dec 12, 2012 2:22 pm

I think you're there. Congrats on the layoff...it may turn out to be the best thing that ever happened to you!
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Re: end of year layoff, can I retire?

Postby Whatyear? » Wed Dec 12, 2012 3:01 pm

If I were in your shoes, I'd retire :).

But I'm amazed at the low monthly expenses. How do you manage? I've got to take a serious re-look at my budget . . . New Year's Resolution!
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Re: end of year layoff, can I retire?

Postby skyvue » Wed Dec 12, 2012 3:05 pm

I think you are very safe to retire. My own "plan" has me retiring when I reach $1.25 million and my planned expenses are a good bit more than yours. I would suggest deferring Social Security as long as possible to have it sort of work as an insurance or hedge against "low risk" of outliving your money.
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Re: end of year layoff, can I retire?

Postby Yipee-Ki-O » Wed Dec 12, 2012 3:34 pm

Yes. You've alread accomplished the most difficult task which is keeping your ongoing living expenses low.
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Re: end of year layoff, can I retire?

Postby athrone » Wed Dec 12, 2012 3:52 pm

gdm129 wrote:age 56, single no dependents
1.1M in mutual funds 30% equity, 65% fixed, 5% cash

expenses of 1850 per month including health care premium of 500. I am pretty low maintenance, my

$22500 annual expenses
4% withdraw rate = $40,000/year in income.

Yes you can easily retire assuming you feel your portfolio is safe from any black swan events in the next 30 years. AKA you don't feel that the 70% of your portfolio in bonds/cash could go to zero (like Greece).
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Re: end of year layoff, can I retire?

Postby Confused » Wed Dec 12, 2012 4:03 pm

Whatyear? wrote:But I'm amazed at the low monthly expenses. How do you manage? I've got to take a serious re-look at my budget . . . New Year's Resolution!


My spouse and I keep our expenses to that much a month. Here's the trick: remember all that fun stuff? Stop it. Remember all that fancy stuff? Don't buy it.
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Re: end of year layoff, can I retire?

Postby BBL » Wed Dec 12, 2012 4:26 pm

With the usual caveat: Be flexible; be adaptable.

Otherwise: :sharebeer
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Re: end of year layoff, can I retire?

Postby letsgobobby » Wed Dec 12, 2012 5:59 pm

if you can't retire, almost no one can!
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Re: end of year layoff, can I retire?

Postby Call_Me_Op » Wed Dec 12, 2012 6:25 pm

athrone wrote:
gdm129 wrote:age 56, single no dependents
1.1M in mutual funds 30% equity, 65% fixed, 5% cash

expenses of 1850 per month including health care premium of 500. I am pretty low maintenance, my

$22500 annual expenses
4% withdraw rate = $40,000/year in income.

Yes you can easily retire assuming you feel your portfolio is safe from any black swan events in the next 30 years. AKA you don't feel that the 70% of your portfolio in bonds/cash could go to zero (like Greece).


We are not Greece. Importantly, our debt is denominated in our own currency. There is no way I can imagine that the US would default in the classical sense. So that's one "black swan" event I wouldn't even consider. If you were to try to consider it - there's no good place to turn anyway.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: end of year layoff, can I retire?

Postby Clearly_Irrational » Wed Dec 12, 2012 6:27 pm

Quick test by Firecalc says yes. 40yrs, 1.1M, 22.2k spending, 30% equities, success = 100%, lowest terminal value $721,268

That ignores SS & pension, but also ignores increasing medical costs and taxes.

You should do a much more detailed analysis but if your numbers are accurate there is a good chance you can probably retire.
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Re: end of year layoff, can I retire?

Postby linguini » Fri Dec 14, 2012 1:46 pm

englishgirl wrote:
mur44 wrote:You need to find out Health Insurance costs.

From 2014, you will have the right to buy health insurance.
Therefore, you may want to go for COBRA which will cover
health insurance for 18 months. Ask your employer for details.


Just to amend this slightly, from 2014, you will be able to buy health insurance on the private market even if you have a preexisting condition. If you don't have any preexisting conditions (or just have minor issues), you may find that individual insurance is cheaper than going through COBRA, so don't just assume that COBRA is the only option until 2014.

For me, private insurance worked out at $182, while my COBRA cost would have been $518 (on a plan that I had been paying $60 a month for through my employer). Admittedly, the private plan I picked had a slightly higher deductible, but both were comparable HDHP plans. Now, I'm younger than you, so my monthly cost is probably less than you can get, but I thought an illustration with actual numbers might help.


Community rating (which will be put into effect nationally in 2014, and is already law of the land in Massachusetts where the OP lives) means that it is not possible for insurers to charge higher or lower premiums based on existing health conditions, so this advice probably does not apply to the OP under current law. However, depending on post retirement income, the OP may be entitled to a state-subsidized premium. OP, if you want instructions for determining your eligibility, check the health connector web site. You may even qualify for Medicaid if you have minimal annual income though you will probably exceed that threshold on investment income.
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Re: end of year layoff, can I retire?

Postby gdm129 » Fri Dec 14, 2012 5:46 pm

linguini wrote:
englishgirl wrote:
mur44 wrote:You need to find out Health Insurance costs.

From 2014, you will have the right to buy health insurance.
Therefore, you may want to go for COBRA which will cover
health insurance for 18 months. Ask your employer for details.


Just to amend this slightly, from 2014, you will be able to buy health insurance on the private market even if you have a preexisting condition. If you don't have any preexisting conditions (or just have minor issues), you may find that individual insurance is cheaper than going through COBRA, so don't just assume that COBRA is the only option until 2014.

For me, private insurance worked out at $182, while my COBRA cost would have been $518 (on a plan that I had been paying $60 a month for through my employer). Admittedly, the private plan I picked had a slightly higher deductible, but both were comparable HDHP plans. Now, I'm younger than you, so my monthly cost is probably less than you can get, but I thought an illustration with actual numbers might help.


Community rating (which will be put into effect nationally in 2014, and is already law of the land in Massachusetts where the OP lives) means that it is not possible for insurers to charge higher or lower premiums based on existing health conditions, so this advice probably does not apply to the OP under current law. However, depending on post retirement income, the OP may be entitled to a state-subsidized premium. OP, if you want instructions for determining your eligibility, check the health connector web site. You may even qualify for Medicaid if you have minimal annual income though you will probably exceed that threshold on investment income.



thanks all for the input. I have looked at the MA health connector info. I think the MA approach illustrates some of the pros and cons for me of the ACA, although overall I'm all for it. It forces insurers to cover all regardless of pre-existing conditions which is GREAT but also forces consumers to pay for a plan that may not be best for them overall medically/financially. I would be willing to accept a very high deductible plan with the knowledge that I could easily cover the deductible if such a need occurred. But MA has minimum standards that plans must have (in terms of the max deductible an approved plan can have) , no doubt to stop the possibility of someone selecting a very high deductible plan, needing the coverage and then not being able to afford the deductible.

at this time for me the Cobraplan I am offered is slightly less expensive than the most economical plan on the health connector and has better coverage.
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Re: end of year layoff, can I retire?

Postby Rodc » Fri Dec 14, 2012 9:40 pm

Hub wrote:Factoring in nothing but the $1.1MM in mutual funds you have enough for a monthly income of $4000 for 30 years assuming the money compounds at 2.00% annual, not accounting for taxes.

With your very modest $1850 monthly expenses and the pension and SS coming down the road it appears to me you're all set to retire if you so choose. Waiting until 70 for SS benefits also appears to be very doable in your case.


Problem is that looks to have you broke at age 86.

When planning out to age 95 or so, you would be better to assume about $3600 per month and better be able to have room to tighten your belt in down turns.

My concern is that at age 56 there is a lot of medical insurance hike risk. You need to cover 9 years before medicare kicks in. If age get raised, which it could, you might need to cover 14 or more years.

This could be substantially mitigated with even a modest part time job.

Good news is you have plenty of money so that there is no panic and you can make a plan without having to worry.

Best of luck.
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Re: end of year layoff, can I retire?

Postby Dandy » Sat Dec 15, 2012 5:15 pm

Your current expenses are extremely low. You probably can make it but consider that you probably need to support yourself closer to 35 or 40 years not the usual planning of 30 years.

Also, I don't trust health insurance premiums/costs - there is a lot going on but an aging population, life extending medical procedures/drugs and expensive heart, joint replacement etc make it very hard to believe a greater part of the medical costs will be transferred to the individual. So, that $500 premium might be a lot higher a lot sooner than you think.

You might consider walking or swiming vs running to save your joints and medical expenses.
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Re: end of year layoff, can I retire?

Postby Mitchell777 » Sat Dec 15, 2012 5:28 pm

My only suggestion would be to review your monthly expenses. I, too, keep my expenses low. $1,350 per month for housing costs incl taxes, utilities, food, and auto expenses incl depreciation and insurance seems really low. Even it is a bit higher it appears you could retire. For me, the biggest concern these days is how long interest rates may require me to take an annual loss on my fixed income investments esp after taxes.
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Re: end of year layoff, can I retire?

Postby archbish99 » Sat Dec 15, 2012 6:43 pm

gdm129 wrote:1.1M in mutual funds 30% equity, 65% fixed, 5% cash
ss estimates if I stop work now and claim at:
62-1544
66-2105
70-2722
small pension of $430 at 65
expenses of 1850 per month including health care premium of 500. I am pretty low maintenance, my sport of choice is running where my main expense is 2-3 pair of good running shoes yearly.
six months severance
condo paid off, 500k equity
longevity in my family Dad died at 88, Mom is now 91!

I may want to keep working and choose to job search but would like to know if I have the option financially to retire. It looks good to me but I seek the wisdom and support of the Bogleheads. am I missing something?


Given the current interest rate environment, waiting is the better option with Social Security, I'll concede. Despite the current interest rates, TIPS are an option to guarantee inflation-adjusted income, and might be something to consider (though I'd substitute I-Bonds to the extent possible). So setting aside your expenses, here's how I would estimate your cash flow and portfolio if you take SS as late as possible....
  • TIPS ladder to provide $33k/year in inflation-adjusted income until age 70 (Social Security Equivalent): ~$525k
  • TIPS ladder to provide $5160/year in inflation-adjusted income until age 65 (Pension Equivalent): ~$50k
  • Remainder of portfolio in balanced stock-bond investments with 2% annual withdrawal rate: $525k => $10k/year
By choosing to defer Social Security, you have mostly-guaranteed inflation-adjusted income of $48k/year or $4000/month in perpetuity.

In either case, $4k/month is double your current estimate of expenses -- if you're confident that your expenses will not more than double in real terms, I'd say you're set. $2k/month is pretty aggressive, but $4k/month seems doable for certain areas of the country.
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