Wish to retire in 7 yrs. and request financial advice

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Outer Marker
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

Remember, you need to exclude prepaids and escrows. Those are not “real” closing costs. You just need to cover fees and expenses to make it no cost.
Topic Author
afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Mon Jun 14, 2021 6:14 pm
afr wrote: Mon Jun 14, 2021 5:57 pm I just tried both brokers and was given rates comparable to my current rate for a no cost loan. Said I'd be looking at 3k closing costs for a 3% loan.
What’s the rate on a 15 year term with -$1,200 in points?
2.75% for 15 year with $1200 in points.
Outer Marker
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Mon Jun 14, 2021 6:29 pm
Outer Marker wrote: Mon Jun 14, 2021 6:14 pm
afr wrote: Mon Jun 14, 2021 5:57 pm I just tried both brokers and was given rates comparable to my current rate for a no cost loan. Said I'd be looking at 3k closing costs for a 3% loan.
What’s the rate on a 15 year term with -$1,200 in points?
2.75% for 15 year with $1200 in points.
Is that +points, or -points? You need $1,200 in - points to make it no cost.
Topic Author
afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Mon Jun 14, 2021 6:34 pm
afr wrote: Mon Jun 14, 2021 6:29 pm
Outer Marker wrote: Mon Jun 14, 2021 6:14 pm
afr wrote: Mon Jun 14, 2021 5:57 pm I just tried both brokers and was given rates comparable to my current rate for a no cost loan. Said I'd be looking at 3k closing costs for a 3% loan.
What’s the rate on a 15 year term with -$1,200 in points?
2.75% for 15 year with $1200 in points.
Is that +points, or -points? You need $1,200 in - points to make it no cost.
+points
Outer Marker
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

So, what’s the rate with $1,200 in - points? I’m guessing maybe 3% for 15 year money, which saves you $1,300 a year at your current principal balance with about the same month payment (since you’re paying additional). That’s free money for the taking…
Topic Author
afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Mon Jun 14, 2021 6:58 pm So, what’s the rate with $1,200 in - points? I’m guessing maybe 3% for 15 year money, which saves you $1,300 a year at your current principal balance with about the same month payment (since you’re paying additional). That’s free money for the taking…
I did not receive a response regarding -$1200 points.
Outer Marker
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Mon Jun 14, 2021 7:26 pm
Outer Marker wrote: Mon Jun 14, 2021 6:58 pm So, what’s the rate with $1,200 in - points? I’m guessing maybe 3% for 15 year money, which saves you $1,300 a year at your current principal balance with about the same month payment (since you’re paying additional). That’s free money for the taking…
I did not receive a response regarding -$1200 points.
I'll PM you the names of a few loan officers at AmeriSave and Loan Depot. AmeriSave is the easiest, and they'll send you a rate sheet with the full range of loan products and points/credits for your loan amount and credit profile. I'd guestimate your costs are going to be around $1,200 if you can get the appraisal waived, $1,800 if you can't. Maybe a tad more. Since you're not keeping the loan for long, you care more about avoiding putting any of your money into the loan vs. getting the lowest possible rate. Sometimes there's an odd break in rates between one point/rate combination and another you can spot with the naked eye and take advantage of. Easier to see when you have the whole rate sheet in front of you.

After you've got the rates, you can try a bit of haggling playing one lender off against the other. You can probably at least get the "application fee" waived.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Thank You
Topic Author
afr
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Need to retire in 6 yrs. and requesting advice

Post by afr »

[Thread merged into here --admin LadyGeek]

Made some poor decisions(career and financial) and would like to retire from work in 6 more yrs. when I turn 67 yrs of age(mental and physical reasons). I'm 61 and spouse is 56. I'd still like to make some tweaks to our TIRA and Roth IRA accounts . Still planning to sell our home in 6 yrs. and move to AZ(downsize to a less expensive property in a 55 and over) where one of our kids live. Refi'd our previous 30 yr. mortgage@4% to a 15 yr.@2.75%(no cost) with a 136k balance. Still maxing out my 401k(takes no rollovers) and only making contributions to Vanguard Total Stock Index in our joint taxable account of 5k/month. Making no further contributions to our non-deductible TIRA's. Planning to do conversions to our Roth IRA's during retirement, when we'll be in a lower tax bracket.

Current income-
Me-180k, wife-35k(no 401k) and neither of us received medical(costs us $1340/mo. and I'll hopefully qualify for Medicare in 4 more yrs.
401k-60/40 AA, pooled office(no rollover possible) account managed thru Raymond James-$405,000

Emergency fund(4-5 mos. expenses)-AMEX online savings-$43,000

All funds held in Vanguard
Non-ded. TIRA's-STAR Fund(0.31 ER)-making no further contributions
Me-$178,500
W-$143,400

Roth IRA's-STAR
Me-$19,400
W-$21,500

Joint taxable account-limiting contributions to total stock fund of 5k/mo. until I retire
Total Stock Index-$106,700-
Limited Term Tax Exempt-$17,000
Health Care fund-$15,345(just changed dividends and cap gains to be directed to Total Stock fund)
Extended Market Index fund-$9100


I'm thinking of changing out of the STAR fund in our TIRA and Roth accounts and don't really want to bother with rebalancing either. Possibly changing our TIRA's to Target Retirement 2025 (0.13 ER) with a 58/42 AA or TR2020 w/AA of 50/50 and exchanging our Roth IRA's to TR2030 w/AA of 65/35. I'd like to try and be heavier in bonds while still allowing for a little growth in our TIRA's in order to keep the cost of gradual Roth conversions down when I retire. Any advice?

Thanks
inverter
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Re: Need to retire in 6 yrs. and requesting advice

Post by inverter »

What is the equity in your home?
What would a new home in AZ cost?
What will be your expenses?
Will your wife continue to work in AZ?
What about social security?
Topic Author
afr
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Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

inverter wrote: Thu Jun 17, 2021 4:58 pm What is the equity in your home?
What would a new home in AZ cost?
What will be your expenses?
Will your wife continue to work in AZ?
What about social security?
Refi'd 136k on our home currently valued at 400-415k. Plan on selling when i retire in 6 yrs. Will be looking for a 2BDRM condo/home in AZ(Sun City/Bullhead City) in a 55 and over preferably under 300k My SS should be ~3k/mo. plus my wife's maybe 1200-1500/mo. I'll have Medicare in 4 more yrs. but will have to carry my wife privately for 4 yrs. I doubt either of us will work. Other than taxes,utilities,food we don't spend(or have) much.
chassis
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Re: Need to retire in 6 yrs. and requesting advice

Post by chassis »

One common method to work this out is the "4% rule". It means 4% withdrawal of your portfolio should theoretically be sustainable for 30+ years.

What are your annual living expenses? Multiply this number by 25 (the inverse of 4%) and this is the total portfolio size you need at retirement.

To factor in Social Security, subtract pre-tax Social Security compensation from your pretax living expenses. Then multiply the result by 25. This is the total portfolio size you need.

For example, if you have a portfolio of $500,000, the 4% rule says it can sustain $20k per year in withdrawals for 30+ years. Add Social Security of $40k per year, and pretax living expenses of $60k per year could be supported by a $500k portfolio plus Social Security of $40k per year.
delamer
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Re: Need to retire in 6 yrs. and requesting advice

Post by delamer »

What’s the 401(k) invested in?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
Topic Author
afr
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Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

chassis wrote: Thu Jun 17, 2021 9:38 pm One common method to work this out is the "4% rule". It means 4% withdrawal of your portfolio should theoretically be sustainable for 30+ years.

What are your annual living expenses? Multiply this number by 25 (the inverse of 4%) and this is the total portfolio size you need at retirement.

To factor in Social Security, subtract pre-tax Social Security compensation from your pretax living expenses. Then multiply the result by 25. This is the total portfolio size you need.

For example, if you have a portfolio of $500,000, the 4% rule says it can sustain $20k per year in withdrawals for 30+ years. Add Social Security of $40k per year, and pretax living expenses of $60k per year could be supported by a $500k portfolio plus Social Security of $40k per year.
Anticipated spending will include medical insurance for my wife for 4 yrs,(in addition to my Medicare premium). Other than utilities, taxes, HOA, food, entertainment and auto insurance not really much more. We don't anticipate having a mortgage anymore.
Topic Author
afr
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Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

delamer wrote: Thu Jun 17, 2021 11:01 pm What’s the 401(k) invested in?

CASH-10.92%
US STOCKS-40.30%
NON-US STOCKS-19.68%
BONDS-21.9%
OTHER/NOT CLSFD-7.19%

I'm unable to insert images of the exact funds, which are many.
dogagility
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Re: Need to retire in 6 yrs. and requesting advice

Post by dogagility »

Thoughts and questions in blue below.
afr wrote: Thu Jun 17, 2021 4:33 pm Still maxing out my 401k(takes no rollovers) and only making contributions to Vanguard Total Stock Index in our joint taxable account of 5k/month. Making no further contributions to our non-deductible TIRA's. Planning to do conversions to our Roth IRA's during retirement, when we'll be in a lower tax bracket.
You should be maxing out your Roth IRA contributions each year. Is this happening?
Current income-
Me-180k, wife-35k(no 401k) and neither of us received medical(costs us $1340/mo. and I'll hopefully qualify for Medicare in 4 more yrs.
401k-60/40 AA, pooled office(no rollover possible) account managed thru Raymond James-$405,000
What are your investment choices in this 401k account?

You should be contributing the maximum tax deductible amount each year to your 401k. Is this happening?

Emergency fund(4-5 mos. expenses)-AMEX online savings-$43,000

All funds held in Vanguard
Non-ded. TIRA's-STAR Fund(0.31 ER)-making no further contributions
Me-$178,500
W-$143,400

I'm thinking of changing out of the STAR fund in our TIRA and Roth accounts and don't really want to bother with rebalancing either. Possibly changing our TIRA's to Target Retirement 2025 (0.13 ER) with a 58/42 AA or TR2020 w/AA of 50/50 and exchanging our Roth IRA's to TR2030 w/AA of 65/35. I'd like to try and be heavier in bonds while still allowing for a little growth in our TIRA's in order to keep the cost of gradual Roth conversions down when I retire. Any advice?
You should consider your entire retirement portfolio as a single entity for asset allocation purposes. What is your desired AA now and in the future? You seem to be at about 60/40 now, which is reasonable. I'm no convinced moving out of the a balanced fund like STAR will make your portfolio easier to manage, but it might if you want to reduce your equity exposure over time.
The more flexibility you have the less you need to know what happens next. -- Morgan Housel
Topic Author
afr
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Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

dogagility wrote: Fri Jun 18, 2021 5:49 am Thoughts and questions in blue below.
afr wrote: Thu Jun 17, 2021 4:33 pm
Still maxing out my 401k(takes no rollovers) and only making contributions to Vanguard Total Stock Index in our joint taxable account of 5k/month. Making no further contributions to our non-deductible TIRA's. Planning to do conversions to our Roth IRA's during retirement, when we'll be in a lower tax bracket.
You should be maxing out your Roth IRA contributions each year. Is this happening? No. Total Stock Index in joint taxable only. Don't qualify for a Roth and too costly to convert
Current income-
Me-180k, wife-35k(no 401k) and neither of us received medical(costs us $1340/mo. and I'll hopefully qualify for Medicare in 4 more yrs.
401k-60/40 AA, pooled office(no rollover possible) account managed thru Raymond James-$405,000
What are your investment choices in this 401k account?

You should be contributing the maximum tax deductible amount each year to your 401k. Is this happening?
Yes
Emergency fund(4-5 mos. expenses)-AMEX online savings-$43,000

All funds held in Vanguard
Non-ded. TIRA's-STAR Fund(0.31 ER)-making no further contributions
Me-$178,500
W-$143,400

I'm thinking of changing out of the STAR fund in our TIRA and Roth accounts and don't really want to bother with rebalancing either. Possibly changing our TIRA's to Target Retirement 2025 (0.13 ER) with a 58/42 AA or TR2020 w/AA of 50/50 and exchanging our Roth IRA's to TR2030 w/AA of 65/35. I'd like to try and be heavier in bonds while still allowing for a little growth in our TIRA's in order to keep the cost of gradual Roth conversions down when I retire. Any advice?
You should consider your entire retirement portfolio as a single entity for asset allocation purposes. What is your desired AA now and in the future? You seem to be at about 60/40 now, which is reasonable. I'm no convinced moving out of the a balanced fund like STAR will make your portfolio easier to manage, but it might if you want to reduce your equity exposure over time.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by LadyGeek »

afr - In order to give appropriate advice, it's best to keep all the info in one spot. I merged your update back into the thread.

(Thanks to the member who reported the post and supplied a link to the original thread.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
dogagility
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Re: Need to retire in 6 yrs. and requesting advice

Post by dogagility »

afr wrote: Fri Jun 18, 2021 5:58 am
dogagility wrote: Fri Jun 18, 2021 5:49 am Thoughts and questions in blue below.
afr wrote: Thu Jun 17, 2021 4:33 pm
Still maxing out my 401k(takes no rollovers) and only making contributions to Vanguard Total Stock Index in our joint taxable account of 5k/month. Making no further contributions to our non-deductible TIRA's. Planning to do conversions to our Roth IRA's during retirement, when we'll be in a lower tax bracket.
You should be maxing out your Roth IRA contributions each year. Is this happening? No. Total Stock Index in joint taxable only. Don't qualify for a Roth and too costly to convert
I'm not an expert at the Backdoor Roth IRA contribution, so I might be thinking of this incorrectly. However, if your traditional IRA is all non-deductible (after tax contributions), then contributing to your Roth IRAs via the Backdoor might not incur any additional income tax?

Hopefully, others will chime in on this topic.
The more flexibility you have the less you need to know what happens next. -- Morgan Housel
Outer Marker
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Re: Need to retire in 6 yrs. and requesting advice

Post by Outer Marker »

afr wrote: Thu Jun 17, 2021 4:33 pm Refi'd our previous 30 yr. mortgage@4% to a 15 yr.@2.75%(no cost) with a 136k balance.

Emergency fund(4-5 mos. expenses)-AMEX online savings-$43,000

All funds held in Vanguard
Non-ded. TIRA's-STAR Fund(0.31 ER)-making no further contributions
Me-$178,500
W-$143,400

Roth IRA's-STAR
Me-$19,400
W-$21,500

Joint taxable account-limiting contributions to total stock fund of 5k/mo. until I retire
Total Stock Index-$106,700-
Limited Term Tax Exempt-$17,000
Health Care fund-$15,345(just changed dividends and cap gains to be directed to Total Stock fund)
Extended Market Index fund-$9100

I'm thinking of changing out of the STAR fund in our TIRA and Roth accounts and don't really want to bother with rebalancing either. Possibly changing our TIRA's to Target Retirement 2025 (0.13 ER) with a 58/42 AA or TR2020 w/AA of 50/50 and exchanging our Roth IRA's to TR2030 w/AA of 65/35. I'd like to try and be heavier in bonds while still allowing for a little growth in our TIRA's in order to keep the cost of gradual Roth conversions down when I retire. Any advice?
Wow. Considering the course of this thread, turning the corner on refi'ing the mortgage is huge. Congratulations. Over the next six years that will save you roughly $10,000 in round numbers with no risk. What finally convinced your wife?

I would go TR 2030 across the board in all of the retirement accounts. Keep it simple. It really doesn't pay to hold bonds right now, but 65/35 AA should keep the ride from getting too rocky in your retirement accounts. Be aware that you are increasing your international exposure, but since all your taxable funds are US, that's probably a good thing.

You probably don't need that much EF in online savings. Convert it to i-Bonds over the next few years at $10,000 per person, per year. Funds are withdrawable after 1 year, so you'll never be below $20,000 in immediately accessible cash. Not to mention your other substantial assets.

Since you know you'll be selling your house in 6 years, I'd basically treat that as a temporary store for "fixed income." I would not buy any more bonds directly, and in fact would consider applying the $17,000 you have sitting in LTD term tax exempt towards the mortgage once the refi is complete. Current SEC yield is 0.3%, whereas you're earning nearly 10x that amount on your mortgage - risk free.

Plan on self-funding the three years of your retirement from age 67 to 70 and begin SSI then. Here's the reason: viewtopic.php?t=102609
retiredjg
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Re: Need to retire in 6 yrs. and requesting advice

Post by retiredjg »

dogagility wrote: Fri Jun 18, 2021 6:34 am
afr wrote: Fri Jun 18, 2021 5:58 am
dogagility wrote: Fri Jun 18, 2021 5:49 am Thoughts and questions in blue below.
afr wrote: Thu Jun 17, 2021 4:33 pm
Still maxing out my 401k(takes no rollovers) and only making contributions to Vanguard Total Stock Index in our joint taxable account of 5k/month. Making no further contributions to our non-deductible TIRA's. Planning to do conversions to our Roth IRA's during retirement, when we'll be in a lower tax bracket.
You should be maxing out your Roth IRA contributions each year. Is this happening? No. Total Stock Index in joint taxable only. Don't qualify for a Roth and too costly to convert
I'm not an expert at the Backdoor Roth IRA contribution, so I might be thinking of this incorrectly. However, if your traditional IRA is all non-deductible (after tax contributions), then contributing to your Roth IRAs via the Backdoor might not incur any additional income tax?

Hopefully, others will chime in on this topic.
If I recall correctly from previous threads, each tIRA contains basis (documented on 8606) but there is still a good amount of pre-tax money in each one. So using the backdoor would not be tax-free but it would not be completely taxable either.

However, with income of $180 + $35, a contribution of $19.5k and catch up of $6.5k to the 401k would bring the income down below the $198k Roth IRA limit and still leave plenty of money available to fund both Roth IRAs and still put some into taxable.

afr, there is not a lot of wiggle room there, so a bonus might mess this up. You might end up in the phase out zone but that could still mean a significant contribution to two Roth IRAs if that is important to you. I would wait to make the Roth IRA contributions until after you have a solid handle on your actual income. If you can't go Roth IRA, it can always go into taxable.
retiredjg
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Re: Need to retire in 6 yrs. and requesting advice

Post by retiredjg »

afr wrote: Thu Jun 17, 2021 4:33 pm Refi'd our previous 30 yr. mortgage@4% to a 15 yr.@2.75%(no cost) with a 136k balance.
You got your mortgage refinanced in 2 days? Is that really possible?
chassis
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Re: Need to retire in 6 yrs. and requesting advice

Post by chassis »

afr wrote: Fri Jun 18, 2021 5:14 am
chassis wrote: Thu Jun 17, 2021 9:38 pm One common method to work this out is the "4% rule". It means 4% withdrawal of your portfolio should theoretically be sustainable for 30+ years.

What are your annual living expenses? Multiply this number by 25 (the inverse of 4%) and this is the total portfolio size you need at retirement.

To factor in Social Security, subtract pre-tax Social Security compensation from your pretax living expenses. Then multiply the result by 25. This is the total portfolio size you need.

For example, if you have a portfolio of $500,000, the 4% rule says it can sustain $20k per year in withdrawals for 30+ years. Add Social Security of $40k per year, and pretax living expenses of $60k per year could be supported by a $500k portfolio plus Social Security of $40k per year.
Anticipated spending will include medical insurance for my wife for 4 yrs,(in addition to my Medicare premium). Other than utilities, taxes, HOA, food, entertainment and auto insurance not really much more. We don't anticipate having a mortgage anymore.
@afr What are you anticipated living expenses including medical insurance, utilities, taxes, HOA, food, entertainment, auto insurance and anything else? This tells you what portfolio size you need. If your portfolio isn't large enough using the 4% rule, Social Security compensation (after tax) can be deducted from after tax living expenses, to re-calculate the required portfolio using the 4% rule.

What are your living expenses in terms of dollars per year?
Topic Author
afr
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Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

retiredjg wrote: Fri Jun 18, 2021 8:11 am
afr wrote: Thu Jun 17, 2021 4:33 pm Refi'd our previous 30 yr. mortgage@4% to a 15 yr.@2.75%(no cost) with a 136k balance.
You got your mortgage refinanced in 2 days? Is that really possible?
Approved but waiting for processing
Topic Author
afr
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Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

chassis wrote: Fri Jun 18, 2021 9:39 am
afr wrote: Fri Jun 18, 2021 5:14 am
chassis wrote: Thu Jun 17, 2021 9:38 pm One common method to work this out is the "4% rule". It means 4% withdrawal of your portfolio should theoretically be sustainable for 30+ years.

What are your annual living expenses? Multiply this number by 25 (the inverse of 4%) and this is the total portfolio size you need at retirement. Maybe 3-4K

To factor in Social Security, subtract pre-tax Social Security compensation from your pretax living expenses. Then multiply the result by 25. This is the total portfolio size you need.

For example, if you have a portfolio of $500,000, the 4% rule says it can sustain $20k per year in withdrawals for 30+ years. Add Social Security of $40k per year, and pretax living expenses of $60k per year could be supported by a $500k portfolio plus Social Security of $40k per year.
Anticipated spending will include medical insurance for my wife for 4 yrs,(in addition to my Medicare premium). Other than utilities, taxes, HOA, food, entertainment and auto insurance not really much more. We don't anticipate having a mortgage anymore.
@afr What are you anticipated living expenses including medical insurance, utilities, taxes, HOA, food, entertainment, auto insurance and anything else? This tells you what portfolio size you need. If your portfolio isn't large enough using the 4% rule, Social Security compensation (after tax) can be deducted from after tax living expenses, to re-calculate the required portfolio using the 4% rule.

What are your living expenses in terms of dollars per year?
Not entirely certain since we don’t plan on having a mortgage and will only be paying private medical for my wife for a few yrs. I plan on taking SS at 67(wife at 62)so about 3k for me and 1200-1500 for my wife per month
Outer Marker
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Re: Need to retire in 6 yrs. and requesting advice

Post by Outer Marker »

afr wrote: Fri Jun 18, 2021 11:18 am I plan on taking SS at 67(wife at 62) so about 3k for me and 1200-1500 for my wife per month
For the reasons explained in the thread above, taking SS at 67 is likely significantly sub-optimal to claiming at 70. Each year you delay increases your benefit by 8% percent, for a total of 24% for 3 years. That's 24% additional, inflation-adjusted income for the rest of your life. You can't find a deal anywhere near that good in the commercial marketplace. You have more than enough assets to carry yourself 3 years. Unless you've got a serious underlying health condition that makes you think you won't live very long, I'd think carefully about that decision.
MrCheapo
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Re: Wish to retire in 7 yrs. and request financial advice

Post by MrCheapo »

Do you have a pension or SS coming? As people have said your expenses will be critical and not to be a downer, but given your savings its going to be hard to retire in comfort if you have no pension or SS.
afr wrote: Thu Jul 16, 2020 2:03 pm Hi,
I'm currently 60 yrs. old(wife is 55) and would like to retire in 7 yrs. We had a very late start due to a poor business decision I had made-Vanguard accounts

TIRA(non-deductible)-STAR-$132,000/wife-$104,000(we both max yearly)
ROTH IRA(started when we qualified and will contribute towards this yr due to income drop)-STAR-$16,000/wife-$17,000
We were in the 24% tax bracket and I was planning on doing gradual Roth conversions in retirement, when I anticipate being in a much lower tax bracket.

joint taxable account-
VEXAX-$4600
VGHCX-$13,000
VMLTX-$17,000
VTIAX-$8500
VTSAX-$74,000

401k(pooled office account thru my employer and managed with Raymond James-about 60%equity/40%fixed, no match and unable to accept any rollovers. I max out yearly and keep in order to reduce my taxable income)-$335,000 Wife has no 401k available

Emergency cash account with AMEX online savings(earning 1%)-$49,500

Currently have $149,700 remaining on a 30 yr fixed mortgage of $233,000@4%(home currently worth ~$350,000) and we also add an extra $500/mo principal pmt.
Auto loan with $11,250 remaining on a loan of $13,900@1.99%

Any advice would be appreciated. Thank you
chassis
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Re: Wish to retire in 7 yrs. and request financial advice

Post by chassis »

@afr you are not answering questions directly, which will help give you guidance you are seeking.

Please answer the question directly : what are your annual living expenses when you have no mortgage and you are paying for health insurance?

Social security compensation has no relation to the above question.

Thanks! :)
Topic Author
afr
Posts: 292
Joined: Sun Apr 27, 2014 4:01 pm

Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

Outer Marker wrote: Fri Jun 18, 2021 12:00 pm
afr wrote: Fri Jun 18, 2021 11:18 am I plan on taking SS at 67(wife at 62) so about 3k for me and 1200-1500 for my wife per month
For the reasons explained in the thread above, taking SS at 67 is likely significantly sub-optimal to claiming at 70. Each year you delay increases your benefit by 8% percent, for a total of 24% for 3 years. That's 24% additional, inflation-adjusted income for the rest of your life. You can't find a deal anywhere near that good in the commercial marketplace. You have more than enough assets to carry yourself 3 years. Unless you've got a serious underlying health condition that makes you think you won't live very long, I'd think carefully about that decision.

Part of my reluctance to take SS at 67 is due to my being financially insecure about having sufficient assets to carry us for 3 yrs. And a bad feeling of taking a cut to my SS payment in 2035, when the day of reckoning comes due.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

chassis wrote: Fri Jun 18, 2021 12:36 pm @afr you are not answering questions directly, which will help give you guidance you are seeking.

Please answer the question directly : what are your annual living expenses when you have no mortgage and you are paying for health insurance?

Social security compensation has no relation to the above question.

Thanks! :)
Taking the mortgage and health insurance premium out of the equation leaves about $3000 in monthly expenses, so roughly $35-40k per year annual expenses
Last edited by afr on Fri Jun 18, 2021 2:00 pm, edited 3 times in total.
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Re: Need to retire in 6 yrs. and requesting advice

Post by Outer Marker »

afr wrote: Fri Jun 18, 2021 1:13 pm Part of my reluctance to take SS at 67 is due to my being financially insecure about having sufficient assets to carry us for 3 yrs. And a bad feeling of taking a cut to my SS payment in 2035, when the day of reckoning comes due.
I don't say this often, but I think you're in much better financial shape than you think. You've got nearly $1M in listed retirement assets already - not counting home equity. You're projecting retirement expenses of $50,000/year. Plus, you've got 7 more years of significant accumulation ahead of you. If your expenses are correct, you've got more than enough. By optimizing SSI withdraws strategy, claiming at 70 would cover all of your expenses from that source alone. Convering 3 years of $50K expenses requires only $150K - and you've got $1M in the bank already. What's the worry? Granted, I haven't gotten out a sharp pencil and gotten into taxes etc, but this is not a borderline situation. If anything, if you wanted to, I think you could comfortably move up retirement a couple years to 65 or so - when you'd be covered by Medicare.

I don't want to delve into prohibited political discussion, but I think you'd do well to optimize your SSI strategy on existing law and projected benefits. I'm a few years younger than you, and not particularly worried about it. You and I will both have enough either way, even if there's a haircut. :beer
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

P.S. delaying SSI will also help you optimize taxes by drawing down your IRAs and doing Roth conversions without the benefit of SSI working against you, tax-wise, in the early years.
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Re: Need to retire in 6 yrs. and requesting advice

Post by afr »

Outer Marker wrote: Fri Jun 18, 2021 1:56 pm
afr wrote: Fri Jun 18, 2021 1:13 pm Part of my reluctance to take SS at 67 is due to my being financially insecure about having sufficient assets to carry us for 3 yrs. And a bad feeling of taking a cut to my SS payment in 2035, when the day of reckoning comes due.
I don't say this often, but I think you're in much better financial shape than you think. You've got nearly $1M in listed retirement assets already - not counting home equity. You're projecting retirement expenses of $50,000/year. Plus, you've got 7 more years of significant accumulation ahead of you. If your expenses are correct, you've got more than enough. By optimizing SSI withdraws strategy, claiming at 70 would cover all of your expenses from that source alone. Convering 3 years of $50K expenses requires only $150K - and you've got $1M in the bank already. What's the worry? Granted, I haven't gotten out a sharp pencil and gotten into taxes etc, but this is not a borderline situation. If anything, if you wanted to, I think you could comfortably move up retirement a couple years to 65 or so - when you'd be covered by Medicare.

I don't want to delve into prohibited political discussion, but I think you'd do well to optimize your SSI strategy on existing law and projected benefits. I'm a few years younger than you, and not particularly worried about it. You and I will both have enough either way, even if there's a haircut. :beer
I revised the number to 35-40k per year in expenses. I took out the medical premium I put on my CC every month
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Fri Jun 18, 2021 1:58 pm P.S. delaying SSI will also help you optimize taxes by drawing down your IRAs and doing Roth conversions without the benefit of SSI working against you, tax-wise, in the early years.
I can see that. I always assumed it was best to draw from taxable account first. But I suppose not in my situation.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by sureshoe »

afr wrote: Mon Jun 14, 2021 5:57 pm I just tried both brokers and was given rates comparable to my current rate for a no cost loan. Said I'd be looking at 3k closing costs for a 3% loan.
https://www.bankrate.com/mortgages/mort ... Code=45040
Go to Better.Com and refinance tomorrow. Really no excuse unless you have bad credit. The other option is to just pay it down - which would be my choice given your circumstance. Over 7 years you're going to save about $10k in a refi probably. Not earth shattering.

I'd just throw every spare cent at it. If you had any opportunity to harvest losses on the taxable account, I would liquidate that and throw it at the mortgage.

It just doesn't make sense to have $50k in savings getting 1%, a 60/40 AA, and paying 4% on the house.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by sureshoe »

Outer Marker wrote: Mon Jun 14, 2021 3:09 pm
afr wrote: Mon Jun 14, 2021 2:47 pm I'd appreciate any and all advice. Thank you.
Why seek advice if you are not willing to make changes?

1. It is clearly a mistake not to refi at no cost to a lower rate mortgage.

2. It is likely a mistake to take SSI at FRA and not wait until 70. viewtopic.php?t=102609
For what it's worth, I agree with you on the refinance - but if he's only going to be in the house for 5-8 years, the savings are not all that substantial. Maybe 1% of his total net worth. Not saying he shouldn't do it, but it's not this complete failure in his retirement plan.

That is part of the reason I would lean more toward paying it down to make an even more nominal number at this point, but that's me.
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Re: Need to retire in 6 yrs. and requesting advice

Post by Outer Marker »

afr wrote: Fri Jun 18, 2021 2:02 pm I revised the number to 35-40k per year in expenses. I took out the medical premium I put on my CC every month
As long as your numbers are right, you're in great shape. Enjoy your extra years at 65 unless you like your job . . .
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

sureshoe wrote: Fri Jun 18, 2021 2:27 pm For what it's worth, I agree with you on the refinance - but if he's only going to be in the house for 5-8 years, the savings are not all that substantial. Maybe 1% of his total net worth. Not saying he shouldn't do it, but it's not this complete failure in his retirement plan.

That is part of the reason I would lean more toward paying it down to make an even more nominal number at this point, but that's me.
$10K is $10K. Unless it's paid off tomorrow, a no-cost refi is a total no brainer. I'll stop on the street to pick up a quarter. I'd sure be willing to sign a few papers for $10K in free money!
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Chadnudj »

afr wrote: Mon Jun 14, 2021 3:16 pm I suppose I should restate. I'd really like advice regarding my retirement portfolio and the possible changes that I'm thinking of making. My wife's feelings are that we are going to sell our property in 6 yrs. and does not want to go thru the headache of added costs and paperwork involved. I don't know what else to say regarding that matter. Thank you.
Can I ask you (or maybe your wife): if this is the case, why are you paying an extra $500 a month on your mortgage? Why not take that $500 a month and plow it into additional savings/investing in your taxable/tax advantaged accounts?

Seems like a strange stance (to me, at least) to say "we won't refinance to a lower rate because we're selling in six years anyways" while also plowing $500 extra per month into paying off principal (reducing liquidity and perhaps losing money if stocks outperform your 4% interest rate saved on that principal/appreciation of the home value itself).
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Wiggums »

Outer Marker wrote: Fri Jun 18, 2021 1:58 pm P.S. delaying SSI will also help you optimize taxes by drawing down your IRAs and doing Roth conversions without the benefit of SSI working against you, tax-wise, in the early years.
we are doing this — delaying SSI and doing Roth conversions
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Re: Wish to retire in 7 yrs. and request financial advice

Post by sureshoe »

Chadnudj wrote: Fri Jun 18, 2021 2:44 pm
afr wrote: Mon Jun 14, 2021 3:16 pm I suppose I should restate. I'd really like advice regarding my retirement portfolio and the possible changes that I'm thinking of making. My wife's feelings are that we are going to sell our property in 6 yrs. and does not want to go thru the headache of added costs and paperwork involved. I don't know what else to say regarding that matter. Thank you.
Can I ask you (or maybe your wife): if this is the case, why are you paying an extra $500 a month on your mortgage? Why not take that $500 a month and plow it into additional savings/investing in your taxable/tax advantaged accounts?

Seems like a strange stance (to me, at least) to say "we won't refinance to a lower rate because we're selling in six years anyways" while also plowing $500 extra per month into paying off principal (reducing liquidity and perhaps losing money if stocks outperform your 4% interest rate saved on that principal/appreciation of the home value itself).
At their age and AA, it makes very little sense to "plow money" into a taxable account when many parts of their portfolio are earning less than 2%. If they were investing aggressively at at a 90/10 type AA, then I'd feel different, but that's not the case.

There are 3 discussions here: 1)What is the right AA? 2)Should they refinance? 3)Should they pay down the mortgage?

Feels like they're somewhat firm on 1+2, which I don't think are ultra-bad decisions. So - paying off the mortgage is a good call as a reasonable option. There aren't a lot of places you can get a 4% tax-free return on your money.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

If you back up and read the thread, they are doing a no cost refi at 2.75 which is a very good decision and doesn’t need to be revisited. AA is reasonable. And, paying down the mortgage is a perfectly reasonable alternative to buying into a frothy market and/or low yielding bonds. In fact , OP seems to have opted for a bit of everything, which is good. There is more than one road to Dublin. Simultaneously and complimentary strategies are a good way to go.
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Re: Need to retire in 6 yrs. and requesting advice

Post by retiredjg »

afr wrote: Fri Jun 18, 2021 11:07 am
retiredjg wrote: Fri Jun 18, 2021 8:11 am
afr wrote: Thu Jun 17, 2021 4:33 pm Refi'd our previous 30 yr. mortgage@4% to a 15 yr.@2.75%(no cost) with a 136k balance.
You got your mortgage refinanced in 2 days? Is that really possible?
Approved but waiting for processing
Impressive.
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

I'm going to keep maxing out my 401k and contribute 5k/month(or more if I can) to the total stock index fund in our joint taxable account for the next 6 yrs., making no further contributions to our non-deductible TIRA's. Then I'll plan on taking distributions from those TIRA's to carry us for 3 yrs. and then take SS at 70(though I'm not sure when my wife should take her SS, since I've been the higher earner and she's 4 yrs .younger than me).
I also wanted to get out of the higher ER STAR funds in our TIRA's and Roth's. Something like 60-65% VTSAX and 30-35% intermediate or limited-term tax exempt fund. Any suggestions?
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Sat Jun 19, 2021 9:56 am I also wanted to get out of the higher ER STAR funds in our TIRA's and Roth's. Something like 60-65% VTSAX and 30-35% intermediate or limited-term tax exempt fund. Any suggestions?
If you're willing to do the work of overhauling and rebalancing your portfolio, you could better optimize your taxes by holding all equities in roth, all equities in taxable, and whatever bonds are needed in your TIRAs and 401Ks. (Never hold a tax exempt bond fund in tax-advantaged). If you just want an all-in-one fund, similar to STAR with lower ER, any of the following would work:

-Vanguard Balanced Fund
-Lifestrategy Moderate Growth
-Target Retirement 2030
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Re: Wish to retire in 7 yrs. and request financial advice

Post by retiredjg »

afr wrote: Sat Jun 19, 2021 9:56 am I'm going to keep maxing out my 401k and contribute 5k/month(or more if I can) to the total stock index fund in our joint taxable account for the next 6 yrs., making no further contributions to our non-deductible TIRA's.
Ok. But did you see my post above - I think you are eligible for Roth IRA. Is that incorrect or would you just prefer to put money into taxable rather than Roth IRA?


I also wanted to get out of the higher ER STAR funds in our TIRA's and Roth's. Something like 60-65% VTSAX and 30-35% intermediate or limited-term tax exempt fund. Any suggestions?
Since you seem to prefer balanced funds and since you are at Vanguard, I would think that LifeStrategy moderate growth fund or a target fund near 60/40 would be the best choice.

You should probably not hold a tax-exempt fund in IRAs.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by Outer Marker »

afr wrote: Thu Jul 16, 2020 2:03 pm Emergency cash account with AMEX online savings(earning 1%)-$49,500 . . .

Auto loan with $11,250 remaining on a loan of $13,900@1.99%
In eyeballing your accounts for a potential overhaul, I spotted this one other bit of small, low-hanging fruit.

Pay off the auto loan with some of your emergency cash. There's no need for an EF that large (if at all). You're lending money at 1% and borrowing at 2%. No sense in that. $140 a year in interest savings may not be much, but its a nice free dinner out. To the extent you need an EF, it is smaller because you've eliminated the required monthly car payment.
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Sat Jun 19, 2021 10:10 am
afr wrote: Sat Jun 19, 2021 9:56 am I also wanted to get out of the higher ER STAR funds in our TIRA's and Roth's. Something like 60-65% VTSAX and 30-35% intermediate or limited-term tax exempt fund. Any suggestions?
If you're willing to do the work of overhauling and rebalancing your portfolio, you could better optimize your taxes by holding all equities in roth, all equities in taxable, and whatever bonds are needed in your TIRAs and 401Ks. (Never hold a tax exempt bond fund in tax-advantaged). If you just want an all-in-one fund, similar to STAR with lower ER, any of the following would work:

-Vanguard Balanced Fund
-Lifestrategy Moderate Growth
-Target Retirement 2030
That sounds reasonable. VTSAX in our small Roth IRA's and Total Bond Index in our TIRA's? Any other Vanguard bond fund recommendations?
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

retiredjg wrote: Sat Jun 19, 2021 10:23 am
afr wrote: Sat Jun 19, 2021 9:56 am I'm going to keep maxing out my 401k and contribute 5k/month(or more if I can) to the total stock index fund in our joint taxable account for the next 6 yrs., making no further contributions to our non-deductible TIRA's.
Ok. But did you see my post above - I think you are eligible for Roth IRA. Is that incorrect or would you just prefer to put money into taxable rather than Roth IRA?

Still ineligible for direct Roth contribution due to MAGI, however we were able to deduct a small amount of my wife's IRA contribution last year. Still puts us in the 24% fed bracket.


I also wanted to get out of the higher ER STAR funds in our TIRA's and Roth's. Something like 60-65% VTSAX and 30-35% intermediate or limited-term tax exempt fund. Any suggestions?
Since you seem to prefer balanced funds and since you are at Vanguard, I would think that LifeStrategy moderate growth fund or a target fund near 60/40 would be the best choice.

You should probably not hold a tax-exempt fund in IRAs.
Understood
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afr
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Re: Wish to retire in 7 yrs. and request financial advice

Post by afr »

Outer Marker wrote: Sat Jun 19, 2021 10:27 am
afr wrote: Thu Jul 16, 2020 2:03 pm Emergency cash account with AMEX online savings(earning 1%)-$49,500 . . .

Auto loan with $11,250 remaining on a loan of $13,900@1.99%
In eyeballing your accounts for a potential overhaul, I spotted this one other bit of small, low-hanging fruit.

Pay off the auto loan with some of your emergency cash. There's no need for an EF that large (if at all). You're lending money at 1% and borrowing at 2%. No sense in that. $140 a year in interest savings may not be much, but its a nice free dinner out. To the extent you need an EF, it is smaller because you've eliminated the required monthly car payment.
Paid it off a while ago. But thanks.
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