Early Retirement - What are we not considering?

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Greywolf
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Joined: Thu Jul 28, 2016 8:12 pm

Early Retirement - What are we not considering?

Post by Greywolf » Sun Mar 05, 2017 12:02 pm

Hello,
Very long time reader and first time posting. I've learned much from these forums.
My spouse and I are both considering retiring within the next 12 months. We are in our both in our upper 50's.
Our scenario is as follows -
Anticipated Pensions - 140,000 combined (no cola)
Retirement Savings - 875,000 Vanguard 403b + 110,000 Roth IRA (both approx 75% equity 25% bond)
Taxable Investments (stocks) 50,000
Bank/CD/MM - 260,000

Estimated annual expenses (based on 13 months of tracking) - 84,000 (includes medical - does not include current fed 25% and state tax 5%).
No debt, house, cars, children's college are paid in full. Expect expenses may decrease some when not working.
Have recently replaced some big ticket items like the furnace, AC and several appliances.

Both SS eligible. Either survivor will receive approximately 75% of the total pension amount above plus SS after 67. Each survivor will also receive a life insurance payout of approximately 50,000. May or may not work part time in the future. Expect some opportunities but these are not factored into any plans.

We have run the numbers through various spreadsheets and scenarios. After many years, it seems like we're close to "winning the game".

For folks who have retired, is there anything we're missing?

AlexanderTheMediocre
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Joined: Wed Aug 17, 2016 6:20 pm

Re: Early Retirement - What are we not considering?

Post by AlexanderTheMediocre » Sun Mar 05, 2017 12:44 pm

I feel like your numbers look pretty good. Will you be immediately accessing your pensions? If so, hard to argue that you haven't won the game, even with uncertain healthcare outcomes ahead.

One thing to keep in mind, especially with no COLA on your pension, is that you may want to delay SS as long as possible to maximize your COLA income later in life.

Also, make sure that quarter million dollars in the bank is not losing value to inflation. That can mean converting 20k to I-bonds each year, high yield savings accounts, and a CD ladder (which it looks like you mention).

Your retirement savings allocations are fairly aggressive, but you have the strong pension income to do that. You may want to ramp that down to a bit more fixed income over time if it looks like you will start to need to tap that.

livesoft
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Re: Early Retirement - What are we not considering?

Post by livesoft » Sun Mar 05, 2017 12:46 pm

You probably don't need an emergency fund any more.
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HIinvestor
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Re: Early Retirement - What are we not considering?

Post by HIinvestor » Sun Mar 05, 2017 11:41 pm

Congrats!

Have you figured out how and where you will be getting medical insurance between retirement and when you qualify for Medicare? Premiums may be significantly higher than you are used to, especially depending on what happens with Congress and ACA. Have you priced policies available in your area that are not provided by your employer? COLA would require you to pay the full premium on the group plan (the part you're now paying plus what your employer pays + 3% admin costs) -- it is only available for 18 months after you leave your job.

Many of us know folks who keep working so they can keep getting good, affordable medical insurance with the employer's group plan.

Greywolf
Posts: 7
Joined: Thu Jul 28, 2016 8:12 pm

Re: Early Retirement - What are we not considering?

Post by Greywolf » Mon Mar 06, 2017 9:41 am

Thank you for the replies.
To answer some of the questions -
Our medical will be covered until Medicare eligible.
We are always looking for more yield for the bank/CD/MM assets.
Currently a small amount of these funds are in the bank, the rest is in high yield online MM funds with some laddered CD's.
Appreciate the input!

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JDCarpenter
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Re: Early Retirement - What are we not considering?

Post by JDCarpenter » Mon Mar 06, 2017 10:10 am

Greywolf wrote:Thank you for the replies.
To answer some of the questions -
Our medical will be covered until Medicare eligible.
We are always looking for more yield for the bank/CD/MM assets.
Currently a small amount of these funds are in the bank, the rest is in high yield online MM funds with some laddered CD's.
Appreciate the input!


Congrats. That was the only financial wildcard I saw in your initial post. You both onboard with what you want to do with the rest of your lives? If you both are interested in international travel, your expenses may be higher in early retirement years than they are now--but you can afford to spend a bit more with the pensions.
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HIinvestor
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Joined: Tue Apr 08, 2014 3:23 am

Re: Early Retirement - What are we not considering?

Post by HIinvestor » Mon Mar 06, 2017 3:09 pm

It's great that you will have medical covered until Medicare. That's a huge issue in early retirement for many folks. Do both your pensions start immediately? I agree that it will be important for you to figure out what you want to do with the rest of your lives. Many people your age will be working fulltime and may not have time to get together with you as often as you may be available. Volunteers are definitely needed and wanted for lots of different opportunities. Travel costs can range a great deal but may add to your annual expenses as well. Good luck & have a great time!

10YearPlan
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Re: Early Retirement - What are we not considering?

Post by 10YearPlan » Mon Mar 06, 2017 3:23 pm

If I were you, I'd be considering what trips I would take in the first year of retirement. And then retire already.
Congratulations.

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Midpack
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Location: Chicagoland

Re: Early Retirement - What are we not considering?

Post by Midpack » Mon Mar 06, 2017 3:47 pm

Greywolf wrote:Have recently replaced some big ticket items like the furnace, AC and several appliances.

This is the spending category that many retirees forget or underestimate IME. Those major expenses that occur at 5-10-15 or greater year intervals, and you can't time them all exactly. In addition to HVAC and appliances, roof replacement is another biggie. Most retirees plan on 30 years in retirement, odds are you'll have to remodel kitchens and baths. Periodic landscaping, decks, patios don't always last forever. You might want to replace some furniture over 30 years, that can be expensive. Several mattresses. You'll have to replace 1-2 cars every X number of years. You get the idea, good to reflect on those things in your life and plan as best you can.

We planned $10K/yr in over and above non-annual expenses, and it's been more than that this first 5 years, but hopefully the avaerage will come down to $10K/yr inflation adjusted.

Some people plan on (much) higher travel expenses early in retirement, and then taper off as physical challenges creep in.

The other major expense some people don't think about is LTC. It can be nothing or a huge expense, but you do have plenty of time to plan on it.
You only live once...

J295
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Joined: Sun Jan 01, 2012 11:40 pm

Re: Early Retirement - What are we not considering?

Post by J295 » Mon Mar 06, 2017 10:06 pm

Looks like your financial house is in good order .... do you own a home?

Dig into this next phase; it can be a grand adventure!

Cruise
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Re: Early Retirement - What are we not considering?

Post by Cruise » Tue Mar 07, 2017 2:18 am

OP:

Looking good, so congrats!

Some thoughts:

1. You have a high percentage of your wealth in cash/bond equivalents. Given that your yearly expenses fall far below your retirement pension, you could be more aggressive by increasing your equity holdings. Even if all hell breaks loose in the markets, you have plenty of time to recover and don't need to touch anything.

2. Where are you planing on living? LCOL area? No income tax state? Does a change in venue make sense?

3. Your financial life appears pretty good. I hope you have planned for your time allocation...

Dandy
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Re: Early Retirement - What are we not considering?

Post by Dandy » Tue Mar 07, 2017 9:12 am

Seems to be doable -- room for cutting monthly expenses if needed since you are starting at a relatively high level.

My major concern would be health care which is in a major state of flux -- to say the least. It is a several years to be Medicare eligible and the time in between might be iffy as far as potential coverage.

The other subtle thing is the length of retirement. Adding years to the traditional 65 has a subtle but dramatic impact on assuring proper funding of a lengthy retirement. Most withdrawal rules of thumb aren't geared to such length of coverage. So, be careful and conservative in your assumptions about having adequate funding for living to say, age 90 or more.

For most early retirees once they retire they have a rapidly declining ability to earn decent money. So, for them the decision to voluntarily retire is, in all practical terms, one that can't be reversed. So, pulling the plug on working is a big deal. If you or your spouse have skills or interests that could supplement your income in a meaningful way -- that is a big deal.

Good luck

Dottie57
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Re: Early Retirement - What are we not considering?

Post by Dottie57 » Tue Mar 07, 2017 9:19 am

Greywolf wrote:Hello,
Very long time reader and first time posting. I've learned much from these forums.
My spouse and I are both considering retiring within the next 12 months. We are in our both in our upper 50's.
Our scenario is as follows -
Anticipated Pensions - 140,000 combined (no cola)
Retirement Savings - 875,000 Vanguard 403b + 110,000 Roth IRA (both approx 75% equity 25% bond)
Taxable Investments (stocks) 50,000
Bank/CD/MM - 260,000

Estimated annual expenses (based on 13 months of tracking) - 84,000 (includes medical - does not include current fed 25% and state tax 5%).
No debt, house, cars, children's college are paid in full. Expect expenses may decrease some when not working.
Have recently replaced some big ticket items like the furnace, AC and several appliances.

Both SS eligible. Either survivor will receive approximately 75% of the total pension amount above plus SS after 67. Each survivor will also receive a life insurance payout of approximately 50,000. May or may not work part time in the future. Expect some opportunities but these are not factored into any plans.

We have run the numbers through various spreadsheets and scenarios. After many years, it seems like we're close to "winning the game".

For folks who have retired, is there anything we're missing?



Are your estimated annual expenses really just $4000? Includes housing , food clothes etc?

Greywolf
Posts: 7
Joined: Thu Jul 28, 2016 8:12 pm

Re: Early Retirement - What are we not considering?

Post by Greywolf » Wed Mar 08, 2017 1:53 pm

Appreciate the replies.

Some questions that were asked..........


Dottie57 wrote:Are your estimated annual expenses really just $4000? Includes housing , food clothes etc?

Annual expenses are approximately 84000

Cruise wrote:Where are you planing on living? LCOL area? No income tax state? Does a change in venue make sense?

We currently live in a HCOL area. That may change in a few years as we explore other areas of the country. That would reduce state taxes/property taxes etc

J295 wrote: .... do you own a home?

Yes, home is paid off

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Youngblood
Posts: 438
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Re: Early Retirement - What are we not considering?

Post by Youngblood » Wed Mar 08, 2017 3:16 pm

I am wondering why you are not including federal, state and property taxes in your planning. I've been retired for almost 19 years now and taxes are still our highest yearly expense category even though we virtually have no state income tax.

But, our income vs. expense ratio was and still is high enough that we still save quite a bit. BTW, our expenses last year were $84,000 including taxes and Medicare premiums. Funny huh, same as yours.

Retire early while you can still enjoy it health wise.

Best of luck.

YB
"I made my money by selling too soon." | Bernard M. Baruch

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