Can my wife and I afford to retire in one year with our portfolio, pension, social security

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soccerfan25
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Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 7:27 pm

My wife and I would like to retire from full-time work in one year's time if possible.

Any and all advice is appreciated on whether you think we're financially ready and what changes should be made.

Thanks!


Overview:

• Emergency Funds: 60k needed
• Debt: Existing 147k mortgage against primary residence worth 640k. Retirement home has no mortgage. No other debt.
• Tax Filing Status: Married, filing jointly
• Tax Rate 20% Federal, 5% State
• State: Moving to North Carolina where retirement home exists (no mortgage)
• Age: Spouse and I are 59.5 years old
• Desired allocation: 60% stock / 40% bonds and cash
• Health care: 2.5 years retirement health care funded by employer; able to buy into employers group health plan at 100% cost
• Insurance: No long-term health care insurance
• Spouse and I still working, would like to retirement in 1 year
• Incomes: me – 180k, wife 80k
• Anticipated retirement expenses including 1k/month for health care = $4.5k/month



Current Retirement Assets:

Overview:
• Total assets are $2.2m across pre-tax, post-tax, existing home equity (included since retirement home owned without mortgage)
• Me: Defined benefit pension worth 45k payable at retirement for life, no COLA, 75% survivor benefits to spouse
• Take Social Security at 67 – me 25.2k / year, wife 22k / year
• No requirement for elder care, child care, leaving bequests, etc.

My 401k (administered by Fidelity for employer) – 44% of total 2.2m portfolio. Where no stock ticker is indicated, my assumption is Fidelity manages the fund. The 44% broken down as:
• Fidelity Low-Priced Stk-k, FLPKX, 4.3%
• Fidelity Contr-Fund K, FCNKX, 4.8%
• Large Company Index Fund, 14.51%
• Total Stock Market Index Fund, 14%
• Dodge & Cox Global Fund, DODWX, 10.6%
• Vanguard Prime Corps,VPCCX, 11.4%
• Small Cap Value Index, 10.2%
• Small Mid Cap Index, 10.3%
• Interest Income Fund, 5%
• International Stock Mkt Index, 4%
• Pacific Stock Mkt Index, 4%
• Vanguard Wellesley ADM, VWIAX, 2.6%
• Fidelity China Region, FHKCX, 4.5%

My Post Tax Vanguard Investments worth 20.3% of total 2.2m portfolio. The 20.3% is broken down as follows:
• Vanguard Ltd-Tim Tx Admir, VMLUX, 18.3%
• Vanguard Total Stk Market Index Fund, VTSAX, 50.8%
• Vanguard Total Stk Market Index, VBTLX, 23.2%
• Vanguard Tot Intl Bond Index, VTABX, 7.7%

Cash is 11.8% of total 2.2m portfolio (will move most of this into Vanguard bond funds)

Current home equity is 11.8% of 2.2m portfolio
• Retirement home not included in portfolio

Wife 401k is 4.2% of 2.2m portfolio broken out as follows:
• Vanguard TSM Idx; Adm, VTSAX, 52.7%
• Schwab US Broad Mkt, SCHB, 10.5%
• Artisan Global, ARTGX, 14.5%
• Various bond funds, 22%

Overall allocation comes to 60% equity, 40% cash and bonds, tax inefficient funds in 401ks. Home equity is considered as bonds/cash.

Current Plan
• Wife and I retire in one year, mid 2018
• 2.5 years of retirement health care are covered by current employer, remaining pre Medicare health care is purchased using ‘access only’ buy-in to current employer’s group coverage.
• Take defined benefit pension immediately
• All 401k assets consolidated into Vanguard accounts and will follow 60-40 allocation
• Current home sale proceeds (selling house now) moved into Vanguard and will follow 60-40 allocation
• Fidelity retirement software indicates we can cover as much as 10k/month retirement expenses (we need 4.5k) using mix of portfolio funds, defined benefit pension, social security. Software lays out deployments of funds on monthly basis over 30 years.


Questions:
1. Do I have any major holes in our plan to retire in 1 year given our resources?
Are we in good enough financial shape to retire in 1 year and not work unless we want to?
2. Do I have any glaring problems in current allocation? (yes, I know I’m holding too much cash and need to move some of it into Vanguard bond funds)
3. Is long term care insurance worth it given how expensive it is and how little it covers?
4. Anything else I should be thinking about as we enter retirement?

Thanks, everyone!

SoccerFan

trueblueky
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby trueblueky » Sun Jul 16, 2017 7:42 pm

You make $260k and plan to live on $54k. That's the part of the plan that seems unrealistic.

Regardless, your assets and pension should easily cover an annual $54k in expenses with adjustments for inflation. Your SS plus pensions are more than your estimated expenses.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 7:53 pm

trueblueky wrote:You make $260k and plan to live on $54k. That's the part of the plan that seems unrealistic.

Regardless, your assets and pension should easily cover an annual $54k in expenses with adjustments for inflation. Your SS plus pensions are more than your estimated expenses.


Yes, I know it seems low but we'll be living in a small North Carolina town and have no mortgage on the house. I've gone through expenses on a line item basis and they seem reasonable at 4.5k / month.

Our current northeast US home does have a mortgage and has much higher upkeep costs. And we've been saving a lot as well.

The Fidelity software says we should be able to cover up to 10k / month in expenses with our current assets. So, I'm thinking the worst thing that happens is we have extra money each month to invest or travel.

mhalley
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby mhalley » Sun Jul 16, 2017 8:02 pm

The 54 k does seem extremely low compared to your income. You would probably be fine even without your pensions. With them, you are golden. Enjoy your retirement.
Last edited by mhalley on Sun Jul 16, 2017 8:03 pm, edited 2 times in total.

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badbreath
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby badbreath » Sun Jul 16, 2017 8:02 pm

You should fold the majority of your 401k into Total Stock Market Index Fund and International Stock Mkt Index and some into a bond fund which I do not see. Then look at the total portfolio yours and the wife's and decide the proper asset allocation for both combined to make one portfolio.
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

Sandman62
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby Sandman62 » Sun Jul 16, 2017 8:07 pm

soccerfan25 wrote: Yes, I know it seems low but we'll be living in a small North Carolina town and have no mortgage on the house. I've gone through expenses on a line item basis and they seem reasonable at 4.5k / month.

Our current northeast US home does have a mortgage and has much higher upkeep costs. And we've been saving a lot as well.

Do your estimated expenses include sporadic large expenses for things like cars, boilers, roofs, etc.?

jebmke
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby jebmke » Sun Jul 16, 2017 8:11 pm

soccerfan25 wrote:Yes, I know it seems low but we'll be living in a small North Carolina town and have no mortgage on the house. I've gone through expenses on a line item basis and they seem reasonable at 4.5k / month.

Things people often leave out when they build an expense budget:
Income taxes
Uninsured medical costs (dental, vision, hearing aids .... these can add up as you get older)
Amortization of "capital" items (new roof, car replacements ...)
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Hyperborea
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby Hyperborea » Sun Jul 16, 2017 8:16 pm

I don't see health insurance listed. That is likely to be your biggest potential expense. When you retire you will have 4-5 years of insurance to cover before Medicare and that may or may not be expensive. Nobody really knows and those who do aren't telling yet. Plan for a big expense particularly if one or both of you have any pre-existing conditions.

Think about delaying your SS until 70 as that will increase your SS and leave a larger guaranteed income stream for you in your later years or your spouse who is statistically likely to outlive you.

Think about spending more in the first 5-10 years while in you are in your 60's and able to be more active and enjoy travel more. With a $45K pension + $77K to $88K portfolio withdrawal (3.5% to 4% of $2.2 million) you have enough means to do so.

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Watty
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby Watty » Sun Jul 16, 2017 8:22 pm

Questions:
1. Do I have any major holes in our plan to retire in 1 year given our resources?
Are we in good enough financial shape to retire in 1 year and not work unless we want to?


It was not clear if your $4.5K a month expenses included taxes or not. I'm pretty middle class compared to a lot of the posters here but that number sounds low once you consider healthcare, income tax, property tax, occasionally buying a replacement car, some travel, etc. People can and do live very comfortably on that and less especially with a paid off house but you should double check your numbers.

Even if it turn out a lot higher you will eventually have about double that between Social Security and your pension.

I think that it is likely that you could retire today unless you need to work a bit longer to get the pension and retirement healthcare benefits.

2. Do I have any glaring problems in current allocation? (yes, I know I’m holding too much cash and need to move some of it into Vanguard bond funds)

Your 401k has way to many mutual funds.

3. Is long term care insurance worth it given how expensive it is and how little it covers?

The LTC cost in North Carolina are not real high, you should be able to do fine. If only one of you is surviving when LTC is needed then it would not be dramatically higher than your normal expenses.

https://www.genworth.com/about-us/indus ... -care.html


4. Anything else I should be thinking about as we enter retirement?

Doing Roth conversion up to the top of the 15% tax bracket each year once you retire. That would need to be balanced with taking long term capital gains up to the top of the 15% tax bracket where the tax rate is 0%. When one of you survives the other they will get up to the 25% tax bracket real quick so it would be good to do these as much as possible while you are in the 15% tax bracket.

Look at delaying when one of you starts Social Security until you are 70 to get the larger benefit check and give you more time to do Roth conversions. Be sure to understand how Social Security is taxed since you can end up in a surprisingly high effective tax bracket.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

https://www.bogleheads.org/wiki/Social_ ... calculator

With your assets, retirement income, and low expenses there is a very good chance that your investments will grow and be in the range where estate taxes are a problem if the money is left invested for a few decades.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 8:26 pm

mhalley wrote:The 54 k does seem extremely low compared to your income. You would probably be fine even without your pensions. With them, you are golden. Enjoy your retirement.

Thank you.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 8:30 pm

badbreath wrote:You should fold the majority of your 401k into Total Stock Market Index Fund and International Stock Mkt Index and some into a bond fund which I do not see. Then look at the total portfolio yours and the wife's and decide the proper asset allocation for both combined to make one portfolio.


Yes, that was my intention. I know I have a mess of pre-tax funds right now and plan on making things much simpler when I consolidate everything in Vanguard. I would think 3-4 funds should be enough.

I do have some bond funds in Vanguard on after-tax basis:
• Vanguard Total Stk Market Index, VBTLX, 23.2%
• Vanguard Tot Intl Bond Index, VTABX, 7.7%

I would expand what's in these funds, of course, so everything stays at 6-40. Thanks.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 8:32 pm

Sandman62 wrote:
soccerfan25 wrote: Yes, I know it seems low but we'll be living in a small North Carolina town and have no mortgage on the house. I've gone through expenses on a line item basis and they seem reasonable at 4.5k / month.

Our current northeast US home does have a mortgage and has much higher upkeep costs. And we've been saving a lot as well.

Do your estimated expenses include sporadic large expenses for things like cars, boilers, roofs, etc.?


I probably don't have enough for unexpected expenses like heat pumps, roofs, etc. But I did try to include them. Thanks for putting this out.

aristotelian
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby aristotelian » Sun Jul 16, 2017 8:33 pm

You don't say your expenses. You may want to cut back a bit from your current $200K+ income lifestyle. However, unless you are extremely extravagant, you are fine. Congratulations.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 8:41 pm

Hyperborea wrote:I don't see health insurance listed. That is likely to be your biggest potential expense. When you retire you will have 4-5 years of insurance to cover before Medicare and that may or may not be expensive. Nobody really knows and those who do aren't telling yet. Plan for a big expense particularly if one or both of you have any pre-existing conditions.

Think about delaying your SS until 70 as that will increase your SS and leave a larger guaranteed income stream for you in your later years or your spouse who is statistically likely to outlive you.

Think about spending more in the first 5-10 years while in you are in your 60's and able to be more active and enjoy travel more. With a $45K pension + $77K to $88K portfolio withdrawal (3.5% to 4% of $2.2 million) you have enough means to do so.


Thanks for your reply. I know that we'll have about 4 years of pre-medicare expenditures. I should have 2.5 years of those 4 years covered by my current employer. I'll just have to pay what I currently pay as an employee for those 2.5 years (about $350/month). The remaining 1.5 years I will be allowed to 'buy into' my employers health group on an unsubsidized basis. This will cost about $16,000 / year.

I am aware that if Obamacare is repealed and replaced with the current Senate bill my wife and I could easily face $35k / year in medical costs if I didn't have retirement health care assistance from my employer.

I hadn't thought too much about delaying Social Security until 70 but that certainly makes sense if the annuity growth rate from ages 66 to 70 is more than 4% or so.

Thanks for your hellp.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 9:03 pm

Watty wrote:Questions:
1. Do I have any major holes in our plan to retire in 1 year given our resources?
Are we in good enough financial shape to retire in 1 year and not work unless we want to?


It was not clear if your $4.5K a month expenses included taxes or not. I'm pretty middle class compared to a lot of the posters here but that number sounds low once you consider healthcare, income tax, property tax, occasionally buying a replacement car, some travel, etc. People can and do live very comfortably on that and less especially with a paid off house but you should double check your numbers.

Even if it turn out a lot higher you will eventually have about double that between Social Security and your pension.

I think that it is likely that you could retire today unless you need to work a bit longer to get the pension and retirement healthcare benefits.

2. Do I have any glaring problems in current allocation? (yes, I know I’m holding too much cash and need to move some of it into Vanguard bond funds)

Your 401k has way to many mutual funds.

3. Is long term care insurance worth it given how expensive it is and how little it covers?

The LTC cost in North Carolina are not real high, you should be able to do fine. If only one of you is surviving when LTC is needed then it would not be dramatically higher than your normal expenses.

https://www.genworth.com/about-us/indus ... -care.html


4. Anything else I should be thinking about as we enter retirement?

Doing Roth conversion up to the top of the 15% tax bracket each year once you retire. That would need to be balanced with taking long term capital gains up to the top of the 15% tax bracket where the tax rate is 0%. When one of you survives the other they will get up to the 25% tax bracket real quick so it would be good to do these as much as possible while you are in the 15% tax bracket.

Look at delaying when one of you starts Social Security until you are 70 to get the larger benefit check and give you more time to do Roth conversions. Be sure to understand how Social Security is taxed since you can end up in a surprisingly high effective tax bracket.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

https://www.bogleheads.org/wiki/Social_ ... calculator

With your assets, retirement income, and low expenses there is a very good chance that your investments will grow and be in the range where estate taxes are a problem if the money is left invested for a few decades.


Thanks very much for your reply. The $4.5k / month includes property and city taxes but not state and federal taxes. So, my assumption is I would need about 133% of 54k in any given year or 70-75k to keep everything afloat. I did use some Fidelity software which takes taxes into account as well as the pre-tax and post-tax status of funds in determining the maximum dollar of expenses we could afford per month. Their calculation said I could handle up to 10k / month in expenses which seems too high but is a comfortable gap over the $4.5k I think I need every month.

I'll definitely look into LTC in North Carolina. I'm just wary of spending 5k/year + inflation for 30 years to get a maximum 160k or so benefit.

Thanks for the tip on waiting until 70.

I do not know much about Roth conversions since it seems I've always been ineligible for them. I will start reading up on what you've described so I can understand and start acting on the recommendation.

I know I have way too many funds. I could simplify my 401k since I control it but I thought I would just wait and do it all at once in Vanguard using 3-4 funds tops. My wife's 401k is managed and I have no easy way to clean up all the different funds being used.

With respect to healthcare, as I explained in another reply, I have 2.5 years of mostly funded pre Medicare healthcare from my employer. I can also buy into my employers group health care for the remaining 1.5 years at 16k/ year in premiums. Therefore, I think I'm largely immune from the effects of Trumpcare (should it be implemented) where I could easily face 35k/year costs.

Thanks for all your advice.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Sun Jul 16, 2017 9:20 pm

jebmke wrote:
soccerfan25 wrote:Yes, I know it seems low but we'll be living in a small North Carolina town and have no mortgage on the house. I've gone through expenses on a line item basis and they seem reasonable at 4.5k / month.

Things people often leave out when they build an expense budget:
Income taxes
Uninsured medical costs (dental, vision, hearing aids .... these can add up as you get older)
Amortization of "capital" items (new roof, car replacements ...)


Here are my planned expenses for retirement:

North Carolina

Yearly Monthly

Food 800
Gas 150
Mortgage 0
House Insurance 900 75
Property / City Taxes 3000 250
Car Insurance 1000 83
Umbrella 500 42
House Cleaning 100

Home Repairs 2500 208
Gardens 700 58

Entertainment 140
YMCA 80
Cable and Internet 100

Cell phones 100
Car Repairs 1000 83
Gas / Elec / Water 350
Healthcare 800

Total: 3361
Contingency 1139

Total Expenses 4500

State and Federal Taxes are not included. With those taxes includes need around $6,000 per month

KlangFool
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby KlangFool » Sun Jul 16, 2017 9:29 pm

soccerfan25 wrote:• Tax Rate 20% Federal, 5% State



soccerfan25,

There is no 20% Federal Tax Rate. What is your actual marginal tax rate? Ditto, what is your state income marginal tax rate?

KlangFool

KlangFool
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby KlangFool » Sun Jul 16, 2017 9:34 pm

soccerfan25 wrote:
• Anticipated retirement expenses including 1k/month for health care = $4.5k/month



soccerfan25,

My preference is to calculate your current annual expense. Then, take out any housing related expense at your existing location in order to verify whether 4.5K per month is realistic.

So,

1) How much tax do you pay last year?

2) How much were you take-home pay last year?

3) How much was your annual saving last year?

Your annual expense = gross income - tax - annual saving

KlangFool

OnTrack2020
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby OnTrack2020 » Sun Jul 16, 2017 9:47 pm

I find it interesting that so many have noted your expenses seem low compared to your income. I imagine that is how you managed to have a portfolio of over $2M.

I have gone through our expected expenses (4 years down the road) in our LCOL area, and bumped it up by 1/4 as our CPA suggested, and still come out at around $57,000--that's will be for 2 adults and 2 kids still living at home. I'm assuming the 1/4 bump includes the larger expense/house repairs/occasional car replacement/occasional travel that come into play. Unless I'm totally missing something, we just don't spend a great deal.

Enjoy retirement.

WildBill
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby WildBill » Sun Jul 16, 2017 9:52 pm

Howdy

One item that was mentioned with no elaboration is your opportunity to do Roth conversions. If I read your numbers correctly you have circa $900k in IRA/40K funds. That could easily grow by age 70 to close to $2 million, which would require RMDs of around $70k per year, which with SS would significantly increase your taxes.

You have the opportunity between now and age 70 to convert a very substantial amount of those tax advantaged funds to Roth accounts while paying minimal tax on the conversions. This should substantially reduce your future tax liabilities. There are several threads on the forum laying this out in detail.

Like you I had no opportunity to use Roth accounts in my accumulation years and was used to paying a substantial amount in taxes each year. I was astonished to discover the opportunities to do these conversions with minimal taxes paid.

A gentlemen named livesoft on the forum is a master of the art. Search his postings for more details and search the wiki for "Roth conversions".

Enjoy North Carolina :happy

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

J295
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby J295 » Sun Jul 16, 2017 10:21 pm

You seem to be in fine financial shape. Enjoy this next grand adventure!

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Mon Jul 17, 2017 6:41 am

J295 wrote:You seem to be in fine financial shape. Enjoy this next grand adventure!

Thank you.

carolinaman
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby carolinaman » Mon Jul 17, 2017 7:09 am

Sandman62 wrote:
soccerfan25 wrote: Yes, I know it seems low but we'll be living in a small North Carolina town and have no mortgage on the house. I've gone through expenses on a line item basis and they seem reasonable at 4.5k / month.

Our current northeast US home does have a mortgage and has much higher upkeep costs. And we've been saving a lot as well.

Do your estimated expenses include sporadic large expenses for things like cars, boilers, roofs, etc.?


I agree with others that your retirement budget seems low. You may be ok for living expenses but what about things like major home repairs, car repairs or replacement, and medical/dental expenses. I have been retired for 6 years (in NC, but a large urban area) and have had some major home repairs: replace HVAC and duct work - $10k, drainage issues - $4k, and others. DW had some major dental work - $7k, replace 10 year old car with new Camry (from savings) - $24k.

DW and I must be out of control with spending. We spend about $6500 per month plus extraordinary items and we do not live an extravagant lifestyle.

NC taxes are pretty high for Southeast. I would suggest validating the LCOL for the small town you have chosen, if you have not already done so.

Even if your expenses are higher, you look to be in great shape. Congratulations on your impending retirement and welcome to the Tar Heel state.

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Mon Jul 17, 2017 8:06 am

carolinaman wrote:
Sandman62 wrote:
soccerfan25 wrote: Yes, I know it seems low but we'll be living in a small North Carolina town and have no mortgage on the house. I've gone through expenses on a line item basis and they seem reasonable at 4.5k / month.

Our current northeast US home does have a mortgage and has much higher upkeep costs. And we've been saving a lot as well.

Do your estimated expenses include sporadic large expenses for things like cars, boilers, roofs, etc.?


I agree with others that your retirement budget seems low. You may be ok for living expenses but what about things like major home repairs, car repairs or replacement, and medical/dental expenses. I have been retired for 6 years (in NC, but a large urban area) and have had some major home repairs: replace HVAC and duct work - $10k, drainage issues - $4k, and others. DW had some major dental work - $7k, replace 10 year old car with new Camry (from savings) - $24k.

DW and I must be out of control with spending. We spend about $6500 per month plus extraordinary items and we do not live an extravagant lifestyle.

NC taxes are pretty high for Southeast. I would suggest validating the LCOL for the small town you have chosen, if you have not already done so.

Even if your expenses are higher, you look to be in great shape. Congratulations on your impending retirement and welcome to the Tar Heel state.


Thanks for your reply, Carolinaman.

My 4.5k /month figure didn't include State and Federal taxes. So, I'm expecting I'd need about 6k / month with those taxes included. I posted my detailed expense calculations earlier in the thread. So, I think 75k /year pre-tax is the minimum I need to keep everything afloat.

Unlike perhaps some retirees, I don't expect us to do a ton of travel as we've lived and worked all over the world. I've also got one million frequent flyer miles and an affinity for staying at AirBnbs which should keep travel costs down when we do travel.

Health care is, indeed, a major concern in these turbulent times. I don't think anyone can predict what will happen so we're just hoping for the best and planning for the worst (as best we can).

On the dental front, for what it's worth, I'd be pretty comfortable getting major dental work done in Mexico or Panama after some research. But that's just me.

Thanks again for your reply.

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HomerJ
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby HomerJ » Mon Jul 17, 2017 8:49 am

soccerfan25 wrote:My wife and I would like to retire from full-time work in one year's time if possible.


Why wait?

The math is way too easy here. Of course you can retire.

KlangFool
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby KlangFool » Mon Jul 17, 2017 9:02 am

OnTrack2020 wrote:
I find it interesting that so many have noted your expenses seem low compared to your income. I imagine that is how you managed to have a portfolio of over $2M.



OnTrack2020,

If OP had been living on 45K per year, the portfolio would be a lot larger. At least 2 times if not more. The gross income is 260K. And, OP and his spouse had worked for 30 years. The gross income across 30 years is around 4 million to 6 million.

KlangFool

Mr.BB
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby Mr.BB » Mon Jul 17, 2017 9:09 am

A great way to tell if you are ready to live on basically $60,000 a year is to take this next year and live on $60,000.
It is the perfect way to tell if that type of budget will work for you, and the extra benefit of being able to use the extra saved income for investments or padding your emergency fund.

I would also recommend that you track ALL of your expenses (including cash) in Quicken for the year to make sure you are not missing anything when estimating your expenses.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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HomerJ
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby HomerJ » Mon Jul 17, 2017 9:46 am

KlangFool wrote:
OnTrack2020 wrote:
I find it interesting that so many have noted your expenses seem low compared to your income. I imagine that is how you managed to have a portfolio of over $2M.



OnTrack2020,

If OP had been living on 45K per year, the portfolio would be a lot larger. At least 2 times if not more. The gross income is 260K. And, OP and his spouse had worked for 30 years. The gross income across 30 years is around 4 million to 6 million.

KlangFool


Come on Klang... I know you have heard of raises and promotions. They didn't start out making anywhere near $260k gross 30 years ago. Maybe not even close to that number 10 years ago.

Plus, they currently live in a higher cost of living area. They spend more than $45k now because of housing and property taxes. The OP is estimating his expenses once they move.

It all doesn't matter. His estimates could be off 300% and they would still be fine. I think he had some good questions, and think he got some useful advice from this thread, but I must admit I dislike the title of the thread.

"Hi, I think my expenses will be 45k in retirement, and I have 90k coming in from pensions and Social Security. Oh, and $2 million invested. Do you think I can retire?"

Of course you can retire.

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HomerJ
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby HomerJ » Mon Jul 17, 2017 9:51 am

Mr.BB wrote:A great way to tell if you are ready to live on basically $60,000 a year is to take this next year and live on $60,000.
It is the perfect way to tell if that type of budget will work for you, and the extra benefit of being able to use the extra saved income for investments or padding your emergency fund.


Well, except they plan to move to an entirely different state with different housing. It's a good idea, but it's not quite that easy.

smitcat
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby smitcat » Mon Jul 17, 2017 9:57 am

KlangFool wrote:
OnTrack2020 wrote:
I find it interesting that so many have noted your expenses seem low compared to your income. I imagine that is how you managed to have a portfolio of over $2M.



OnTrack2020,

If OP had been living on 45K per year, the portfolio would be a lot larger. At least 2 times if not more. The gross income is 260K. And, OP and his spouse had worked for 30 years. The gross income across 30 years is around 4 million to 6 million.

KlangFool



In many ways we are similar to this situation you point out.
We make more mow than we did at any other time - by a lot.
We had job 'disruptions" (layoffs) that affected income in earlier years.
We live much below our current income.
We will have numerous adjustments to our current expenses which will lower them in retirement (taxes, lower cost move, college costs, etc)

You just could not make that mathematical leap guessing why our numbers are where they are by assuming we have had 30-40 years of similar income or costs.
YMMV

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celia
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby celia » Mon Jul 17, 2017 10:05 am

WildBill wrote:One item that was mentioned with no elaboration is your opportunity to do Roth conversions. If I read your numbers correctly you have circa $900k in IRA/40K funds. That could easily grow by age 70 to close to $2 million, which would require RMDs of around $70k per year, which with SS would significantly increase your taxes.

You have the opportunity between now and age 70 to convert a very substantial amount of those tax advantaged funds to Roth accounts while paying minimal tax on the conversions. This should substantially reduce your future tax liabilities. There are several threads on the forum laying this out in detail.

Like you I had no opportunity to use Roth accounts in my accumulation years and was used to paying a substantial amount in taxes each year. I was astonished to discover the opportunities to do these conversions with minimal taxes paid.


+1

Your finances are fine. Besides having too much in tax-deferred, your spending habits would be the only other potential problem I see. To prove to yourself that you can afford to retire, start living on 4.5K per month, not including your current mortgage or increase in taxes due to a Roth conversions. If you can do that for a whole year without cheating, then you are good to go.

Congrats on your excellent savings.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

KlangFool
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby KlangFool » Mon Jul 17, 2017 10:09 am

HomerJ wrote:
KlangFool wrote:
OnTrack2020 wrote:
I find it interesting that so many have noted your expenses seem low compared to your income. I imagine that is how you managed to have a portfolio of over $2M.



OnTrack2020,

If OP had been living on 45K per year, the portfolio would be a lot larger. At least 2 times if not more. The gross income is 260K. And, OP and his spouse had worked for 30 years. The gross income across 30 years is around 4 million to 6 million.

KlangFool


Come on Klang... I know you have heard of raises and promotions. They didn't start out making anywhere near $260k gross 30 years ago. Maybe not even close to that number 10 years ago.

Plus, they currently live in a higher cost of living area. They spend more than $45k now because of housing and property taxes. The OP is estimating his expenses once they move.

It all doesn't matter. His estimates could be off 300% and they would still be fine. I think he had some good questions, and think he got some useful advice from this thread, but I must admit I dislike the title of the thread.

"Hi, I think my expenses will be 45k in retirement, and I have 90k coming in from pensions and Social Security. Oh, and $2 million invested. Do you think I can retire?"

Of course you can retire.


Okay. You are right. I am missing the big picture.

KlangFool

soccerfan25
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Mon Jul 17, 2017 10:26 am

HomerJ wrote:
KlangFool wrote:
OnTrack2020 wrote:
I find it interesting that so many have noted your expenses seem low compared to your income. I imagine that is how you managed to have a portfolio of over $2M.



OnTrack2020,

If OP had been living on 45K per year, the portfolio would be a lot larger. At least 2 times if not more. The gross income is 260K. And, OP and his spouse had worked for 30 years. The gross income across 30 years is around 4 million to 6 million.

KlangFool


Come on Klang... I know you have heard of raises and promotions. They didn't start out making anywhere near $260k gross 30 years ago. Maybe not even close to that number 10 years ago.

Plus, they currently live in a higher cost of living area. They spend more than $45k now because of housing and property taxes. The OP is estimating his expenses once they move.

It all doesn't matter. His estimates could be off 300% and they would still be fine. I think he had some good questions, and think he got some useful advice from this thread, but I must admit I dislike the title of the thread.

"Hi, I think my expenses will be 45k in retirement, and I have 90k coming in from pensions and Social Security. Oh, and $2 million invested. Do you think I can retire?"

Of course you can retire.


My apologies if I've offended with the title of the thread. I've run calculators which show I can retire without problem, but it's still thoroughly nerve-wracking to think about leaving our jobs, employer health care, etc. We can't make a wrong decision on this one and financial planning is not something in which I'm an expert. So, it was not completely obvious to me our numbers were solid.

I'd like to thank everyone for their advice. My takeaways are:

a) Live on 75k as soon as I move and make sure that's viable.
b) Immediately look at Roth conversions.
c) Consider taking social security at 70 (for at least one of us) to get a higher payout and leave more time for Roth conversions
d) Take another look at long term care insurance

Thanks again, all. I'll try to pay it forward as I can on this forum. I don't have super knowledge yet but I think I do know something about staying the course.

KlangFool
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby KlangFool » Mon Jul 17, 2017 11:15 am

soccerfan25 wrote:• Health care: 2.5 years retirement health care funded by employer; able to buy into employers group health plan at 100% cost


soccerfan25,

Is it possible to find out the 100% cost for this year? At my current employer, this number is listed in my pay check (employee and employer portion). The biggest uncertainty for retirement is the health care cost. My current retirement plan assumes 20K of health care expenditures per year for me and my spouse.

KlangFool

SuzBanyan
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby SuzBanyan » Mon Jul 17, 2017 11:21 am

KlangFool wrote:
soccerfan25 wrote:• Health care: 2.5 years retirement health care funded by employer; able to buy into employers group health plan at 100% cost


soccerfan25,

Is it possible to find out the 100% cost for this year? At my current employer, this number is listed in my pay check (employee and employer portion). The biggest uncertainty for retirement is the health care cost. My current retirement plan assumes 20K of health care expenditures per year for me and my spouse.

KlangFool

And one more thing for the OP to check: will the employer's health plan cover them in their new community? Your expenses are likely to be higher if you are out-of-network for most medical services. Even then, the OP is probably fine to retire.

soccerfan25
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Joined: Fri Jun 30, 2017 5:05 pm

Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Mon Jul 17, 2017 12:10 pm

KlangFool wrote:
soccerfan25 wrote:• Health care: 2.5 years retirement health care funded by employer; able to buy into employers group health plan at 100% cost


soccerfan25,

Is it possible to find out the 100% cost for this year? At my current employer, this number is listed in my pay check (employee and employer portion). The biggest uncertainty for retirement is the health care cost. My current retirement plan assumes 20K of health care expenditures per year for me and my spouse.

KlangFool


KlangFool,

My employer doesn't break out total health care cost and what my portion is. However, I know from a friend who has gone through the process that the 2017 'access only' price is $17,000. Bear in my mind I work for a very large employer so it wouldn't surprise me their group rate is relatively competitive. Also, not all companies allow 'access only' to health insurance in retirement. Fortunately, mine does.

What is your 20k health care cost estimate based on? There are basically a few different ways to get health after retiring from a company:

a) Use any "virtual" money provided by the employer to buy health care from the company plan (I have that for 2.5 years).
b) Use Cobra for 1.5 years (assuming your employer is reasonably large) which costs 102% of what the employee normally pays.
c) After Cobra expires and if your company allows it, use 'access only' to buy unsubsidized insurance at full price.
d) Go into the individual insurance market.

If you're estimate is based on option d), I believe 20k will be far too low if Trumpcare passes. I would estimate a minimum of 35k if the current Senate bill passes. If Obamacare remains the law of the land, your yearly cost would vary considerably with your income and might easily be less than 20k since subsidies are based on income (not assets).

I know this whole topic pretty well so let me know if you have any questions.

KlangFool
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby KlangFool » Mon Jul 17, 2017 12:30 pm

soccerfan25 wrote:
KlangFool wrote:
soccerfan25 wrote:• Health care: 2.5 years retirement health care funded by employer; able to buy into employers group health plan at 100% cost


soccerfan25,

Is it possible to find out the 100% cost for this year? At my current employer, this number is listed in my pay check (employee and employer portion). The biggest uncertainty for retirement is the health care cost. My current retirement plan assumes 20K of health care expenditures per year for me and my spouse.

KlangFool


KlangFool,

My employer doesn't break out total health care cost and what my portion is. However, I know from a friend who has gone through the process that the 2017 'access only' price is $17,000. Bear in my mind I work for a very large employer so it wouldn't surprise me their group rate is relatively competitive. Also, not all companies allow 'access only' to health insurance in retirement. Fortunately, mine does.

What is your 20k health care cost estimate based on? There are basically a few different ways to get health after retiring from a company:

a) Use any "virtual" money provided by the employer to buy health care from the company plan (I have that for 2.5 years).
b) Use Cobra for 1.5 years (assuming your employer is reasonably large) which costs 102% of what the employee normally pays.
c) After Cobra expires and if your company allows it, use 'access only' to buy unsubsidized insurance at full price.
d) Go into the individual insurance market.

If you're estimate is based on option d), I believe 20k will be far too low if Trumpcare passes. I would estimate a minimum of 35k if the current Senate bill passes. If Obamacare remains the law of the land, your yearly cost would vary considerably with your income and might easily be less than 20k since subsidies are based on income (not assets).

I know this whole topic pretty well so let me know if you have any questions.


soccerfan25,

<<What is your 20k health care cost estimate based on? >>

1) I was unemployed 2 years ago. This is based on actual premium and out of pocket maximum of an ACA insurance.

2) Given that the US Median Household income of 60K, this is about right as to the maximum that people are willing to pay.

<<My employer doesn't break out total health care cost and what my portion is. However, I know from a friend who has gone through the process that the 2017 'access only' price is $17,000. Bear in my mind I work for a very large employer so it wouldn't surprise me their group rate is relatively competitive. >>

3) If you want a conservative estimate, you should add the out of pocket maximum cost to that 17K.

<< If you're estimate is based on option d), I believe 20k will be far too low if Trumpcare passes. I would estimate a minimum of 35k if the current Senate bill passes. >>

4) The US Median Household income is 60K.

<< b) Use Cobra for 1.5 years (assuming your employer is reasonably large) which costs 102% of what the employee normally pays.>>

5) I was on Cobra for 1.5 years. It is actually 103% of the total cost (Employee plus Employer). It is not 102% of the employee portion. Some employer subsidizes more and some less.

KlangFool

Thesaints
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby Thesaints » Mon Jul 17, 2017 12:42 pm

Mmmh... primary residence value is 640k, outstanding mortgage is 147k, that means equity is just a notch under half a million.
How is that 11.8% of your 2.2 million assets ?

I'd say it is more like almost a quarter, which would leave you with a 1.7M invested portfolio. Is this figure correct ?

soccerfan25
Posts: 20
Joined: Fri Jun 30, 2017 5:05 pm

Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Mon Jul 17, 2017 1:16 pm

Thesaints wrote:Mmmh... primary residence value is 640k, outstanding mortgage is 147k, that means equity is just a notch under half a million.
How is that 11.8% of your 2.2 million assets ?

I'd say it is more like almost a quarter, which would leave you with a 1.7M invested portfolio. Is this figure correct ?


Good catch. I was typing too quickly and repeated the 11.8% number twice. The overview should have read:

Cash: 11.82% of total portfolio
Home equity: 19.3% of total portfolio

soccerfan25
Posts: 20
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Mon Jul 17, 2017 1:29 pm

KlangFool wrote:
soccerfan25 wrote:
KlangFool wrote:
soccerfan25 wrote:• Health care: 2.5 years retirement health care funded by employer; able to buy into employers group health plan at 100% cost


soccerfan25,

Is it possible to find out the 100% cost for this year? At my current employer, this number is listed in my pay check (employee and employer portion). The biggest uncertainty for retirement is the health care cost. My current retirement plan assumes 20K of health care expenditures per year for me and my spouse.

KlangFool


KlangFool,

My employer doesn't break out total health care cost and what my portion is. However, I know from a friend who has gone through the process that the 2017 'access only' price is $17,000. Bear in my mind I work for a very large employer so it wouldn't surprise me their group rate is relatively competitive. Also, not all companies allow 'access only' to health insurance in retirement. Fortunately, mine does.

What is your 20k health care cost estimate based on? There are basically a few different ways to get health after retiring from a company:

a) Use any "virtual" money provided by the employer to buy health care from the company plan (I have that for 2.5 years).
b) Use Cobra for 1.5 years (assuming your employer is reasonably large) which costs 102% of what the employee normally pays.
c) After Cobra expires and if your company allows it, use 'access only' to buy unsubsidized insurance at full price.
d) Go into the individual insurance market.

If you're estimate is based on option d), I believe 20k will be far too low if Trumpcare passes. I would estimate a minimum of 35k if the current Senate bill passes. If Obamacare remains the law of the land, your yearly cost would vary considerably with your income and might easily be less than 20k since subsidies are based on income (not assets).

I know this whole topic pretty well so let me know if you have any questions.


soccerfan25,

<<What is your 20k health care cost estimate based on? >>

1) I was unemployed 2 years ago. This is based on actual premium and out of pocket maximum of an ACA insurance.

2) Given that the US Median Household income of 60K, this is about right as to the maximum that people are willing to pay.

<<My employer doesn't break out total health care cost and what my portion is. However, I know from a friend who has gone through the process that the 2017 'access only' price is $17,000. Bear in my mind I work for a very large employer so it wouldn't surprise me their group rate is relatively competitive. >>

3) If you want a conservative estimate, you should add the out of pocket maximum cost to that 17K.

<< If you're estimate is based on option d), I believe 20k will be far too low if Trumpcare passes. I would estimate a minimum of 35k if the current Senate bill passes. >>

4) The US Median Household income is 60K.

<< b) Use Cobra for 1.5 years (assuming your employer is reasonably large) which costs 102% of what the employee normally pays.>>

5) I was on Cobra for 1.5 years. It is actually 103% of the total cost (Employee plus Employer). It is not 102% of the employee portion. Some employer subsidizes more and some less.

KlangFool


Yep, of course, you're right. It's 103% of the total employer cost.

My feeling is that 20k / year in insurance premiums for a Silver level plan is on the low side if the ACA is repealed, especially if any pre-existing conditions are involved. Out of pocket payments should rise substantially as well. But, of course, it's all speculation at this point ...

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imbogled
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Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby imbogled » Mon Jul 17, 2017 1:29 pm

FIRECalc: How long will your money last?

http://www.firecalc.com/

"With what you have today, and what it costs you to live, can you retire and maintain the same lifestyle?"
A very popular tool for considering retirement. I am guessing you will be golden in your golden years!
Someone is sitting in the shade today because someone planted a tree a long time ago. | Warren Buffett

soccerfan25
Posts: 20
Joined: Fri Jun 30, 2017 5:05 pm

Re: Can my wife and I afford to retire in one year with our portfolio, pension, social security

Postby soccerfan25 » Mon Jul 17, 2017 1:43 pm

imbogled wrote:FIRECalc: How long will your money last?

http://www.firecalc.com/

"With what you have today, and what it costs you to live, can you retire and maintain the same lifestyle?"
A very popular tool for considering retirement. I am guessing you will be golden in your golden years!


Thanks, I'll check that out.

I did run some Fidelity software that imports all my 401k and after tax assets, social security and defined benefit pension numbers and charts out how I meet monthly expenses on a month-by-month basis for 33 years. The specific withdrawal from each asset type is specified to meet my expense target.

It then gives me a probability I'll meet my monthly expense number based on historic market returns and current or optimized asset allocation. Of all the software I've looked at, I found this approach to be the most effective since it took into account taxes, asset allocation, social security, defined benefit pension as well as all my assumptions around when we'll take social security, draw down the pension, etc. And it offered to optimize my portfolio.

Thanks for the link!


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