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Retirement advice

Posted: Wed Oct 04, 2017 10:40 pm
by spartanap
Background: Wife is currently retired with a $26,000/yr pension. I plan to retire at 60 with a $44,000/yr pension w/ 50% survivor benefit. We will be able to purchase health insurance from our former employers. Soc Sec: Wife $12,000/yr at 62. Me - $26,000 at 67(possibly 70). Current income is 100K. Planning on a $7000/mo budget in retirement. No kids, so not worried about leaving an inheritance.

Emergency funds: 6 months
Debt: none $215,000 house paid for. Plan to move to a 325K (approx) house after retirement.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 6% State
State of Residence: MO
Age: 57; 56 (spouse)
Desired Asset allocation: 60% equities / 40% bonds
Desired International allocation: 20-30% of equities
Current assets: Very low seven figures. Avg expense ratio: .18%

Taxable

CFFN CAPITOL FED FINANCIAL INC 2.2%
JNJ JOHNSON & JOHNSON 1.3%
DODBX DODGE & COX BALANCED 3.0%
VFIAX Vanguard 500 Index Fund Admiral 3.7%
VEXEX Vanguard Extended Market Index Fund Admiral 2.0%
VWITX Vanguard Intermediate-Term Tax-Exempt Fund 1.4%
VBIRX Vanguard Short-Term Bond Index Fund Admiral 2.1%

My Vanguard IRA

VBTLX Vanguard Total Bond Market Index Fund Admiral 7.8%
VTABX Vanguard Total International Bond Index Fund Admiral 3.4%
VTIAX Vanguard Total International Stock Index Fund Admiral 3.2%
VTSAX Vanguard Total Stock Market Index Fund Admiral 7.5%

My Schwab IRA

SCHH SCHWAB US REIT ETF 1.0%
SCHE SCHWAB EMERGING MARKETS EQUITY ETF 1.0%
SCHF SCHWAB INTERNATIONAL EQUITY ETF 2.2%
SCHZ SCHWAB US AGGREGATE BOND ETF 5.7%
SCHB SCHWAB US BROAD MARKET ETF 7.0%

My Roth IRA

VWIGX Vanguard International Growth Fund Investor Shares 2.3%
VSMAX Vanguard Small-Cap Index Fund Admiral Shares 2.0%
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 1.0%
VWENX Vanguard Wellington Fund Admiral Shares 3.6%

Wife's Vanguard IRA

VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 5.0%
VTABX Vanguard Total International Bond Index Fund Admiral Shares 2.1%
VTIAX Vanguard Total International Stock Index Fund Admiral Shares 2.4%
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares 4.7%

Wife's Schwab IRA

SCHH SCHWAB US REIT ETF 0.5%
SCHE SCHWAB EMERGING MARKETS EQUITY ETF 1.0%
SCHF SCHWAB INTERNATIONAL EQUITY ETF 1.5%
SCHZ SCHWAB US AGGREGATE BOND ETF 4.0%
SCHB SCHWAB US BROAD MARKET ETF 4.7%

Wife's Roth IRA

VEMAX Vanguard Emerging Markets Stock Index Fund Admiral Shares 1.0%
VWIGX Vanguard International Growth Fund Investor Shares 2.2%
VSMAX Vanguard Small-Cap Index Fund Admiral Shares 2.0%
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 1.0%
VWENX Vanguard Wellington Fund Admiral Shares 3.5%

Contributions to both Roths are maxed out every year.

1. Is my plan to retire at 60 doable?
2. I'm really struggling with the issue of buying LTC insurance. Family history of dementia on wife's side is a concern. I feel we are set up to self-insure; accepting the risk that a catastrophic health event early could severely damage our plans. Advice?
3. Any portfolio issues?
4. Any other issues we should be considering?

Re: Retirement advice

Posted: Wed Oct 04, 2017 11:09 pm
by Peter Foley
I think the plan is doable.

You need $84,000/year and your two pensions equal $70,000. The $14,000 per year you need for the first few years is less than a 2% withdrawal rate. When your spouse begins taking SS benefits your withdrawal rate is negligible.

In addition, if your $84,000 is your gross income need you will be well within the 15% tax bracket when you retire. This would allow you to draw down taxable without paying capital gains or withdraw funds from tax deferred at 15% to meet your needs. That gives you a lot of flexibility in terms of tax efficient withdrawals.

You could simplify your portfolio a lot just by reducing some of the duplication. There is no reason to hold multiple total bond funds, emerging market funds, or REITS. Also, Wellington is a widely respected fund but it is a balanced fund and would make rebalancing a little more complicated.

As to AA, I'm of fan of being about 50/50 at retirement - a little conservative for some folks - and then letting the allocation rise a bit to 55% or 60% equities.

I'm not a fan of LTC Insurance based on the experience we've had with my wife's parents and their LTC insurer. Your pensions and SS Benefits also favor a self insure approach in my humble opinion.

Re: Retirement advice

Posted: Fri Oct 27, 2017 10:49 pm
by spartanap
Peter Foley wrote: Wed Oct 04, 2017 11:09 pm I think the plan is doable.

You need $84,000/year and your two pensions equal $70,000. The $14,000 per year you need for the first few years is less than a 2% withdrawal rate. When your spouse begins taking SS benefits your withdrawal rate is negligible.

In addition, if your $84,000 is your gross income need you will be well within the 15% tax bracket when you retire. This would allow you to draw down taxable without paying capital gains or withdraw funds from tax deferred at 15% to meet your needs. That gives you a lot of flexibility in terms of tax efficient withdrawals.

You could simplify your portfolio a lot just by reducing some of the duplication. There is no reason to hold multiple total bond funds, emerging market funds, or REITS. Also, Wellington is a widely respected fund but it is a balanced fund and would make rebalancing a little more complicated.

As to AA, I'm of fan of being about 50/50 at retirement - a little conservative for some folks - and then letting the allocation rise a bit to 55% or 60% equities.

I'm not a fan of LTC Insurance based on the experience we've had with my wife's parents and their LTC insurer. Your pensions and SS Benefits also favor a self insure approach in my humble opinion.
Thanks for the feedback!

Re: Retirement advice

Posted: Thu Mar 15, 2018 8:31 pm
by spartanap
Topping for more feedback.
Background: Wife is currently retired with a $26,000/yr pension. I plan to retire at 60 with a $44,000/yr pension w/ 50% survivor benefit. We will be able to purchase health insurance from our former employers. Soc Sec: Wife $12,000/yr at 62. Me - $26,000 at 67(possibly 70). Current income is 100K. Planning on a $7000/mo budget in retirement. No kids, so not worried about leaving an inheritance.

Emergency funds: 6 months
Debt: none $215,000 house paid for. Plan to move to a 325K (approx) house after retirement.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 6% State
State of Residence: MO
Age: 57; 56 (spouse)
Desired Asset allocation: 60% equities / 40% bonds
Desired International allocation: 20-30% of equities
Current assets: Very low seven figures. Avg expense ratio: .18%

Taxable

CFFN CAPITOL FED FINANCIAL INC 2.2%
JNJ JOHNSON & JOHNSON 1.3%
DODBX DODGE & COX BALANCED 3.0%
VFIAX Vanguard 500 Index Fund Admiral 3.7%
VEXEX Vanguard Extended Market Index Fund Admiral 2.0%
VWITX Vanguard Intermediate-Term Tax-Exempt Fund 1.4%
VBIRX Vanguard Short-Term Bond Index Fund Admiral 2.1%

My Vanguard IRA

VBTLX Vanguard Total Bond Market Index Fund Admiral 7.8%
VTABX Vanguard Total International Bond Index Fund Admiral 3.4%
VTIAX Vanguard Total International Stock Index Fund Admiral 3.2%
VTSAX Vanguard Total Stock Market Index Fund Admiral 7.5%

My Schwab IRA

SCHH SCHWAB US REIT ETF 1.0%
SCHE SCHWAB EMERGING MARKETS EQUITY ETF 1.0%
SCHF SCHWAB INTERNATIONAL EQUITY ETF 2.2%
SCHZ SCHWAB US AGGREGATE BOND ETF 5.7%
SCHB SCHWAB US BROAD MARKET ETF 7.0%

My Roth IRA

VWIGX Vanguard International Growth Fund Investor Shares 2.3%
VSMAX Vanguard Small-Cap Index Fund Admiral Shares 2.0%
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 1.0%
VWENX Vanguard Wellington Fund Admiral Shares 3.6%

Wife's Vanguard IRA

VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 5.0%
VTABX Vanguard Total International Bond Index Fund Admiral Shares 2.1%
VTIAX Vanguard Total International Stock Index Fund Admiral Shares 2.4%
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares 4.7%

Wife's Schwab IRA

SCHH SCHWAB US REIT ETF 0.5%
SCHE SCHWAB EMERGING MARKETS EQUITY ETF 1.0%
SCHF SCHWAB INTERNATIONAL EQUITY ETF 1.5%
SCHZ SCHWAB US AGGREGATE BOND ETF 4.0%
SCHB SCHWAB US BROAD MARKET ETF 4.7%

Wife's Roth IRA

VEMAX Vanguard Emerging Markets Stock Index Fund Admiral Shares 1.0%
VWIGX Vanguard International Growth Fund Investor Shares 2.2%
VSMAX Vanguard Small-Cap Index Fund Admiral Shares 2.0%
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 1.0%
VWENX Vanguard Wellington Fund Admiral Shares 3.5%

Contributions to both Roths are maxed out every year.

1. Is my plan to retire at 60 doable?
2. I'm really struggling with the issue of buying LTC insurance. Family history of dementia on wife's side is a concern. I feel we are set up to self-insure; accepting the risk that a catastrophic health event early could severely damage our plans. Advice?
3. Any portfolio issues?
4. Any other issues we should be considering?

Re: Retirement advice

Posted: Thu Mar 15, 2018 8:51 pm
by dwickenh
You have a very valuable floor of income at 70,000 with the two pensions. That leaves a void of 14,000 after tax for your 7,000 per month expenses.
Safe withdrawal of 3% of your assets will be 30,000 per year until SS kicks in.

1. I would say you are in good shape as long as the health insurance cost is not prohibitive.

2. Compare the cost of insuring for LTC Insurance now at your young age, and compare to using your house and portfolio to self insure.
You may find your assets are a little light to self insure, but I am current self insuring at about the same asset level.
3. Your portfolio appears to be low cost and tax efficient. You may want to simplify once you retire and consolidate the investments to
one or two companies(Vanguard,Fidelity, Schwab).

4. If the health Insurance doesn't materialize as expected, hold off on your pension to help lower the income thresh hold for the ACA(Affordable Care
Act). A couple will need to be below 64,000 per year for subsidies. The taxable account will be invaluable for controlling taxable income in the
early years of retirement.

Good Luck and best wishes,

Dan

Re: Retirement advice

Posted: Thu Mar 15, 2018 9:51 pm
by radiowave
Agree with the above. In additional to consolidating overlapping funds, consider consolidating accounts, e.g. your wife has two IRAs - consider consolidating into a single account.