Would YOU retire

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Saver2018
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Would YOU retire

Post by Saver2018 » Thu Mar 08, 2018 2:44 pm

<t>First i want to say that i really enjoy reading these posts. Bogleheads, you are an elite group of people and i respect the advice you give ...... with that, i am a noob here and i am seeking some advice myself....

My wife and i are trying to decide whether we could/should retire now or wait. We are kinda tired of the corporate rat race. We have both been with the company over 32 yrs and ready to be done.

Here is our current situation.

Age: I am 56 my wife is 59
Investments: $2.35M not including personal residence, vacation home, or rental units. Almost entirely in before tax 401k's and IRA's, in a scary 70/30 equity/cash ratio currently. We only have about $60K in after tax cash at this time (which is one of my largest concerns). Nothing in bonds right now due to interest rate risks
Rentals: 2 condos, paid for valued at approx $135k each
Rental income: $1500/mo after HOA, taxes and insurance (includes both condos)
Personal residence valued at approx $400K, paid for; taxes are $1650/yr and insurance is $950/yr.
Vacation home, paid for, valued at $115K. Taxes $650/yr and insurance $600/yr.
Estmated pensions: me $1500/mo ($1200 if i add my wifes life to it, still need to make that decision); wife $950/mo ($700 if she adds my life to it)
Esimated social security based on highest 35 years and last years factors: me $2411/mo, wife $2025/mo both at full retirement age.

I estimate we need $9650/mo after taxes in retirement in todays dollars This includes $1500/mo health insurance premium and $12k/yr deductible; big vacation every other year; new car every 10-12 years, and a big house or condo expense (AC, roof, water heater, etc) every 5-6 year and our typical montly bills, entertainment, bday presents for kids and grandkids, dinners out, and hobbies.

I ran the math in a big spreadsheet and assuming 35/20/65 cash/bond/equity split with a 2% reduction in equities/yr.And 2% increase in bonds each year, 2.5% inflation, 4.7% eqities return, 1.2% cash return, 2.9% bond return, 25% tax bracket, collect SS at full retirement age, medicare at 65, I calculate we can fund through age 95 and die flat broke. If we live past 95 then we have to sell real estate, reverse mortgage the house or move in with the kids :)

I know what you are thinking. You did the math, if it works "just do it". Unfortunately no math results in a binary yes or no answer. There many assumptions; when you will die, cash/bond/equity ratio, investment returns, expected inflation, tax rates, health insursnce costs...... and there are many risks; market risks, inflation, health care reform, social security reform, your health........ there is no black and white answer no matter what anyone tells you. And your assumptions make a giant difference .... the diference between a 4% equity return and 6% equity return assumption is the difference between the poor house and leaving the kids $10 million when you die. And the difference between 2 and 3% inflation makes your bills unbelievably high 25-30 years from now.

Another alternative is to more slowly ease into retirement. My wife has offered to find a part time job that has health insurance until she turns 65 and i might be able to consult as a part time engineer maybe, i would have to figure that out if we go down that road.

Health insurance is extremely important to us since i am diabetic and my wife is arthritic. She already has two new knees. We are both fairly healthy however. We work out 5 days a week or so, eat right and stay active and dont drink toooo much but the genes are not in our favor :)

Soooo now if you are still reading this...........Bogleheads, i guess what i am lookjng for is YOUR expert opinions. Especially from those who may already be retired. If you were US would you retire NOW or wait until you have more safety margin. I really look forward to your responses. Thank you

ReadyToRetire
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Re: Would YOU retire

Post by ReadyToRetire » Thu Mar 08, 2018 3:43 pm

With that net worth, I would have already been gone!

Plus, you've got "the wife is willing to work part time"????? Why are you waiting. Her potential earnings will free up enough assets for a nicer boat at the vacation house.

Enjoy!

delamer
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Re: Would YOU retire

Post by delamer » Thu Mar 08, 2018 3:44 pm

Inevitably, one of you will live longer than the other.

Have you run the numbers as to what happens if you die first and also if your wife dies first?

With you both alive, it looks like the pensions and SS get you about half way to your goal. So you have different needs from the portfolio based on who has begun to collect which payment. Have you looked at it from that point-of-view? What do we need to take out today versus in 5 years versus in 10 years?

LukeHeinz57
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Re: Would YOU retire

Post by LukeHeinz57 » Thu Mar 08, 2018 3:47 pm

Yes. I would be uncomfortable holding as much in cash as you plan to though...Congratulations on a job well done :beer
"Contentment", the only thing you ever truly need more of!

rkhusky
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Re: Would YOU retire

Post by rkhusky » Thu Mar 08, 2018 3:48 pm

Saver2018 wrote:
Thu Mar 08, 2018 2:44 pm
Nothing in bonds right now due to interest rate risks
So, you are afraid of bonds that might lose 5-10%, but you're invested in stocks that could lose 30-50% and in fact, just dropped 10% a month ago?

35/20/65 cash/bond/equity split adds up to 120.

Have you tried running your situation through FIRECalc or CFIRESim to see how you might have fared retiring in past years? I don't see how you would be flat broke at age 95 under any conditions that have occurred in the past.
Last edited by rkhusky on Thu Mar 08, 2018 3:56 pm, edited 1 time in total.

Lexi
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Re: Would YOU retire

Post by Lexi » Thu Mar 08, 2018 3:50 pm

My one big concern would be uncertainty over health insurance. If your wife can get a PT job with insurance for both of you and she is willing to do that, I would choose that option.

bloom2708
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Re: Would YOU retire

Post by bloom2708 » Thu Mar 08, 2018 3:54 pm

Does the $9,650 (115,800 for a year) include taxes you need to pay?

You only have 3 years until 59.5. 6 years to Medicare for your wife.

With the various homes you likely have a complex scenario. I would run a simplification scenario where you streamline/lower some of the costs (even if the rentals are cashflowing by a margin.

The key in most of these "right there" scenarios is to have flexibility in your spending. At $90k or $100k you are good. At $120k or $130k (if you need to pay taxes), then it just gets closer.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

TravelGeek
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Re: Would YOU retire

Post by TravelGeek » Thu Mar 08, 2018 3:59 pm

Saver2018 wrote:
Thu Mar 08, 2018 2:44 pm
I estimate we need $9650/mo after taxes in retirement in todays dollars This includes $1500/mo health insurance premium and $12k/yr deductible; big vacation every other year; new car every 10-12 years, and a big house or condo expense (AC, roof, water heater, etc) every 5-6 year and our typical montly bills, entertainment, bday presents for kids and grandkids, dinners out, and hobbies.
Did you model this as a forever-stable expense budget? In other words, do you anticipate big vacations every year until age 95? I think for many people it would likely be decreasing over time, unless you expect to go on more luxurious (comfortable) trips as you age. E.g., premium economy until 75, then business class until 85 and then private jet :)

liberty53
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Re: Would YOU retire

Post by liberty53 » Thu Mar 08, 2018 4:05 pm

I would run your scenario using FireCalc or cFireSim and see what it looks like without using the constant % return on investments method which doesn't account for sequence of returns risk.

Your need seems like it was estimated conservatively, which is great, but at approx. $9K/month after accounting for taxes,income from the rentals, and pensions you are still short of investment assets based on the 4% rule (need about $2.7MM). Note this does not include SS which will obviously help.

Maybe run three different scenarios for need based on conservative, most likely, and optimistic using each with the calculators mentioned above and see how it works out.

aristotelian
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Re: Would YOU retire

Post by aristotelian » Thu Mar 08, 2018 4:30 pm

It seems you have a fairly high expense lifestyle ($90K expenses, vacation home). I would consider cutting back some if you are nervous about the numbers. I would rather go without the vacation home than work another 1 or 2 years to keep it.

Read a book on bonds to educate yourself about interest rate risk. You could hold short term bonds or buy CD's, etc. You should certainly start reducing your stock.

Do you have a withdrawal plan that avoids penalties on IRA withdrawals? If liquidity is a concern, that might be another reason to sell either the vacation home or one of the rentals.

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Meg77
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Re: Would YOU retire

Post by Meg77 » Thu Mar 08, 2018 4:31 pm

First: I'd add her to your pension but not add you to hers (sorry but statistically you are much more likely to die first just from being male, even though you're a bit younger. The diabetes just improves the odds of her outliving you).

$94,000 from investments (4% withdrawal rate)
$12,000 rental income (net of estimated maintenance)
$25,800 both pensions (she will get this for life; if she dies first you'd lose $11k a year)
$28,932 him SS
$24,300 her SS
$185k retirement Income

So you're definitely fine once all these income sources kick in, but that's the question - when do you get the pensions? If you're having to draw well over 4% on your portfolio in the interim to make the numbers work, assuming you'll cut way back later, that is risky due to the sequence of returns risk. In other words, it would be really hard to recover if the market tanks for several years early in your retirement. If the interim is just a couple of years then I say go for it (like if the pensions hit at 60 for you or 62 for her). But if we're talking close to a decade retired before you get SS and the pensions, then I say stay at work another year or so together or at least take part time work for a bit to reduce reliance on the investment portfolio.
"An investment in knowledge pays the best interest." - Benjamin Franklin

Saver2018
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Re: Would YOU retire

Post by Saver2018 » Thu Mar 08, 2018 4:35 pm

Thank you for all of the responses
Readytorun: maybe ill start keeping an eye out for a good deal on that boat :)
Delamar: that would be a great analysis to do, that can help me decide whether to keep my wifes life on my pension or not. I will do that
Luheinze57/rkhusky: 35/20/65 is a mistake, fat fingered mistake actual is 15/20/65. I know i am crazy being 70% in equities at my age right now, im going to lower it tomorrow
Bloom7708: 9650 AFTER taxes
Travelgeek: actually my model has 4 seperate expense ranges. 9650 prior to any medicare. 1500 less when my wife gets on medicare. 1500 less when i get on medicare and15% less when i turn 80. I actaully model this on a year by year basis with my wifes ss kicking in when she turn 67 and my ss kicking in when i turn 67 and medicare reductions kicking in when each of us turn 67.
Liberty53: YOU HIT THE NAIL ON THE HEAD. If i had 2.8M i would feel ALOT better about retiring, that is why i am hesitant at 2.3.... i used firecalc a while back. It always gave me at least 95% confidence results, but past performance is no indication of future results :) but i still kinda like my big spreadsheet though :) 3.0M would be perfect

Tal-
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Re: Would YOU retire

Post by Tal- » Thu Mar 08, 2018 4:37 pm

I tend to be conservative on the "can I retire now" question, so take this for what it's worth.

It's close...

Pros:
*Pensions (two of them!)
*Little/no debt
*$2M+ in investable assets is a good bucket of cash
*Your high income target suggests that you could take less than that if needed, and still be fine.
*Your return assumptions seem reasonably conservative - given normal(ish) market conditions.
*% of assets taken out in year one is reasonable, probably around 3%.
*You seem to have factored in most major expenses that you may hit.


Cons:
*Your pensions and real estate are unlikely to keep pace with inflation.
*Your target asset allocation is very conservative (I think...) - probably too conservative. I wouldn't put more than ~5-10% in cash.
*Your condo return looks ambitious. Does that include vacancy and repairs?
*Pretty high income target. I'm wondering how that compares to current spending.

Would I retire today? Probably yes, but only if you're willing to spend less than 10K/month if returns aren't great. For example, if your assets fall to $2M, you can only take out 50K that year (plus pensions and rental income).

Just my take.
Debt is to personal finance as a knife is to cooking.

Snuffycuts99
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Re: Would YOU retire

Post by Snuffycuts99 » Thu Mar 08, 2018 4:59 pm

I would do it, but that's just me. It seems to me that you'll be in very good shape once you hit full retirement age. The pensions and SS will provide a good portion of your living expenses. And Medicare will help to lower those living expenses. The 'bridge' to full retirement age is the key here. I agree with previous posters in that I think you have a good amount of flexibility with your expenses. You aren't exactly living frugally with those annual expenses. Not lavishly either, but I think it provides you with great flexibility to cut back if need be to avoid sequence of return risk. If it were me, I'd be comfortable starting out with a 4% SWR. That, in combination with your pensions and rental income, goes above and beyond your income desire. At 3%, which I find very conservative, you'd still be meeting your income needs for the bridge to full retirement. Once you hit FRA, you should be able to scale back your withdrawal percentage accordingly.

I also just read Meg's post...yes, when do you get the pensions? I was assuming they would begin if you retired now. Without that pension income, I would be concerned as well about having to increase your withdrawal rate from investments during the bridge period.

Saver2018
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Re: Would YOU retire

Post by Saver2018 » Thu Mar 08, 2018 5:33 pm

Yes we get the pensions as soon as we retire. These numbers assume we retire this year. They will continue to go up the later we retire ....... we can also take them as a lump sum, but we can save that discussion for another post another day :happy

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HomerJ
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Re: Would YOU retire

Post by HomerJ » Thu Mar 08, 2018 5:42 pm

I would retire immediately.
Saver2018 wrote:
Thu Mar 08, 2018 2:44 pm
I estimate we need $9650/mo after taxes in retirement in todays dollars
This has to be at least 50% discretionary, if not more. That's quite a precise number... Not $10,000/mo, but $9650. Have you really broken it down that well?

That seems very high considering your houses are paid off, and you apparently live in a Low-Cost-Of-Living (LCOL) area, based on the house prices, and the taxes. What are you spending all that money on?

Because so much of your spending appears to be discretionary, AND you're not even counting your home equity, there is very little risk here.

Your worst case is not dying broke. Your worst case is going on 2 vacations a year instead of 4 vacations a year and eating out less if everything goes really really bad.

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HomerJ
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Re: Would YOU retire

Post by HomerJ » Thu Mar 08, 2018 5:45 pm

This includes $1500/mo health insurance premium and $12k/yr deductible
Are these numbers accurate? or just a guess? Are you planning and budgeting spending the full $12,000 deductible every year?

Saver2018
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Re: Would YOU retire

Post by Saver2018 » Thu Mar 08, 2018 6:02 pm

They are a complete WAG and a very conservative assumption but i am a conservative kinda guy. And the 7150 per month leftover after healthcare is about 1500-2000 per month more than we spend right now. But..... right now we DONT go on big vacations ever other year. Its more like a big vacation every 5 years. We want to travel more than we do now. We have lived extremely frugally over the last 35 years or so, and actually want to spend MORE than we do now in retirment on travel.

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Sandtrap
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Re: Would YOU retire

Post by Sandtrap » Thu Mar 08, 2018 6:07 pm

Welcome.
Congratulations on your success and formulating a sound strategy going into retirement.
Some considerations and information.
1. Given you "bond allocation", consider this article and discussion on Kitce's "Retirement Red Zone" viewtopic.php?t=233574
As well as this excellent discussion on "Sequence of Returns Risk"
viewtopic.php?t=236665

While you have excellent diversified income streams going forward, including R/E income, it is something to consider to shore up any weak points in your plan.

2. That said, I would take a long second look at your fixed allocation (bonds) as a means to anchor your portfolio. To support this idea, read this:
Outstanding write up on the 64/40 allocation by Bernstein.
http://web.archive.org/web/20061214061 ... in6040.pdf
R. Ferri on Bernstein's 60/40
http://www.etf.com/sections/index-inve ... nopaging=1

3. The elephants in the room are healthcare expenses. If you retire now, will all contingencies be covered.

4. Given your health and spouses health, delaying retirement also means not taking advantage of the time you have right now to enjoy retirement in optimal health. This is the flip side of things that are not quantifiable or able to be calculated on a spreadsheet. Quality of life is not the same as longevity.
** This is the most compelling reason for you to consider retiring now. So that you and your wife can get the most enjoyment while your are in best health.

Congratulations on your retirement and stepping into the "golden years".
aloha
j

Olemiss540
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Re: Would YOU retire

Post by Olemiss540 » Thu Mar 08, 2018 6:17 pm

If you can't live an extravagant lifestyle with that kind of after tax income or less (and do a LOT of traveling) than you may have bigger issues regardless of your retirement date. Do it!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Nestegg_User
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Re: Would YOU retire

Post by Nestegg_User » Thu Mar 08, 2018 7:13 pm

OP

I would model it in two phases:

model on most conservative- - BOTH are survivor in retirement benefits ($1200+$700= $1900/mo)
needs = $9450 - $1900 - $1500 = $6050/mo x 12 = $72600

PHASE 1: before first SS— —
[ in this case.. wife’s SS 7 years to FRA]
so take $350 k from portfolio and put it into very safe bond fund and take 1/7 out every year { $50k}

$72600 - $50000 = $ 22600 needed

with the remaining $2 M take 3 %= $60 k
so you have enough before first SS starts. ** GOOD **

PHASE 2: after first SS — —
still have $72600 shortfall (assuming rental keep up with inflation). There might be some loss to inflation from pension, so need some gains from portfolio (might be as conservative as 35-40% equities)

now have her $2025/ mo = $ 24300 /yr

$72600 - $24300 = $48300 needed

at the above 3% withdrawal of $60 k , you are still good
if the portfolio increases so much the better. { start inflation adjustments to withdrawals, potentially increase to 3.5-4% as well}



clearly, even without taking inflation adjusted amounts prior to starting first SS there is enough “slack” that more really isn’t needed. in addition, your SS of $28800 is just three years away! (so if there’s a bear right before and you need to increase WR for a few years- the second SS is there to save the day)


IN SUMMARY- - using this two phase approach, modeled with BOTH taking survivor benefits in pension, and taking a very conservative 3% WR (unadjusted for inflation prior to first SS ===> Gives SUCCESSFUL retirement

congratulations :beer

{The last phase: one survivor
still have full pension from both (remember, we had both give benefits to surviving spouse) and we already had success with the lower SS, so surviving spouse would still be good. likely would sell rental properties and downsize to just one personal residence for lower costs
(likely won’t even need to think about a SPIA)

Bacchus01
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Re: Would YOU retire

Post by Bacchus01 » Thu Mar 08, 2018 7:26 pm

I’m really surprised by the $9650 per month need. What for?

We own two houses and some investment land that we pay mortgage and taxes on every month. Home values are well above what yours are. We have three kids still at home and all their food and activities. We take two nice vacations every year including international. We have two newer $50K+ SUVs that we pay loans on.

And we still only spend $125-$135K. If the boys were gone and the houses paid off, I can’t see us spending more than $50K/year and that’s living very nicely.

delamer
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Re: Would YOU retire

Post by delamer » Thu Mar 08, 2018 7:38 pm

Bacchus01 wrote:
Thu Mar 08, 2018 7:26 pm
I’m really surprised by the $9650 per month need. What for?

We own two houses and some investment land that we pay mortgage and taxes on every month. Home values are well above what yours are. We have three kids still at home and all their food and activities. We take two nice vacations every year including international. We have two newer $50K+ SUVs that we pay loans on.

And we still only spend $125-$135K. If the boys were gone and the houses paid off, I can’t see us spending more than $50K/year and that’s living very nicely.
In these types of posts, unless the OP asks for advice about expenses that could be cut back then I don’t see the point of asking “why” they need the income that they are targeting.

We Bogleheads are all over the place in terms of what we spend money on, how much we spend on those things, and how we prioritize different spending.

Your idea of “living very nicely” is probably nothing like mine or the OP’s.

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Nestegg_User
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Re: Would YOU retire

Post by Nestegg_User » Thu Mar 08, 2018 8:20 pm

indeed

in my outline above, the OP could easily get another $10 k - $15 k (possibly even $20 k) additional income while still having a conservative 3% WR. If both survive into SS age at FRA, there would be no doubt: as medical costs would likely be significantly decreased with medicare and medicare supplement plan, and copays / deductibles would decrease as well.

{in the above, if any unspent funds were carried over, or added into any emergency fund for repair of rental properties, they wouldn’t even need to consider going to higher withdrawal rates. }

{ given the health history of diabetes, lifespans much over 30 years might not be expected, but even the conservative 3-3.5% WR have decent probability of having surviving portfolios to the age of 96 spelled out above (3.5% WR survival probability for 30 years > 95% with even a 40/60 portfolio)**}

** although Pfau argues that with the lower interest bond rates, the WR might need to be reduced to 2.8% ( so staying at 3% until SS does give a margin of error in case a worst-of-worst case occurs/ / so the OP would probably have to cut back on the international travel, under worse case conditions)
Last edited by Nestegg_User on Thu Mar 08, 2018 8:34 pm, edited 1 time in total.

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HomerJ
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Re: Would YOU retire

Post by HomerJ » Thu Mar 08, 2018 8:28 pm

delamer wrote:
Thu Mar 08, 2018 7:38 pm
In these types of posts, unless the OP asks for advice about expenses that could be cut back then I don’t see the point of asking “why” they need the income that they are targeting.
It does make a difference when deciding if someone has enough.

If 4% is all needs, then it's a little more dangerous... If 2% covers all your needs, and 2% is all your fun, you really don't have to ever worry about living under a bridge. Since cutting back on fun is always an option.

The odds are very high that you won't have to cut back on fun at all, but when the 5% failure chance equals "go on 2 vacations a year instead of 4 (or 4 cheaper vacations)", that's not a terrible outcome, and it's easier to take that risk.
Last edited by HomerJ on Thu Mar 08, 2018 8:56 pm, edited 1 time in total.

delamer
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Re: Would YOU retire

Post by delamer » Thu Mar 08, 2018 8:45 pm

HomerJ wrote:
Thu Mar 08, 2018 8:28 pm
delamer wrote:
Thu Mar 08, 2018 7:38 pm
In these types of posts, unless the OP asks for advice about expenses that could be cut back then I don’t see the point of asking “why” they need the income that they are targeting.
It does make a difference when deciding if someone has enough.

If 4% is all needs, then it's a little more dangerous... If 2% covers all your needs, and 2% is all your fun, you really don't have to ever worry about living under a bridge. Since cutting back on fun is always an option.
But there is a difference between pointing out that a reduction to 2% withdrawals is safer than 4% versus (if cutting back is an option) versus saying “I am really surprised by the $9650 per month need. What for?”

Snuffycuts99
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Re: Would YOU retire

Post by Snuffycuts99 » Thu Mar 08, 2018 8:56 pm

The OP also seems to be using somewhat of a 'bucket' approach to expenses and looks to be including monthly savings towards future large expenses, such as vehicles and home maintenance. So while I still think the budget seems cushy, those are clearly inflating it. Not sure if that's how I would do it or not.

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HomerJ
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Re: Would YOU retire

Post by HomerJ » Thu Mar 08, 2018 8:58 pm

delamer wrote:
Thu Mar 08, 2018 8:45 pm
HomerJ wrote:
Thu Mar 08, 2018 8:28 pm
delamer wrote:
Thu Mar 08, 2018 7:38 pm
In these types of posts, unless the OP asks for advice about expenses that could be cut back then I don’t see the point of asking “why” they need the income that they are targeting.
It does make a difference when deciding if someone has enough.

If 4% is all needs, then it's a little more dangerous... If 2% covers all your needs, and 2% is all your fun, you really don't have to ever worry about living under a bridge. Since cutting back on fun is always an option.
But there is a difference between pointing out that a reduction to 2% withdrawals is safer than 4% versus (if cutting back is an option) versus saying “I am really surprised by the $9650 per month need. What for?”
Maybe, but I asked the same question. I'm pretty sure $9650 isn't all needs. But I wanted to be sure, so I asked the question. $120,000 a year spending in a LCOL area when you have the house paid off is indeed a LOT of money. Objectively. (when talking about needs). Food and utilities just don't cost that much. But I need to be sure there's not some $3000 a month payment going to a disabled kid before I give advice.
Last edited by HomerJ on Thu Mar 08, 2018 9:08 pm, edited 1 time in total.

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Watty
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Re: Would YOU retire

Post by Watty » Thu Mar 08, 2018 9:08 pm

Saver2018 wrote:
Thu Mar 08, 2018 2:44 pm
I estimate we need $9650/mo after taxes in retirement in todays dollars This includes $1500/mo health insurance premium and $12k/yr deductible;
That will go down a lot when you both get under medicare and it is very likely that for at least the first 18 months you can use COBRA, in a few states they have extended longer.
Saver2018 wrote:
Thu Mar 08, 2018 2:44 pm
We only have about $60K in after tax cash at this time (which is one of my largest concerns).
Under the current tax laws a couple can have over $100K in taxable income and still be in the 12% federal tax bracket. You might want to do Roth conversions or make Roth contributions when you can but you are in a pretty good situation with regards to that.
Saver2018 wrote:
Thu Mar 08, 2018 2:44 pm
Esimated social security based on highest 35 years and last years factors: me $2411/mo, wife $2025/mo both at full retirement age.
It often makes sense for a couple to have at least one person delay starting Social Security until they are 70. Not only can that give you a larger check but there are tax advantages since that would give you more time to do Roth conversions and your Social Security may be taxed less than your other income.
Saver2018 wrote:
Thu Mar 08, 2018 2:44 pm
My wife has offered to find a part time job that has health insurance until she turns 65.....
Part time jobs with health insurance are pretty rare so if you are planning on this you need to make sure that she will actually be able to find one.

delamer
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Re: Would YOU retire

Post by delamer » Thu Mar 08, 2018 9:15 pm

HomerJ wrote:
Thu Mar 08, 2018 8:58 pm
delamer wrote:
Thu Mar 08, 2018 8:45 pm
HomerJ wrote:
Thu Mar 08, 2018 8:28 pm
delamer wrote:
Thu Mar 08, 2018 7:38 pm
In these types of posts, unless the OP asks for advice about expenses that could be cut back then I don’t see the point of asking “why” they need the income that they are targeting.
It does make a difference when deciding if someone has enough.

If 4% is all needs, then it's a little more dangerous... If 2% covers all your needs, and 2% is all your fun, you really don't have to ever worry about living under a bridge. Since cutting back on fun is always an option.
But there is a difference between pointing out that a reduction to 2% withdrawals is safer than 4% versus (if cutting back is an option) versus saying “I am really surprised by the $9650 per month need. What for?”
Maybe, but I asked the same question. I'm pretty sure $9650 isn't all needs. But I wanted to be sure, so I asked the question. $120,000 a year spending in a LCOL area when you have the house paid off is indeed a LOT of money. Objectively (when talking about needs). Food and utilities just don't cost that much. But I need to be sure there's not some $3000 a month payment going to a disabled kid before I give advice.
Yes, I just checked and your post was similar. I am not sure why the later one struck me as more judgmental in tone. Maybe because of the direct comparison to his lifestyle? As you pointed out, the OP could have extraordinary expenses that the commenter does not. Plus, while I am frequently puzzled by others’ spending decisions, they ceased to surprise me a long time ago.

In any case, I might say instead “how much wiggle room do you have in the budget; is there anything you’d be willing to give up in order to be more financially secure, if needed?”

dknightd
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Re: Would YOU retire

Post by dknightd » Thu Mar 08, 2018 9:35 pm

When I retire I plan to have 2-4 years of cash like things to cover my living expenses. I do not want to suffer from an expected, or unexpected, drop in the "market". That will likely reduce what i expect to earn on my previous investments. For me it is a peace of mind issue. I'm willing to give up some some potential returns for the money in the bank

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sergeant
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Re: Would YOU retire

Post by sergeant » Thu Mar 08, 2018 9:49 pm

Yes, I would retire.
Lincoln 3 EOW!

simas
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Re: Would YOU retire

Post by simas » Thu Mar 08, 2018 10:09 pm

YES is an answer (and I am already retired/FIRE 15 years younger than you).

Few things

- if you are looking for certainty, forget it as none ever exists. you are wasting your time and letting inner demons of fear take advantage of you looking for impossible. deal with likelyhoods/probabilities
- your numbers 'do not work' because you made them not to work by feeding highly unrealistic spending expectations over time. This is not how it works in real life with every real senior, in your 70s (if you are alive) you would need significantly less money for vacations, and in even more so in your 80s (which is if you are still alive). Settings up an after tax budget that is 150% of median pre tax household income is sabotaging yourself
- you are not accounting for Medicare in healthcare cost. not sure why
- you are not accounting for real things here which is your longevity. you would be fortunate (even without any other issues) to live until 85. you would be very lucky not to have more serious health problems in the next 10-15 years, and this is before 'genes not on your side' and health issues mentioned. Are your parents still around and if not (condolences..) what is your family history suggests?

so stop feeding your demons, and live your life already! you could end tomorrow. your health could also change tomorrow. you worked hard, made very smart choices along the way, live, do not carry these to the grave.. now , if you love what you do and want to continue do it - by all means. however, financially you are more than ok.

in terms of anectotical examples - I have two in laws in their late 70s , who travel on Caribean/cross Atlantic cruises, still fly to Europe,etc . Slightly below your level of assets (I am executor and trustee), however true budget is <40k annually and this is with 10k of which is property taxes. Spending 100k annually of which only 2k is property taxes is honestly crazy..
Last edited by simas on Thu Mar 08, 2018 11:08 pm, edited 1 time in total.

simas
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Re: Would YOU retire

Post by simas » Thu Mar 08, 2018 10:14 pm

and one more thing - you retire to do what exactly now you do not have to work for living anymore? Have you given that a thought in terms of what brings joy to your life?

my personal experience is that I determined I love building solutions (I am an engineer/problem solver at heart and get joy out of solving things/puzzles/problems). so I did leave my career in financial services but very soon found myself 'helping' in other challenges knowing I can get up and walk away every second , really helped me negotiate everything on my terms

what excites you? without it, what is the point of 'retirement'?

Bacchus01
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Re: Would YOU retire

Post by Bacchus01 » Thu Mar 08, 2018 11:33 pm

delamer wrote:
Thu Mar 08, 2018 7:38 pm
Bacchus01 wrote:
Thu Mar 08, 2018 7:26 pm
I’m really surprised by the $9650 per month need. What for?

We own two houses and some investment land that we pay mortgage and taxes on every month. Home values are well above what yours are. We have three kids still at home and all their food and activities. We take two nice vacations every year including international. We have two newer $50K+ SUVs that we pay loans on.

And we still only spend $125-$135K. If the boys were gone and the houses paid off, I can’t see us spending more than $50K/year and that’s living very nicely.
In these types of posts, unless the OP asks for advice about expenses that could be cut back then I don’t see the point of asking “why” they need the income that they are targeting.

We Bogleheads are all over the place in terms of what we spend money on, how much we spend on those things, and how we prioritize different spending.

Your idea of “living very nicely” is probably nothing like mine or the OP’s.
Let me be more succinct. No, I would not retire on that amount if I was planning to spend $100K a year. But I can’t imagine what they are spending $100K a year on. I think it’s very Relevant.

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Nestegg_User
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Re: Would YOU retire

Post by Nestegg_User » Fri Mar 09, 2018 12:32 am

Bacchus01

I’ve already outlined how they could easily have that type of income [$100 k +], they’ve already shown that they have rental income at a 6.6% cap rate (although they didn’t say if vacancies were considered) and I used pensions with BOTH having survivors benefits, and used a 3% WR to be fully conservative (to best insure that 30-35 years was feasible) .... and they still made it.

I didn’t even assume any need for the second SS, so they could (and should) delay his to 70 for max COLA benefits - but even just the FRA benefits of SS COLA adjusted add a level of growth that more than compensates for potential slower growth of a less equity driven portfolio. I used 35-40% equities to give a little growth but with far less volatility {they’ve already won the race, extra gravy isn’t needed}.

Michread
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Re: Would YOU retire

Post by Michread » Fri Mar 09, 2018 7:15 am

We just did (retired) this month with less than what you have. We are younger, 55. But we expect we only need 80k on an up year to live the good life. :sharebeer

“As soon as (Benjamin) Franklin acquired enough wealth not to have to work, he retired from business at the age of forty two and became a gentleman of leisure.”
The Racalism of the American Revolution, Gordon S. Wood

ReadyToRetire
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Re: Would YOU retire

Post by ReadyToRetire » Fri Mar 09, 2018 9:18 am

simas wrote:
Thu Mar 08, 2018 10:09 pm
YES is an answer (and I am already retired/FIRE 15 years younger than you).

Few things

- if you are looking for certainty, forget it as none ever exists. you are wasting your time and letting inner demons of fear take advantage of you looking for impossible. deal with likelyhoods/probabilities
- your numbers 'do not work' because you made them not to work by feeding highly unrealistic spending expectations over time. This is not how it works in real life with every real senior, in your 70s (if you are alive) you would need significantly less money for vacations, and in even more so in your 80s (which is if you are still alive). Settings up an after tax budget that is 150% of median pre tax household income is sabotaging yourself
- you are not accounting for Medicare in healthcare cost. not sure why
- you are not accounting for real things here which is your longevity. you would be fortunate (even without any other issues) to live until 85. you would be very lucky not to have more serious health problems in the next 10-15 years, and this is before 'genes not on your side' and health issues mentioned. Are your parents still around and if not (condolences..) what is your family history suggests?

so stop feeding your demons, and live your life already! you could end tomorrow. your health could also change tomorrow. you worked hard, made very smart choices along the way, live, do not carry these to the grave.. now , if you love what you do and want to continue do it - by all means. however, financially you are more than ok.

in terms of anectotical examples - I have two in laws in their late 70s , who travel on Caribean/cross Atlantic cruises, still fly to Europe,etc . Slightly below your level of assets (I am executor and trustee), however true budget is <40k annually and this is with 10k of which is property taxes. Spending 100k annually of which only 2k is property taxes is honestly crazy..
Simas, I am interested in learning more about your situation. As someone who wants to retire soon - even this year - I am always on the hunt for people who've made the leap prior to me. I'll go back and search your posts, but anything more you can share? You are right that certainty doesn't exist and probably a need to be flexible is important. I think I am somewhere between where you might have been mentally when you made the retirement leap and where the current OP is. He appears to be on the more fearful side. I don't think I am there, but not quite brave enough to just pull the rip cord. I'm stuck with a case of one more year syndrome.

How about your spending? I know everyone is different, but was it higher or lower than what you projected? Any particular areas of spending surprise you?

How about your level of nervousness? I would guess the first year or two without a steady paycheck would be a bit of a stressor. How long before the feeling subsided? Or did you have it at all?

Thanks!

Saver2018
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Re: Would YOU retire

Post by Saver2018 » Fri Mar 09, 2018 10:39 am

Wow..... thank you all soo much for the discussion.

Yes.....the 9650 is EXTREMELY CONSERVATIVE. It assumes we spend the ENTIRE medical deductible of 12k every year as well as acruals for a new car for me and my wife every 10 years and accruals for major repairs to home, vacation home and condos as pointed out by snuffycutts99 and accruals for major car repairs. All of which may or may not happen. It also includes gas money for the truck to haul around our fifth wheel on a more regular basis (right now it mostly sits in the backyard collecting dust as we only find the time to use it 2-3 times per year). It also includes an ADDITIONAL 500/mo for generic fun. YES VERY VERY VVery CONSERVATIVE. But i plan on spending more in retirement having fun than we do now. We have lived pretty fugally to get where we are today and i actually want to spend more..

Btw the rental income does not include vacancy losses or repairs. Luckily i have 2 great renters who qhave been there quite a while and treat the places like thier own. I hope they continue to stay for many years to come.

We got where we are today due to my conservatism. I am an aerospace engineer and i am trained to be conservative since peoples lives are at stake in everything i design at work. So this discussion has been a good reality check for me....my wife has been telling me my whole life that i am too conservative. But i guess its in my dna.......

You guys are actually reaffirming what my wife always tells me when we review the retirement plan (the math and assumptions are overwhelming for her) she just wants me to tell her when she can retire. These discussions are great for me. I cannot really discuss this with hardly any friends or family because they would just call me rich and expect me to start paying for everything :happy .

Couple of things to mention. My grandma was diabetic and lived to be 102. My dad died of a heart attack at 58, but he smoked 4 to 5 packs of cigarrettes a day and never exercised. My mom died at 43 of cancer. My wifes parents are still alive and well. Btw my wife and i did this on our own with no inheritance, my dad left anything he had all to my stepmom.

Simas your response really really really hit home and makes me really think we should pull the trigger. I think im going to tell my wife that she can retire in the fall. After we build up a LITTLE more cash reserves. And will still encourage her to find a job with health insurance with pay being of little importance. And i am now thinking about targetting end of year or q1 next year for myself. I still see myself doing some teaching or part time consulting but under my terms....

Thank you all for these responses. Please keep them coming. I am getting alot out of them

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bottlecap
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Re: Would YOU retire

Post by bottlecap » Fri Mar 09, 2018 10:58 am

If I didn't like what I was doing, I would retire.

So long as you don't plan on greatly exceeding your planned expenses on a regular basis, this would be plenty for me.

JT

delamer
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Re: Would YOU retire

Post by delamer » Fri Mar 09, 2018 10:59 am

Bacchus01 wrote:
Thu Mar 08, 2018 11:33 pm
delamer wrote:
Thu Mar 08, 2018 7:38 pm
Bacchus01 wrote:
Thu Mar 08, 2018 7:26 pm
I’m really surprised by the $9650 per month need. What for?

We own two houses and some investment land that we pay mortgage and taxes on every month. Home values are well above what yours are. We have three kids still at home and all their food and activities. We take two nice vacations every year including international. We have two newer $50K+ SUVs that we pay loans on.

And we still only spend $125-$135K. If the boys were gone and the houses paid off, I can’t see us spending more than $50K/year and that’s living very nicely.
In these types of posts, unless the OP asks for advice about expenses that could be cut back then I don’t see the point of asking “why” they need the income that they are targeting.

We Bogleheads are all over the place in terms of what we spend money on, how much we spend on those things, and how we prioritize different spending.

Your idea of “living very nicely” is probably nothing like mine or the OP’s.
Let me be more succinct. No, I would not retire on that amount if I was planning to spend $100K a year. But I can’t imagine what they are spending $100K a year on. I think it’s very Relevant.
We’ll just have to disagree on this. To me, the risk is that posters come here for advice on portfolio allocation and income streams and are put off when people criticize their spending.

Apparently, the OP on this thread dealt with it fine so no harm in this case.

Snuffycuts99
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Re: Would YOU retire

Post by Snuffycuts99 » Fri Mar 09, 2018 11:28 am

I think you should pull the trigger. It seems like you're really ready and your wife is, too. Other posters have given really great advice. Life is short, you just never know how much longer you have. I don't think it makes much sense to continue working if that's not what you want to do, WHEN you're safe to stop doing it. And from the majority of responses on this post, it seems like you're safe. And that's from a really conservative perspective. It's not like you'd be stretching to make it happen. I plan on doing the same as you when I retire in the future...in that I'd like to increase my spending in early retirement after living somewhat frugally during my working years. But, as others have pointed out, your spending should decrease once you get into your late 70s and 80s.

Glockenspiel
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Re: Would YOU retire

Post by Glockenspiel » Fri Mar 09, 2018 11:45 am

On your death bed, will you wish you had worked more or wish you had spent more time enjoying relationships with family and friends and doing whatever fulfills you? Yes, I would pull the trigger and enjoy!
Last edited by Glockenspiel on Fri Mar 09, 2018 12:24 pm, edited 1 time in total.

kalrocmk
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Re: Would YOU retire

Post by kalrocmk » Fri Mar 09, 2018 12:13 pm

9650 prior to any medicare. 1500 less when my wife gets on medicare. 1500 less when i get on medicare and15% less when i turn 80. I actaully model this on a year by year basis with my wifes ss kicking in when she turn 67 and my ss kicking in when i turn 67 and medicare reductions kicking in when each of us turn 67.

Just want to remind you that even with medicare, you will have to pay premiums for Medicare Part B, D and possibly Medicare Part C.

However, with all that factored in you should be fine.

:sharebeer
Just trying to make a living

retiringwhen
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Location: New Jersey, USA

Re: Would YOU retire

Post by retiringwhen » Fri Mar 09, 2018 12:16 pm

delamer wrote:
Thu Mar 08, 2018 7:38 pm

Your idea of “living very nicely” is probably nothing like mine or the OP’s.
Because my DW has a strong affinity to staying near family, my retirement will likely be comparatively very expensive due to a very HCOL location. I would love to be able to retire on $9650/mo. As you stated the OP's spending habits are not well enough documented to comment upon, and not germane to the question at hand.

As to his real question, my answer is Heck YEAH! Retire now, the comments made by others on how to reduce risk (survivorship for example) and better analyze risk related to asset allocation are all good advice, but the plan appears to be well researched, there appears to be ample resources and options to deal with contingencies.

Time to jump in the pool, the water looks warm :-)

gotester2000
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Re: Would YOU retire

Post by gotester2000 » Fri Mar 09, 2018 12:52 pm

OP,

Retire at the earliest if money is the only aspect that you are working for.
Energy is needed to have fun and those trips - no amount of money can give you back TIME.

SuperGrafx
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Re: Would YOU retire

Post by SuperGrafx » Fri Mar 09, 2018 2:10 pm

2.35 million.
Yep, you are good to retire.
You can't take it with you.

wrongfunds
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Re: Would YOU retire

Post by wrongfunds » Fri Mar 09, 2018 3:13 pm

Just couple of weeks ago when I asked about ratio of "needs" vs "wants" in retirement, I got very large range of answers such as 1:0.5 through 1:3 When one estimates future retirement expenses, having a single total number of spending amount without knowing that ratio means one always thinks that another 500K is needed before taking the jump.

Saver2018
Posts: 8
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Re: Would YOU retire

Post by Saver2018 » Fri Mar 09, 2018 3:39 pm

Would you consider assuming you will need the entire health care plan deductible as part of your retirement budget be considered a WANT or a NEED

simas
Posts: 167
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Re: Would YOU retire

Post by simas » Fri Mar 09, 2018 3:44 pm

"

Simas your response really really really hit home and makes me really think we should pull the trigger. I think im going to tell my wife that she can retire in the fall. After we build up a LITTLE more cash reserves. And will still encourage her to find a job with health insurance with pay being of little importance. And i am now thinking about targetting end of year or q1 next year for myself. I still see myself doing some teaching or part time consulting but under my terms...."

good, that was the intent - i fully understand desire to be safe, conservative in projections, not to encounter nasty surprises later on. 'defensive pessimist' as I read it defined somewhere else, I am one myself. Similarly, it is a challenge to remind myself that being very conservative also creates its own risks (and at time significant risks like health changing for the worst tomorrow or dying tonight). what is the value of what you built then? Be aware that transition will take time, may include have confused feelings (who am I? what am I doing?) now you are not 'SVP or XYZ at ABC'. I think there are post-FIRE forums where people who went through this may also help

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