Investment Help Retirement implications

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Investment Help Retirement implications

Post by mdshumaker » Mon Jun 18, 2018 2:57 pm

Contemplating retiring this Fall, 2 years ahead of schedule. Working life is miserable but scared to retire. Currently can finally start saving around 4k a month since last child graduated college.Makes it hard to retire when I finally can save some money. I really don't want to work anymore. I need portfolio review - I'm scared to retire and scared to lose money and scared to spend the money I've saved. Help! (Government Employee worried about possible upcoming changes to benefits proposed by OPM. 17 years part time, 10 years full time for total 27 years.)

1. 63 yrs old female
2. 640,000 TSP Fund holdings 60% G , 20% C, 20% S
Contributions 45% G, 25% C, 25% S, 5% I
3.Salary $117,000 - Maxed out on TSP plus do catch up contributions
4. Emergency Fund $50,000 Money Market in Wells Fargo
5. House paid for
6. No debt
7. Husband 6 years younger still working $99,000 Maxing out 401K plus catchup
8. Schwab Total $63K- Inherited IRA $19K DFA Global Equity (DGEIX) was previously using a financial advisor -left over from him
- Roth IRA 33K Schwab Markettrack Balanced ( but have made too much to contribute in last few years)
- Cash 10K Money market
9. Vanguard $51,500 $40,500 Vanguard Federal Money Market Fund $10,500 VTSAX (Vanguard Total Stock Market Admiral)
10. Pension only $1,500 month because of 17 years part time employee reduction
11. Husband"s take home is only $4k a month because of 401K, catch-up and other deductions
12. Have Long Term Care policy (shared) with Genworth - cost $2800/yr.
13. I'm trying to wait until at least full retirement age or longer to take social security

Monthly expenses approximately $4000 so might be tight on husband's salary with my small pension. Assuming I will wait to withdraw money from TSP as long as possible. Currently able to save $4k a month to add to emergency fund or investments until retirement either in September or December of this year. (2018). I know I am probably too conservatively invested but am afraid of market drop in the next 2 years. If OPM enacts Federal Employee benefits changes October 1st the high 3 vs high 5 option affects me because of a big salary increase 3 years ago. If that passes I probably need to retire 9/29/18 to preserve high 3 for pension. Sort of paralyzed as to what to do. I read Simple Path to Wealth by JL Collins but don't think I can risk that allocation at retirement. Husband knows nothing about investing. Kind of on my own with this.Plus taxes are killing us!
Any help is appreciated.

delamer
Posts: 5107
Joined: Tue Feb 08, 2011 6:13 pm

Re: Investment Help Retirement implications

Post by delamer » Mon Jun 18, 2018 3:30 pm

If you husband brings home $4,000/month and your expenses are $4,000/month, why are you scared to retire? Seems like your pension is a nice bonus.

At your age, you can take about $25,000/year out of TSP and have a very low chance of running out of money. Your TSP allocation is fine if that is the risk level you are comfortable holding. So what is the point of having the TSP assets if you aren’t willing to spend some of them so you can retire?

But, again, why would you need to spend it down if your husband’s earnings and your pension cover your expenses?

Not to mention that you have Social Security coming in a few years, based on your own plan.

(OPM doesn’t get to change the high-3 rule; that rule is determined by law by Congress/White House. Not to say that it can’t change on October 1, but OPM does not get to make the change by fiat.)

Also, how can taxes be killing you if you are putting so much in tax deferred? And a lower income may not be a recommended way to lower your taxes, but it will.

Your issue is not financial, it is psychological. That isn’t uncommon, but there isn’t much that this forum can do to help.

123
Posts: 3387
Joined: Fri Oct 12, 2012 3:55 pm

Re: Investment Help Retirement implications

Post by 123 » Mon Jun 18, 2018 3:39 pm

delamer wrote:
Mon Jun 18, 2018 3:30 pm
...Your issue is not financial, it is psychological. That isn’t uncommon, but there isn’t much that this forum can do to help.
+1 Time for you to retire and relax a bit.
The closest helping hand is at the end of your own arm.

Grt2bOutdoors
Posts: 18582
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Investment Help Retirement implications

Post by Grt2bOutdoors » Mon Jun 18, 2018 3:39 pm

You don’t need to retire, you are putting the cart before the horse as changes are proposed- not set in stone. If anything, I’d think they’d grandfather in existing workers of age 55+, younger and newer workers would be impacted.
Your husband can be brought up to speed, start with a book, I’m sure fellow posters can recommend a good book - I hear Jane Bryant Quinn has a good one that’s well liked on this forum.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Re: Investment Help Retirement implications

Post by mdshumaker » Mon Jun 18, 2018 6:35 pm

Other than needing a psychologist, any asset allocation guidance? Are the funds in the inherited IRA or Roth decent funds to stick with? These are holdovers from an old financial planner and I have just let them sit there. I realize the federal benefits changes are not set in stone and may not pass at all in FY19 budget cycle. I DO NOT enjoy my job anymore. I am on call for cardiac surgery 3 out of 4 weeks and weekends a month and have just worked 15 days straight with no time off (12-15 hr days). I have no life. So I DO want to retire. I just wanted to make sure I wasn't too conservatively allocated to balance between a decent return that beat inflation and losing my shirt in a market crash.

delamer
Posts: 5107
Joined: Tue Feb 08, 2011 6:13 pm

Re: Investment Help Retirement implications

Post by delamer » Mon Jun 18, 2018 6:56 pm

mdshumaker wrote:
Mon Jun 18, 2018 6:35 pm
Other than needing a psychologist, any asset allocation guidance? Are the funds in the inherited IRA or Roth decent funds to stick with? These are holdovers from an old financial planner and I have just let them sit there. I realize the federal benefits changes are not set in stone and may not pass at all in FY19 budget cycle. I DO NOT enjoy my job anymore. I am on call for cardiac surgery 3 out of 4 weeks and weekends a month and have just worked 15 days straight with no time off (12-15 hr days). I have no life. So I DO want to retire. I just wanted to make sure I wasn't too conservatively allocated to balance between a decent return that beat inflation and losing my shirt in a market crash.
I don’t know anything about those specific funds (inherited and Roth) but they are a small portion of your assets so won’t have a significant impact on your overall portfolio return. If they have expense ratios of more than about 0.5%, it would make sense to exchange them for something cheaper. You might want to consider an international fund for the Roth, since you don’t have one elsewhere.

Your TSP is 40% stocks and 60% bonds, which is perfectly fine as I noted earlier. The sweet spot is that you should not have less than 30% stocks in your portfolio in retirement.

Two other questions:

Are you providing a survivor’s benefit for your husband so he can continue FEHB if you predecease him?

How much does your husband have in his 401(k)? While he can’t access it now, it is certainly additional security as you age.

ExitStageLeft
Posts: 485
Joined: Sat Jan 20, 2018 4:02 pm

Re: Investment Help Retirement implications

Post by ExitStageLeft » Mon Jun 18, 2018 7:00 pm

Your TSP is a 40/60 allocation, that's pretty conservative. That's balanced out by your Schwab account, which is about 64/36 and your Vanguard money market account which is 0/100. Overall you're looking at an alocation of 39.5% stock assets and 60.5% fixed income assets. Looks like a pretty secure position to retire with.

Edit to add: The DFA Global Equity I (DGEIX) is a fund of funds that has ~30% international equities. With an ER of 0.3% it's not bad, just not great.

mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Re: Investment Help Retirement implications

Post by mdshumaker » Mon Jun 18, 2018 7:19 pm

delamer wrote:
Mon Jun 18, 2018 6:56 pm
mdshumaker wrote:
Mon Jun 18, 2018 6:35 pm
Other than needing a psychologist, any asset allocation guidance? Are the funds in the inherited IRA or Roth decent funds to stick with? These are holdovers from an old financial planner and I have just let them sit there. I realize the federal benefits changes are not set in stone and may not pass at all in FY19 budget cycle. I DO NOT enjoy my job anymore. I am on call for cardiac surgery 3 out of 4 weeks and weekends a month and have just worked 15 days straight with no time off (12-15 hr days). I have no life. So I DO want to retire. I just wanted to make sure I wasn't too conservatively allocated to balance between a decent return that beat inflation and losing my shirt in a market crash.
I don’t know anything about those specific funds (inherited and Roth) but they are a small portion of your assets so won’t have a significant impact on your overall portfolio return. If they have expense ratios of more than about 0.5%, it would make sense to exchange them for something cheaper. You might want to consider an international fund for the Roth, since you don’t have one elsewhere.

Your TSP is 40% stocks and 60% bonds, which is perfectly fine as I noted earlier. The sweet spot is that you should not have less than 30% stocks in your portfolio in retirement.

Two other questions:

Are you providing a survivor’s benefit for your husband so he can continue FEHB if you predecease him?

How much does your husband have in his 401(k)? While he can’t access it now, it is certainly additional security as you age.
delamer wrote:
Mon Jun 18, 2018 6:56 pm
mdshumaker wrote:
Mon Jun 18, 2018 6:35 pm
Other than needing a psychologist, any asset allocation guidance? Are the funds in the inherited IRA or Roth decent funds to stick with? These are holdovers from an old financial planner and I have just let them sit there. I realize the federal benefits changes are not set in stone and may not pass at all in FY19 budget cycle. I DO NOT enjoy my job anymore. I am on call for cardiac surgery 3 out of 4 weeks and weekends a month and have just worked 15 days straight with no time off (12-15 hr days). I have no life. So I DO want to retire. I just wanted to make sure I wasn't too conservatively allocated to balance between a decent return that beat inflation and losing my shirt in a market crash.
I don’t know anything about those specific funds (inherited and Roth) but they are a small portion of your assets so won’t have a significant impact on your overall portfolio return. If they have expense ratios of more than about 0.5%, it would make sense to exchange them for something cheaper. You might want to consider an international fund for the Roth, since you don’t have one elsewhere.

Your TSP is 40% stocks and 60% bonds, which is perfectly fine as I noted earlier. The sweet spot is that you should not have less than 30% stocks in your portfolio in retirement.

Two other questions:

Are you providing a survivor’s benefit for your husband so he can continue FEHB if you predecease him?

How much does your husband have in his 401(k)? While he can’t access it now, it is certainly additional security as you age.
My husband has $750K in his 401K and 8 more years of work. I am doing the smallest survivor's benefit that allows him to have FEHB. He will have a pension also, which will be in the $3500 range in addition to SS. We will probably have more when he retires( cash flow wise) than we do now.

delamer
Posts: 5107
Joined: Tue Feb 08, 2011 6:13 pm

Re: Investment Help Retirement implications

Post by delamer » Mon Jun 18, 2018 7:46 pm

mdshumaker wrote:
Mon Jun 18, 2018 7:19 pm
delamer wrote:
Mon Jun 18, 2018 6:56 pm
mdshumaker wrote:
Mon Jun 18, 2018 6:35 pm
Other than needing a psychologist, any asset allocation guidance? Are the funds in the inherited IRA or Roth decent funds to stick with? These are holdovers from an old financial planner and I have just let them sit there. I realize the federal benefits changes are not set in stone and may not pass at all in FY19 budget cycle. I DO NOT enjoy my job anymore. I am on call for cardiac surgery 3 out of 4 weeks and weekends a month and have just worked 15 days straight with no time off (12-15 hr days). I have no life. So I DO want to retire. I just wanted to make sure I wasn't too conservatively allocated to balance between a decent return that beat inflation and losing my shirt in a market crash.
I don’t know anything about those specific funds (inherited and Roth) but they are a small portion of your assets so won’t have a significant impact on your overall portfolio return. If they have expense ratios of more than about 0.5%, it would make sense to exchange them for something cheaper. You might want to consider an international fund for the Roth, since you don’t have one elsewhere.

Your TSP is 40% stocks and 60% bonds, which is perfectly fine as I noted earlier. The sweet spot is that you should not have less than 30% stocks in your portfolio in retirement.

Two other questions:

Are you providing a survivor’s benefit for your husband so he can continue FEHB if you predecease him?

How much does your husband have in his 401(k)? While he can’t access it now, it is certainly additional security as you age.
delamer wrote:
Mon Jun 18, 2018 6:56 pm
mdshumaker wrote:
Mon Jun 18, 2018 6:35 pm
Other than needing a psychologist, any asset allocation guidance? Are the funds in the inherited IRA or Roth decent funds to stick with? These are holdovers from an old financial planner and I have just let them sit there. I realize the federal benefits changes are not set in stone and may not pass at all in FY19 budget cycle. I DO NOT enjoy my job anymore. I am on call for cardiac surgery 3 out of 4 weeks and weekends a month and have just worked 15 days straight with no time off (12-15 hr days). I have no life. So I DO want to retire. I just wanted to make sure I wasn't too conservatively allocated to balance between a decent return that beat inflation and losing my shirt in a market crash.
I don’t know anything about those specific funds (inherited and Roth) but they are a small portion of your assets so won’t have a significant impact on your overall portfolio return. If they have expense ratios of more than about 0.5%, it would make sense to exchange them for something cheaper. You might want to consider an international fund for the Roth, since you don’t have one elsewhere.

Your TSP is 40% stocks and 60% bonds, which is perfectly fine as I noted earlier. The sweet spot is that you should not have less than 30% stocks in your portfolio in retirement.

Two other questions:

Are you providing a survivor’s benefit for your husband so he can continue FEHB if you predecease him?

How much does your husband have in his 401(k)? While he can’t access it now, it is certainly additional security as you age.
My husband has $750K in his 401K and 8 more years of work. I am doing the smallest survivor's benefit that allows him to have FEHB. He will have a pension also, which will be in the $3500 range in addition to SS. We will probably have more when he retires( cash flow wise) than we do now.
You didn’t think it was worth mentioning that your husband had $750,000 in his 401(k) in your original post?

Unless he has invested it all in gold in the Ukraine, or something equally ridiculous, even if he never saved another dime of his salary he will have a substantial nest egg when he stops working.

Not to mention a pension.

Presumably you are in this together. I don’t understand why either of you would continue to work, unless he really likes his job.

ExitStageLeft
Posts: 485
Joined: Sat Jan 20, 2018 4:02 pm

Re: Investment Help Retirement implications

Post by ExitStageLeft » Mon Jun 18, 2018 8:28 pm

mdshumaker wrote:
Mon Jun 18, 2018 7:19 pm
My husband has $750K in his 401K and 8 more years of work. I am doing the smallest survivor's benefit that allows him to have FEHB. He will have a pension also, which will be in the $3500 range in addition to SS. We will probably have more when he retires( cash flow wise) than we do now.
It certainly seems that you are well-positioned to enjoy a well-earned retirement. Your expenses are in the ballpark of $50k per year. With your assets, pensions, and social security, you can retire next year and spend over $100,000 per year and probably have a $5M estate. That's a quick analysis using CFIRESim.com to investigate a safe spending level. With a 95% success rate you could probably go up to $135k per year.

mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Re: Investment Help Retirement implications

Post by mdshumaker » Mon Jun 18, 2018 9:07 pm

I didn’t mention my husband’s assets because I was more focused on my asset allocation and situation. His company offers portfolio management by Financial Engines and I do my own to save on management expenses and because the TSP offers limited choices. I was more concerned about cash flow for the next few years before I take SS.

retiredjg
Posts: 32911
Joined: Thu Jan 10, 2008 12:56 pm

Re: Investment Help Retirement implications

Post by retiredjg » Tue Jun 19, 2018 9:01 am

I think you have more than enough money to retire. And it sounds like you really need to. This job is clearly affecting your outlook on life and probably your health. Likely even your heart.... :(

I think your husband could probably retire as well if he wants, but that is less clear and since you have not mentioned that he wants to, it may not matter for this discussion.

I think what you have is mostly fear of the unknown, probably exacerbated by exhaustion. Fear of retirement is not uncommon at all. While working, you know where your money is going to come from. After retirement seems like a scary black box.

Turns out, it is not that much different. You still get a check in your checking account and you can tap into your TSP as needed (you'll have to roll some to an IRA to do this). If your husband keeps working, I'm not sure much will be needed anyway.

Consider if taking 3 days off so that you can clear your head might be worthwhile. I think you are too stressed for your thoughts to be entirely reasonable.

Even if you decide to work a little longer, I think you should consider putting in retirement papers for 9/29/18 as a backstop for possible OPM changes. Or when you talk to HR, you may find you would not be affected anyway.

Smart of you to keep your husband in the FESB loop.

User avatar
Sandtrap
Posts: 4922
Joined: Sat Nov 26, 2016 6:32 pm
Location: 10/90 Allocation - Hawaii😀 Northern AZ.😳

Re: Investment Help Retirement implications

Post by Sandtrap » Tue Jun 19, 2018 9:28 am

123 wrote:
Mon Jun 18, 2018 3:39 pm
delamer wrote:
Mon Jun 18, 2018 3:30 pm
...Your issue is not financial, it is psychological. That isn’t uncommon, but there isn’t much that this forum can do to help.
+1 Time for you to retire and relax a bit.
+1
Congratulations on your successes and planning.
Transitioning into retirement with a mix of anticipation, excitement, and insecurity .. . is common.

You can increase your retirement "comfort zone" through the following:
1. Find ways to adjust your expenses to give you a comfortable margin.
2. Adjust lifestyle per #1.
3. Consider transitioning into "full retirement" with part time employment after retiring from your present position. (baby steps)
4. While you are doing the above, explore other ways to tap into what you have such as: (don't have to do them, just think about it)
a. . . Possibility of downsizing to tap into home asset.
b . . Possibility of moving to a lower cost of living area if possible or needed at some future time.
c. . . etc.

Also, be sure you health insurance is in place. If ACA, that you are under the "subsidy cliff". If part of pension. . great.

Finally. . health is the priority. Take a break. Relax. Breath.

Congratulations.
aloha
j

retiredjg
Posts: 32911
Joined: Thu Jan 10, 2008 12:56 pm

Re: Investment Help Retirement implications

Post by retiredjg » Tue Jun 19, 2018 9:44 am

mdshumaker wrote:
Mon Jun 18, 2018 2:57 pm
Makes it hard to retire when I finally can save some money.
It does not appear to me that you need to save any more money. In fact, you may already have too much in tax-deferred accounts.


I need portfolio review - I'm scared to retire and scared to lose money and scared to spend the money I've saved. Help! I know I am probably too conservatively invested but am afraid of market drop in the next 2 years. Plus taxes are killing us!
We can look at it, but it does not mean much until your husband's assets are considered as well. Here is a summary of what I think you told us.

63 yrs old female

Emergency fund $50,000 Money Market in Wells Fargo
no debt
Married
Salary $117,000 (hers) + 99,000 (his) appears to be 24% tax bracket

Her expected pension $18k a year
His expected pension $42 in 8 years

Current expenses (probably not including health care) = $36k

Her SS - yes
His SS - yes


Schwab Taxable account $10k
Money Market

Vanguard Taxable account $51,000
$10,500 VTSAX (Vanguard Total Stock Market Admiral)
$40,500 Vanguard Federal Money Market Fund


$640,000 TSP (Contributions 45% G, 25% C, 25% S, 5% I $24,500)
20% C. 500 index
20% S mid/small cap completion
60% G short term bond

Schwab Roth IRA $33k
Schwab Markettrack Balanced

Schwab Inherited IRA $19k
DFA Global Equity (DGEIX)


His 401k $750k
unknown


Contributions
Her TSP $24,500
His 401k $24,500




Monthly expenses approximately $4000 so might be tight on husband's salary with my small pension. Assuming I will wait to withdraw money from TSP as long as possible.
I can't see a reason to wait. What is yours? Did you save this money for something other than retirement? Or is this just fear of change/unknown?

Between you and your husband, you have about $1.4 million in tax-deferred accounts. That's a lot and it would be good for a significant portion of that to be converted to Roth IRA before age 70.5 when RMDs start.

If you both retired tomorrow, you could reasonably spend $56k a year from these tax deferred accounts for probably 30 years without running out of money. That $56k includes taxes so you don't get to actually spend that much.

It doesn't sound like you will need anywhere near that. When SS starts, you will need even less.

Do you think you will need that much each year? It sounds like the pensions will more than cover your expected expenses. You obviously are not living the high lifestyle. You obviously know how to save a lot of money. In fact, I think you may be so accustomed to saving, you may actually have to learn how to spend.

Here's an idea you may not be familiar with - doing Roth conversions early in retirement when your tax rates are low. To do this, you would need to retire. :happy Postpone your SS for awhile. Each year, convert an amount of the tax-deferred money to Roth. Pay taxes out of your taxable account as you can, but paying taxes out of the tax-deferred account is OK too. You would simply be giving Uncle Sam his portion of the money now as opposed to later. The reason is that tax rates may be higher later.

One thing to be cautious of is converting too much. If your total income goes over $185k in the year you are 63, that will increase your Medicare costs when you reach 65.

I know I'm getting a little ahead of you at this point. Just throwing out things you will need to consider in the next few years.

delamer
Posts: 5107
Joined: Tue Feb 08, 2011 6:13 pm

Re: Investment Help Retirement implications

Post by delamer » Tue Jun 19, 2018 10:01 am

mdshumaker wrote:
Mon Jun 18, 2018 9:07 pm
I didn’t mention my husband’s assets because I was more focused on my asset allocation and situation. His company offers portfolio management by Financial Engines and I do my own to save on management expenses and because the TSP offers limited choices. I was more concerned about cash flow for the next few years before I take SS.
You should be looking at the asset allocation across all of your retirement savings, not yours separately from your husband’s. People here can’t provide good advice if we only have part of the picture, and you were asking for “investment help.”

Because you are mistakenly focusing on short-term cash flow, you aren’t seeing the big picture of your finances.

ExitStageLeft
Posts: 485
Joined: Sat Jan 20, 2018 4:02 pm

Re: Investment Help Retirement implications

Post by ExitStageLeft » Tue Jun 19, 2018 12:39 pm

I'll reiterate my position that you are ready and able to retire now. It's up to you on the willing part.

I think you are set when it comes to cash flow. You could go with the 4% recommendation from the Trinity study, which allows for withdrawing 4% of your portfolio in the first year and taking that same dollar amount in successive year, updating for inflation. That withdrawal plan allows for success over a thirty year horizon. If you wish to be even more conservative, you could opt for a 3% withdrawal rate, which leaves capital intact in practically all scenarios.

3% of $750,000 is $22,500. Add that to your pension and you will have $40,500 (adjusted for inflation) essentially in perpetuity. If your husband continues to work and continues to contribute to his 401k at current rates, then he'll be bringing home something like $48k per year. Total income near-term amounts to $88k per year. If your expenses are significantly less than that, there is no reason I see to delay your retirement.

mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Re: Investment Help Retirement implications

Post by mdshumaker » Tue Jun 19, 2018 8:48 pm

retiredjg wrote:
Tue Jun 19, 2018 9:44 am
mdshumaker wrote:
Mon Jun 18, 2018 2:57 pm
Makes it hard to retire when I finally can save some money.
It does not appear to me that you need to save any more money. In fact, you may already have too much in tax-deferred accounts.


I need portfolio review - I'm scared to retire and scared to lose money and scared to spend the money I've saved. Help! I know I am probably too conservatively invested but am afraid of market drop in the next 2 years. Plus taxes are killing us!
We can look at it, but it does not mean much until your husband's assets are considered as well. Here is a summary of what I think you told us.

63 yrs old female

Emergency fund $50,000 Money Market in Wells Fargo
no debt
Married
Salary $117,000 (hers) + 99,000 (his) appears to be 24% tax bracket

Her expected pension $18k a year
His expected pension $42 in 8 years

Current expenses (probably not including health care) = $36k

Her SS - yes
His SS - yes


Schwab Taxable account $10k
Money Market

Vanguard Taxable account $51,000
$10,500 VTSAX (Vanguard Total Stock Market Admiral)
$40,500 Vanguard Federal Money Market Fund


$640,000 TSP (Contributions 45% G, 25% C, 25% S, 5% I $24,500)
20% C. 500 index
20% S mid/small cap completion
60% G short term bond

Schwab Roth IRA $33k
Schwab Markettrack Balanced

Schwab Inherited IRA $19k
DFA Global Equity (DGEIX)


His 401k $750k
unknown


Contributions
Her TSP $24,500
His 401k $24,500




Monthly expenses approximately $4000 so might be tight on husband's salary with my small pension. Assuming I will wait to withdraw money from TSP as long as possible.
I can't see a reason to wait. What is yours? Did you save this money for something other than retirement? Or is this just fear of change/unknown?

Between you and your husband, you have about $1.4 million in tax-deferred accounts. That's a lot and it would be good for a significant portion of that to be converted to Roth IRA before age 70.5 when RMDs start.

If you both retired tomorrow, you could reasonably spend $56k a year from these tax deferred accounts for probably 30 years without running out of money. That $56k includes taxes so you don't get to actually spend that much.

It doesn't sound like you will need anywhere near that. When SS starts, you will need even less.

Do you think you will need that much each year? It sounds like the pensions will more than cover your expected expenses. You obviously are not living the high lifestyle. You obviously know how to save a lot of money. In fact, I think you may be so accustomed to saving, you may actually have to learn how to spend.

Here's an idea you may not be familiar with - doing Roth conversions early in retirement when your tax rates are low. To do this, you would need to retire. :happy Postpone your SS for awhile. Each year, convert an amount of the tax-deferred money to Roth. Pay taxes out of your taxable account as you can, but paying taxes out of the tax-deferred account is OK too. You would simply be giving Uncle Sam his portion of the money now as opposed to later. The reason is that tax rates may be higher later.

One thing to be cautious of is converting too much. If your total income goes over $185k in the year you are 63, that will increase your Medicare costs when you reach 65.

I know I'm getting a little ahead of you at this point. Just throwing out things you will need to consider in the next few years.
Thanks,! You are very helpful and non judgemental, which I appreciate. I am doing some research on your idea of Roth conversions. And I did not know about the increase in Medicare costs with total income over 185k. My father lives off his SS and pension plus rental income from a duplex and does not touch his 401k money. He lives more frugally than I would want to in retirement but that was my role model for how to use retirement money. I've been taught to save, save, save, my whole life but have always been reluctant to spend. Most of my money the past 9 years has gone to put 3 kids through college - all graduating in 4 years. You are correct in that I need to learn how to spend money. I joined Bogleheads to learn about investing and strategies for managing money. I appreciate all the helpful comments!

mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Re: Investment Help Retirement implications

Post by mdshumaker » Tue Jun 19, 2018 8:58 pm

ExitStageLeft wrote:
Tue Jun 19, 2018 12:39 pm
I'll reiterate my position that you are ready and able to retire now. It's up to you on the willing part.

I think you are set when it comes to cash flow. You could go with the 4% recommendation from the Trinity study, which allows for withdrawing 4% of your portfolio in the first year and taking that same dollar amount in successive year, updating for inflation. That withdrawal plan allows for success over a thirty year horizon. If you wish to be even more conservative, you could opt for a 3% withdrawal rate, which leaves capital intact in practically all scenarios.

3% of $750,000 is $22,500. Add that to your pension and you will have $40,500 (adjusted for inflation) essentially in perpetuity. If your husband continues to work and continues to contribute to his 401k at current rates, then he'll be bringing home something like $48k per year. Total income near-term amounts to $88k per year. If your expenses are significantly less than that, there is no reason I see to delay your retirement.
Thank you for your comments! I appreciate your information on withdrawal rates and cash flow. Because of your helpful comments and those of some others I feel more confident in making the decision to retire 2.5 years ahead of schedule. I'm definitely willing!

mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Re: Investment Help Retirement implications

Post by mdshumaker » Tue Jun 19, 2018 9:09 pm

Sandtrap wrote:
Tue Jun 19, 2018 9:28 am
123 wrote:
Mon Jun 18, 2018 3:39 pm
delamer wrote:
Mon Jun 18, 2018 3:30 pm
...Your issue is not financial, it is psychological. That isn’t uncommon, but there isn’t much that this forum can do to help.
+1 Time for you to retire and relax a bit.
+1
Congratulations on your successes and planning.
Transitioning into retirement with a mix of anticipation, excitement, and insecurity .. . is common.

You can increase your retirement "comfort zone" through the following:
1. Find ways to adjust your expenses to give you a comfortable margin.
2. Adjust lifestyle per #1.
3. Consider transitioning into "full retirement" with part time employment after retiring from your present position. (baby steps)
4. While you are doing the above, explore other ways to tap into what you have such as: (don't have to do them, just think about it)
a. . . Possibility of downsizing to tap into home asset.
b . . Possibility of moving to a lower cost of living area if possible or needed at some future time.
c. . . etc.

Also, be sure you health insurance is in place. If ACA, that you are under the "subsidy cliff". If part of pension. . great.

Finally. . health is the priority. Take a break. Relax. Breath.

Congratulations.
aloha
j
Thank you for your kind comments, especially about the transition to retirement. I am fortunate in that I will be able to take my Federal Employee Health Benefits with me into retirement (which covers my husband and 1 daughter now also). The FEHB cost comes out of my pension but at least I have those very important benefits. Since I'm retiring 2.5 years before I had originally planned I was not confident that I could do it. There is always the opportunity to work part time although I'd rather not. I plan to play pickleball, golf, go camping ,drink craft beer and enjoy life with my husband.
Yes - it's definitely time to leave my high stress job.

Loon11
Posts: 205
Joined: Wed Feb 29, 2012 6:07 pm

Re: Investment Help Retirement implications

Post by Loon11 » Tue Jun 19, 2018 9:28 pm

your situation is somewhat similar to mine in that I too was afraid of "letting go" to retire, been saving since teens. One thing might be important - you are parttime right? I was parttime also for the last 4 yrs of my federal employment. I also worked many hours above and beyond my "tour of duty"
Those extra hours count towards your retirement. I was fearful that they would not be property counted since the retirement estimate did not include them. turns out that they did NOT include them in figuring my pension. OPM told me it was correct but I did not believe them - so I requested and received 4 years of DFAS paycheck information indicating my biweekly hrs worked and sent it to OPM. After 4.5 months, my final pension was about $100 a month more then they figured - which is significant over my lifetime. So if this applies to you, be forewarned and get copies of your worked hrs if more then your "scheduled" time.

Its only been 6 months retired but I have not even spent the lump sum payout for annual leave. Between pension and my spouse's social security, we need nothing. I fear taxes when I have to take RMD. my suspended social security at 70.5 and pension. would like also to do roth conversion but won't have much room with our income. We will start medicare B next month (fed retirees have 8 months to sign up after retirement). thus far, have only had FEHB BCBS but figure Medicare B will be needed as we age.

Good luck, you will be fine.

stuper1
Posts: 52
Joined: Tue Apr 03, 2018 9:30 am

Re: Investment Help Retirement implications

Post by stuper1 » Tue Jun 19, 2018 9:57 pm

mdshumaker wrote:
Tue Jun 19, 2018 9:09 pm
I plan to play pickleball, golf, go camping ,drink craft beer and enjoy life with my husband.
Yes - it's definitely time to leave my high stress job.
Hooray, there is another pickleballer on here. Looks like you are in good financial shape. I wish I was a few months from retirement.

mdshumaker
Posts: 18
Joined: Wed Jul 20, 2016 10:28 am

Re: Investment Help Retirement implications

Post by mdshumaker » Wed Jun 20, 2018 8:00 am

Loon11 wrote:
Tue Jun 19, 2018 9:28 pm
your situation is somewhat similar to mine in that I too was afraid of "letting go" to retire, been saving since teens. One thing might be important - you are parttime right? I was parttime also for the last 4 yrs of my federal employment. I also worked many hours above and beyond my "tour of duty"
Those extra hours count towards your retirement. I was fearful that they would not be property counted since the retirement estimate did not include them. turns out that they did NOT include them in figuring my pension. OPM told me it was correct but I did not believe them - so I requested and received 4 years of DFAS paycheck information indicating my biweekly hrs worked and sent it to OPM. After 4.5 months, my final pension was about $100 a month more then they figured - which is significant over my lifetime. So if this applies to you, be forewarned and get copies of your worked hrs if more then your "scheduled" time.

Its only been 6 months retired but I have not even spent the lump sum payout for annual leave. Between pension and my spouse's social security, we need nothing. I fear taxes when I have to take RMD. my suspended social security at 70.5 and pension. would like also to do roth conversion but won't have much room with our income. We will start medicare B next month (fed retirees have 8 months to sign up after retirement). thus far, have only had FEHB BCBS but figure Medicare B will be needed as we age.

Good luck, you will be fine.
I actually was part-time from 1991 to 2009. Then fulltime until now. Who did you contact to get copies of your paycheck information? My retirement estimate sounded low and I questioned whether they figured in my extra hours (which were a lot on every part-time paycheck) and they said they included them. I'm not so sure they did. I also have BCBS and was wondering about what components of Medicare to sign up for. Did you get part D? I worry with proposed changes to FEHB that it might be good to sign up for part D in case they scale back our plans drastically. I plan to get part B also.Thanks for the heads up on the part time hours! I don't trust anything OPM or any other government office does - they have messed up paychecks, etc. my whole career.!

Loon11
Posts: 205
Joined: Wed Feb 29, 2012 6:07 pm

Re: Investment Help Retirement implications

Post by Loon11 » Thu Jun 21, 2018 12:29 am

I called the DFAS customer servce phone # on our paystubs. they required a letter and a copy of my drivers license to comply. they sent me a CD which had all the payment info - 600 pages so it is a lot to get through. I converted it to a pdf and sent it by email to my assigned OPM specialist. she was very good and ended up contacting dfas herself to confirm so I'm confident it was finally counted. As for Medicare - I am just getting Part B only-believe my BC/BS (basic) will be enough for us. Wecurrently only carry BC/BS alone and its fine. We rarely need medical care but this can change so quickly as we age. Good luck with your retirement - it was a good decision for me and a good time to get out. However, plan to do some fee basis work soon - I do miss seeing my Vets.
another thing to think about is timing your date to opimize your annual leave and sick leave. If you leave on Dec. 31, your annual leave lump sum will go into the next year so it won't be taxed in this year. not sure if that's a concern for you.

retiredjg
Posts: 32911
Joined: Thu Jan 10, 2008 12:56 pm

Re: Investment Help Retirement implications

Post by retiredjg » Thu Jun 21, 2018 5:39 am

mdshumaker, there are many old discussions of FEHB and Medicare. You can find them by using the google search box above.

I have the lower tier BCBS and Medicare Part B only. So far I have no medical costs at all, not even co-pays for visits. I do pay co-pays on prescriptions - my only medical expense.

Post Reply