I am being asked to retire. Am I ready?

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inbox788
Posts: 6644
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Re: I am being asked to retire. Am I ready?

Post by inbox788 » Sun Sep 22, 2019 8:23 pm

GuyNearRetirement wrote:
Sun Sep 22, 2019 5:53 pm
Joint Life & Period Certain Options
Income Starts Immediately Est. Monthly Income $3,719

Joint Life & Period Certain Options
Income Starts in 10 Years Est. Monthly Income $5,792
There is an option for an annuity. For J&C 100%, it would pay $3,310. For J&C 50%, it would pay $3,516. For a single life, it would be $3,750. I've got two kids (daughter is 20, son is 18). I had planned on doing the annuity, but I was told that the annuity was surprisingly low compared with the lump sum.

Incidentally, I have separate accounts not listed above that cover their expected college costs and a buffer for those unexpected early adulthood expenses.
You can get $3719 Joint Life in the open market, so your annuity is very poor, and IRA rollover makes sense. That adds to your tax-deferred portion and later leads to higher RMDs which is not the worst problem to have. Roth Rollovers can be used to reduce the RMD liability if later higher tax brackets can be reduced/eliminated.

I'm new to i-orp, but roughly, "Your projected, maximum, annual Disposable Income is $136,000 in today's, after tax dollars." Looks like there's some inflation adjustment, but plans to exhaust funds by age 92.
https://www.i-orp.com/Models/M199220vXLnbhYETq6/MC.html
Correct any errors, and adjust up for spouse SS at 70 (didn't see how do that with simulation; also don't know why it chose 92 as Retiree Planning Horizon).

I would have guessed it made sense to spend down the taxable accounts first and do Roth conversions the first years of retirement, but i-orp seems to point out that some taxable at lower brackets should be taken out as well, which makes sense now.

If you annuitize now, you can spend almost 5%, but have to consider inflation. If you use up taxable and annuitize at 65, it goes up to almost 7.5%. And/or you can annuitize even later for longevity planning needs.

3719*12/937000=4.76%
5,792*12/937000=7.42%

Alternatively, the 4% SWR stands a good chance of being sustainable and leaving behind a nice inheritance if that's important.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

So, OP, various ways of looking at the income side put you in a very good position. On top of all that, I think you've overestimated (at least for now, not knowing inflation later) the basic non-discretionary spending.

bltn
Posts: 576
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Re: I am being asked to retire. Am I ready?

Post by bltn » Sun Sep 22, 2019 8:50 pm

I agree with WC Investor.
4 million dollars times 3.5% is 140,000 dollars a year. When money starts being taken out of retirement plans, you ll be looking at 10,000-15,000 dollars in yearly taxes (rough guesstimate). I don t think this is quite as comfortable as many posters indicate. You ll need to stay flexible with your expenses as the market goes up and down. Costs for medical care may increase in the future. Personally, I wouldn t consider anything but traditional medical care. No foreign care or care within medical co ops .
In your position, if I felt good, I d investigate other employment for the next few years, even if it were just part time. Added security. That s me.

mikeyzito22
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Re: I am being asked to retire. Am I ready?

Post by mikeyzito22 » Sun Sep 22, 2019 9:54 pm

inbox788 wrote:
Sun Sep 22, 2019 1:04 pm
HomeStretch wrote:
Sun Sep 22, 2019 12:10 pm
Does $9,800 / month include income taxes, healthcare expenses (which may be a lot higher in retirement until Medicare-eligible) and lumpy expenses (i.e., new car, new roof, etc.)? If not, then I suggest you relook at your expenses.
OP, I'm expecting mortgage, taxes, and healthcare to be the biggest expenses in retirement. With no mortgage and taxes expected to be lower in retirement, how are you reaching $6000/month in non-discretionary expenses? How much are you budgeting for health insurance? When Medicare kicks in, you''ll likely only need Medigap, which should be substantially lower. What are the next 3 biggest budgeted non-discretionary items and amounts?
Pension Lump Sum
$937,000 23% (To be received in 1/2020 and rolled into an IRA)
Is there an annuity option? Deferred annuity? You could always buy one on your own now or later, but occasionally I've seen some generous plans that might be worth considering.
Joint Life & Period Certain Options
Income Starts Immediately Est. Monthly Income $3,719

Joint Life & Period Certain Options
Income Starts in 10 Years Est. Monthly Income $5,792
https://www.immediateannuities.com/

Bone up on Roth Conversions and RMDs. Who are your beneficiaries?

https://www.bogleheads.org/wiki/Roth_IRA_conversion
https://www.bogleheads.org/wiki/Require ... uitization
I wouldn't buy an annuity if I had 4 million dollars. Wait, I wouldn't buy an annuity even if I had a million dollars. You can easily fund ten years with your portfolio without a mortgage until social security comes in. Couldn't you take that lump sum and kill it with a 60/40 portfolio? I think so. You only live once and this is your money Imho.

ivk5
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Re: I am being asked to retire. Am I ready?

Post by ivk5 » Sun Sep 22, 2019 10:16 pm

GuyNearRetirement wrote:
Sun Sep 22, 2019 5:59 pm
I've been told that
OP: you made this comment a couple times about topics that are vital to your retirement finances (ACA subsidies, taxes, timing of Roth conversions).

I’d suggest doing a little more reading here and experimenting with resources linked in wiki until you have a basic comfort level modeling things for yourself rather than waiting for spreadsheets from your well-meaning BIL.

Congrats on winning the game.

gch
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Joined: Thu May 30, 2019 2:47 pm

Re: I am being asked to retire. Am I ready?

Post by gch » Sun Sep 22, 2019 11:15 pm

bltn wrote:
Sun Sep 22, 2019 8:50 pm
I agree with WC Investor.
4 million dollars times 3.5% is 140,000 dollars a year. When money starts being taken out of retirement plans, you ll be looking at 10,000-15,000 dollars in yearly taxes (rough guesstimate). I don t think this is quite as comfortable as many posters indicate. You ll need to stay flexible with your expenses as the market goes up and down. Costs for medical care may increase in the future. Personally, I wouldn t consider anything but traditional medical care. No foreign care or care within medical co ops .
In your position, if I felt good, I d investigate other employment for the next few years, even if it were just part time. Added security. That s me.
In 10-15 years (depending on when he takes it) He’ll have ~40k in SS income plus Medicare will reduce his expenses by ~2k a month according to his calculations.

So he can withdraw 3.5% for 10-15 years, then drop down to less than 2% with SA and Medicare factored in

gamboolman
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Re: I am being asked to retire. Am I ready?

Post by gamboolman » Mon Sep 23, 2019 12:00 am

OP
Well done
You look to be in excellent shape

Is your Social Security projection based on your early retirement date?

Regardless you appear to be good to go

Bfwolf
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Re: I am being asked to retire. Am I ready?

Post by Bfwolf » Mon Sep 23, 2019 12:10 am

gch wrote:
Sun Sep 22, 2019 11:15 pm
bltn wrote:
Sun Sep 22, 2019 8:50 pm
I agree with WC Investor.
4 million dollars times 3.5% is 140,000 dollars a year. When money starts being taken out of retirement plans, you ll be looking at 10,000-15,000 dollars in yearly taxes (rough guesstimate). I don t think this is quite as comfortable as many posters indicate. You ll need to stay flexible with your expenses as the market goes up and down. Costs for medical care may increase in the future. Personally, I wouldn t consider anything but traditional medical care. No foreign care or care within medical co ops .
In your position, if I felt good, I d investigate other employment for the next few years, even if it were just part time. Added security. That s me.
In 10-15 years (depending on when he takes it) He’ll have ~40k in SS income plus Medicare will reduce his expenses by ~2k a month according to his calculations.

So he can withdraw 3.5% for 10-15 years, then drop down to less than 2% with SA and Medicare factored in
Agreed. I don't know why people so willfully ignore Social Security and Medicare. OP is fine to retire.

international001
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Re: I am being asked to retire. Am I ready?

Post by international001 » Mon Sep 23, 2019 6:44 am

deleted

pennywise
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Re: I am being asked to retire. Am I ready?

Post by pennywise » Mon Sep 23, 2019 7:12 am

GuyNearRetirement wrote:
Sun Sep 22, 2019 1:06 pm
The whole retirement thing was something I expected to be years away until some major shifts at work started earlier this year. It quickly went from a possibility to a probability to an almost certainty. I had hoped to work another 4-5 years, but I don't really want to start all over again at a new company.

I guess that's a good lesson learned. Over-prepare for retirement because you may not be the one that decides when it starts.
This is an important mental and emotional lesson! While I wasn't explicitly let go from a position, I had a somewhat similar experience in that a job that had been stable and rewarding for many years went south, unexpectedly and rather quickly under a new leader.

I retired a few months ago and at first had somewhat of a phantom limb sensation, as if I still should have been in the office doing....something. However I have been exceedingly pleasantly surprised to realize just how wonderful life can be when one does NOT have to be in the office doing anything :D .

You have been given a gift by the universe, both in the external circumstance of your company's changes and the internal one of your own careful planning. Unwrap the gift of time and enjoy what you've created: the rest of your life to do as you please.

glennherwig
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Re: I am being asked to retire. Am I ready?

Post by glennherwig » Mon Sep 23, 2019 10:43 pm

Why are people suggesting the annuity? When op can put the lump sum pension into a corporate bond etf like HYG, or LQD and earn near the same amount and not have to give up the liquidity. I’m confused that’s all. Annuity’s really only benefit the salesman.

desiderium
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Re: I am being asked to retire. Am I ready?

Post by desiderium » Tue Sep 24, 2019 9:54 am

Here's a couple of thoughts, given your age and long horizon

-you might have difficulty adjusting to "leisure time"
-you might feel like going a little crazy with spending now that you are not working all the time
-your "SWR" planning might not work out as well as we all think

Consider staying employed at some level, perhaps after a break. Do some consulting, contract or part time work to keep your skills up and to blunt withdrawals. Portfolio survival and/or ~safe spending ability will increase.

Bruce T
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Re: I am being asked to retire. Am I ready?

Post by Bruce T » Tue Sep 24, 2019 10:29 am

desiderium wrote:
Tue Sep 24, 2019 9:54 am
Here's a couple of thoughts, given your age and long horizon

-you might have difficulty adjusting to "leisure time"
-you might feel like going a little crazy with spending now that you are not working all the time
-your "SWR" planning might not work out as well as we all think

Consider staying employed at some level, perhaps after a break. Do some consulting, contract or part time work to keep your skills up and to blunt withdrawals. Portfolio survival and/or ~safe spending ability will increase.
+1000 on those

... most of the advice in the thread so far has been (understandably) about financial readiness ... I agree with others that you ought to be in good shape in that regard (albeit with monitoring and adjustments possibly needed along the way) ... however, this having been sprung on you a bit unexpectedly, I think the points raised above do speak to the question of whether you are ready in other regards, in addition to above:
- do you and your spouse have a mutual understanding on plans and how your lives will change?
- have you thought about how to develop some structure and meaning in your life (at least as much as you might benefit from) to replace the structure and meaning that a work life brings?

Note: we are in the same age range and portfolio value and are facing challenges with meeting ACA MAGI levels for subsidies - in part because we are more highly weighted to after tax accounts... but we also have children to help raise the threshold ... make sure you run the ACA math carefully and understand what goes into the ACA's MAGI. Also carefully consider which assets are placed in which account types (e.g. we have placed more growth oriented/low dividend in post-tax accounts, including a chunk of 0% dividend BRK - not a pure BH move, I am sure, but needed to shave income and that seemed a suitable means).

Best wishes - and congratulations on living prudently enough to be in your financial condition!

furikake
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Re: I am being asked to retire. Am I ready?

Post by furikake » Tue Sep 24, 2019 11:05 am

How do you get ACA subsidy when your annual expenses are $118k+income tax+health insurance? The income limit for this coverage year is less than $65,840 for a couple to qualify for subsidy.

soccerrules
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Re: I am being asked to retire. Am I ready?

Post by soccerrules » Tue Sep 24, 2019 11:17 am

GuyNearRetirement wrote:
Sun Sep 22, 2019 1:00 pm
unclescrooge wrote:
Sun Sep 22, 2019 11:57 am
On the surface 3% of $4 million is $120k so you're good to go! 👍

What does the non discretionary include? Mortgage and car payments?
No mortgage. Paid off the house a few years ago.

It includes property taxes ($1,000/month), electricity, water, gas, food, insurance, automobile costs (fuel, service, replacement), cell phones, and that sort of stuff. It doesn't include more discretionary stuff like hobbies, travel, club memberships, charitable contributions, and anything we'd quickly be willing to drop in lean times. Obviously, we could cut some of our "non-discretionary" expenses like reducing electrical use, driving less, switching to cheaper phone plans, etc.
I think you need to vet this out a little more. It seems as if your essentials equate to about $115K a year. if you add $25K for discretionary you are at $140k plus income taxes. That makes the WR about 3.5% which is by most opinions good to go and with the ability to trim the $25K if needed. If your discretionary is higher than that, you will want to watch your burn rate and sequence of returns.
I would imagine the vast majority of BH's would pull the rip cord with your numbers.

Enjoy retirement
Don't let your outflow exceed your income or your upkeep will be your downfall.

Bruce T
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Re: I am being asked to retire. Am I ready?

Post by Bruce T » Tue Sep 24, 2019 11:23 am

furikake wrote:
Tue Sep 24, 2019 11:05 am
How do you get ACA subsidy when your annual expenses are $118k+income tax+health insurance? The income limit for this coverage year is less than $65,840 for a couple to qualify for subsidy.
Easy: ACA MAGI income thresholds are not the same thing as expenses. The ACA does not consider your expenses, only your income, relative to the premium tax credits (a.k.a. subsidies) (except to the extent that expenses impact on ACA MAGI, in which case it would reduce your income), those expense categories are:
Educator expenses
Health Savings Account (HSA) contributions
Health insurance expenses (If you're self-employed)
IRA deductions
Student loan interest

22twain
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Re: I am being asked to retire. Am I ready?

Post by 22twain » Tue Sep 24, 2019 11:50 am

furikake wrote:
Tue Sep 24, 2019 11:05 am
How do you get ACA subsidy when your annual expenses are $118k+income tax+health insurance? The income limit for this coverage year is less than $65,840 for a couple to qualify for subsidy.
Withdrawals of "principal" from taxable accounts (i.e. cost basis) are not included in your taxable income or ACA MAGI. The OP has about $1M in taxable accounts, so he has plenty that he can withdraw.
My investing princiPLEs do not include absolutely preserving princiPAL.

SuperGrafx
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Re: I am being asked to retire. Am I ready?

Post by SuperGrafx » Tue Sep 24, 2019 12:01 pm

You have over $4 million and you're still wondering if you can retire?
Uh yeah...you can retire.

PDX_Traveler
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Re: I am being asked to retire. Am I ready?

Post by PDX_Traveler » Tue Sep 24, 2019 1:18 pm

skeptical wrote:
Sun Sep 22, 2019 3:34 pm
[... snipped...]
Think of it this way: Set aside (mentally or physically) $650,000 to cover "SS" at $50K a year until 67, when you get the real SS.

That gives you a spend rate of $70K on $3.5M, which is 2% a year, less than the perpetual withdrawal rate, and you can live on basic dividends and interest. You can spend an extra $15K to $20K a year and still have a perpetual withdrawal rate.

[...]
That's an interesting way to think of it, for me. Suppose one were to think of 'physically' setting this amount aside, what would be a good suggested vehicle to "cover SS" - TIPS? Thank you!

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Wiggums
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Re: I am being asked to retire. Am I ready?

Post by Wiggums » Tue Sep 24, 2019 1:31 pm

You’re financially able to retire. Congratulations.

You have sufficient retirement funds and social security. You’ll want to keep an eye on your projected retirement expenses and adjust accordingly.

Good luck to you...

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FIREchief
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Re: I am being asked to retire. Am I ready?

Post by FIREchief » Tue Sep 24, 2019 3:31 pm

GuyNearRetirement wrote:
Sun Sep 22, 2019 11:52 am
My Projected SS: $2,731 at Age 67
Spouses Projected SS: $667 at Age 62, $1,366 (half of mine) at age 68
I don't believe that your spouse will get half your FRA benefit if she starts drawing her own at 62.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

skeptical
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Re: I am being asked to retire. Am I ready?

Post by skeptical » Tue Sep 24, 2019 4:52 pm

PDX_Traveler wrote:
Tue Sep 24, 2019 1:18 pm
skeptical wrote:
Sun Sep 22, 2019 3:34 pm
[... snipped...]
Think of it this way: Set aside (mentally or physically) $650,000 to cover "SS" at $50K a year until 67, when you get the real SS.

That gives you a spend rate of $70K on $3.5M, which is 2% a year, less than the perpetual withdrawal rate, and you can live on basic dividends and interest. You can spend an extra $15K to $20K a year and still have a perpetual withdrawal rate.

[...]
That's an interesting way to think of it, for me. Suppose one were to think of 'physically' setting this amount aside, what would be a good suggested vehicle to "cover SS" - TIPS? Thank you!
For me, I just keep everything in a 50/50 equity/bond portfolio, as I do not buy into the bucket approach. The "extra" money I need until age 70 comes from my equity side so I can reduce my rebalancing costs.

What I do is to mentally tally up what my "extra" expenses will be from now until 70 (when I will take SS). These include what I plan to get from SS (essentially paying myself now), college costs, what I think I am paying extra for health care until I reach medicare, etc. I take this sum, subtract it from my portfolio value, and ask my self if I am comfortable with the resulting withdrawal rate. Your seems like it is about 2%, but you should carefully check your assumptions.

You could take that sum and put it into tips, short terms bonds, etc. What you need to be careful of is accounting for inflation, so you want to make sure that whatever you put it into will hopefully keep up with inflation.

What cannot be accounted for is changes to taxes, SS eligibility, health care eligibility, etc.

TimDex
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Re: I am being asked to retire. Am I ready?

Post by TimDex » Tue Sep 24, 2019 5:29 pm

You may need to think more about the time you’ll have on your hands, than the actual financial issues. You’ve been off to work every day, then suddenly you won’t be. Spend some time thinking about what you’ll want to do. And no, golf and travel won’t be enough. You are still going to have a lot of energy, and will need to find something as a good outlet. Part time consulting, volunteering, hobby, small business. My f-i-l was a dentist, liked to golf, after retirement had a smalll business repairing golf clubs, things of that nature. Tim
"All man's miseries derive from not being able to sit quietly in a room alone. " -- Pascal

Topic Author
GuyNearRetirement
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Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 5:30 pm

HomeStretch wrote:
Sun Sep 22, 2019 6:13 pm
GuyNearRetirement wrote:
Sun Sep 22, 2019 5:59 pm
My BIL is going to send me a spreadsheet that helps me optimize that process. He said that tax rates will go up in a few years if the laws don't change. I don't really understand how taxes can go up without the law changing, but he usually knows what he's talking about.
The individual tax rates under the Tax Cuts and Jobs Act of 2017 are scheduled to sunset on 12/31/2025, so absent any legislation rates revert back in 2026.
That sort of makes sense. Why they would change tax rates temporarily doesn't make much sense, but I'll just accept it and move on with life.

Topic Author
GuyNearRetirement
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Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 5:32 pm

Katietsu wrote:
Sun Sep 22, 2019 6:32 pm
Healthcare may influence more decisions than you currently realize. For instance, you may have to balance Roth conversions with ACA subsidies. You might want to do larger Roth conversions this year and next while you have company insurance and then reduce conversions until on Medicare.

And many people seem to only have access to ACA plans with a local network. Therefore, if you have an emergency while traveling, you could end up with balance billing and a huge expense. And since available plans and services are dependent on location, it is possible that you may need to change your residence to have access to reasonable healthcare in the future, much more so than whether or not to do a Roth conversion or what asset allocation to choose.

With more than a decade to go to Medicare, changes to healthcare in the next decade could substantially improve or worsen your situation. I would devote significant time to studying the healthcare aspect of early retirement. I consider it to be the most challenging part of ER once you have a few million dollars.
Thanks. Healthcare is my biggest concern and where I am doing the most reading now. I really appreciate the tip about local networks. Having worked for mid to large sized corporations for most of my career, I guess I've just taken having extensive networks for granted.

Topic Author
GuyNearRetirement
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Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 5:36 pm

inbox788 wrote:
Sun Sep 22, 2019 8:23 pm
I'm new to i-orp, but roughly, "Your projected, maximum, annual Disposable Income is $136,000 in today's, after tax dollars." Looks like there's some inflation adjustment, but plans to exhaust funds by age 92.
https://www.i-orp.com/Models/M199220vXLnbhYETq6/MC.html
Correct any errors, and adjust up for spouse SS at 70 (didn't see how do that with simulation; also don't know why it chose 92 as Retiree Planning Horizon).

I would have guessed it made sense to spend down the taxable accounts first and do Roth conversions the first years of retirement, but i-orp seems to point out that some taxable at lower brackets should be taken out as well, which makes sense now.
I'm unfamiliar with i-orp. I'll have to check it out. What do you like most about it?

Topic Author
GuyNearRetirement
Posts: 25
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Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 5:37 pm

bltn wrote:
Sun Sep 22, 2019 8:50 pm
I agree with WC Investor.
4 million dollars times 3.5% is 140,000 dollars a year. When money starts being taken out of retirement plans, you ll be looking at 10,000-15,000 dollars in yearly taxes (rough guesstimate). I don t think this is quite as comfortable as many posters indicate. You ll need to stay flexible with your expenses as the market goes up and down. Costs for medical care may increase in the future. Personally, I wouldn t consider anything but traditional medical care. No foreign care or care within medical co ops .
In your position, if I felt good, I d investigate other employment for the next few years, even if it were just part time. Added security. That s me.
Thanks. We've been discussing either keeping expenses down for a few more years or doing part-time/consulting work just to build up a better margin of safety.

Topic Author
GuyNearRetirement
Posts: 25
Joined: Fri Aug 30, 2019 1:35 pm

Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 5:40 pm

ivk5 wrote:
Sun Sep 22, 2019 10:16 pm
GuyNearRetirement wrote:
Sun Sep 22, 2019 5:59 pm
I've been told that
OP: you made this comment a couple times about topics that are vital to your retirement finances (ACA subsidies, taxes, timing of Roth conversions).

I’d suggest doing a little more reading here and experimenting with resources linked in wiki until you have a basic comfort level modeling things for yourself rather than waiting for spreadsheets from your well-meaning BIL.

Congrats on winning the game.
I agree completely. This thread is part of the start of that. I hadn't planned to retire for several more years, so I'm playing catch-up. As I said in my original post, I don't think I'm stupid, just a little ignorant. I'm working on correcting the that.

Topic Author
GuyNearRetirement
Posts: 25
Joined: Fri Aug 30, 2019 1:35 pm

Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 5:53 pm

desiderium wrote:
Tue Sep 24, 2019 9:54 am
Here's a couple of thoughts, given your age and long horizon

-you might have difficulty adjusting to "leisure time"
-you might feel like going a little crazy with spending now that you are not working all the time
-your "SWR" planning might not work out as well as we all think

Consider staying employed at some level, perhaps after a break. Do some consulting, contract or part time work to keep your skills up and to blunt withdrawals. Portfolio survival and/or ~safe spending ability will increase.
Leisure time won't be a problem. My spouse quit paid work many years ago to focus on raising the kids and then on taking on lots of active roles in our community. As the kids have grown to be more independent, I think my spouse has steadily transitioned to working as many hours as I do. It has always been kind of assumed that when I have more time available, I'll be getting involved as well. I'm more worried about over committing than I am about getting bored.

As for spending, I think we'll be OK. We've lived far below our means for a very long time and have grown accustomed to it. It would feel weird to start going over budget, especially when the opportunities to out-earn the problem are fading.

I'm a little concerned about the SWR, but I think we can manage that with a combination of living below our budget and/or earning side income for a while. If not, we are very flexible people and could dramatically reduce our burn rate if necessary.

Topic Author
GuyNearRetirement
Posts: 25
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Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 5:56 pm

furikake wrote:
Tue Sep 24, 2019 11:05 am
How do you get ACA subsidy when your annual expenses are $118k+income tax+health insurance? The income limit for this coverage year is less than $65,840 for a couple to qualify for subsidy.
We have two kids, which helps with the subsidy. The other important thing is that the subsidy is based on income rather than expenses. We have a large amount of taxable savings we can draw on for several years. My plan was to stay in the 12% tax bracket, which should also qualify us for a subsidy.

Topic Author
GuyNearRetirement
Posts: 25
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Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 6:12 pm

soccerrules wrote:
Tue Sep 24, 2019 11:17 am
GuyNearRetirement wrote:
Sun Sep 22, 2019 1:00 pm
unclescrooge wrote:
Sun Sep 22, 2019 11:57 am
On the surface 3% of $4 million is $120k so you're good to go! 👍

What does the non discretionary include? Mortgage and car payments?
No mortgage. Paid off the house a few years ago.

It includes property taxes ($1,000/month), electricity, water, gas, food, insurance, automobile costs (fuel, service, replacement), cell phones, and that sort of stuff. It doesn't include more discretionary stuff like hobbies, travel, club memberships, charitable contributions, and anything we'd quickly be willing to drop in lean times. Obviously, we could cut some of our "non-discretionary" expenses like reducing electrical use, driving less, switching to cheaper phone plans, etc.
I think you need to vet this out a little more. It seems as if your essentials equate to about $115K a year. if you add $25K for discretionary you are at $140k plus income taxes. That makes the WR about 3.5% which is by most opinions good to go and with the ability to trim the $25K if needed. If your discretionary is higher than that, you will want to watch your burn rate and sequence of returns.
I would imagine the vast majority of BH's would pull the rip cord with your numbers.

Enjoy retirement
I think there was a miscommunication somewhere. My total annual expenses are expected to be around $118,000/yr plus income tax. Of those, what I call my non-discretionary expenses are expected to be around $72,000 year. The remaining $46,000/year are in the category I listed as discretionary. And I use those terms loosely because I would start cutting a lot of the non-discretionary expenses well be I eliminated the discretionary expenses.

If I spend $118,000/year and another $17,000/year in income taxes, that's a total of $135,000. If I'm working with a retirement nest egg of $4,100,000, I think that works out to a 3.3% withdrawal rate. So that gets me under the 3.5% limit.

Topic Author
GuyNearRetirement
Posts: 25
Joined: Fri Aug 30, 2019 1:35 pm

Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 6:17 pm

Wiggums wrote:
Tue Sep 24, 2019 1:31 pm
You’re financially able to retire. Congratulations.

You have sufficient retirement funds and social security. You’ll want to keep an eye on your projected retirement expenses and adjust accordingly.

Good luck to you...
I think that is very central to my thinking. We feel that we live extremely comfortably, especially compared with how we grew up and how we lived when we were first married. If markets get ugly, we'd both be perfectly happy to spend more time camping in the Smokey Mountains and less time in Europe. We've grown accustomed to buying stuff we life but don't need, but we wouldn't have problems giving much of that up if necessary. If the markets are good to us, we'll live very nicely and if they are bad to us, we'll still live very nicely but in different ways.

Topic Author
GuyNearRetirement
Posts: 25
Joined: Fri Aug 30, 2019 1:35 pm

Re: I am being asked to retire. Am I ready?

Post by GuyNearRetirement » Tue Sep 24, 2019 6:22 pm

FIREchief wrote:
Tue Sep 24, 2019 3:31 pm
GuyNearRetirement wrote:
Sun Sep 22, 2019 11:52 am
My Projected SS: $2,731 at Age 67
Spouses Projected SS: $667 at Age 62, $1,366 (half of mine) at age 68
I don't believe that your spouse will get half your FRA benefit if she starts drawing her own at 62.
I need to look into this. I thought they killed the "file and suspend" trick but didn't kill the other. My spouse would only take $50,000 from 62 to 68, so we can afford to give that up. I'm hesitant to put a lot of thought into the SS angles until we get closer because I'm confident that the rules for SS will change before we're ready and I'll have done all that research for nothing. [Comment that I didn't make because it would be removed by LadyGeek anyway :happy ]

HomeStretch
Posts: 2862
Joined: Thu Dec 27, 2018 3:06 pm

Re: I am being asked to retire. Am I ready?

Post by HomeStretch » Tue Sep 24, 2019 7:30 pm

As you dig into Social Security claiming strategies, you and spouse should create to online accounts at SSA.gov if you haven’t already.

Opensocialsecurity.com is a fairly easy web resource to use for help with the timing of claiming SS.

soccerrules
Posts: 944
Joined: Mon Nov 14, 2016 4:01 pm

Re: I am being asked to retire. Am I ready?

Post by soccerrules » Wed Sep 25, 2019 7:49 am

GuyNearRetirement wrote:
Tue Sep 24, 2019 6:12 pm
soccerrules wrote:
Tue Sep 24, 2019 11:17 am
GuyNearRetirement wrote:
Sun Sep 22, 2019 1:00 pm
unclescrooge wrote:
Sun Sep 22, 2019 11:57 am
On the surface 3% of $4 million is $120k so you're good to go! 👍

What does the non discretionary include? Mortgage and car payments?
No mortgage. Paid off the house a few years ago.

It includes property taxes ($1,000/month), electricity, water, gas, food, insurance, automobile costs (fuel, service, replacement), cell phones, and that sort of stuff. It doesn't include more discretionary stuff like hobbies, travel, club memberships, charitable contributions, and anything we'd quickly be willing to drop in lean times. Obviously, we could cut some of our "non-discretionary" expenses like reducing electrical use, driving less, switching to cheaper phone plans, etc.
I think you need to vet this out a little more. It seems as if your essentials equate to about $115K a year. if you add $25K for discretionary you are at $140k plus income taxes. That makes the WR about 3.5% which is by most opinions good to go and with the ability to trim the $25K if needed. If your discretionary is higher than that, you will want to watch your burn rate and sequence of returns.
I would imagine the vast majority of BH's would pull the rip cord with your numbers.

Enjoy retirement
I think there was a miscommunication somewhere. My total annual expenses are expected to be around $118,000/yr plus income tax. Of those, what I call my non-discretionary expenses are expected to be around $72,000 year. The remaining $46,000/year are in the category I listed as discretionary. And I use those terms loosely because I would start cutting a lot of the non-discretionary expenses well be I eliminated the discretionary expenses.

If I spend $118,000/year and another $17,000/year in income taxes, that's a total of $135,000. If I'm working with a retirement nest egg of $4,100,000, I think that works out to a 3.3% withdrawal rate. So that gets me under the 3.5% limit.
ah good stuff. Well then if you must -- go retire! :beer
Congrat's go have fun!
Don't let your outflow exceed your income or your upkeep will be your downfall.

international001
Posts: 1162
Joined: Thu Feb 15, 2018 7:31 pm

Re: I am being asked to retire. Am I ready?

Post by international001 » Wed Sep 25, 2019 9:36 am

glennherwig wrote:
Mon Sep 23, 2019 10:43 pm
Why are people suggesting the annuity? When op can put the lump sum pension into a corporate bond etf like HYG, or LQD and earn near the same amount and not have to give up the liquidity. I’m confused that’s all. Annuity’s really only benefit the salesman.
Shooting for the same average ~4% return after inflation. Well, then an annuity would look nicer, since it has 0 volatility.

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