Scared Stiff to retire

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Scared Stiff to retire

Post by Zso »

I will be 66 next week and planning on retiring within next 3-4 months. Actually I was going to retire last year but hesitated since I am only working part time. Why stop when I am still getting full benefits and getting a 4 day weekend.
I had paid off all my depth last year, started planning for retirement, however now I am looking to a financial planner to see what to do with my nest egg. I found this forum last week and I cannot stop reading all the useful advice on this forum.
So before I move all In, I am now thinking I can do this myself without a planner. “Scared stiff to retire”.

Should I get a financial planner? Most want a portfolio size of 1M to start.
I am reading a lot about the Vanguard diehards. Is having a Vanguard 401K plan any advantage?
I have 200K in savings are there better options?
No Roth or IRA accounts, should I ?
I am thinking that my net worth is acceptable, but “Scared Stiff” if am wrong. Myself and the missus live a life with no major material desires.
My wife is still working and will retire in 2-3 years. I do not plan on tapping into Social security till 70, my wife will probably start social security at 62.

Some background;
Net worth about 1.8 million
1.1M in 401k accounts between the missus and me
200k in 1.6% saving accounts
500k house no mortgage, two cars paid off
20K in check/saving accounts
4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
Future spending, 2 wedding for the kids, Say 50K. possible a RV 50K
1500 + 4000 in SS benefits at age 62(wife) and 70(myself)
Me - Vanguard 401k 850K
Vanguard Wellington Fund Admiral Shares (VWENX) 39%
Vanguard Instl 500 Index Trust (—/7504) 22%
Vanguard Mid-Cap Index Inst Plus (VMCPX/1859) 20%
Vanguard PRIMECAP Fund Admiral (VPMAX/0559) 19%

Wife – TIAA CREF 403b 333K
T. Rowe Price Blue Chip Growth TRBCX 15%
Vanguard Extended Market Index Fund Admiral VEXAX 35%
Vanguard Institutional Index Fund Institutional VINIX: 35%
TIAA Traditional Annuity 15%


Vanguard 401K Exp Ratio
Vanguard Federal Money Mkt Fund (VMFXX/0033) 0.110%
Vanguard Retire Savings Trust II (—/0338) 0.260%
Vanguard Inst Tot Bd Mkt Ix Tr (—/7505) 0.028%
Vanguard Target Ret 2015 Tr Sel (—/1675) 0.090%
Vanguard Target Ret 2020 Tr Sel (—/1676) 0.090%
Vanguard Target Ret 2025 Tr Sel (—/1677) 0.090%
Vanguard Target Ret 2035 Tr Sel (—/1679) 0.090%
Vanguard Target Ret 2040 Tr Sel (—/1680) 0.090%
Vanguard Target Ret 2045 Tr Sel (—/1681) 0.090%
Vanguard Target Ret 2050 Tr Sel (—/1682) 0.090%
Vanguard Target Ret 2055 Tr Sel (—/1683) 0.090%
Vanguard Target Ret 2060 Tr Sel (—/1685) 0.090%
Vanguard Target Ret 2065 Tr Sel (—/1795) 0.090%
Vanguard Target Ret Income Tr Sel (—/1686) 0.050%
X Vanguard Wellington Fund Admiral (VWENX/0521) 0.170%
Dodge & Cox Stock (DODGX/0292) 0.520%
Vanguard Explorer Fund Admiral (VEXRX/5024) 0.340%
X Vanguard Instl 500 Index Trust (—/7504) 0.014%
X Vanguard Mid-Cap Index Fund Institutional Plus Shares (VMCPX) 0.030%
X Vanguard PRIMECAP Fund Admiral (VPMAX/0559) 0.310%
Vanguard Sm-Cap Index Inst Plus (VSCPX/1861) 0.030%
Dodge & Cox International Stock (DODFX/2491) 0.630%
Vanguard Inst Tot Intl St Mt Ix Tr (—/7569) 0.080%
Vanguard Real Estate Index Institl (VGSNX/3123) 0.100%


TIAA-CREF 403B
American Beacon Large Cap Value Fund Institutional Class (AADEX) 0.62% / 0.62%
American Funds EuroPacific Growth R5 (RERFX) 0.53% / 0.53%
BrandywineGLOBAL Global Opportunities Bond I (GOBIX) 0.68% / 0.68%
CREF Money Market Account (R2) (QCMMPX) 0.28% / 0.28%
CREF Social Choice Account (R2) (QCSCPX) 0.29% / 0.29%
CREF Stock Account (R2) (QCSTPX) 0.35% / 0.35%
Diamond Hill Small Mid Cap Fund Class I (DHMIX) 0.93% / 0.94%
Eaton Vance Atlanta Capital SMID Cap Fund Class I (EISMX) 0.91% / 0.91%
Hartford Schroders Emerging Markets Equity SDR (SEMTX) 1.10% / 1.10%
Metropolitan West Total Return Bond Fund Class I (MWTIX) 0.44% / 0.44%
X T. Rowe Price Blue Chip Growth (TRBCX) 0.70% / 0.70%
TIAA Real Estate Account (QREARX) 0.83% / 0.83%
TIAA-CREF Lifecycle 2010 Fund (Institutional) (TCTIX) 0.37% / 0.50%
TIAA-CREF Lifecycle 2015 Fund (Institutional) (TCNIX) 0.38% / 0.50%
TIAA-CREF Lifecycle 2020 Fund (Institutional) (TCWIX) 0.39% / 0.51%
TIAA-CREF Lifecycle 2025 Fund (Institutional) (TCYIX) 0.41% / 0.52%
TIAA-CREF Lifecycle 2030 Fund (Institutional) (TCRIX) 0.42% / 0.53%
TIAA-CREF Lifecycle 2035 Fund (Institutional) (TCIIX) 0.43% / 0.54%
TIAA-CREF Lifecycle 2040 Fund (Institutional) (TCOIX) 0.44% / 0.55%
TIAA-CREF Lifecycle 2045 Fund (Institutional) (TTFIX) 0.45% / 0.56%
TIAA-CREF Lifecycle 2050 Fund (Institutional) (TFTIX) 0.45% / 0.57%
TIAA-CREF Lifecycle 2055 Fund (Institutional) (TTRIX) 0.45% / 0.59%
TIAA-CREF Lifecycle 2060 Fund (Institutional) (TLXNX) 0.45% / 0.71%
TIAA-CREF Lifecycle Retirement Income Fund (Institutional) (TLRIX) 0.37% / 0.53%
TIAA-CREF Money Market Fund (Institutional) (TCIXX) 0.14% / 0.14%
X Vanguard Extended Market Index Fund Admiral (VEXAX) 0.07% / 0.07%
Vanguard Inflation Protected Securities Fund Admiral (VAIPX) 0.10% / 0.10%
X Vanguard Institutional Index Fund Institutional (VINIX) 0.04% / 0.04%
Vanguard Total Bond Market Index Fund Admiral (VBTLX) 0.04% / 0.04%
Vanguard Total International Stock Index Fund Admiral (VTIAX) 0.11% / 0.11%
Last edited by Zso on Mon Jan 20, 2020 7:32 pm, edited 1 time in total.
Elysium
Posts: 3226
Joined: Mon Apr 02, 2007 6:22 pm

Re: Scared Stiff to retire

Post by Elysium »

You look like doing really well. Looking at the portfolios you have for both of you, it seems someone has actually done a good job of financial planning. If you did that give yourself credit, you have done better than most financial planners would do. You don't need to be scared "stiff".

That said, leaving alone wife's retirement assets for when she is ready to retire, you have $820K + $200K in savings accounts for a total of $1M to draw from. Given a 4% rate, this would allow $40k per year without running out of money for next 30 years. However, given you are delaying SS until 70 for a larger payout possibly, you could draw a little more than $40K right now until you hit 70. I would think $60K a year is sustainable for the next 4 years, and then you could draw less from the portfolio as SS kicks in.

All I would add is increase more in bonds by moving some from stocks into perhaps Short Term Inflation Protected Bonds (VTAPX). I would think perhaps 15%-20% from Equities can go into VTAPX, this will ensure about $120K to $160K to draw from that is protected against future inflation. Combine with $200K in Savings, that will give you about $320K to $360K in safe assets to draw on while the rest of equities will grow to keep the overall assets from inflation.

Given that Wellington fund is about 35% in bonds, I have calculated this change to VTAPX would leave you an Asset Allocation of roughly about 50/50 stocks & bonds. This is similar to the recommended allocation by professional planners like Vanguard Target Date funds for someone in retirement. You could bring that down little bit as the years go by, say to reach about 30% in equities by age 70.

Others may chine in with different opinions.
Last edited by Elysium on Sun Jan 19, 2020 12:58 pm, edited 4 times in total.
adamthesmythe
Posts: 3834
Joined: Mon Sep 22, 2014 4:47 pm

Re: Scared Stiff to retire

Post by adamthesmythe »

The thinking around here is that a person who has become educated (1) doesn't need a financial planner and (2) would lose money overall by paying a financial planner an AUM fee.

TIAA for sure and maybe Vanguard will offer you an advisor meeting to look things over and make comments. No charge for this. Maybe try it first.

Some say that it is best to be less in stocks and more in bonds when near retirement or in early retirement. Have a look at the allocations in some of the target date funds.

Whatever you do, don't let anyone talk you into an indexed annuity or whatever they are calling these things. A single premium immediate annuity MAY, under some circumstances, be worth considering.
User avatar
Watty
Posts: 20899
Joined: Wed Oct 10, 2007 3:55 pm

Re: Scared Stiff to retire

Post by Watty »

Zso wrote: Sun Jan 19, 2020 12:35 pm 4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
How much will you get in Social Security?

You can get your basic benefit numbers off of the Social Security website then enter them on this web site to get a suggested claiming strategy.

https://opensocialsecurity.com/

One other important question, What color RV do you want?
Lalamimi
Posts: 618
Joined: Mon Jun 24, 2019 4:22 pm
Location: Texas

Re: Scared Stiff to retire

Post by Lalamimi »

OP
Just a thought - will you move over to your wife's insurance, or go on Medicare. I was laid off 3/18 at 64. Medicare and a supplement can take a chunk out of funds if more than Employer insurance. I thank you for the post, and we recently bailed from Edward Jones and I am managing our IRAs, after talking to several "advisors" and discovering this forum. We are short on bonds, so gleaning info from your responses. If you don't have a hobby to keep you busy while wife is working, I suggest finding one. My husband "retired" 12 years ago and had hobby, but he went through over a year of back surgeries and pain and lost all motivation. He is fine now and we enjoy being together 24/7...
User avatar
JoeRetire
Posts: 5988
Joined: Tue Jan 16, 2018 2:44 pm

Re: Scared Stiff to retire

Post by JoeRetire »

Zso wrote: Sun Jan 19, 2020 12:35 pm So before I move all In, I am now thinking I can do this myself without a planner. “Scared stiff to retire”.

Should I get a financial planner? Most want a portfolio size of 1M to start.
There are plenty of fee-only fiduciary financial planners who won't require anything near a $1M portfolio. (Besides, you have a portfolio bigger than $1M).
I have 200K in savings are there better options?
Almost certainly.
I am thinking that my net worth is acceptable, but “Scared Stiff” if am wrong.
If assurances that you seem to be fine aren't enough, I'd suggest that spend a few hours with a good professional financial planner. If you can subsequently convince yourself that you are capable of doing it alone, then you can just move on. Otherwise, you can get the help you need.

Don't be scared. Be proactive.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
KATNYC
Posts: 490
Joined: Fri Apr 07, 2017 4:34 pm

Re: Scared Stiff to retire

Post by KATNYC »

If you accumulated that without a planner, you do not need one now. A colleague was supposed to retire in September 2019 but didn't, took a promotion instead. The spouse did retire though and they moved to their small vacation home while building a new house a few miles away.

I have no idea what they have saved but the big issue that came up was medical insurance, which is far cheaper through a job for them than Cobra or other options. So long as you can draw down to cover your monthly expenses, plus medical, until social security kicks in (Medicare?) then I believe you can do it without a planner.

IRA's have a required minimum distribution at age [edited to 72] so getting an IRA now is not something I'd do. Figuring out the saving and investing part is a lot easier than figuring out the drawdown period and where to keep buckets of money for the best tax savings. There are a lot of people on this forum who can assist with it though.

You don't have to retire if you like your job. My dad is 70 and has no plans to retire.
Last edited by KATNYC on Sun Jan 19, 2020 3:40 pm, edited 3 times in total.
User avatar
4nursebee
Posts: 1592
Joined: Sun Apr 01, 2012 7:56 am
Location: US

Re: Scared Stiff to retire

Post by 4nursebee »

Yeah, not enough info here
SS and pension info needed.
Not a lot of comfort room without those.
Pale Blue Dot
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

Watty wrote: Sun Jan 19, 2020 12:56 pm
Zso wrote: Sun Jan 19, 2020 12:35 pm 4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
How much will you get in Social Security?

You can get your basic benefit numbers off of the Social Security website then enter them on this web site to get a suggested claiming strategy.

https://opensocialsecurity.com/

One other important question, What color RV do you want?
at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.

a black RV
User avatar
mhadden1
Posts: 729
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: Scared Stiff to retire

Post by mhadden1 »

You may feel better if you run your numbers through a retirement calculator on the web, like FireCalc. A few iterations will likely reassure you that your chances for success are high. Good luck!
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

4nursebee wrote: Sun Jan 19, 2020 2:19 pm Yeah, not enough info here
SS and pension info needed.
Not a lot of comfort room without those.
No pensions just the 401K and 403B
SS will be 4k at 70 for me and 1500 for the missus at 62.
MathIsMyWayr
Posts: 2493
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Scared Stiff to retire

Post by MathIsMyWayr »

Zso wrote: Sun Jan 19, 2020 2:22 pm at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.
Are you sure it will be $4k/mon.?
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: Scared Stiff to retire

Post by dbr »

Zso wrote: Sun Jan 19, 2020 2:29 pm
4nursebee wrote: Sun Jan 19, 2020 2:19 pm Yeah, not enough info here
SS and pension info needed.
Not a lot of comfort room without those.
No pensions just the 401K and 403B
SS will be 4k at 70 for me and 1500 for the missus at 62.
What I read then is that you want to spend between $4000 and $6000 and four years from now you will have an income of $5500.

I suppose you could just delay retirement to age 70 and never have to touch your assets at all, or nearly so. Otherwise, live on your wife's salary until she retires and you still don't have to touch your assets at all. If your wife is not earning quite enough a small withdrawal would make up the difference. I note you did not actually say when your wife will be 62, but there is plenty of money there to work it out somehow.

It could even be you could start SS at age 66 and your wife delay to her age 66 and it might be better. But I am just speculating. There are programs that work through that problem.
Grt2bOutdoors
Posts: 23143
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Scared Stiff to retire

Post by Grt2bOutdoors »

Zso wrote: Sun Jan 19, 2020 2:29 pm
4nursebee wrote: Sun Jan 19, 2020 2:19 pm Yeah, not enough info here
SS and pension info needed.
Not a lot of comfort room without those.
No pensions just the 401K and 403B
SS will be 4k at 70 for me and 1500 for the missus at 62.
How much does your wife bring home each month? This will continue for another 2-3 years right? Take your $4K in expenses today and deduct your wifes take home pay from it? What is your net expense for the next 2-3 years? Result?:
In exactly 4 years you will have an additional inflow of $4K per year. Take the result above and now add back $2K (assume worse case scenario of combined medical expenses of $2K per month). What are your expenses per month?

With a $1.1MM portfolio, you should be able to withdraw 3.5% per year today at age 70, start taking 3.65% and then follow the current IRS distribution table percentages. Yes, I know they've adjusted the actuarial tables to account for longer life and thus reduced those percentages, but the reductions are not material. You should be pulling out about $38.5K, if the markets drop you may have to adjust your budget a bit, take out only based on a percentage of overall portfolio value, not what you want to spend.

If you are still uncomfortable with retiring, then work one more year.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: Scared Stiff to retire

Post by dbr »

MathIsMyWayr wrote: Sun Jan 19, 2020 2:42 pm
Zso wrote: Sun Jan 19, 2020 2:22 pm at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.
Are you sure it will be $4k/mon.?
I think the age 70 max in 2018 was $3698/mo. but that might be close enough for estimating.
Grt2bOutdoors
Posts: 23143
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Scared Stiff to retire

Post by Grt2bOutdoors »

KATNYC wrote: Sun Jan 19, 2020 2:16 pm If you accumulated that without a planner, you do not need one now. A colleague was supposed to retire in September 2019 but didn't, took a promotion instead. The spouse did retire though and they moved to their small vacation home while building a new house a few miles away.

I have no idea what they have saved but the big issue that came up was medical insurance, which is far cheaper through a job for them than Cobra or other options. So long as you can draw down to cover your monthly expenses, plus medical, until social security kicks in (Medicare?) then I believe you can do it without a planner.

IRA's have a required minimum distribution at age 70.5 so getting an IRA now is not something I'd do. Figuring out the saving and investing part is a lot easier than figuring out the drawdown period and where to keep buckets of money for the best tax savings. There are lot of people on this forum that can assist with it though.

You don't have to retire if you like your job. My dad is 70 and has no plans to retire.
The law has changed - RMD's are extended to age 72 from 70 1/2. The SECURE Act changed that requirement but only applies to folks who turn 70.5 years of age after 2019.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

Elysium wrote: Sun Jan 19, 2020 12:49 pm You look like doing really well. Looking at the portfolios you have for both of you, it seems someone has actually done a good job of financial planning. If you did that give yourself credit, you have done better than most financial planners would do. You don't need to be scared "stiff".
Thanks, I did meet with a few financial planners over the last couple of years. One tried to sell annuities, not interested. The Vanguard planner said I was doing well, but recommended an index fund that wash not doing very well. I did not take his advice.
Elysium wrote: Sun Jan 19, 2020 12:49 pm That said, leaving alone wife's retirement assets for when she is ready to retire, you have $820K + $200K in savings accounts for a total of $1M to draw from. Given a 4% rate, this would allow $40k per year without running out of money for next 30 years. However, given you are delaying SS until 70 for a larger payout possibly, you could draw a little more than $40K right now until you hit 70. I would think $60K a year is sustainable for the next 4 years, and then you could draw less from the portfolio as SS kicks in.
If I understand this scenario, that was my plan. I will get about 5,500/month for both SS at age 70.
Elysium wrote: Sun Jan 19, 2020 12:49 pm All I would add is increase more in bonds by moving some from stocks into perhaps Short Term Inflation Protected Bonds (VTAPX). I would think perhaps 15%-20% from Equities can go into VTAPX, this will ensure about $120K to $160K to draw from that is protected against future inflation. Combine with $200K in Savings, that will give you about $320K to $360K in safe assets to draw on while the rest of equities will grow to keep the overall assets from inflation.
So this is the problem with my Vanguard 401K plan. And I stated this to the Vanguard planner. At the time there were no Bond funds available to pick from. I believe this year they added VBMPX, VTAPX not available.
Elysium wrote: Sun Jan 19, 2020 12:49 pm Given that Wellington fund is about 35% in bonds, I have calculated this change to VTAPX would leave you an Asset Allocation of roughly about 50/50 stocks & bonds. This is similar to the recommended allocation by professional planners like Vanguard Target Date funds for someone in retirement. You could bring that down little bit as the years go by, say to reach about 30% in equities by age 70.

Others may chine in with different opinions.
Thank you for the advice
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

dbr wrote: Sun Jan 19, 2020 2:49 pm
MathIsMyWayr wrote: Sun Jan 19, 2020 2:42 pm
Zso wrote: Sun Jan 19, 2020 2:22 pm at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.
Are you sure it will be $4k/mon.?
I think the age 70 max in 2018 was $3698/mo. but that might be close enough for estimating.
I checked the SS website before I posted. OK so it $3945
User avatar
cashboy
Posts: 582
Joined: Tue Sep 11, 2018 5:03 pm
Location: USA

Re: Scared Stiff to retire

Post by cashboy »

Zso wrote: Sun Jan 19, 2020 12:35 pm
So before I move all In, I am now thinking I can do this myself without a planner.
speaking from my personal experience, yes, you can do it yourself.

i was in a similar position as yours and decided to do it all myself.

the BH forums can provide any help you require. AND, that help comes from numerous individuals whose answers provide a balanced response to any questions you might have.

Zso wrote: Sun Jan 19, 2020 12:35 pm
Should I get a financial planner?
with just a little time reading BH posts and Wiki, and asking detailed questions, i found that i did not need one.

good luck on your new adventure!

:sharebeer
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CDs - CASH - Canned Beans - Rice - Bottled Water)
KATNYC
Posts: 490
Joined: Fri Apr 07, 2017 4:34 pm

Re: Scared Stiff to retire

Post by KATNYC »

Grt2bOutdoors wrote: Sun Jan 19, 2020 2:51 pm
The law has changed - RMD's are extended to age 72 from 70 1/2. The SECURE Act changed that requirement but only applies to folks who turn 70.5 years of age after 2019.
Good to know. My dad is 70 and has not retired or taken his social security. He said taking SS will put him in another tax bracket and he doesn't need to take it. His wife is 57. I guess he is just going to work until he dies. We have people in our family who lived to over 100 years old.
Last edited by KATNYC on Sun Jan 19, 2020 3:38 pm, edited 1 time in total.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

Grt2bOutdoors wrote: Sun Jan 19, 2020 2:48 pm
Zso wrote: Sun Jan 19, 2020 2:29 pm
4nursebee wrote: Sun Jan 19, 2020 2:19 pm Yeah, not enough info here
SS and pension info needed.
Not a lot of comfort room without those.
No pensions just the 401K and 403B
SS will be 4k at 70 for me and 1500 for the missus at 62.
How much does your wife bring home each month? This will continue for another 2-3 years right? Take your $4K in expenses today and deduct your wifes take home pay from it? What is your net expense for the next 2-3 years? Result?:
In exactly 4 years you will have an additional inflow of $4K per year. Take the result above and now add back $2K (assume worse case scenario of combined medical expenses of $2K per month). What are your expenses per month?
My wife brings home 5k/month. That's plus 1K. I feel better already.
One item I have not accounted for is the full medical cost. I do have Medicare Part B and additional insurance for me about 400K per month included in my budget. However I had forgot my wife's and she would not reach 65 for another 2-3 years.

Thanks for tip....2k/month is pretty high though?
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

cashboy wrote: Sun Jan 19, 2020 3:23 pm
Zso wrote: Sun Jan 19, 2020 12:35 pm
So before I move all In, I am now thinking I can do this myself without a planner.
speaking from my personal experience, yes, you can do it yourself.

i was in a similar position as yours and decided to do it all myself.

the BH forums can provide any help you require. AND, that help comes from numerous individuals whose answers provide a balanced response to any questions you might have.

Zso wrote: Sun Jan 19, 2020 12:35 pm
Should I get a financial planner?
with just a little time reading BH posts and Wiki, and asking detailed questions, i found that i did not need one.

good luck on your new adventure!

:sharebeer
Thank you
I plan on picking up some of the books constantly mentioned in this forum.
supersharpie
Posts: 776
Joined: Wed Dec 22, 2010 1:28 pm

Re: Scared Stiff to retire

Post by supersharpie »

Zso wrote: Sun Jan 19, 2020 2:29 pm
4nursebee wrote: Sun Jan 19, 2020 2:19 pm Yeah, not enough info here
SS and pension info needed.
Not a lot of comfort room without those.
No pensions just the 401K and 403B
SS will be 4k at 70 for me and 1500 for the missus at 62.
So, Social Security will cover your monthly expenses. What in the world are you worried about?
User avatar
dratkinson
Posts: 5084
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Scared Stiff to retire

Post by dratkinson »

The short answer. I think you'll be okay. You don’t need to pay someone to do this.



The long answer.

Data points.
--A 4% SWR (initial, safe withdrawal rate, indexed for inflation) is reported to last 30yrs in retirement.
--A 2.5% SWR (initial, indexed for inflation) is reported to be the never-exhausted perpetual SWR as withdrawals are refilled by distributions+market growth.
--Your SS benefits reduce your cost of living---need for withdrawals.
--Some retirees report keeping 5yrs of living expenses liquid to avoid sequence of return risk (SoRR) in retirement---the need to sell equities in a down market. Assume most market downturns recover within 4yrs.

See: https://earlyretirementnow.com/2017/01/ ... ase-study/

Image


Given.
--$48K/yr (=12mo x $4K/mo, indexed for inflation) living expenses.
--$220K in savings/checking and $48K living expense, you have ~5yrs of liquid living expenses so SoRR seems to be covered.
--$1.3M ($1.1M 401K + $200K savings) retirement nest egg, you can withdraw $32.5K (2.5% SWR) perpetually, to $52K (4% SWR) for 30yrs.

Your need to withdraw from your retirement nest egg is offset by your wife’s income until she retires, and then offset by her SS at age 62.


Worst case. You and your wife are both retired and no current SS benefit. You are 66 so will need to withdraw from your retirement nest egg for living expenses until you start your SS at age 70. Assume your SS benefit will be $30K/yr.
--So you withdraw $192K (=$48K/yr x 4yr), leaving your retirement nest egg at $1.1M (=$1.3M - 192K).
--After the 4yrs your cost of living drops to $18K (=$48K - $30K your SS benefit)---less than 2.5% SWR.
--Meaning you should never run out of money, and could have >$1M to pass to heirs.

Student exercise. Lather, rinse, repeat above with better numbers and your wife's income and SS benefit.


Student exercise. For a better understanding of your retirement situation, can use Excel to model your annual retirement cash flows:
Annual beginning retirement nest egg (carry forward from previous year),
+wife’s income (offsets living expense, need for withdrawals),
+wife's SS benefit at age 62 (offsets living expense, need for withdrawals),
+your SS benefit at age 70 (offsets living expense, need for withdrawals),
-withdrawals for living expenses (includes RMDs when required*),
-1x events (wedding, RV,...),
+market growth on remaining retirement nest egg (assume 7% for this exercise),
=annual ending retirement nest egg.

* Your RMDs will be larger than your needed withdrawals, so open a taxable investing account and use the excess RMDs to create a 3-fund portfolio in taxable. Why? Inflation is retirees’ largest risk. And the most successful way to offset inflation is by investing in total markets. (You should not leave your excess RMDs in savings to be eroded by inflation.)


Suggested books for other ideas.
--How to Make Your Money Last, Quinn.
--The Bogleheads' Guide to Retirement Planning.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
siriusblack
Posts: 201
Joined: Mon Dec 24, 2018 3:50 pm
Contact:

Re: Scared Stiff to retire

Post by siriusblack »

One thing you might want to check out is the variable withdrawal worksheet here on the BH forum. Conceptually what this does is split your portfolio into two parts-- 1. Bridge to social security. 2. Remainder of portfolio.

So just to use easy round numbers, let's say you have 1 million in assets, and expect to start taking SS at 30k per year in 2 years. (I know this is different from your situation.) The vpw would basically figure 60k as bridge to SS (actually not exactly that amount because it assumes it's invested) and the rest (940k) is then applied uniformly ignoring SS. The tool combines the two withdrawals into a single amount and also tells you what flexibility you should bake into your plan in case the market drops as much as 50%.

To put this is perspective, I'm 40, have less assets than you, and vpw tells me I could withdraw 50k per year starting right now and be ok.

Overall I think you are in much better shape than you think, because you don't need a large bridge to SS. That makes a very big difference. Good luck
Elysium
Posts: 3226
Joined: Mon Apr 02, 2007 6:22 pm

Re: Scared Stiff to retire

Post by Elysium »

Zso wrote: Sun Jan 19, 2020 3:09 pm
Elysium wrote: Sun Jan 19, 2020 12:49 pm All I would add is increase more in bonds by moving some from stocks into perhaps Short Term Inflation Protected Bonds (VTAPX). I would think perhaps 15%-20% from Equities can go into VTAPX, this will ensure about $120K to $160K to draw from that is protected against future inflation. Combine with $200K in Savings, that will give you about $320K to $360K in safe assets to draw on while the rest of equities will grow to keep the overall assets from inflation.
So this is the problem with my Vanguard 401K plan. And I stated this to the Vanguard planner. At the time there were no Bond funds available to pick from. I believe this year they added VBMPX, VTAPX not available.
VBMPX is fine instead. I prefer VTAPX for retirees because it does protect against unexpected inflation, but given that you have $200K in Savings account, there is an alternative. You can buy I-Bonds with some of that money and then buy VBMPX in 401(k) plan. Either way, it is important that you increase fixed income by taking away another 15%-20% from equities, because you do have a lot of equity exposure and going into retirement with that much exposes you to sequence of returns risk if we enter a prolonged bear market.
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: Scared Stiff to retire

Post by dbr »

A person who pretty nearly does not need to take any withdrawals from a portfolio to support expenses does not have sequence of returns risk.

That said, unless there is an ambition to grow wealth at a maximum rate, it would certainly seem prudent to shift significantly from stocks to bonds. It would be nice for that plan to have access to TIPS, but I doubt a balanced investment in total stocks and total bonds will do badly over time. I would think intermediate TIPS might be better suited than short TIPS, but it is possible to discuss bonds forever without any really effective result.

Are there no bonds in the plan in the form of target retirement funds? It has become a trend to default to TR funds rather than offer a selection of stock and bond funds.
Northster
Posts: 198
Joined: Wed Oct 28, 2009 3:30 pm

Re: Scared Stiff to retire

Post by Northster »

You are in a very similar situation to where I was when I retired in 2009 at 63. That was near the market bottom and it was a little unsettling. I too delayed SS to 70 and had higher expenses than you do, but it all worked out. I would agree that adding some bonds could reduce the stress. I was 60/40 going into the recession and eased my way to 40/60 (helped in part by the decline in equities). Not having a paycheck can take some adjustment but you will get used to it. Relax and enjoy.
reln
Posts: 454
Joined: Fri Apr 19, 2019 4:01 pm

Re: Scared Stiff to retire

Post by reln »

Zso wrote: Sun Jan 19, 2020 12:35 pm I will be 66 next week and planning on retiring within next 3-4 months. Actually I was going to retire last year but hesitated since I am only working part time. Why stop when I am still getting full benefits and getting a 4 day weekend.
I had paid off all my depth last year, started planning for retirement, however now I am looking to a financial planner to see what to do with my nest egg. I found this forum last week and I cannot stop reading all the useful advice on this forum.
So before I move all In, I am now thinking I can do this myself without a planner. “Scared stiff to retire”.

Should I get a financial planner? Most want a portfolio size of 1M to start.
I am reading a lot about the Vanguard diehards. Is having a Vanguard 401K plan any advantage?
I have 200K in savings are there better options?
No Roth or IRA accounts, should I ?
I am thinking that my net worth is acceptable, but “Scared Stiff” if am wrong. Myself and the missus live a life with no major material desires.
My wife is still working and will retire in 2-3 years. I do not plan on tapping into Social security till 70, my wife will probably start social security at 62.

Some background;
Net worth about 1.8 million
1.1M in 401k accounts between the missus and me
200k in 1.6% saving accounts
500k house no mortgage, two cars paid off
20K in check/saving accounts
4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
Future spending, 2 wedding for the kids, Say 50K. possible a RV 50K

Me - Vanguard 401k 820K
Vanguard Wellington Fund Admiral Shares (VWENX) 39%
Vanguard Instl 500 Index Trust (—/7504) 22%
Vanguard Mid-Cap Index Inst Plus (VMCPX/1859) 20%
Vanguard PRIMECAP Fund Admiral (VPMAX/0559) 19%

Wife – TIAA CREF 403b 320K
T. Rowe Price Blue Chip Growth TRBCX 20%
Vanguard Extended Market Index Fund Admiral VEXAX 40%
Vanguard Institutional Index Fund Institutional VINIX: 40%
Don't retire if you still like to work. There's no rush.
User avatar
Watty
Posts: 20899
Joined: Wed Oct 10, 2007 3:55 pm

Re: Scared Stiff to retire

Post by Watty »

Zso wrote: Sun Jan 19, 2020 2:22 pm
Watty wrote: Sun Jan 19, 2020 12:56 pm
Zso wrote: Sun Jan 19, 2020 12:35 pm 4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
How much will you get in Social Security?

You can get your basic benefit numbers off of the Social Security website then enter them on this web site to get a suggested claiming strategy.

https://opensocialsecurity.com/

One other important question, What color RV do you want?


at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.

a black RV
I agree that the prior comment about $4k in Social Security seems high so you should double check on that.

Even if is just $3K though you should be fine.

As far as what to invest it all except about $200K are in retirement accounts and that $200k sounds like it would mainly be for the RV and and the weddings so that in essence all your retirement funds are basically in retirement accounts.

My details were a lot different but almost all of my retirement funds were also in retirement accounts when I retired in 2015 so I just put my funds into the Vanguard Target Date Retirement 2015 fund. Some people tend to think of Target Date funds as being some sort of dumbed down "investing for dummies" choice that needs to be improved on but in the right situation they are an excellent choice. The main reasons not to use one are if;
1) You have significant retirement money in taxable accounts and you need to worry about the tax efficiency.
2) You don't have a good LOW COST target date funds in your 401k, which is way too common.

In addition to being a good choice in general one of the reasons I like having the money in target date fund is that it will be much easier to manage as I age and may be less mentally capable. It will also be easier for my wife, who knows less about investing has to manage it some day.

It really can be that simple.
Zso wrote: Sun Jan 19, 2020 2:22 pma black RV
Be sure to look into if being black will make it hotter in the summer. :D
User avatar
GerryL
Posts: 2910
Joined: Fri Sep 20, 2013 11:40 pm

Re: Scared Stiff to retire

Post by GerryL »

OP,
If you are not happy with the investment choices in your 401k, you may be able to do an in-service roll over to an IRA account and invest a chunk of it in any Vanguard funds you want. In-service roll overs are allowed after age 59.5, but you need to check with your employer to make sure they support that feature. But then, you are so close to planned retirement, this may be moot for you.

I chose to consolidate the bulk of my portfolio at a single institution (Vanguard) a few years prior to retirement and then moved the rest over once I separated from the company. I have my retirement accounts set up in a basic 4-fund model. I was aiming for simplicity.

Don't be scared. You've done alright so far. Keep learning and enjoy retirement.
User avatar
tennisplyr
Posts: 2717
Joined: Tue Jan 28, 2014 1:53 pm
Location: Sarasota, FL

Re: Scared Stiff to retire

Post by tennisplyr »

My guess is financially you will always be fine. Like any decision in life, you have to decide is it something you want or are just doing it because you're of age.
Those who move forward with a happy spirit will find that things always work out.
User avatar
JoeRetire
Posts: 5988
Joined: Tue Jan 16, 2018 2:44 pm

Re: Scared Stiff to retire

Post by JoeRetire »

KATNYC wrote: Sun Jan 19, 2020 3:34 pmMy dad is 70 and has not retired or taken his social security. He said taking SS will put him in another tax bracket and he doesn't need to take it.
:confused

Uhm, are you sure?

There is no case where it ever makes sense not to start collecting at 70. That is the age where the benefits can no longer grow by delaying. He is just throwing money away.

If your dad wants to give the money away, he can. I'll volunteer to take it if you don't want it. I like to be helpful that way. :wink:
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
RadAudit
Posts: 3939
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Scared Stiff to retire

Post by RadAudit »

Zso wrote: Sun Jan 19, 2020 12:35 pm “Scared stiff to retire”.
Fear is the beginning of wisdom.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.
wrongfunds
Posts: 2313
Joined: Tue Dec 21, 2010 3:55 pm

Re: Scared Stiff to retire

Post by wrongfunds »

Zso wrote: Sun Jan 19, 2020 3:11 pm
dbr wrote: Sun Jan 19, 2020 2:49 pm
MathIsMyWayr wrote: Sun Jan 19, 2020 2:42 pm
Zso wrote: Sun Jan 19, 2020 2:22 pm at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.
Are you sure it will be $4k/mon.?
I think the age 70 max in 2018 was $3698/mo. but that might be close enough for estimating.
I checked the SS website before I posted. OK so it $3945
SS website assumes you continue to work until your full age. There is another option where you have to enter expected annual income for years from you stop working until that age to the actual number. Granted, if you have enough credits, that number will drop by about $20 per month; not much to make a difference but you should use that
MathIsMyWayr
Posts: 2493
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Scared Stiff to retire

Post by MathIsMyWayr »

wrongfunds wrote: Sun Jan 19, 2020 7:34 pm
Zso wrote: Sun Jan 19, 2020 3:11 pm
dbr wrote: Sun Jan 19, 2020 2:49 pm
MathIsMyWayr wrote: Sun Jan 19, 2020 2:42 pm
Zso wrote: Sun Jan 19, 2020 2:22 pm at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.
Are you sure it will be $4k/mon.?
I think the age 70 max in 2018 was $3698/mo. but that might be close enough for estimating.
I checked the SS website before I posted. OK so it $3945
SS website assumes you continue to work until your full age. There is another option where you have to enter expected annual income for years from you stop working until that age to the actual number. Granted, if you have enough credits, that number will drop by about $20 per month; not much to make a difference but you should use that
"maximum Social Security retirement benefits in 2020: $3,790 for someone who files at age 70"
Why is there a discrepancy of about 4%? Is it due to inflation in the next 4 years or a certain peculiarity of ss benefit calculation?
Elysium
Posts: 3226
Joined: Mon Apr 02, 2007 6:22 pm

Re: Scared Stiff to retire

Post by Elysium »

dbr wrote: Sun Jan 19, 2020 4:59 pm A person who pretty nearly does not need to take any withdrawals from a portfolio to support expenses does not have sequence of returns risk.
I respect your opinions. That said, couple of things. OP said he wishes to retire now at 66 and draw from the portfolio. That exposes him to sequence of returns risk. He has an above average equity allocation, I calculated 70% equities between his 401(k) plan and Savings. About 50/50 seems to be more rational for someone planning to draw from the portfolio.
dbr wrote: Sun Jan 19, 2020 4:59 pm It would be nice for that plan to have access to TIPS, but I doubt a balanced investment in total stocks and total bonds will do badly over time.
I do not doubt it either, but unexpected inflation could be a problem, and hence my suggestion to include Short TIPS to protect against it.
dbr wrote: Sun Jan 19, 2020 4:59 pm I would think intermediate TIPS might be better suited than short TIPS, but it is possible to discuss bonds forever without any really effective result.
Would you agree Short Term TIPS are better for protection against unexpected inflation. Vanguard seems to prefer Short TIPS in their Target Date funds, and I base it on that.
User avatar
colodane
Posts: 86
Joined: Tue Oct 23, 2018 11:32 pm

Re: Scared Stiff to retire

Post by colodane »

Forgive me, OP, if I missed this in my admittedly quick scan of your postings.

It seems to me that since you are "scared" about retirement, to ask about your present job. How do you like it? Is it secure for a few more years? Any chances for advancement or new challenges? If you did retire, do you have any driving interests or goals in terms of how to spend your time?
Since you spouse will be working for awhile longer, I assume that extended travel isn't on the horizon ?

I'm sure that you and your spouse have discussed all this, but your conclusions might help with the type of advice you get here.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

colodane wrote: Sun Jan 19, 2020 10:53 pm Forgive me, OP, if I missed this in my admittedly quick scan of your postings.

It seems to me that since you are "scared" about retirement, to ask about your present job. How do you like it? Is it secure for a few more years? Any chances for advancement or new challenges? If you did retire, do you have any driving interests or goals in terms of how to spend your time?
Since you spouse will be working for awhile longer, I assume that extended travel isn't on the horizon ?

I'm sure that you and your spouse have discussed all this, but your conclusions might help with the type of advice you get here.
I have always loved my job. I am an expert on planning and designing facilities. 12 years ago I was recruited for my current company and received a hefty 50% increase in salary. That’s when I really began to save. Put all the increase into savings and maxed out on the 401k each year. My work took me to almost all major cities, New York, Chicago, LA, SF, Philadelphia London, Milan, Shanghai to name few. I am going on 66 and frankly speaking, now, that I’ve been working part time. I enjoy the freedom. I do not want anymore stress dealing with clients. I can keep myself busy. I enjoy building and carpentry. I have a “honey do list” and then my list to keep me busy. Me and the missus have travel plans to see the great USA, therefore the need for an RV. We have done our major bucket list, traveled to and explored most of Europe.

My idea of retirement is a log cabin in upper Minnesota. However, I have type 2 diabetes and my health is deteriorating slowly. Minnesota will not happen, the blood is running very tin.
I think it’s time to enjoy life. And It is getting shorter every year. My wife is more realistic...She says why are you so obsessed with the money? We can live on much less.

TMI....All these acronyms here. What does OP stand for?

I really appreciate everyone response and grateful for the forum.
lakpr
Posts: 6208
Joined: Fri Mar 18, 2011 9:59 am

Re: Scared Stiff to retire

Post by lakpr »

OP = original post or original poster
pop77
Posts: 468
Joined: Wed Dec 12, 2007 7:57 pm

Re: Scared Stiff to retire

Post by pop77 »

Zso wrote: Mon Jan 20, 2020 12:03 am
colodane wrote: Sun Jan 19, 2020 10:53 pm Forgive me, OP, if I missed this in my admittedly quick scan of your postings.

It seems to me that since you are "scared" about retirement, to ask about your present job. How do you like it? Is it secure for a few more years? Any chances for advancement or new challenges? If you did retire, do you have any driving interests or goals in terms of how to spend your time?
Since you spouse will be working for awhile longer, I assume that extended travel isn't on the horizon ?

I'm sure that you and your spouse have discussed all this, but your conclusions might help with the type of advice you get here.
I have always loved my job. I am an expert on planning and designing facilities. 12 years ago I was recruited for my current company and received a hefty 50% increase in salary. That’s when I really began to save. Put all the increase into savings and maxed out on the 401k each year. My work took me to almost all major cities, New York, Chicago, LA, SF, Philadelphia London, Milan, Shanghai to name few. I am going on 66 and frankly speaking, now, that I’ve been working part time. I enjoy the freedom. I do not want anymore stress dealing with clients. I can keep myself busy. I enjoy building and carpentry. I have a “honey do list” and then my list to keep me busy. Me and the missus have travel plans to see the great USA, therefore the need for an RV. We have done our major bucket list, traveled to and explored most of Europe.

My idea of retirement is a log cabin in upper Minnesota. However, I have type 2 diabetes and my health is deteriorating slowly. Minnesota will not happen, the blood is running very tin.
I think it’s time to enjoy life. And It is getting shorter every year. My wife is more realistic...She says why are you so obsessed with the money? We can live on much less.

TMI....All these acronyms here. What does OP stand for?

I really appreciate everyone response and grateful for the forum.
I think you are fine from a financial standpoint. Having said that, someone can always come up with a scenario that will make how much ever you have saved not enough. It is a high price to pay to go from 98% certain to 100%. You should read " Your Money Your Life" if you have not already. The kindle version is on sale for 1.99.

https://www.amazon.com/dp/B0052MD8VO/re ... TF8&btkr=1
User avatar
22twain
Posts: 2587
Joined: Thu May 10, 2012 5:42 pm

Re: Scared Stiff to retire

Post by 22twain »

Zso wrote: Sun Jan 19, 2020 3:36 pm I do have Medicare Part B and additional insurance for me about 400K per month included in my budget.
That seems a bit high (even if it's only $400 not $400K :wink: ), unless maybe it includes dental and vision insurance. I'm 66 also, and I pay about $260 per month for Medicare parts B and D, and a plan G supplement. No dental or vision.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
KATNYC
Posts: 490
Joined: Fri Apr 07, 2017 4:34 pm

Re: Scared Stiff to retire

Post by KATNYC »

JoeRetire wrote: Sun Jan 19, 2020 7:16 pm
KATNYC wrote: Sun Jan 19, 2020 3:34 pmMy dad is 70 and has not retired or taken his social security. He said taking SS will put him in another tax bracket and he doesn't need to take it.
:confused

Uhm, are you sure?

There is no case where it ever makes sense not to start collecting at 70. That is the age where the benefits can no longer grow by delaying. He is just throwing money away.

If your dad wants to give the money away, he can. I'll volunteer to take it if you don't want it. I like to be helpful that way. :wink:
Positive. I asked multiple times. It makes no sense to me either but he said his wife, who is 57, can take it when she qualifies.
I have no idea who he's been talking to but it sounds a lot like people who don't like to work overtime because they pay more taxes and it doesn't seem worthwhile....which of course is a myth.
User avatar
JoeRetire
Posts: 5988
Joined: Tue Jan 16, 2018 2:44 pm

Re: Scared Stiff to retire

Post by JoeRetire »

KATNYC wrote: Mon Jan 20, 2020 8:28 am
JoeRetire wrote: Sun Jan 19, 2020 7:16 pm
KATNYC wrote: Sun Jan 19, 2020 3:34 pmMy dad is 70 and has not retired or taken his social security. He said taking SS will put him in another tax bracket and he doesn't need to take it.
:confused

Uhm, are you sure?

There is no case where it ever makes sense not to start collecting at 70. That is the age where the benefits can no longer grow by delaying. He is just throwing money away.

If your dad wants to give the money away, he can. I'll volunteer to take it if you don't want it. I like to be helpful that way. :wink:
Positive. I asked multiple times. It makes no sense to me either but he said his wife, who is 57, can take it when she qualifies.
I have no idea who he's been talking to but it sounds a lot like people who don't like to work overtime because they pay more taxes and it doesn't seem worthwhile....which of course is a myth.
It does make no sense.

Unlike working overtime to get more pay, you don't have to give up anything to collect social security benefits.

It makes me worry what else confuses your dad financially.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
User avatar
Sandtrap
Posts: 11867
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Scared Stiff to retire

Post by Sandtrap »

+1 (great input from "watty" and "dratkinson").
Should I get a financial planner? Most want a portfolio size of 1M to start.
No.
You're already in the right place.
(bogleheads.org . . . financial planning)
am going on 66 and frankly speaking, now, that I’ve been working part time. I enjoy the freedom. I do not want anymore stress dealing with clients. I can keep myself busy. I enjoy building and carpentry. I have a “honey do list” and then my list to keep me busy. Me and the missus have travel plans to see the great USA, therefore the need for an RV. We have done our major bucket list, traveled to and explored most of Europe.

My idea of retirement is a log cabin in upper Minnesota. However, I have type 2 diabetes and my health is deteriorating slowly. Minnesota will not happen, the blood is running very tin.
I think it’s time to enjoy life. And It is getting shorter every year. My wife is more realistic...She says why are you so obsessed with the money? We can live on much less.
Health issues sometimes have a way of multiplying and progressing quicker as one ages.
Like your diabetes has sidelined your Minnesota log cabin idea, so goes other things as well.
And, perhaps, eventually the larger building and carpentry projects will also become more difficult. (lifestyle reverse creep?)
So. . . consider listening to your wife's realism.
It's time to move away from the paradigm that made you financially secure to another one oriented toward a health, quality of life, and making new memories.

Congratulations on your success.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: Scared Stiff to retire

Post by dbr »

Elysium wrote: Sun Jan 19, 2020 9:44 pm
dbr wrote: Sun Jan 19, 2020 4:59 pm A person who pretty nearly does not need to take any withdrawals from a portfolio to support expenses does not have sequence of returns risk.
I respect your opinions. That said, couple of things. OP said he wishes to retire now at 66 and draw from the portfolio. That exposes him to sequence of returns risk. He has an above average equity allocation, I calculated 70% equities between his 401(k) plan and Savings. About 50/50 seems to be more rational for someone planning to draw from the portfolio.

Correct in general. In detail the issue turns on how much is being withdrawn for how long. I have the impression the OP will actually be living largely on his wife's salary as she works 3 more years until she retires and he takes SS. But there are assumptions there and we don't have all the numbers. Three years of larger than average withdrawals are not likely to have much of an impact any way around. And a person can just set that amount of money aside in a savings account in they want.
dbr wrote: Sun Jan 19, 2020 4:59 pm It would be nice for that plan to have access to TIPS, but I doubt a balanced investment in total stocks and total bonds will do badly over time.
I do not doubt it either, but unexpected inflation could be a problem, and hence my suggestion to include Short TIPS to protect against it.
dbr wrote: Sun Jan 19, 2020 4:59 pm I would think intermediate TIPS might be better suited than short TIPS, but it is possible to discuss bonds forever without any really effective result.
Would you agree Short Term TIPS are better for protection against unexpected inflation. Vanguard seems to prefer Short TIPS in their Target Date funds, and I base it on that.

No, all TIPS are indexed exactly for CPI inflation so all TIPS protect equally from expected and unexpected inflation. Longer TIPS offer higher real yield in return for greater volatility from real interest rate changes. If it would turn out that real interest rates are also consistently correlated with inflation that might be something to think about, but I think that is second order. Vanguard has a paper where they judge inflation protection to be measured by correlation with inflation and therefore recommend short TIPS, but I think that is illogical. Interest rate risk and inflation risk are different issues. If a person wants to eliminate both, the short TIPS are the choice. But the cost is lower real return. Larry Swedroe has suggested that the issue between short and longer TIPS should be decided by the yield curve, as one does with any bonds. As of today you only gain about 0.5%
going from five year to thirty year TIPS, so there is no incentive to go long with a flat yield curve. Also, the best instrument for just inflation protected investing is I bonds, but you can't put a lot of money in I bonds quickly. Another consideration is that while TIPS do not have inflation risk, they don't actually hedge inflation effects on other investments.

User avatar
dratkinson
Posts: 5084
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Scared Stiff to retire

Post by dratkinson »

RV. There was a recent topic on RVs. For $50K you could probably get a used class-B (van) or a heavy travel trailer. However, a heavy trailer will require a heavy duty tow vehicle, so the expectation is that the combination of tow+towed will be more than $50K.

Are you looking to buy a black used class-B van? I guess a black class-B cabin-on-wheels would keep your warmer traveling through Min.ne.so.ta. Will you get AWD for winter travel?



In the '80s, I recall meeting a retired couple in Omaha living temporarily in an RV park down the street from my apartment complex. They had a large class-A towing a small car. They had sold their home and spent every year traveling to visit their 3 children scattered to Nebraska, Texas, and Florida: 4mos here to visit one child/grandchildren, 4mos there to visit another child/grandchildren,.... Seems like a fun leisurely life.

They said the large class-A didn't give them enough living space and the towed vehicle was difficult to drive... so they wanted to upgrade to a larger converted Greyhound bus that carried a small car internally in the luggage bay. Would like to have seen it.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
Jack FFR1846
Posts: 12799
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Scared Stiff to retire

Post by Jack FFR1846 »

dratkinson wrote: Sun Jan 19, 2020 3:55 pm
Student exercise. For a better understanding of your retirement situation, can use Excel to model your annual retirement cash flows:
Annual beginning retirement nest egg (carry forward from previous year),
+wife’s income (offsets living expense, need for withdrawals),
+wife's SS benefit at age 62 (offsets living expense, need for withdrawals),
+your SS benefit at age 70 (offsets living expense, need for withdrawals),
-withdrawals for living expenses (includes RMDs when required*),
-1x events (wedding, RV,...),
+market growth on remaining retirement nest egg (assume 7% for this exercise),
=annual ending retirement nest egg.

* Your RMDs will be larger than your needed withdrawals, so open a taxable investing account and use the excess RMDs to create a 3-fund portfolio in taxable. Why? Inflation is retirees’ largest risk. And the most successful way to offset inflation is by investing in total markets. (You should not leave your excess RMDs in savings to be eroded by inflation.)


Suggested books for other ideas.
--How to Make Your Money Last, Quinn.
--The Bogleheads' Guide to Retirement Planning.
This....very much so!

Build yourself a simple excel spread sheet. Plot out yearly predictions of savings, social security, and expenses. Where this beats any percentage or number is that you can put in big purchases (new car, new roof, move) and you can account for the 25% drop of social security payments in 2034. You can get very accurate. Predict when you're going to stop working. Predict when your wife will stop working. If you plan to take a part time, fun job for $5k a year, just to allow Roth contributions, put that in. Mine has assumed percentage increases for my savings with changeable percentage for each year. As a year closes, I over-write each predicted value with the actual value. All future numbers update. I have earmarked when I plan to die. So the number there is what my wife gets to move forward with.
Bogle: Smart Beta is stupid
Elysium
Posts: 3226
Joined: Mon Apr 02, 2007 6:22 pm

Re: Scared Stiff to retire

Post by Elysium »

dbr wrote: Mon Jan 20, 2020 9:41 am
Elysium wrote: Sun Jan 19, 2020 9:44 pm
dbr wrote: Sun Jan 19, 2020 4:59 pm A person who pretty nearly does not need to take any withdrawals from a portfolio to support expenses does not have sequence of returns risk.
I respect your opinions. That said, couple of things. OP said he wishes to retire now at 66 and draw from the portfolio. That exposes him to sequence of returns risk. He has an above average equity allocation, I calculated 70% equities between his 401(k) plan and Savings. About 50/50 seems to be more rational for someone planning to draw from the portfolio.

Correct in general. In detail the issue turns on how much is being withdrawn for how long. I have the impression the OP will actually be living largely on his wife's salary as she works 3 more years until she retires and he takes SS. But there are assumptions there and we don't have all the numbers. Three years of larger than average withdrawals are not likely to have much of an impact any way around. And a person can just set that amount of money aside in a savings account in they want.
dbr wrote: Sun Jan 19, 2020 4:59 pm It would be nice for that plan to have access to TIPS, but I doubt a balanced investment in total stocks and total bonds will do badly over time.
I do not doubt it either, but unexpected inflation could be a problem, and hence my suggestion to include Short TIPS to protect against it.
dbr wrote: Sun Jan 19, 2020 4:59 pm I would think intermediate TIPS might be better suited than short TIPS, but it is possible to discuss bonds forever without any really effective result.
Would you agree Short Term TIPS are better for protection against unexpected inflation. Vanguard seems to prefer Short TIPS in their Target Date funds, and I base it on that.

No, all TIPS are indexed exactly for CPI inflation so all TIPS protect equally from expected and unexpected inflation. Longer TIPS offer higher real yield in return for greater volatility from real interest rate changes. If it would turn out that real interest rates are also consistently correlated with inflation that might be something to think about, but I think that is second order. Vanguard has a paper where they judge inflation protection to be measured by correlation with inflation and therefore recommend short TIPS, but I think that is illogical. Interest rate risk and inflation risk are different issues. If a person wants to eliminate both, the short TIPS are the choice. But the cost is lower real return. Larry Swedroe has suggested that the issue between short and longer TIPS should be decided by the yield curve, as one does with any bonds. As of today you only gain about 0.5%
going from five year to thirty year TIPS, so there is no incentive to go long with a flat yield curve. Also, the best instrument for just inflation protected investing is I bonds, but you can't put a lot of money in I bonds quickly. Another consideration is that while TIPS do not have inflation risk, they don't actually hedge inflation effects on other investments.

Haven't read the Vanguard paper on TIPS, but I do intent to read it eventually. Do you have link? I haven't included TIPS at this time, but my plan is to start adding Short Term TIPS toward 5 years to retirement, probably in another 5 years I will start considering moving into TIPS in anticipation of retirement. I see the point about lower returns, and I see that as the price to pay for the safety from both inflation and interest rate risks. Essentially this is more like a cash position with inflation protection, I guess that's how Vanguard see it in their Target Date funds. Perhaps this is not needed instead Intermediate TIPS are also fine as you say, with the possibility of sudden rate hikes causing problems for someone drawing from it. But of course, I get it, there may be several sources to draw from, and chance that all of them facing sequence of returns risk at the same time may be remote.`
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: Scared Stiff to retire

Post by dbr »

Elysium wrote: Mon Jan 20, 2020 11:38 am

Haven't read the Vanguard paper on TIPS, but I do intent to read it eventually. Do you have link? I haven't included TIPS at this time, but my plan is to start adding Short Term TIPS toward 5 years to retirement, probably in another 5 years I will start considering moving into TIPS in anticipation of retirement. I see the point about lower returns, and I see that as the price to pay for the safety from both inflation and interest rate risks. Essentially this is more like a cash position with inflation protection, I guess that's how Vanguard see it in their Target Date funds. Perhaps this is not needed instead Intermediate TIPS are also fine as you say, with the possibility of sudden rate hikes causing problems for someone drawing from it. But of course, I get it, there may be several sources to draw from, and chance that all of them facing sequence of returns risk at the same time may be remote.`
I don't have a link handy -- I would have to do a search for it. I think they reference their white paper stuff on their institutional web pages.

There is nothing wrong with managing interest rate risks. The only issue is not to get confused that managing inflation risk has to include also managing interest rate risk, keeping in mind also that it is real and not nominal rates that are involved with TIPS.

I think it is much better to think of a portfolio as whole than to think of each part managed separately. For example, if you maintain a balanced asset allocation it doesn't even make sense to refer to what you withdrew "from." A person withdrawing money would probably sell whatever asset is above its target. At the same time they might even be selling more of that same asset to buy what is below target.

Holding TIPS in a portfolio means the portfolio as a whole has less inflation risk that otherwise, but that only becomes finished when one has a 100% TIPS portfolio. Directing small allocations to TIPS for inflation reasons is pointless. The rational for adding TIPS in small amounts would have come from a portfolio theory analysis such as mean variance optimization. But I have no idea how Vanguard does its portfolio design. There was just a post this morning on a paper from Vanguard about that and darned if I can find it now.
Post Reply