not sure, please help [Can we retire, where to invest?]

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mapleleaf
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not sure, please help [Can we retire, where to invest?]

Post by mapleleaf »

My wife (54) and myself (57) want to retire within 3 years. We have 1.4 million sitting in cash . Our emergency fund is in a MM with Fidelity and all else is in combined IRA's there as well.(in cash) We have zero debt (house paid off etc) and our kid's college has been paid for and they will graduate next year.
By my math, I would seem that at age 67 we would hopefully receive around $5000 in Social Security.

Question: We don't know if we have enough to retire nor would we know where to put the money considering the short time frame and low savings rate.
Are we too young to buy a SPIA? Can you help? Thanks so much!
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nedsaid
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Re: not sure, please help

Post by nedsaid »

What are your expenses? Obviously if your expenses are $500,000 a year, your retirement will be a short one. My wild guess is that you likely have enough to retire but we have very limited information. My suspicion is that you probably are too young to buy a Single Premium Immediate Annuity but again we have so little information that we cannot give informed advice.
A fool and his money are good for business.
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retired@50
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Re: not sure, please help [Can we retire, where to invest?]

Post by retired@50 »

mapleleaf wrote: Sun Jun 21, 2020 9:27 am Can you help? Thanks so much!
You might need to provide more information.

See link: viewtopic.php?f=1&t=6212

Asking Portfolio Questions in this format is helpful. All your relevant information will be in one place.

Regards.
This is one person's opinion. Nothing more.
sailaway
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Re: not sure, please help [Can we retire, where to invest?]

Post by sailaway »

The single most important factor in determining how much you need in retirement is your expenses.

How much are your current expenses? How do you expect your lifestyle to change in retirement? How will you cover healthcare?

Are your SS projections from the SSA website? If so, they assume that you keep working at your current income level through to the age you claim.
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mapleleaf
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Re: not sure, please help [Can we retire, where to invest?]

Post by mapleleaf »

sailaway wrote: Sun Jun 21, 2020 9:36 am The single most important factor in determining how much you need in retirement is your expenses.

How much are your current expenses? How do you expect your lifestyle to change in retirement? How will you cover healthcare?

Are your SS projections from the SSA website? If so, they assume that you keep working at your current income level through to the age you claim.
I think we will need 85% of our income , so around 70-80k yearly. I guess we buy a healthcare plan off of the market before age 65 (although I have TRS here in Texas)

My biggest problem, I just don't know where to safely invest for 5 years or so.
k3vb0t
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Re: not sure, please help [Can we retire, where to invest?]

Post by k3vb0t »

Did you mean $50,000 from Social Security instead of $5,000?
Topic Author
mapleleaf
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Re: not sure, please help [Can we retire, where to invest?]

Post by mapleleaf »

k3vb0t wrote: Sun Jun 21, 2020 9:52 am Did you mean $50,000 from Social Security instead of $5,000?
I'm sorry $5000 a month at age 62
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racy
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Re: not sure, please help [Can we retire, where to invest?]

Post by racy »

OP,
Have you tried the FIREcalc calculator? https://firecalc.com/
(I suspect with an all cash portfolio and your projected retirement age, that you'll deplete your funds. But, try the calculator yourself).
Last edited by racy on Sun Jun 21, 2020 10:10 am, edited 1 time in total.
sailaway
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Re: not sure, please help [Can we retire, where to invest?]

Post by sailaway »

mapleleaf wrote: Sun Jun 21, 2020 9:54 am
k3vb0t wrote: Sun Jun 21, 2020 9:52 am Did you mean $50,000 from Social Security instead of $5,000?
I'm sorry $5000 a month at age 62
Google says the maximum benefit at age 62 is less than half that, so that seems like an optimistic rounding up.

Have you looked at SPIA's? You are considerably less than the ideal age, so I would expect less than ideal terms.

Why are you not considering a run of the mill boglehead portfolio? A conservative allocation would allow you to withdrawal heavily at the beginning, until you start receiving SS.

If you have TRS healthcare, isn't there a pension involved? As I recall (and it has been a while since I left, much less since I first signed up, plus changes were originally phased in over time), the healthcare was only available if one chose a defined benefit plan, rather than a defined contribution plan.
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22twain
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Re: not sure, please help [Can we retire, where to invest?]

Post by 22twain »

mapleleaf wrote: Sun Jun 21, 2020 9:49 am I think we will need 85% of our income , so around 70-80k yearly.
It would be useful to find out what you actually spent last year, and maybe also a few years before that. Even if you don't keep a detailed budget, you can get the total amount easily if all your expenses flow through your checking account:

Start with the initial balance for the year.
Add to it, all your paychecks and other inflows (tax refunds, etc.).
Subtract from it, any payments that aren't really expenses (e.g. transfers to an investment account, buying CDs, etc.).
Finally, subtract the final balance for the year.

If you have more than one checking account, repeat for each of them, and add the results together.

This should give you your total expenses, not including things which are automatically deducted from your paychecks (income tax, payroll tax, employer-sponsored health insurance, maybe other stuff).

Your income taxes are likely to be different after you retire, so you'll have to estimate those separately. Also health insurance which will be different before and after you start Medicare.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
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22twain
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Re: not sure, please help [Can we retire, where to invest?]

Post by 22twain »

sailaway wrote: Sun Jun 21, 2020 10:09 am
mapleleaf wrote: Sun Jun 21, 2020 9:54 am
k3vb0t wrote: Sun Jun 21, 2020 9:52 am Did you mean $50,000 from Social Security instead of $5,000?
I'm sorry $5000 a month at age 62
Google says the maximum benefit at age 62 is less than half that, so that seems like an optimistic rounding up.
Definitely double-check that $5000 per month. If you tell us exactly where you got that number, people here can probably figure out what's happening.

For comparison, DW and I each had maximum salaries of about $70K per year in today's dollars, up to about age 62-63. We both waited / will wait until age 70 to start SS. One of us started last year, the other still has a few years to go. When we're both collecting, it will be about $36K apiece for a total of about $72K per year. If we had started at 62, the total would be maybe $40K.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
Topic Author
mapleleaf
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Re: not sure, please help [Can we retire, where to invest?]

Post by mapleleaf »

22twain wrote: Sun Jun 21, 2020 10:44 am
sailaway wrote: Sun Jun 21, 2020 10:09 am
mapleleaf wrote: Sun Jun 21, 2020 9:54 am
k3vb0t wrote: Sun Jun 21, 2020 9:52 am Did you mean $50,000 from Social Security instead of $5,000?
I'm sorry $5000 a month at age 62
Google says the maximum benefit at age 62 is less than half that, so that seems like an optimistic rounding up.
Definitely double-check that $5000 per month. If you tell us exactly where you got that number, people here can probably figure out what's happening.

For comparison, DW and I each had maximum salaries of about $70K per year in today's dollars, up to about age 62-63. We both waited / will wait until age 70 to start SS. One of us started last year, the other still has a few years to go. When we're both collecting, it will be about $36K apiece for a total of about $72K per year. If we had started at 62, the total would be maybe $40K.
I dug this up:

wife: small pension available at age 65= $570 month
wife social security at age 62= $2090 age 67= $2987
myself: TRS age 65= $828
myself S.S age 65= $828. ( I am qualified to accept both TRS and S.S )

thanks!
JimmyJammy
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Re: not sure, please help [Can we retire, where to invest?]

Post by JimmyJammy »

Have you tried the Engaging Data calculator?

https://engaging-data.com/fire-calculator/
bampf
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Re: not sure, please help [Can we retire, where to invest?]

Post by bampf »

Hi! I am around the same age. One way to think about this is to build a portfolio that has a chance to last you the rest of your life. A previous poster suggested firecalc, and I very much suggest this also.

1. Know your expenses. Taxes and healthcare as well.
2. Track everything for a year so you know you know your expenses.
3. Consider a portfolio that will sustain you for 30 to 40 years. Many people use the Trinity Study as a rule of thumb (4% a year).
4. Build in a safety margin (like two years in cash/tips/CDs).
5. Look at i-orp as well. Get familiar with it.
6. Draft up an investment plan and an asset allocation.
7. Consider the multitude of portfolios and the suggestions. I would argue for simplicity. Consider a three fund portfolio.

Your current savings give you roughly $56K a year (4% at a 60/40 portfolio). You can front load it with your expectation of SS at 62 or 70.

Can you retire? Hard to say not knowing your expenses.
I think you are missing out on retirement safety by holding your savings in cash. Yes, cash is less safe for your portfolio than equities over the long haul.

Anyway, work for you to do here.
Good luck. Exciting times.

--Bampf
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Watty
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Re: not sure, please help [Can we retire, where to invest?]

Post by Watty »

This is a good website to use to get a suggested Social Security claiming strategy.

https://opensocialsecurity.com/

There is a getting started wiki if you have not seen that.

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

The Boglehead books are also easy to understand and will really help you figure out the basics.

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

There is also a suggested posting format for asking questions that you can use for a guideline which will give a lot more information so you will likely get better responses. You do not need to follow it exactly.

viewtopic.php?f=1&t=6212

For most people how they will get health insurance until they can get on Medicare is a critical factor in determining if they can retire or not.
mapleleaf wrote: Sun Jun 21, 2020 9:27 am Are we too young to buy a SPIA?
That is a complex question and the first thing to be clear about is that insurance companies sell all sorts of complex expensive things that they call some sort of annuity. They sell these so they can make a lot of money off of you. Those are almost always a terrible choice. If someone tries to sell you an annuity then they are almost certainly trying to rip you off to make money off of you. The annuity sales people(not advisors) will also give you misleading numbers and often outright lie to you.

The exception is the Single Premium Immediate Annuity (SPIA) which is basically like buying a pension. These can be a valid part of retirement plan but when they are it is often at an older age and it often makes sense to buy a series of annuities at different ages with different options. Just like other investments you need diversification when you buy a SPIA so it would be very risky to buy a single large one at any age.

With those caveats yes you are likely too young for a SPIA to make sense.

If you have been reading these boards you have likely seen a lot of posts about people refinancing and how it is a great time to get a mortgage on your house because interest rates are so low. The flip side of this is that the low interest rates also impact SPIAs and when interest rates are low it is not such a great time to buy a SPIA.

Delaying starting Social Security to get a larger check later is in effect buying an inflation adjusted SPIA with great survivor benefits which is a lot better than anything you could buy from an insurance company. It would make little sense to buy a SPIA and when one spouse is not delaying staring Social Security until they are 70.

That is a long winded way of saying that it would likely be a bad idea to buy a SPIA now.
mapleleaf wrote: Sun Jun 21, 2020 9:27 am We don't know if we have enough to retire nor would we know where to put the money considering the short time frame and low savings rate.
.....
Our emergency fund is in a MM with Fidelity and all else is in combined IRA's there as well.
As other people have said your expenses will be critical. I retired a few years ago with a paid off house and a lot less than you have and I am doing but but I live in a low to medium cost of living area. With a paid off house a budget of $65K a year is plenty to have an above average middle class lifestyle here including a fair amount of travel. When we both get on Medicare that will go down some.

It is very possible for you to manage your own money especially by using investments like target date funds but since you seem to have a lot to learn one option would be to have Vanguard manage it for you for a few years while you get your finances organized and on automatic pilot, then you can take it over yourself. They only charge 0.3% and they will not put you into expensive mutual funds. Many other financial "advisors" may charge you 1% and then also put you unto expensive mutual funds that they get paid a commission for selling. Be sure to ask if you do not understand why the vast majority of financial advisors are really just salespeople that can be very bad for your finances.

https://investor.vanguard.com/financial ... r-services
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