Retirement at 53 (a little over one year from now)

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Topic Author
Low Maintenance
Posts: 17
Joined: Sat Oct 31, 2020 5:17 pm

Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

I would like to tap into the collective wisdom and goodwill of the Bogleheads community on this subject. I appreciate any guidance you can offer about the following and anything else you think is relevant:
  • Go-forward investment allocation over time (I am heavily overweighted in Cash currently)
  • Draw-down strategy over time
  • Other suggested actions such as additional Roth conversion, etc.
  • Questioning my assumptions
  • Anything else you think I am missing including additional questions you may have

Profile
  • I am married
  • Me: Age 52; working and planning to retire at 53, maxing out 401k until that point
  • My wife: Age 54; working and planning to retire at 55, maxing out 401k until that point
Income
  • Total annual income over the next year until retirement: $260k
  • Annual stream of income after retirement: $7k annually for 8 years; $4k for subsequent 17 years
  • My annual Social Security taken at age 67: $27k (estimated in today's dollars)
  • My wife's annual Social Security taken at age 67: $13k (estimated in today's dollars)
Expenses
  • Current annual: $70k
  • Post retirement annual: $84k
  • Reside in a state with no state income tax
Retirement Savings: $1.3M (Allocation: Cash: 56%, Bonds: 3%, Int'l Stocks: 17%, US Stocks: 23%, Alternative: 1%)
  • 401k: $800k
  • Roth IRA: $310k
  • IRA: $220k
Non-Retirement Taxable Savings: $550k (Allocation: Cash: 68%, Bonds: 5%, Int'l Stocks: 9%, US Stocks: 17%, Alternative: 1%)

Other Assets
  • Home equity: $425k
Liabilities
  • No debt or mortgage
  • Kids college already paid for
Robdac
Posts: 61
Joined: Tue Aug 06, 2019 3:23 pm

Re: Retirement at 53 (a little over one year from now)

Post by Robdac »

Standard retirement rule of thumb for spending is 4% of initial assets adjusted annually for inflation. So, 4% of $1.85MM which is your retirement and non-retirement savings is $74,000 in year one. But, with being so cash heavy, you are unlikely to be able to spend 4% because cash won't generate adequate returns over your years of retirement.
jeffreys
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Joined: Wed Jan 24, 2018 7:46 pm

Re: Retirement at 53 (a little over one year from now)

Post by jeffreys »

We're in a similar place to you: viewtopic.php?f=1&t=328541

I'm curious what your additional expenses in retirement will be -- $70k to $84k. I didn't consider that in our analysis and we'll probably have a similar increase for health insurance and travel. Is that what you anticipate or something different we should take into consideration?
Topic Author
Low Maintenance
Posts: 17
Joined: Sat Oct 31, 2020 5:17 pm

Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

jeffreys wrote: Sat Oct 31, 2020 8:01 pm We're in a similar place to you: viewtopic.php?f=1&t=328541

I'm curious what your additional expenses in retirement will be -- $70k to $84k. I didn't consider that in our analysis and we'll probably have a similar increase for health insurance and travel. Is that what you anticipate or something different we should take into consideration?
You got it. In my case, the increase is based on health insurance.
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WoodSpinner
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Joined: Mon Feb 27, 2017 1:15 pm

Re: Retirement at 53 (a little over one year from now)

Post by WoodSpinner »

Op,

So why all that cash?

Do you have a target AA and perhaps a Glidepath?
Are you going to try for subsidized ACA Health Insurance?
Are their any lumpy expenses you need to plan for (e.g. weddings, new cars, big trips?)

Have you looked at how your plans will work using the Variable Portfolio Withdrawal approach?
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Or the Time Value of Money approach?
https://www.bogleheads.org/blog/2019/02 ... -of-money/

I think either would be a good start since it can help you figure a proposed withdrawal plan which factors in current market conditions, longevity, and other income streams.

With more info we can give better advice.
Topic Author
Low Maintenance
Posts: 17
Joined: Sat Oct 31, 2020 5:17 pm

Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

WoodSpinner wrote: Sat Oct 31, 2020 8:34 pm Op,

So why all that cash?

Do you have a target AA and perhaps a Glidepath?
Are you going to try for subsidized ACA Health Insurance?
Are their any lumpy expenses you need to plan for (e.g. weddings, new cars, big trips?)

Have you looked at how your plans will work using the Variable Portfolio Withdrawal approach?
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Or the Time Value of Money approach?
https://www.bogleheads.org/blog/2019/02 ... -of-money/

I think either would be a good start since it can help you figure a proposed withdrawal plan which factors in current market conditions, longevity, and other income streams.

With more info we can give better advice.
Thanks for the guidance, including the questions. I will process your questions and also look into the resources you pointed me to. Historically, I have had an aggressive portfolio, predominantly S&P 500 tracking ETFs and mutual funds. I am so heavily weighted toward cash now because I recently liquidated many of those positions after the recovery and run-up during the pandemic. In hindsight, I should have probably determined my go-forward strategy and allocation before that liquidation and moving so heavily into cash. But as of now I'm inadvertently benefiting from the timing with the recent downturn since I sold.
bampf
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Joined: Thu Aug 04, 2016 6:19 pm

Re: Retirement at 53 (a little over one year from now)

Post by bampf »

I think only an up tick of $14K is under estimating healthcare. I am not too far off of you and expect at least $24K in healthcare for just the premiums. In a bad year for health you can tack on another $10K. The only thing that would mitigate this is if your income was low enough to get healthcare subsidies, which is possible based on what you are talking about, but, not super likely I don't know whether you should plan for that. It also depends on where you live. That being said, it seems like an under estimation to me.

Next, you have about $500K after tax. That needs to last until you can tap into your IRA/401ks, which seems possible but a touch tricky if you hit a downturn. There are other options too for early withdrawal from retirement accounts.

I'm pretty comfortable with a 90% equities allocation currently. I have about 10% in cash and a pretty good job. If I were to retire I would increase my cash position to about 3 years run rate and leave the rest in equities. However, I can scale down my monthly expenditures to about 5K a month and feel no pain. And I could do that for a long time.

My concerns with your plan would be healthcare assumptions, accurate estimation of expenses and flexibility of expenses and risk tolerance. The fact that you dumped a bunch recently concerns me. It isn't a stay the course kind of plan, which you need in my opinion for this to work. Just make sure you know your risk tolerance and behavioral approaches. That being said, with $2M or so in NW, you can do pretty much anything you like with in reason. May not be fat. May hit a huge string of bad luck. Course, you could walk out the door tomorrow and get t-boned by a semi. So, you know, live your life. Have fun. Plan accordingly and deal with things as they come up.
BernardShakey
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Location: CA

Re: Retirement at 53 (a little over one year from now)

Post by BernardShakey »

Low Maintenance wrote: Sat Oct 31, 2020 7:35 pm I would like to tap into the collective wisdom and goodwill of the Bogleheads community on this subject. I appreciate any guidance you can offer about the following and anything else you think is relevant:
  • Go-forward investment allocation over time (I am heavily overweighted in Cash currently)
  • Draw-down strategy over time
  • Other suggested actions such as additional Roth conversion, etc.
  • Questioning my assumptions
  • Anything else you think I am missing including additional questions you may have

Profile
  • I am married
  • Me: Age 52; working and planning to retire at 53, maxing out 401k until that point
  • My wife: Age 54; working and planning to retire at 55, maxing out 401k until that point
Income
  • Total annual income over the next year until retirement: $260k
  • Annual stream of income after retirement: $7k annually for 8 years; $4k for subsequent 17 years
  • My annual Social Security taken at age 67: $27k (estimated in today's dollars)
  • My wife's annual Social Security taken at age 67: $13k (estimated in today's dollars)
Expenses
  • Current annual: $70k
  • Post retirement annual: $84k
  • Reside in a state with no state income tax
Retirement Savings: $1.3M (Allocation: Cash: 56%, Bonds: 3%, Int'l Stocks: 17%, US Stocks: 23%, Alternative: 1%)
  • 401k: $800k
  • Roth IRA: $310k
  • IRA: $220k
Non-Retirement Taxable Savings: $550k (Allocation: Cash: 68%, Bonds: 5%, Int'l Stocks: 9%, US Stocks: 17%, Alternative: 1%)

Other Assets
  • Home equity: $425k
Liabilities
  • No debt or mortgage
  • Kids college already paid for
Question: Is the 84k in annual expenses including federal taxes owed ? Or is that after-tax expenses (essentially 7k per month) ?

With your nice nest egg, you can safely pull 3.5-4.0% annually if you're 50% stocks/50% bonds. At your relatively young ages, I'd lean more to 3.5%. That means 1.85M x 0.035 = 65k. Based on this, even if the 84k expenses includes taxes, I would work longer and also get back to at least a 40/60 stock / bond mix.
An important key to investing is having a well-calibrated sense of your future regret.
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David Jay
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Re: Retirement at 53 (a little over one year from now)

Post by David Jay »

I would strongly suggest that you check out https://opensocialsecurity.com to evaluate your SS options. In almost every case, it makes sense for the higher-benefit spouse to delay until age 70 and the lower-earning spouse to claim early. This is because the benefit for the surviving spouse after the first spouse passes is the larger of the two benefits.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
desiderium
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Re: Retirement at 53 (a little over one year from now)

Post by desiderium »

Your age and current income suggests you are leaving substantial human capital on the table.

Nothing wrong with that, but predicting financial success with your current savings over the next 30-40 years involves a long string of predictions, regarding both markets and your spending needs. I would consider ways in which you might continue to generate income through part time work, consulting, or otherwise maintaining your skills so that you could make money in the future if it became desirable. Partially offsetting your spending through earnings will help the portfolio a great deal.
Outer Marker
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Re: Retirement at 53 (a little over one year from now)

Post by Outer Marker »

desiderium wrote: Sun Nov 01, 2020 11:50 am Your age and current income suggests you are leaving substantial human capital on the table.

Nothing wrong with that, but predicting financial success with your current savings over the next 30-40 years involves a long string of predictions, regarding both markets and your spending needs. I would consider ways in which you might continue to generate income through part time work, consulting, or otherwise maintaining your skills so that you could make money in the future if it became desirable. Partially offsetting your spending through earnings will help the portfolio a great deal.
+1. You probably have "enough" but not a lot of cushion, certainly by boglehead standards. A couple extra years and retiring at 55 will build considerable wealth and avoid drawing down your portfolio. I'd rather work 2 extra years at $250,000 than 20 years at $25,000 if I need to supplement my retirement income. If your job is really unpleasant or you're being forced out, that's another thing. But, I find it quite liberating to be working because I want to, not because I have to. You can take a couple of really nice spurge vacations to reward yourself along the way if you decide to work a bit longer.
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

Outer Marker wrote: Sun Nov 01, 2020 12:03 pm
desiderium wrote: Sun Nov 01, 2020 11:50 am Your age and current income suggests you are leaving substantial human capital on the table.

Nothing wrong with that, but predicting financial success with your current savings over the next 30-40 years involves a long string of predictions, regarding both markets and your spending needs. I would consider ways in which you might continue to generate income through part time work, consulting, or otherwise maintaining your skills so that you could make money in the future if it became desirable. Partially offsetting your spending through earnings will help the portfolio a great deal.
+1. You probably have "enough" but not a lot of cushion, certainly by boglehead standards. A couple extra years and retiring at 55 will build considerable wealth and avoid drawing down your portfolio. I'd rather work 2 extra years at $250,000 than 20 years at $25,000 if I need to supplement my retirement income. If your job is really unpleasant or you're being forced out, that's another thing. But, I find it quite liberating to be working because I want to, not because I have to. You can take a couple of really nice spurge vacations to reward yourself along the way if you decide to work a bit longer.
Thank you Outer Marker and desiderium. I appreciate your more conservative guidance and may end up taking that route, particularly since I do enjoy my job. At the same time, all the help I have already gotten from the Bogleheads community is helping me to create an analytical planning framework based on the more aggressive scenario I originally outlined. My thought is that after establishing the analytical framework that is taking shape, I can then explore diverging from the more aggressive time horizon as you both suggest. Many thanks for the insight!
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Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

David Jay wrote: Sat Oct 31, 2020 9:52 pm I would strongly suggest that you check out https://opensocialsecurity.com to evaluate your SS options. In almost every case, it makes sense for the higher-benefit spouse to delay until age 70 and the lower-earning spouse to claim early. This is because the benefit for the surviving spouse after the first spouse passes is the larger of the two benefits.
David Jay, thank you for this very helpful tool! Based on the tool, what you shared also applies in my case: my wife take SS at 67 and for me to do so at 70.
J295
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Re: Retirement at 53 (a little over one year from now)

Post by J295 »

Healthcare.

We are 61 and have been on the affordable care act since it was approved by the US Supreme Court. I’m thinking that was about seven years ago This past year we again managed modified adjusted gross income and paid $0 for premium said otherwise would have been $25,000.

I recognize healthcare is a moving target.

Ymmv
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geerhardusvos
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Re: Retirement at 53 (a little over one year from now)

Post by geerhardusvos »

Low Maintenance wrote: Sat Oct 31, 2020 8:50 pm
WoodSpinner wrote: Sat Oct 31, 2020 8:34 pm Op,

So why all that cash?

Do you have a target AA and perhaps a Glidepath?
Are you going to try for subsidized ACA Health Insurance?
Are their any lumpy expenses you need to plan for (e.g. weddings, new cars, big trips?)

Have you looked at how your plans will work using the Variable Portfolio Withdrawal approach?
https://www.bogleheads.org/wiki/Variabl ... withdrawal

Or the Time Value of Money approach?
https://www.bogleheads.org/blog/2019/02 ... -of-money/

I think either would be a good start since it can help you figure a proposed withdrawal plan which factors in current market conditions, longevity, and other income streams.

With more info we can give better advice.
Thanks for the guidance, including the questions. I will process your questions and also look into the resources you pointed me to. Historically, I have had an aggressive portfolio, predominantly S&P 500 tracking ETFs and mutual funds. I am so heavily weighted toward cash now because I recently liquidated many of those positions after the recovery and run-up during the pandemic. In hindsight, I should have probably determined my go-forward strategy and allocation before that liquidation and moving so heavily into cash. But as of now I'm inadvertently benefiting from the timing with the recent downturn since I sold.
I would highly recommend getting back into the market in a 60/40 or 70/30 or whatever you are comfortable with. You need to keep equities in order to give you the income you need for your long retirement. With your desired retirement expenses of over $80,000 per year, you need something more like 1.5 million or 1.8 million in the portfolio. Social Security will come through for you, but you need to either reduce that spending or work another couple years. Get that cash into the market, don’t ever liquidate again, stick with a plan, and you guys should be in good shape.
VTSAX and chill
Outer Marker
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Re: Retirement at 53 (a little over one year from now)

Post by Outer Marker »

Low Maintenance wrote: Sun Nov 01, 2020 12:16 pm ...My thought is that after establishing the analytical framework that is taking shape, I can then explore diverging from the more aggressive time horizon as you both suggest. Many thanks for the insight!
Most welcome. I would also caution against trying to develop any sort of "analytic framework" as to your asset allocation. Your recent market timing good fortune may encourge you into thinking that's a viable strategy. It's not. This could lead to much lower returns than all the predictive studies on safe withdrawl rate might indicate. Pick an asset allocation and stay with it.
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

BernardShakey wrote: Sat Oct 31, 2020 9:38 pm
Low Maintenance wrote: Sat Oct 31, 2020 7:35 pm I would like to tap into the collective wisdom and goodwill of the Bogleheads community on this subject. I appreciate any guidance you can offer about the following and anything else you think is relevant:
  • Go-forward investment allocation over time (I am heavily overweighted in Cash currently)
  • Draw-down strategy over time
  • Other suggested actions such as additional Roth conversion, etc.
  • Questioning my assumptions
  • Anything else you think I am missing including additional questions you may have

Profile
  • I am married
  • Me: Age 52; working and planning to retire at 53, maxing out 401k until that point
  • My wife: Age 54; working and planning to retire at 55, maxing out 401k until that point
Income
  • Total annual income over the next year until retirement: $260k
  • Annual stream of income after retirement: $7k annually for 8 years; $4k for subsequent 17 years
  • My annual Social Security taken at age 67: $27k (estimated in today's dollars)
  • My wife's annual Social Security taken at age 67: $13k (estimated in today's dollars)
Expenses
  • Current annual: $70k
  • Post retirement annual: $84k
  • Reside in a state with no state income tax
Retirement Savings: $1.3M (Allocation: Cash: 56%, Bonds: 3%, Int'l Stocks: 17%, US Stocks: 23%, Alternative: 1%)
  • 401k: $800k
  • Roth IRA: $310k
  • IRA: $220k
Non-Retirement Taxable Savings: $550k (Allocation: Cash: 68%, Bonds: 5%, Int'l Stocks: 9%, US Stocks: 17%, Alternative: 1%)

Other Assets
  • Home equity: $425k
Liabilities
  • No debt or mortgage
  • Kids college already paid for
Question: Is the 84k in annual expenses including federal taxes owed ? Or is that after-tax expenses (essentially 7k per month) ?

With your nice nest egg, you can safely pull 3.5-4.0% annually if you're 50% stocks/50% bonds. At your relatively young ages, I'd lean more to 3.5%. That means 1.85M x 0.035 = 65k. Based on this, even if the 84k expenses includes taxes, I would work longer and also get back to at least a 40/60 stock / bond mix.
Thanks for the probing questions and advice. The 84k in annual expense includes taxes, which I estimate as low based on 10% income tax bracket. The tools that others have shared have been helpful. Is there a similar tool that can help me to validate my annual income taxes? Thanks in advance!
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

Outer Marker wrote: Sun Nov 01, 2020 12:26 pm
Low Maintenance wrote: Sun Nov 01, 2020 12:16 pm ...My thought is that after establishing the analytical framework that is taking shape, I can then explore diverging from the more aggressive time horizon as you both suggest. Many thanks for the insight!
Most welcome. I would also caution against trying to develop any sort of "analytic framework" as to your asset allocation. Your recent market timing good fortune may encourge you into thinking that's a viable strategy. It's not. This could lead to much lower returns than all the predictive studies on safe withdrawl rate might indicate. Pick an asset allocation and stay with it.
Agreed and planning on doing that (i.e., picking an asset allocation and staying with it). Just determining the AA to go with: 60/40 (stock/bond), which has been my recent AA, or moving to 50/50. My reference to analytical framework was in reference to the tools that have been posted in this thread (e.g., VPW, PV-based Annuitized Spending, etc.). Thanks again!
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David Jay
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Re: Retirement at 53 (a little over one year from now)

Post by David Jay »

Low Maintenance wrote: Sun Nov 01, 2020 12:18 pm
David Jay wrote: Sat Oct 31, 2020 9:52 pm I would strongly suggest that you check out https://opensocialsecurity.com to evaluate your SS options. In almost every case, it makes sense for the higher-benefit spouse to delay until age 70 and the lower-earning spouse to claim early. This is because the benefit for the surviving spouse after the first spouse passes is the larger of the two benefits.
David Jay, thank you for this very helpful tool! Based on the tool, what you shared also applies in my case: my wife take SS at 67 and for me to do so at 70.
The author of that tool is a CPA and he is a Boglehead (“Oblivious Investor”).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
rkhusky
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Re: Retirement at 53 (a little over one year from now)

Post by rkhusky »

Might want to check out whether your wife’s 401k allows rule of 55 withdrawals, where you can withdraw prior to 59.5 without penalty if you retire in the year you turn 55 or later. You probably have enough in taxable to get to 59.5 but it’s nice to have an emergency backup (or it might allow you to feel more comfortable holding stocks in taxable and bonds in the 401k).
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David Jay
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Re: Retirement at 53 (a little over one year from now)

Post by David Jay »

rkhusky wrote: Sun Nov 01, 2020 7:09 pm Might want to check out whether your wife’s 401k allows rule of 55 withdrawals, where you can withdraw prior to 59.5 without penalty if you retire in the year you turn 55 or later. You probably have enough in taxable to get to 59.5 but it’s nice to have an emergency backup.
Agree, the phrase to look for in the 401k Summary Plan Description (available from HR) is if one can make “partial distributions” before age 59.5
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
rkhusky
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Re: Retirement at 53 (a little over one year from now)

Post by rkhusky »

You can also think about using a 4.5% withdrawal for 12-15 years and then move down to 2-3% after starting SS.
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Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

David Jay wrote: Sun Nov 01, 2020 7:14 pm
rkhusky wrote: Sun Nov 01, 2020 7:09 pm Might want to check out whether your wife’s 401k allows rule of 55 withdrawals, where you can withdraw prior to 59.5 without penalty if you retire in the year you turn 55 or later. You probably have enough in taxable to get to 59.5 but it’s nice to have an emergency backup.
Agree, the phrase to look for in the 401k Summary Plan Description (available from HR) is if one can make “partial distributions” before age 59.5
Thanks so much for the tip David Jay and rkhusky! Here is what I found in my wife's 401k Plan Information:

"The 10% additional income tax does not apply to the following payments from the Plan:
• Payments made after you separate from service if you will be at least age 55 in the year of the separation"
Last edited by Low Maintenance on Sun Nov 01, 2020 8:15 pm, edited 2 times in total.
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David Jay
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Re: Retirement at 53 (a little over one year from now)

Post by David Jay »

Low Maintenance wrote: Sun Nov 01, 2020 7:53 pm
David Jay wrote: Sun Nov 01, 2020 7:14 pm
rkhusky wrote: Sun Nov 01, 2020 7:09 pm Might want to check out whether your wife’s 401k allows rule of 55 withdrawals, where you can withdraw prior to 59.5 without penalty if you retire in the year you turn 55 or later. You probably have enough in taxable to get to 59.5 but it’s nice to have an emergency backup.
Agree, the phrase to look for in the 401k Summary Plan Description (available from HR) is if one can make “partial distributions” before age 59.5
Thanks so much for the tip! Here is what I found in my wife's 401k Plan Information, which seems to affirm what you were suggesting:

"The 10% additional income tax does not apply to the following payments from the Plan:
• Payments made after you separate from service if you will be at least age 55 in the year of the separation"
That’s good, you are almost there. You still need to verify that “partial distributions” are allowed after separation from service and before age 59.5 because this is the only way that the age 55 distributions are practical. If one has to withdraw the entire balance of the 401K in one year it would push one into a very high tax bracket. One needs to be able to make a partial withdrawal each year to control taxable income and minimize the tax implications.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Lalamimi
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Re: Retirement at 53 (a little over one year from now)

Post by Lalamimi »

Based on personal experience, wait a few more years. Also, I believe if wife waits until FRA to start her SS, when you reach FRA and start drawing, she will be able to switch to 1/2 of your amount.
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Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

David Jay wrote: Sun Nov 01, 2020 8:05 pm
Low Maintenance wrote: Sun Nov 01, 2020 7:53 pm
David Jay wrote: Sun Nov 01, 2020 7:14 pm
rkhusky wrote: Sun Nov 01, 2020 7:09 pm Might want to check out whether your wife’s 401k allows rule of 55 withdrawals, where you can withdraw prior to 59.5 without penalty if you retire in the year you turn 55 or later. You probably have enough in taxable to get to 59.5 but it’s nice to have an emergency backup.
Agree, the phrase to look for in the 401k Summary Plan Description (available from HR) is if one can make “partial distributions” before age 59.5
Thanks so much for the tip! Here is what I found in my wife's 401k Plan Information, which seems to affirm what you were suggesting:

"The 10% additional income tax does not apply to the following payments from the Plan:
• Payments made after you separate from service if you will be at least age 55 in the year of the separation"
That’s good, you are almost there. You still need to verify that “partial distributions” are allowed after separation from service and before age 59.5 because this is the only way that the age 55 distributions are practical. If one has to withdraw the entire balance of the 401K in one year it would push one into a very high tax bracket. One needs to be able to make a partial withdrawal each year to control taxable income and minimize the tax implications.
David Jay, after some more digging in my wife's 401k Plan Information, I found the following within a section titled "Termination and distribution before Normal Retirement Age (or age 62 if later)":

"If you terminate employment and will receive a distribution before the later of age 62 and Normal Retirement Age and your vested account
balance exceeds $5,000, you may elect to receive a distribution of your vested account balance in:
• a single lump-sum payment in cash
installments over a period of not more than your assumed life expectancy (or the assumed life expectancies of you and your
beneficiary)"


Does the above confirm what you were suggesting, or is more follow up needed on my part? Thanks much!
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

With regard to my go-forward asset allocation, I am leaning toward 60/40 (stocks/bond) using a three-fund portfolio
(https://www.bogleheads.org/wiki/Three-f ... d.27s_tool) with the following Fidelity flavors:
  • Fidelity Total Market Index Fund (FSKAX)
  • Fidelity Total International Index Fund (FTIHX)
  • Fidelity U. S. Bond Index Fund (FXNAX)
I welcome any input about the above based on what I am trying to achieve.

Also, what guidance can you provide in terms of which of the above funds make best sense to concentrate in which of the below account types from a tax (or any other) standpoint that I should consider?
  • IRA
  • Roth IRA
  • 401k
  • Non-Retirement, Taxable Account
Thanks much!
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

Lalamimi wrote: Sun Nov 01, 2020 8:21 pm Based on personal experience, wait a few more years. Also, I believe if wife waits until FRA to start her SS, when you reach FRA and start drawing, she will be able to switch to 1/2 of your amount.
Lalamimi, regarding your suggestion about my wife waiting until FRA to start here SS, I used the https://opensocialsecurity.com tool recommended by David Jay. After inputting my data and my wife's data, the tool recommended that my wife file for her SS benefit at age 65 and 9 months, I file for my SS benefit at age 70, and my wife file for her spousal benefit at 72 and 8 months. However, my wife's spousal benefit is nowhere near 1/2 of my amount. Am I missing something?
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David Jay
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Re: Retirement at 53 (a little over one year from now)

Post by David Jay »

Low Maintenance wrote: Sun Nov 01, 2020 8:37 pm
David Jay wrote: Sun Nov 01, 2020 8:05 pm
Low Maintenance wrote: Sun Nov 01, 2020 7:53 pm
David Jay wrote: Sun Nov 01, 2020 7:14 pm
rkhusky wrote: Sun Nov 01, 2020 7:09 pm Might want to check out whether your wife’s 401k allows rule of 55 withdrawals, where you can withdraw prior to 59.5 without penalty if you retire in the year you turn 55 or later. You probably have enough in taxable to get to 59.5 but it’s nice to have an emergency backup.
Agree, the phrase to look for in the 401k Summary Plan Description (available from HR) is if one can make “partial distributions” before age 59.5
Thanks so much for the tip! Here is what I found in my wife's 401k Plan Information, which seems to affirm what you were suggesting:

"The 10% additional income tax does not apply to the following payments from the Plan:
• Payments made after you separate from service if you will be at least age 55 in the year of the separation"
That’s good, you are almost there. You still need to verify that “partial distributions” are allowed after separation from service and before age 59.5 because this is the only way that the age 55 distributions are practical. If one has to withdraw the entire balance of the 401K in one year it would push one into a very high tax bracket. One needs to be able to make a partial withdrawal each year to control taxable income and minimize the tax implications.
David Jay, after some more digging in my wife's 401k Plan Information, I found the following within a section titled "Termination and distribution before Normal Retirement Age (or age 62 if later)":

"If you terminate employment and will receive a distribution before the later of age 62 and Normal Retirement Age and your vested account
balance exceeds $5,000, you may elect to receive a distribution of your vested account balance in:
• a single lump-sum payment in cash
installments over a period of not more than your assumed life expectancy (or the assumed life expectancies of you and your
beneficiary)"


Does the above confirm what you were suggesting, or is more follow up needed on my part? Thanks much!
That’s less than ideal. It can be made to work. I would have your spouse ask if one can select installments for a specific period and then rollover the remaining funds to an IRA. I suspect that they cannot prevent you from doing this under ERISA rules. In that way, you could set up a period that gives you, say, (for illustration) $40,000 a year beginning at age 55 and then do a rollover when you no longer want the distribution (Perhaps when your spouse starts SS).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

David Jay wrote: Sun Nov 01, 2020 9:32 pm
Low Maintenance wrote: Sun Nov 01, 2020 8:37 pm
David Jay wrote: Sun Nov 01, 2020 8:05 pm
Low Maintenance wrote: Sun Nov 01, 2020 7:53 pm
David Jay wrote: Sun Nov 01, 2020 7:14 pm
Agree, the phrase to look for in the 401k Summary Plan Description (available from HR) is if one can make “partial distributions” before age 59.5
Thanks so much for the tip! Here is what I found in my wife's 401k Plan Information, which seems to affirm what you were suggesting:

"The 10% additional income tax does not apply to the following payments from the Plan:
• Payments made after you separate from service if you will be at least age 55 in the year of the separation"
That’s good, you are almost there. You still need to verify that “partial distributions” are allowed after separation from service and before age 59.5 because this is the only way that the age 55 distributions are practical. If one has to withdraw the entire balance of the 401K in one year it would push one into a very high tax bracket. One needs to be able to make a partial withdrawal each year to control taxable income and minimize the tax implications.
David Jay, after some more digging in my wife's 401k Plan Information, I found the following within a section titled "Termination and distribution before Normal Retirement Age (or age 62 if later)":

"If you terminate employment and will receive a distribution before the later of age 62 and Normal Retirement Age and your vested account
balance exceeds $5,000, you may elect to receive a distribution of your vested account balance in:
• a single lump-sum payment in cash
installments over a period of not more than your assumed life expectancy (or the assumed life expectancies of you and your
beneficiary)"


Does the above confirm what you were suggesting, or is more follow up needed on my part? Thanks much!
That’s less than ideal. It can be made to work. I would have your spouse ask if one can select installments for a specific period and then rollover the remaining funds to an IRA. I suspect that they cannot prevent you from doing this under ERISA rules. In that way, you could set up a period that gives you, say, (for illustration) $40,000 a year beginning at age 55 and then do a rollover when you no longer want the distribution (Perhaps when your spouse starts SS).
Understood and will do. Thanks again!
Boatguy
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Re: Retirement at 53 (a little over one year from now)

Post by Boatguy »

Regarding your wife’s spousal SS benefit being well less than 50% of your age 70 benefit, her spousal benefit is based upon your benefit at your FRA, and not the benefit amount earned at age 70.
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Re: Retirement at 53 (a little over one year from now)

Post by RyeBourbon »

Low Maintenance wrote: Sun Nov 01, 2020 9:28 pm
Lalamimi wrote: Sun Nov 01, 2020 8:21 pm Based on personal experience, wait a few more years. Also, I believe if wife waits until FRA to start her SS, when you reach FRA and start drawing, she will be able to switch to 1/2 of your amount.
Lalamimi, regarding your suggestion about my wife waiting until FRA to start here SS, I used the https://opensocialsecurity.com tool recommended by David Jay. After inputting my data and my wife's data, the tool recommended that my wife file for her SS benefit at age 65 and 9 months, I file for my SS benefit at age 70, and my wife file for her spousal benefit at 72 and 8 months. However, my wife's spousal benefit is nowhere near 1/2 of my amount. Am I missing something?
This is the way I understand it.

She will still get her benefit and her spousal benefit will be the difference between half of your benefit at FRA and the benefit she is receiving. That's if she starts her benefit at her FRA. If she starts earlier, the amount will be somewhat reduced.
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

RyeBourbon wrote: Sun Nov 01, 2020 10:12 pm
Low Maintenance wrote: Sun Nov 01, 2020 9:28 pm
Lalamimi wrote: Sun Nov 01, 2020 8:21 pm Based on personal experience, wait a few more years. Also, I believe if wife waits until FRA to start her SS, when you reach FRA and start drawing, she will be able to switch to 1/2 of your amount.
Lalamimi, regarding your suggestion about my wife waiting until FRA to start here SS, I used the https://opensocialsecurity.com tool recommended by David Jay. After inputting my data and my wife's data, the tool recommended that my wife file for her SS benefit at age 65 and 9 months, I file for my SS benefit at age 70, and my wife file for her spousal benefit at 72 and 8 months. However, my wife's spousal benefit is nowhere near 1/2 of my amount. Am I missing something?
This is the way I understand it.

She will still get her benefit and her spousal benefit will be the difference between half of your benefit at FRA and the benefit she is receiving. That's if she starts her benefit at her FRA. If she starts earlier, the amount will be somewhat reduced.
Understood. Thanks for clarifying!
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

I'm reposting the below as it may have been lost in the above thread.

With regard to my go-forward asset allocation, I am leaning toward 60/40 (stocks/bond) using a three-fund portfolio
(https://www.bogleheads.org/wiki/Three-f ... d.27s_tool) with the following Fidelity flavors:
  • Fidelity Total Market Index Fund (FSKAX)
  • Fidelity Total International Index Fund (FTIHX)
  • Fidelity U. S. Bond Index Fund (FXNAX)
I welcome any input about the above based on what I am trying to achieve.

Also, what guidance can you provide in terms of which of the above funds make best sense to concentrate in which of the below account types from a tax (or any other) standpoint that I should consider?
  • IRA
  • Roth IRA
  • 401k
  • Non-Retirement, Taxable Account
Thanks much!
Outer Marker
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Re: Retirement at 53 (a little over one year from now)

Post by Outer Marker »

How did you arrive at your 60/40 asset allocation? Its a reasonable choice, but do some serious soul searching on how you arrived at it. It is far and away the single most investment decision you will make. Have you taken the Vanguard quiz? It's a useful little tool that incidentally returned exactly my own chosen allocation derived from many years of investing. Would be curious what it predicts for you . . .? https://personal.vanguard.com/us/FundsInvQuestionnaire

This is a useful illustration of what to expect for the various AA choices. https://personal.vanguard.com/us/insigh ... llocations

The Fidelity Fund choices are just fine. As you probably know, it is not necessary to have each asset class in each account - they should be optimized across all accounts based on what is availalbe in your employer plans as far as low cost index options, and effecient tax placement as described in the wiki. https://www.bogleheads.org/wiki/Tax-eff ... _placement
bb
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Re: Retirement at 53 (a little over one year from now)

Post by bb »

If the 401k plan does not allow flexibility then just roll it over and do
ROTH conversions. Not sure why that wasn't already mentioned.
Outer Marker
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Re: Retirement at 53 (a little over one year from now)

Post by Outer Marker »

bb wrote: Sun Nov 01, 2020 11:29 pm If the 401k plan does not allow flexibility then just roll it over and do
ROTH conversions. Not sure why that wasn't already mentioned.
OP will be working for more than a year; perhaps longer. That is not an option right now.
The Stone Wall
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Re: Retirement at 53 (a little over one year from now)

Post by The Stone Wall »

You must have a lot of zeros or low income years in your SS estimate. Working a year or two more would not only add to you retirement accounts, it might significantly add to your SS amounts.
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

The Stone Wall wrote: Mon Nov 02, 2020 11:44 am You must have a lot of zeros or low income years in your SS estimate. Working a year or two more would not only add to you retirement accounts, it might significantly add to your SS amounts.
My wires got crossed earlier. I understood something different than what was being said. Please ignore my earlier statement. Thanks!
Topic Author
Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

Outer Marker wrote: Sun Nov 01, 2020 11:07 pm How did you arrive at your 60/40 asset allocation? Its a reasonable choice, but do some serious soul searching on how you arrived at it. It is far and away the single most investment decision you will make. Have you taken the Vanguard quiz? It's a useful little tool that incidentally returned exactly my own chosen allocation derived from many years of investing. Would be curious what it predicts for you . . .? https://personal.vanguard.com/us/FundsInvQuestionnaire

This is a useful illustration of what to expect for the various AA choices. https://personal.vanguard.com/us/insigh ... llocations

The Fidelity Fund choices are just fine. As you probably know, it is not necessary to have each asset class in each account - they should be optimized across all accounts based on what is availalbe in your employer plans as far as low cost index options, and effecient tax placement as described in the wiki. https://www.bogleheads.org/wiki/Tax-eff ... _placement
Historically I have held asset allocations weighted toward stocks (early on 90/10 and over time tapering downward to 70/30). I took the Vanguard quiz over the weekend. It recommended 60/40.

Outer Market, thanks for the wiki link re: tax-efficient fund placement!

Based on where I am at, what guidance can you provide for how much cash on hand I should be keeping?
Lalamimi
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Re: Retirement at 53 (a little over one year from now)

Post by Lalamimi »

Low Maintenance wrote: Sun Nov 01, 2020 9:28 pm
Lalamimi wrote: Sun Nov 01, 2020 8:21 pm Based on personal experience, wait a few more years. Also, I believe if wife waits until FRA to start her SS, when you reach FRA and start drawing, she will be able to switch to 1/2 of your amount.
Lalamimi, regarding your suggestion about my wife waiting until FRA to start here SS, I used the https://opensocialsecurity.com tool recommended by David Jay. After inputting my data and my wife's data, the tool recommended that my wife file for her SS benefit at age 65 and 9 months, I file for my SS benefit at age 70, and my wife file for her spousal benefit at 72 and 8 months. However, my wife's spousal benefit is nowhere near 1/2 of my amount. Am I missing something?
From what I have read (boning up for my brother to do what I suggested), the first spouse has to wait until her FRA in order to get 1/2 of your FRA amount once you file, after reaching FRA. By not waiting it decreases both her amount and her share of yours. I squeaked in to draw spousal (Dec 1953 birthday) and my DH started drawing same time last Dec at 68. I get 1/2 of his FRA amount, not of what he draws by waiting 2 yrs. Mine gets to grow until I hit 70. Its confusing. Just keep it in mind as you get ready to draw.
CRTR
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Re: Retirement at 53 (a little over one year from now)

Post by CRTR »

jeffreys wrote: Sat Oct 31, 2020 8:01 pm We're in a similar place to you: viewtopic.php?f=1&t=328541

I'm curious what your additional expenses in retirement will be -- $70k to $84k. I didn't consider that in our analysis and we'll probably have a similar increase for health insurance and travel. Is that what you anticipate or something different we should take into consideration?
speaking from experience here . . . .my expenses jumped ~30% when I retired. Was traveling a lot more, new fly fishing gear/fishing more, going out to coffee/lunch/dinner more, lost my group health insurance discount, doing all those house and landscaping projects I've put off for years, etc etc etc. lol, I'm freakin busy!!! Obviously, the overhead will decrease over the next few years. I read a lot on the subject (Blanchett, Bernicke, JP Morgan, etc) and, supposedly, my experience is fairly common.
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Re: Retirement at 53 (a little over one year from now)

Post by Outer Marker »

Low Maintenance wrote: Mon Nov 02, 2020 7:51 pm Historically I have held asset allocations weighted toward stocks (early on 90/10 and over time tapering downward to 70/30). I took the Vanguard quiz over the weekend. It recommended 60/40.

Outer Market, thanks for the wiki link re: tax-efficient fund placement!

Based on where I am at, what guidance can you provide for how much cash on hand I should be keeping?
I plan on working another 10 years, and am 70/30. I keep 2 years worth of expenses in cash, not as a separate emergency fund, but as part of fixed income. I plan to maintain that same profile into retirement and beyond.

There is another thread out there on various cash and fixed income "buckets". Too complicated for me. If I just have 2 years cash on hand as part of fixed income, I can outlast most short term recessions and spend down cash during bad years to keep things more or less in balance.
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Low Maintenance
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Re: Retirement at 53 (a little over one year from now)

Post by Low Maintenance »

jeffreys wrote: Sat Oct 31, 2020 8:01 pm We're in a similar place to you: viewtopic.php?f=1&t=328541

I'm curious what your additional expenses in retirement will be -- $70k to $84k. I didn't consider that in our analysis and we'll probably have a similar increase for health insurance and travel. Is that what you anticipate or something different we should take into consideration?
jeffreys, thank you for sharing the link to the discussion about your situation. In that threaded discussion, you mention the possibility of Roth conversion in your case. Are you able to point me to any resources that assist in determining based on scenario inputs whether or not Roth conversion will pay off? Thanks in advance!
jeffreys
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Re: Retirement at 53 (a little over one year from now)

Post by jeffreys »

Low Maintenance wrote: Wed Nov 11, 2020 9:45 am
jeffreys wrote: Sat Oct 31, 2020 8:01 pm We're in a similar place to you: viewtopic.php?f=1&t=328541

I'm curious what your additional expenses in retirement will be -- $70k to $84k. I didn't consider that in our analysis and we'll probably have a similar increase for health insurance and travel. Is that what you anticipate or something different we should take into consideration?
jeffreys, thank you for sharing the link to the discussion about your situation. In that threaded discussion, you mention the possibility of Roth conversion in your case. Are you able to point me to any resources that assist in determining based on scenario inputs whether or not Roth conversion will pay off? Thanks in advance!
Other Boglheads have recommended I-ORP: https://www.i-orp.com/GlidPath/extended.html I've run my numbers through this tool, but admittedly, I've had difficulty interpreting the results. Fortunately, someone in our local Bogleheads group who has a better understanding of is going to do a demo of it when we have our next Zoom meeting.
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WoodSpinner
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Re: Retirement at 53 (a little over one year from now)

Post by WoodSpinner »

OP,

A good starting point is the WIKI, https://www.bogleheads.org/wiki/Roth_IRA_conversion

Happy to answer questions as they come up.

WoodSpinner
vas
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Re: Retirement at 53 (a little over one year from now)

Post by vas »

Low Maintenance wrote: Sat Oct 31, 2020 7:35 pm
  • Questioning my assumptions
I question your assumptions about risk. Are you planning a full stop retirement or moving on to a second career of some type? Ideas like 25x and 4% withdrawal rate get tossed about quite a bit but I'd recommend caution about applying these metrics to your personnel situation. Suppose the next ten years look more like the seventies than the nineties. Can you enjoy lounging on the cruse ship deck while the market drops and inflation eats up your little all? Imagine interviewing for a job at sixty and trying to spin skills as fresh as COBAL programming to a thirty year old with pink hair that thinks three times your speed and works twice the hours.
There is nothing you can't prove if your outlook is sufficiently limited
gneeby
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Re: Retirement at 53 (a little over one year from now)

Post by gneeby »

jeffreys wrote: Wed Nov 11, 2020 11:11 am
Other Boglheads have recommended I-ORP: https://www.i-orp.com/GlidPath/extended.html I've run my numbers through this tool, but admittedly, I've had difficulty interpreting the results. Fortunately, someone in our local Bogleheads group who has a better understanding of is going to do a demo of it when we have our next Zoom meeting.
The ORP web site encourages users with questions about interpreting ORP's results to send in their questions. Don't be shy.
`
jeffreys
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Re: Retirement at 53 (a little over one year from now)

Post by jeffreys »

gneeby wrote: Wed Nov 18, 2020 7:50 pm
jeffreys wrote: Wed Nov 11, 2020 11:11 am
Other Boglheads have recommended I-ORP: https://www.i-orp.com/GlidPath/extended.html I've run my numbers through this tool, but admittedly, I've had difficulty interpreting the results. Fortunately, someone in our local Bogleheads group who has a better understanding of is going to do a demo of it when we have our next Zoom meeting.
The ORP web site encourages users with questions about interpreting ORP's results to send in their questions. Don't be shy.
`
We had a good Boglehead meetup over Zoom and after staying up late Saturday night playing with it, we were able to wrap our head around it and have made some plans for retirement. I'll probably update the discussion on our goal to retire early (viewtopic.php?f=1&t=328541) when our numbers have a significant change and/or we cement our retirement plans further.
visualguy
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Re: Retirement at 53 (a little over one year from now)

Post by visualguy »

vas wrote: Wed Nov 11, 2020 12:28 pm Imagine interviewing for a job at sixty and trying to spin skills as fresh as COBAL programming to a thirty year old with pink hair that thinks three times your speed and works twice the hours.
This is no joke. I'm only in my 50s, not 60s and not spinning COBOL skills. I had interviews with a couple of companies recently. In the first one, about half the people who interviewed me were around the same age as my kids, and in the second one all of them were around that age. I did get offers from both, but it was a bit shocking to realize how much older I am now than people who are likely to interview me.

I think I got lucky because they actually wanted to balance the team a bit more with experienced people, and I look/act younger than my age, or (more likely...) there's such a shortage of candidates that they're ok now with old geezers like me if qualified. Anyway, there's no way I'd put myself in a situation where I HAVE to get a job in my 60s. Ideally you don't want to be in that situation in your 50s either if you're in tech, and many other careers.
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