Retiring Soonish — Would love a portfolio review (please)!

[Wisco22]

Hi Everyone,

I think I’ve decided to pull the trigger on retirement in 2.5 years when I’m 61. Would love to get any thoughts on how I’m positioned for that and if I’ve missed anything I should be thinking about.

I’m currently in higher education in a tenured position with an annual income of about $190k. DW just retired from a teaching position and brings in $16k/year from her teacher retirement. At retirement my state pension will generate approximately $98,000/year, so our combined pension income would be $114,000/year. The pensions don’t have a cola, but are adjusted annually based on market returns (Wisconsin Retirement System). They can go up, but will never drop below what they start at.

Projected expenses look like $100,000/year (including taxes and sinking funds for lumpy expenses). Just bought a new SUV so that’s covered for a while.

Health insurance costs are covered by a state benefit that will fully cover the family premium until I’m around 75.

Plan to have DW take social security when she turns 62 (projected at $1,350/mos) and I’ll start at 70 (projected at $4,000/mos). These amounts take into account stopping work at 61 and wife stopping this past spring.

_______________________________________________________________

Emergency funds: Nothing specific. Would use cash reserves if needed.

Debt: None.
Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal, 5.3% State
State of Residence: WI

Age: 59
Wife: 57

Desired Asset allocation: 80% stocks / 20% bonds (? not quite sure about this)
Desired International allocation: 15% of stocks

Approximate size of total portfolio: 1.04 m

Current retirement assets
Taxable
11% cash - Vanguard Money Market (VMFXX)
10% Vanguard Total Stock (VTSAX)

His 403b
5.5% Fidelity Institutional Index (VINIX) (0.035%)
1.5% Roth—Fidelity Institutional Index (VINIX) (0.035%)
9% Fidelity Total International Stock Index (VTSNX) (0.08%)
10% Vanguard Total Bond Mkt Index (VBTIX) (0.035%)
No company match

His Roth IRA at Vanguard
14% Vanguard Total Stock (VTSAX)

His Inherited IRA at Vanguard
(old rules, don’t need to empty in 10 years - just taking RMDs and moving into taxable VTSAX)
9% Vanguard Total Stock (VTSAX)

His HSA at Optum
3% Schwab S&P 500 Index (SWPPX) (0.02%)

Her 403b
15% Fidelity Total Mkt Index (FSKAX) (0.015%)
No company match

Her Roth IRA at Vanguard
9% Vanguard Total Stock (VTSAX)

Her Inherited Roth IRA at Fidelity
3% Fidelity Total Mkt Index (FSKAX)
_______________________________________________________________

Contributions
New annual Contributions (for another 2.5 years)
$30,000 (or whatever the max is) his 403b Roth
$7,500 his Roth IRA
$7,500 her Roth IRA
and about $20k each year into taxable VMFXX
_______________________________________________________________

Questions:
I feel like we’re pretty well set in terms of pension income covering expenses in retirement. The main concern I have is leaving an inheritance to our two daughters (and/or helping them get established as they get their lives underway). Along those lines, not sure if it makes more sense to continue 403b Roth contributions for the last 2.5 years or to switch back to tax-deferred contributions. It looks to me like I’ll be in the 22% tax bracket now and in the future, which is why I went with Roth there. I suppose it doesn’t really matter (but happy to be corrected on that).

Also, any suggestions for the investment allocations would be appreciated. Are there things I’m not seeing? Could it be more efficient?

What else should I be doing? Any and all help very much appreciated !

[bloom2708]

I would mull over if you need (want) to be 80/20 with your pensions and SS.

You both don't need to take that risk and can take it. Higher rates maybe make it so you can lock in nice returns with less risk.

I would also consider not working the full 2.5 more years depending on how that affects the pension.

[MrCheapo]

We are in the same job (academic) and situation (pension covers expenses) but different states (I'm in CA).

PM me if you want to ask more questions. I've researched retiring to death because as we both know it's just about impossible to re-enter the market as a tenured professor once you've retired.

Firstly, do a very detailed expense estimation. This is a critical first step and really drives everything. I broke mine down into mandatory expenses (i.e. taxes, medical, utilities) all those things you must pay and discretionary expenses (i.e. entertainment, travel etc.). I based mandatory expenses on my last 24 months of expenditure I didn't guestimate. For me these came out together to be $98K which was more than I had thought by quite a bit. My wife and I's pensions are $110K which are COLA adjusted with full rights of survivorship.

After doing the above, I realized I'm really investing for my heirs and perhaps long term care if needed (I'm self insuring). Hence I am transitioning into a 100% equity (80% domestic 20% international) asset allocation.

One tool I used was to break my retired life into 3 parts: i) retirement to SS (67 for me), ii) 67 to 75 (RMD age) and iii) RMD - Death. That was an eye opener as I saw that unless I drew down on my tax deferred accounts I'd be paying huge RMDs pushing me into the 32% tax bracket. See viewtopic.php?p=7546239#p7546239 for details if interested.

Best of luck.

Hi Everyone,

I think I’ve decided to pull the trigger on retirement in 2.5 years when I’m 61. Would love to get any thoughts on how I’m positioned for that and if I’ve missed anything I should be thinking about.

I’m currently in higher education in a tenured position with an annual income of about $190k. DW just retired from a teaching position and brings in $16k/year from her teacher retirement. At retirement my state pension will generate approximately $98,000/year, so our combined pension income would be $114,000/year. The pensions don’t have a cola, but are adjusted annually based on market returns (Wisconsin Retirement System). They can go up, but will never drop below what they start at.

Projected expenses look like $100,000/year (including taxes and sinking funds for lumpy expenses). Just bought a new SUV so that’s covered for a while.

Health insurance costs are covered by a state benefit that will fully cover the family premium until I’m around 75.

Plan to have DW take social security when she turns 62 (projected at $1,350/mos) and I’ll start at 70 (projected at $4,000/mos). These amounts take into account stopping work at 61 and wife stopping this past spring.

_______________________________________________________________

Emergency funds: Nothing specific. Would use cash reserves if needed.

Debt: None.
Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal, 5.3% State
State of Residence: WI

Age: 59
Wife: 57

Desired Asset allocation: 80% stocks / 20% bonds (? not quite sure about this)
Desired International allocation: 15% of stocks

Approximate size of total portfolio: 1.04 m

Current retirement assets
Taxable
11% cash - Vanguard Money Market (VMFXX)
10% Vanguard Total Stock (VTSAX)

His 403b
5.5% Fidelity Institutional Index (VINIX) (0.035%)
1.5% Roth—Fidelity Institutional Index (VINIX) (0.035%)
9% Fidelity Total International Stock Index (VTSNX) (0.08%)
10% Vanguard Total Bond Mkt Index (VBTIX) (0.035%)
No company match

His Roth IRA at Vanguard
14% Vanguard Total Stock (VTSAX)

His Inherited IRA at Vanguard
(old rules, don’t need to empty in 10 years - just taking RMDs and moving into taxable VTSAX)
9% Vanguard Total Stock (VTSAX)

His HSA at Optum
3% Schwab S&P 500 Index (SWPPX) (0.02%)

Her 403b
15% Fidelity Total Mkt Index (FSKAX) (0.015%)
No company match

Her Roth IRA at Vanguard
9% Vanguard Total Stock (VTSAX)

Her Inherited Roth IRA at Fidelity
3% Fidelity Total Mkt Index (FSKAX)
_______________________________________________________________

Contributions
New annual Contributions (for another 2.5 years)
$30,000 (or whatever the max is) his 403b Roth
$7,500 his Roth IRA
$7,500 her Roth IRA
and about $20k each year into taxable VMFXX
_______________________________________________________________

Questions:
I feel like we’re pretty well set in terms of pension income covering expenses in retirement. The main concern I have is leaving an inheritance to our two daughters (and/or helping them get established as they get their lives underway). Along those lines, not sure if it makes more sense to continue 403b Roth contributions for the last 2.5 years or to switch back to tax-deferred contributions. It looks to me like I’ll be in the 22% tax bracket now and in the future, which is why I went with Roth there. I suppose it doesn’t really matter (but happy to be corrected on that).

Also, any suggestions for the investment allocations would be appreciated. Are there things I’m not seeing? Could it be more efficient?

What else should I be doing? Any and all help very much appreciated !

[gavinsiu]

Looks pretty good. Are you going to even withdraw from your portfolio or you are just sticking with 80/20 so you have more money for your heir?

[delamer]

If inheritance is a principal goal, you can’t really go wrong with a Roth.

The only “but” is that you don’t really know what tax rates will be like over the course of your retirement.

[Watty]

What is your housing situation and the details? (Rent, mortgage, paid off?)

Will the survivor get 100% of the pensions if either of you survives the other?

It looks to me like I’ll be in the 22% tax bracket now and in the future.....

It is a lot more complicated than that because;

1) The federal tax brackets are scheduled to revert to the old higher tax brackets in 2026.

2) If one of you survives the other they will be filing tax returns in the higher single tax brackets.

3) The way Social Security is taxed is complex and can result in you being in a higher effective tax bracket.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

4) You could hit the IRMAA tax income level.

[er999]

Since your pension will cover your living expenses seems like your ~ 1 million portfolio will be backup in case your somewhat inflation adjusted pension doesn’t keep up with inflation, for unexpected expenses such as long term care, or perhaps for lumpy expenses like car purchases but most likely will be used for an inheritance.

In that case a stock heavy portfolio is appropriate. I’d just make sure the pension will continue to cover your expenses — it is a joint pension that will continue to pay out to your wife even if you die first? As another poster mentioned do you already own your housing so you don’t have to worry about rent increases? How secure is the pension? I don’t know much about Wisconsin politics (and not allowed to debate per forum rules) but what has made the national news from Wisconsin would make me hesitate about depending on a government program there.

If there’s a possibility your pension might not be secure and you’d have to withdrawal from your portfolio regularly, you could consider higher bonds. Vanguard 2025 target date retirement fund is 47% fixed income to give you an estimate of what experts suggest for your age.

However, your pension likely has a cash value of 1-1.5 million (haven’t done the calculation) so in a sense you are already >50% fixed income now.

[lifebeckonss]

Is your pension of $98K/year (or the state benefit that covers your health insurance) contingent upon you working for the next 2.5 years?

If not, I feel you can retire today.

[Wisco22]

We are in the same job (academic) and situation (pension covers expenses) but different states (I'm in CA).

PM me if you want to ask more questions. I've researched retiring to death because as we both know it's just about impossible to re-enter the market as a tenured professor once you've retired.

Firstly, do a very detailed expense estimation. This is a critical first step and really drives everything. I broke mine down into mandatory expenses (i.e. taxes, medical, utilities) all those things you must pay and discretionary expenses (i.e. entertainment, travel etc.). I based mandatory expenses on my last 24 months of expenditure I didn't guestimate. For me these came out together to be $98K which was more than I had thought by quite a bit. My wife and I's pensions are $110K which are COLA adjusted with full rights of survivorship.

After doing the above, I realized I'm really investing for my heirs and perhaps long term care if needed (I'm self insuring). Hence I am transitioning into a 100% equity (80% domestic 20% international) asset allocation.

One tool I used was to break my retired life into 3 parts: i) retirement to SS (67 for me), ii) 67 to 75 (RMD age) and iii) RMD - Death. That was an eye opener as I saw that unless I drew down on my tax deferred accounts I'd be paying huge RMDs pushing me into the 32% tax bracket. See viewtopic.php?p=7546239#p7546239 for details if interested.

Best of luck.

Hi Everyone,

I think I’ve decided to pull the trigger on retirement in 2.5 years when I’m 61. Would love to get any thoughts on how I’m positioned for that and if I’ve missed anything I should be thinking about.

I’m currently in higher education in a tenured position with an annual income of about $190k. DW just retired from a teaching position and brings in $16k/year from her teacher retirement. At retirement my state pension will generate approximately $98,000/year, so our combined pension income would be $114,000/year. The pensions don’t have a cola, but are adjusted annually based on market returns (Wisconsin Retirement System). They can go up, but will never drop below what they start at.

Projected expenses look like $100,000/year (including taxes and sinking funds for lumpy expenses). Just bought a new SUV so that’s covered for a while.

Health insurance costs are covered by a state benefit that will fully cover the family premium until I’m around 75.

Plan to have DW take social security when she turns 62 (projected at $1,350/mos) and I’ll start at 70 (projected at $4,000/mos). These amounts take into account stopping work at 61 and wife stopping this past spring.

_______________________________________________________________

Emergency funds: Nothing specific. Would use cash reserves if needed.

Debt: None.
Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal, 5.3% State
State of Residence: WI

Age: 59
Wife: 57

Desired Asset allocation: 80% stocks / 20% bonds (? not quite sure about this)
Desired International allocation: 15% of stocks

Approximate size of total portfolio: 1.04 m

Current retirement assets
Taxable
11% cash - Vanguard Money Market (VMFXX)
10% Vanguard Total Stock (VTSAX)

His 403b
5.5% Fidelity Institutional Index (VINIX) (0.035%)
1.5% Roth—Fidelity Institutional Index (VINIX) (0.035%)
9% Fidelity Total International Stock Index (VTSNX) (0.08%)
10% Vanguard Total Bond Mkt Index (VBTIX) (0.035%)
No company match

His Roth IRA at Vanguard
14% Vanguard Total Stock (VTSAX)

His Inherited IRA at Vanguard
(old rules, don’t need to empty in 10 years - just taking RMDs and moving into taxable VTSAX)
9% Vanguard Total Stock (VTSAX)

His HSA at Optum
3% Schwab S&P 500 Index (SWPPX) (0.02%)

Her 403b
15% Fidelity Total Mkt Index (FSKAX) (0.015%)
No company match

Her Roth IRA at Vanguard
9% Vanguard Total Stock (VTSAX)

Her Inherited Roth IRA at Fidelity
3% Fidelity Total Mkt Index (FSKAX)
_______________________________________________________________

Contributions
New annual Contributions (for another 2.5 years)
$30,000 (or whatever the max is) his 403b Roth
$7,500 his Roth IRA
$7,500 her Roth IRA
and about $20k each year into taxable VMFXX
_______________________________________________________________

Questions:
I feel like we’re pretty well set in terms of pension income covering expenses in retirement. The main concern I have is leaving an inheritance to our two daughters (and/or helping them get established as they get their lives underway). Along those lines, not sure if it makes more sense to continue 403b Roth contributions for the last 2.5 years or to switch back to tax-deferred contributions. It looks to me like I’ll be in the 22% tax bracket now and in the future, which is why I went with Roth there. I suppose it doesn’t really matter (but happy to be corrected on that).

Also, any suggestions for the investment allocations would be appreciated. Are there things I’m not seeing? Could it be more efficient?

What else should I be doing? Any and all help very much appreciated !

Great advice about the expenses. I think I have a pretty good handle on them (with fixed versus discretionary, etc.). Will need to think about the tax-deferred and possible RMD consequences. Thanks!

[Wisco22]

Thanks everyone for all the comments and suggestions. In answer to some of the questions, we own our house outright. So no mortgage to worry about, which gives us a fixed expense for that (just maintenance and property taxes). Honestly, that's a decision we made a few years back (not to upgrade to a larger house when income increased) that's made all the difference. Nothing for us is as affordable as staying put where we are--would be hard pressed to even rent an apartment for what we're paying now.

As for the pensions, my DW's is set not to continue at all when she passes. For mine, I'm thinking of going with a 75% to survivor when I pass. Essentially this would mean we each take a small hit when either of us goes, but not too bad, and by the time that happens, we'd hopefully be into our social security years (even if reduced to 80%).

The pension itself is one of the most well-funded in the country. And, while you can never count on anything, *should* be untouchable. If it made it through the earlier political turmoil in the state, I think there's a good bet it will continue.

[Wisco22]

Is your pension of $98K/year (or the state benefit that covers your health insurance) contingent upon you working for the next 2.5 years?

If not, I feel you can retire today.

While it would be nice to retire today, I do need the last couple of years of high salary to get to my number. The pension payout is determined by the three highest years of pay, so would be nice to get those. Health insurance payout is there either way.

[dbr]

At your age and guessing the ages of your daughters, it is possible that it will be so long to your demise that any thought of helping your daughters get started will not happen. They will be far into middle age by the time they inherit. That raises the additional complication of how to pass money to your heirs by gift long before you die.

A consideration is that gifting appreciated securities to someone at a time when they have little or no income can allow that person to realize some gains at zero tax cost.

Others may have ideas about this general issue.

[Wisco22]

What is your housing situation and the details? (Rent, mortgage, paid off?)

Will the survivor get 100% of the pensions if either of you survives the other?

It looks to me like I’ll be in the 22% tax bracket now and in the future.....

It is a lot more complicated than that because;

1) The federal tax brackets are scheduled to revert to the old higher tax brackets in 2026.

2) If one of you survives the other they will be filing tax returns in the higher single tax brackets.

3) The way Social Security is taxed is complex and can result in you being in a higher effective tax bracket.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

4) You could hit the IRMAA tax income level.

Great questions. I think these speak to maintaining the Roth contributions over the last 2.5 years (higher brackets in 2026 and likely if one of us dies and the other has to file as single. The IRMAA is something I need to look at more carefully. Thanks!

[Wisco22]

Looks pretty good. Are you going to even withdraw from your portfolio or you are just sticking with 80/20 so you have more money for your heir?

Hoping to not touch the portfolio (except for some lumpy expenses). Would be great to pass this all on to daughters, either slowly now or in the end.

[gavinsiu]

Hoping to not touch the portfolio (except for some lumpy expenses). Would be great to pass this all on to daughters, either slowly now or in the end.

OK, if you don't plan to use it, then any allocation would be best and one of the things you should consider is converting your tax deferred to roth ira. If you die and your account is taxable, your kids get the money tax free (baring estate tax) via a stepup-basis. If you die and your account is roth, your kids will have to withdraw it within 10 years but the withdraw is tax free. If you died and the account is a IRA or 401K, your kids will need withdraw the amount in 10 years and if it's rather large, it will definitely shoot up their tax bracket since withdraw are considered income.

If your kids are not adult, consider talking to an estate lawyer to setup a trust, since you don't give a minor a million dollars. You may want to setup a trust even if they are an adult to shield them from asset loss from a divorce.

One other thing to watch out for is how much risk you want to take in regards to unintentiional event. For example, you need a new car or something and have to tap the portfolio after a 40% loss.

[MrCheapo]

Great advice about the expenses. I think I have a pretty good handle on them (with fixed versus discretionary, etc.). Will need to think about the tax-deferred and possible RMD consequences. Thanks!

But don't forget to plan out the three stages of retirement (retirement-SS, SS-RMD, RMD-Death). That was an eye opener for me and has drastically changed the way I'm planning my estate and even my daily spending habits.

Also, research to death the ins/outs of your retirement pension/benefits. Our university has weird poorly documented quirks and I'm sure yours does as well. For instance, we have one health plan suitable if you retire out of state. But you cannot change to it AFTER you retire. You have to be in it when you retire.

[Wisco22]

Hoping to not touch the portfolio (except for some lumpy expenses). Would be great to pass this all on to daughters, either slowly now or in the end.

OK, if you don't plan to use it, then any allocation would be best and one of the things you should consider is converting your tax deferred to roth ira. If you die and your account is taxable, your kids get the money tax free (baring estate tax) via a stepup-basis. If you die and your account is roth, your kids will have to withdraw it within 10 years but the withdraw is tax free. If you died and the account is a IRA or 401K, your kids will need withdraw the amount in 10 years and if it's rather large, it will definitely shoot up their tax bracket since withdraw are considered income.

If your kids are not adult, consider talking to an estate lawyer to setup a trust, since you don't give a minor a million dollars. You may want to setup a trust even if they are an adult to shield them from asset loss from a divorce.

One other thing to watch out for is how much risk you want to take in regards to unintentiional event. For example, you need a new car or something and have to tap the portfolio after a 40% loss.

All good points. Thanks!

[Wisco22]

Great advice about the expenses. I think I have a pretty good handle on them (with fixed versus discretionary, etc.). Will need to think about the tax-deferred and possible RMD consequences. Thanks!

But don't forget to plan out the three stages of retirement (retirement-SS, SS-RMD, RMD-Death). That was an eye opener for me and has drastically changed the way I'm planning my estate and even my daily spending habits.

Also, research to death the ins/outs of your retirement pension/benefits. Our university has weird poorly documented quirks and I'm sure yours does as well. For instance, we have one health plan suitable if you retire out of state. But you cannot change to it AFTER you retire. You have to be in it when you retire.

Good advice on both of these. Will definitely model the three stages look carefully at the retirement benefits. Appreciate that!

[marlin2023]

just look into some roth conversions. when you first retire you might be able to squeeze some in the 12/15% tax bracket. If you don't use the ira funds they can grow significantly by age 75 and rmd's. so maybe fine tune that pre-tax / post -tax ratio sometime in early retirement.

i think 80/20 split is fine since you don't really need the portfolio for living expenses. You could even take some of the dividends worse case scenario.

[Wisco22]

just look into some roth conversions. when you first retire you might be able to squeeze some in the 12/15% tax bracket. If you don't use the ira funds they can grow significantly by age 75 and rmd's. so maybe fine tune that pre-tax / post -tax ratio sometime in early retirement.

i think 80/20 split is fine since you don't really need the portfolio for living expenses. You could even take some of the dividends worse case scenario.

Wonderful advice. Thanks!

[gavinsiu]

Wonderful advice. Thanks!

Yes, a good time to do this would be when you stop working but have not draw SS yet.