Can I really retire? Please check my math and poke holes.

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dknightd
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Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 7:23 pm

Can I really retire? Please check my math and poke holes.

I'm tentatively planing to retire Fall of 2019. Before I hand in my paper work I'd like to have a double (triple, quadruple) check on my plan.

I figure we need about $72k before taxes to live a comfortable life.
We want that level of income more or less guaranteed, and to somewhat keep up with inflation. We'd like to have more than $72k per year. My thinking is $20K per year as "fun" money. Together that adds up to about what we spend now. We want the $72k more or less guaranteed. We are more flexible with the $20k "fun" money (which might go for fun, or unanticipated expenses, who knows).

So here is my (our) current plan. It is open to change.
I'm in the fortunate situation where health insurance costs are not likely to change much when I retire. And those health costs are included in my $72k/year budget.

Current:
DW SS $929/month
DW Pension $328/month (dual life, some CPI adjustment)
This provides about $15k/year, and I'm still working.

I'm 60, will likely retire at 61 3/4. Wife is currently 66 and has already retired.

When I retire, we'll have about $1.2M in my retirement accounts.
We'll still get DW's $15k/year
We'll take out a dual life annuity. I'm conservatively estimating it will cost $300k to generate a $15k/year annuity.
So we'd need to make up $42k/year for 8.25 years = 346k
Or allowing for some inflation (42 + 42*1.03**8)/2 = 47.6 x 8.25 = 393k
Lets call it $400k. That covers our required $72k/year between now and when I'm 70.
Most of that money will come from our "fixed income" assets.
It leaves 1200-300-400= $500k to cover our fun money between 61 and our death.

When I'm 70, I'll claim SS.
We'll still have DW's pension of about $328k/month
My projected SS at 70 is about $3300/month
DW will now get 1/2 of my PIA, about $1250/month
We'll still have the annuity, it might be only worth $14k/year by then.
This gives us about $72k/year - just what we'd like to have guaranteed.
Most of that will have some CPI protection, but inflation would be a concern going forward.
If one of us died, we'd loose $1250/month (which would leave about $57k/year, which we think is enough for one of us to be comfortable)

If our "fun money" is 50/50 or 60/40 using the simple 4% rule will provide $20k/year which should adjust for inflation and last 30 years. We can be flexible with this money, some years we might take out more, some years less. Since our comfortable floor is covered.

In my planning I'm using a bucket type of arrangement. I'm also assuming that investments and incomes will more of less match inflation. But I think we'll always have enough money to be comfortable, and there is a good chance we'll have some extra.

Thoughts?

Thanks for your help,
David

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sergeant
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Re: Can I really retire? Please check my math and poke holes.

Post by sergeant » Tue Sep 18, 2018 8:00 pm

Your numbers add up. I don't understand the buckets comment nor do I agree taking just from fixed income during that time prior to you collecting SS. Why not just take from the entire portfolio?


Good luck with your retirement. :sharebeer
Lincoln 3 EOW!

veindoc
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Re: Can I really retire? Please check my math and poke holes.

Post by veindoc » Tue Sep 18, 2018 8:03 pm

I feel like you have “just” enough.
It may work out great but you could be left a little short. Sequence of returns could be a real risk.
Any interest in taking a fun side job during retirement - to generate the fun money?
Any heirs to consider?

Thesaints
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Re: Can I really retire? Please check my math and poke holes.

Post by Thesaints » Tue Sep 18, 2018 8:14 pm

Why would you bother to take such a small annuity ?

One comment. If you plan to spend capital to support expenses, such as the 400k between now and age 70, those funds should be set aside in safe vehicles like a series of CD's with suitable maturities, or something like that.

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 8:16 pm

sergeant wrote:
Tue Sep 18, 2018 8:00 pm
Your numbers add up. I don't understand the buckets comment nor do I agree taking just from fixed income during that time prior to you collecting SS. Why not just take from the entire portfolio?


Good luck with your retirement. :sharebeer
I'm currently very very over invested in more or less cash like things. I got nervous that a crash would crash my plans. I'm perhaps overly concerned about sequence of return risks.
I'm about 30/70 now. By the time I reach 70 I expect to be more like 50/50 (or 60/40). Mostly becuase I'll annuatize some, and spend down some fixed income between now and then. Hopefully my stock holdings will be worth more in 9 years, and keep growing.

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 8:20 pm

veindoc wrote:
Tue Sep 18, 2018 8:03 pm
I feel like you have “just” enough.
It may work out great but you could be left a little short. Sequence of returns could be a real risk.
Any interest in taking a fun side job during retirement - to generate the fun money?
Any heirs to consider?
I've considered a side job. Or maybe a hobby that might turn out cash neutral. I have potential heirs. I think they can take care of themselves. My goal is to make sure they do not have to help take of me.

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celia
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Re: Can I really retire? Please check my math and poke holes.

Post by celia » Tue Sep 18, 2018 8:27 pm

dknightd wrote:
Tue Sep 18, 2018 7:23 pm
I figure we need about $72k before taxes to live a comfortable life.

When I retire, we'll have about $1.2M in my retirement accounts.
Why aren't you taking taxes into account? That can make or break you depending on the 1.2M being in tax-deferred or Roth. If it is in tax-deferred, do you plan to convert each year until you are age 70 so you can get some of that money in Roth?

If the money is all in tax-deferred, the RMDs will continue to grow each year, which sound great, until you remember that all of that will be subject to taxes. Bigger RMDs = bigger tax bill.

I suggest you do YEARLY income projections each year until you are 71 to estimate your taxes and spendable income each year. Keep the retirement accounts growing during this exercise and you may be surprised at the age 71 result (when you are also taking SS for a full year).
Last edited by celia on Tue Sep 18, 2018 8:28 pm, edited 1 time in total.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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Watty
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Re: Can I really retire? Please check my math and poke holes.

Post by Watty » Tue Sep 18, 2018 8:27 pm

What is your housing situation? Do you rent, have a mortgage, or a paid off house? If you have a house how much is it worth?
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
we'll take out a dual life annuity. I'm conservatively estimating it will cost $300k to generate a $15k/year annuity.
......
We'll still have the annuity, it might be only worth $14k/year by then.
That is overly optimistic. 8 years of inflation will likely have a bigger impact than that.

One thing that you are missing is that when you 62 you if you have $1.2 million in investments than that would likely pay a 2% dividend. That is $24,000 a year without touching your principal. If you just set your investments to not automatically reinvest your dividends then I don't see a need to buy an annuity that pays $15,000 a year.
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
So we'd need to make up $42k/year for 8.25 years = 346k
Or allowing for some inflation (42 + 42*1.03**8)/2 = 47.6 x 8.25 = 393k
$24K-$15K=$9K so instead of needing $45K a year from other sources you would only need $36K so you may want to rework your other numbers.

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 8:28 pm

Thesaints wrote:
Tue Sep 18, 2018 8:14 pm
Why would you bother to take such a small annuity ?

One comment. If you plan to spend capital to support expenses, such as the 400k between now and age 70, those funds should be set aside in safe vehicles like a series of CD's with suitable maturities, or something like that.
Small annuity so that together with SS it covers our base expenses when I'm 70.
The $400k between 61 and 70 is sitting in cash like things. That is why I allowed for inflation on that part. I assume they will earn zero, but get hit by 3% inflation.
Thanks for asking. This is not an easy thing to decide

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 8:41 pm

celia wrote:
Tue Sep 18, 2018 8:27 pm
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
I figure we need about $72k before taxes to live a comfortable life.

When I retire, we'll have about $1.2M in my retirement accounts.
Why aren't you taking taxes into account? That can make or break you depending on the 1.2M being in tax-deferred or Roth. If it is in tax-deferred, do you plan to convert each year until you are age 70 so you can get some of that money in Roth?

If the money is all in tax-deferred, the RMDs will continue to grow each year, which sound great, until you remember that all of that will be subject to taxes. Bigger RMDs = bigger tax bill.

I suggest you do YEARLY income projections each year until you are 71 to estimate your taxes and spendable income each year. Keep the retirement accounts growing during this exercise and you may be surprised at the age 71 result (when you are also taking SS for a full year).
I am taking taxes into account. I figure if we can live on $72-92K per year before taxes, we'll likely be in the 12% marginal tax bracket, at least for next year. Who knows what the future might hold. 1.2M is all in tax deferred 403b. We have 13K in Roth IRA, but for now I'm ignoring that. Our plan is to spend what we need, and hope there is still some room to convert some to Roth before we have to go above 12% federal tax.
Trust me, I'll be doing yearly projections, every single year.
Part of the reason to annutize is that income is not subject to RMD. At least that is my understanding.

sc9182
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Re: Can I really retire? Please check my math and poke holes.

Post by sc9182 » Tue Sep 18, 2018 8:47 pm

dknightd wrote:
Tue Sep 18, 2018 7:23 pm
..
We'll still have DW's pension of about $328k/month
My projected SS at 70 is about $3300/month
Hang tight to your wife, you got the best one on BH with $328k/month pension! Many be happy to dig a mere 5k-10k/month spousal pension and be dandy! A $328k/month is serious coin!

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 8:55 pm

So I met with my TIAA advisor today. He recons we''ll have $82K after tax to spend, with a 80% chance of sucess. Which kind of matches up with what I was thinking.

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 9:00 pm

sc9182 wrote:
Tue Sep 18, 2018 8:47 pm
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
..
We'll still have DW's pension of about $328k/month
My projected SS at 70 is about $3300/month
Hang tight to your wife, you got the best one on BH with $328k/month pension! Many be happy to dig a mere 5k-10k/month spousal pension and be dandy! A $328k/month is serious coin!
Shoot me, leave off the k ! Is that your only comment? an extra k slipped in there? $328/month is still more than zero. It may seem small but should not be neglected. $328/month pretty much covers what she buys in yarn. Everybody needs a hobby :)

sc9182
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Re: Can I really retire? Please check my math and poke holes.

Post by sc9182 » Tue Sep 18, 2018 9:11 pm

dknightd wrote:
Tue Sep 18, 2018 9:00 pm
sc9182 wrote:
Tue Sep 18, 2018 8:47 pm
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
..
We'll still have DW's pension of about $328k/month
My projected SS at 70 is about $3300/month
Hang tight to your wife, you got the best one on BH with $328k/month pension! Many be happy to dig a mere 5k-10k/month spousal pension and be dandy! A $328k/month is serious coin!
Shoot me, leave off the k ! Is that your only comment? an extra k slipped in there? $328/month is still more than zero. It may seem small but should not be neglected. $328/month pretty much covers what she buys in yarn. Everybody needs a hobby :)
It was meant in a kind spirit, and to emphasise relationships are more valuables than money alone. Still hang tight for that yarn and grandkid sweaters in-making:-)

You doing fine, but more could be better. Have you also tried Fidelity modeller? Think you may have to register (?)

marcopolo
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Re: Can I really retire? Please check my math and poke holes.

Post by marcopolo » Tue Sep 18, 2018 9:43 pm

Overall, the numbers in your plan seem to work out. Having health insurance covered is a huge advantage.

A few comments:
1) For the money set aside between 61-70, you should be able to safely get at least enough earning to cover inflation (TIPS, CD ladder, or Short term bonds), so, i see no reason to add more money up front to that "bucket" to cover inflation.

2) I am not a big fan of annuities, but I can see what you are trying to do. A n alternative you might want to investigate is doing a deferred annuity instead of an immediate one, the cost of that may be enough to cover the $15k between now and when it kicks in.

3) Have you considered what happens to your plan if the current Soc Sec projections (25% cut in benefits in 2034) actually takes place?

4) Not sure how much you have in your $72k budget for health care, will that go down (or up) when you hit medicare age?

5) If you have not done so, you might consider running your situation through multiple retirement planners (FireCalc, cFireSim, i-ORP, Fidelity RPM) to get some historical/monte carlo analysis of your particular situation.

It can be agonizing decision when you are doing it voluntarily. Best wishes for a happy retirement.
Once in a while you get shown the light, in the strangest of places if you look at it right.

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Tue Sep 18, 2018 9:58 pm

sc9182 wrote:
Tue Sep 18, 2018 9:11 pm
dknightd wrote:
Tue Sep 18, 2018 9:00 pm
sc9182 wrote:
Tue Sep 18, 2018 8:47 pm
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
..
We'll still have DW's pension of about $328k/month
My projected SS at 70 is about $3300/month
Hang tight to your wife, you got the best one on BH with $328k/month pension! Many be happy to dig a mere 5k-10k/month spousal pension and be dandy! A $328k/month is serious coin!
Shoot me, leave off the k ! Is that your only comment? an extra k slipped in there? $328/month is still more than zero. It may seem small but should not be neglected. $328/month pretty much covers what she buys in yarn. Everybody needs a hobby :)
It was meant in a kind spirit, and to emphasise relationships are more valuables than money alone. Still hang tight for that yarn and grandkid sweaters in-making:-)

You doing fine, but more could be better. Have you also tried Fidelity modeller? Think you may have to register (?)
It was taken in kind spirit.
I tried https://www.firecalc.com/ and
https://www.i-orp.com/LumpSum/index.html
They both have me being right on the edge.
The back of the envelope, and TIAA also have me being right on the edge.
I think perhaps I'm ready to fall off the edge, and hope things work out.
I have not tried the Fidelity modeller.
I have several months before I have to give notice. I don't want to do that before I am sure.

dknightd
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Wed Sep 19, 2018 8:02 am

marcopolo wrote:
Tue Sep 18, 2018 9:43 pm
Overall, the numbers in your plan seem to work out. Having health insurance covered is a huge advantage.

A few comments:
1) For the money set aside between 61-70, you should be able to safely get at least enough earning to cover inflation (TIPS, CD ladder, or Short term bonds), so, i see no reason to add more money up front to that "bucket" to cover inflation.
I might revise and update that part as I go along.
marcopolo wrote:
Tue Sep 18, 2018 9:43 pm
2) I am not a big fan of annuities, but I can see what you are trying to do. A n alternative you might want to investigate is doing a deferred annuity instead of an immediate one, the cost of that may be enough to cover the $15k between now and when it kicks in.
I MIght do part now and part later. The advice I've been getting is if you are going to annuitize you might as well do it all at once and be done with it. I have a 9 months to revisit that decision. Thanks for making me thing about it again.
marcopolo wrote:
Tue Sep 18, 2018 9:43 pm
3) Have you considered what happens to your plan if the current Soc Sec projections (25% cut in benefits in 2034) actually takes place?
No. I'm perhaps foolishly assuming that once I'm collecting the benefits will not go down.
marcopolo wrote:
Tue Sep 18, 2018 9:43 pm
4) Not sure how much you have in your $72k budget for health care, will that go down (or up) when you hit medicare age?
I'm budgeting $12/year. My insurance will cost me about $6k/year. the other $6k is a generous estimate for copays and stuff.
I expect the cost to stay about the same when medicare starts. My current insurance will then act as a medicare advantage program. It is a good deal. Of course medical expenses will probably continue to rise faster then inflation. It might be a good idea to add keep some of our fun money as long as possible in case it has to get diverted to medical expenses ;(
marcopolo wrote:
Tue Sep 18, 2018 9:43 pm
5) If you have not done so, you might consider running your situation through multiple retirement planners (FireCalc, cFireSim, i-ORP, Fidelity RPM) to get some historical/monte carlo analysis of your particular situation.

It can be agonizing decision when you are doing it voluntarily. Best wishes for a happy retirement.
I've used FireCalc and i-ORP. I still have some more work to do before I hand in paperwork to retire.

Thanks for your help and wishes :)

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Steelersfan
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Re: Can I really retire? Please check my math and poke holes.

Post by Steelersfan » Wed Sep 19, 2018 9:20 am

I'd be careful about "I'm in the fortunate situation where health insurance costs are not likely to change much when I retire.".

There are no protections that guarantee retiree health benefits can't be changed. If they do, it's highly likely they won't be to your benefit, and you've got 20 - 30 years of years of potential change.

walkindude
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Re: Can I really retire? Please check my math and poke holes.

Post by walkindude » Wed Sep 19, 2018 10:15 am

What about big, lumpy expenses? Like new cars, roofs, furnaces, things like that? Does that come from the fun money too?

Saving as much as you can in taxable/emergency fund between now and retirement may be helpful. You're pretty close now; I'd hate you to get creamed on taxes in retirement for lumpy expenses. Good luck!

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celia
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Re: Can I really retire? Please check my math and poke holes.

Post by celia » Wed Sep 19, 2018 12:22 pm

If you're "right on the edge", like I was, it is better to play it safe and work an extra year or two. (I didn't see a reason that you need to retire soon.) An 80% success rate by your advisor would make me uncomfortable as that means there is 20% "failure" rate. For 5 couples in your exact same circumstance, one of them will not make it (statistically) due to unforeseen circumstances like death of one partner soon after retiring, medical issues, or an unfortunate personal "disaster".

What we did, was wait till the house was paid off and the kids were on their own. We cut back where we easily could on expenses and actually lived on our expected retirement income (including taxes) for a few years and put all other income into savings. By working an extra two years, we increased savings and didn't have to withdraw from them while we continued to work.

It is a lot easier to continue working a little longer now than when you are older and not as agile, forgetful, and "have to".

gotester2000
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Re: Can I really retire? Please check my math and poke holes.

Post by gotester2000 » Wed Sep 19, 2018 1:31 pm

You are projecting abt 57k fixed income at age 70. Between 62-70 you need about 500k.
700k will grow close to a million in 8 years. If you still want an annuity you will get a better rate.

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CyclingDuo
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Re: Can I really retire? Please check my math and poke holes.

Post by CyclingDuo » Wed Sep 19, 2018 2:36 pm

dknightd wrote:
Tue Sep 18, 2018 9:58 pm
I tried https://www.firecalc.com/ and
https://www.i-orp.com/LumpSum/index.html
They both have me being right on the edge.
The back of the envelope, and TIAA also have me being right on the edge.
I think perhaps I'm ready to fall off the edge, and hope things work out.
I have not tried the Fidelity modeller.
I have several months before I have to give notice. I don't want to do that before I am sure.
That last sentence is key. If you have the option or flexibility to get in a OMY (one more year) or two if it comes to that to increase the potential of being sure, it may be well worth it for building up what will be the most important leg of the stool for you in retirement.

We loved watching this video and the Q&A after the presentation about the power of working longer - even if on a part-time basis.

https://www.youtube.com/watch?v=lxKRTwmMLDI

The old three legged stool for retirement will hold true for only about 40% of the workforce ages 55-65 due to them having a pension (private sector, government, military, educators, etc...).

Image

Creating a replacement leg or two or three with other options is what those without pensions have the ability to do (real estate rental, part-time/consulting work, etc...). Sounds like you want to move a portion of your personal savings leg over to be an annuity as a self-funded pension leg. The one more year (or more) of work possibility increases the personal savings leg, which in turn could increase the amount you utilize to purchase a self-funded pension leg via an annuity.

As the video above points out, working one more year or two more years lowers your need to finance those years as you can cash flow your expenses during the additional working time, and allows you to build up even more in the personal savings leg of the "stool" since you won't be drawing from it as long as if you retired in the Fall of 2019. If you add in the currently planned reduced SS benefits come 2035, the lack of the pension leg and a somewhat weaker SS leg 17 years from now puts pressure on your personal savings leg to be beefed up. The good news about i-ORP calculations is that the SS reduction of 25% is built in beginning in 2035 which at least gives you a nice view of how close to the edge you are.

You mention TIAA, so assume you are faculty or staff. Have you enjoyed the luxury of mini-retirement every summer up to this point in your career due to the academic calendar? We have enjoyed that in our household for the majority of 33 years, so we are okay with getting in OMY, or two, or three, or more to make sure.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

chuckb84
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Re: Can I really retire? Please check my math and poke holes.

Post by chuckb84 » Wed Sep 19, 2018 5:39 pm

dknightd wrote:
Tue Sep 18, 2018 7:23 pm
Can I really retire? Please check my math and poke holes.

I'm tentatively planing to retire Fall of 2019. Before I hand in my paper work I'd like to have a double (triple, quadruple) check on my plan.

I figure we need about $72k before taxes to live a comfortable life.
We want that level of income more or less guaranteed, and to somewhat keep up with inflation. We'd like to have more than $72k per year. My thinking is $20K per year as "fun" money. Together that adds up to about what we spend now. We want the $72k more or less guaranteed. We are more flexible with the $20k "fun" money (which might go for fun, or unanticipated expenses, who knows).

So here is my (our) current plan. It is open to change.
I'm in the fortunate situation where health insurance costs are not likely to change much when I retire. And those health costs are included in my $72k/year budget.

Current:
DW SS $929/month
DW Pension $328/month (dual life, some CPI adjustment)
This provides about $15k/year, and I'm still working.

I'm 60, will likely retire at 61 3/4. Wife is currently 66 and has already retired.

When I retire, we'll have about $1.2M in my retirement accounts.
We'll still get DW's $15k/year
We'll take out a dual life annuity. I'm conservatively estimating it will cost $300k to generate a $15k/year annuity.
So we'd need to make up $42k/year for 8.25 years = 346k
Or allowing for some inflation (42 + 42*1.03**8)/2 = 47.6 x 8.25 = 393k
Lets call it $400k. That covers our required $72k/year between now and when I'm 70.
Most of that money will come from our "fixed income" assets.
It leaves 1200-300-400= $500k to cover our fun money between 61 and our death.

When I'm 70, I'll claim SS.
We'll still have DW's pension of about $328k/month
My projected SS at 70 is about $3300/month
DW will now get 1/2 of my PIA, about $1250/month
We'll still have the annuity, it might be only worth $14k/year by then.
This gives us about $72k/year - just what we'd like to have guaranteed.
Most of that will have some CPI protection, but inflation would be a concern going forward.
If one of us died, we'd loose $1250/month (which would leave about $57k/year, which we think is enough for one of us to be comfortable)

If our "fun money" is 50/50 or 60/40 using the simple 4% rule will provide $20k/year which should adjust for inflation and last 30 years. We can be flexible with this money, some years we might take out more, some years less. Since our comfortable floor is covered.

In my planning I'm using a bucket type of arrangement. I'm also assuming that investments and incomes will more of less match inflation. But I think we'll always have enough money to be comfortable, and there is a good chance we'll have some extra.

Thoughts?

Thanks for your help,
David
Since you know about i-orp, you might put all this into the extended version and see what it says.

https://www.i-orp.com/LumpSum/extended.html

And, for a second opinion, try Flexible retirement planner, and override the default returns with your own more conservative numbers.

https://www.flexibleretirementplanner.com/wp/

Ron Scott
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Re: Can I really retire? Please check my math and poke holes.

Post by Ron Scott » Wed Sep 19, 2018 6:41 pm

dknightd wrote:
Tue Sep 18, 2018 8:20 pm
veindoc wrote:
Tue Sep 18, 2018 8:03 pm
I feel like you have “just” enough.
It may work out great but you could be left a little short. Sequence of returns could be a real risk.
Any interest in taking a fun side job during retirement - to generate the fun money?
Any heirs to consider?
I've considered a side job. Or maybe a hobby that might turn out cash neutral. I have potential heirs. I think they can take care of themselves. My goal is to make sure they do not have to help take of me.
It is somewhat tight.

If there's one time in your life to be conservative this is it. I don't like to see anyone go into retirement by reducing their expenses so I would lean toward a couple more years' on the job. The ability to earn through work is still your most valuable asset.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

JohnDoh
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Re: Can I really retire? Please check my math and poke holes.

Post by JohnDoh » Wed Sep 19, 2018 9:44 pm

CyclingDuo wrote:
Wed Sep 19, 2018 2:36 pm

We loved watching this video and the Q&A after the presentation about the power of working longer - even if on a part-time basis.

https://www.youtube.com/watch?v=lxKRTwmMLDI
This is a GREAT video. Thanks for sharing. I will say, however, that:
1) the Q&A is critical
2) because it reveals that the heart of their finding is about the power of deferring SS (and to a less extent annuitization), as they are forced somewhat sheepishly to admit.
3) But they (shockingly?) do not consider any kind of overall "quality of life" metric whatsoever.
4) So, sure, working longer (i.e. deferring SS and having a way to finance that deferral) will optimize "retirement income" but it also necessarily shortens "retirement duration" (assuming constant lifespan, which may be a generous assumption if working longer actually shortens lifespan).
5) The key task as I understand it is to find the "Goldilocks (Pareto Optimal) retirement moment" that maximizes overall quality of life of a maximally-well-funded, maximally-extended retirement (assuming of course that retirement per se is a high quality of life for a given individual).
6) Those two (maximally-well-funded and maximally-extended) are the Scylla and Charybdis of retirement planning.

Overall, therefore, I thought (and was surprised to find myself thinking) that the quality of the analysis was not really as good as that generally found here at Bogleheads. :confused

Anyway: the video is very much worth watching IMO.

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Re: Can I really retire? Please check my math and poke holes.

Post by Juice3 » Thu Sep 20, 2018 5:31 am

celia wrote:
Wed Sep 19, 2018 12:22 pm
An 80% success rate by your advisor would make me uncomfortable as that means there is 20% "failure" rate. For 5 couples in your exact same circumstance, one of them will not make it (statistically) due to unforeseen circumstances like death of one partner soon after retiring, medical issues, or an unfortunate personal "disaster".
I believe the correct math is 1-.8^5 or 67% probability that at least 1 of the 5 couples fail.

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 5:53 am

Steelersfan wrote:
Wed Sep 19, 2018 9:20 am
I'd be careful about "I'm in the fortunate situation where health insurance costs are not likely to change much when I retire.".

There are no protections that guarantee retiree health benefits can't be changed. If they do, it's highly likely they won't be to your benefit, and you've got 20 - 30 years of years of potential change.
I agree, there is some risk to this. I think it is pretty safe. It is provided by the state, and we have a fairly strong union. I currently pay about $5k for family coverage. I have budgeted 12k for healthcare. More than we'll need now, and probably enough if we end up only with medicare.
If I tried to budget to all unknowns and risks I'd have to work till 70 !

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 5:58 am

walkindude wrote:
Wed Sep 19, 2018 10:15 am
What about big, lumpy expenses? Like new cars, roofs, furnaces, things like that? Does that come from the fun money too?

Saving as much as you can in taxable/emergency fund between now and retirement may be helpful. You're pretty close now; I'd hate you to get creamed on taxes in retirement for lumpy expenses. Good luck!
Predictable lumpy expenses are covered in my $72k budget. Unpredictable lumpy expenses will come from emergency fund or "fun" money.
One lumpy expense might be moving. The place we might like to move is more expensive than here. I think I have budgeted for this but we'd have to get a smaller place, or perhaps a condo. Some fun money might have to be used to live in a fun place. . .

Our $72k budget does leave some money for hobbies and travel. Just not quite as much as we might like. So there is some flexibility.

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Re: Can I really retire? Please check my math and poke holes.

Post by Grt2bOutdoors » Thu Sep 20, 2018 6:07 am

Watty wrote:
Tue Sep 18, 2018 8:27 pm
What is your housing situation? Do you rent, have a mortgage, or a paid off house? If you have a house how much is it worth?
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
we'll take out a dual life annuity. I'm conservatively estimating it will cost $300k to generate a $15k/year annuity.
......
We'll still have the annuity, it might be only worth $14k/year by then.
That is overly optimistic. 8 years of inflation will likely have a bigger impact than that.

One thing that you are missing is that when you 62 you if you have $1.2 million in investments than that would likely pay a 2% dividend. That is $24,000 a year without touching your principal. If you just set your investments to not automatically reinvest your dividends then I don't see a need to buy an annuity that pays $15,000 a year.
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
So we'd need to make up $42k/year for 8.25 years = 346k
Or allowing for some inflation (42 + 42*1.03**8)/2 = 47.6 x 8.25 = 393k
$24K-$15K=$9K so instead of needing $45K a year from other sources you would only need $36K so you may want to rework your other numbers.
Dividends can be cut! And they were in 2008.

OP - is there a health reason why you are retiring? Do you have to retire? The numbers seem very tight, with little room for error. It’s the discretionary spending that is worrisome - you budget $20k and spend more than that.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Can I really retire? Please check my math and poke holes.

Post by Grt2bOutdoors » Thu Sep 20, 2018 6:10 am

dknightd wrote:
Thu Sep 20, 2018 5:53 am
Steelersfan wrote:
Wed Sep 19, 2018 9:20 am
I'd be careful about "I'm in the fortunate situation where health insurance costs are not likely to change much when I retire.".

There are no protections that guarantee retiree health benefits can't be changed. If they do, it's highly likely they won't be to your benefit, and you've got 20 - 30 years of years of potential change.
I agree, there is some risk to this. I think it is pretty safe. It is provided by the state, and we have a fairly strong union. I currently pay about $5k for family coverage. I have budgeted 12k for healthcare. More than we'll need now, and probably enough if we end up only with medicare.
If I tried to budget to all unknowns and risks I'd have to work till 70 !
Working to 65 might be a more optimal solution. Don’t bank on the strength of anything, when things get rough, everything is on the table.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 6:15 am

CyclingDuo wrote:
Wed Sep 19, 2018 2:36 pm

That last sentence is key. If you have the option or flexibility to get in a OMY (one more year) or two if it comes to that to increase the potential of being sure, it may be well worth it for building up what will be the most important leg of the stool for you in retirement.

We loved watching this video and the Q&A after the presentation about the power of working longer - even if on a part-time basis.

https://www.youtube.com/watch?v=lxKRTwmMLDI

The old three legged stool for retirement will hold true for only about 40% of the workforce ages 55-65 due to them having a pension (private sector, government, military, educators, etc...).

Image

Creating a replacement leg or two or three with other options is what those without pensions have the ability to do (real estate rental, part-time/consulting work, etc...). Sounds like you want to move a portion of your personal savings leg over to be an annuity as a self-funded pension leg. The one more year (or more) of work possibility increases the personal savings leg, which in turn could increase the amount you utilize to purchase a self-funded pension leg via an annuity.

As the video above points out, working one more year or two more years lowers your need to finance those years as you can cash flow your expenses during the additional working time, and allows you to build up even more in the personal savings leg of the "stool" since you won't be drawing from it as long as if you retired in the Fall of 2019. If you add in the currently planned reduced SS benefits come 2035, the lack of the pension leg and a somewhat weaker SS leg 17 years from now puts pressure on your personal savings leg to be beefed up. The good news about i-ORP calculations is that the SS reduction of 25% is built in beginning in 2035 which at least gives you a nice view of how close to the edge you are.

You mention TIAA, so assume you are faculty or staff. Have you enjoyed the luxury of mini-retirement every summer up to this point in your career due to the academic calendar? We have enjoyed that in our household for the majority of 33 years, so we are okay with getting in OMY, or two, or three, or more to make sure.
I agree, timing is critical. In many ways this is my first OMY.
The biggest benefit to me for working one more year is having one less year to support till I'm 70 (plus one more year to save).
The biggest problem working one more year is my wife and I will both be one year older.

I have an unusual position, I'm staff, but have an academic year appointment. I've worked every summer supported by external research grants. I'll be giving that summer salary up this year. Grant money makes the job more interesting, but, I'm tired of having to work during the summer (especially since now you are not allowed to take vacation while working on grant funds!).

I could put in OMY. I still might. It is also possible that when I announce my retirement they may ask me to put in OMY. And I may if I can do it on my terms (preferably part time with a very flexible schedule). I'm not planning on that. Once I give formal written notice I expect to follow through.

There is a risk not doing OMY (or three). There is also a risk working OMY. I think the risks are more or less equal now.
Eventually I'm going to have to say enough is enough. With an older wife I think the time might be now.

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Re: Can I really retire? Please check my math and poke holes.

Post by Grt2bOutdoors » Thu Sep 20, 2018 6:17 am

gotester2000 wrote:
Wed Sep 19, 2018 1:31 pm
You are projecting abt 57k fixed income at age 70. Between 62-70 you need about 500k.
700k will grow close to a million in 8 years. If you still want an annuity you will get a better rate.
The OP is 30/70 now, how do you figure he’Ll earn 5% average annual returns over next 8-9 years in real money? Take a look at Year to date returns this year for such a portfolio, it’s a preview of what to expect for next 5 years.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 6:20 am

Juice3 wrote:
Thu Sep 20, 2018 5:31 am
celia wrote:
Wed Sep 19, 2018 12:22 pm
An 80% success rate by your advisor would make me uncomfortable as that means there is 20% "failure" rate. For 5 couples in your exact same circumstance, one of them will not make it (statistically) due to unforeseen circumstances like death of one partner soon after retiring, medical issues, or an unfortunate personal "disaster".
I believe the correct math is 1-.8^5 or 67% probability that at least 1 of the 5 couples fail.
The advisor predicts a 20% failure rate if we both live to 95, and, we want to have fun money the whole time. We can be flexible with fun money, we'll probably need less as we get older, and I would be very surprised if we both made it to 95.

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 7:41 am

JohnDoh wrote:
Wed Sep 19, 2018 9:44 pm
CyclingDuo wrote:
Wed Sep 19, 2018 2:36 pm

We loved watching this video and the Q&A after the presentation about the power of working longer - even if on a part-time basis.

https://www.youtube.com/watch?v=lxKRTwmMLDI
This is a GREAT video. Thanks for sharing. I will say, however, that:
1) the Q&A is critical
2) because it reveals that the heart of their finding is about the power of deferring SS (and to a less extent annuitization), as they are forced somewhat sheepishly to admit.
3) But they (shockingly?) do not consider any kind of overall "quality of life" metric whatsoever.
4) So, sure, working longer (i.e. deferring SS and having a way to finance that deferral) will optimize "retirement income" but it also necessarily shortens "retirement duration" (assuming constant lifespan, which may be a generous assumption if working longer actually shortens lifespan).
5) The key task as I understand it is to find the "Goldilocks (Pareto Optimal) retirement moment" that maximizes overall quality of life of a maximally-well-funded, maximally-extended retirement (assuming of course that retirement per se is a high quality of life for a given individual).
6) Those two (maximally-well-funded and maximally-extended) are the Scylla and Charybdis of retirement planning.

Overall, therefore, I thought (and was surprised to find myself thinking) that the quality of the analysis was not really as good as that generally found here at Bogleheads. :confused

Anyway: the video is very much worth watching IMO.
The biggest flaw in the video for me, is that they assume the retiree claims SS at retirement. It was still worth watching although I think I've read the same thing elsewhere in less time ;)
Sure there are benefits to delaying retirement.
I'm looking for your #5. to find the "Goldilocks (Pareto Optimal) retirement moment". You will never know when that might have been till it is too late to change your mind.

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Re: Can I really retire? Please check my math and poke holes.

Post by CyclingDuo » Thu Sep 20, 2018 8:23 am

JohnDoh wrote:
Wed Sep 19, 2018 9:44 pm
This is a GREAT video. Thanks for sharing. I will say, however, that:
1) the Q&A is critical

Yup!

2) because it reveals that the heart of their finding is about the power of deferring SS (and to a less extent annuitization), as they are forced somewhat sheepishly to admit.

We thought it was appropriate with regard to the OP to shorten the gap period, not dip into personal savings, and contribute OMY to strengthen a leg or two.

3) But they (shockingly?) do not consider any kind of overall "quality of life" metric whatsoever.

This is where debate, personal preference, goals, and family experience come into play. True, we come from families with parents that did officially retire in their mid to late 60's, but also chose to extend their working years on a part-time basis for many years into retirement (actually into their 80's for three of them). So that obviously colors our perspective from the experience point of view. In the case of all three, the continued part-time work was inspired by love for what they did, desire to keep mentally active, and not a choice that was ruled by finances. However, we saw the benefits of what those decisions to extend work on a part-time basis did to their assets by adding a leg to the stool - in a positive way - as a result.

Not saying it is for all to work until age 65-67, but just inferring that so much focus on retiring early these days may not be the end all be all when it comes to overall quality of life. Again, the point was in reference to the OP wondering if he was sure in terms of timing and finances that he is where he needs to be for taking an early retirement.


4) So, sure, working longer (i.e. deferring SS and having a way to finance that deferral) will optimize "retirement income" but it also necessarily shortens "retirement duration" (assuming constant lifespan, which may be a generous assumption if working longer actually shortens lifespan).

Again the debate is if it truly is the end all be all in the scope of our journey here on earth. If one is physically and mentally spent from their career, and has saved enough to retire - so be it. We also have mentors such as Warren Buffett, Jack Bogle, Charlie Munger, and we could all name friends/folks we know who are working in their late 60's, 70's and beyond. Obviously, one has the option to pick up some consulting, or part-time work if they can get it after a decision has been made to cut the full-time cord and officially retire. The part-time work can help fill the gap years and delay decumulation of the personal savings. Certainly a good time now for that with the low unemployment rate, but may be more difficult in coming years if the business cycle turns.

Good article here on those still working in their 70's, 80's, and 90's in terms of quality of life:
https://www.theguardian.com/lifeandstyl ... 0s-80s-90s


5) The key task as I understand it is to find the "Goldilocks (Pareto Optimal) retirement moment" that maximizes overall quality of life of a maximally-well-funded, maximally-extended retirement (assuming of course that retirement per se is a high quality of life for a given individual).

That's the crux of the debate. Sounds like the OP is already in the midst of a OMY scenario. Just looked like an additional OMY or two may cement the financial equation for the well-funded retirement. Looks to be funded as it is, but perhaps not as well-funded to remove all worries. However, as we know from plenty of retirees reports - adapting to one's personal financial situation in retirement happens automatically. The OP didn't mention health issues or burn out, so he may indeed be fine and dandy where he is financially. We just wanted to provide the opposing view to satisfy that surety question.

6) Those two (maximally-well-funded and maximally-extended) are the Scylla and Charybdis of retirement planning.

Agree.

Overall, therefore, I thought (and was surprised to find myself thinking) that the quality of the analysis was not really as good as that generally found here at Bogleheads. :confused

It's easy to get stuck on the metrics they used, but in the Q&A it was clear that the implications could provide powerful results to those who are close to a well-funded retirement, but not quite there. No pain, no gain... Then again, our bias is colored by experience from our family members - be it grandparents or parents. All of them worked a long time, and lived to the age of 88-92.

Anyway: the video is very much worth watching IMO.
Last edited by CyclingDuo on Fri Sep 21, 2018 6:43 am, edited 1 time in total.
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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 10:02 am

If it was easy decision I would have already made up my mind. That is why I'm reaching out for other's thoughts. Being on the cusp is difficult. I'm tired of working, but could keep doing it if needed. I'm both lucky and unlucky to have the luxury of making that decision. I could become a crappy worker and make them fire me. But I'd rather end when people still respect me

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Re: Can I really retire? Please check my math and poke holes.

Post by David Jay » Thu Sep 20, 2018 10:09 am

celia wrote:
Wed Sep 19, 2018 12:22 pm
If you're "right on the edge", like I was, it is better to play it safe and work an extra year or two.
An extra year is a double-dip. You not only get to squirrel away a few additional acorns, the bigger benefit is that you don't have to spend that year's living expenses from your portfolio.

In my case, there was no way I could retire at 59 or 60 - the numbers didn't work. Retirement will be comfortable at age 62 (in 2019).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Can I really retire? Please check my math and poke holes.

Post by David Jay » Thu Sep 20, 2018 10:18 am

One more thing - I found that it is much easier to put up with carp at work once I picked a date (even though the date was 18 months out). I have a countdown app on my phone: 194 days

The human spirit can survive almost anything when we know that it is temporary. Think of a marathon, who quits after mile 25?
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Can I really retire? Please check my math and poke holes.

Post by marcopolo » Thu Sep 20, 2018 10:28 am

dknightd wrote:
Thu Sep 20, 2018 10:02 am
If it was easy decision I would have already made up my mind. That is why I'm reaching out for other's thoughts. Being on the cusp is difficult. I'm tired of working, but could keep doing it if needed. I'm both lucky and unlucky to have the luxury of making that decision. I could become a crappy worker and make them fire me. But I'd rather end when people still respect me
Is there a possibility of engineering your own exit? You get to leave on good terms, but get an exit package as well. Companies that are re-organizing, or reducing staff will sometimes make this an option.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 10:33 am

I would not quit at 25 miles. But I might quit at 30 years

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Re: Can I really retire? Please check my math and poke holes.

Post by marcopolo » Thu Sep 20, 2018 10:33 am

Juice3 wrote:
Thu Sep 20, 2018 5:31 am
celia wrote:
Wed Sep 19, 2018 12:22 pm
An 80% success rate by your advisor would make me uncomfortable as that means there is 20% "failure" rate. For 5 couples in your exact same circumstance, one of them will not make it (statistically) due to unforeseen circumstances like death of one partner soon after retiring, medical issues, or an unfortunate personal "disaster".
I believe the correct math is 1-.8^5 or 67% probability that at least 1 of the 5 couples fail.
I think it depends on how correlated the 5 couples are. Your equation is correct if they are completely independent out comes. But, I suspect failure scenarios are highly correlated, and due to a relatively small number of poor sequence of returns. So, the combined failure rate is probably somewhere between 20% and 67%
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Can I really retire? Please check my math and poke holes.

Post by marcopolo » Thu Sep 20, 2018 10:37 am

dknightd wrote:
Thu Sep 20, 2018 5:53 am

If I tried to budget to all unknowns and risks I'd have to work till 70 !
LOL. You are being way too optimistic. If you read some of the threads on the fears that are sometimes conjured up on this forum, you would never retire!

I think you are looking at it the right way. You have to balance risks and rewards, and choose a balance that feels comfortable to you. It helps to have it backed up by as much research/analysis that you find. But, in the end none of that is a guarantee. You can't eliminate all risk, you can only try to mitigate some of it, and decide how much you can live with.

Good luck.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 10:50 am

marcopolo wrote:
Thu Sep 20, 2018 10:28 am

Is there a possibility of engineering your own exit? You get to leave on good terms, but get an exit package as well. Companies that are re-organizing, or reducing staff will sometimes make this an option.
In my dreams :) !

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 12:57 pm

I basically told my boss to F@ today. I may not have a job tomorrow. I guess it was time before I knew it.

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Re: Can I really retire? Please check my math and poke holes.

Post by sergeant » Thu Sep 20, 2018 2:41 pm

dknightd wrote:
Thu Sep 20, 2018 12:57 pm
I basically told my boss to F@ today. I may not have a job tomorrow. I guess it was time before I knew it.
Yikes! There goes that respect thing. Time for you to pull the plug and retire.
Lincoln 3 EOW!

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Thu Sep 20, 2018 3:03 pm

maybe.

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Re: Can I really retire? Please check my math and poke holes.

Post by JohnDoh » Thu Sep 20, 2018 3:17 pm

sergeant wrote:
Thu Sep 20, 2018 2:41 pm
dknightd wrote:
Thu Sep 20, 2018 12:57 pm
I basically told my boss to F@ today. I may not have a job tomorrow. I guess it was time before I knew it.
Yikes! There goes that respect thing. Time for you to pull the plug and retire.
Awww, he's just living up to his name, 'cuz now he'll be "d(e)-knight-(e)d" :twisted:

(I sympathize.)

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Re: Can I really retire? Please check my math and poke holes.

Post by EnjoyIt » Fri Sep 21, 2018 11:12 am

dknightd wrote:
Tue Sep 18, 2018 9:58 pm
sc9182 wrote:
Tue Sep 18, 2018 9:11 pm
dknightd wrote:
Tue Sep 18, 2018 9:00 pm
sc9182 wrote:
Tue Sep 18, 2018 8:47 pm
dknightd wrote:
Tue Sep 18, 2018 7:23 pm
..
We'll still have DW's pension of about $328k/month
My projected SS at 70 is about $3300/month
Hang tight to your wife, you got the best one on BH with $328k/month pension! Many be happy to dig a mere 5k-10k/month spousal pension and be dandy! A $328k/month is serious coin!
Shoot me, leave off the k ! Is that your only comment? an extra k slipped in there? $328/month is still more than zero. It may seem small but should not be neglected. $328/month pretty much covers what she buys in yarn. Everybody needs a hobby :)
It was meant in a kind spirit, and to emphasise relationships are more valuables than money alone. Still hang tight for that yarn and grandkid sweaters in-making:-)

You doing fine, but more could be better. Have you also tried Fidelity modeller? Think you may have to register (?)
It was taken in kind spirit.
I tried https://www.firecalc.com/ and
https://www.i-orp.com/LumpSum/index.html
They both have me being right on the edge.
The back of the envelope, and TIAA also have me being right on the edge.
I think perhaps I'm ready to fall off the edge, and hope things work out.
I have not tried the Fidelity modeller.
I have several months before I have to give notice. I don't want to do that before I am sure.
Your numbers look sound and you should be fine with the plan especially if you are ok downgrading your lifestyle a little for a few years if a recession hits early in your plan.

May I suggest looking for a hobby that produces a tiny profit. Maybe sell off some of the items that are made with all that yarn you are buying :)
Maybe a little credit card and checking account churning? At your budget an extra couple of thousand per year can be a big difference in the long run.

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Re: Can I really retire? Please check my math and poke holes.

Post by dknightd » Fri Sep 21, 2018 1:37 pm

EnjoyIt wrote:
Fri Sep 21, 2018 11:12 am

May I suggest looking for a hobby that produces a tiny profit. Maybe sell off some of the items that are made with all that yarn you are buying :)
Maybe a little credit card and checking account churning? At your budget an extra couple of thousand per year can be a big difference in the long run.
I've suggested selling her knitting. I don't think that is going to happen. I agree a little extra might be nice. I'm thinking about it. . .

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