Retiring with under $1M

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Topic Author
searchher
Posts: 38
Joined: Tue May 22, 2018 11:50 am

Retiring with under $1M

Post by searchher »

Looking for some feedback and suggestions for planning our 60s and beyond.

Net Worth: $880,000 including home equity
Savings account: $130,000
Debt: Mortgage (owe $45,000 @ 3%), no other debt.
Estimated Home Value: $375,000 (conservatively. Some sites estimate it as high as $415,000)
Tax Filing Status: Married Filing Jointly
Age: 61 & 60


Current Investments (~$420,000)

My Traditional IRA @ Vanguard ($215,000)
$90,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$33,000 Vanguard Prime Money Market Fund (VMMXX) (0.16%)
$54,000 Vanguard Federal Money Market Fund (VMFXX) (0.11%)
$27,000 Vanguard Total International Stock Index Fund (VXUS)
$11,000 Vanguard Total Bond Market Index Fund (BND)

My Roth IRA @ Vanguard ($31,000)
$16,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$15,000 Vanguard Total World Bond ETF (BNDW)

Spouse Traditional IRA @ Vanguard ($46,000)
$44,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$2,000 Vanguard Prime Money Market Fund (VMMXX) (0.16%)

Taxable Brokerage Acct at Vanguard ($105,000)
$17,000 Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)
$20,000 Vanguard Total International Stock ETF (VXUS) (0.11%)
$33,000 Vanguard Federal Money Market Fund (VMFXX) (0.11%)
$10,000 Vanguard Energy ETF (VDE) (0.10%)
$21,000 Vanguard Precious Metals and Mining Fund (VGPMX) (0.37%

Cryptocurrency ($20,000)


Questions:
1) I was layed off a year ago and am having a hard time keeping a consistent job, that is also fulfilling and matches my skill set. It's quite upsetting and difficult to deal with. So my income has recently (and will likely continue to be) sporadic but hopefully at least covers the mortgage ($3,000) and some of our monthly healthcare costs ($1,100).
2) Estimating about $3,000 in Social Security if we take it at 66 or $4,000 if we take it at 70 (I qualify for the max). Projections seem like it may be wise in our case to start taking it early. I don't foresee living well into our 80s based on family history, and think it may make sense to let our investments grow longer by supplementing with social security earlier. What else should I be considering regarding this?
3) We're open to downsizing eventually but we love our house of 33 years and aside from the mortgage, the costs are reasonable for maintaining.
4) We'll likely need to replace one of our cars in the next 3 years and will likely try to find a ~$15k used Toyota or Honda that's reliable and last the rest of our life.
5. How should I think about the stock market? If we have more years like 2019 then I think we'll be pretty safe. But as you can tell, my investments are half food in, half out because I'm scared of losing the little we have and would love to take advantage of a dip to propel us into our future.
6) I'm pretty worried. I feel like we're on the bubble with no margin of safety, yet thankful because I know we're still in a better position than most others. Any words of advice aside from continuing to try to find work?

EDIT
Average Monthly Expenses ($7,260, so $4,260 after mortgage is paid off for annual expenses of $51,000)
-$3,000 mortgage
-$1,600 healthcare (insurance + meds)
-$1,000 dining/groceries
-$550 other
-$350 home maintenance
-$330 cable & utilities
-$150 clothing/other shopping
-$140 cell phones
-$140 other insurance


Mortgage details
Remaining Balance: $45,000
Term/Rate: 10 years/3.125%
$3,015
Principle: $2,340
Interest: $125
PMI: $0
Escrow: $550
Property Taxes are about $5k/yr
Last edited by searchher on Thu Jan 09, 2020 4:27 pm, edited 7 times in total.
balbrec2
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Re: Retiring with under $1M

Post by balbrec2 »

Can/does your wife work? Any pensions?
Topic Author
searchher
Posts: 38
Joined: Tue May 22, 2018 11:50 am

Re: Retiring with under $1M

Post by searchher »

balbrec2 wrote: Thu Jan 09, 2020 9:50 am Can/does your wife work?
Good question. Unfortunately no, but please don't push that issue (there are reasons preventing).
Jack FFR1846
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Location: 26 miles, 385 yards west of Copley Square

Re: Retiring with under $1M

Post by Jack FFR1846 »

There's a lot you can do here to both simplify and reduce risk. Read about the 3 fund portfolio and convert to it. Your portfolio looks a bit scattered without a written IPS. Check out the wiki for writing an IPS. Sell the crypto today! That is pure gambling and you don't have the money to gamble.

On the work side of things, both you and your spouse should have jobs doing something. Whether in your field or fulfilling or not, sort of doesn't matter. You really need to up your savings here. Your current savings are good for $16,800 a year if you fixed your portfolio. As it stands now, I could see huge losses, even with a rising market.

The house may be wonderful, but I think it's a drag on your bottom line. Consider selling and renting a much smaller apartment in order to free up the equity and reduce costs.
Bogle: Smart Beta is stupid
bloom2708
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Re: Retiring with under $1M

Post by bloom2708 »

What is your spending annually?

4% of your portfolio is $16,800. You can push it for a few years. You will have to.

Will your spouse get SS? Can she claim at 62, you wait until 67-70 and work to fill in the gaps?

Is downsizing/pricing the house an option? I don't see any way to completely stop earning. What are you doing for health insurance?

It really all comes down to how small you can make your spending. Houses cost with taxes/insurance. You mention future car payments.

Not fun, but if you both lock in SS at 62 that might also be a tough road.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
jtdavid
Posts: 156
Joined: Thu Mar 01, 2007 12:21 pm

Re: Retiring with under $1M

Post by jtdavid »

I didn't see anything about your living expenses so its hard to answer. But you are better off than most. I would sell the crypto yesterday and payoff the mortgage with those proceeds and taxable. Think about simplifying the IRAs to a single LifeStrategy fund.
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Tim_in_GA
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Location: O-HI-O

Re: Retiring with under $1M

Post by Tim_in_GA »

$3K mortgage on a $375K house? Pay that sucker off. Everything else depends on your total expenses (which I don't see here).
knightrider
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Re: Retiring with under $1M

Post by knightrider »

Jack FFR1846 wrote: Thu Jan 09, 2020 9:55 am Sell the crypto today! That is pure gambling and you don't have the money to gamble.
+1!
Perkunas
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Re: Retiring with under $1M

Post by Perkunas »

Pretty hard to say whether or not you can retire without having a clue what your expenses are outside of a very large monthly mortgage for what does not seem like an expensive home.

I would advise you continue working. It seems like your mortgage will be paid off within 2 years so that is good news. When you say you'll have $2100 SS if you take it early, do you mean at age 62? Or do you mean at ~66? Seems like you already have health issues that yall are deadling with so working til 65 (medicare) seems like a need.

You are ahead of most, that is for sure. If the house has big property taxes then downsizing would be a good idea even if it will be paid off soon. If the costs to maintain post-mortgage are negligible then maybe it isn't a big deal to stay there a few more years before downsizing.

Couple possible action items:

Remove bonds from your Roth; you want growth in your Roth.

Get the heck out of crypto ASAP.
Cwise
Posts: 61
Joined: Wed Jan 01, 2014 11:51 pm

Re: Retiring with under $1M

Post by Cwise »

Tim_in_GA wrote: Thu Jan 09, 2020 10:02 am $3K mortgage on a $375K house? Pay that sucker off. Everything else depends on your total expenses (which I don't see here).
+1
I'm confused how you could possibly have a $3,000/month mortgage on a $375,000 house you have owned for 33 years. What is going on here? Is the house a piggy bank? If so stop taking money out of it.
JBTX
Posts: 7107
Joined: Wed Jul 26, 2017 12:46 pm

Re: Retiring with under $1M

Post by JBTX »

searchher wrote: Thu Jan 09, 2020 9:46 am Looking for some feedback and suggestions for planning our 60s and beyond.

Net Worth: $880,000 including home equity
Savings account: $130,000
Debt: Mortgage (owe $45,000 @ 4%), no other debt.
Estimated Home Value: $375,000
Tax Filing Status: Married Filing Jointly
Age: 61 & 60


Current Investments (~$420,000)

My Traditional IRA @ Vanguard ($215,000)
$90,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$33,000 Vanguard Prime Money Market Fund (VMMXX) (0.16%)
$54,000 Vanguard Federal Money Market Fund (VMFXX) (0.11%)
$27,000 Vanguard Total International Stock Index Fund (VXUS)
$11,000 Vanguard Total Bond Market Index Fund (BND)

My Roth IRA @ Vanguard ($31,000)
$16,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$15,000 Vanguard Total World Bond ETF (BNDW)

Spouse Traditional IRA @ Vanguard ($46,000)
$44,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$2,000 Vanguard Prime Money Market Fund (VMMXX) (0.16%)

Taxable Brokerage Acct at Vanguard ($105,000)
$17,000 Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)
$20,000 Vanguard Total International Stock ETF (VXUS) (0.11%)
$33,000 Vanguard Federal Money Market Fund (VMFXX) (0.11%)
$10,000 Vanguard Energy ETF (VDE) (0.10%)
$21,000 Vanguard Precious Metals and Mining Fund (VGPMX) (0.37%

Cryptocurrency ($20,000)


Questions:
1) I was layed off a year ago and am having a hard time keeping a consistent job, that is also fulfilling and matches my skill set. It's quite upsetting and difficult to deal with. So my income has recently (and will likely continue to be) sporadic but hopefully at least covers the mortgage ($3,000) and some of our monthly healthcare costs ($1,100).
2) Estimating about $2,100 in Social Security if we take it early or $3,000 if we take it at 70. Projections seem like it may be wise in our case to start taking it early. I don't foresee living well into our 80s based on family history, and think it may make sense to let our investments grow longer by supplementing with social security earlier. What else should I be considering regarding this?
3) We're open to downsizing eventually but we love our house of 33 years and aside from the mortgage, the costs are reasonable for maintaining.
4) We'll likely need to replace one of our cars in the next 3 years and will likely try to find a ~$15k used Toyota or Honda that's reliable and last the rest of our life.
5. How should I think about the stock market? If we have more years like 2019 then I think we'll be pretty safe. But as you can tell, my investments are half food in, half out because I'm scared of losing the little we have and would love to take advantage of a dip to propel us into our future.
6) I'm pretty worried. I feel like we're on the bubble with no margin of safety, yet thankful because I know we're still in a better position than most others. Any words of advice aside from continuing to try to find work?
1. Personally I would not have almost 20% of my investments money market on top of 30% in savings accounts. I understand your hesitancy but you have to decide if you want to be in or out. Figure out a suitable asset allocation and stick with it.

2. You are tilted towards international. Is that deliberate? If so, that is fine, as long as you know why you are doing it.

3. I would not be screwing around with crypto, individual stocks or sector funds, especially if your resources are limited.

4. Your investments are around $500k. You can pull $20k a year out of that reasonably safely. If you keep half of it in cash then perhaps on $15k per year.

5. To the extent you can downsize that will increase what you can have in investments and pull out in annual cash flow.

6. Additional income would be great, but if you can't you can't.

7. In general deferring on social security is best for married couples, but in your case taking it early may be a necessity.

Good luck!
Grt2bOutdoors
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Location: New York

Re: Retiring with under $1M

Post by Grt2bOutdoors »

Tim_in_GA wrote: Thu Jan 09, 2020 10:02 am $3K mortgage on a $375K house? Pay that sucker off. Everything else depends on your total expenses (which I don't see here).
Agree. Pay off the mortgage and get rid of the cryptocurrency.
Cwise wrote: Thu Jan 09, 2020 10:16 am
Tim_in_GA wrote: Thu Jan 09, 2020 10:02 am $3K mortgage on a $375K house? Pay that sucker off. Everything else depends on your total expenses (which I don't see here).
+1
I'm confused how you could possibly have a $3,000/month mortgage on a $375,000 house you have owned for 33 years. What is going on here? Is the house a piggy bank? If so stop taking money out of it.
Payments are PITI - principal, interest, taxes and insurance. It's quite possible that OP has a large property tax burden relative to value of the home. I wouldn't be so quick to pass judgement on why the cost of monthly payment is so high.
Last edited by Grt2bOutdoors on Thu Jan 09, 2020 10:24 am, edited 1 time in total.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
aristotelian
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Re: Retiring with under $1M

Post by aristotelian »

The majority of Americans retire with much less than $1M. Pay off your mortgage, then keep your spending net of Social Security under $40K and you are good.
sixtyforty
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Location: USA

Re: Retiring with under $1M

Post by sixtyforty »

You didn't mention anything about healthcare, so I'm assuming it's covered. If not, be sure to check out ACA in your state. I believe open enrollment is still open until Jan 15. Here are my other observations;

- It's hard to see what your allocation is based on all those funds, but I probably wouldn't be more than 60/40 at your age and situation. Personally,
I would consolidate some funds to make it much simpler especially if you have to start withdrawing from your portfolio. Consider taking this asset allocation questionnaire to get an idea of where you fall within your risk profile etc. https://personal.vanguard.com/us/FundsInvQuestionnaire

- Consider running multiple retirement calculators with your portfolio along with your social security. SS can make a big difference. I found them to be extremely helpful in understanding what your budget can be for a set success ratio etc. Here is a link to a complete list. https://www.bogleheads.org/wiki/Retirem ... d_spending I've personally used, firecalc.com, cfiresim, fidelity and portfolio visualizer. It will help you answer the question "Can I retire with my current portfolio" ?
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci
Lalamimi
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Location: Texas

Re: Retiring with under $1M

Post by Lalamimi »

I was laid off 3/18 at age 64. Little better, but not much. I did draw 6 months of unemployment. Have you: cut cable, cell phone bills, shopped for electricity, new homeowners and car insurance? Its the little things that really help. We shop at Aldi and Walmart a lot more that we used to. Costco for gas and some basics. Do you have enough education to substitute at the schools? Teach a hobby to small groups for $? Pick your favorite stores and apply for jobs there. You said leave wife working out of it, but is there something she can do from home, perhaps. Guessing you are not a veteran?
Its scary, but doable. Apply for all the assistance you can, I saw someone's post here about getting tax credits on Obamacare insurance. Good luck.
soccerrules
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Re: Retiring with under $1M

Post by soccerrules »

knowing your expenses would help to provide additional input.

It appears your mortage may be a large part of your monthly expense. if you only owe $45K, pay it off from your savings account. Even if you are earning 2% there, paying off a 4% note is a win and then you have $3000/mo less on expenses. Another way to look at it. $45K invested with a SWR of 4% provides $1,800/year or $150 month. I would trade a $3000k expenses for a reduction of $150/mo "income". I am not sold on selling the house for sure. Again it come down to your expenses and what you need to pull from nest egg to cover your daily living.

Sell Crypto

I would try and get any work to reduce need to spend your nest egg. If you are handy --check the local Hardware, HD or Lowes. or take a lower job in your field.

Find the link tot he SS optimizer and consider the best drawing strategy for you guys.

Also try and reduce expenses to the bone while you navigate this.
Best of luck
Don't let your outflow exceed your income or your upkeep will be your downfall.
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WoodSpinner
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Re: Retiring with under $1M

Post by WoodSpinner »

searchher wrote: Thu Jan 09, 2020 9:46 am Looking for some feedback and suggestions for planning our 60s and beyond.

Net Worth: $880,000 including home equity
Savings account: $130,000
Debt: Mortgage (owe $45,000 @ 4%), no other debt.
Estimated Home Value: $375,000
Tax Filing Status: Married Filing Jointly
Age: 61 & 60


Current Investments (~$420,000)

My Traditional IRA @ Vanguard ($215,000)
$90,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$33,000 Vanguard Prime Money Market Fund (VMMXX) (0.16%)
$54,000 Vanguard Federal Money Market Fund (VMFXX) (0.11%)
$27,000 Vanguard Total International Stock Index Fund (VXUS)
$11,000 Vanguard Total Bond Market Index Fund (BND)

My Roth IRA @ Vanguard ($31,000)
$16,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$15,000 Vanguard Total World Bond ETF (BNDW)

Spouse Traditional IRA @ Vanguard ($46,000)
$44,000 Vanguard Target Retirement 2025 Fund (VTTVX) (0.14%)
$2,000 Vanguard Prime Money Market Fund (VMMXX) (0.16%)

Taxable Brokerage Acct at Vanguard ($105,000)
$17,000 Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)
$20,000 Vanguard Total International Stock ETF (VXUS) (0.11%)
$33,000 Vanguard Federal Money Market Fund (VMFXX) (0.11%)
$10,000 Vanguard Energy ETF (VDE) (0.10%)
$21,000 Vanguard Precious Metals and Mining Fund (VGPMX) (0.37%

Cryptocurrency ($20,000)
My best advice is to relax a bit, your situation is not dire and with some work and budgeting you will be just fine. At this point, I suggest that you keep trying to find work — transitions aren’t easy and you are in the middle of a big one.

1. I think your Net Worth number is a bit off, might revisit
2. Do you have a target Asset Allocation?
3. Simplify the portfolio, kill Crypto for sure and anything that is under 5% of the portfolio total. A 2 or three fund will suit you well.
4. Posting some more details on your income and expenses will help us give you a better answer.

WoodSpinner
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onthecusp
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Re: Retiring with under $1M

Post by onthecusp »

Following advice above on asset allocation solidifies your investments and underpins my comment here.

If you paid off your mortgage over the next few years (you could actually do it now out of savings/money market) you would have 500,000 in investments now and lower your monthly expenses. Assume those investments only keep up with inflation.

Without any additional savings you have an income at social security full retirement age (66+) of 3,000/month or 36,000/ year. 500,000 in solid investments is generally seen to provide 20,000/year for least 30 years (4% of 500,000, you can read many discussions on the "4% rule." So right now you have assets to provide 56,000/yr, and a paid off home. Federal income tax on this will be minimal, so property taxes and living expenses. You are far from destitute even if you can't save any more.

Following the basic advice gets you to this point. Continuing saving what you can to full retirement age or beyond will improve your lot. So with your difficult employment situation, I would work on that and take what I can get. If you are making more than 56,000 per year try and just live on 56,000 and save the rest. If you are making less, that is what you have. Work on belt tightening and avoid dipping into your investments.
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onthecusp
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Re: Retiring with under $1M

Post by onthecusp »

onthecusp wrote: Thu Jan 09, 2020 10:43 am Following advice above on asset allocation solidifies your investments and underpins my comment here.

If you paid off your mortgage over the next few years (you could actually do it now out of savings/money market) you would have 500,000 in investments now and lower your monthly expenses. Assume those investments only keep up with inflation.

Without any additional savings you have an income at social security full retirement age (66+) of 3,000/month or 36,000/ year. 500,000 in solid investments is generally seen to provide 20,000/year for least 30 years (4% of 500,000, you can read many discussions on the "4% rule." So right now you have assets to provide 56,000/yr, and a paid off home. Federal income tax on this will be minimal, so property taxes and living expenses. You are far from destitute even if you can't save any more.

Following the basic advice gets you to this point. Continuing saving what you can to full retirement age or beyond will improve your lot. So with your difficult employment situation, I would work on that and take what I can get. If you are making more than 56,000 per year try and just live on 56,000 and save the rest. If you are making less, that is what you have. Work on belt tightening and avoid dipping into your investments.

In edit, I meant to add that if you can follow such a plan, the investments will likely grow a bit over inflation for the next few years and you will be in a better position.
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UpsetRaptor
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Re: Retiring with under $1M

Post by UpsetRaptor »

My .02
- Sell Crypto
- Combine ^ with some taxable and pay off mortgage. That's a guaranteed 4% return (and you have 1/3 your portfolio in money market yielding <2%), and frees up monthly cashflow.
- Read up: The wiki and forum here is all you really need, or books: Bogleheads Guide to Investing, Bogleheads Guide to Three Fund Portfolio
- Simplify your portfolio into a three-fund portfolio or something similar. TIRAs for any fixed income. Taxable for any equities.
- Continue to try to find work wherever you can.
- Try to delay SS as long as you can.
- You'll be okay.
Cwise
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Re: Retiring with under $1M

Post by Cwise »

Grt2bOutdoors wrote: Thu Jan 09, 2020 10:21 am
Tim_in_GA wrote: Thu Jan 09, 2020 10:02 am $3K mortgage on a $375K house? Pay that sucker off. Everything else depends on your total expenses (which I don't see here).
Agree. Pay off the mortgage and get rid of the cryptocurrency.
Cwise wrote: Thu Jan 09, 2020 10:16 am
Tim_in_GA wrote: Thu Jan 09, 2020 10:02 am $3K mortgage on a $375K house? Pay that sucker off. Everything else depends on your total expenses (which I don't see here).
+1
I'm confused how you could possibly have a $3,000/month mortgage on a $375,000 house you have owned for 33 years. What is going on here? Is the house a piggy bank? If so stop taking money out of it.
Payments are PITI - principal, interest, taxes and insurance. It's quite possible that OP has a large property tax burden relative to value of the home. I wouldn't be so quick to pass judgement on why the cost of monthly payment is so high.
Exactly my point. Knowing what is happening here could help provide better answers. What are the costs of staying in the house even after paying off the $45K owed on it? If it is property tax or insurance then it could be time to move.
wolf359
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Re: Retiring with under $1M

Post by wolf359 »

+1 on:
- Getting out of crypto
- Simplifying your portfolio, getting out of sector funds and individual stocks, all of which increase risk.
- Writing down your investment strategy in an investor's policy statement

With health issues and sporadic work, what you have is what you have. Any additional work you get at this point should be prioritized to cover the bills, and won't build up the nest egg any further.

That means you have two priorities:

1) Reduce your expenses.
2) Increase your income.

REDUCE EXPENSES:
The lower you can make your expenses, the less income is required to sustain your current lifestyle.

- I agree with using the crypto proceeds to pay off the mortgage, combining it with taxable savings as required. Knocking $3,000/mo off your current expenses is a huge short-term win that should alleviate a lot of pressure.
- Keep the car alive as long as possible. When it's time to get rid of it, see if you can live with one car as long as possible. Car expenses are the second largest expense behind housing. In fact, if you can attempt to live with one car now (and just reduce the wear & tear and insurance costs on the less reliable one) you might be able to cut operating costs, and still have it around as a backup.
- Focus on jobs that cover the health care.

INCREASE INCOME:
I'm not just talking about current income. Your Social Security represents an inflation adjusted income stream that you cannot outlive. Maximizing it is more important than maximizing your nest egg. If you're wrong about you or your spouse's lifespan, then you risk running out of money before you run out of life. If at all possible, try to defer the largest Social Security check until age 70. If your spouse is eligible for Social Security on her own work history, you might have her claim earlier or at FRA if that's necessary to max out that big one. The reason it's so important is that when one of you passes, the survivor will be left will only the larger of the two SSA checks. The budget at that point may go critical, and may not be large enough to live on if the investment account has been depleted. You need to look beyond retirement as a couple and look at all the future possible outcomes.

The point of working while you can is to reduce the drawdown on your investments. If that isn't possible due to health reasons, or simple difficulty of finding work, then reducing expenses becomes even more critical. You're not saying what your annual spending is, so I can't estimate whether or not your current nest egg will sustain you for the time required.

Whether or not you keep the house depends upon what level of income you can sustain and whether or not you need the assets it would free up to live on. One of the benefits of a paid off mortgage is that it caps your housing expense. Rents might go up in the future. It also keeps the house equity in reserve should something bad happens to your portfolio balance.
michaeljc70
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Re: Retiring with under $1M

Post by michaeljc70 »

As others said, it is hard to say much without knowing your expenses. It doesn't seem like your situation is that bad if your expenses are relatively low. I recently read that 25% of people that retire early do so because they lose their job and don't find another suitable job, so it is pretty common. My biggest concern is that you seem to not have enough in equities to sustain a high SWR. It is a paradox because with more equities you might not be able to sleep at night but without them (and in low earning MM/CDs) you may not be able to sleep at night worrying about not earning enough from investments to live off.
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JoeRetire
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Re: Retiring with under $1M

Post by JoeRetire »

searchher wrote: Thu Jan 09, 2020 9:46 am Net Worth: $880,000 including home equity
Savings account: $130,000
Debt: Mortgage (owe $45,000 @ 4%), no other debt.
Estimated Home Value: $375,000
Tax Filing Status: Married Filing Jointly
Age: 61 & 60

Current Investments (~$420,000)

Questions:
1) I was layed off a year ago and am having a hard time keeping a consistent job, that is also fulfilling and matches my skill set. It's quite upsetting and difficult to deal with. So my income has recently (and will likely continue to be) sporadic but hopefully at least covers the mortgage ($3,000) and some of our monthly healthcare costs ($1,100).
2) Estimating about $3,000 in Social Security if we take it at 66 or $4,000 if we take it at 70. Projections seem like it may be wise in our case to start taking it early. I don't foresee living well into our 80s based on family history, and think it may make sense to let our investments grow longer by supplementing with social security earlier. What else should I be considering regarding this?
It would probably not be wise to take social security earlier.

Experiment with https://opensocialsecurity.com/

Likely it will advise that the higher earner delay until 70. Given your lack of assets, that may be particularly important if you are able.
6) I'm pretty worried. I feel like we're on the bubble with no margin of safety, yet thankful because I know we're still in a better position than most others. Any words of advice aside from continuing to try to find work?
I'd be worried too. And I'd find a way to get on a payroll as soon as possible.

Stop waiting for a job that is "consistent", "fulfilling" and "matches your skill set". Instead, find one that can give you healthcare and help pay your bills. You can always keep looking for something more appealing, but doing it while you are on a payroll will ease some of the financial pressure.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
l8_apex
Posts: 6
Joined: Fri Mar 08, 2019 10:57 am

Re: Retiring with under $1M

Post by l8_apex »

Seems like everybody's comments above are pretty consistent and I agree with all of them. I would be focusing more on expenses. Do you live somewhere with a particularly high cost of living, and or high taxes particularly property taxes? Are you willing to relocate if that provided you a low enough cost of living that you felt like you had better safety net?

Your situation is far from dire, you are better off than most.
ohai
Posts: 1327
Joined: Wed Dec 27, 2017 2:10 pm

Re: Retiring with under $1M

Post by ohai »

I think a large part of the discussion is how OP will find consistent work to pay for living expenses, as this is going to be more important than asset allocation in the short term.
Topic Author
searchher
Posts: 38
Joined: Tue May 22, 2018 11:50 am

Re: Retiring with under $1M

Post by searchher »

Perkunas wrote: Thu Jan 09, 2020 10:06 am Pretty hard to say whether or not you can retire without having a clue what your expenses are outside of a very large monthly mortgage for what does not seem like an expensive home.

I would advise you continue working. It seems like your mortgage will be paid off within 2 years so that is good news. When you say you'll have $2100 SS if you take it early, do you mean at age 62? Or do you mean at ~66? Seems like you already have health issues that yall are deadling with so working til 65 (medicare) seems like a need.

You are ahead of most, that is for sure. If the house has big property taxes then downsizing would be a good idea even if it will be paid off soon. If the costs to maintain post-mortgage are negligible then maybe it isn't a big deal to stay there a few more years before downsizing.

Couple possible action items:

Remove bonds from your Roth; you want growth in your Roth.

Get the heck out of crypto ASAP.
Average Monthly Expenses ($7,260, so $4,260 after mortgage is paid off for annual expenses of $51,000)
-$3,000 mortgage
-$1,600 healthcare (insurance + meds)
-$1,000 dining/groceries
-$550 other
-$350 home maintenance
-$330 cable & utilities
-$150 clothing/other shopping
-$140 cell phones
-$140 other insurance
wolf359
Posts: 2212
Joined: Sun Mar 15, 2015 8:47 am

Re: Retiring with under $1M

Post by wolf359 »

searchher wrote: Thu Jan 09, 2020 2:01 pm Average Monthly Expenses ($7,260, so $4,260 after mortgage is paid off for annual expenses of $51,000)
-$3,000 mortgage
-$1,600 healthcare (insurance + meds)
-$1,000 dining/groceries
-$550 other
-$350 home maintenance
-$330 cable & utilities
-$150 clothing/other shopping
-$140 cell phones
-$140 other insurance
If you did pay off the mortgage, how much of that payment is going to property taxes and homeowner's insurance? That part of the mortgage payment becomes your responsibility, and won't actually go away. That amount would still need to be accounted for.

Is car maintenance, repairs, gasoline, and car insurance covered in other line items?

Can you get good coverage under T-Mobile? They're a major nationwide carrier with a plan targeted at seniors. It's only $55 for two lines, unlimited talk, text, and data, and might cut your cell bill by 60%. The plan is called "Magenta" or "Essentials Unlimited 55." It supports iPhone and Android, where you use your own phone. (Of course, they'll sell you one, too.)
JGoneRiding
Posts: 1970
Joined: Tue Jul 15, 2014 3:26 pm

Re: Retiring with under $1M

Post by JGoneRiding »

Why is the mortgage so high?
Is that taxes and insurance and not actually your .mortgage payment or are you un a really short term?

If that is really mortgage payment I would refi. If p&I are actually low and mostly t&I then you are very stuck.
michaeljc70
Posts: 7240
Joined: Thu Oct 15, 2015 3:53 pm

Re: Retiring with under $1M

Post by michaeljc70 »

I don't know if anyone has mentioned it, but anywhere I could simplify my portfolio without significant tax consequences I would. Having things that are .1% of your portfolio isn't really doing anything. Personally, I'd pick a target retirement fund or life strategy fund or 3 fund portfolio that you feel comfortable with. You don't need to pick a target date fund that corresponds with when you are retiring. You can adjust the risk up or down by going up or down on the year. The advantage of rolling your own portfolio is you can put more tax efficient things in the taxable account.

If you are not working or working and making less than ~$65k you should be able to get an ACA subsidy for the next 4 years. $19k in healthcare costs a year is a lot. Depending on the state though if your income is too low you might be pushed to Medicaid or not eligible at all.
User avatar
Watty
Posts: 20902
Joined: Wed Oct 10, 2007 3:55 pm

Re: Retiring with under $1M

Post by Watty »

searchher wrote: Thu Jan 09, 2020 9:46 am Average Monthly Expenses ($7,260, so $4,260 after mortgage is paid off for annual expenses of $51,000)
searchher wrote: Thu Jan 09, 2020 9:46 am Savings account: $130,000
Debt: Mortgage (owe $45,000 @ 4%), no other debt.
searchher wrote: Thu Jan 09, 2020 9:46 am Cryptocurrency ($20,000)
Sell the Crypto and take some money out of the savings account to pay off the Mortgage ASAP, like tomorrow.

It looked like you did not include income taxes or property in your expenses but your numbers would be a lot more manageable without the mortage. You will also need to budget for occasional large expenses like major home repairs or replacing cars.

The house is still pretty expensive compared to your net worth so one of the tradeoffs of not downsizing would be that you will still need to keep working as much as possible even though it is frustrating. Even if you can earn just $2,000 a month that will be about half of your budget.
User avatar
Watty
Posts: 20902
Joined: Wed Oct 10, 2007 3:55 pm

Re: Retiring with under $1M

Post by Watty »

michaeljc70 wrote: Thu Jan 09, 2020 2:54 pm If you are not working or working and making less than ~$65k you should be able to get an ACA subsidy for the next 4 years. $19k in healthcare costs a year is a lot. Depending on the state though if your income is too low you might be pushed to Medicaid or not eligible at all.
How to get the maximum ACA subsidy without getting into Medicaid(unless you wanted to) is a good point and could be a topic for a different thread.

One easy way to get enough income to not go onto Medicaid is to do Roth conversions of just enough to get your income above that cut off point.
Topic Author
searchher
Posts: 38
Joined: Tue May 22, 2018 11:50 am

Re: Retiring with under $1M

Post by searchher »

wolf359 wrote: Thu Jan 09, 2020 2:32 pm
searchher wrote: Thu Jan 09, 2020 2:01 pm Average Monthly Expenses ($7,260, so $4,260 after mortgage is paid off for annual expenses of $51,000)
-$3,000 mortgage
-$1,600 healthcare (insurance + meds)
-$1,000 dining/groceries
-$550 other
-$350 home maintenance
-$330 cable & utilities
-$150 clothing/other shopping
-$140 cell phones
-$140 other insurance
If you did pay off the mortgage, how much of that payment is going to property taxes and homeowner's insurance? That part of the mortgage payment becomes your responsibility, and won't actually go away. That amount would still need to be accounted for.

Is car maintenance, repairs, gasoline, and car insurance covered in other line items?

Can you get good coverage under T-Mobile? They're a major nationwide carrier with a plan targeted at seniors. It's only $55 for two lines, unlimited talk, text, and data, and might cut your cell bill by 60%. The plan is called "Magenta" or "Essentials Unlimited 55." It supports iPhone and Android, where you use your own phone. (Of course, they'll sell you one, too.)
Mortgage details
Remaining Balance: $45,000
Term/Rate: 10 years/3.125%
$3,015
Principle: $2,340
Interest: $125
PMI: $0
Escrow: $550
Property Taxes are about $5k/yr

EDIT:
I could take money from my savings or sell the $33,000 of Vanguard Federal Money Market Fund (VMFXX) in my taxable account to pay off the mortgage early. I was keeping it for a rainy day, emergencies, or to take advantage of stocks if markets dip. What are the advantages of paying the house now given that interest is a very little portion of the total payment? To be clear, I'd love to pay it off because mentally that would feel good but I'm unsure if it's the wisest money decision.
Last edited by searchher on Thu Jan 09, 2020 4:06 pm, edited 1 time in total.
Topic Author
searchher
Posts: 38
Joined: Tue May 22, 2018 11:50 am

Re: Retiring with under $1M

Post by searchher »

michaeljc70 wrote: Thu Jan 09, 2020 2:54 pm I don't know if anyone has mentioned it, but anywhere I could simplify my portfolio without significant tax consequences I would. Having things that are .1% of your portfolio isn't really doing anything. Personally, I'd pick a target retirement fund or life strategy fund or 3 fund portfolio that you feel comfortable with. You don't need to pick a target date fund that corresponds with when you are retiring. You can adjust the risk up or down by going up or down on the year. The advantage of rolling your own portfolio is you can put more tax efficient things in the taxable account.

If you are not working or working and making less than ~$65k you should be able to get an ACA subsidy for the next 4 years. $19k in healthcare costs a year is a lot. Depending on the state though if your income is too low you might be pushed to Medicaid or not eligible at all.
What's the best way for me to go about figuring out if I can get an ACA subsidy? Can that happen in retrospect after I figure out how much I bring in for 2020? Right now, I'm bringing in $5,000 a month. My hope is to increase that but there's always a chance it stays flat or decreases.
Lalamimi
Posts: 619
Joined: Mon Jun 24, 2019 4:22 pm
Location: Texas

Re: Retiring with under $1M

Post by Lalamimi »

after a layoff in 2007, I took a contract position and drove almost 200 miles each Sunday, stayed w friends, family, occasionally a hotel (thru Hotwire) for almost 4 years. Would return home on Fridays to DH and dogs. Not fun, but that was where the money was and our "retirement home" was on 10 acres. My dad used to have to go out of town to work construction. Its not that hard. BTH, we sold the place last year and retired back near family.
wolf359
Posts: 2212
Joined: Sun Mar 15, 2015 8:47 am

Re: Retiring with under $1M

Post by wolf359 »

searchher wrote: Thu Jan 09, 2020 3:21 pm
wolf359 wrote: Thu Jan 09, 2020 2:32 pm
searchher wrote: Thu Jan 09, 2020 2:01 pm Average Monthly Expenses ($7,260, so $4,260 after mortgage is paid off for annual expenses of $51,000)
-$3,000 mortgage
-$1,600 healthcare (insurance + meds)
-$1,000 dining/groceries
-$550 other
-$350 home maintenance
-$330 cable & utilities
-$150 clothing/other shopping
-$140 cell phones
-$140 other insurance
If you did pay off the mortgage, how much of that payment is going to property taxes and homeowner's insurance? That part of the mortgage payment becomes your responsibility, and won't actually go away. That amount would still need to be accounted for.

Is car maintenance, repairs, gasoline, and car insurance covered in other line items?

Can you get good coverage under T-Mobile? They're a major nationwide carrier with a plan targeted at seniors. It's only $55 for two lines, unlimited talk, text, and data, and might cut your cell bill by 60%. The plan is called "Magenta" or "Essentials Unlimited 55." It supports iPhone and Android, where you use your own phone. (Of course, they'll sell you one, too.)
Mortgage details
Remaining Balance: $45,000
Term/Rate: 10 years/3.125%
$3,015
Principle: $2,340
Interest: $125
PMI: $0
Escrow: $550
Property Taxes are about $5k/yr
So if I'm understanding it correctly, your post-mortgage expenses would actually be $4810/mo, or $57,720/year.

If you make it to age 70, your Social Security will cover $4,000/mo. Your remaining savings will then have to cover a shortfall of ~$810/mo. Using the 4% rule of thumb, your retirement savings at age 70 needs to be about $243,000 to cover you for about 30 years. You stated you were worried about being close to the edge. You have multiple margins of safety (things that give you flexibility and will help you achieve your financial goals):

1) The more you can reduce expenses and cut back before you have a steady income stream coming in, the less financial stress on your budget. There's room to cut back, but the actual choices for what is acceptable for your lifestyle and spouse are up to you.

2) The more you can work to offset the health care expense (getting it covered by work) or to pay the bills without pulling the income from savings, the better. You have less than a decade to cover before age 70. This margin of safety may decrease as you get older and as your health worsens, so try to take advantage of it while you can.

3) Time works in your favor the longer you delay tapping your investments and the longer you wait to claim Social Security. The investments can be simplified. Almost a decade more of compounding should grow the nest egg, even if you can't add to it. Make sure you have a sufficient bond allocation -- you can't afford to take big risks with your portfolio. Gambles like bitcoin, market timing, and day trading in individual stocks should be in the rear view mirror at this point in your life.

4) Your home equity acts as a last margin of safety. If your nest egg isn't enough, you could either sell the house, or take out a loan and turn it into a reverse mortgage. However these measures should be your last line of financial defense.

You should also stress test your plan for what happens if one of the Social Security checks stops, and if Social Security takes a 25% haircut around 2035.

Overall, things aren't as bad as you may be fearing. You can do this -- it just takes some reasonable steps to cut back, manage the budget and investments, and work if you can.
Last edited by wolf359 on Thu Jan 09, 2020 4:01 pm, edited 2 times in total.
core4portfolio
Posts: 576
Joined: Thu Dec 26, 2013 2:12 pm

Re: Retiring with under $1M

Post by core4portfolio »

Only advise from my end is you can get MINT mobile or RED POCKET mobile and pay less than 140 per month.
ATT prepaid is 300 per year. Try reduce cell phone bill if you wish.
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner
JGoneRiding
Posts: 1970
Joined: Tue Jul 15, 2014 3:26 pm

Re: Retiring with under $1M

Post by JGoneRiding »

On the budget.
You should be closer to $500 per month for 2 people for food mcoh have this be your wife goal.
Household needs should be fairly min. Dont by stuff you are old no one else wants the stuff. Only buy consumables.
Clothing budget seems crazy high for 2 not working people.
Ditch the cable. Get Netflix or Amazon fire call it good.
The cell phone bills are high to can half that.

With the above you should be able to get the none mortgage budget down to about $35 to 40k a year . With that you would be fine!
michaeljc70
Posts: 7240
Joined: Thu Oct 15, 2015 3:53 pm

Re: Retiring with under $1M

Post by michaeljc70 »

searchher wrote: Thu Jan 09, 2020 3:27 pm
michaeljc70 wrote: Thu Jan 09, 2020 2:54 pm I don't know if anyone has mentioned it, but anywhere I could simplify my portfolio without significant tax consequences I would. Having things that are .1% of your portfolio isn't really doing anything. Personally, I'd pick a target retirement fund or life strategy fund or 3 fund portfolio that you feel comfortable with. You don't need to pick a target date fund that corresponds with when you are retiring. You can adjust the risk up or down by going up or down on the year. The advantage of rolling your own portfolio is you can put more tax efficient things in the taxable account.

If you are not working or working and making less than ~$65k you should be able to get an ACA subsidy for the next 4 years. $19k in healthcare costs a year is a lot. Depending on the state though if your income is too low you might be pushed to Medicaid or not eligible at all.
What's the best way for me to go about figuring out if I can get an ACA subsidy? Can that happen in retrospect after I figure out how much I bring in for 2020? Right now, I'm bringing in $5,000 a month. My hope is to increase that but there's always a chance it stays flat or decreases.
It can only happen in retrospect if you bought a plan for 2020 on the ACA exchange. If you do that you can get a monthly premium credit which reduces the premium you pay or you can reconcile it on your 2020 taxes and get the credit then.
Topic Author
searchher
Posts: 38
Joined: Tue May 22, 2018 11:50 am

Re: Retiring with under $1M

Post by searchher »

I could take money from my savings or sell the $33,000 of Vanguard Federal Money Market Fund (VMFXX) in my taxable account to pay off the mortgage early. I was keeping it for a rainy day, emergencies, or to take advantage of stocks if markets dip. What are the advantages of paying the house now given that interest is a very little portion of the total payment? To be clear, I'd love to pay it off because mentally that would feel good but I'm unsure if it's the wisest money decision.

Thank you all.
michaeljc70
Posts: 7240
Joined: Thu Oct 15, 2015 3:53 pm

Re: Retiring with under $1M

Post by michaeljc70 »

searchher wrote: Thu Jan 09, 2020 4:06 pm I could take money from my savings or sell the $33,000 of Vanguard Federal Money Market Fund (VMFXX) in my taxable account to pay off the mortgage early. I was keeping it for a rainy day, emergencies, or to take advantage of stocks if markets dip. What are the advantages of paying the house now given that interest is a very little portion of the total payment? To be clear, I'd love to pay it off because mentally that would feel good but I'm unsure if it's the wisest money decision.

Thank you all.
You are keeping money in VMFXX earning 1.5% (before taxes) while paying 3.125% or 4% (the % is different in your 1st post and later post) on the mortgage.
delamer
Posts: 10590
Joined: Tue Feb 08, 2011 6:13 pm

Re: Retiring with under $1M

Post by delamer »

searchher wrote: Thu Jan 09, 2020 4:06 pm I could take money from my savings or sell the $33,000 of Vanguard Federal Money Market Fund (VMFXX) in my taxable account to pay off the mortgage early. I was keeping it for a rainy day, emergencies, or to take advantage of stocks if markets dip. What are the advantages of paying the house now given that interest is a very little portion of the total payment? To be clear, I'd love to pay it off because mentally that would feel good but I'm unsure if it's the wisest money decision.

Thank you all.
Despite the fact that your monthly mortgage interest is low in dollar terms, you are still paying 4% on it versus earning 2% on your savings. So it doesn’t make sense not to pay it off (throw in some other taxable money to do so).

But do remember that you’ll only get rid of the P&I, not the escrow.

Between food, “other,” and home maintenance, you are spending nearly $2,000 a month. Given your financial insecurity, you should be looking very closely at ways to cut back in those categories. If you can reduce those costs by 20%, you’ll save $400/month.

Good luck.
snowman
Posts: 1196
Joined: Thu Jan 31, 2013 12:59 pm

Re: Retiring with under $1M

Post by snowman »

You are in good shape, not as close to the edge as you fear. Look at your entire financial picture, rearrange some stuff, you should be good to go.

Below are 2 links that will help you plan financially for ACA health insurance (should be way lower than what you are spending now):

https://www.payingforseniorcare.com/fed ... erty-level

https://www.kff.org/interactive/subsidy-calculator/

The first table will tell you which "bracket" you fall into - from below poverty line all the way to the "cliff". The second one takes you to interactive calculator that will tell you exactly what your monthly premium would be. Play with it and see the difference. By utilizing both taxable and tax-deferred investments efficiently, you should be able to reduce your healthcare expenses significantly until you hit Medicare.
ExitStageLeft
Posts: 1946
Joined: Sat Jan 20, 2018 4:02 pm

Re: Retiring with under $1M

Post by ExitStageLeft »

I agree with others that you are in a fairly good position provided you can keep working three more years.

I assume a budget of $60k annually once you pay off the mortgage. If you can work until age 65 without tapping the nest egg, it should be about $550k by then (market obliging).

You could then draw from the retirement accounts while deferring social security. The reason to do this is for longevity insurance. The odds are good that one of you will live to age 90.

If you can hold off until age 70 for SS then you will only need to draw $12k from retirement accounts to live on. The RMD will probably exceed that, so you can start building up the taxable account.

Using CFIRESim, a scenario where you work four more years then take SS has a 95% success rate with an annual spend of $58k.

With that same scenario but delaying SS until age 70 then the 95% success rate has an annual spend of $61k.

To sum up, I think you have a few years to figure this out as long as you can work enough to pay the bills. That means paying off the mortgage and trimming as much from the budget as you are comfortable with.

If the intervening years are market friendly then you can probably live off the tax-deferred funds while deferring SS to age 70. If the market is brutal then you may need to take SS earlier and take more drastic measures to reduce your expenses.
jwhitaker
Posts: 70
Joined: Thu Jun 16, 2016 12:57 pm

Re: Retiring with under $1M

Post by jwhitaker »

I know it has been said but something seemed off with your mortgage. I think the disconnect for me, maybe others to, is that 10 years was the original term, not the time remaining now. It makes absolutely no sense to have to pay 3k per month for 10 years to pay off 40k. You probably only have a few years left, so to pay it off now gets rid of that large monthly payment, save you some interest expense, and will simplify things as you navigate this question.
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