Stumbling upon Retirement

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LunaLauren
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Stumbling upon Retirement

Post by LunaLauren »

I'm considering an imminent retirement. Personal and world events have caused me to consider now may be a good time to step off the crazy train.

I'm fortunate (one way of looking at it) to have ended up at age 59.5, with approx $2M in a mix of taxable, deferred and nontaxable retirement accounts. It is invested too conservatively 30/70 because as I aged, I started freaking out at the thought of losing a whole bunch of life savings in the market and adjusted my AA.

Additionally, an $1,100/month pension - from which will be deducted, approx $175/month premium for healthcare in retirement. I am eligible for both of these now.

At 62, $2K in Soc Sec, and I believe it rises to $3K month if wait to draw at age 67.

Divorced (was married 10 years, former spouse still works), no debts, few tangible assets - a vehicle worth about $15K. no property, currently renting.

household goods, mostly sentimental.

My one adult child will receive a very large inheritance from a family member's estate soon, so I feel no need to leave a legacy, only any remaining property I hold at the time of death.

My family has a history of its members living into their 80s on average (mix of 70s- late 90s).

I have always been frugal, living on approximately $70-80K in a HCOL area, after taxes and retirement funding deductions. I plan to move from a HCOL area to a medium to low COL area.

Looking for opinions, outside views. I am not objective. I have arrived at this point not because I figured out how much my annual expenses are and then arrived at a nestegg to withdraw from.

I arrived here because I was frugal, invested consistently for 30 years and never touched my retirement accounts. For all intents and purposes, I employed a set it and forget it approach.

It appears I can retire and still live on approx $116K/year

80K (4% SWR) + 12K (pension) + 24K (if I take Soc Sec at 62) = $116K.

So basically, unless I am missing something, I can live on $116K in retirement and *have a more comfortable, higher income lifestyle* than I did when I was working?

What am I missing?

I don't know how much longer I will consider renting...thinking I might want to buy a condo. In the area I am looking at to move to, a nicer condo in a neighborhood with amenities starts at $200K. So that would dial my assets back to about $1.8M, unless I could get a mortage in retirement?

Based on this portfolio of assets and income streams, age, etc. what kind of financial retirement would you design for yourself?

Several will likely point out that this is a personal decision. I know that, I am asking because I suspect I have played things too safe for too long and maybe I can live a little now. As I said, I don't feel objective here. (short note - childhood spent in poverty can do that to a person, enuff said on that).

THANKS!
Last edited by LunaLauren on Thu Jul 16, 2020 6:35 pm, edited 1 time in total.
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FiveK
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Re: Stumbling upon Retirement

Post by FiveK »

LunaLauren, welcome to the forum.

It appears you are in a good situation - congratulations!

You might consider delaying Soc. Sec. benefits. See Open Social Security: Free, Open-Source Social Security Calculator for an objective perspective on that topic.

Have you assembled some budgets for yourself: bare-bones, normal, and "reasonably extravagant", to see how those numbers compare with your resources?
BernardShakey
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Re: Stumbling upon Retirement

Post by BernardShakey »

Personally, I would stay away from a mortgage in retirement though today's low rates are enticing. Is your 70/30 AA 70% stocks and 30% bonds ? If so, I would not view that as too conservative for someone planning to retire and just about to hit 60.
An important key to investing is having a well-calibrated sense of your future regret.
Topic Author
LunaLauren
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Re: Stumbling upon Retirement

Post by LunaLauren »

Thank you for pointing that out. I accidentally reversed those and have corrected it. The AA stands at 30/70.
BernardShakey
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Re: Stumbling upon Retirement

Post by BernardShakey »

Ah, much better. That might be a little conservative for your age but probably not overly so, IMO. Everyone has their mix that allows them to sleep well.
An important key to investing is having a well-calibrated sense of your future regret.
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Stinky
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Re: Stumbling upon Retirement

Post by Stinky »

Welcome to the Forum!

Some might say that a 4% withdrawal rate might be aggressive. Especially since you could be living 30+ years in retirement.

How would it look for you at 3.5%, or even 3%?
It's a GREAT day to be alive - Travis Tritt
02nz
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Re: Stumbling upon Retirement

Post by 02nz »

I would not take SS at 62. I would wait until FRA. That maximizes the COLA'd "annuity" and is good old age insurance. Use the time between retiring and 70 to withdraw from, and/or do Roth conversions on, your traditional (tax-deferred) balance at low tax rates, and take long-term capital gains from taxable at 0%. Between the two you can have a bit over $50K of income as a single filer every year (including pension) and still pay a low income tax rate (0% LTCG). Drawing down your tax-deferred balance before starting SS will lower your RMDs and should in most cases result in more spendable money after tax. Try to draw from Roth last.

30/70 is ok though on the conservative side.
Last edited by 02nz on Thu Jul 16, 2020 9:45 pm, edited 1 time in total.
Topic Author
LunaLauren
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Re: Stumbling upon Retirement

Post by LunaLauren »


How would it look for you at 3.5%, or even 3%?


That would bring me closer to about $100K/year which already seems higher than my past several years of income/expenses yet while also working.

That said - I think I need to consider the difference between attempting to spend down a portfolio vs. leaving a legacy (which matters little to me, if life works out that way).
megabad
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Re: Stumbling upon Retirement

Post by megabad »

Looks like I would bet you would be ok. I can't tell if you are considering taxes (in your 116k). If not, remember that is another $10-15k expense right there. Even so you have a pretty decent buffer. Just a reminder, you are outside the normal parameters of the 4% rule with your asset allocation (and possibly your age). This may or may not mean that 4% is a little high. Also, looks like you have a few years where you could do roth conversion in the 12% bracket if desired.
Colorado Guy
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Re: Stumbling upon Retirement

Post by Colorado Guy »

LunaLauren wrote: Thu Jul 16, 2020 4:11 pm At 62, $2K in Soc Sec, and I believe it rises to $3K month if wait to draw at age 67.
FYI, there are Social Security Divorced Spouse Benefits that may be helpful.
https://www.benefits.gov/benefit/4388
This may (or may not) permit you to delay your Social Security until FRA or even 70.
LunaLauren wrote: Thu Jul 16, 2020 4:11 pm Divorced (was married 10 years, former spouse still works),
Ten years is key, as requirements are
  • Be at least 62 years old and not currently married.
    Be divorced from a person who receives Social Security retirement or disability benefits.
    Have been married to that person for at least 10 years before the date the divorce became final.
    Not be entitled an equal or higher retirement or disability benefits.
tibbitts
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Re: Stumbling upon Retirement

Post by tibbitts »

I think 4% is wildly optimistic for retiring at your age, but it sounds like you can live comfortably at 3% or less and I'd suggest that.

If not for social security being in legislative limbo I would suggest postponing it (barring health issues) until after FRA at 67. That's what I had counted on being able to do, until recently. Now, I don't think I'll take it at 62, but maybe 63 or 64. Not having those additional years for Roth conversions undermines what I had thought were my fairly carefully thought-out retirement plans.
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Watty
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Re: Stumbling upon Retirement

Post by Watty »

LunaLauren wrote: Thu Jul 16, 2020 4:11 pm What am I missing?
A couple of things;

1) One thing to keep in mind is that your expenses will be different at different ages. I have seen relatives get into about their mid 70s and naturally slow down even though they were in relatively good health for their age. At that point they did not want to travel much and even a big evening out was a rare event. They were also more interested in downsizing then buying more stuff. At that point their spending went way down and since they had a paid off house their main expenses were things like food, utilities, and a house keeper that came in several days a week.

2) I really like the idea of having a paid off house or condo in retirement since that makes your expenses more predictable and often reduces your taxes since you need less income to live on. That said it would be good to rent for at least a year if you move to the lower cost of living area. That will give you a chance to make sure that you really like that area and to learn more about the local housing market.

3) If you move be sure to check to see if you will have in-network doctors with your retirement healthcare plan in the area you move to. You may have something like Blue Cross and Blue Cross might be in that area but that does not always mean your your plan has in network doctors in that area.
tibbitts
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Re: Stumbling upon Retirement

Post by tibbitts »

Watty wrote: Thu Jul 16, 2020 8:17 pm
LunaLauren wrote: Thu Jul 16, 2020 4:11 pm What am I missing?
A couple of things;

1) One thing to keep in mind is that your expenses will be different at different ages. I have seen relatives get into about their mid 70s and naturally slow down even though they were in relatively good health for their age. At that point they did not want to travel much and even a big evening out was a rare event. They were also more interested in downsizing then buying more stuff. At that point their spending went way down and since they had a paid off house their main expenses were things like food, utilities, and a house keeper that came in several days a week.

2) I really like the idea of having a paid off house or condo in retirement since that makes your expenses more predictable and often reduces your taxes since you need less income to live on. That said it would be good to rent for at least a year if you move to the lower cost of living area. That will give you a chance to make sure that you really like that area and to learn more about the local housing market.

3) If you move be sure to check to see if you will have in-network doctors with your retirement healthcare plan in the area you move to. You may have something like Blue Cross and Blue Cross might be in that area but that does not always mean your your plan has in network doctors in that area.
1. I think the expenses slowing with age thing has been largely cancelled out by Covid-19.

2. A house or condo vs. renting has more variable expenses, due to sometimes-unanticipated sudden large expenditures being required.

3. Totally agree with checking on Healthcare. Mine has no out-of-state providers in-network, and I can't choose a (employer-subsidized) plan that does.
Barsoom
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Re: Stumbling upon Retirement

Post by Barsoom »

LunaLauren wrote: Thu Jul 16, 2020 7:21 pm
How would it look for you at 3.5%, or even 3%?


That would bring me closer to about $100K/year which already seems higher than my past several years of income/expenses yet while also working.

That said - I think I need to consider the difference between attempting to spend down a portfolio vs. leaving a legacy (which matters little to me, if life works out that way).
You should try modeling your portfolio, expenses, pension, social security, taxes, etc., in the BH Retiree Portfolio Model spreadsheet. It will let you model your cash flow out for 40 years. You can look at the impacts of decisions on taxes paid, asset allocation changes, inflation, etc. See how your taxes might change in retirement, which will leave more of your withdrawals for living expenses.

Here's the link: viewtopic.php?f=2&t=97352

-B
Topic Author
LunaLauren
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Joined: Thu Jul 16, 2020 3:42 pm

Re: Stumbling upon Retirement

Post by LunaLauren »


Ten years is key, as requirements are
Be at least 62 years old and not currently married.
Be divorced from a person who receives Social Security retirement or disability benefits.
Have been married to that person for at least 10 years before the date the divorce became final.
Not be entitled an equal or higher retirement or disability benefits.



Thank you. I had planned to look into this. In the not too distant future, I will be 62 and don't plan to marry. Also meet the 10 year requirement. I need to consider whose benefit would be higher BUT I also noticed that the ex spouse has to be receiving SS retirement or disability benefits.

I know for certain he receives a VA disability pension. I need to see if that counts.
Jack FFR1846
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Re: Stumbling upon Retirement

Post by Jack FFR1846 »

Rather than looking at 4% plus social security taken at 62 to see what you CAN spend, look carefully at what you actually DO spend. With that, ignore SS for now and figure out the % you'd need from your portfolio. That's just a rule of thumb thing, but if you were spending $60k a year, then you're in the under 3% withdrawal area and could easily leave SS alone until 70.

If you do move to a lower cost area, recalculate what you end up spending. Of course, there are plenty of strategies to do backdoor Roth conversions with low to no income and reduce RMDs in the process. Medicare costs will depend on the income in years before you hit 65. The numbers say you're fine with your plan to stop working and live off of your savings.
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GeoMetry
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Re: Stumbling upon Retirement

Post by GeoMetry »

You are currently 59.5, when do you turn 60? If you are turning 60 before the end of 2020, see the article linked below, you might need to adjust your social security estimate.

https://financialducksinarow.com/14070/ ... er-forget/
Golf maniac
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Re: Stumbling upon Retirement

Post by Golf maniac »

I recommend a detailed retirement budget to see what you will need. Add an inflation factor each year and a rate of return from your portfolio. If you plan to travel put that in. You really need to figure out SS as each situation is different. If your personal SS benefit is greater than spousal then delaying SS may be the best option. You will need to figure out which path is the best for you. It really is simple math, which projection and path will make your money last the longest given your portfolio. Good luck.
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ResearchMed
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Re: Stumbling upon Retirement

Post by ResearchMed »

LunaLauren wrote: Fri Jul 17, 2020 9:45 am
Ten years is key, as requirements are
Be at least 62 years old and not currently married.
Be divorced from a person who receives Social Security retirement or disability benefits.
Have been married to that person for at least 10 years before the date the divorce became final.
Not be entitled an equal or higher retirement or disability benefits.



Thank you. I had planned to look into this. In the not too distant future, I will be 62 and don't plan to marry. Also meet the 10 year requirement. I need to consider whose benefit would be higher BUT I also noticed that the ex spouse has to be receiving SS retirement or disability benefits.

I know for certain he receives a VA disability pension. I need to see if that counts.
My understanding is that the above quoted wording is a bit misleading.

Looking further in that linked document, one finds:

"To qualify for this benefit program, you must meet the following requirements:
Be at least 62 years old and not currently married.
Be divorced from a person who is at least 62 years old and has enough work credits to get Social Security benefits.
Have been married to that person for at least 10 years and divorced for at least two continuous years.
Not be entitled an equal or higher Social Security retirement benefit or disability benefit based on your own work.
"

That is, the spouse does not need to be getting SS now. Spouse only needs to be eligible to receive them, in terms of having worked long enough, etc.

But I hadn't realized the requirement to be divorced for at least two continuous years.

But double check this, obviously.

RM
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