Can I Retire ?

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Topic Author
sunrisered
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Can I Retire ?

Post by sunrisered »

My company will be implementing workforce reductions and has offered some early buy-out packages. I would like to take advantage of this opportunity and would like your thoughts. Can I retire? The details -

I am 58 my wife is 59. We have no debts/loans and we are very thankful for that. We are rather conservative and our expenses track at a relatively consistent amount each year. Our expenses will be $72,000 per year (this includes retiree medical insurance of $1,300 per month)

Retirement Type Funds:
401K $709,791
Roth IRAs $186,732
Pension Lump Sum Amount (will put in IRA) $425,000

NON-Retirement Type Funds:
Early buy-out package (after taxes) $73,000 (plus 6 months health insurance)
HSA $45,454
Mutual Fund Investment $27,902
Savings/Checking $127,532

Thank you for your consideration and any suggestions
sunrisered
twh
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Re: Can I Retire ?

Post by twh »

You can also take the package and not retire, getting a job somewhere else.
IMO, you don't have enough $ to retire.
What are your health insurance plans until you get to Medicare?
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

Thank you twh. My company has retiree medical insurance which will cost us $1,300 per month until Medicare.
Fulltimer
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Re: Can I Retire ?

Post by Fulltimer »

I would not be comfortable with those numbers at this point in time.

Does your retiree health insurance have to cost $1300 per month? If you could reduce that by keeping your income down and getting a subsidized ACA plan that might help. It may not be in your best interest to stay on the company plan.

What will your social security amounts be and when will you take them?

Also, what is your current asset allocation? The market may not be done falling for a while and, depending on AA your assets might be heading downward while inflation is putting upward pressure on your expenses.
Last edited by Fulltimer on Mon Jun 20, 2022 6:54 pm, edited 1 time in total.
twh
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Re: Can I Retire ?

Post by twh »

sunrisered wrote: Mon Jun 20, 2022 6:22 pm Thank you twh. My company has retiree medical insurance which will cost us $1,300 per month until Medicare.
Ok, that's a good start. Whatever you do, you may not want to give that up. Even if you get some other lower stress or more flexible job, if you don't give up your retiree medical, you can quit that next job without fear of losing medical.
mary1492
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Re: Can I Retire ?

Post by mary1492 »

You can probably do it if you really want to.

I'm assuming that at age 62, both you and DW will be eligible to receive SS of $1500/month (minimally you will). That will fund half of your annual expenses. A few years after that, you'll qualify for Medicare, and your annual medical insurance expenses will likely go down.
GibsonL6s
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Re: Can I Retire ?

Post by GibsonL6s »

my two cents.

If you use the 4% rule as a quick estimate of what you can withdraw, you get about $62k a year, which leaves you a bit short. What does you social security look like?

A couple of thoughts, are you sure the pension lump sum is the way to go, is there an income stream quote to compare.

I think you could easily go part time for a bit and then full retirement.

Good luck
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AnnetteLouisan
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Re: Can I Retire ?

Post by AnnetteLouisan »

Hi OP, I think it depends.

Do you own your home outright?

Does the $72k in expenses this year include taxes?

If you own your home, is it appreciating and is it possible to downsize in the future if you need to?

How are your accounts invested?

Are the figures you are giving yours only or combined? Does your wife work?

How are you insured? Do you have long term care insurance?
Last edited by AnnetteLouisan on Mon Jun 20, 2022 7:01 pm, edited 2 times in total.
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2pedals
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Re: Can I Retire ?

Post by 2pedals »

Is your wife going to retire as well? What is your income and your wife's?
ThankYouJack
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Re: Can I Retire ?

Post by ThankYouJack »

I'd jump on it.

Assuming your combined social security starting at 62 is over $20k and we don't have any black swan events, you should be good to go.

Congrats!
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JoeRetire
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Re: Can I Retire ?

Post by JoeRetire »

sunrisered wrote: Mon Jun 20, 2022 6:05 pmCan I retire?
You can retire.

Whether or not you can retire now probably depends on the availability of another source of income in retirement. You haven't presented enough information:
- will you be eligible for social security at some point?
- if so, how much?
- is your wife working?
- if so, how much does she make and for how much longer?
- do you have long term care insurance?

Your current nest egg seems insufficient to support the full $72k/year by itself. If you could get by on less, you might be able to make it. I wouldn't want to cut it that close.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

Fulltimer wrote: Mon Jun 20, 2022 6:24 pm I would not be comfortable with those numbers at this point in time.

Does your retiree health insurance have to cost $1300 per month? If you could reduce that by keeping your income down and getting a subsidized ACA plan that might help. It may not be in your best interest to stay on the company plan.

What will your social security amounts be and when will you take them?

Also, what is your current asset allocation? The market may not be done falling for a while and, depending on AA your assets might be heading downward while inflation is putting upward pressure on your expenses.
Fulltimer - thank you for your response. I agree I should check into the subsidized ACA plan. I wanted to show as a budget amount what I could pay with the retiree medical. For the subsidized ACA, is it based on my previous years earnings or on what my income is in the current year where I might have the ACA coverage? I will be spending from our savings for the first few years so will not pull from retirement accounts and therefore show little income.

My wife and I plan to collect SS when I turn 62. I will get $2,000 a month. She will get $1,000 a month with spousal SS - she worked part-time mostly, especially when our kids were in school.

My asset allocation is roughly 60/40 and I also plan to spend from our cash as I will not yet be 59.5
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

mary1492 wrote: Mon Jun 20, 2022 6:32 pm You can probably do it if you really want to.

I'm assuming that at age 62, both you and DW will be eligible to receive SS of $1500/month (minimally you will). That will fund half of your annual expenses. A few years after that, you'll qualify for Medicare, and your annual medical insurance expenses will likely go down.
mary1492 - thank you for your thoughts. My wife and I will collect SS when I turn 62. I will collect $2,000 a month and my wife will collect $1,000 for spousal SS as she worked mostly part-time. And when we turn 65, costs will decrease with Medicare (granted we still need to plan for some costs, just a lesser amount).
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happysteward
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Re: Can I Retire ?

Post by happysteward »

OP, does the $72,000 per year of expenses include taxes?
"How much money is enough?", John Rockefeller responded, "...just a little bit more."
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

GibsonL6s wrote: Mon Jun 20, 2022 6:42 pm my two cents.

If you use the 4% rule as a quick estimate of what you can withdraw, you get about $62k a year, which leaves you a bit short. What does you social security look like?

A couple of thoughts, are you sure the pension lump sum is the way to go, is there an income stream quote to compare.

I think you could easily go part time for a bit and then full retirement.

Good luck
GibsonL6s - thank you for your response. For SS, we plan to collect when I turn 62. My SS will be $2,000 a month and my wife's will be $1,000 a month for spousal SS.

For pension lump sum, in some ways, I like the lump sum (as it allows me to get the benefit from my company and manage myself and possibly help with inflation, also our kids can get the proceeds upon the death of my wife and I). But; I do want to try and make a wise/informed decision. If I take the pension as a monthly payout for myself and my wife, (so she will receive if I pre-decease her) the amount is $2,131 per month. How do I properly compare lump sum versus monthly payout to determine which one might be preferred?

My preference is full retirement, but I want to be flexible and thoughtful on my approach.
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

AnnetteLouisan wrote: Mon Jun 20, 2022 6:44 pm Hi OP, I think it depends.

Do you own your home outright?

Does the $72k in expenses this year include taxes?

If you own your home, is it appreciating and is it possible to downsize in the future if you need to?

How are your accounts invested?

Are the figures you are giving yours only or combined? Does your wife work?

How are you insured? Do you have long term care insurance?
AnnetteLouisian thank you. - We do own our home outright. It is a smaller but nice and comfortable home - We plan to live in during retirement. We could downsize if we needed but would not be like downsizing from a large home.

Our investments are roughly 60/40 in index mutual funds with Vanguard and Fidelity. The figures are combined for my wife and I. My wife works part-time. For insurance, we certainly will ensure we have medical insurance. We do not have long term care insurance (and from what I have read, I'm not a big fan of LTC insurance, so plan to self insure from our investments).
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

2pedals wrote: Mon Jun 20, 2022 6:49 pm Is your wife going to retire as well? What is your income and your wife's?
2pedals, thank you for your questions. My wife is going to retire as well. Mine is 140k my wife works part-time and hers is about 5k.
GuyInFL
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Re: Can I Retire ?

Post by GuyInFL »

sunrisered wrote: Tue Jun 21, 2022 5:34 am My asset allocation is roughly 60/40 and I also plan to spend from our cash as I will not yet be 59.5
Check your 401K for the 'Rule of 55'. You may be eligible to withdraw since you are over 55. Assuming the 401K is traditional, be sure to consider Roth conversions to the top of the 12% bracket. Also check opensocialsecurity.com for filing recommendations.
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

ThankYouJack wrote: Mon Jun 20, 2022 6:58 pm I'd jump on it.

Assuming your combined social security starting at 62 is over $20k and we don't have any black swan events, you should be good to go.

Congrats!
ThankYouJack - thank you for your comments. Our combined SS starting at 62 will be $36k (2,000 a month for me and 1,000 a month for my wife with spousal SS). We will be spending from our after-tax, cash until 59.5 and are planning to continue to be conservative with our spending.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

JoeRetire wrote: Mon Jun 20, 2022 7:05 pm
sunrisered wrote: Mon Jun 20, 2022 6:05 pmCan I retire?
You can retire.

Whether or not you can retire now probably depends on the availability of another source of income in retirement. You haven't presented enough information:
- will you be eligible for social security at some point?
- if so, how much?
- is your wife working?
- if so, how much does she make and for how much longer?
- do you have long term care insurance?

Your current nest egg seems insufficient to support the full $72k/year by itself. If you could get by on less, you might be able to make it. I wouldn't want to cut it that close.
JoeRetire - thank you for your thoughts and questions.

My wife and I plan to collect SS when I turn 62. Mine will be $2,000 a month and hers will be $1,000 a month for spousal SS. My wife is working part-time but plans to retire soon. She makes about 5K per year. I do not have long term care insurance (and from what I have read, am not a big fan of it. We plan to self insure with our investments, which would leave our kids with a little less at the end of our lives. Our Fidelity tool shows 1.4M left over upon our deaths in a below-average market)
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

happysteward wrote: Tue Jun 21, 2022 5:41 am OP, does the $72,000 per year of expenses include taxes?
happysteward - thank you for your question.

The expenses of 72K is after taxes - it does include the retiree medical of $1,300 per month.
Topic Author
sunrisered
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Re: Can I Retire ?

Post by sunrisered »

GuyInFL wrote: Tue Jun 21, 2022 6:03 am
sunrisered wrote: Tue Jun 21, 2022 5:34 am My asset allocation is roughly 60/40 and I also plan to spend from our cash as I will not yet be 59.5
Check your 401K for the 'Rule of 55'. You may be eligible to withdraw since you are over 55. Assuming the 401K is traditional, be sure to consider Roth conversions to the top of the 12% bracket. Also check opensocialsecurity.com for filing recommendations.
GuyInFL - thank you for your comments. I planned to spend from our after-tax cash at first but will check regarding the 'Rule of 55' for my 401K. I will check the opensocialsecurity.com you mentioned for filing recommendations.

For the Roth conversions, to the top of the 12% bracket, can you elaborate a little bit about that? I would like to understand more about how to think about and evaluate doing Roth conversions. Thank you.
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happysteward
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Re: Can I Retire ?

Post by happysteward »

Looks like you have all the basic numbers accounted for, I.e. estimated….I am seeing a 4.5% withdrawal rate ** required not including social security as you are so young…that withdrawal rate is too high for my liking and based on your conservative nature I am guessing it is too high for you too…I wouldn’t do it yet (I.e. retire)…consider part time in another line for a while?

** $72,000/$1,600,000= 4.5%
Last edited by happysteward on Tue Jun 21, 2022 6:25 am, edited 1 time in total.
"How much money is enough?", John Rockefeller responded, "...just a little bit more."
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JoeRetire
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Re: Can I Retire ?

Post by JoeRetire »

sunrisered wrote: Tue Jun 21, 2022 5:34 am My wife and I plan to collect SS when I turn 62. I will get $2,000 a month. She will get $1,000 a month with spousal SS - she worked part-time mostly, especially when our kids were in school.
Explore with https://opensocialsecurity.com/ before making that decision.

In general, you will receive more combined lifetime benefits if the higher earner delays until 70.
Last edited by JoeRetire on Tue Jun 21, 2022 6:29 am, edited 1 time in total.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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JoeRetire
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Re: Can I Retire ?

Post by JoeRetire »

sunrisered wrote: Tue Jun 21, 2022 6:00 amWe do not have long term care insurance (and from what I have read, I'm not a big fan of LTC insurance, so plan to self insure from our investments).
How much of your investments are you setting aside for long term care?
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
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happysteward
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Re: Can I Retire ?

Post by happysteward »

JoeRetire wrote: Tue Jun 21, 2022 6:24 am
sunrisered wrote: Tue Jun 21, 2022 5:34 am My wife and I plan to collect SS when I turn 62. I will get $2,000 a month. She will get $1,000 a month with spousal SS - she worked part-time mostly, especially when our kids were in school.
Explore with https://opensocialsecurity.com/ before making that decision.

In general, you will receive more combined lifetime benefits if the higher earner delays until 70.
:thumbsup :thumbsup
"How much money is enough?", John Rockefeller responded, "...just a little bit more."
sixtyforty
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Re: Can I Retire ?

Post by sixtyforty »

You could also experiment with the retirement calculators listed on the page below. I've found them to be quite helpful (FireCalc, CFIreSim and ABW). I haven't run your numbers but I would say you could probably retire when you include SS.

https://www.bogleheads.org/wiki/Retirem ... d_spending
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci
OnTrack2020
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Re: Can I Retire ?

Post by OnTrack2020 »

sunrisered wrote: Mon Jun 20, 2022 6:05 pm My company will be implementing workforce reductions and has offered some early buy-out packages. I would like to take advantage of this opportunity and would like your thoughts. Can I retire? The details -

I am 58 my wife is 59. We have no debts/loans and we are very thankful for that. We are rather conservative and our expenses track at a relatively consistent amount each year. Our expenses will be $72,000 per year (this includes retiree medical insurance of $1,300 per month)

Retirement Type Funds:
401K $709,791
Roth IRAs $186,732
Pension Lump Sum Amount (will put in IRA) $425,000

NON-Retirement Type Funds:
Early buy-out package (after taxes) $73,000 (plus 6 months health insurance)
HSA $45,454
Mutual Fund Investment $27,902
Savings/Checking $127,532

Thank you for your consideration and any suggestions
sunrisered
My husband retired at the end of 2019 with a buyout package; his age at the time was 60 and I was 56. Our numbers, in total, were very similar to yours; we had less in pension, Roth, HSA, and savings/checking, but more in 401k and mutual funds. Our expenses were, at that time, roughly the same as yours (and we had 2 kids graduating college and still have 2 at home). We rolled the lump sum pension into an IRA. With the buyout money, we used it to live that first year (2020). Buyout package fell under tax year 2020. Health insurance was subsidized through early 2021, and then we switched over to an ACA plan. ACA plans are based on estimated income (wages, IRA distributions, capital gains, dividends, etc.). It looks like, if you take the buyout, that you will be getting health insurance through 2022?

This is the now the 3rd year of husband's retirement. He is eligible for SS, but we haven't started it yet. I think the plan is to take it at age 65. We are currently living off of the amount in the "rolled over into an IRA" pension money. The ACA has been really good for us, except coverage does not extend outside of our geographic region, so we will need to purchase medical travel insurance if, and when, we take a trip. We are on a bronze plan, and the premiums are low. We also have a $14k deductible and $17k out-of-pocket maximum which is, of course, ridiculously high. Some of the leftover buyout money just sits in a money market account in case we would need to tap it for some major health issue between now and taking SS. Over these past couple of years, I have spent a fair amount of time budgeting and re-budgeting for health insurances expenses and how will we cover those expenses because they do vary somewhat, and it's somewhat hard to get them nailed down.

You will have expenses of roughly $500k until SS, if taken at age 65. You might want to consider doing a side-by-side comparison of the retiree health plan and an ACA plan using your estimated income, especially as your retiree health insurance is going to cost over $15k per year in premiums. How much do you think you will also pay out for co-pays, the deductible, and what is your total overall out-of-pocket expense under the retiree health plan? However, if you will really like the retiree plan, can use your current doctors, hospital, and are getting good prices on your prescription meds, there's a lot to be said for keeping it.

Currently, our withdrawal rate is a little over 4%. It is what it is. Husband continues to be happy he made the decision to take the buyout package.
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Watty
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Re: Can I Retire ?

Post by Watty »

Your numbers are somewhat similar but better than my numbers when I retired almost seven years ago.

A lot of posters here are higher income but with around $1.4 million dollars, retiree healthcare, a paid off house, and Social Security you should be fine for a nice middle class retirement if you are careful.

You may want to look at my "Can I retire?" thread to see the details I looked at and the questions that were asked to help figure out is there was anything you have not considered. Keep in mind that was seven years ago so some of the number may need to be adjusted for inflation.

viewtopic.php?t=167664

As someone else mentioned at least one of you should likely delay starting Social Security until later to get a larger Social Security benefit. The Open Social Security web site that was mentioned is great but it does not try to take taxed into account which is understandable. Being able to do Roth conversion or take capital gains in a low tax bracket is very important and many states do not tax Social Security. The way Social Security is taxed is complicated and if you are not careful you can end up in a higher than expected tax bracket so be sure to take that into account. When one of you survives the other then they will also be filing in the higher single tax brackets.

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

Also play with what your future tax rates will look like. A couple can has around $100k in taxable income and still be in the 12% federal tax bracket(15% after 2025 when they revert to the old higher rates.) As I recall an married couple can have about $40K in Social Security and $20K in taxable income and pay no federal income tax.

The big points I see are;

1) Sometimes retiree health benefits are linked to taking the pension option and at some companies you will lose that if you take the lump sum. Be sure to look into that.

2) As mentioned delaying starting SS is like a good idea.

3) Retiree health insurance sounds great but by managing your taxable income you can likely get a LARGE subsidy for an affordable care act health plan. There are lots of details and you have to look at the health plans that are available in your area. I was able to get a large subsidy and paid a LOT less than the $1300 a month that you would be paying.

4) Before you retire you might want to set up a HELOC on your paid off house so that you can draw on that if you need to if you have some large expense. That may allow you to not go into a higher tax bracket or get a large ACA subsidy. This will be easier to set up while you still have the income on the loan application.

5) Look at doing Roth conversion up to the top of the 12% federal tax bracket at least through 2025. There are lots of details to consider but years from now 12% may look really good in hindsight.

:beer There are lots of details to figure out but you should be fine.
GuyInFL
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Re: Can I Retire ?

Post by GuyInFL »

sunrisered wrote: Tue Jun 21, 2022 6:19 am
GuyInFL wrote: Tue Jun 21, 2022 6:03 am
sunrisered wrote: Tue Jun 21, 2022 5:34 am My asset allocation is roughly 60/40 and I also plan to spend from our cash as I will not yet be 59.5
Check your 401K for the 'Rule of 55'. You may be eligible to withdraw since you are over 55. Assuming the 401K is traditional, be sure to consider Roth conversions to the top of the 12% bracket. Also check opensocialsecurity.com for filing recommendations.
GuyInFL - thank you for your comments. I planned to spend from our after-tax cash at first but will check regarding the 'Rule of 55' for my 401K. I will check the opensocialsecurity.com you mentioned for filing recommendations.

For the Roth conversions, to the top of the 12% bracket, can you elaborate a little bit about that? I would like to understand more about how to think about and evaluate doing Roth conversions. Thank you.
Basic concept is you don't want to pay 0%, living off cash and then bump up to 22% later, especially when one of you passes on and you switch from MFJ to Single.

I like this calculator for tax brackets.
https://engaging-data.com/tax-brackets/ ... 0&cg=10000
Just enter your 401K withdrawal (and conversion) as 'Regular Wage Income' and your after tax capital gains and it will show you how the tax brackets work.
Since capital gains are tax free in the 12% bracket, you probably don't want to go over that unless you decide to group your capital gains in alternate years.
As an example, you could withdraw + convert $90K plus receive another $10K in capital gains and still just barely be in the 12% bracket
https://engaging-data.com/tax-brackets/ ... 0&cg=10000
michaeljc70
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Re: Can I Retire ?

Post by michaeljc70 »

Yes, you can retire. You can collect SS in just 3-4 years and that will cover half your expenses. I don't understand the math some people are using. I would throw in the caveat that if you are invested very conservatively (less than 50/50) I'd rethink retiring now. Even if you wait until FRA to collect SS, you have enough money to last until that or age 70. Guessing based on my projected SS benefits, 36k SS at age 62 would be around $60k if you wait until age 70.
Fulltimer
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Re: Can I Retire ?

Post by Fulltimer »

“If I take the pension as a monthly payout for myself and my wife, (so she will receive if I pre-decease her) the amount is $2,131 per month. How do I properly compare lump sum versus monthly payout to determine which one might be preferred?”

People have used immediateannuities.com to get a feel for how their lump sum compares to the monthly payment. If you put in the LS amount, your ages and state it will tell you if your co pension is better than one you could get on your own. Sounds as if your pension would not be cola’d and the immediate annuities aren’t either so that’s a wash and neither will help manage inflation.

Also, the 72k per year is not including any taxes per another post of yours so two things about that. 1. If one of you passes the other will be in a single filing status. I would suggest double checking that the $72k would be able to handle the lower expenses of a single person but the potential higher tax rate. 2. You may want to pay some minimal taxes now for Roth conversions to save later but you may feel differently about that.
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Kenkat
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Re: Can I Retire ?

Post by Kenkat »

Your situation has a fair amount in common with mine overall. I am retiring in July of this year at age 58.5. I am taking a lump sum pension option. My thinking on this is that when I claim social security, currently planning for age 70, I will have a significant portion of my expenses covered by that. I won’t really need that $2000/mo. lifetime annuity once social security starts, especially when RMDs kick in. So I will use the lump sum pension as a bridge to social security, invested a little more conservatively, which reduces my overall withdraw percentage early in retirement.
Fulltimer
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Re: Can I Retire ?

Post by Fulltimer »

Would your wife be eligible for her own benefit at 62 to help with expenses while you possibly wait? Also, verify your $2000 at 62 includes no income after 58.

Open Social Security calcs told me (younger and lower income spouse) to take mine at 62. My husband should take his at 70 to provide the highest benefit for our combined lifetimes. Since he retired 68 months before his first SS payment, we took that projected payment, $3,866, times 68 and we are holding that money in a separate safe bucket. We withdraw $3,866 from that bucket each month and at age 70 it will be depleted and SS will kick in. Kind of having our cake and eating it too.

His bucket, my SS bucket(I am not 62 yet so we did the same thing for my benefit) and a small pension cover our normal annual expenses so the remainder of our investments will go to various lump sum expenses, a possible future home purchase, Roth conversion tax payments, and future long term care.

We are doing Roth conversions while tax rates are a bit lower that they are projected to be in 2026 and while both of us are alive. When one of us passes we may be looking at high tax rates, RMDs and IRMAA.
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cockersx3
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Re: Can I Retire ?

Post by cockersx3 »

sunrisered wrote: Tue Jun 21, 2022 5:34 am For the subsidized ACA, is it based on my previous years earnings or on what my income is in the current year where I might have the ACA coverage? I will be spending from our savings for the first few years so will not pull from retirement accounts and therefore show little income.
Not sure that I saw a response to your question on this, but....it's the latter. ACA subsidies are based on the income realized in the current year when you have the coverage. So, if I earned $1MM a year in 2021 but only earned $30K this year, I would be eligible for ACA subsidies this year (2022) based on the $30K and not the $1MM.

When you apply for ACA, they may challenge your estimate of current year earnings if they are significantly different than last year. If that occurs, you may need to provide a written explanation if needed - could be something as simple as "I'm not working anymore and therefore living off of my capital gains / dividends / Roth conversions / IRA withdrawals / (insert taxable income source here) in the expected amount of $xx/yr."

Keep in mind that ACA subsidies require a minimum amount of income (typically 100-133% of the federal poverty limit depending on where you live) to avoid being put on Medicaid. If you go this route, you may want to do Roth conversions of IRA money (or just straight-up IRA withdrawals if you or your wife are >59.5) to ensure you maintain income above that limit. Of course, there is also the much-talked-about subsidy "cliff" that zeros out ACA subsidies when your household income goes above 400% of the federal poverty limit. (Note that this was eliminated for this year, but will resume next year under current law.)

There is lots of information online on how early retirees can optimize health insurance costs. Here's a few links to info that will help you get started in the evaluation process: here and here.

To answer your headline question - in my view you are golden! While you will have a withdrawal rate over 4% initially. your social security checks will cut that in half (or more) within a few years. If anything I would recommend looking at the Open Social Security tool (shown upthread) to optimize your SS claiming strategy. For two earners where one is much higher income, it's common to see the ideal strategy involve the lower-earning spouse claiming early (ie 62) but having the higher-earning spouse delay till age 70.

Enjoy retirement!
Casper
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Re: Can I Retire ?

Post by Casper »

If I were in the same position, I'd take the package and retire. Especially if you can cut your costs a bit. $72k per year is a bit high (and not an amount I'd call "conservative").
FoolMeOnce
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Re: Can I Retire ?

Post by FoolMeOnce »

happysteward wrote: Tue Jun 21, 2022 6:24 am Looks like you have all the basic numbers accounted for, I.e. estimated….I am seeing a 4.5% withdrawal rate ** required not including social security as you are so young…that withdrawal rate is too high for my liking and based on your conservative nature I am guessing it is too high for you too…I wouldn’t do it yet (I.e. retire)…consider part time in another line for a while?

** $72,000/$1,600,000= 4.5%
4.5% would probably be fine for most people for 30 years, and if it proves not to be, they can cut costs down the line - that possibility is the trade-off for retiring now instead of continuing to work. But that is without even considering SS, which will drastically reduce the withdrawal rate. They should be more than fine.
michaeljc70
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Re: Can I Retire ?

Post by michaeljc70 »

happysteward wrote: Tue Jun 21, 2022 6:24 am Looks like you have all the basic numbers accounted for, I.e. estimated….I am seeing a 4.5% withdrawal rate ** required not including social security as you are so young…that withdrawal rate is too high for my liking and based on your conservative nature I am guessing it is too high for you too…I wouldn’t do it yet (I.e. retire)…consider part time in another line for a while?

** $72,000/$1,600,000= 4.5%
Why would you exclude the SS they can take in 3-4 years that will cover half their expenses? They will have a 4.5% WR for only 3 or 4 years.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

happysteward wrote: Tue Jun 21, 2022 6:24 am Looks like you have all the basic numbers accounted for, I.e. estimated….I am seeing a 4.5% withdrawal rate ** required not including social security as you are so young…that withdrawal rate is too high for my liking and based on your conservative nature I am guessing it is too high for you too…I wouldn’t do it yet (I.e. retire)…consider part time in another line for a while?

** $72,000/$1,600,000= 4.5%
thank you happysteward
delamer
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Re: Can I Retire ?

Post by delamer »

I don’t see any reason that you can’t retire now.

As I always recommend in these situations, I’d do a spreadsheet showing income sources and expenses for the next 10 years. That will allow you to see how both will change over time, plus your portfolio balance.

Medicare eligibility and Social Security claiming will both make big differences.

Make sure you include income taxes in your spreadsheet.

And definitely check out a Social Security calculator. In order to optimize your benefits, it will probably recommend that you claim at 70 and your wife at 62. Remember that when the first spouse dies, the survivor will receive the larger of the two benefits. So if you delay, it has significant benefits down the road.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

JoeRetire wrote: Tue Jun 21, 2022 6:27 am
sunrisered wrote: Tue Jun 21, 2022 6:00 amWe do not have long term care insurance (and from what I have read, I'm not a big fan of LTC insurance, so plan to self insure from our investments).
How much of your investments are you setting aside for long term care?
Thank you JoeRetire. I will check out opensocialsecurity and also consider what part of our investments we should consider/set aside for ltc. I appreciate your comments.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

sixtyforty wrote: Tue Jun 21, 2022 6:56 am You could also experiment with the retirement calculators listed on the page below. I've found them to be quite helpful (FireCalc, CFIreSim and ABW). I haven't run your numbers but I would say you could probably retire when you include SS.

https://www.bogleheads.org/wiki/Retirem ... d_spending
thanks sixtyforty. I used a Fidelty tool to do some scenarios (they administer our companies 401k) but will also check out the ones that you've mentioned. thank you for your insight.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

OnTrack2020 wrote: Tue Jun 21, 2022 7:20 am
sunrisered wrote: Mon Jun 20, 2022 6:05 pm My company will be implementing workforce reductions and has offered some early buy-out packages. I would like to take advantage of this opportunity and would like your thoughts. Can I retire? The details -

I am 58 my wife is 59. We have no debts/loans and we are very thankful for that. We are rather conservative and our expenses track at a relatively consistent amount each year. Our expenses will be $72,000 per year (this includes retiree medical insurance of $1,300 per month)

Retirement Type Funds:
401K $709,791
Roth IRAs $186,732
Pension Lump Sum Amount (will put in IRA) $425,000

NON-Retirement Type Funds:
Early buy-out package (after taxes) $73,000 (plus 6 months health insurance)
HSA $45,454
Mutual Fund Investment $27,902
Savings/Checking $127,532

Thank you for your consideration and any suggestions
sunrisered
My husband retired at the end of 2019 with a buyout package; his age at the time was 60 and I was 56. Our numbers, in total, were very similar to yours; we had less in pension, Roth, HSA, and savings/checking, but more in 401k and mutual funds. Our expenses were, at that time, roughly the same as yours (and we had 2 kids graduating college and still have 2 at home). We rolled the lump sum pension into an IRA. With the buyout money, we used it to live that first year (2020). Buyout package fell under tax year 2020. Health insurance was subsidized through early 2021, and then we switched over to an ACA plan. ACA plans are based on estimated income (wages, IRA distributions, capital gains, dividends, etc.). It looks like, if you take the buyout, that you will be getting health insurance through 2022?

This is the now the 3rd year of husband's retirement. He is eligible for SS, but we haven't started it yet. I think the plan is to take it at age 65. We are currently living off of the amount in the "rolled over into an IRA" pension money. The ACA has been really good for us, except coverage does not extend outside of our geographic region, so we will need to purchase medical travel insurance if, and when, we take a trip. We are on a bronze plan, and the premiums are low. We also have a $14k deductible and $17k out-of-pocket maximum which is, of course, ridiculously high. Some of the leftover buyout money just sits in a money market account in case we would need to tap it for some major health issue between now and taking SS. Over these past couple of years, I have spent a fair amount of time budgeting and re-budgeting for health insurances expenses and how will we cover those expenses because they do vary somewhat, and it's somewhat hard to get them nailed down.

You will have expenses of roughly $500k until SS, if taken at age 65. You might want to consider doing a side-by-side comparison of the retiree health plan and an ACA plan using your estimated income, especially as your retiree health insurance is going to cost over $15k per year in premiums. How much do you think you will also pay out for co-pays, the deductible, and what is your total overall out-of-pocket expense under the retiree health plan? However, if you will really like the retiree plan, can use your current doctors, hospital, and are getting good prices on your prescription meds, there's a lot to be said for keeping it.

Currently, our withdrawal rate is a little over 4%. It is what it is. Husband continues to be happy he made the decision to take the buyout package.
thanks OnTrack2020. Yes if i take the buyout that will cover medical insurance through 2022. I will have to check into the subsidized ACA. Our current health insurance is all high deductible (thus the HSA), so I am very familiar with deductibles that are much higher than when I grew up and everything was just........... covered........ ahh the good 'ol days........ Even today, we consider our insurance more for the larger, catastrophic items as they do not cover any day to day items.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

Watty wrote: Tue Jun 21, 2022 7:52 am Your numbers are somewhat similar but better than my numbers when I retired almost seven years ago.

A lot of posters here are higher income but with around $1.4 million dollars, retiree healthcare, a paid off house, and Social Security you should be fine for a nice middle class retirement if you are careful.

You may want to look at my "Can I retire?" thread to see the details I looked at and the questions that were asked to help figure out is there was anything you have not considered. Keep in mind that was seven years ago so some of the number may need to be adjusted for inflation.

viewtopic.php?t=167664

As someone else mentioned at least one of you should likely delay starting Social Security until later to get a larger Social Security benefit. The Open Social Security web site that was mentioned is great but it does not try to take taxed into account which is understandable. Being able to do Roth conversion or take capital gains in a low tax bracket is very important and many states do not tax Social Security. The way Social Security is taxed is complicated and if you are not careful you can end up in a higher than expected tax bracket so be sure to take that into account. When one of you survives the other then they will also be filing in the higher single tax brackets.

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

Also play with what your future tax rates will look like. A couple can has around $100k in taxable income and still be in the 12% federal tax bracket(15% after 2025 when they revert to the old higher rates.) As I recall an married couple can have about $40K in Social Security and $20K in taxable income and pay no federal income tax.

The big points I see are;

1) Sometimes retiree health benefits are linked to taking the pension option and at some companies you will lose that if you take the lump sum. Be sure to look into that.

2) As mentioned delaying starting SS is like a good idea.

3) Retiree health insurance sounds great but by managing your taxable income you can likely get a LARGE subsidy for an affordable care act health plan. There are lots of details and you have to look at the health plans that are available in your area. I was able to get a large subsidy and paid a LOT less than the $1300 a month that you would be paying.

4) Before you retire you might want to set up a HELOC on your paid off house so that you can draw on that if you need to if you have some large expense. That may allow you to not go into a higher tax bracket or get a large ACA subsidy. This will be easier to set up while you still have the income on the loan application.

5) Look at doing Roth conversion up to the top of the 12% federal tax bracket at least through 2025. There are lots of details to consider but years from now 12% may look really good in hindsight.

:beer There are lots of details to figure out but you should be fine.
thank you Watty. I will look at your 'can i retire' post. That will be helpful. I will also look into the possibility of health benefits being linked to the monthly pension payout option, Roth conversion and consideration of tax rates and the other key points you mentioned. thank you so much for your help.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

GuyInFL wrote: Tue Jun 21, 2022 8:00 am
sunrisered wrote: Tue Jun 21, 2022 6:19 am
GuyInFL wrote: Tue Jun 21, 2022 6:03 am
sunrisered wrote: Tue Jun 21, 2022 5:34 am My asset allocation is roughly 60/40 and I also plan to spend from our cash as I will not yet be 59.5
Check your 401K for the 'Rule of 55'. You may be eligible to withdraw since you are over 55. Assuming the 401K is traditional, be sure to consider Roth conversions to the top of the 12% bracket. Also check opensocialsecurity.com for filing recommendations.
GuyInFL - thank you for your comments. I planned to spend from our after-tax cash at first but will check regarding the 'Rule of 55' for my 401K. I will check the opensocialsecurity.com you mentioned for filing recommendations.

For the Roth conversions, to the top of the 12% bracket, can you elaborate a little bit about that? I would like to understand more about how to think about and evaluate doing Roth conversions. Thank you.
Basic concept is you don't want to pay 0%, living off cash and then bump up to 22% later, especially when one of you passes on and you switch from MFJ to Single.

I like this calculator for tax brackets.
https://engaging-data.com/tax-brackets/ ... 0&cg=10000
Just enter your 401K withdrawal (and conversion) as 'Regular Wage Income' and your after tax capital gains and it will show you how the tax brackets work.
Since capital gains are tax free in the 12% bracket, you probably don't want to go over that unless you decide to group your capital gains in alternate years.
As an example, you could withdraw + convert $90K plus receive another $10K in capital gains and still just barely be in the 12% bracket
https://engaging-data.com/tax-brackets/ ... 0&cg=10000
thank you GuyInFL. yes that would be a rude awakening to have some 0% tax rate years and then graduate up to a 22% bracket. that would be nice to avoid/minimize.
poker27
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Re: Can I Retire ?

Post by poker27 »

Social security will be covering half your expenses in just 3 years, sounds good to me!

I will echo others, and say do the math to see if it makes sense to live on investments, and delay SS a bit.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

michaeljc70 wrote: Tue Jun 21, 2022 8:37 am Yes, you can retire. You can collect SS in just 3-4 years and that will cover half your expenses. I don't understand the math some people are using. I would throw in the caveat that if you are invested very conservatively (less than 50/50) I'd rethink retiring now. Even if you wait until FRA to collect SS, you have enough money to last until that or age 70. Guessing based on my projected SS benefits, 36k SS at age 62 would be around $60k if you wait until age 70.
thank you michaeljc70 for your thoughtful comments. I have a 60/40 aa and plan to stick at or close to that.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

Fulltimer wrote: Tue Jun 21, 2022 10:07 am “If I take the pension as a monthly payout for myself and my wife, (so she will receive if I pre-decease her) the amount is $2,131 per month. How do I properly compare lump sum versus monthly payout to determine which one might be preferred?”

People have used immediateannuities.com to get a feel for how their lump sum compares to the monthly payment. If you put in the LS amount, your ages and state it will tell you if your co pension is better than one you could get on your own. Sounds as if your pension would not be cola’d and the immediate annuities aren’t either so that’s a wash and neither will help manage inflation.

Also, the 72k per year is not including any taxes per another post of yours so two things about that. 1. If one of you passes the other will be in a single filing status. I would suggest double checking that the $72k would be able to handle the lower expenses of a single person but the potential higher tax rate. 2. You may want to pay some minimal taxes now for Roth conversions to save later but you may feel differently about that.
thanks Fulltimer. I will take a look at immediateannuities to get a feel as well.
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sunrisered
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Re: Can I Retire ?

Post by sunrisered »

Kenkat wrote: Tue Jun 21, 2022 10:15 am Your situation has a fair amount in common with mine overall. I am retiring in July of this year at age 58.5. I am taking a lump sum pension option. My thinking on this is that when I claim social security, currently planning for age 70, I will have a significant portion of my expenses covered by that. I won’t really need that $2000/mo. lifetime annuity once social security starts, especially when RMDs kick in. So I will use the lump sum pension as a bridge to social security, invested a little more conservatively, which reduces my overall withdraw percentage early in retirement.
thank you Kenkat. there are a lot of good thoughts that shows me I have some things to think about.
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sunrisered
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Joined: Mon Jun 20, 2022 2:31 pm

Re: Can I Retire ?

Post by sunrisered »

cockersx3 wrote: Tue Jun 21, 2022 12:35 pm
sunrisered wrote: Tue Jun 21, 2022 5:34 am For the subsidized ACA, is it based on my previous years earnings or on what my income is in the current year where I might have the ACA coverage? I will be spending from our savings for the first few years so will not pull from retirement accounts and therefore show little income.
Not sure that I saw a response to your question on this, but....it's the latter. ACA subsidies are based on the income realized in the current year when you have the coverage. So, if I earned $1MM a year in 2021 but only earned $30K this year, I would be eligible for ACA subsidies this year (2022) based on the $30K and not the $1MM.

When you apply for ACA, they may challenge your estimate of current year earnings if they are significantly different than last year. If that occurs, you may need to provide a written explanation if needed - could be something as simple as "I'm not working anymore and therefore living off of my capital gains / dividends / Roth conversions / IRA withdrawals / (insert taxable income source here) in the expected amount of $xx/yr."

Keep in mind that ACA subsidies require a minimum amount of income (typically 100-133% of the federal poverty limit depending on where you live) to avoid being put on Medicaid. If you go this route, you may want to do Roth conversions of IRA money (or just straight-up IRA withdrawals if you or your wife are >59.5) to ensure you maintain income above that limit. Of course, there is also the much-talked-about subsidy "cliff" that zeros out ACA subsidies when your household income goes above 400% of the federal poverty limit. (Note that this was eliminated for this year, but will resume next year under current law.)

There is lots of information online on how early retirees can optimize health insurance costs. Here's a few links to info that will help you get started in the evaluation process: here and here.

To answer your headline question - in my view you are golden! While you will have a withdrawal rate over 4% initially. your social security checks will cut that in half (or more) within a few years. If anything I would recommend looking at the Open Social Security tool (shown upthread) to optimize your SS claiming strategy. For two earners where one is much higher income, it's common to see the ideal strategy involve the lower-earning spouse claiming early (ie 62) but having the higher-earning spouse delay till age 70.

Enjoy retirement!
thank you cockersx3 for your comments. I will check out the links for health care considerations, give consideration to SS claiming, and appreciate your comments.
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