Can I afford to retire now?

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want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Can I afford to retire now?

Post by want_to_retire » Tue May 15, 2018 4:44 pm

Have been browsing this site recently and have been really impressed with the responses from the members -the amount of their
wisdom and time they are willing to share/spare for a total stranger.

Here are my questions - and would love feedback from members on this board. I plan on talking to a financial consultant also - but I would trust your feedback more - please read below.

Emergency funds: 65K in checking
Debt: 360K in house - 2.75 % pa loan – loan terminates 2026
Tax Filing Status: Married filing joint with 1 child

Tax Rate: 28% Federal, 8.2% State (Will change if I retire)
State of Residence: CA
Age: 59 yrs,7 months.
Desired Asset allocation: 60 % stock / 40 % bond
Desired International allocation: 10 % of stocks


Current retirement assets

Taxable
Cash: 800K (acquisition of company I worked for – all ESPP, RSU converted to cash – need to invest)
Stocks: 1M (Berkshire 500K, Visa 150K, MCD 50K, rest in REITS, SPY, QQQ, Mutual Funds)
I-Bonds: 240K (yielding average 3.5%)
Foreign real-estate: 600K (intend to repatriate back to US over next 5 years – this amount approx is after all taxes paid)
Equity in current home – 1.1M

401k – 700K (total)
350K – Vanguard target 2025
350K – Vanguard target 2030

Income :
Spouse temp job : 25K
Current annual dividend from Stocks: 11K

Expenses : 135K p.a

I will get Social Security 24K p.a when I complete 62. Also child graduates in 3 years- will reduce annual expense to 100K.

Questions:
1. Can I retire now? Or should I dust off my resume (was laid off after acquisition) and work a few more years – Comments?

2. What should I do with the 800K cash? Suggestions/Comments ?
I was going to invest 75K in 1 year T Bill and 75K in 2year T Bill. Rest 650K in VPGDX (managed payout)
Should I invest all 800K in VPGDX? Or create a 3 fund portfolio (50/40/10) and rebalance ever year orso?

3. Do I need to downsize on my primary residence – in order to meet retirement expenses?

PFInterest
Posts: 2120
Joined: Sun Jan 08, 2017 12:25 pm

Re: Can I afford to retire now?

Post by PFInterest » Tue May 15, 2018 6:29 pm

sure
2.7MM in assets will yield 110K/year.
this doesnt include SS or selling your house to fund your lifestyle.

enjoy.

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Meaty
Posts: 612
Joined: Mon Jul 22, 2013 7:35 pm
Location: Texas

Re: Can I afford to retire now?

Post by Meaty » Tue May 15, 2018 6:34 pm

All in it appears you have 2.5+ million not including foreign real estate or home equity. At a 4% withdrawal rate that’s 100k/year for 30 years (probably longer). If it were me I’d downsize my home and sell the foreign real estate to add a little cushion given youre 59.

Outside of that, I’d vote you can retire although it maybe close and you’ll need to ensure you have health care factored into your expenses
"Discipline equals Freedom" - Jocko Willink

delamer
Posts: 5837
Joined: Tue Feb 08, 2011 6:13 pm

Re: Can I afford to retire now?

Post by delamer » Tue May 15, 2018 6:49 pm

If you used some of that cash to pay off your mortgage, how much would that reduce your annual expenses (remember that only your principal and interest would disappear)?

michaeljc70
Posts: 3346
Joined: Thu Oct 15, 2015 3:53 pm

Re: Can I afford to retire now?

Post by michaeljc70 » Tue May 15, 2018 8:25 pm

Sure, you can retire. You have a NW approaching 4.5 Million. I would just make sure to unload the foreign real estate, especially if it isn't providing income. You have an expensive home (almost $1.5 million), and I am surprised your expenses are that low with that expensive of a home. Downsizing/moving (I know you are in CA so $1.5M doesn't mean big home) would free up money for other things if you wanted.

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MP123
Posts: 693
Joined: Thu Feb 16, 2017 3:32 pm

Re: Can I afford to retire now?

Post by MP123 » Tue May 15, 2018 9:40 pm

Yes, I think you can retire.

Your stock position is concentrated in BRK. I'm not sure about the managed payout fund but more diversity would be good. Add some bonds. 3 fund approach might be good for you.

Would downsizing even reduce your fixed expenses (other than p&i) considering Prop. 13?

Where's the foreign real estate? What's the outlook there? Might be worth holding on to.

make_a_better_world
Posts: 31
Joined: Mon Mar 18, 2013 11:55 pm

Re: Can I afford to retire now?

Post by make_a_better_world » Tue May 15, 2018 10:09 pm

Congratulations on your accomplishments. As others have said I would liquidate the foreign property, especially if it does not generate income. The numbers look good, but at 59 years old with a child that hasn't graduated there are a considerable number of assumptions on a long timeline. This gets personal and I do not believe there is a right or wrong answer. I guess it comes down to how badly you'd like to retire now. Judging by your user name, I gather that desire is quite high. I'd also consider your general health and would be more inclined to retire if there was something to be worried about there. As a cardiologist, I consider 59 to still be on the younger side. Personally I think it is wiser to retire into something else as opposed to becoming sedentary, and perhaps that something else could generate income, even if it was modest.

gotester2000
Posts: 553
Joined: Sun Nov 12, 2017 1:59 am

Re: Can I afford to retire now?

Post by gotester2000 » Tue May 15, 2018 10:55 pm

I would retire and relax.
You have about 3.3M excluding home equity and SS. A 3% withdrawal rate gives you about 100k and is perpetual.
The home equity is a good backup.
I would not pay the good mortgage off though as 2026 is not too far.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 12:00 am

PFInterest wrote:
Tue May 15, 2018 6:29 pm
sure
2.7MM in assets will yield 110K/year.
this doesnt include SS or selling your house to fund your lifestyle.

enjoy.
Thank you very much - validation is always good.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 12:03 am

Meaty wrote:
Tue May 15, 2018 6:34 pm
All in it appears you have 2.5+ million not including foreign real estate or home equity. At a 4% withdrawal rate that’s 100k/year for 30 years (probably longer). If it were me I’d downsize my home and sell the foreign real estate to add a little cushion given youre 59.

Outside of that, I’d vote you can retire although it maybe close and you’ll need to ensure you have health care factored into your expenses
Thank you - I intend to sell the foreign real estate as fast as I can - but they are tied down for now.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 12:09 am

delamer wrote:
Tue May 15, 2018 6:49 pm
If you used some of that cash to pay off your mortgage, how much would that reduce your annual expenses (remember that only your principal and interest would disappear)?
Thank you. My thoughts are I should retain the mortgage - it is mostly payment towards principal, and the interest is deductible.
I could do a lot better with the 360k invested elsewhere.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 12:18 am

michaeljc70 wrote:
Tue May 15, 2018 8:25 pm
Sure, you can retire. You have a NW approaching 4.5 Million. I would just make sure to unload the foreign real estate, especially if it isn't providing income. You have an expensive home (almost $1.5 million), and I am surprised your expenses are that low with that expensive of a home. Downsizing/moving (I know you are in CA so $1.5M doesn't mean big home) would free up money for other things if you wanted.
Thank you. You are right - the home is actually quite modest, but happens to be in CA, and in a top school district.
The expenses are a post retirement estimate; I was conservative, but did factor in some cost cutting which I intend to do - getting rid of my land line, and the 5 zillion channel cable subscription among a few. Actually we are quite frugal, and may not be too far off on the estimate - but should get a better handle after the first year.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 12:28 am

MP123 wrote:
Tue May 15, 2018 9:40 pm
Yes, I think you can retire.

Your stock position is concentrated in BRK. I'm not sure about the managed payout fund but more diversity would be good. Add some bonds. 3 fund approach might be good for you.

Would downsizing even reduce your fixed expenses (other than p&i) considering Prop. 13?

Where's the foreign real estate? What's the outlook there? Might be worth holding on to.
Thank you. Yes I have a lot invested in BRK - a lot of it is gains. Maybe that is the stock to pick first for dilution.
By downsizing, I was referring to moving out of state, and also saving on state taxes - a last resort considering how much I love it here.
The foreign real estate is not quite liquid - I would like to dispose as fast as I can. The currency exchange rates progressively wipes out
any appreciation. Also not generating any income.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 12:42 am

make_a_better_world wrote:
Tue May 15, 2018 10:09 pm
Congratulations on your accomplishments. As others have said I would liquidate the foreign property, especially if it does not generate income. The numbers look good, but at 59 years old with a child that hasn't graduated there are a considerable number of assumptions on a long timeline. This gets personal and I do not believe there is a right or wrong answer. I guess it comes down to how badly you'd like to retire now. Judging by your user name, I gather that desire is quite high. I'd also consider your general health and would be more inclined to retire if there was something to be worried about there. As a cardiologist, I consider 59 to still be on the younger side. Personally I think it is wiser to retire into something else as opposed to becoming sedentary, and perhaps that something else could generate income, even if it was modest.
Thank you, Doctor. I am in great health and physically very active. A number of folks have also warned me that retiring early is detrimental to health. But personally, I have really enjoyed the past couple of months (the first time since high school that I had such a long relaxing time...) and have enough activities to keep me occupied, let us see how it goes. I may not be is as good shape physically, say 10 years from now. I am working on adding volunteering to the mix.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 12:44 am

gotester2000 wrote:
Tue May 15, 2018 10:55 pm
I would retire and relax.
You have about 3.3M excluding home equity and SS. A 3% withdrawal rate gives you about 100k and is perpetual.
The home equity is a good backup.
I would not pay the good mortgage off though as 2026 is not too far.
Thank you for the feedback.

Ron Scott
Posts: 804
Joined: Tue Apr 05, 2016 5:38 am

Re: Can I afford to retire now?

Post by Ron Scott » Wed May 16, 2018 8:47 am

I would not retire given the circumstances you describe, especially your consideration of making a major life change by moving to a different state and the fact that you are obviously concerned you're in a borderline situation financially.

You have the means to live modestly/well in CA and quite well in 80% of the rest of the US. That's a great safety net to use as a springboard for a final go at a little career/life planning, and you can approach this with the confidence in knowing you'll be fine one way or the other.

My vote is to polish off the resume, make a sincere attempt to secure a job you will enjoy, work for another 2-3 years, and use the additional time to get your finances if order rather than being forced to do so on a more harried schedule.

I retired at 61 because I did not want to take another exec job with what I felt was a 3+ year commitment. The financials were immaterial, but a little part of me wonders if I'd have enjoyed continuing that journey.

magicrat
Posts: 391
Joined: Sat Nov 29, 2014 7:04 pm

Re: Can I afford to retire now?

Post by magicrat » Wed May 16, 2018 9:00 am

Re: speaking to the financial "consultant" Most of these are sales people who will try to take 1-2% per year from your portfolio. If you are planning so spend 4% of your portfolio each you, 25-50% of your budget will go towards paying this consultant.

hawkfan55
Posts: 279
Joined: Thu Apr 03, 2014 9:04 pm

Re: Can I afford to retire now?

Post by hawkfan55 » Wed May 16, 2018 10:46 am

Emergency funds: 65K in checking
You will find that, when you are retired, having 65k in a checking account might not be prudent as long as you can access funds in case of an emergency. Consider keeping a year's expenses in a high-yield savings account or Vanguard's Prime Money Market earning 1.5% or better.
Debt: 360K in house - 2.75 % pa loan – loan terminates 2026
Assuming the loan terminates in 8 years, 360k principal at 2.75% = a monthly payment of approx. $4,182 or 50k per year. This is a high percentage of your planned retirement expenses. Although you can most likely cash flow this payment during retirement, you may "wish" for it to be paid off leaving more money for travel, entertainment, etc. since you'll have more time to do those things in retirement. Another consideration is how long you plan to stay in your present home? You may want to designate a portion of your savings specifically set aside for paying off your mortgage if you ever get to the point where you feel you want to do this. This money should be invested conservatively so it will be there if you decide to pay off your mortgage. You will not want to consider this "mortgage payoff fund" when figuring your Safe Withdrawal Rate.
I'm speaking from personal experience as we also have a 2.75% mortgage rate with a balance due of about 114k payable over the next 9.5 years. I'm 62, retired for 1.5 years. It's a nice mortgage interest rate so doesn't make a lot of financial sense to pay it off, however, when on a fixed income, it would be nice to have it paid off. With property taxes approx. $800/mo, housing expense is a little over $2000/mo, not counting maintenance.
Tax Filing Status: Married filing joint with 1 child
Do you have college savings for your dependent child? Everyone's ideas on this are different... just a consideration.
I will get Social Security 24K p.a when I complete 62
You may want to consider spending down retirement savings while waiting till FRA or 70 to take Social Security as it is COLA'ed.

Do you have Roth Savings? You will find the time before starting SS to be a great time to do any Roth Conversions. If you can convert in the 22% or 24% tax bracket, you may find it advantageous to do so. The federal tax brackets are not permanent so you may want to look at the next 6 years as a great time to get deferred savings into Roth accounts.

1. Can I retire now? Or should I dust off my resume (was laid off after acquisition) and work a few more years – Comments?
I would consider completing a retirement calculator such as www.I-ORP.com (extended version) as it takes taxes into account and may give you some guidance in whether or not you will want to retire now.
Forum Library of Investing Advice: https://www.bogleheads.org/wiki/Main_Page

delamer
Posts: 5837
Joined: Tue Feb 08, 2011 6:13 pm

Re: Can I afford to retire now?

Post by delamer » Wed May 16, 2018 11:20 am

want_to_retire wrote:
Wed May 16, 2018 12:09 am
delamer wrote:
Tue May 15, 2018 6:49 pm
If you used some of that cash to pay off your mortgage, how much would that reduce your annual expenses (remember that only your principal and interest would disappear)?
Thank you. My thoughts are I should retain the mortgage - it is mostly payment towards principal, and the interest is deductible.
I could do a lot better with the 360k invested elsewhere.

With the change in tax laws, are you sure that it will make sense for you to itemize and deduct your interest beginning in 2018?

A lot of families will be taking the new standard deduction ($24,000) rather than itemizing, due to the cap on property tax deductions ($10,000).

I suggest you put your 2018 numbers into a tax calculator like TaxCaster and find out.

If you can’t itemize, paying off the mortgage is a guaranteed return of 2.75% at a time when you are lucky to get half of that in a risk-free investment.

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MP123
Posts: 693
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Re: Can I afford to retire now?

Post by MP123 » Wed May 16, 2018 12:09 pm

Do you have a plan for healthcare insurance until both you and your spouse qualify for Medicare?

If at all possible it would be important to keep your income below the "ACA cliff" so that you can get subsidies and not have to pay the full premiums which can be very high.

That's another issue with keeping the mortgage since the money you need to feed it has to come from somewhere and that may raise your AGI over the subsidy limit. Paying off the mortgage will simultaneously reduce your reportable income (because you have less invested assets) and your need for that income in the first place. If you're close to the ACA cliff that could be quite significant.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 1:29 pm

Ron Scott wrote:
Wed May 16, 2018 8:47 am
I would not retire given the circumstances you describe, especially your consideration of making a major life change by moving to a different state and the fact that you are obviously concerned you're in a borderline situation financially.

You have the means to live modestly/well in CA and quite well in 80% of the rest of the US. That's a great safety net to use as a springboard for a final go at a little career/life planning, and you can approach this with the confidence in knowing you'll be fine one way or the other.

My vote is to polish off the resume, make a sincere attempt to secure a job you will enjoy, work for another 2-3 years, and use the additional time to get your finances if order rather than being forced to do so on a more harried schedule.

I retired at 61 because I did not want to take another exec job with what I felt was a 3+ year commitment. The financials were immaterial, but a little part of me wonders if I'd have enjoyed continuing that journey.
My reason for considering moving at all was - "Earthquakes" (and this may be need a separate thread altogether - but please do let me know the forum members thoughts on this).
All CA retirees have considerable amount of their nest egg in their home. A major earthquake (and the probabilities for this are quite high over the next 30 years) in CA, for eg Bay Area, could devastate real estate, and although eventually it would recover - may not quite happen in the lifetime of a retiree. There is earthquake insurance - but it is catastrophic insurance only.
Of course the stock market could also crash too - but we cannot run away from that - it would affect everyone, regardless of residence.
And I think the stock market would recover a lot sooner. There does not seem to be enough articles/analysis on this event. There are some parallels in the North Ridge and Loma Prieta - but the damage is expected to be much more in a Bay Area quake.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 1:36 pm

MP123 wrote:
Wed May 16, 2018 12:09 pm
Do you have a plan for healthcare insurance until both you and your spouse qualify for Medicare?

If at all possible it would be important to keep your income below the "ACA cliff" so that you can get subsidies and not have to pay the full premiums which can be very high.

That's another issue with keeping the mortgage since the money you need to feed it has to come from somewhere and that may raise your AGI over the subsidy limit. Paying off the mortgage will simultaneously reduce your reportable income (because you have less invested assets) and your need for that income in the first place. If you're close to the ACA cliff that could be quite significant.
Thank you - that is a very good point. I will follow up on this.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 1:40 pm

delamer wrote:
Wed May 16, 2018 11:20 am
want_to_retire wrote:
Wed May 16, 2018 12:09 am
delamer wrote:
Tue May 15, 2018 6:49 pm
If you used some of that cash to pay off your mortgage, how much would that reduce your annual expenses (remember that only your principal and interest would disappear)?
Thank you. My thoughts are I should retain the mortgage - it is mostly payment towards principal, and the interest is deductible.
I could do a lot better with the 360k invested elsewhere.

With the change in tax laws, are you sure that it will make sense for you to itemize and deduct your interest beginning in 2018?

A lot of families will be taking the new standard deduction ($24,000) rather than itemizing, due to the cap on property tax deductions ($10,000).

I suggest you put your 2018 numbers into a tax calculator like TaxCaster and find out.

If you can’t itemize, paying off the mortgage is a guaranteed return of 2.75% at a time when you are lucky to get half of that in a risk-free investment.
Yes - I will look into this. The deduction consideration and also the ACA income cut-offs should be factored in.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 16, 2018 1:42 pm

hawkfan55 wrote:
Wed May 16, 2018 10:46 am
Emergency funds: 65K in checking
You will find that, when you are retired, having 65k in a checking account might not be prudent as long as you can access funds in case of an emergency. Consider keeping a year's expenses in a high-yield savings account or Vanguard's Prime Money Market earning 1.5% or better.
Debt: 360K in house - 2.75 % pa loan – loan terminates 2026
Assuming the loan terminates in 8 years, 360k principal at 2.75% = a monthly payment of approx. $4,182 or 50k per year. This is a high percentage of your planned retirement expenses. Although you can most likely cash flow this payment during retirement, you may "wish" for it to be paid off leaving more money for travel, entertainment, etc. since you'll have more time to do those things in retirement. Another consideration is how long you plan to stay in your present home? You may want to designate a portion of your savings specifically set aside for paying off your mortgage if you ever get to the point where you feel you want to do this. This money should be invested conservatively so it will be there if you decide to pay off your mortgage. You will not want to consider this "mortgage payoff fund" when figuring your Safe Withdrawal Rate.
I'm speaking from personal experience as we also have a 2.75% mortgage rate with a balance due of about 114k payable over the next 9.5 years. I'm 62, retired for 1.5 years. It's a nice mortgage interest rate so doesn't make a lot of financial sense to pay it off, however, when on a fixed income, it would be nice to have it paid off. With property taxes approx. $800/mo, housing expense is a little over $2000/mo, not counting maintenance.
Tax Filing Status: Married filing joint with 1 child
Do you have college savings for your dependent child? Everyone's ideas on this are different... just a consideration.
I will get Social Security 24K p.a when I complete 62
You may want to consider spending down retirement savings while waiting till FRA or 70 to take Social Security as it is COLA'ed.

Do you have Roth Savings? You will find the time before starting SS to be a great time to do any Roth Conversions. If you can convert in the 22% or 24% tax bracket, you may find it advantageous to do so. The federal tax brackets are not permanent so you may want to look at the next 6 years as a great time to get deferred savings into Roth accounts.

1. Can I retire now? Or should I dust off my resume (was laid off after acquisition) and work a few more years – Comments?
I would consider completing a retirement calculator such as www.I-ORP.com (extended version) as it takes taxes into account and may give you some guidance in whether or not you will want to retire now.
Thank you - I will follow up on your suggestions. Looks like I have enough HW to keep me busy for a while :happy

hawkfan55
Posts: 279
Joined: Thu Apr 03, 2014 9:04 pm

Re: Can I afford to retire now?

Post by hawkfan55 » Wed May 16, 2018 2:02 pm

3. Do I need to downsize on my primary residence – in order to meet retirement expenses?
Only you can determine whether you need or want to downsize your home. I-ORP will give you your optimal spending solution after taxes. You can then "rightsize" your spending.
My reason for considering moving at all was - "Earthquakes" (and this may be need a separate thread altogether - but please do let me know the forum members thoughts on this).
Only you can decide if the threat of earthquakes is a factor in your financial life. Tens of millions of people own homes in earthquake prone areas. Tens of millions live in areas where sinkholes are prevalent... same with tornado and coastal or flood prone areas. Some areas might have water shortages. All of these calamities involve risk. Make sure you have proper insurance coverage and can cover the deductible if you have a loss. If the heat in the kitchen is too hot, get out. :confused You could rent and let someone else take on the risks.

One other thing if forgot to mention in my previous reply... google IRMAA. You can do Roth Conversions without having IRMAA affect you if you do them before the tax year when you turn 63.

Good Luck!
Forum Library of Investing Advice: https://www.bogleheads.org/wiki/Main_Page

dbdavidson
Posts: 13
Joined: Tue Apr 09, 2013 9:11 am

Re: Can I afford to retire now?

Post by dbdavidson » Wed May 16, 2018 2:50 pm

Your wife brings in 25K
1M in stock will bring in 11K dividends
You'll get some small interest on 800K cash and 240K I-Bonds.

Doesn't the 28% tax rate start from $153,100 and up?

How do you get into such a high bracket? Maybe that was from before the layoff?

TravelforFun
Posts: 1424
Joined: Tue Dec 04, 2012 11:05 pm

Re: Can I afford to retire now?

Post by TravelforFun » Wed May 16, 2018 5:57 pm

want_to_retire wrote:
Tue May 15, 2018 4:44 pm
1. Can I retire now? Or should I dust off my resume (was laid off after acquisition) and work a few more years – Comments?
You should work a couple of more years. This is how I figure how much you should have in order to retire now. Discounting your wife's income because it's temporary, you would need:
* $135K - $11K dividends = $124K a year for 3 years before you receive your SS and kids out of school. Total: $372K
* then $100K - $24K = $76K a year from age 62 on. That means based on a 3% safe withdrawal rate, you would need $76K x 33 = $2,508K.

* Total: $2.9 million and you have $2.7 million.

I would work another year or two.

TravelforFun

marcopolo
Posts: 1052
Joined: Sat Dec 03, 2016 10:22 am

Re: Can I afford to retire now?

Post by marcopolo » Wed May 16, 2018 7:00 pm

TravelforFun wrote:
Wed May 16, 2018 5:57 pm
want_to_retire wrote:
Tue May 15, 2018 4:44 pm
1. Can I retire now? Or should I dust off my resume (was laid off after acquisition) and work a few more years – Comments?
You should work a couple of more years. This is how I figure how much you should have in order to retire now. Discounting your wife's income because it's temporary, you would need:
* $135K - $11K dividends = $124K a year for 3 years before you receive your SS and kids out of school. Total: $372K
* then $100K - $24K = $76K a year from age 62 on. That means based on a 3% safe withdrawal rate, you would need $76K x 33 = $2,508K.

* Total: $2.9 million and you have $2.7 million.

I would work another year or two.

TravelforFun

Another way to look at it is that if 3% is good for age 62 on wards, it is probably good from current age of 59 as well.
So, that means $2508k to generate the $76k/year. Then he needs $59k/yr (135-76), $177k over 3 years, to fill the gap until SS and lower expenses.
Total of $2685k, a little less than he has currently, plus he will have some income from his wife, at least temporarily.
Not, a slam dunk, but seems reasonable that he could retire now.
Once in a while you get shown the light, in the strangest of places if you look at it right.

TravelforFun
Posts: 1424
Joined: Tue Dec 04, 2012 11:05 pm

Re: Can I afford to retire now?

Post by TravelforFun » Wed May 16, 2018 9:36 pm

marcopolo wrote:
Wed May 16, 2018 7:00 pm
TravelforFun wrote:
Wed May 16, 2018 5:57 pm
want_to_retire wrote:
Tue May 15, 2018 4:44 pm
1. Can I retire now? Or should I dust off my resume (was laid off after acquisition) and work a few more years – Comments?
You should work a couple of more years. This is how I figure how much you should have in order to retire now. Discounting your wife's income because it's temporary, you would need:

* $135K - $11K dividends = $124K a year for 3 years before you receive your SS and kids out of school. Total: $372K
* then $100K - $24K = $76K a year from age 62 on. That means based on a 3% safe withdrawal rate, you would need $76K x 33 = $2,508K.

* Total: $2.9 million and you have $2.7 million.

I would work another year or two.

TravelforFun

Another way to look at it is that if 3% is good for age 62 on wards, it is probably good from current age of 59 as well.
So, that means $2508k to generate the $76k/year. Then he needs $59k/yr (135-76), $177k over 3 years, to fill the gap until SS and lower expenses.
Total of $2685k, a little less than he has currently, plus he will have some income from his wife, at least temporarily.
Not, a slam dunk, but seems reasonable that he could retire now.
MP,

Nothing wrong with your numbers.

TravelforFun

dbdavidson
Posts: 13
Joined: Tue Apr 09, 2013 9:11 am

Re: Can I afford to retire now?

Post by dbdavidson » Thu May 17, 2018 8:50 am

Personally, I think your in decent shape. I did not want to hijack this thread with a discussion on a specific forecast of this situation, so I created a new thread: viewtopic.php?f=1&t=249664

But, since it is a forecast on this situation I hope you find that discussion interesting/useful.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Thu May 17, 2018 1:38 pm

dbdavidson wrote:
Wed May 16, 2018 2:50 pm
Your wife brings in 25K
1M in stock will bring in 11K dividends
You'll get some small interest on 800K cash and 240K I-Bonds.

Doesn't the 28% tax rate start from $153,100 and up?

How do you get into such a high bracket? Maybe that was from before the layoff?
Yes - that was for 2017 (I had indicated in my first posting that it will change post retirement).
I expect it the bracket to remain the same for 2018 - worked early in the year and then got a severance.
2019 will be my first year with no employment income.

And note : Ypu are probably aware - the I-bond interests are compounded to the principal - taxed only on withdrawal. The cash will be invested shortly.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Thu May 17, 2018 1:45 pm

TravelforFun wrote:
Wed May 16, 2018 9:36 pm
marcopolo wrote:
Wed May 16, 2018 7:00 pm
TravelforFun wrote:
Wed May 16, 2018 5:57 pm
want_to_retire wrote:
Tue May 15, 2018 4:44 pm
1. Can I retire now? Or should I dust off my resume (was laid off after acquisition) and work a few more years – Comments?
You should work a couple of more years. This is how I figure how much you should have in order to retire now. Discounting your wife's income because it's temporary, you would need:

* $135K - $11K dividends = $124K a year for 3 years before you receive your SS and kids out of school. Total: $372K
* then $100K - $24K = $76K a year from age 62 on. That means based on a 3% safe withdrawal rate, you would need $76K x 33 = $2,508K.

* Total: $2.9 million and you have $2.7 million.

I would work another year or two.

TravelforFun

Another way to look at it is that if 3% is good for age 62 on wards, it is probably good from current age of 59 as well.
So, that means $2508k to generate the $76k/year. Then he needs $59k/yr (135-76), $177k over 3 years, to fill the gap until SS and lower expenses.
Total of $2685k, a little less than he has currently, plus he will have some income from his wife, at least temporarily.
Not, a slam dunk, but seems reasonable that he could retire now.
MP,

Nothing wrong with your numbers.

TravelforFun
Thank you MarcoPolo and TravelforFun. Just to clarify - "temp" was a poor choice of word to describe spouse's job. It is a part time job she loves and intends to continue indefinitely - maybe put in more time into it - now that I am fully taking care of cooking meals and chores :happy. The job is secure.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Thu May 17, 2018 1:48 pm

dbdavidson wrote:
Thu May 17, 2018 8:50 am
Personally, I think your in decent shape. I did not want to hijack this thread with a discussion on a specific forecast of this situation, so I created a new thread: viewtopic.php?f=1&t=249664

But, since it is a forecast on this situation I hope you find that discussion interesting/useful.
Thank You, dbdavidson - will study that analysis. I briefly perused the output. I am assuming I can play around with the parameters.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Thu May 17, 2018 1:52 pm

magicrat wrote:
Wed May 16, 2018 9:00 am
Re: speaking to the financial "consultant" Most of these are sales people who will try to take 1-2% per year from your portfolio. If you are planning so spend 4% of your portfolio each you, 25-50% of your budget will go towards paying this consultant.
Thank you - given the amount of feedback and tools I have received from this forum (including taxation advice) - I may not go beyond the first "free" appointment I was going to setup with him.

dbdavidson
Posts: 13
Joined: Tue Apr 09, 2013 9:11 am

Re: Can I afford to retire now?

Post by dbdavidson » Thu May 17, 2018 1:55 pm

want_to_retire wrote:
Thu May 17, 2018 1:48 pm
dbdavidson wrote:
Thu May 17, 2018 8:50 am
Personally, I think your in decent shape. I did not want to hijack this thread with a discussion on a specific forecast of this situation, so I created a new thread: viewtopic.php?f=1&t=249664

But, since it is a forecast on this situation I hope you find that discussion interesting/useful.
Thank You, dbdavidson - will study that analysis. I briefly perused the output. I am assuming I can play around with the parameters.
Unfortunately you can not play with parameters since I've not yet created a GUI. Sorry about that.
However, if you PM me with requested updates I'll try to accommodate.

Tal-
Posts: 338
Joined: Fri Apr 22, 2016 10:41 pm

Re: Can I afford to retire now?

Post by Tal- » Thu May 17, 2018 3:35 pm

OP,

You've provided a really good summary of your assets, but I'm much less clear on your spending - both current and expected.

How is medical factored into the 135K?

How is your PITI factored into the $135K, and how will that change in a few years when you pay off the mortgage?

What big expenses do you have coming up? Paying for college or a wedding? Helping with a down payment? How are those factored in?

Is $135K your current expenses in a HCOL area? Where would you move?

You don't necessarily need to answer, but nailing down your spending is, in my opinion, one of the bigger unknowns about your plan.
Debt is to personal finance as a knife is to cooking.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Mon May 21, 2018 11:09 am

Tal- wrote:
Thu May 17, 2018 3:35 pm
OP,

You've provided a really good summary of your assets, but I'm much less clear on your spending - both current and expected.

How is medical factored into the 135K?

How is your PITI factored into the $135K, and how will that change in a few years when you pay off the mortgage?

What big expenses do you have coming up? Paying for college or a wedding? Helping with a down payment? How are those factored in?

Is $135K your current expenses in a HCOL area? Where would you move?

You don't necessarily need to answer, but nailing down your spending is, in my opinion, one of the bigger unknowns about your plan.
Thank you Tal - working on this.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Mon May 21, 2018 11:22 am

hawkfan55 wrote:
Wed May 16, 2018 10:46 am

You may want to consider spending down retirement savings while waiting till FRA or 70 to take Social Security as it is COLA'ed.

Do you have Roth Savings? You will find the time before starting SS to be a great time to do any Roth Conversions. If you can convert in the 22% or 24% tax bracket, you may find it advantageous to do so. The federal tax brackets are not permanent so you may want to look at the next 6 years as a great time to get deferred savings into Roth accounts.
Is it really worth making the Roth conversions? Or just spend down the 401K first (ahead of the taxable) to push out SS start ?

hawkfan55
Posts: 279
Joined: Thu Apr 03, 2014 9:04 pm

Re: Can I afford to retire now?

Post by hawkfan55 » Tue May 22, 2018 1:47 pm

Is it really worth making the Roth conversions? Or just spend down the 401K first (ahead of the taxable) to push out SS start ?
We think so... here's why. DW and I both retired. Pensions of $54k. We are withdrawing from deferred to meet expenses AND doing Roth Conversions. DW starting SS at 63, I will wait until sometime between FRA and 70. Our 401k/403b contributions were made while solidly in the 25% tax bracket. Over the next 6-7 years, we can convert those dollars into Roth IRAs at 22%. :happy As of now, the MFJ brackets will revert back to prior amounts in 2025. Converting deferred savings to Roth will reduce or eliminate our RMDs to near zero, allowing us to stay at the top of the 12% bracket instead of 22% for the duration of our plan. A large consideration in my mind... in the event one of us were to die, the surviving spouse would be taxed using "single" brackets, at much higher rates assuming same taxable income.

Another factor when considering pace of conversions is keeping IRMAA in mind. Keep in mind MAGI two years prior to turning 65 and qualifying for Medicare. In our case, we'll convert within the 22% bracket, however, not to the top because we want to keep our MAGI below 170k.

With deferred accounts, the government is your investing partner and they share in your gains. In addition, you, or your heirs will also have to pay the taxes eventually. I would rather convert at a known tax percentage into a Roth IRA and, from that point on, benefit by reaping 100% of the returns from that point on. With Roth, you also have more flexibility as to when and how much you withdraw.

You will need to use a calculator such as RPM or ORP to see if Roth Conversions might make sense for your situation. Factors to be considered will be $ amounts of pensions, social security and retirement savings. Also when these income streams are started during retirement. As they say, YMMV :D
Forum Library of Investing Advice: https://www.bogleheads.org/wiki/Main_Page

cslovacek
Posts: 4
Joined: Tue May 22, 2018 2:30 pm

Re: Can I afford to retire now?

Post by cslovacek » Tue May 22, 2018 2:35 pm

Brutha -

1. Pay of your home immediately. That will reduce expenses.
2. If you are only generating $11,000 a year off of $1M, there is a problem. If you put $1 Million into VGIAX for example (a Solid Growth & Income Mutual Fund), you would have made about 56K in Distributions (Dividends & Capital Gains) in 2017.

Eliminating the house payment having funds that pay better distributions will take you a long way towards your goal.

Individual stocks are too risk. Invest in 3 or 4 Solid Mutual Funds that tend to pay nice distributions. It's all really very simple..don't make it more complicated than it needs to be. Yes, if you do these two things, you can certainly retire right now.

Great job!

dharrythomas
Posts: 882
Joined: Tue Jun 19, 2007 4:46 pm

Re: Can I afford to retire now?

Post by dharrythomas » Tue May 22, 2018 5:14 pm

I think you can pay off the house and retire. Many of us who itemized are now going to be taking the standard deduction. With careful management, you can make it even in a high cost of living area.

Good luck.

SimplicityNow
Posts: 472
Joined: Fri Aug 05, 2016 10:31 am

Re: Can I afford to retire now?

Post by SimplicityNow » Tue May 22, 2018 5:34 pm

I think you know this already but if you plan to sell the individual stocks with gains make sure that you aren't reinvesting those dividends into new purchases.

As far as retiring early being detrimental to you health I would strongly disagree.

I retired last year. I have lost 10 pounds and have the time to go to the gym 4-5 times a week. I also ride my bike several time a week. I love the extra sleep and the reduction in stress. All the above I feel makes me healthier. They key is to have interests. If you have interests outside of your career then you will be fine. If you don't, now is the time to develop some.

Best of luck in your decision.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 23, 2018 1:39 pm

hawkfan55 wrote:
Tue May 22, 2018 1:47 pm
Is it really worth making the Roth conversions? Or just spend down the 401K first (ahead of the taxable) to push out SS start ?
We think so... here's why. DW and I both retired. Pensions of $54k. We are withdrawing from deferred to meet expenses AND doing Roth Conversions. DW starting SS at 63, I will wait until sometime between FRA and 70. Our 401k/403b contributions were made while solidly in the 25% tax bracket. Over the next 6-7 years, we can convert those dollars into Roth IRAs at 22%. :happy As of now, the MFJ brackets will revert back to prior amounts in 2025. Converting deferred savings to Roth will reduce or eliminate our RMDs to near zero, allowing us to stay at the top of the 12% bracket instead of 22% for the duration of our plan. A large consideration in my mind... in the event one of us were to die, the surviving spouse would be taxed using "single" brackets, at much higher rates assuming same taxable income.

Another factor when considering pace of conversions is keeping IRMAA in mind. Keep in mind MAGI two years prior to turning 65 and qualifying for Medicare. In our case, we'll convert within the 22% bracket, however, not to the top because we want to keep our MAGI below 170k.

With deferred accounts, the government is your investing partner and they share in your gains. In addition, you, or your heirs will also have to pay the taxes eventually. I would rather convert at a known tax percentage into a Roth IRA and, from that point on, benefit by reaping 100% of the returns from that point on. With Roth, you also have more flexibility as to when and how much you withdraw.

You will need to use a calculator such as RPM or ORP to see if Roth Conversions might make sense for your situation. Factors to be considered will be $ amounts of pensions, social security and retirement savings. Also when these income streams are started during retirement. As they say, YMMV :D
Thank You hawkfan...

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 23, 2018 1:55 pm

cslovacek wrote:
Tue May 22, 2018 2:35 pm
Brutha -

1. Pay of your home immediately. That will reduce expenses.
2. If you are only generating $11,000 a year off of $1M, there is a problem. If you put $1 Million into VGIAX for example (a Solid Growth & Income Mutual Fund), you would have made about 56K in Distributions (Dividends & Capital Gains) in 2017.

Eliminating the house payment having funds that pay better distributions will take you a long way towards your goal.

Individual stocks are too risk. Invest in 3 or 4 Solid Mutual Funds that tend to pay nice distributions. It's all really very simple..don't make it more complicated than it needs to be. Yes, if you do these two things, you can certainly retire right now.

Great job!
Thanks cslovacek.
1. Yes I do intend to payoff my mortgage - and as was pointed out by others, reduces the income to needed to make payments...helps to meet ACA cutoffs.
2. As you see bulk of the holding is Berkshire which explains lack of dividends - but overall my equity port folio performance was not too shabby last year. Have to carefully (they are all sitting on a lot of gains) reduce individual stock holdings. And of late BRK has started under-performing S&P, and also there is the looming question of Buffet successor. Do intend to invest the leftover cash after mortgage into Vanguard MFs.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 23, 2018 1:56 pm

dharrythomas wrote:
Tue May 22, 2018 5:14 pm
I think you can pay off the house and retire. Many of us who itemized are now going to be taking the standard deduction. With careful management, you can make it even in a high cost of living area.

Good luck.
Thank you - yes I will be doing that.

want_to_retire
Posts: 23
Joined: Tue May 15, 2018 11:58 am

Re: Can I afford to retire now?

Post by want_to_retire » Wed May 23, 2018 2:01 pm

SimplicityNow wrote:
Tue May 22, 2018 5:34 pm
I think you know this already but if you plan to sell the individual stocks with gains make sure that you aren't reinvesting those dividends into new purchases.

As far as retiring early being detrimental to you health I would strongly disagree.

I retired last year. I have lost 10 pounds and have the time to go to the gym 4-5 times a week. I also ride my bike several time a week. I love the extra sleep and the reduction in stress. All the above I feel makes me healthier. They key is to have interests. If you have interests outside of your career then you will be fine. If you don't, now is the time to develop some.

Best of luck in your decision.
Yes - it is making sure the mind and body don't waste away. I have been off work for the past several months - and have enough things to keep me busy, and am really enjoying it.

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