Can I retire soon?

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Topic Author
jornsy
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Can I retire soon?

Post by jornsy »

I have updated my numbers below (from 2019) and thinking more and more about retiring soon, rather than waiting until I'm 60. I am seeking your input on whether we have enough to retire later this year or maybe July 2022.

Emergency fund: 1 year of expenses in money market fund & cd, not listed below.
Debt: No debt (mortgage paid off, cars paid off, pay full balance of credit cards each month).
Tax Filing Status: Married filing jointly
Tax Rate: Federal effective rate <22% (Fed) 2020 AGI = $126,000, 5% State (Illinois).
Age: 57, wife 53
Desired Asset allocation: 60% stocks/ 40% bonds.
Intl allocation: 20% of stocks

Retirement accounts:
(Fund/ticker, expense ratio, balance, yearly contribution)

S.U.R.S. retirement at Voya ($708,000 total).
In a target date fund for age 65. Will have to annuitize to receive state health benefits for life.

403b at Vanguard ($763,000 total)
Vanguard - REIT Index Fund (VGSIX) .12, $112,000, 0
Vanguard - Total Bond Market Index Fund (VBMFX) .05, $156,000, 0
Vanguard - Total International Stock Index Fund (VGTSX) .11, $129,000, 0
Vanguard - Total Stock Market Index Fund (VTSMX) .04, $366,000, 0

457b at T. Rowe Price ($164,000 total)
Vanguard - Institutional 500 Index Trust (FXAIX) .01, $62,000
Vanguard - Total Bond Market Index Fund (VGTSX) .03, $77,000
Northern Trust - All Country World ex-US Index (NTACW) .05, $25,000

Roth IRAs ($476,000 total)
Vanguard - Balanced Fund (VBIAX) .07, $241,000, $7,000
Vanguard - Wellington Fund (VWENX) .16, $235,000, $7000


Taxable account: ($328,000)

Vanguard - Intermediate-Term Tax-Exempt Fund (VWIUX), .09, $112,000
Vanguard - Prime Money Market Fund (VMMXX) .16, $3,300
Vanguard - Small-Cap Index Fund (VSMAX) .06, $14,000
Vanguard - Total International Stock Index Fund (VTIAX) .11, $34,000
Vanguard - Total Stock Market Index Fund (VTSAX) .04, $165,000

My SURS Retirement (state-IL) has to be annuitized when I retire in order to receive state health benefits. I may roll over the 457b into the SURS account when I retire to boost the payments for both of our lives & 20 year guaranteed.

I plan on converting some funds each year (till age 72) from my 403b to my Roth to lower my future RMDs.

Expected Spending: in retirement will be around $80,000.

My SS will be affected by GPO & WEP, so I won't receive much at all. My wife (age 53) will be eligible for SS, but she was a stay at home mom for a long time, so her contributions have been at a lower level (W2 income now $32,000). She will continue to work for another 10-? years in the family business managing rental properties (S-corp) to increase her SS benefit.

Tax-deferred total = $1,635,000
Roth total = $476,000
After tax total = $328,000

Combined total for retirement = 2,440,000

I would also love to hear from other fellow SURS members who are using the new Retirement Savings Plan (RSP) and if you are planning on using the Lifetime Income Strategy (LIS) or annuitizing everything with Principal.
orklc
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Re: Can I retire soon?

Post by orklc »

Can you tell us more about the annuity conversion? Fixed amounts (starting when?) with or without inflation adjustments? It sounds like we should figure out how much of your expenses that will cover first.
Topic Author
jornsy
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Re: Can I retire soon?

Post by jornsy »

orklc wrote: Fri Apr 23, 2021 6:43 pm Can you tell us more about the annuity conversion? Fixed amounts (starting when?) with or without inflation adjustments? It sounds like we should figure out how much of your expenses that will cover first.
If I annuitize the SURS $708,000, I will receive approximately $30,000 or more if I combine the 457b ($164,000). There will be no COLA.
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Watty
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Re: Can I retire soon?

Post by Watty »

What do you expect your expenses to be?
(Edit: I missed that you said you would be spending about $80K a year. Does that include income tax? If not then you also need to budget for that. )

If you take the annuity with the pension then how much will you get, when does it start, is it adjusted for inflation, and will your wife still get it if you die first?

How secure and well funded is your pension plan? I don't really follow it but as I recall I have see several posts about Illinois government pension plans being in big trouble.

How much is your house worth? You might not be planning on using the home equity but it could be a good safety net.

If your wife will be working another 10 years or so then can she get health insurance through that job?
Last edited by Watty on Fri Apr 23, 2021 7:04 pm, edited 1 time in total.
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JoeRetire
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Re: Can I retire soon?

Post by JoeRetire »

jornsy wrote: Fri Apr 23, 2021 6:05 pmI am seeking your input on whether we have enough to retire later this year or maybe July 2022.

Expected Spending: in retirement will be around $80,000.

Combined total for retirement = 2,440,000
Should be good to go.
I love a good nap. Sometimes it’s the only thing getting me out of bed in the morning.
Topic Author
jornsy
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Re: Can I retire soon?

Post by jornsy »

Watty wrote: Fri Apr 23, 2021 6:54 pm What do you expect your expenses to be?
(Edit: I missed that you said you would be spending about $80K a year. Does that include income tax? If not then you also need to budget for that. )

$80,000 is on the high end. Right now we are spending roughly $70,000-$75,000 per year, but wanted to error on the higher end because my pension will not have COLA. Yes, the $80,000 includes taxes.


If you take the annuity with the pension then how much will you get, when does it start, is it adjusted for inflation, and will your wife still get it if you die first?

When I take the annuitized pension, I will receive approximately $30,000 with no COLA. It is a Joint and Survivor Annuity with guaranteed period of 20 years.

How secure and well funded is your pension plan? I don't really follow it but as I recall I have see several posts about Illinois government pension plans being in big trouble.

The good thing about my Illinois pension is that all the money (my contributions and Illinois' contributions) are in my account now. It is a defined contribution plan, so I'm not at the mercy of the debt of Illinois. Illinois has a traditional (defined benefit plan), a portal plan and the self-managed plan (defined contribution plan). My pension is not affected by Illinois' politics.

How much is your house worth? You might not be planning on using the home equity but it could be a good safety net.

My house and 5 acres is worth $200,000, but we also cash rent 80 acres of farmland that brings in $16,000. We have been saving this money for lumpy expenses in the future.

If your wife will be working another 10 years or so then can she get health insurance through that job?

Both my wife and I will have health insurance covered by the state of Illinois for our lifetime. At age 65, medicare will be primary and Illinois health insurance will become secondary.
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bampf
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Re: Can I retire soon?

Post by bampf »

Absolutely. 4% of your liquid assets is generally considered a safe withdrawal rate. You are there.
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Orange_Philosophy
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Re: Can I retire soon?

Post by Orange_Philosophy »

Admittedly I know nothing about SURS. I assume you have to essentially surrender your 708K balance to the state and in return you get about 30K in guaranteed returns for 20 years plus state employee medical benefits? What happens after the 20 years? Medicare and you will have surrendered the 708K balance? If so I’m not sure I’d take that offer. 708K/20=35,000 with no returns factored in.
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Watty
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Re: Can I retire soon?

Post by Watty »

jornsy wrote: Fri Apr 23, 2021 6:51 pm If I annuitize the SURS $708,000, I will receive approximately $30,000 or more if I combine the 457b ($164,000). There will be no COLA.
That $30K is only about a 4.2% return on the $708K. I can see where you might want to keep that money in the plan to get retiree healthcare but it does not sound like a fantastic deal for the additional $164K.

In addition it does not look like you need the additional pension income right now because you would have.

$30K pension
$35K wife's income while she is still working.
$16K rental income from the farm
You would also have something like $1.5 million in other investments that will be generating $20K+ in dividends and interest each year.

Combined that will easily more than cover more your expenses so you don't need the additional from putting the $164K into the pension income

It would be good to play with the numbers on this website to see how that compares to an comercial immediate annuity you could buy.

https://www.immediateannuities.com/

Buying an immediate annuity at 57 and 53 is pretty young, compare that to what you would get if you buy an annuity in 10 years when your wife stops working when you would be 67 and 63.

You could keep the $164K invested until your wife stops working then decide if buying a commercial annuity would make sense then when you need some more income. At that point it will likely pay out more because; you are older, the investments will have grown, and interest rates may be higher then.

At least to me it looks like you can retire.

One thing you did not mention though is how much your pension would increase if you worked another year.

It might make sense to work a bit longer so that your wife does not not need to keep working so long. If you work another year then you would have another years income and a larger pension so you might be able to both retire then.

Every couple is different but many people want to do thing like travel or do things together when they are retired and if she works another 10 year that will really limit the things you can do. You are doing really well there is not a big need for her to work that long so I would not really plan on her working that long. (As I understand it though she will need to work 40 quarter, ten years, under Social Security get anything so be sure to check on that. She does not need to earn much so even things part time jobs in high school will count for her 40 quarters. If she is just a bit short of having 40 quarter then working a bit longer to get the 40 quarters could make sense.)
jornsy wrote: Fri Apr 23, 2021 6:05 pm My SURS Retirement (state-IL) has to be annuitized when I retire in order to receive state health benefits.
One thing to look into is just how the calculations for the annuitization work.

Some pension plans determine how much you get paid each month based on your final salary and years of service so only the lump sum amount changes when interest rates go up or down.

Other pension plans are a cash balance plan when the amount you would be paid each month is determined by how large and annuity you can buy with that cash balance on the day you retire. Interest rates are a major factor in determining that so if you work an additional year and interest rates are higher when you retire you would get a larger pension.

If yours is like this then you should be aware that if you wait another year to retire and interest rates are higher next year then you could get a larger pension. Of course interest rates are impossible to predict and if they are lower next year then the pension might be lower. It is hard to recommend what to do but it would be good to be sure to understand how this works for your pension.
Point
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Re: Can I retire soon?

Post by Point »

The 1.635 at 3.25%/year will yield 57k/year. Draw down the sum of your Roth and after tax at the same rate and add to the 57K. Will this meet your expenses?
Topic Author
jornsy
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Re: Can I retire soon?

Post by jornsy »

Hello everyone. I updated my numbers below for one final analysis by the Boglehead community. I would like to retire next spring (2022) and need your final comments and encouragement.

Retirement accounts:

S.U.R.S. retirement at Voya ($766,000 total). This account will be annuitized (100% joint life with 20 year certain) when I retire in order to have medical coverage for life. It should be around $30,000/year, but I won't know for sure until I have another report/analysis done in January.

403b at Vanguard ($828,000 total)
Vanguard - REIT Index Fund (VGSIX) .12, $127,000
Vanguard - Total Bond Market Index Fund (VBMFX) .05, $157,000
Vanguard - Total International Stock Index Fund (VGTSX) .11, $131,000
Vanguard - Total Stock Market Index Fund (VTSMX) .04, $413,000

457b at T. Rowe Price ($197,000 total)
Vanguard - Institutional 500 Index Trust (FXAIX) .01, $94,000
Vanguard - Total Bond Market Index Fund (VGTSX) .03, $78,000
Northern Trust - All Country World ex-US Index (NTACW) .05, $25,000

Roth IRAs ($517,000 total)
Vanguard - Balanced Fund (VBIAX) .07, $260,000, $7,000
Vanguard - Wellington Fund (VWENX) .16, $257,000, $7000


Taxable accounts::

Investments at Vanguard ($346,000)
Vanguard - Cash Reserves Federal Money Market (VMRXX) .10, $3,300
Vanguard - Intermediate-Term Tax-Exempt Fund (VWIUX) .09, $112,000
Vanguard - Small-Cap Index Fund (VSMAX) .05, 15,000
Vanguard - Total International Stock Index Fund (VGTSX) .11, $34,000
Vanguard - Total Stock Market Index Fund (VTSMX) .04, $182,000

Savings Account at bank 1 ($40,000)
Savings/CD at credit union ($30,000)


My wife works for the family S-corp/business (rental properties), so her income is very stable ($35,000). She will be eligible for SS, but mine will be reduced by WEP/GPO.

Our 2020 AGI was $100,000 after the standard MFJ deduction. So $100,000 - ($30,000/annuity + $35,000/wife's income) = $35,000 is needed from from our investments. Since I turn 58 in January, I was planning on using funds from my 457b until I am 59.5 when I have penalty-free access to my 403b account. I know we can use money from our Roth IRAs if needed, but we would like to keep most of these funds for gifting to our three adult children in the future.

Thanks in advance for your comments, thoughts and advice.
aristotelian
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Re: Can I retire soon?

Post by aristotelian »

What are the state health benefits? How much to they save you vs ACA? Have you analyzed to make sure the annuity is worth it?

I think you have enough saved but would be somewhat concerned about a non-inflation adjusted annuity representing such a large portion of your portfolio, especially with only one SS payment.
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willthrill81
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Re: Can I retire soon?

Post by willthrill81 »

aristotelian wrote: Tue Nov 23, 2021 1:01 pm I think you have enough saved but would be somewhat concerned about a non-inflation adjusted annuity representing such a large portion of your portfolio, especially with only one SS payment.
I am very concerned about that. Generally speaking, annuitizing more than 25% of so of one's portfolio is a bad idea. Fixed annuity payouts are completely exposed to inflation risk, and liquidity of the annuitized funds is permanently lost.

Regarding inflation risk, even a very low 2% inflation rate will result in the buying power of a fixed payout being halved in 36 years. 3% inflation would do the same in 24 years.
Last edited by willthrill81 on Thu Nov 25, 2021 12:34 pm, edited 1 time in total.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Topic Author
jornsy
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Re: Can I retire soon?

Post by jornsy »

willthrill81 wrote: Tue Nov 23, 2021 1:35 pm
aristotelian wrote: Tue Nov 23, 2021 1:01 pm I think you have enough saved but would be somewhat concerned about a non-inflation adjusted annuity representing such a large portion of your portfolio, especially with only one SS payment.
I am very concerned about that. Generally speaking, annuitizing more than 25% of so of one's portfolio is generally a bad idea. Fixed annuity payouts are completely exposed to inflation risk, and liquidity of the annuitized funds is permanently lost.

Regarding inflation risk, even a very low 2% inflation rate will result in the buying power of a fixed payout being halved in 36 years. 3% inflation would do the same in 24 years.
I do have the option to annuitize 50% and then leave the rest invested in mutual funds/bonds and take withdrawals as needed in order to get the State of Illinois health care insurance. Would doing this be the better plan?
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willthrill81
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Re: Can I retire soon?

Post by willthrill81 »

jornsy wrote: Tue Nov 23, 2021 2:28 pm
willthrill81 wrote: Tue Nov 23, 2021 1:35 pm
aristotelian wrote: Tue Nov 23, 2021 1:01 pm I think you have enough saved but would be somewhat concerned about a non-inflation adjusted annuity representing such a large portion of your portfolio, especially with only one SS payment.
I am very concerned about that. Generally speaking, annuitizing more than 25% of so of one's portfolio is generally a bad idea. Fixed annuity payouts are completely exposed to inflation risk, and liquidity of the annuitized funds is permanently lost.

Regarding inflation risk, even a very low 2% inflation rate will result in the buying power of a fixed payout being halved in 36 years. 3% inflation would do the same in 24 years.
I do have the option to annuitize 50% and then leave the rest invested in mutual funds/bonds and take withdrawals as needed in order to get the State of Illinois health care insurance. Would doing this be the better plan?
Annuitizing 50% is certainly far better than annuitizing 100%. If you go that route, I would urge you to invest the non-annuitized funds quite aggressively since your annuity will act as a nominal bond.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Zeno
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Re: Can I retire soon?

Post by Zeno »

jornsy wrote: Tue Nov 23, 2021 12:41 pm Hello everyone. I updated my numbers below for one final analysis by the Boglehead community. I would like to retire next spring (2022) and need your final comments and encouragement.

Retirement accounts:

S.U.R.S. retirement at Voya ($766,000 total). This account will be annuitized (100% joint life with 20 year certain) when I retire in order to have medical coverage for life.
I am an annuity neophyte. What does “100% joint life with 20 year certain” mean? And that is coupled with lifetime HC? It sounds like a trade off between the period of the annuity and lifetime HC benefits. If so, that is intriguing and I would want to know more about the HC benefits to be provided.
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willthrill81
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Re: Can I retire soon?

Post by willthrill81 »

Zeno wrote: Tue Nov 23, 2021 3:14 pm
jornsy wrote: Tue Nov 23, 2021 12:41 pm Hello everyone. I updated my numbers below for one final analysis by the Boglehead community. I would like to retire next spring (2022) and need your final comments and encouragement.

Retirement accounts:

S.U.R.S. retirement at Voya ($766,000 total). This account will be annuitized (100% joint life with 20 year certain) when I retire in order to have medical coverage for life.
I am an annuity neophyte. What does “100% joint life with 20 year certain” mean?
It means that the payout will continue paying as long as the OP or the OP's spouse is alive. 20 years certain means that if they both pass away before 20 years of payouts have occurred, the payout will continue to the heirs until the 20 year period is reached.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Zeno
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Re: Can I retire soon?

Post by Zeno »

willthrill81 wrote: Tue Nov 23, 2021 3:16 pm
Zeno wrote: Tue Nov 23, 2021 3:14 pm
jornsy wrote: Tue Nov 23, 2021 12:41 pm Hello everyone. I updated my numbers below for one final analysis by the Boglehead community. I would like to retire next spring (2022) and need your final comments and encouragement.

Retirement accounts:

S.U.R.S. retirement at Voya ($766,000 total). This account will be annuitized (100% joint life with 20 year certain) when I retire in order to have medical coverage for life.
I am an annuity neophyte. What does “100% joint life with 20 year certain” mean?
It means that the payout will continue paying as long as the OP or the OP's spouse is alive. 20 years certain means that if they both pass away before 20 years of payouts have occurred, the payout will continue to the heirs until the 20 year period is reached.
Thank you, @willthrill81
Zeno
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Re: Can I retire soon?

Post by Zeno »

jornsy wrote: Tue Nov 23, 2021 2:28 pm
willthrill81 wrote: Tue Nov 23, 2021 1:35 pm
aristotelian wrote: Tue Nov 23, 2021 1:01 pm I think you have enough saved but would be somewhat concerned about a non-inflation adjusted annuity representing such a large portion of your portfolio, especially with only one SS payment.
I am very concerned about that. Generally speaking, annuitizing more than 25% of so of one's portfolio is generally a bad idea. Fixed annuity payouts are completely exposed to inflation risk, and liquidity of the annuitized funds is permanently lost.

Regarding inflation risk, even a very low 2% inflation rate will result in the buying power of a fixed payout being halved in 36 years. 3% inflation would do the same in 24 years.
I do have the option to annuitize 50% and then leave the rest invested in mutual funds/bonds and take withdrawals as needed in order to get the State of Illinois health care insurance. Would doing this be the better plan?
With the caveat I am not an annuity guru, but with the recent education from @willthrill81, I see this as a “my kingdom for a horse” moment where the “horse” is lifetime HC and “my kingdom” is a chunk of what I have saved over my lifetime.

That’s an interesting trade off. As an old guy, I might buy the horse based on more information about it. Are you healthy? What is your family history of medical issues?

Based on the results of the aforementioned due diligence regarding the horse, I might be tempted to go for the horse in return for the smallest piece of real estate of my kingdom.
aristotelian
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Re: Can I retire soon?

Post by aristotelian »

jornsy wrote: Tue Nov 23, 2021 2:28 pm
willthrill81 wrote: Tue Nov 23, 2021 1:35 pm
aristotelian wrote: Tue Nov 23, 2021 1:01 pm I think you have enough saved but would be somewhat concerned about a non-inflation adjusted annuity representing such a large portion of your portfolio, especially with only one SS payment.
I am very concerned about that. Generally speaking, annuitizing more than 25% of so of one's portfolio is generally a bad idea. Fixed annuity payouts are completely exposed to inflation risk, and liquidity of the annuitized funds is permanently lost.

Regarding inflation risk, even a very low 2% inflation rate will result in the buying power of a fixed payout being halved in 36 years. 3% inflation would do the same in 24 years.
I do have the option to annuitize 50% and then leave the rest invested in mutual funds/bonds and take withdrawals as needed in order to get the State of Illinois health care insurance. Would doing this be the better plan?
I would incline to annuitizing as little as possible to get the health insurance or skip the annuity altogether and use ACA for insurance if the cost is not much greater.

Using 3.75% withdrawal rate, the options appear to be something like:

1. $30k nominal annuity with $1.88M invested, $70k real spending.

2. $15k nominal annuity with $2.27M invested, $85k real spending.

3. No annuity, $2.65M invested plus ACA cost, $99k real spending.

It appears with any option you start with about $100k spending, so the more you annuitize, the more you are losing to inflation. I would definitely prefer option 2 or 3.
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willthrill81
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Re: Can I retire soon?

Post by willthrill81 »

aristotelian wrote: Tue Nov 23, 2021 3:52 pm
jornsy wrote: Tue Nov 23, 2021 2:28 pm
willthrill81 wrote: Tue Nov 23, 2021 1:35 pm
aristotelian wrote: Tue Nov 23, 2021 1:01 pm I think you have enough saved but would be somewhat concerned about a non-inflation adjusted annuity representing such a large portion of your portfolio, especially with only one SS payment.
I am very concerned about that. Generally speaking, annuitizing more than 25% of so of one's portfolio is generally a bad idea. Fixed annuity payouts are completely exposed to inflation risk, and liquidity of the annuitized funds is permanently lost.

Regarding inflation risk, even a very low 2% inflation rate will result in the buying power of a fixed payout being halved in 36 years. 3% inflation would do the same in 24 years.
I do have the option to annuitize 50% and then leave the rest invested in mutual funds/bonds and take withdrawals as needed in order to get the State of Illinois health care insurance. Would doing this be the better plan?
I would incline to annuitizing as little as possible to get the health insurance or skip the annuity altogether and use ACA for insurance if the cost is not much greater.

Using 3.75% withdrawal rate, the options appear to be something like:

1. $30k nominal annuity with $1.88M invested, $70k real spending.

2. $15k nominal annuity with $2.27M invested, $85k real spending.

3. No annuity, $2.65M invested plus ACA cost, $99k real spending.

It appears with any option you start with about $100k spending, so the more you annuitize, the more you are losing to inflation. I would definitely prefer option 2 or 3.
I agree. Sacrificing $14k of annual real spending (i.e., option 2 vs. option 3), a difference that will grow ever larger over time due to inflation, just to get healthcare insurance for 8 years for the OP and 12 years for the OP's spouse seems like a bad tradeoff, the tail wagging the dog.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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jornsy
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Re: Can I retire soon?

Post by jornsy »

The State of Illinois health insurance includes dental and eye care. It will be my primary insurance until age 65 when Medicare will be primary and the Illinois insurance will be secondary. Combined, I will have low medical expenses during retirement.
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Wiggums
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Re: Can I retire soon?

Post by Wiggums »

In my experience, Medicare will become the primary insurer.

Situations when Medicare is a secondary payer include when:
-You are covered by a group health plan (GHP) through employment, self-employed, or a spouse’s employment, AND the employer has more than 20 employees.
-You are disabled and are covered by a GHP through employment or a spouse’s employment AND the employer has over 100 employees.
-You have ESRD, are covered by COBRA on top of Medicare, and are in the first 30 months of being eligible for Medicare.
-You have Medicare and are in an accident where no-fault or liability insurance is involved.
-You are covered by Workers’ Compensation.
Investors need to be better informed about the costs they pay. “High fund fees can be hazardous to your wealth in the same way that high calories can be hazardous for your health.”
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Watty
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Re: Can I retire soon?

Post by Watty »

jornsy wrote: Tue Nov 23, 2021 5:11 pm The State of Illinois health insurance includes dental and eye care. It will be my primary insurance until age 65 when Medicare will be primary and the Illinois insurance will be secondary. Combined, I will have low medical expenses during retirement.
Be sure to look at the details of the dental plan. The one I had when I was working in the private sector had something like a $1,500 yearly maximum which will not go a long ways toward something like a tooth implant or a bridge. It may also greatly limit your choice of dentists which is very important. Now that I am retired I have a deal with a very good dentist who does not try to upsell extra cosmetic work for about $325 a year. This covers twice a year exams, cleaning, x-rays, and a discount on any additional work. Most years that is all that we need. The retiree dental plan may not be worth as much as you think especially if you have any premium or copay.

I recently started Medicare and I selected a Medicare Advantage plan where I do not need a supplement. There are pros and cons to those but even if you need a supplement it may cost less than $200 a month so it is not a huge cost when you are not on a tight retirement budget.

You would need to look at the details but I suspect that most of the value of the retiree healthcare will be before you both get on Medicare so if I was you I would focus on that.

I don't know if it was mentioned or not but taking the annuity could greatly reduce the chance that you can do Roth conversions in a low tax bracket.
jornsy wrote: Tue Nov 23, 2021 2:28 pm I do have the option to annuitize 50% and then leave the rest invested in mutual funds/bonds and take withdrawals as needed in order to get the State of Illinois health care insurance. Would doing this be the better plan?
I did not crunch the numbers but I suspect between your wifes Social Security, the rental income, interest and dividends on your investments, and RMDs then those start that you will not actually need the pension income at some point. You would basically be taking the pension check, paying taxes on it, possibly in a higher tax bracket, then investing it in a taxable account.

The problem with that is an annuity can be thought of as "longevity insurance" to prevent you from outliving your money. The problem with that is that you don't need that insurance. There can be other reasons to want to take the pension but you need to be careful that you do do not get in a situation similar to buying car insurance when you don't own a car.

Only putting half of it in the pension could be a very good idea especially since that would get you the retiree healthcare which is a big factor for you. You would also be guaranteed to have also made the best decision with half of the money. :D
jornsy wrote: Fri Apr 23, 2021 6:05 pm My SS will be affected by GPO & WEP, so I won't receive much at all. My wife (age 53) will be eligible for SS, but she was a stay at home mom for a long time, so her contributions have been at a lower level (W2 income now $32,000). She will continue to work for another 10-? years in the family business managing rental properties (S-corp) to increase her SS benefit.
I do not have a clue how that works.

If your wife survives you and then gets your pension will she have a similar reduction in her Social Security?
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jornsy
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Joined: Tue Jul 10, 2012 4:21 pm

Re: Can I retire soon?

Post by jornsy »

My wife's SS will be higher than her spousal SS from me. And yes, her spousal SS on me will be reduced by 2/3 of my pension, so she will just keep hers.
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