Author Topic: Case Study - Critique my numbers and plan  (Read 1190 times)

Retiredmajor

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Case Study - Critique my numbers and plan
« on: January 01, 2018, 12:16:09 PM »
I just joined this forum so HELLO to everyone and happy new year! I'm going to lay out our numbers and my plan for retirement and I'd like your unbiased opinions and thoughts. Thanks in advance!

I just left my fulltime job in early November 2017 and we are both retired as of 1/1/2018
I just turned 61 in December of 2017, she is 10 months younger than me
We have a total of $740K in IRA's. It's approx. 80% stocks and 20% bonds - pretty aggressive.
We have another $30K in savings
I have a military pension of $15K per year right now, tied to inflation, for the rest of my life + Tricare military healthcare
I will earn approx $30K - $50K in 2018 from a hobby job I have and love and could possible earn the same in 2019 and 2020
We need about $75,000 annually to live right now
Our house will be paid off in 2026 (9 years), at that point we will need about $60,000 annually to live

My plan is:
For 2018: $15k pension + $40K hobby job + $30K savings
For 2019 (I turn 62): $15k pension + My SS of $21.6k + $30k hobby job + withdraw $10k from IRA
For 2020: $15k pension + My SS of $21.6k + her SS of $10K + IRA withdrawal of about $30K (4% of IRA)
We would follow the 2020 income model for a few years until the house is paid off in 2026 and then our IRA withdrawal drops to less than 2% forever
We have the ability to adjust our lifestyle if need be, but we prefer not to.
I've used Firecalc, NewRetirement Planner and the Flexible Retirement Planner and all have us as solid/100% for the next 30 years.

What do you think?
Major



« Last Edit: January 01, 2018, 12:25:21 PM by Retiredmajor »

MDM

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Re: Case Study - Critique my numbers and plan
« Reply #1 on: January 01, 2018, 12:37:59 PM »
Consider this post from Cut-Throat in Social Security at 62? Letís Run the Numbers - Bogleheads.org.

Would that apply to your situation?

marty998

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Re: Case Study - Critique my numbers and plan
« Reply #2 on: January 01, 2018, 01:26:44 PM »
$60,000 annual expenses is a lot all things considered... are you subsidising adult kids with education and the like?

Retiredmajor

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Re: Case Study - Critique my numbers and plan
« Reply #3 on: January 01, 2018, 01:54:19 PM »
marty998, Thanks for replying! We are not supporting children in any way, but our annual expenses do include trips to visit them and vacations. We enjoy traveling which is one of the reasons we are retiring earlier than many other people. We want to travel while we are healthy and can enjoy it to the fullest. We walk, hike, bike ride and enjoy cruises. I do feel that as we get older (70+) we might slow down and our expenses may drop accordingly.
« Last Edit: January 01, 2018, 01:57:01 PM by Retiredmajor »

Retiredmajor

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Re: Case Study - Critique my numbers and plan
« Reply #4 on: January 01, 2018, 02:00:28 PM »
MDM, thanks for replying. I looked at the link you provided. One thing that may happen is my hobby job may continue into 2019, 2020 and beyond and provide a nice income during future years. If that happens, I'll delay taking SS as long as I can, but if not, I prefer to spend the Government's money before I spend my own. SS may be impacted down the road by cuts and I prefer to be taking it earlier as opposed to later. Major

Laura33

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Re: Case Study - Critique my numbers and plan
« Reply #5 on: January 04, 2018, 07:58:57 AM »
Sounds like you have run the math, and should be ok as long as the hobby job pays off.  One question:  what happens to your wife if you pre-decease her?  She will switch to taking your SS as survivor's benefits at that point, meaning that she will drop her @$1K SS, so the budget get tighter.  What happens to your pension?  Does it continue in full, at 50%, or does it stop entirely?  You don't want her to be locked into a lifestyle that requires @$60K/yr and then suddenly lose multiple income sources that you are currently relying on to cover that nut (hobby job + one SS + pension).

To my mind, this would be the primary reason to consider delaying your SS: if you die first, she will get to claim your SS benefits, but at whatever level you have been claiming.  So if some of your other income sources may drop off significantly, you may want to hedge her future by delaying your SS so that she is ensured a significantly higher payout when those other income sources go away.

And, yeah, SS will be cut, but to date they have never cut benefits for the already-retired.  They are more likely to continue to tweak the benefits, like they just did with the change in how they will calculate inflation, or with how much is taxable, etc.  (And speaking of, have you run the numbers on how the hobby job will affect your SS benefits if you claim at 62?  That might also argue in favor of delaying SS until at least your full retirement age.)
Laugh while you can, monkey-boy

Retiredmajor

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Re: Case Study - Critique my numbers and plan
« Reply #6 on: January 05, 2018, 09:06:38 AM »
Laura33, thanks for chiming in! You ask good questions. If I pass before my wife, she gets 50% of my pension. In addition we have a $250,000 Term life insurance policy on me that she would get. I intend to keep that in place for at least the next 10 years. Our actual "living basics" cost per month is $5000 right now, the additional money ($15K) is for travel and recreation. When the house is paid off, the basic expense will be just over $3000 per month. So, she could live well on @ $36K per year. She should be fine with my SS, half my pension, the $250K insurance and our nest egg.

I will delay taking SS if that makes sense and will evaluate it one year at a time. Our plan probably isn't perfect but we have leeway to cut back if necessary now and in the future. I agree with you regarding potential SS cuts in the future. I don't see how they could do anything drastic to existing retirees, but the way our government is running right now.....God only knows!

Major

Another Reader

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Re: Case Study - Critique my numbers and plan
« Reply #7 on: January 05, 2018, 09:22:13 AM »
If the "hobby job" is earned income, Social Security will deduct one dollar for every two dollars earned over a certain amount until you reach full retirement age.  You can read the explanation at https://www.ssa.gov/pubs/EN-05-10069.pdf.  The limit for earned income before this kicks in for 2018 is $17,040.  You will want to make that calculation as part of your analysis.

Another Reader

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Re: Case Study - Critique my numbers and plan
« Reply #8 on: January 05, 2018, 09:41:09 AM »
I also think you are asking the wrong group of people.  This forum is comprised of mostly younger people that are very optimistic in their projections.  For a review by people that are closer in age to you, many of whom are already retired, look at the forums at early-retirement.org. 

There is a lot of risk in your plan.  The pension and Tricare are important to your success, as you do not have to worry about the ACA.  However, if you become sick or disabled and unable to work, or the hobby job disappears, you will be in trouble.  A decline in the market early on will also damage your prospects - you will want to consider sequence of returns risk in your analysis.

In your shoes, I would look at cutting expenses and delaying taking Social Security.  I assume the $1,500 implied mortgage payment is principal and interest only, as taxes and insurance survive the mortgage.  That says to me there is a substantial principal left.  I would want that paid off ASAP with the numbers you show.

Zamboni

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Re: Case Study - Critique my numbers and plan
« Reply #9 on: January 05, 2018, 10:02:28 AM »
Without additional information like family health data, your plan to delay drawing social security as long as possible seems very prudent. The pension is nice and keeps you out of the soup kitchen line, but your burn rate just seems really high to me. Do you live in a HCOL area? Is there any advantage to downsizing your home?

This is my personal bias, as every single one of my relatives (parents, aunts and uncles) who are in their mid-70's now starting taking SS as soon as they could . . . all regret it now. Every. Single. One. I don't even want to listen to their moaning about it. They were lazy and pulled the trigger at 62 when they absolutely should not have.

The only person it made sense to take early benefits was my Dad, who had three different types of cancer before he was 62. He had enough health problems that it seemed reasonable he might not make it to the higher pay off age. In fact, for years I have though he could die any day now. I think his love for his wife keeps him alive; there is no doubt he would be long dead without her. But, he is about to turn 75, and he is still having to work his "hobby job" because of:
1) not having his house paid off before he semi-retired, and
2) not waiting on his SS.
If he had waited, or made better decisions about home financing, then he could have fully retired three years ago. He warns me about it rather than complains. Oh well.

My Mom was especially foolish for taking it early, as all of her female relatives lived well into her 90's. But, like you, she didn't trust the govt not to pull the rug out from under her, and so she wanted to get money sooner rather than later. She is 77 now with zero health problems. Stupid, stupid decision. She is basically below the poverty line, maybe finally getting to frail to really work hard, and would be in much better shape if she had kept up working a little longer and delayed the SS activation so she could get bigger monthly checks. Thankfully she is so frugal that she won't starve, but it is a bare bones survival life of keeping the thermostat set lower than is comfortable for anyone. No money to travel anywhere. I could have told her at the time, but she would never listen to me. Her paranoia is just that ingrained. Don't let boogeyman myths about Social Security derail you the way it derailed her.

Good luck!

Retiredmajor

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Re: Case Study - Critique my numbers and plan
« Reply #10 on: January 14, 2018, 05:11:50 PM »
Zamboni, sorry to hear about your mother and other relatives. They should have saved some money along the way but it sounds like they are trying to live on just SS. That WOULD be poverty level or below. Not everyone who takes SS before FRA is lazy or is making a mistake and everyone's situation is different. But, I came here for opinions and I appreciate yours. I will delay taking SS every year that I feel it makes sense, but if anyone trusts our government or the idiots in charge to do the "right thing", they are mistaken. I'm OK with keeping the mortgage. It's a 2.75% loan with now 8 years remaining. After deductions that's an effective interest rate of about 2.5%. I won't pull money making more than 6% a year out of investments to pay off a loan costing 2.5%.

I've seen too many people keep working for that "last nickel" and lose their health doing so. A woman who worked with me is 66 and her husband is 67, they are both still working good jobs with good retirement. She limps around all day and looks like a whipped dog most days, but is holding out until 70 for SS. Those folks retire and sit home because they can't get around or don't have the health or energy to travel. They have enough money but are just existing. We all "know someone" and can relate stories.

I could die tomorrow or live to be 110, who knows?
I choose differently!

Best of luck,
Major