Do I have enough money to retire? Need your advice

[alexabreana]

Hello, I am new to this site, and could really need some advice as I am trying to figure out if I have enough money to retire. I live in Sunny San Diego, one of the most expensive Cities in the US. I am 55 years old,  I can live comfortable on 50K yearly, I work for the Government so I do get a pension, ok, her is my breakdown:

Government pension $2,700 monthly for life
Drop Government Program $200K
IRA 100K
SPSP (Gov investment account as we don't contribute to Social Security) 200K
$450 monthly for life  (can only be use for medical)

Thank you in advance :-)

Christina

[ixtap]

Your pension comes to $32,400 which leaves you with an annual shortfall of $17,600. This means, in theory, $440,000 should be your goal (25x the expenses not covered by your pension). As such, you have the basic math covered.

The real question is how confident you are in your expenses. I agree that $50k can make a comfortable life in San Diego (hi, neighbor!). The question is, does it account for your expenses, in retirement.

Is your pension COLA adjusted?

You mention a medical pension, is that enough to cover your insurance or do you have retiree insurance?

Does $50k allow for things like replacing the car?

Have you considered taxes?

What will your retirement life look like? If you want to travel more, have you allowed for that in your expenses?

[bmjohnson35]

In addition to ixtap's comments:

Can you collect your pension prior to 59.5 yrs old without any tax penalty?

Will you have tax penalty for withdraws prior to 59.5 yrs old on your other accounts you reference?

Your various investments appear to add up to $500k, but you don't describe their allocation or your historical rate of return ( stocks, bonds, real estate, annuities, cash, etc.)

[alexabreana]

Thank you for your advice neighbor :-) I do have a yearly COLA adjustment at 2%, once I retire I can keep my health insurance at $600 monthly, I have a 2019 Honda Civic so I won't need a car anytime soon, I don't have Debt, my car is paid off.

[alexabreana]

I can retire and collect from Government accounts with no penalties at 55, most of my investments are with Vanguard S&P 500 Index Funds

[MiatAccountant]

Hi Christina (also your neighbor in San Diego).

My wife also has similar SPSP, pension, medical allowance, and retirement health coverage like yours that will be available at 55. It's really awesome.
I do suggest you do the numbers (spreadsheet or retirement tools with the broker) for your expected retirement period.

Based on limited information you provided, on the surface, it may be doable but bit risky. The biggest being pre-tax amount you listed versus the $50K post tax spend that ixtap pointed out. Make sure you're comparing apples to apples. Other thing that makes me nervous is your plan doesn't seem to account for any unforseen spend (do you own a house that may require repairs in the future, 2019 Honda Civic will be the last car you'll ever own, potential medical expenses beyond the insurance coverage, what happens if income tax rates go up, etc) or are these costs embedded somewhere in the $50K/year number?

I think ixtap has a great suggestion to forecast what your retirement spend would be (including these one off hiccup expenses) and see you would still be comfortable. Not exact science, hence you want to leave some cushion for yourself, especially since your monthly pension amount goes up as you continue to work past 55 (assuming your plan is similar to my wife).

[alexabreana]

Great advice, thank you for everyone who gave me input, greatly appreciate your advice :-)

[nippycrisp]

Geez, who DOESN'T live in San Diego? SDer #3 here.

Agree with the "doable but a little close" assessment. One question: will you be collecting any social security, or does the pension replace that entirely? Sorry, not sure how the gov system works.

[ixtap]

Geez, who DOESN'T live in San Diego? SDer #3 here.

We will have to do a meet up. Only one more month until they start inoculating the next group that still doesn't include me...

[Lady Stash]

 +1 to the numbers alexabreana posted looking doable but tight. 

Think about utilities going up if you are home, wanting to start new hobbies with more time on your hands, needing another car in 15 years, any house repairs, travel, etc.

[Car Jack]

Is that amount just for you or is there a spouse in the picture?  Kids?  The biggest expense we ever had was college for our 2 kids.  More than cars.  More than our house.  By far.  I'm not a fan of the Boglehead strategy of "the kids can get their own damned loans and go to community college", because....well....there are no loans beyond government Stafford loans that the kids can get.  Any other loans need a parent to cosign, which means it's the parents' loans, not the kids.

I assume you have a paid off house.  Is that right?

Not really enough information, but looking at your numbers, I don't think you're even close.  But I'm a huge safety net guy and am not retired (nor is my wife) with 50 times spending in liquid assets, paid off house and 4 paid off cars.

[ericrugiero]

The numbers you posted look aggressive but doable.  You didn't mention housing specifically.  Do you own a home or rent? 

For me personally, I would want a backup plan to retire with numbers that tight.  For instance, If you own a home in San Diego, it's probably pretty expensive.  If things get tight, you could sell and rent.  If you are OK with a different location, you could move somewhere cheaper down the road.  How much room is there to cut the $50K/year if needed?  Do you have a way to earn a little extra money if needed?  Those are all contingencies and are somewhat unlikely to be needed.  I just like a little wiggle room for comfort. 

[slappy]

What about posting a case study?

https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/

[Monkey Uncle]

I highly recommend running your numbers on cFiresim (https://alistair-marshall.github.io/cFIREsim-open/).  It can run a whole-picture analysis that includes your pension and any other sources of income or extra expenses. 

I'm a big fan of safety buffers.  Having been FIREd for three years, I can attest to the likelihood that your life, and therefore your expenses, will change once you are free from the shackles of a full time career.  Plus stuff just happens that isn't included in your spending estimate, even if you've been tracking everything for years. 

The output I find most useful is "investigate - max initial spending."  It's telling me what I can afford to spend, rather than me projecting that I'm going to spend 50k or whatever.  I run it at a 100% historical success rate, and then cut the resulting number by a 15% contingency buffer.  Then I use that as my "not to exceed unless SHTF" number.  Of course that still isn't an iron-clad guarantee that something historically unprecedented won't happen, but anyone who needs that kind of a guarantee probably will end up working forever.

I can tell you that I am very happy that I worked another year and a half after I hit my bare-bones number.  The extra savings and investment growth gave me the flexibility to do some traveling, get a dog, help out my adult son a little, and just generally not worry all the time about whether I'm going to go over budget this year.  Of course, your temperament may differ from mine, and you may find my buffering a bit excessive.  But if you leave no slack at all, when unexpected spending needs/wants arise, your only choices are to cut back somewhere else or go back to work.

[MiatAccountant]

Geez, who DOESN'T live in San Diego? SDer #3 here.

Agree with the "doable but a little close" assessment. One question: will you be collecting any social security, or does the pension replace that entirely? Sorry, not sure how the gov system works.

Howdy neighbor!

Since OP didn't get a chance to respond, I can answer which is "no" for social security. "SPSP" stands for Supplemental Pension Savings Plan where government entity such as "City of San Diego" employee can contribute to the "SPSP" account instead of paying social security tax (basically another individual's retirement account). I thought it was cool when my wife had it. Much better than paying to Social Security administration that will mismanage your money.

[wageslave23]

Is that amount just for you or is there a spouse in the picture?  Kids?  The biggest expense we ever had was college for our 2 kids.  More than cars.  More than our house.  By far.  I'm not a fan of the Boglehead strategy of "the kids can get their own damned loans and go to community college", because....well....there are no loans beyond government Stafford loans that the kids can get.  Any other loans need a parent to cosign, which means it's the parents' loans, not the kids.

I assume you have a paid off house.  Is that right?

Not really enough information, but looking at your numbers, I don't think you're even close.  But I'm a huge safety net guy and am not retired (nor is my wife) with 50 times spending in liquid assets, paid off house and 4 paid off cars.

Are you talking about 50x yearly expenses or monthly?  OP didn't mention anything about kids, and at age 55, I doubt that college expenses would be a surprise in the future.  If OP was planning on paying for college it would be now or in the immediate future.   

OP, I do think you are close.  Whether you have some wiggle room in your budget is what you need to determine.