Author Topic: Case Study I think Im ready to retire?  (Read 3100 times)


  • 5 O'Clock Shadow
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Case Study I think Im ready to retire?
« on: June 20, 2014, 07:42:51 AM »
Hello Everyone.  Newbie here to the Forum and would like to get some feedback on my plans.  I think I am in a position to permanently quit my job but would like some independent opinions.  Looking at the information below, do you think I can move forward? Am I missing something important? 

    Age 56
    No children
    Some Health Issues (Kidney Transplant and also Lymph Node Cancer survivor)
    House worth $290,000 (paid off)
    2013 VW GTI (paid off)
    1968 Chevy Pickup (Hobby)
    Total Savings of $485,000 (IRA, Roth IRA, 457 Plan, Standard Savings, Mutual Funds)
    Checking $8000
Monthly Income after Quitting Job
    $4673  Pension (with COLA raises after 3 years)
    $1,500 Savings Withdrawals (3.7% of Savings Annually)
    $6173 Total
   -$1,210 Taxes (No state income tax)
    $4963 Total Net Monthly Income
    (Note: Pension is a level income option so it will reduce by the amount of social security I receive at full retirement age.)
Monthly Spending (Average over last 8 months or estimated if new)
   $210  House Taxes & Insurance
   $295  House Maintenance (includes Pool)
   $188  Home Improvement
   $243  Autos (Insurance, gas, etc.)
   $301  Utilities
   $234  Groceries   
   $145  Restaurants
   $575  Health & LTC Insurance
   $405  Medical (Dr. & Rx)
   $223 Dog   (He has health issues too)
     $71 Phone
   $154  Internet/TV
   $184  Travel
   $143  Gifts & Charity
   $365  All Other   
  $3726  Total Spending
So $4963 (income) minus $3726 (spending) gives me a $1237 buffer each month.  My plan is to put part of it into a savings account to use for fun things or to simply return part or all of it to my retirement savings.  What does everyone think?  Thanks to everyone in advance for your opinions and advice.


  • Magnum Stache
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Re: Case Study I think Im ready to retire?
« Reply #1 on: June 20, 2014, 08:31:37 AM »
You're probably OK, if that pension is stable.  Still might want to reduce expenses where you can to add more safety margin.

One question - where did you get the $1210 for income taxes?  When I plug in your total income figure of 6173 (74076 annually) to tax calculators, I come up with $11,838 annually with the standard deduction and one exemption - under $1,000 per month.  This figure is pretty high too - assumes that you make withdrawals in such a way that the entire $1500 / month withdrawn is taxable - you'd definitely be smarter than that.  You don't have to pay FICA on pension or savings withdrawals.  Unless you've got quite a bit of dividend income or capital gains coming off of your mutual funds in the taxable account, I'm not seeing nearly as much tax as you are planning for.

You might consider that your pension alone can cover your expenses if I'm right about the taxes.  You might try and just live on the pension by itself, and leave the savings alone unless an expense actually comes up.  The taxes on the pension income, if this is your only income, are under $7500 a year - why trigger additional taxes unless you have to?  By letting it ride in your investment accounts, you should also get more growth out of those, further reducing the chance of running out of money down the road.

former player

  • Magnum Stache
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Re: Case Study I think Im ready to retire?
« Reply #2 on: June 20, 2014, 09:56:03 AM »
Have you checked what sort of returns you are getting on your investments and what the costs are, and are you happy with them or could they be further optimised?

I'm not quite sure why you would want to take money out of savings each month than you are not going to spend, and then return it to savings?  If there are things you want to spend the money on that aren't in your budget, try to think what they are and budget for them (you already have a $365 per month "other" category: do you need more than that for things not otherwise budgeted?).

Have you worked out any alternative budgets?  By which I mean, are there things you could cut out and still be happy with your standard of living, for instance if you need to deal with not having COLA until 3 years time, or if your investments have a period of poor returns?  Or are there things which will cost more when you are not working and have more time to spend on them?   But even without doing this, it looks to me as though you've got a decent amount of wriggle room in your current proposed budget, and even with that budget you will essentially be living off just your pension.  That leaves you with your $485,000 investments plus the income they bring in as your first safety net.

If you work out how much it would cost you to buy an annuity equivalent to your pension, you could add that as a capital sum to your investments, cash and house equity to give yourself a notional net worth.  Seeing your total financial worth set out as a total capital amount could give you a different perspective on where you are, rather than seeing it split between capital assets and income assets.


  • Stubble
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Re: Case Study I think Im ready to retire?
« Reply #3 on: June 20, 2014, 10:07:30 AM »
Medical cost are where the budget is hardest to solve. Are they pretty stable? Or can they jump by large amounts year after year? Overall it looks like your in good shape. I second just trying to live off pension and only using savings when necessary. I would have no issues retiring at your age/income but I would probably be much more ruthless with cost cutting ...cable/new auto/phone...seems like if you are afraid at all of retiring you can make some pretty easy cuts here.

Also you survived cancer...time to quit the day job and enjoy life! : )


  • 5 O'Clock Shadow
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Re: Case Study I think Im ready to retire?
« Reply #4 on: June 20, 2014, 10:36:56 AM »
When I estimate medical costs/medical and LTC insurance for myself during retirement, it is a lot higher than what you have here.  Mine will be out of pocket completely when I retire, no medical benefits from my employer upon retirement, but $405 a month for medical and prescriptions seems low to me going forward, especially with your transplant history, I assume you have ongoing medications.  Maybe I am overly pessimistic regarding insurance costs though. 


  • 5 O'Clock Shadow
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Re: Case Study I think Im ready to retire?
« Reply #5 on: June 20, 2014, 11:25:26 AM »
Thanks everyone for the feedback so far. dandarc, you are right on the taxes.  I had just used tax tables instead of a calculator.  Good point from several of you that i should not take money out of my savings that I don't really need so I will rethink that and use my pension only, unless I need (or want) more for something.

I am going to work on cutting spending and think I can do quite a bit there.  I know I can be happy without several of the 'luxuries' I spend on now.

As far as investments, as soon as I quit my job, I plan to move a big chunk of money from my 457 plan to my IRA because the 457 plan has pretty high fees and less investment choices.  The advantage of the 457 plan is that I can withdraw from it without penalty before I am 59 1/2 so I do want to leave some there.  Overall, my investments have been doing pretty well as far as returns.  I also think I have more in cash than I should have, so I will be moving some of that as well.

I know medical costs are a hard one and all I really have is my past averages.  My health insurance is partially subsidized by my company, which is nice.  I definitely agree that those may go up, especially given my health history.  Right now, my medical situation has been pretty stable, but you never know.  It is partly because of my medical history that I want to retire early while I am currently healthy and can enjoy it.

I really appreciate the feedback, it was just what I was looking for.  This forum is awesome and I wish I had discovered it earlier.  Thanks again.