My plan:
I intend to turn in my notice on my 55th b-day later this year. I feel pretty good about my financial situation. I currently have about 16X my gross annual salary (which represents about 38X what I currently spend) set aside in various accounts (401k, a Roth, a couple of rollover IRAs, a taxable account and the lump sum value of my tiny corporate pension). The 401k represents about 25% of my total portfolio.
My plan is to convert my entire 401k into a 10-year income annuity, which will provide me with a little more than what I currently spend, and let everything else ride the market. (if you quit your job at age 55+ you won’t pay the 10% early withdrawal tax penalty). That gets me to age 65 when I start drawing from the taxable account. Claim SS at 70 and supplement that with $ from the IRAs, etc.
As for the pension, I could withdraw the lump sum value ($31k) after age 55, start payments at age 55, delay payments until age 65, etc. Max monthly benefit would be $353 (or grow to $56k lump sum) at 65. The company froze it a few years ago, so now they only make monthly interest accruals, and no COLA provisions. I plan to leave it alone for now and view it as a reserve source of funds/income.
Other factors: I have $0 debt. Paid the mortgage off last year. Married, no kids. My wife is a CPA who makes significantly more than me, loves her job and isn’t interested in RE but is relatively frugal. Beyond groceries, utilities, home improvement/maintenance, we don’t generally share our money.
Healthcare: My company offers lifetime retiree medical insurance (I still have to pay the premiums) as early as age 55, which is why I’m gutting it out for a few more months. Plus, I can add my wife later. At age 65, MegaCorp insurance becomes secondary to Medicare. (or is it Medicaid?? I will never keep the two straight in my brain!). In a few weeks I will be eligible to request an estimate of the monthly premiums, but I’m confident it will be cheaper than Obamacare or joining wife’s company plan.
If I really needed (but I don’t expect to), I could freelance, turn my hobby into some minor income or do contract work in my field.
So does anyone see any glaring mistakes or omissions in my plan? Would you change what I have laid out (e.g. the order in which I plan to access the various accounts)?
About the income annuity plan: Would I be better off tax-wise waiting until the first of the year when I won’t have a corp. salary? Is there a better way to generate a reliable income stream?
Thanks all for reviewing!