Author Topic: Planning for Retirement  (Read 5969 times)

CestMoi

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Planning for Retirement
« on: May 20, 2015, 01:04:37 PM »
My net worth is currently 880k (not including mortgage-free apartment). I was planning to wait until I hit $1 mil to retire; but Iím not sure I can last another year/year and a half. I may decide to pull the plug this fall instead.

Iíd appreciate thoughts/advice on issues I should be considering for retirement. Thereís the living situation (staying in paid-off apartment for now); eventual moving to lower cost area with my fiance; the Roth pipeline to arrange; healthcare and taxes to consider. Any thoughts/advice on these, or anything else I should be considering?

What are the steps you will take toward your retirement, or if already retired, what were the steps you took?

Thanks in advance.

nereo

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Re: Planning for Retirement
« Reply #1 on: May 20, 2015, 01:24:54 PM »
CestMoi
You listed your NW but did not reveal where that NW comes from and what you anticipate your expenses will be in ER.  That last point is crucial.  I'd feel more than comfortable retiring on $880k of investments, but that's because our annual expenses are well under $30k

Besides future expenses, the most important thing I think you should consider is how flexible will you be in ER?  You mentioned possibly moving to a lower COL area, but could you earn $5k-8k/year if necessary? That relatively paltry amount can make a huge difference in the survival of your portfolio. 

Evgenia

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Re: Planning for Retirement
« Reply #2 on: May 20, 2015, 01:42:34 PM »
Not to pile on to your thread, but any responses will help me as well. I am in a similar place but can also tell you some of the steps my husband and I are taking.

We paid off the house three months ago and have $1.8m in investments, $270k in cash, plus our retirement portfolios. My husband is in his first week of early retirement and loving it. (Funny how he started sleeping like a rock out of nowhere and looks about 10 years younger overnight.)

Our plan was for me to continue working for the rest of the year but, like you, I'm not sure how much longer I can last. Husband's early retirement made me more, not less, eager to join him. I have the cash cow job that doesn't demand a lot but... MMM has posts on this so most readers probably know the deal. I know I should know better, but I grew up without much money and in very precarious economic situations, so being without a steady income is terrifying to me no matter how much we have.

I have no plans to stop working: I do agricultural work and other things I enjoy, and want to focus on those. I'm just afraid I wouldn't get any work, though that's never *actually* been a problem for me (all mental stuff, this).

We live in a very small, cozy house on the far south side of San Francisco. Our property taxes on the paid off house are high, but we don't yet have a desire to move. We love our house and neighbors, are able to bike and take public transit almost everywhere, and are staying put for now.

Six months of high roller spending for us (i.e. not trying; eating out twice a week; flights to see family) comes out to $36k/year, which I'm confident we can bring down. This spending includes everything though: all insurance, property taxes, food, transportation, etc.

Health care is my big focus right now: the cheapest I can find via Covered California is a little over $600/month for both of us, with a high deductible, which I'm being super whiney pants about having to pay.

I have not looked into dividend income yet: that's on my to-do list. I don't understand it well enough yet. 

Otherwise, I can't think of anything else you should be doing.

CestMoi

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Re: Planning for Retirement
« Reply #3 on: May 20, 2015, 04:12:35 PM »
nereo, I anticipate my expenses to be about 26k - 29k. The final amount depends on which health plan I go with, and whether I decide to subscribe to certain professional memberships upon retirement.

In terms of earning some money per year if I need to--yes, I feel I can do that with no problem, especially if I keep my current professional skills up somewhat. I'm also not averse to taking a part-time job if necessary.

anysteph, it sounds to me like you and your husband are doing great. I don't think I'd be too hesitant in your situation. But that's easy for me to say!



nereo

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Re: Planning for Retirement
« Reply #4 on: May 20, 2015, 04:44:17 PM »
nereo, I anticipate my expenses to be about 26k - 29k. The final amount depends on which health plan I go with, and whether I decide to subscribe to certain professional memberships upon retirement.

In terms of earning some money per year if I need to--yes, I feel I can do that with no problem, especially if I keep my current professional skills up somewhat. I'm also not averse to taking a part-time job if necessary.
I see absolutely no reason why you can't retire right now should you so choose.  With a net worth of $880k and expected expenses under $30k you would need a WR of just 3.4%.  My only concern is how much of your NW is in investments and how much may be tied up in your paid-off apartment.  However, even at 4% you'd need just $725k to generate that kind of income - and since you already put moving on the table, having NW tied up in an apartment isn't a huge issue here.
Since you're willing to work in a part-time capacity if necessary, that offers another layer of protection - even $5k would drive your WR down to in the 2.5% range.

Definitely optimize your taxes, set up a ROTH pipeline and think about what you want to do with your ER.  Check out healthcare.gov to get an idea of what coverage might cost in the next few years, but realize that absolutely no one has any real idea what it will cost in 5, 10, and 20 years. 
Congrats!

forummm

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Re: Planning for Retirement
« Reply #5 on: May 20, 2015, 06:09:42 PM »
Not to pile on to your thread, but any responses will help me as well. I am in a similar place but can also tell you some of the steps my husband and I are taking.

We paid off the house three months ago and have $1.8m in investments, $270k in cash, plus our retirement portfolios. My husband is in his first week of early retirement and loving it. (Funny how he started sleeping like a rock out of nowhere and looks about 10 years younger overnight.)

Our plan was for me to continue working for the rest of the year but, like you, I'm not sure how much longer I can last. Husband's early retirement made me more, not less, eager to join him. I have the cash cow job that doesn't demand a lot but... MMM has posts on this so most readers probably know the deal. I know I should know better, but I grew up without much money and in very precarious economic situations, so being without a steady income is terrifying to me no matter how much we have.

I have no plans to stop working: I do agricultural work and other things I enjoy, and want to focus on those. I'm just afraid I wouldn't get any work, though that's never *actually* been a problem for me (all mental stuff, this).

We live in a very small, cozy house on the far south side of San Francisco. Our property taxes on the paid off house are high, but we don't yet have a desire to move. We love our house and neighbors, are able to bike and take public transit almost everywhere, and are staying put for now.

Six months of high roller spending for us (i.e. not trying; eating out twice a week; flights to see family) comes out to $36k/year, which I'm confident we can bring down. This spending includes everything though: all insurance, property taxes, food, transportation, etc.

Health care is my big focus right now: the cheapest I can find via Covered California is a little over $600/month for both of us, with a high deductible, which I'm being super whiney pants about having to pay.

I have not looked into dividend income yet: that's on my to-do list. I don't understand it well enough yet. 

Otherwise, I can't think of anything else you should be doing.

At $36k/ year with $2 million, you are ready to retire at will.

CestMoi

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Re: Planning for Retirement
« Reply #6 on: May 21, 2015, 12:09:40 AM »
nereo, my NW has none of my apartment equity/worth included. I could probably add 90k to my NW if I counted my coop.

With my fiance's NW added to mine, we'll have about 1.4 mil together. But I want to reach FI on my own before we combine our finances. Its always been a goal for me to do it myself.

nereo

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Re: Planning for Retirement
« Reply #7 on: May 21, 2015, 05:19:11 AM »
nereo, my NW has none of my apartment equity/worth included. I could probably add 90k to my NW if I counted my coop.

With my fiance's NW added to mine, we'll have about 1.4 mil together. But I want to reach FI on my own before we combine our finances. Its always been a goal for me to do it myself.
Well pat yourself on the back because you've hit "full FI" even before considering the $0.5MM your fiance adds to the equation.  Even at $30k/year (a bit more than you even anticipate spending) you have a WR of 3.4%, plus the willingness (flexibility) to move, find part time work, and have equity in your own apartment.  Your SO's 'stach is just icing on the cake.

CestMoi

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Re: Planning for Retirement
« Reply #8 on: May 22, 2015, 12:21:52 AM »
Good to hear!

Anyone have any more suggestions for things I should be considering?

Pooja Sharma

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Re: Planning for Retirement
« Reply #9 on: May 22, 2015, 06:33:51 AM »
You can easily retire having $880k considering all the future expenses. Once you retire, you get pensions and funds from government to keep your ball rolling. Infact, you should retire and start investing money in stock market to double and triple it ;)

amberfocus

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Re: Planning for Retirement
« Reply #10 on: May 22, 2015, 07:43:11 AM »
Ha, the OP and I are, like, practically twins. It's kind of hilarious. :) As of right now, I'm at $817K NW ($880K w/ home equity) and the SO has $500K. I'm also aiming for $1MM.

I have a lot of thoughts around retirement planning written up in my IPS, and if anyone is interested, PM me for the link. I'm not entirely comfortable sharing it on the forum because it's got a lot of personal info in it, and I don't want it to get indexed by search engines. It's also, like, 15 pages long. For a preview (it's also a WIP), here is the table of contents --

Core Philosophy
Investment Objectives
- Interim Goals
- FIRE Criteria
Investment Strategy
- Target Asset Allocation
  - Accumulation Phase
  - FIRE Phase
- Risk Tolerance
- Total Returns
- Diversification
Portfolio Overview
- Funds
- Holdings
- Stock Options
Portfolio Management
- Contributions
  - Tax-advantaged
  - Taxable
- Withdrawals
  - Safe Withdrawal Rate
  - Projected Cashflow
  - Order of Withdrawal
  - Contingencies
  - Cash Reserves
- Monitoring & Rebalancing
- Benchmarks
Tax Planning
- Tax Laws & Brackets
  - Federal Income Taxes
  - State Income Taxes
- Roth Conversions
- Roth Withdrawals
- Stock Options
- Required Minimum Distributions
Additional Considerations
- Health care
- Marriage
- Trusts and Estate
References

CestMoi

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Re: Planning for Retirement
« Reply #11 on: May 22, 2015, 09:17:26 AM »
amberfocus, I just PM'd you.

Eric

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Re: Planning for Retirement
« Reply #12 on: May 22, 2015, 12:31:04 PM »
here is the table of contents --

Core Philosophy
[killer shit]
References

Damn, that sounds totally badass!!

Catbert

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Re: Planning for Retirement
« Reply #13 on: May 22, 2015, 12:53:03 PM »
If you don't think you'll make it through 2015 then think about front loading 401k/TSP/403b contributions so that you'll hit the max before you bail.  I say "think" because you should sit down and figure out a Roth pipeline first.  It might make sense to not make the contribution depending on how much available post-tax money you already have.

Jason at www.rootofgood.com recently did a great posting on Roth pipelines.  He not only explained what it all means, he did a spreadsheet walking through various sources of income, inflation, etc. to determine how much to convert each year. It might help you create your own pipeline plan. 

CestMoi

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Re: Planning for Retirement
« Reply #14 on: May 24, 2015, 02:31:55 AM »
Thanks mary w.

CestMoi

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Re: Planning for Retirement
« Reply #15 on: June 01, 2015, 09:28:49 AM »
mary w, front loading my 401k was an great idea. I just took care of that.

Where on www.rootofgood.com does he discuss the Roth pipeline? Can you PM me a URL? Many thanks.

While I'm here, anyone else have suggestions on what I should be considering if I'm going to retire at the end of September?

Net worth - 880k (not including worth of apartment)
Apartment paid off, worth at least 100k, minus 10k for spiffing up

nereo

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Re: Planning for Retirement
« Reply #16 on: June 01, 2015, 10:00:44 AM »
While I'm here, anyone else have suggestions on what I should be considering if I'm going to retire at the end of September?
kind of broad, but if you have infrequent expenses that you could do now while you have a larger income stream, consider doing them now.  for example, necessary renovations or energy-efficiency improvements.  $10k added to your 'stach won't make much of a difference with your WR at this point, but reducing expenses can. 

CestMoi

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Re: Planning for Retirement
« Reply #17 on: June 01, 2015, 02:08:36 PM »
Good point, nereo, thanks.

Catbert

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Re: Planning for Retirement
« Reply #18 on: June 01, 2015, 03:10:26 PM »


Where on www.rootofgood.com does he discuss the Roth pipeline? Can you PM me a URL? Many thanks.

While I'm here, anyone else have suggestions on what I should be considering if I'm going to retire at the end of September?

Net worth - 880k (not including worth of apartment)
Apartment paid off, worth at least 100k, minus 10k for spiffing up

This should get you directly there.   http://rootofgood.com/roth-ira-conversion-ladder-early-retirement/