NOT SURE IF I CAN RETIRE--- PLEASE HELP ME FIGURE THIS OUT!!!!!!!!!!!!!!!!!

[alexabreana]

NOT SURE HOW TO FIGURE OUT IF I AM READY FOR RETIMENT.

I AM CURRENTLY 60, SINGLE, LIVE IN CRAZY EXPENSIVE SAN DIEGO, CA. MY CURRENT LIVING EXPENSES ARE 70K PER YEAR

I CURRENTLY HAVE 600K IN A TRADITIONAL ROTH IRA WITH VANGUARD
I WORK FOR THE GOVERNMENT AND WILL GET A MONTHLY PENSION OF 4K MONTHLY FOR LIFE (before taxes) with 2 percent Cola every year for life.  I rent a home and don't have debt, i am usually very frugal.  I WILL NOT GET SOCIAL SECURITY BECAUSE I DID NOT PAY INTO THE SYSTEM.
 ALSO, I WILL GET 100K FROM MY MOTHERS ESTATE WHEN SHE PASSES AWAY, SHE IS CURRENTLY 95 YEARS OLD NOW BUT I HOPE SHE LIVES FOREVER :-)

MEDICAL will be covered 100 percent by my work.  I am not sure how to figure this out, can someone give me some advice?  Thanks Kristina








I HAVE

[ixtap]

One basic calculation is that your expenses are $70k and your pension is $48k. This leaves $22k for you to cover with your own funds. Apply the 4% rule and you need $550,000 to fund your retirement. In theory, you should be fine.

In practice, that depends on a number of factors. The first is how accurate your spending calculations are. Have you accounted for replacing your car some day and similar very occasional expenses? Have you accounted for any additional spending depending on how what you want to do once retired? We spend about the same as you, so I am not questioning your level of spending, just making sure you have accounted for rarer things.

The other concern is inflation. The 4% rule is designed to keep up with inflation, but your pension could fall behind.

Do you have an option to work for another year or two to add buffers? It is easy to get carried away with one more year, but I know that personally I would feel a little more comfortable with a tad more leeway than you currently have. But then, I am a decade younger than you and my planning accounts for an even younger spouse. I also don't include any expected inheritance in my planning. It could be eaten up in long term care or be redirected to grandkids or....

[alexabreana]

 Thank you for your time and advice :-)

[Ron Scott]

In general, retirement seems fine given your description. But the devil is in the details for something so important.

I suggest a book—The Bogleheads' Guide to Retirement Planning—that covers A LOT and should give you a solid point of reference for considering the issues in your life. It’s one of the most popular books read by those planning their retirements.

[alexabreana]

Thank you for the book recommendation!

[uniwelder]

Would you consider moving away from San Diego in the future? That could dramatically lower your expenses, should your situation change- landlord selling property, etc. After your mom passes away, of course.

[alexabreana]

Yes.. i was thinking about moving out of California.. we get taxed like crazy here!

[GilesMM]

How did you manage to work for the government (which government?) for so long without paying a nickel for social security.  And why are you shouting in all caps?

[nessness]

How did you manage to work for the government (which government?) for so long without paying a nickel for social security.  And why are you shouting in all caps?

If she started working for the federal government before 1987, she would be under the CSRS retirement system. CSRS employees (of which there aren't many left) didn't pay into social security.

[spartana]

How did you manage to work for the government (which government?) for so long without paying a nickel for social security.  And why are you shouting in all caps?

If she started working for the federal government before 1987, she would be under the CSRS retirement system. CSRS employees (of which there aren't many left) didn't pay into social security.

Many local governments (county, city and still some states) only have pension options and no SS option. I was on CalPERS which up until at least the early 2000s only paid into the pension and not SS (although this depends on the various agencies and their contracts). I think maybe the OP has a city or county pension.

As for retiringbId suggest doing a case study to see if you can lower your expenses. Also what's your situation? Have a partner you share expenses with?  Kids or other dependants? Can you downsize your rental housing? Etc... Your expenses seem high to me even in coastal CA where, if you are living alone,  a one bedroom apt should be relatively affordable on your pension with plenty left to live off without having to touch your stache by much or at all.

[Laura33]

You have two really great things going for you:

1.  You have a guaranteed pension, with at least a small guaranteed COLA.

2.  You have fully-paid medical.  It is hard to overstate how big a benefit this is, particularly as you age.

The math says that you can retire.  As noted above, though, you're pretty close to the line, so a big expense, or a market drop early into retirement, could affect your long-term prospects.  So what I would suggest is to really think about and do some research on all of the various things you could do to either cut expenses or bring in more money. 

Do you currently track your spending?  The reality is that a $70K/yr budget has a lot of room to play with, particularly when none of it is taken up with debt repayment.  I assume your rent is a big part of that given where you live, so that is one thing to consider changing -- could you move to a smaller/cheaper place if you needed to, or take on a roommate? 

Do you have/need a car?  Given the weather in your part of the country, you may be able to manage with just a scooter or ebike, which would cost less to own, less to maintain, less to operate, etc.  What kind of insurance coverage do you have, both vehicle and personal/renters?  May be worth shopping around and/or seeing if you would save money by cutting back on some of your coverages. 

I'm sure there are a lot of little things you can change around the edges, like substituting some cheaper groceries.  But don't limit yourself to that.  Think about big options, like moving, going car-less, etc.  You may or may not choose to do so, but those are all options that are out there and so are worthy of consideration.  Is it worth another [6 months/year/3 years/etc.] at the job if it allows you to [keep your apartment/keep your car/stay in CA/etc.]?  If you don't even consider those big options, you can't ever weigh them fairly against the value of the additional time at work they may be costing you.

Don't forget options that may bring you more income.  Certainly getting a roommate is one.  But do you have any hobbies you could monetize -- anything you like to make that you can sell for a few thousand a year, or any particular skills people would pay you for (tutoring, organizing, etc.)?  Could you go part-time instead of quitting entirely?  Or would you be willing to take on a part-time job for 10-20 hrs/week if allows you to quit your primary job?  If you could bring in, say, $10K/yr doing something small on the side, that may not sound like a whole lot of money -- and yet it is almost half the money you need to cover the gap between your pension and your expenses. 

Finally, I do want to clarify one thing:  Is your pension $4K/mo. for life if you retire now, at 60?  If so, does that increase if you work a bit longer, and if so, by how much?  Be sure you fully understand the terms of the pension, including any cuts you may take for retiring before 65 and/or increases you could earn by working longer -- that is the bulk of all of your future income, so make sure you get that right.

[ixtap]

Your expenses seem high to me even in coastal CA where, if you are living alone,  a one bedroom apt should be relatively affordable on your pension with plenty left to live off without having to touch your stache by much or at all.

When I last looked at apartments in San Diego, 1 bedroom apartments were generally at least 90% the cost of two bedroom apartments. SFH can be a better value than either, but then utilities will likely increase.

[wageslave23]

Are you ready to retire? No.

This has nothing to do with math or money. If you don't understand the concepts of retirement planning enough that you need to ask here, then you don't have the financial knowledge to retire. You need to do a lot of reading, posting on here is a good start. Dive into the details of your current spending.  Look at all future costs and build in a buffer. Look at your fallback contingencies.  Read about and talk to a financial advisor about allocations and taxes.

So you might have enough money, but you have probably a solid year of learning to do, after which you will know enough to answer your question for yourself.

[the lorax]

Just checking - is the question whether you can quit work and retire now? If so - when can you start getting that pension? Do you need to cover all your expenses for a number years before you can claim it? If so, then you don't have enough, if not then probably yes. Definitely worth considering moving to lower CoL area though either way if that's something you would be ok with.

[spartana]

Your expenses seem high to me even in coastal CA where, if you are living alone,  a one bedroom apt should be relatively affordable on your pension with plenty left to live off without having to touch your stache by much or at all.

When I last looked at apartments in San Diego, 1 bedroom apartments were generally at least 90% the cost of two bedroom apartments. SFH can be a better value than either, but then utilities will likely increase.

Yeah they're expensive. I lived in coastal OC when I Fired (I owned) and I think prices for rental housing is about the same as coastal SD. But SFH are almost double the cost of a one or 2 bedroom apt so if the OPs biggest expense is housing costs then they might look to downsize that somehow. You're right that a 2 bedroom apt isn't that much more than a one bedroom and you can get a roommate to lower costs. And the no maintenance expense can be huge. Basicly a single person even in SD should be able to live on a $48k pension comfortably and they can still tap their investments as needed/wanted. Im looking at rentals now in coastal Calif and they are high but doable on the OPs income.

[mistymoney]

golden girls?

[ixtap]

golden girls?

We are a couple and we still chose to have a roommate the last time we lived on land. We didn't know what to do with two bedrooms and there weren't any smaller options where we wanted to be.

[Drink Coffee And Stack Money]

Are you ready to retire? No.

This has nothing to do with math or money. If you don't understand the concepts of retirement planning enough that you need to ask here, then you don't have the financial knowledge to retire. You need to do a lot of reading, posting on here is a good start. Dive into the details of your current spending.  Look at all future costs and build in a buffer. Look at your fallback contingencies.  Read about and talk to a financial advisor about allocations and taxes.

So you might have enough money, but you have probably a solid year of learning to do, after which you will know enough to answer your question for yourself.

This was my initial thought as well. Good advice.

[Dee18]

In your original post you say you have a "TRADITIONAL ROTH IRA WITH VANGUARD"

A traditional IRA and a Roth IRA are two different things.  If it is a traditional IRA you will have to pay income tax on the money as you withdraw it.  If it is a Roth you will not have to pay income tax on it. Most of my money is in traditional IRAs where $600,000 invested will be $450,000 after taxes if I am at the 25% tax bracket.  This would be a good thing to get straight before deciding if you can retire now.

[spartana]

golden girls?

We are a couple and we still chose to have a roommate the last time we lived on land. We didn't know what to do with two bedrooms and there weren't any smaller options where we wanted to be.

Same here. Ex-DH and I moved into a 3/2 house when we moved off our boat because we had a couple of young dogs (labs of course!) and wanted a yard for them as they got bigger. Also "inherited" 3 stray cats that came with the house. To off set costs we got a roommate. It worked out well in that regard. Although in our 30s then so not sure if getting a roommate would be that great once older and retired.

[GilesMM]

Are you ready to retire? No.

This has nothing to do with math or money. If you don't understand the concepts of retirement planning enough that you need to ask here, then you don't have the financial knowledge to retire. You need to do a lot of reading, posting on here is a good start. Dive into the details of your current spending.  Look at all future costs and build in a buffer. Look at your fallback contingencies.  Read about and talk to a financial advisor about allocations and taxes.

So you might have enough money, but you have probably a solid year of learning to do, after which you will know enough to answer your question for yourself.

Strange as it may sound around here, not every single person who retires has a keen interest in the math nor wants to spend a year studying the problem. Some just want someone else to look at the figures and reassure them they are on track. I’m ok with that.

[jimmyshutter]

You also need to account for taxes which I don't believe were calculated in other people's posts. You may actually need 100k to cover 70k expenses but I'm too lazy to figure it out.

[mistymoney]

You also need to account for taxes which I don't believe were calculated in other people's posts. You may actually need 100k to cover 70k expenses but I'm too lazy to figure it out.

if the 600k is in roth, won't be much of a tax bite.

if in traditional, then yes. My calc is 100k taxable income is 88258 in pocket. Will vary depending on if any state taxes on retirement income.

[Villanelle]

Your expenses seem high to me even in coastal CA where, if you are living alone,  a one bedroom apt should be relatively affordable on your pension with plenty left to live off without having to touch your stache by much or at all.

When I last looked at apartments in San Diego, 1 bedroom apartments were generally at least 90% the cost of two bedroom apartments. SFH can be a better value than either, but then utilities will likely increase.

We just sold a townhouse in San Diego.  Are you saying that owning a SFH would be a better value, or renting a SFH is a better value?  Either way, I'm not sure I agree.

You could price out buying a 2 bed and then renting a room to a roommate.  That could help you offset some expenses and also be at least somewhat of a hedge against inflation. 

If you are open to leaving San Diego (and especially leaving CA), you should be able to significantly lower expenses.  This is especially true because you rent so you aren't even benefitting from Prop 13 like you would have if you'd owned for years.

Also, does your $70k in expenses include taxes (state and federal)?

Finally, you should not count on the $100k (or anything) from your mom.  That's not very much, and if she gets ill or injured, or needs assistance of care, that could be eaten up in a very short time. 

Personally, I wouldn't be comfortable retiring right now if I were in your shoes, unless I moved to a lower cost of living area. (That's especially true if your $70k in expenses doesn't include taxes and lumpy expenses like car repair.) If home/rental prices in San Diego rise (recently named one of the top 10 least affordable cities in the *world*), your expenses could increase drastically, and you'd have little control over it.  I'd say you are close, but for me, it would feel too uncertain.  I'd likely either move to a cheaper area (and likely one with lower taxes), house hack (if the numbers make sense), find ways to cut expenses (and be committed to sticking with those) or do what is called barista FIRE, where you get a low-stress, usually part-time job to bring in some cash and reduce the amount you need to withdraw. 

[spartana]

Your expenses seem high to me even in coastal CA where, if you are living alone,  a one bedroom apt should be relatively affordable on your pension with plenty left to live off without having to touch your stache by much or at all.

When I last looked at apartments in San Diego, 1 bedroom apartments were generally at least 90% the cost of two bedroom apartments. SFH can be a better value than either, but then utilities will likely increase.

We just sold a townhouse in San Diego.  Are you saying that owning a SFH would be a better value, or renting a SFH is a better value?  Either way, I'm not sure I agree.

You could price out buying a 2 bed and then renting a room to a roommate.  That could help you offset some expenses and also be at least somewhat of a hedge against inflation. 

If you are open to leaving San Diego (and especially leaving CA), you should be able to significantly lower expenses.  This is especially true because you rent so you aren't even benefitting from Prop 13 like you would have if you'd owned for years.

Also, does your $70k in expenses include taxes (state and federal)?

Finally, you should not count on the $100k (or anything) from your mom.  That's not very much, and if she gets ill or injured, or needs assistance of care, that could be eaten up in a very short time. 

Personally, I wouldn't be comfortable retiring right now if I were in your shoes, unless I moved to a lower cost of living area. (That's especially true if your $70k in expenses doesn't include taxes and lumpy expenses like car repair.) If home/rental prices in San Diego rise (recently named one of the top 10 least affordable cities in the *world*), your expenses could increase drastically, and you'd have little control over it.  I'd say you are close, but for me, it would feel too uncertain.  I'd likely either move to a cheaper area (and likely one with lower taxes), house hack (if the numbers make sense), find ways to cut expenses (and be committed to sticking with those) or do what is called barista FIRE, where you get a low-stress, usually part-time job to bring in some cash and reduce the amount you need to withdraw.

I definitely don't think owning would be better than renting for a single person who doesn't have dependants. I've been going down the Zillow wormhole in different areas of coastal Calif and prices would be massively prohibiting with the OPs FIRE income and even getting a couple of roommates wouldn't cover all.the costs of buying. Unless the OP would be ok buying into one of those "Active 55 plus" condo/co-op communities. My mom lived in one and it was pretty awesome. Low cost to buy (had to pay all cash though) and low monthly as an fees that covered most maintenance and services.

So renting is a clear winner and, unless they want the added expense of renting a house or the hassle dealing with roommates, then the smaller the better. Lots of cute small ADUs out there now too so it doesn't have to be a apt complex.

I'm curious what the OP pays in rent now (@alexabreana come back to your thread!). Looking at rentals here in coastal OC it seems the average one bedroom place is $2200- $2500 and a 2 bedroom is about $500 more. Where SFH are around $4500 and up and condos $3500-$5000. So even if the OP paid $3000/month for a nice 2 bedroom place they'd have some $$$ left over from their pension and wouldn't have to tap that much extra from their investments. Im also curious that since they said no debt and free medical how much of that $70k is spent on housing and what does the rest go to?

[spartana]

Another thing I wanted to add to the long term rent issue, since I've dealt with that myself,  is that qualifying for a place often requires 3 times your monthly income - and often LLs won't count investment income. So while you may be able to afford a place once FIREd based on your projected FIRE income, you may not actually be able to qualify. So a $3000/month rental would be affordable for you on your pension alone, you'd likely need to have earnings over $100k to qualify. For a place. And that's not taking into consideration what a rental will cost 10, 20 or 30 years down the road.

[partgypsy]

You also need to account for taxes which I don't believe were calculated in other people's posts. You may actually need 100k to cover 70k expenses but I'm too lazy to figure it out.

if the 600k is in roth, won't be much of a tax bite.

if in traditional, then yes. My calc is 100k taxable income is 88258 in pocket. Will vary depending on if any state taxes on retirement income.

. She will only need to take out 20k or so from retirement each year. So the tax implications are not as bad if a higher percentage was withdrawn.

[mistymoney]

You also need to account for taxes which I don't believe were calculated in other people's posts. You may actually need 100k to cover 70k expenses but I'm too lazy to figure it out.

if the 600k is in roth, won't be much of a tax bite.

if in traditional, then yes. My calc is 100k taxable income is 88258 in pocket. Will vary depending on if any state taxes on retirement income.

. She will only need to take out 20k or so from retirement each year. So the tax implications are not as bad if a higher percentage was withdrawn.

but the pension is also taxable income I'm assuming, so if she needs 70k to live on, so would need about 80k with 10k taxes. Not that that is heavy taxing but she is cutting it close if the 600k ira is trad and not roth. if roth then taxes are more minimal.

[Tempname23]

In your original post you say you have a "TRADITIONAL ROTH IRA WITH VANGUARD"

A traditional IRA and a Roth IRA are two different things.  If it is a traditional IRA you will have to pay income tax on the money as you withdraw it.  If it is a Roth you will not have to pay income tax on it. Most of my money is in traditional IRAs where $600,000 invested will be $450,000 after taxes if I am at the 25% tax bracket.  This would be a good thing to get straight before deciding if you can retire now.

 If they moved to Nevada where there is no state tax, their tax rate on $70,000 is about 10.4%.
Nevada does have a 4.6% sales tax on the money spend that is left after taxes.

[OttawaNeal]

Something fishy going on with OP’s age.

60 now, in a post a year ago was 5 years away from 60, and 2 years ago was 50!

At that rate of aging, taking retirement would be advisable! That’s 5 years per year.

Just got divorce and got awarded Ex-pension in the amount of 200K
I am 50 year old, not sure if I should leave the money in his pension account (Not 401K), transfer to my Vanguard Roth IRA, take a lump sum,  not sure how taxes will play out, any advice would be greatly appreciated.

[Villanelle]

Something fishy going on with OP’s age.

60 now, in a post a year ago was 5 years away from 60, and 2 years ago was 50!

At that rate of aging, taking retirement would be advisable! That’s 5 years per year.

Just got divorce and got awarded Ex-pension in the amount of 200K
I am 50 year old, not sure if I should leave the money in his pension account (Not 401K), transfer to my Vanguard Roth IRA, take a lump sum,  not sure how taxes will play out, any advice would be greatly appreciated.

Interesting.  Thanks for pointing this out.  They also haven't posted since July 8 or logged on since July 15, so I think offers of advice or help are... unnecessary, at this point.  (IMO.  Of course people are free to do whatever feels best for them.)

[Villanelle]

Something fishy going on with OP’s age.

60 now, in a post a year ago was 5 years away from 60, and 2 years ago was 50!

At that rate of aging, taking retirement would be advisable! That’s 5 years per year.

Just got divorce and got awarded Ex-pension in the amount of 200K
I am 50 year old, not sure if I should leave the money in his pension account (Not 401K), transfer to my Vanguard Roth IRA, take a lump sum,  not sure how taxes will play out, any advice would be greatly appreciated.

Interesting.  Thanks for pointing this out.  They also haven't posted since July 8 or logged on since July 15. This is also at least her 6th "can I retire/what do I need to retire" post", and that has been almost her only participation.  She asks the question, people respond, she disappears, and then comes back a some months later and asks again.  So I think offers of advice or help are... unnecessary at this point.  (IMO.  Of course people are free to do whatever feels best for them.)  When there's almost no interaction with those who take the time to respond, the same question asked repeatedly, and no effort to interact with other people's posts... meh. 

[spartana]

Something fishy going on with OP’s age.

60 now, in a post a year ago was 5 years away from 60, and 2 years ago was 50!

At that rate of aging, taking retirement would be advisable! That’s 5 years per year.

Just got divorce and got awarded Ex-pension in the amount of 200K
I am 50 year old, not sure if I should leave the money in his pension account (Not 401K), transfer to my Vanguard Roth IRA, take a lump sum,  not sure how taxes will play out, any advice would be greatly appreciated.

Interesting.  Thanks for pointing this out.  They also haven't posted since July 8 or logged on since July 15. This is also at least her 6th "can I retire/what do I need to retire" post", and that has been almost her only participation.  She asks the question, people respond, she disappears, and then comes back a some months later and asks again.  So I think offers of advice or help are... unnecessary at this point.  (IMO.  Of course people are free to do whatever feels best for them.)  When there's almost no interaction with those who take the time to respond, the same question asked repeatedly, and no effort to interact with other people's posts... meh.

Yeah I've noticed a lot of hit and run posts recently. People post asking for advice, people kindly spend their time trying to both help and ask for more details and clarification and...crickets. OP disappears or just has a short response with no engagement with their own thread. Weird to me but maybe that's the norm now on forums.

[lhamo]

Something fishy going on with OP’s age.

60 now, in a post a year ago was 5 years away from 60, and 2 years ago was 50!

At that rate of aging, taking retirement would be advisable! That’s 5 years per year.

Just got divorce and got awarded Ex-pension in the amount of 200K
I am 50 year old, not sure if I should leave the money in his pension account (Not 401K), transfer to my Vanguard Roth IRA, take a lump sum,  not sure how taxes will play out, any advice would be greatly appreciated.

Interesting.  Thanks for pointing this out.  They also haven't posted since July 8 or logged on since July 15. This is also at least her 6th "can I retire/what do I need to retire" post", and that has been almost her only participation.  She asks the question, people respond, she disappears, and then comes back a some months later and asks again.  So I think offers of advice or help are... unnecessary at this point.  (IMO.  Of course people are free to do whatever feels best for them.)  When there's almost no interaction with those who take the time to respond, the same question asked repeatedly, and no effort to interact with other people's posts... meh.

Yeah I've noticed a lot of hit and run posts recently. People post asking for advice, people kindly spend their time trying to both help and ask for more details and clarification and...crickets. OP disappears or just has a short response with no engagement with their own thread. Weird to me but maybe that's the norm now on forums.

The Reddit effect, maybe? 

[spartana]

^^^Probably. Reddit kind of drives me insane so I generally don't go there but I was just looking at the lean FIRE Reddit and you see a lot of one offs even there.