58 yo old asks, Can I retire?

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piglet005
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58 yo old asks, Can I retire?

Post by piglet005 »

For clarity’s sake, the two people referred to below, myself and my wife, are both female. We have no children or legacy concerns.

Emergency funds: Yes. 1 year in credit union.
Debt: None.
Tax Filing Status: Married Filing Jointly
Tax Rate: 12% Federal, 6% State
State of Residence: California (near Pasadena, considered HCOL or VHCOL area)
Age: 58 (self), wife 72
Current Income
My employment: $86k annual

Current Expenses $47k annual.

Current retirement assets
Size of your total portfolio: $2.3 million 100% taxable. $500,000 of that will be used for home purchase, leaving $1.8 million.

Current Asset allocation: 10% stocks, <1% bonds / 90% fixed income.

Other income in retirement:
My social security at 67: $25,000 annual
Wife's social security: $14,000 annual
Royalties: $240 annual
Principal drawdown:
2023: $39,000
2024: $52,000
2025: $48,000
2026-2030: $58,000
2031: $54,000
2032 onwards: $33,000

Planned expenses in retirement:
I have broken my expenses up into four periods, corresponding to whether I am renting or own a home, whether I have ACA or Medicare, and whether I am receiving Social Security. These figures include taxes and budgeting for lumpy expenses like a new refrigerator or computer. All figures are today’s dollars.
2023-24: $69,000
2025-2029: 59,000
2030-31: 58,000
2032 Onwards: $58,000


Questions:
1. Can I afford to retire now and pay myself a fixed income of $72,000? If you do not think I can retire now, what steps do you think are needed?
Last edited by piglet005 on Mon Mar 20, 2023 12:14 pm, edited 2 times in total.
BogleTaxPro
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Re: 58 yo old asks, Can I retire?

Post by BogleTaxPro »

Per "recommendations for cleaning up your portfolio"...I believe you got some good advice in your previous thread: viewtopic.php?t=391766

IE: move the taxable account out of Morgan Stanley (if you haven't already done so) to avoid paying sales commissions. Then start selling stocks that have a loss at your new brokerage. Reinvest in a simple 3 fund portfolio. Rinse and repeat.
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thank you, yes, I did get good advice previously. I wound up moving everything to Vanguard, rather than selling at Morgan Stanley. I have not sold anything yet, but the advice given was good and I plan to follow it. I simply repeated the question in this context since I was laying everything out.

I am hoping to get advice on whether I could retire now, because retiring would allow me more time to focus on selling and reinvesting. I feel I need to read more before selecting the 3 fund portfolio that is right for me. I have been reading the Boglehead Wiki but there is so much to take in.

[*]EDIT: I edited my initial post to focus on whether I can retire now.
swylie
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Re: 58 yo old asks, Can I retire?

Post by swylie »

I'm thinking you might be a candidate for Vanguard Personal Advisory Services. I believe the fee is .35% annually, but you can go on Vanguard's website and have them work out a plan for free. Then you can decide whether to implement it yourself or have them implement it.

The reason I suggest PAS is because they will basically set up a four fund portfolio using VTI (total US stock market), VXUS (total international market), BND (total bond market) and BNDX (international bond market), which generally follows Boglehead philosophy. Also, they will give helpful advice about asset allocation, tax implications and I think they could help with your main question which is whether you can afford to retire now.

After my father passed I advised my mother to move from Raymond James to Vanguard, and PAS helped facilitate the move. They gave great advice simplifying her taxable and nontaxable accounts. When things were streamlined I ended the service and it's been easy for me to manage her accounts on my own.

One change since my mother used PAS--Vanguard has introduced some actively managed funds exclusive to (and pushed by) PAS. You might want to check them out, but also consider steering clear of them if you embrace the passive investing philosophy central to the Boglehead ethos.

I think the fee you'd have to pay for one year of PAS would be about $7,700 which could be well worth it to get yourself moving on a plan you can follow and feel confident about.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thank you for the response. I have looked into VPAS and have not ruled them out, but I have put myself on Rick Ferri's wait list and was thinking I would see if he could help me out. I lack time to figure it out now, and even with time, I might lack confidence. I have a had a good experience so far with Vanguard's service in relation to inheritance, transfer, and ownership.

The answers here have helped me understand more what I'm trying to ask with this post. I've done work to gather data regarding retirement expenses, budget, etc. I will have my CPA go over those figures. I plan on following Boglehead philosophy to simplify my portfolio, with or without assistance. I do face some hurdles there but I think I can conquer them. It's mainly putting the time in, or paying for someone else's time.

I think what I'm asking here might be, I have x amount of money and I'm planning a 90/10 allocation. Here is my spending level and age, do you think I will run out of money? Given what I've submitted, am I missing something?
delamer
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Re: 58 yo old asks, Can I retire?

Post by delamer »

I’m confused about a few things:

1) Is the $72,000 in addition to your wife’s Social Security of $14,000?

2) Based on your planned expenses whuch are lower, why do you need $72,000? Do the planned expenses include income taxes?

2) Is the $500,000 for a home included in the $2.3 million? In other words, if you bought the house would your nest egg then be $1.8 million?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
kd2008
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Re: 58 yo old asks, Can I retire?

Post by kd2008 »

Helpful hints - May be cleanup your post to bring focus on the questions you want answers. No need to post individual stock positions they are distracting. If you have stepped up basis for those then simply liquidate them. Otherwise wait for more informed guidance from others.

1. Post total portfolio value - taxable, 457b, emergency and anything else. (Avoid runny conditional clauses after you present a number, it is confusing). This is $2.3 million, correct? Also mention what amount from this is to be used for home purchase.

2. Post annual expenses you estimate - I love how you are thinking here - each stage has different number and different constraints. pre-Medicare on ACA, then Medicare, then your SS etc.

3. Explain the cash flow sources for each stage. Wife's SS, portfolio drawdown (No need to separate dividends, they are just part of portfolio), your SS etc. Avoid mentioning numbers as monthly, just post annual numbers. Avoid including .00 after numbers. We are not looking for precision here. Rounding amounts to hundred or thousand is ok. Brings better readability. For example, 5789.00 can be presented as 6K or 5,800. Much better and easier to grasp.

4. Hopefully, with this info we can evaluate your plan in more detail.

5. Given your expenses, and taxable account, your actual income for ACA purposes can be managed to receive a larger subsidy and your monthly plan cost can be close to zero. Of course, deductibles are usually larger with ACA plan.

Looking forward to hearing from you.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

1) Is the $72,000 in addition to your wife’s Social Security of $14,000?

2) Based on your planned expenses whuch are lower, why do you need $72,000? Do the planned expenses include income taxes?

2) Is the $500,000 for a home included in the $2.3 million? In other words, if you bought the house would your nest egg then be $1.8 million?
Response to #1. Yes, the 72,000 is in addition to wife's Soc Sec. Total is $86,000 for annual income. I will change my original post to reflect that.

Response to #2. I chose $72,000 because it seemed like a generous amount to me. It does include income taxes. I don't know how to calculate for price increases over time and I live in a state that has seen some hefty price increases in many areas. The only way I know how to plan is to give myself some padding. That's how I chose that number. Now that you've pointed it out, it does seem random to me.

Response to #3. Yes, the $500,000 is included in the $2.3 million. In my spreadsheet planning my income, I reduced $2.3 million to $1.8 million in late 2024. I will clarify my original post.

Thank you for helping me think this through.
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Wiggums
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Re: 58 yo old asks, Can I retire?

Post by Wiggums »

Since you received a step up basis for the individual stock, it seems like NOW is a good time to exchange individual stock for the vanguard total Stock market fund (VTSAX).

If you don’t want to pull the trigger, you could engage Vanguard PAS to do it for you. Rick Ferri will give you good advice, but he does not manage the portfolio, and I am under the impression that you want someone to re-organize the portfolio for you.
"I started with nothing and I still have most of it left."
aristotelian
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Re: 58 yo old asks, Can I retire?

Post by aristotelian »

Biggest concern for me is your asset allocation. With only 10% stocks, your biggest risk is inflation. This portfolio should have a very low expected return, perhaps earning just barely more than inflation over time. If you are OK with slowly spending down your funds that is fine. I do not think this portfolio is a safe bet to produce $72k on its own but since you will be claiming SS you should be OK. As it is you have 25 years expenses (4% withdrawal rate) which is typically regarded as safe but that is assuming at least 50% in equities.

With such a bond centric approach consider at least some allocation to TIPS for inflation protection.
Last edited by aristotelian on Mon Mar 20, 2023 11:40 am, edited 1 time in total.
student
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Re: 58 yo old asks, Can I retire?

Post by student »

I am also a bit confused on the points brought up by other posters. I am also confused about <1% bond and the 90% fixed income. In any case, I think the standard rule of thumb is 4% of the portfolio (with inflation adjustment in subsequent years). However, this assumes retiring at 65 (30 years retirement) and a 50/50 portfolio. https://www.forbes.com/advisor/retireme ... etirement/ Personally, I prefer a more conservative 3%.

Assuming my understanding is correct, you have $2.3M investable assets and you would like $72k a year in today's dollars. Using my preferred 3%, it is close enough. However your portfolio is 10/90 and you are only 58. Personally I would not do it at this time with a 10/90 portfolio.
aristotelian
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Re: 58 yo old asks, Can I retire?

Post by aristotelian »

student wrote: Mon Mar 20, 2023 11:40 am I am also a bit confused on the points brought up by the previous two posters. I am also confused about <1% bond and the 90% fixed income. In any case, I think the standard rule of thumb is 4% of the portfolio (with inflation adjustment in subsequent years). However, this assumes retiring at 65 (30 years retirement) and a 50/50 portfolio. https://www.forbes.com/advisor/retireme ... etirement/ Personally, I prefer a more conservative 3%.

Assuming my understanding is correct, you have $2.3M investable assets and you would like $72k a year in today's dollars. Using my preferred 3%, it is close enough. However you portfolio is 10/90 and you are only 58. Personally I would not do it at this time with a 10/90 portfolio.
They arent counting a house purchase, which gleaves then $1.8M or 4%. I think it's pretty close with their conservative allocation.
delamer
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Re: 58 yo old asks, Can I retire?

Post by delamer »

piglet005 wrote: Mon Mar 20, 2023 11:25 am
1) Is the $72,000 in addition to your wife’s Social Security of $14,000?

2) Based on your planned expenses whuch are lower, why do you need $72,000? Do the planned expenses include income taxes?

2) Is the $500,000 for a home included in the $2.3 million? In other words, if you bought the house would your nest egg then be $1.8 million?
Response to #1. Yes, the 72,000 is in addition to wife's Soc Sec. Total is $86,000 for annual income. I will change my original post to reflect that.

Response to #2. I chose $72,000 because it seemed like a generous amount to me. It does include income taxes. I don't know how to calculate for price increases over time and I live in a state that has seen some hefty price increases in many areas. The only way I know how to plan is to give myself some padding. That's how I chose that number. Now that you've pointed it out, it does seem random to me.

Response to #3. Yes, the $500,000 is included in the $2.3 million. In my spreadsheet planning my income, I reduced $2.3 million to $1.8 million in late 2024. I will clarify my original post.

Thank you for helping me think this through.
It’s good to have a little padding in planning expenses but 20% is on the high side. Maybe use $65,000 instead of $72,000?

Also paying cash for a house vs. renting could drastically alter your expenses.

Based on the numbers you’ve supplied, and buying a house:

If you take Social Security at 67, then you’ll need $25,000 less from your portfolio at that point. Using $65,000 in annual expenses, you’d need to draw down your portfolio by about $600,000 to cover them until then. Assuming that your portfolio only has returns that keep up with inflation (very conservative)*, that will leave you with $1.2 million at 67. Going forward, you’ll have to withdraw $40,000 from your portfolio. That’s a 3.3% withdrawal rate. Which is comfortable at age 67. (Check the Wiki for “safe withdrawal rate.”)

* You really should plan on a minimum 30% in stocks to keep up with inflation over the long term. But putting the remainder in cash equivalents — CD ladders, TIPS, Treasuries — is fine.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
student
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Re: 58 yo old asks, Can I retire?

Post by student »

aristotelian wrote: Mon Mar 20, 2023 11:41 am
student wrote: Mon Mar 20, 2023 11:40 am I am also a bit confused on the points brought up by the previous two posters. I am also confused about <1% bond and the 90% fixed income. In any case, I think the standard rule of thumb is 4% of the portfolio (with inflation adjustment in subsequent years). However, this assumes retiring at 65 (30 years retirement) and a 50/50 portfolio. https://www.forbes.com/advisor/retireme ... etirement/ Personally, I prefer a more conservative 3%.

Assuming my understanding is correct, you have $2.3M investable assets and you would like $72k a year in today's dollars. Using my preferred 3%, it is close enough. However you portfolio is 10/90 and you are only 58. Personally I would not do it at this time with a 10/90 portfolio.
They arent counting a house purchase, which gleaves then $1.8M or 4%. I think it's pretty close with their conservative allocation.
Thanks for the clarifications. Personally I think a 10/90 asset allocation is not strong enough for a 4% withdrawal rate especially starting at 58.

Edit: I have not take into account of SS on purpose as OP said "Can I afford to retire now and pay myself a fixed income of $72,000? "
Last edited by student on Mon Mar 20, 2023 11:54 am, edited 1 time in total.
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Reworking post now!
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

I have revised my post in response to kd2008's suggestions to make things clearer. I will now read and respond to what has been posted since.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

In response to @Wiggims, thank you for your replay on the timing of sales. I plan to take action on this as soon as possible. Thank you also for clarifying what Rick Ferri can and cannot do for me.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

In response to aristotelian, I am interested in TIPs and ibonds. However, I don't feel like I understand them enough at this time to invest in them. That will probably be a task for this year.

You mention that this portfolio will have a very low return over time. For this year, I anticipate that it will outstrip my current salary. I understand that is an unusual interest rate environment and I cannot count on that continuing. However, you have touched on an issue that concerns me.

I am going to consider increasing my stock allocation. I imagine 30% might be as high as I can go, given the risks.
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Wiggums
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Re: 58 yo old asks, Can I retire?

Post by Wiggums »

piglet005 wrote: Mon Mar 20, 2023 12:35 pm In response to aristotelian, I am interested in TIPs and ibonds. However, I don't feel like I understand them enough at this time to invest in them. That will probably be a task for this year.

You mention that this portfolio will have a very low return over time. For this year, I anticipate that it will outstrip my current salary. I understand that is an unusual interest rate environment and I cannot count on that continuing. However, you have touched on an issue that concerns me.

I am going to consider increasing my stock allocation. I imagine 30% might be as high as I can go, given the risks.
30% stock is perfectly reasonable. Inflation is really your only enemy.

We have been buying Treasuries and CDs over 5%

Ibonds have a purchase limit so you can use them in conjunction with your other fixed income choices.

There is no rush to buying a place until you are sure you want to live there.

We retired at 56. If your withdrawal rate is closer to 3%, I say go for it.
"I started with nothing and I still have most of it left."
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

I am also confused about <1% bond and the 90% fixed income. In any case, I think the standard rule of thumb is 4% of the portfolio (with inflation adjustment in subsequent years).
I used Vanguard's Portfolio Watch numbers to come up with <1% bond. I think that comes from the mutual funds I am holding. Example: BLACKROCK LOW DURATION BOND CL A is one of my bond funds.

The 90% fixed income comes from VUSXX and individual treasuries. That's where most of my money is.

I'm concerned I may have misconstrued your instructions on listing principal drawdown because I don't think it should be 4%. I think it should be 2.7%. I thought what you wanted me to do was include the money I'm making in interest and from dividends in the principal drawdown. Is that correct?

For example, in my edited original post, I have listed my drawdown for 2023 as $39,000. That's how much I will need to withdraw from Vanguard this year, but the portfolio as invested should make more than that. I should have money left over at the end of the year. In 2025, I will remove $48,000 from Vanguard, but I should earn nearly all of that. I predict I will only need to take out $3000 over what I have earned.
kd2008
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Re: 58 yo old asks, Can I retire?

Post by kd2008 »

Thank you for updating your post.

Based on what I understand, yes you can retire now if you like.

As other have suggested, for long term survival of your portfolio, you probably should have higher percentage of stocks in your portfolio. 30%, or 50% etc, depends on your risk tolerance. Take time to figure this out before taking action.

You don't have to figure it out all in one go. Baby steps as you solve your puzzle.

The forum is a great resource for all your questions. So please do ask as you have them.
thousandaire
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Re: 58 yo old asks, Can I retire?

Post by thousandaire »

$72k per year from a $1.8MM portfolio is a good plan ONLY IF you increase your stock allocation. 40% would be preferred at your age.

You are overvaluing "risk of stocks going down" relative to the "risk of costs going up." At 58 you've seen both, but while the market has always recovered over time, prices rarely go back down. 30 years ago, $30k bought you a Corvette. Now it buys you a Camry.

Looking at your plan, you may be able to draw $72k now, but that same standard of living may cost $90k in 10 years. There are risks on both sides, so the important part is to develop an allocation that balances both.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

It’s good to have a little padding in planning expenses but 20% is on the high side. Maybe use $65,000 instead of $72,000?

Also paying cash for a house vs. renting could drastically alter your expenses.
Thank you for this feedback. I'm going to alter my spreadsheet for planning purposes. I also appreciate your comments regarding housing.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

As other have suggested, for long term survival of your portfolio, you probably should have higher percentage of stocks in your portfolio. 30%, or 50% etc, depends on your risk tolerance. Take time to figure this out before taking action.

You don't have to figure it out all in one go. Baby steps as you solve your puzzle.
I appreciate your wisdom! You have been so helpful. Thank you.
suemarkp
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Re: 58 yo old asks, Can I retire?

Post by suemarkp »

Agree with others that inflation is a risk. You are old enough to have grown up in the late 70's and 80's when inflation was high. Do you remember how fast prices went up then? I would add a factor to your expenses to account for inflation at some rate. What rate to plan for is difficult. The Fed wants 2%, reality will most likely average higher, but your personal inflation rate may not match the CPI basket. I'd plan for at least 3% to 5%. At 3%, that means prices/expenses will double in 24 years so your budget needs to double in 24 years too. At 5%, prices would double in 14 years. Social Security is inflation protected, but most of your money is not.

In looking back to the 80's you can take advantage of the high CD and bond rates that occur during high inflation. Perhaps buy some longer duration CDs or bonds if the returns get well over your inflation planning rate. You're locking up that money for awhile, but 10 year CD/bond ladders may provide some protection from inflation.

One other item to plan for would be the death of your spouse. She is a bit older than you, so what happens when she dies? Her SS goes away. Your tax filing status becomes single which cuts the tax thresholds in half so your taxes go up. Your spending will decrease somewhat, but not by half.

I think your plan will work for 20 years. Longer than that it seems risky to me unless you have some inflation protection (i.e. higher stock allocation), inflation stays low, or you work a bit longer to increase your nest egg and reduce the amount of time it needs to last.
Mark | Somewhere in WA State
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

You are overvaluing "risk of stocks going down" relative to the "risk of costs going up." At 58 you've seen both, but while the market has always recovered over time, prices rarely go back down. 30 years ago, $30k bought you a Corvette. Now it buys you a Camry.

Looking at your plan, you may be able to draw $72k now, but that same standard of living may cost $90k in 10 years. There are risks on both sides, so the important part is to develop an allocation that balances both.
Thank you, thousandaire, I am going to think hard on this. When you say "At 58 you've seen both" you are right on the mark. I have been through numerous layoffs, with the consequent ups and downs in income and savings, and that has led to a reticence to invest more of my windfall, which I have received through dumb luck and not through benefit of slow and steady investing, as many people here have.

I am aware that this is my main issue in looking at retirement right now. I was hoping I had enough that I wouldn't have to face it.

I used to go with my grandmother to visit a friend of hers who didn't leave her house much and we'd always take her a loaf of bread. The friend would hand my grandmother some change every time--I can't remember if it was a quarter or fifty cents. After we left one time, my grandmother said to me, "she doesn't realize the price of bread has gone up, but I don't say anything." I sometime wonder if I am in danger of becoming like my grandmother's friend.

On the other side of things, I look at your statement about the same standard of living costing 90k in 10 years, and I have trouble wrapping my head around that.
student
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Re: 58 yo old asks, Can I retire?

Post by student »

piglet005 wrote: Mon Mar 20, 2023 12:56 pm
I am also confused about <1% bond and the 90% fixed income. In any case, I think the standard rule of thumb is 4% of the portfolio (with inflation adjustment in subsequent years).
I used Vanguard's Portfolio Watch numbers to come up with <1% bond. I think that comes from the mutual funds I am holding. Example: BLACKROCK LOW DURATION BOND CL A is one of my bond funds.

The 90% fixed income comes from VUSXX and individual treasuries. That's where most of my money is.
Usually the asset allocation is on your entire portfolio. In any case, I think you have 10/90/ (10% stock and 90% fixed income.)

Now you wrote
piglet005 wrote: Mon Mar 20, 2023 9:43 am Other income in retirement:
My social security at 67: $25,000 annual
Wife's social security: $14,000 annual
Royalties: $240 annual
Principal drawdown:
2023: $39,000
2024: $52,000
2025: $48,000
2026-2030: $58,000
2031: $54,000
2032 onwards: $33,000

Questions:
1. Can I afford to retire now and pay myself a fixed income of $72,000? If you do not think I can retire now, what steps do you think are needed?
Rewriting the response as I misread something.

I assume the statement "Can I afford to retire now and pay myself a fixed income of $72,000?" includes SS and
"Principal drawdown:
2023: $39,000
2024: $52,000
2025: $48,000
2026-2030: $58,000
2031: $54,000
2032 onwards: $33,000"
is what you need from your portfolio. So for simplicity, assume your portfolio keeps pace with inflation perfectly every year. (Or simply assume inflation is 0%.) Assume you retire now. So from 2023-2031, you take $483k from you portfolio. So in 2032, you will have $1,317k and you will be 67. Using 30 years retirement, $33k x 40 is $1,320k. So as long as you can match/beat inflation, the number works out. But I think you need more stock than 10/90.
Last edited by student on Mon Mar 20, 2023 2:33 pm, edited 6 times in total.
aristotelian
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Re: 58 yo old asks, Can I retire?

Post by aristotelian »

Here is how I look at it. After buying house, portfolio is $1.8M.

Starting at age 67, you have $39,000 income from SS.
From now until 67, you have $14,000. If you set aside 9 X $25,000, that means you will have $39k taken care of for life.

That leaves you with $1.575M. A conservative 3% withdrawal rate would yield $47,250. $47,250 + $39,000 = total income of $86,250.

That almost exactly hits your goal of $86,000. I think you are good to retire, but there's not much room for error. You still probably want somewhere around 20-30% stocks to stay ahead of inflation.
https://earlyretirementnow.com/2016/12/ ... t-1-intro/
marcopolo
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Re: 58 yo old asks, Can I retire?

Post by marcopolo »

aristotelian wrote: Mon Mar 20, 2023 2:12 pm Here is how I look at it. After buying house, portfolio is $1.8M.

Starting at age 67, you have $39,000 income from SS.
From now until 67, you have $14,000. If you set aside 9 X $25,000, that means you will have $39k taken care of for life.

That leaves you with $1.575M. A conservative 3% withdrawal rate would yield $47,250. $47,250 + $39,000 = total income of $86,250.

That almost exactly hits your goal of $86,000. I think you are good to retire, but there's not much room for error. You still probably want somewhere around 20-30% stocks to stay ahead of inflation.
https://earlyretirementnow.com/2016/12/ ... t-1-intro/
I think this is a good way to look at it.
But, I would say it does leave some room for error, for the following reasons.

1) The 9 x $25 could be put into a TIPs ladder, with current positive yields, it would require less than the $225k indicated.

2) The 3% WR is pretty conservative, close to historical perpetual rate, so already allow some room for error.

3) The desired $86k was (according to OP) essentially chosen to allow a lot of room for error
Once in a while you get shown the light, in the strangest of places if you look at it right.
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thank you suemarkp for your observations. I had not thought of this:
One other item to plan for would be the death of your spouse. She is a bit older than you, so what happens when she dies? Her SS goes away. Your tax filing status becomes single which cuts the tax thresholds in half so your taxes go up. Your spending will decrease somewhat, but not by half.
I did not know that's what would happen. That's an important consideration.

The idea that my plan will only work for 20 years is disturbing. My spreadsheet shows me with $771,000 left at that point. I will need to have a rethink.
student
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Re: 58 yo old asks, Can I retire?

Post by student »

piglet005 wrote: Mon Mar 20, 2023 3:13 pm Thank you suemarkp for your observations. I had not thought of this:
One other item to plan for would be the death of your spouse. She is a bit older than you, so what happens when she dies? Her SS goes away. Your tax filing status becomes single which cuts the tax thresholds in half so your taxes go up. Your spending will decrease somewhat, but not by half.
I did not know that's what would happen. That's an important consideration.

The idea that my plan will only work for 20 years is disturbing. My spreadsheet shows me with $771,000 left at that point. I will need to have a rethink.
Have you tried https://firecalc.com/ other similar tools?
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thank you student for your latest response.
So for simplicity, assume your portfolio keeps pace with inflation perfectly every year. (Or simply assume inflation is 0%.) Assume you retire now. So from 2023-2031, you take $483k from you portfolio. So in 2032, you will have $1,317k and you will be 67. Using 30 years retirement, $33k x 40 is $1,320k. So as long as you can match/beat inflation, the number works out. But I think you need more stock than 10/90.
Your calculation of how much I have in 2032 is about what I have. I am making above 4% on 90% of my portfolio now (VUSXX and treasuries.) This is not beating inflation. Do any of the lazy portfolios beat inflation? If I invested 30% today in a lazy portfolio does that change people's mind about readiness?

I think part of my problem understanding the effects of inflation is that my reality over the years has been a stagnant or even declining wage. I am used to aggressively trading down in order to survive. It's not how I want to live really but it is a skill. But there are limits to that. I want to learn more about managing that better.
swylie
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Re: 58 yo old asks, Can I retire?

Post by swylie »

When considering Social Security benefits and death of a spouse, usually the surviving spouse gets to keep the higher of the two benefits. That's why it's generally good practice for the spouse with the highest benefit to wait until 70 to claim so that the benefit gains 8% per year beyond full retirement age and the spouse with the lower benefit should claim earlier. Make sure you check out social security rules to understand if you or your wife are eligible for survivor benefits.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thanks for replying again aristotelian. Nice handle.
That almost exactly hits your goal of $86,000. I think you are good to retire, but there's not much room for error. You still probably want somewhere around 20-30% stocks to stay ahead of inflation.
Whoops! I realize now that I forgot to deduct my wife's social security from the $72,000, in asking my question. I meant to ask can I pay myself $58,000. But now that I know more about how death affects Social security, I realize that I need to take my wife's social security out of the calculations anyway, so the original question was fine.

You are right that there is not much room for error. I am coming round to the idea that I need 20-30% stocks.
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piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thank you marcopolo, for the points you make after this statement:
But, I would say it does leave some room for error, for the following reasons.
I'm realizing that my tendency to overestimate expenses may be working against me. I think I need to redo my spreadsheet with less padding--since I tend to pad everything--and then reconsider my allocation.
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Hi student! I have looked at firecalc and the results were fine. It's a useful tool.
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thank you for the additional detail about Social security swylie. I appreciate it!
The Stone Wall
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Re: 58 yo old asks, Can I retire?

Post by The Stone Wall »

If I understand correctly, nearly all of your retirement assets are from the inheritance. Your wife and you have 'saved' very little through life. It will be very important for you to develop a good budget and understand all of your expenses. If you haven't done so, now is a good time to start tracking all of your expenses in a spreadsheet. There is a tremendous amount of knowledge in this forum and I am glad you found it.

Have you had access to workplace retirement plans like 401ks?

A home has a lot of advantages, but it comes with a lot of added expenses: maintenance, insurance, property taxes, etc. Depending on where you want to live, and your skills, owning a home doesn't always beat the option of renting. I say this since you have discussed staying in CA or moving to NM. Spend some time really thinking about this.

You have stated a number for social security. Does this take into account the 'zeros' that exist in that calculation if you stopped working at 58? You may have 35 years of good salaries, but if there are some low salary years, this will make a difference.

Spend a few months absorbing as much knowledge from this forum as you can before making a retirement decision. I don't think you will be working for much longer but I think you will retire with a much better foundation.
suemarkp
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Re: 58 yo old asks, Can I retire?

Post by suemarkp »

piglet005 wrote: Mon Mar 20, 2023 4:05 pm Whoops! I realize now that I forgot to deduct my wife's social security from the $72,000, in asking my question.
I should clarify the SS death benefit, as it can be complicated.

If your wife died tomorrow, you'd get nothing because you are too young to claim.
When you are 60, you could claim on her record for survivor benefits if she has passed. Your benefit will be reduced because you're taking it before age 67, but that could be the best payout choice because when you are 70 you then switch and file on your own record which will be a higher benefit.

I was assuming she would die after you were taking your SS. In that case, her's will go away because your primary benefit is much higher.

But understanding these details is part of the planning process, especially when looking 20-30 years down the road. The general rules are difficult because it matters who has the higher payout, there are different factors for taking things early or waiting, etc. So there are multiple permutations. But you already know the primary insurance amounts so that makes it easier to figure out.

So eliminating her SS completely from planning is certainly conservative, and you can probably count on it up to age 70 (assuming you delay yours until then). After that, you'll get both until one dies. If you die first, your wife could probably get a boost
Mark | Somewhere in WA State
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Thank you, The Stone Wall, for your reply. To answer your questions:
If I understand correctly, nearly all of your retirement assets are from the inheritance. Your wife and you have 'saved' very little through life.

We had about $300,000 of our own when the inheritance came.
Have you had access to workplace retirement plans like 401ks?

Sometimes yes and sometimes no. I had to liquidate my 401k after a layoff once and it made me wary of investing again. I have also not always liked the terms under which they were offered. This may not have been very wise, but I did the best I could. EDIT: My line of work became dominated by contract work or precarious work.
A home has a lot of advantages, but it comes with a lot of added expenses: maintenance, insurance, property taxes, etc. Depending on where you want to live, and your skills, owning a home doesn't always beat the option of renting. I say this since you have discussed staying in CA or moving to NM. Spend some time really thinking about this.
I am thinking a lot about this.
You have stated a number for social security. Does this take into account the 'zeros' that exist in that calculation if you stopped working at 58? You may have 35 years of good salaries, but if there are some low salary years, this will make a difference.

Yes, it does take that into account.

Thank you for your suggestion about taking some time before retiring. That has occurred to me as a result of this conversation.
Last edited by piglet005 on Mon Mar 20, 2023 4:46 pm, edited 1 time in total.
student
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Re: 58 yo old asks, Can I retire?

Post by student »

piglet005 wrote: Mon Mar 20, 2023 3:29 pm Thank you student for your latest response.
So for simplicity, assume your portfolio keeps pace with inflation perfectly every year. (Or simply assume inflation is 0%.) Assume you retire now. So from 2023-2031, you take $483k from you portfolio. So in 2032, you will have $1,317k and you will be 67. Using 30 years retirement, $33k x 40 is $1,320k. So as long as you can match/beat inflation, the number works out. But I think you need more stock than 10/90.
Your calculation of how much I have in 2032 is about what I have. I am making above 4% on 90% of my portfolio now (VUSXX and treasuries.) This is not beating inflation. Do any of the lazy portfolios beat inflation? If I invested 30% today in a lazy portfolio does that change people's mind about readiness?

I think part of my problem understanding the effects of inflation is that my reality over the years has been a stagnant or even declining wage. I am used to aggressively trading down in order to survive. It's not how I want to live really but it is a skill. But there are limits to that. I want to learn more about managing that better.
I don't think there is a silver bullet to keep pace/beat inflation. Perhaps TIPS but one has to hold it to maturity; otherwise, it is subject to interest rate risk. Most people allocate a higher portion to stock in the hope of beating inflation. Perhaps take a look at viewtopic.php?t=370521 to see whether getting professional help is a possibility.

I am about the same age and I plan to work for a few more years. I understand that you have an older spouse and you probably want to spend more time together.
Topic Author
piglet005
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Re: 58 yo old asks, Can I retire?

Post by piglet005 »

Yes, student, my wife's age is a motivator.
I am about the same age and I plan to work for a few more years. I understand that you have an older spouse and you probably want to spend more time together.
EDIT: Also thank you for the thread. I will read it.
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