Do you think we are prepared to retire? (pension, move, 2015)

[crystal lite]

DH was planning to retire this fall but is now undecided. On paper it looks like we are fine to retire now with $950K invested and owning 3 homes with no mortgage. The 3 homes are valued at $2.5M and we are planning to sell the larger one by spring 2015. DH is 62 and I am 60. He plans to take his SS at 66 and I am planning to take mine at 62. No pension for either of us but we do have good health insurance.

If we retired today our expenses would be $80K per year which would come from rental income ($40K) and interest on our investments ($40K). After we sell the larger home our expenses will be reduced significantly. Houses in the area sell quickly so I have no doubt our house would too. We would like to time it so we could move into our FL condo when the current lease is up April 2015.

There is still some uncertainty that it would go as planned and that is why DH is undecided and may work longer. He doesn't enjoy his work and it's very stressful work so I would like him to retire in the fall as originally planned while we are still relatively young enough and healthy. Do you think we are prepared to retire now or do you think DH is doing the right thing to work longer?

[mathjak107]

as i stated in a previous thread:

retirement is not about a lump sum as much as it is about SAFE,CONSISTANT ,RELIABLE cash flow with an income stream that can be counted on like a pay check. you need extra money for large expenditures and emergencies that are out of budget and you may want legacy money for family.

how you arrive at that income stream , amount for emergencies and legacy goals is going to vary based on needs ,wants, amount of powder you want to keep dry in case things don't go as planned and how much volatility do you want to take on to achieve that income stream and money left over.

another factor will be is how high of a chance do you want that failure of that stream to be? failure meaning you have to adjust downward or run out of money.

one can throw the same amount of money in to cd's and the bank and draw the same income as someone with a 50/50 portfolio but deopending on the withdrawal rate they may face a much higher chance of failure.

the person with the cd's may need a much higher savings amount to achieve the same income level as the 50/50 mix does but does it with a smaller amount of savings.

other folks have annuity income or if they did some good tax planning over funded their whole life policies and will borrow that money out tax free as income.

that reduced their pile of money needed but it increased cash flow.

tax planning is a big factor. someone may need 30% more then someone else simply because of poor tax planning .

the point is there is no simple answer to how much is enough because there are to many variables to make an effective comparison between people.


the closer you get to retirement and the more detailed your planning the more you realize it isn't about an amount but cash flow and consistancy of that income while having a tax plan..

you can't tell someone who wants to put 5 million in cd's that is way to much money because perhaps if they used a 60/40 mix they would have only needed 2.5 million to achieve the same exact success rate of income.

their amount will greatly depend on what they are going to invest that money in. neither case is wrong in the above yet the income may be the same in both cases..

the difference is the volatility and success rate someone wants to achieve and how much legacy money left over.

you can't tell someone what is enough or to much..

[oldsoldier1976]

I echo what mathjak says in his post above and would add one more thing to his comments. It was something he gave me and many others here. www.firecalc.com. This is a great tool to see if your numbers add up. Follow the instruction. Click from tab to tab on the page then press calculate. It will tell you if you need to adjust. You can also play around with a few what ifs and what nots.

[Hemlock140]

Assuming the value of the homes stays the same or better, you could sell them and live about 30 years just on the profits.
The problem is that real estate and your other investments are not without risk. If there is another crash like we had in 2008, crime increases in the area, catastrophe such as fire/hurricane/earthquake, or bad tenant vandalism you will suffer losses that reduce the income stream. There are also many expenses that come up such as new roof, foundation issues, replacement of side sewer that can cost $10,000 to correct. Your other investments are also subject to the fluctuations of the economy. Hopefully you can depend on the SS income but it's only a small portion of your expected income. While you cannot predict the future, you could try to sell the rental homes at the right time to maximize profits and and turn the money into a more reliable, secure income stream.

[crystal lite]

Thank you Mathjak, Golfingduo and Hemlock. I will look into that calculator more throughly. I did put our numbers into it and all looked well but I will do some what ifs. DH is still undecided and it will probably take a leap of faith to make the move. I guess our best bet is to sell the larger house sooner than later.

[poodlecamper]

I figured our expenses, our guaranteed income and since we're not high rollers ,went for it. Both 63, DH was tired of working, and we're glad we did it. It's really all in what kind of lifestyle you plan. Some people build mansions (dream home) for retirement, we went for small and paid cash. Only you know how you want to spend your time. Of course, good health insurance, since that is the big unknowable.

[crystal lite]

Thank you poodlecamper. It's always helpful to hear how others decided to make the leap into retirement. We're still thinking things over and looking at options. We will probably put the large house up for sale soon. I like the idea of small and paying cash. All good advice. Thanks again