Tuesday, May 9, 2017

The Money Going Into Retirement



If you've been reading here for awhile you may remember the post I did back in September 20115 about our big Retirement Meeting.

Since Hubs is leaving work on June 30th(7.5 weeks and counting!)I wanted to see/update what funds we will have to support us at that date into our "Golden Years".

Let me also preface this accounting by saying we have a paid for house and two paid for cars so none of this money needs to be spent on either in retirement(at least not for cars for awhile).


* Pension account--Approx. $443,240 will be in that account on June 30th.  We ares buying an annuity with this money which will give us an income of $41,004 per year.  If Hubs dies I get 75% of that amount, or $30,756 per year. Once we've passed the 10.8 year mark we'll be paid on the company's dime as that is how long that pile of money would have lasted if we had just drawn down on it at a rate of $41,004 per year(ok, maybe a little longer due to interest accumulating).

* Retirement Savings--$500,000.  We will drawn down monthly on this until we hit full Social Security.  At that point we will stop and still have $385,000 in this account.  Due to it still growing while drawing out of the account we'll still have 77% of what we started with in there at the retirement date when we stop drawing from that fund in 2024.

* Cash & Regular Savings--All together this comes to $368,000 now so will be a tad more by June 30th but a chunk will be used to pay College Boy's tuition next semester so we'll have about $360K.

* HSA account--When Hubs leaves June 30th there will be $12,923.83 in that account.

* RMSA account--This is the retiree medical savings account with which we can pay for retiree health insurance until we hit Medicare age.  It will have approx. $99,000 in it.

* Personal Day Payout-Hubs will have personal days he can cash out when he leaves.  At his pay rate that means another $4,500 in cash.

* Stock-Hubs has a moderate amount of company stock he earned when his firm went public in 2001.  He will cash it out which means about $9,000 more in our accounts.

* Add in to this mix that we still have a home and property in Louisiana we will be selling sometime this year(I hope).  We hope to clear a few dollars after that sale but at this point we don't know how much this sale will add to our coffers.



So the plan is that we'll have annuity income starting in July of $41K yr. and will tap some of our 401K$ until Hubs hits full SS age.
Between the annuity and 401K withdrawals or SS we'll have $70K yr. to live on pre-tax.
In addition to those income streams we will still have over $350K of regular savings + $385K left in retirement savings).
Once I hit full SS age the annuity/SS mix increases to $82,836 yr.(+ what's still in the nest egg accounts).

Last year we spent just under $46K total of our take-home income to "live".  That's paying for everything except-term life insurance payments, healthcare insurance payments and long term care insurance payments which all came out of the paycheck before we got it.

After figuring that last year we paid $8K OOP for healthcare co-pays + a $3K high deductible OOP before benefits kicked in, $11K of that $46K was medical spending. 8-(  We actually spent $35K for living expenses in 2016(outside of medical things).

Once retired the life insurance payments go away(unless we elect to keep life insurance on Hubs....doesn't make much sense though as it was kept on him as he was the breadwinner, but once he retires we aren't "protecting" potential income).

The health insurance payments/premiums once retired will come out of the RMSA account and it should just about cover that expense until we hit 65.(If it doesn't, and who can know right now with the ACA upheaval, we can always take some of our non-retirement account funds or some retirement account funds to cover the extra...plus we have the HSA with almost $13K in it as of June 30th.)

The only one of these three medical expenses we need to cover in retirement out of our two income streams is the long term care premiums.  Currently long term care premiums come to just under $1800 a year so this expense can be absorbed into our $70K year annuity/retirement account draw down income easily.  We know full well that long term care premiums will rise as we age though so we'll be sure to be cognizant of that expense rising over the years and make adjustments in how our financial resources are divided up so we can still cover this expense.

So add $1800 to the $46K we spent to live in 2016 and we are around $48K in yearly expenses that need to come out of our potential $70K retirement income starting July 1st.

Once we take out withholding/taxes on that $70K yearly income we will actually have $60K+/- a year net income to live off of.  Of course for 2017 this won't apply as we will have Hubs working income for half the year and living off of asset income the other half so our "income" and tax bracket will be much higher.  The first 6 months of retirement will be different financially from the rest of the years ahead when we are retired.

Once we get into 2018, if we keep our spending at where it is now, pre-retirement, we will have a nice cushion each year for any unforeseen expenses leftover from our income stream.  This doesn't count the Personal and Non-retirement Savings/Cash pot, the potential Stock Sale revenue, the cash out of Personal Days when Hubs leaves and the proceeds from the sale of the house in Louisiana which will mean additional infusions of cash into the non-retirement kitty.

I really don't see us reducing our living expenses short term due to College Boy still being on the "family payroll" for another year and Daughter living at home until she finishes her degree.  While Daughter's expense on us is not large(we feed her and she doesn't kick in for rent or utilities while in school)her being here still costs us a bit in higher electric and food bills.  She pays her own car insurance, car gas and maintenance, cell phone bill, dog expenses, clothing expenses, etc. and any extras she wants, she pays for(liquor, vape, nights out).
Come to think of it, outside of college expenses we really don't spend money on College Boy either.....maybe some clothes now and then but that's it.

Ok, this has become very long and tedious and I'll bring it to an end.

If you see anything I have missed do let me know but overall, I think we are going into retirement in a strong financial shape.  8-)
*Sluggy pats herself on the back.....


Sluggy


31 comments:

  1. You are in fantastic shape money-wise. I don't know anyone who has done the annuity thing, I guess they are not that popular here in Canada. Everything looks very healthy. Our intention is to travel more now and in the next 10-20 years and then likely that will drop off a bit for us as hubby is 55 this year (me 48 this year). We don't have quite the healthcare costs although do have to pay for things like CPAP machines etc so am anticipating $5000-8000 per year on health/dental/vision in the upcoming years. You guys have done very well for yourselves!

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  2. Annuities seem to be making a comeback these days in response to the death of company sponsored pensions. People want a bankable income stream besides Social Security instead of drawing down savings accounts(retirement or other). But you need to be careful when selecting one as many are NOT a good deal. Hubs works in the industry so he gets a special higher rate if he buys one....otherwise we'd just invest a portion of that money, take systematic withdraws and cross our fingers the money didn't run out. lolz
    We spent the last 10 years hoping that interest rates would come out of the toilet.....if that had happened and we could get a guaranteed annual return of 8-10% on that pension account money then we wouldn't have had to get the annuity. But it didn't happen and at the rate things are going in the US we'll be dead and buried before rates return to those levels. ;-)

    Of course you can't foresee every possibility that can happen in retirement but keeping on top of what you have/where it is/how it can grow/etc. and dodging and weaving accordingly helps.

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  3. congrats to you guys - VERY well done! Enjoy the retirement :)

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  4. You have done very well, but you also have worked very hard at this and deserve a big Yahoo!

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  5. You and your husband did great!! I'll pat you both on the back for very good future planning. Penny S.

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    1. Thanks Penny S. Now the hard part begins....

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  6. I agree with One Family, VERY well done! Congrats!

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    1. Thanks Lucy! What a long strange trip it's been, to quote a guy.....

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  7. Good job! I am not a fan of the annuity, but your money, your choice. It seems you have a lot of cash on hand. Is it just in savings, or do you have laddered CDs?

    How does it feel to be a millionairess? I expect a picture of you with a monocle, drinking out of a martini glass!

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    1. Very little of the "Cash & Savings" is actual cash. Most is in interest bearing CDs or bonds but it is easily liquidated if needed. Being so close to retirement we have done a gradual pull-out of the stock market. We prefer to have no exposure there once retired....with our savings level we don't see the benefit outweighing the losses in a market correction.

      It's strange to think of myself as a millionairess but I guess I am...until we need to start spending it down. lolz

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  8. Great job you guys! You are by far much better prepared than a good portion of your fellow-Americans, as I'm sure you are aware. Hats off to you!

    Question though, I thought your said Hubs is just recently turning 59. You have to be 59.5 to pull money from your 401k without penalty right? So you won't be able to tap that for 6 more months.

    I have a pension, but back in the late 90s my company switched it to a Cash Balance Plan (i.e. robbed it!). What a stinker. I've been here 25 years and it only has $167K in it. Because of that I started socking every penny I could into my 401k. Luckily after being bought by another company, which had the traditional defined benefit plan, management saw it in their small hearts to amend our plan so it was more equal to their defined benefit plan. So now it is much better. And my 401K is nicely funded as well.

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    1. Yes, we have to wait until Oct. to access the 401K monies. We can handle 3 months using cash & savings to supplement the annuity payments during that time. If we are careful during this time though we may not even need to tap the savings. Time will tell.

      Hubs work did away with their traditional pension too but those working there at that time had the option of staying in the pension or taking a big pile of $ the company offered and investing that. It's the way the business world has changed in corporate America.
      But with all these formerly blue chip companies going under and not being able to pay pensions fully(at least there are the ERISA safeguards)I'd rather not be beholden to the company paying us a pension in perpetuity but rather be directing our own funds. But that's just me.....

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    2. I totally hear you. I work for a public utility so it's a little different than your average corporation.

      The Cash Balance Plan part can be taken as a lump sum when I retire, which is great! But the "make-them-whole like a defined benefit plan" part has to be taken as an annuity, which is fine by me. I realize I am lucky to not only have a pension still, but to have a company who made ours better than it was (even though legally probably not good for them to have different valued benefits for some employees vs. other employees).

      Whatever, the situation has made it so we will be much better prepared for retirement than had they not monkeyed around with it.

      Now I just have to finish paying for kids' college (1 year left for one, 2 left for the other) and paying off the house and we will be golden.

      You are an inspiration to us all!!

      Yours, DeeCee

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  9. Hi Sluggy, this is Chris. Thank you for being transparent with us about your retirement situation. Congratulations! I know you have worked hard for this.

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  10. I am at the far end of retirement--husband passed away and living in a very nice retirement community. What has happened to the Thrifty Millionaire? I was just getting used to her new site when she disappeared again.

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    1. I've wondered that too. I really miss her blogging!

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    2. Hi Carole & Lucy. Thanks for asking about me. This is Cindi.
      I'm fully retired right now and in the midst of fixing up my main residence for sale in either two or five years. Lots of work to do. Very overwhelming. I can't believe all the clutter we collected in 17 years!
      Anyway, I just don't have the time to blog anymore. Heck, I haven't even picked up my camera either. I'll check in with Sluggy every once in a while, though.
      Denise, you and your husband have done fantasically regarding your retirement. Hats off to you both. You'll see as your retirement goes on, how well you have really done. Congrats again.
      Live well and prosper, my friends.
      Live well and prosper.
      Cindi

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    3. Hi Ladies. I just wanted you to know I finally started another blog. Why was I out of the picture? Well, I didn't want to talk about it till now.
      https://retiredandthrifty.wordpress.com/
      It's OK now. I'm feeling better about it and can talk about it.
      Cindi
      Thanks for thinking about me.

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  11. Jeanie pats Sluggy on the back, too. What an outstanding job!

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    1. Thanks Jeanie. What we did for many years has paid off.

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  12. You have all your ducks in a row and have managed to do it so young!

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    1. Doesn't feel that young but I'll take it. lolz

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  13. That post was not tedious at all, just interesting. I have been watching since you started your blog, watching all the ways you have been working to this end. Congrats!

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    1. I wish there was blogging/internet when I was younger and working our plan. You've only seen the last 6 years or so years of the process. We've gotten some lucky breaks too along the way.

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  14. Sluggy, I really like those numbers and appreciate your honesty. Inspiring post! Congrats again!

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    1. Thanks Ms. Moreless. Once you get the house paid off your money will loosen up as long as lifestyle inflation doesn't creep in. I know we could have saved more if I had worked full time but that's not how it worked out or what we planned.

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  15. WOW! I am speechless! You both did a FANTASTIC JOB preparing for this - I am definitely in awe and have a renewed in excitement about saving for retirement!

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  16. All of your terrific planning is about to pay off. Enjoy every minute of it! Too many people believe that retirement will never arrive so they never plan.You guys have done well and I applaud the both of you.

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  17. Hi Denise,
    Just found your plan, as I had some time to read blogs tonight. :) It sounds like you have everything in good order! We hit $1M in our 401K retirement accounts this week, and hope to have that rise to $1.4-6M by the time we retire. Once we retire, I'm hoping to have anextra $200,000 in cash with the sale of our home, and moving to a less expensive area and home. We will be 5 years away from applying to Medicare, but I hope to build up the healthcare accounts to a nice tidy sum. The best think I can do there is try to stay healthy, right? I think you have PLENTY of safety nets. You guys are not big spenders and living on only $46K to $75K will certainly allow you many years. I'm imagining our monthly nut will go down drastically when kids are off payroll and we have things paid off. Congrats on retirement for you and hubby! Enjoy every minute!

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  18. P.S. This calculator was very helpful in figuring out how much we will need to pull out to live.
    https://smartasset.com/retirement/retirement-taxes

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