After 35 years as a professional I am retiring as of Nov 15. I think I am good shape but as a " glass half empty" kind of guy, I worry a bit. 60 years old, live in HCOL city. 2.6 million in mostly taxable retirement accounts. I own an office building that nets 3000/mo after paying mortgage ( principle is 296K, worth 1 million). We are trying to sell it but if we dont any time soon, we are ok with that. At 67 , SS will net 55k per year. We own 1 million $ home that we will probably live in another 5-10 years then likely down size. I have 5 young adult kids who we help out with various things from time to time but no debt. Property taxes on home are 7K a year. We estimate to live the lifestyle we would like , we need between 170-180K a year ( this includes paying taxes). I think Im ready
Posted by Scubacane
16 Comments
It seems like you’re in a great position financially. Have you thought about what you’re going to be spending your time with? My father in law retired at ~64 and it took a couple years for him to settle in and be happy in retirement. He was very restless and seemed cooped up, and drove my mother in law crazy at first. He’s found hobbies and indulged in gardening and now has a grandson, but I would make sure you have an idea of how you want to fill your days.
Guessing you’ll want about $4M-$4.5M in investments to keep up with your desired lifestyle.
At first glance I’d say as long as you have your money invested appropriately as far as balancing short term needs and longer term needs and put yourself in the most optimal position from a tax standpoint, then all seems to be in order. You should be sure to have some liquidity too if that building doesn’t sell and your portfolio is tied up with stocks. I’m 6 years younger than you, but on a similar track. I will have no regrets and can’t wait. I’m an outdoor enthusiast, so I will have zero problem figuring out how to spend my time. Good luck!
Wow I pay 7K in taxes on a $200K house. I need to move I guess !
$3.6 million at 4% is $144k and that’s if you sell the building. Of course you could do several things to span the gap:
1. Make income from a side hustle or part time job.
2. Reduce spending. Moving from HCOL alone would probably do this.
3. Spend more than 4% until you get to SS age, then less once you get SS help.
So I would say it’s doable but you need to have an active plan to make it work.
Do you have a plan for dealing with sequence of returns risk?
For me, I knew I was financially able to retire on paper, but I continued working another 10 or so years. The hard part was using assets I worked so long to save up! Once I got used to that, I was good.
You stated you’ll need $180K/year at retirement. Great.
When you retire, what will your yearly total *income* likey be? That’s the other key metric.
You also need to consider the cost of health insurance between retirement and Medicare.
My concern is the next 7 years until your as buffer… Only 3k of income listed(property)… If you pull 150k out each year until 65…. Your retirement account gets depleted to 1.8ish million. Safe withdrawal rate of 4% a year is 72k. Can you sell the property?
Where’s your health insurance coming from? This would make you expenses much higher for the next 5 years then you are possibly used to.
Have you set up a Roth ladder?
You’re in great shape for the lifestyle you want. I’d personally hold onto the office building as a form of guaranteed income until SS kicks in. Not sure if there are other expenses in that $3k/mo after mortgage but I’d stick with that over the potential equity in the sale of the building.
Your guaranteed income is $91K a year and expenses about twice that. You’d need savings about $2 million to fill gap by 4% withdrawal rule. You have more than that.
Gap health care until medicare age 65 could be pricey.
Check out Armchair income channel on yt too.
So, to be brutally honest here, I think you’re right on the line and it could go either way. What jumps out to me first is the next 5 to 7 years are probably going to determine the successful outcome of the next 30.
Without going into detail, you have a number of tax related decision points, and the timing of which they occur could either be extremely advantageous, or punitive.
I’d recommend you at least talk to an experienced CFP, with a specialization in performing tax efficient retirement transitions. You may think that’s pretty common, but in my experience only a smaller percentage of “Financial Advisors “ do a thorough job with this. Most just want to manage your money and collect fees.
Just to summarize:
– $2.6M in taxable retirement
– $104k at 4% withdrawal rate
– $143k at 5.5% withdrawal rate
– $700k equity in office building ($36k net income)
– $1M in home equity
– $55k annually from social security starting in 7 years
So you’ll be at a 5.5% withdrawal rate against retirement accounts for the next 7 years (bringing in $143k plus the $36k from the office building), which is high if you wanted to do that indefinitely but given your other assets and planned SS income is *probably* fine.
If there’s a downturn in the next few years you will probably need to tighten your belt.
Also you don’t mention it – is healthcare included in your $180k figure?
You’re 60 and you have 3.6M between your savings & your home? Unless your HCOL city is Taiwan you’re more than fine.
Congrats on your upcoming retirement! 🎉 From what you’ve shared, it looks like you’re in really solid shape. You have a diversified mix of investments, a property generating passive income, Social Security coming in, and no debt. Downsizing later will give you extra flexibility. The only thing I’d suggest is keeping an eye on unexpected expenses and taxes as you go, but overall, it looks like you’re well-prepared. Enjoy this new chapter!
We are in a similar boat. Just retired at 59. We don’t have a rental though, but home is about $1.5m. It would be nice to have a little income. We’ve worked with two financial planners, fidelity and independent who have confirmed we are good if all goes as expected. It is hard not to be nervous. After about a year of running numbers, planning withdrawals, etc I feel a little better.