Hi,
Assuming my wife & I retire when I turn 55, I'd like to get some advice on how best to build a 15 year social security delay bridge using secure income to cover basic essential living expenses until claiming social security at age 70.
Our retirement income preference is safety-first for minimum basic living expenses, but very comfortable with total return approach from a 60/40 portfolio for discretionary / fun expenses. Here are the numbers:
Emergency funds: 6 months of expenses.
Debt: just a little left on the mortgage, should pay off in 2026. Home is worth $500k.
Tax Filing Status: Married filing jointly
Tax Rate: 24% federal, 3.15% state
State of Residence: Indiana
Age: me (husband) 49, wife is 50
Desired Asset allocation: 75% stocks / 25% bonds (right now), 70/30 to 60/40 in retirement, TBD.
Desired International allocation: 30% of stocks
Approximate size of portfolio 1.6M
Current retirement assets
Taxable – $0.3M
10% Vanguard Total Stock Market VTI
6% Vanguard Total International Stock Market VXUS
3% Vanguard Total Bond Market BND
1% Vanguard Total International Bond Market BNDX
His 401k - $1.3M
80% Vanguard Target Retirement 2040 Fund VFORX
Company match? Yes, 50% of contributions up to 6% of pay.
No other IRA’s or 401k’s for me or wife
Pension: I have a fully vested cash balance pension plan projected to be worth $550,000 at age 55 (earliest possible retirement scenario). It can be taken as an annuity or lump sum upon retirement. If annuitized that is projected to be about $35k.
New annual Contributions
$34,000 his 401k (including company match contributions)
$90,000 taxable Vanguard brokerage account
Context
I’ve run the analysis in Open Social Security and it recommends that my wife take SS at 62 ($8k/yr) and I take SS at age 70 so that is our plan of record. My benefit plus my wife's spousal benefit cover our basic living expenses after age 70.
My question is really to get feedback on my retirement income plan. Assume we retire when I turn 55 (about 6 years from now). Using a 6% average growth rate & current contribution rates, my total investable retirement assets are projected to be about $3M (including the cash balance pension lump sum before annuitization). At that time almost 1/3 of that $3M should be in the taxable brokerage account. The pension if annuitized is projected to cover about half of our basic (minimum dignity floor) expenses ($35k of $70k total basic expenses) in retirement. I acknowledge this purchasing power gradually erodes with inflation. At age 70, our combined Social Security payment will cover 100% of our basic living expenses in retirement. If I pre-decease my wife, then her survivor benefit would fall short of covering those basic living expenses.
I like the idea of annuitizing my cash balance pension plan because if I retire at 55, we have no other source of secure income, so I feel more comfortable turning that on at least. Even though the purchasing power of this erodes with inflation, it would also provide secure cash to augment my wife’s Social Security survivor benefit if I die first.
I don’t think I want to buy a SPIA at age 55 that fully covers our basic expenses starting at age 55 because when I claim SS at age 70, that plus the “full SPIA” would be fixed income at a level well in excess of basic living expenses & I’d have given up investable capital too early. So that seems sub-optimal, but I'm open to advice (seeking it really).
Assume the $3M portfolio is split out 60/40, that puts $1.8M in stock index funds. Another $550k gets annuitized in the pension plan, netting us $35k in annual secure income. The remainder is the fixed income portion that can help build the social security delay bridge. I'd also view a 1% withdrawal rate from the $1.8M stock index funds as equivalently low risk as fixed income, so some low level of spending from the stock index fund is an option to build the SS delay bridge to age 70.
Questions:
1) How best to generate approximately $35k / yr of additional secure income during the 15 year period from age 55 to age 70, assuming I’ve already got $35k coming from my pension? (Secure income target is $70k). What fixed income strategy would you use & why? Pros & cons?
2) Any other advice on how to build out the retirement income plan? See anything that I'm not considering with respect to the income plan?
Thanks in advance for the feedback.
Assuming my wife & I retire when I turn 55, I'd like to get some advice on how best to build a 15 year social security delay bridge using secure income to cover basic essential living expenses until claiming social security at age 70.
Our retirement income preference is safety-first for minimum basic living expenses, but very comfortable with total return approach from a 60/40 portfolio for discretionary / fun expenses. Here are the numbers:
Emergency funds: 6 months of expenses.
Debt: just a little left on the mortgage, should pay off in 2026. Home is worth $500k.
Tax Filing Status: Married filing jointly
Tax Rate: 24% federal, 3.15% state
State of Residence: Indiana
Age: me (husband) 49, wife is 50
Desired Asset allocation: 75% stocks / 25% bonds (right now), 70/30 to 60/40 in retirement, TBD.
Desired International allocation: 30% of stocks
Approximate size of portfolio 1.6M
Current retirement assets
Taxable – $0.3M
10% Vanguard Total Stock Market VTI
6% Vanguard Total International Stock Market VXUS
3% Vanguard Total Bond Market BND
1% Vanguard Total International Bond Market BNDX
His 401k - $1.3M
80% Vanguard Target Retirement 2040 Fund VFORX
Company match? Yes, 50% of contributions up to 6% of pay.
No other IRA’s or 401k’s for me or wife
Pension: I have a fully vested cash balance pension plan projected to be worth $550,000 at age 55 (earliest possible retirement scenario). It can be taken as an annuity or lump sum upon retirement. If annuitized that is projected to be about $35k.
New annual Contributions
$34,000 his 401k (including company match contributions)
$90,000 taxable Vanguard brokerage account
Context
I’ve run the analysis in Open Social Security and it recommends that my wife take SS at 62 ($8k/yr) and I take SS at age 70 so that is our plan of record. My benefit plus my wife's spousal benefit cover our basic living expenses after age 70.
My question is really to get feedback on my retirement income plan. Assume we retire when I turn 55 (about 6 years from now). Using a 6% average growth rate & current contribution rates, my total investable retirement assets are projected to be about $3M (including the cash balance pension lump sum before annuitization). At that time almost 1/3 of that $3M should be in the taxable brokerage account. The pension if annuitized is projected to cover about half of our basic (minimum dignity floor) expenses ($35k of $70k total basic expenses) in retirement. I acknowledge this purchasing power gradually erodes with inflation. At age 70, our combined Social Security payment will cover 100% of our basic living expenses in retirement. If I pre-decease my wife, then her survivor benefit would fall short of covering those basic living expenses.
I like the idea of annuitizing my cash balance pension plan because if I retire at 55, we have no other source of secure income, so I feel more comfortable turning that on at least. Even though the purchasing power of this erodes with inflation, it would also provide secure cash to augment my wife’s Social Security survivor benefit if I die first.
I don’t think I want to buy a SPIA at age 55 that fully covers our basic expenses starting at age 55 because when I claim SS at age 70, that plus the “full SPIA” would be fixed income at a level well in excess of basic living expenses & I’d have given up investable capital too early. So that seems sub-optimal, but I'm open to advice (seeking it really).
Assume the $3M portfolio is split out 60/40, that puts $1.8M in stock index funds. Another $550k gets annuitized in the pension plan, netting us $35k in annual secure income. The remainder is the fixed income portion that can help build the social security delay bridge. I'd also view a 1% withdrawal rate from the $1.8M stock index funds as equivalently low risk as fixed income, so some low level of spending from the stock index fund is an option to build the SS delay bridge to age 70.
Questions:
1) How best to generate approximately $35k / yr of additional secure income during the 15 year period from age 55 to age 70, assuming I’ve already got $35k coming from my pension? (Secure income target is $70k). What fixed income strategy would you use & why? Pros & cons?
2) Any other advice on how to build out the retirement income plan? See anything that I'm not considering with respect to the income plan?
Thanks in advance for the feedback.
Statistics: Posted by Airco_DH2_pilot — Wed Oct 30, 2024 7:08 pm — Replies 5 — Views 492