Goal Setting, Retirement

Our 5 Year Journey to Retirement

lose up photo of green flower
Photo by Vraj Shah

In about 4.5 – 5 years’ time, my husband and I plan to hang up the 9-5. We will be 60 and 62 respectively.

Saying goodbye to a steady paycheck can be a bit scary, but having the freedom to do things on our own time, while we are still relatively young, is intoxicating.  We will, of course, need to save a bit more and plan a bit more before we actually make the move.

Here is what we currently have:

  1.  HealthCare.  Good healthcare costs will be upwards of $30,000 a year before Medicare kicks in at the age of 65.  We currently have a Health Savings Account (and plan on keeping it!) that we contribute the maximum amount ($8,000) to every year.  This tax deductible account will cover deductibles and our long term care insurance.  Health insurance is the bigger nut to crack, and something we will research extensively.  We could use my husband’s firm COBRA for the first 18 mos, or private health insurance. We also have an investment account of $137,000 (the amount is an estimate, and could possibly be more) that I will receive at age 62.  We plan on pulling from this account to pay for our health insurance until Medicare.
  2. Retirement Account Growth. At the present time, our 401Ks and Roth Accounts stand just shy of $1.2M.  It’s been a bit of a roller coaster ride over the past several years, but it’s also been a steady climb.  We do not have a pension, so this, along with social security, is it.  We will be contributing the maximum amount over the next 4-5 years, so conservatively we believe it will grow to at least $1.7M.  Obviously we won’t touch a good portion of that so it can continue to grow over the next 10 -15 years, giving us enough to last our whole lives.
  3. Downsizing.  Since healthcare will, in essence, match the cost of our mortgage, it is imperative that we own our home outright.  We are not in a position to pay our current home off in 4 years (see #4), but we plan on downsizing and have no mortgage upon retirement.  Besides being mortgage free, we like the idea of lower utility bills, lower taxes and less to take care of.  The unknown at this point will be where we decide to live.
  4. A healthy cash stash.  By living well below our means, over the next 4-5 years we plan on having two years’ worth of living expenses in cash.  We hope to use this so either our retirement accounts can grow a bit longer, or use during a down market.  Of course, you know me.  I believe in balance and that tomorrow is not guaranteed, so we still will be taking vacations and having fun during this time period. 🙂
  5. Social Security. {UPDATE}  After learning more about social security benefits, we will both take our benefit at age 67.  I will be two years ahead of my husband, so part of it will start on Year 5 of our retirement.

Of course, you all know the best laid plans can go awry, but this is what we know right now.  I will be blogging about our retirement journey here in this space, (and hopefully be a bit more consistent. 😉 ).  I hope you will join me.

If you are retired, or planning to retire, am I missing anything??  Please share!




14 thoughts on “Our 5 Year Journey to Retirement”

    1. Thanks Cindi! I’m trying to get back in the game. A little part time income to add to our retirement plan doesn’t hurt either, right?

  1. We are about seven years ahead of you. He (69ish) has a pension and I (62ish) have a tiny pension that starts when I am 65. Currently, we live debt free on about half what you are planning to live on. We know we will need more as inflation kicks in.
    I know you are convinced of taking SS at 62. Here is what we did.
    My husband waited to start SS until 65, when he started Medicare. During the five years before he started SS we converted as much of his traditional IRAs into Roth IRAs. We were, mostly, living on money that we had saved for that period of time. We had enough cash to cover the taxes on the conversions. The con was having to get out of some long held stocks and reinvest. Our brokerage did most of the work with tiny charges….They would have to be sold someday, any way.
    Here is what that did for us:
    Since we were living on money that we had accumulated, our taxes had dropped like a rock. We payed much lower taxes in converting the IRAs. You can only convert up until the point of the beginning of RMD.
    Now that he is reaching 70 (gasp) he is forced to take a RMD. Surprisingly, we do not need that money. The old account balances amount would have forced us into a higher tax bracket. We stay comfortable in our lower bracket (and we look rather lower middle class our to the IRS which may come into play if SS ever becomes means based).
    We end up giving Medicare about $250 a month of SS…. I am betting the medicare will go up as the SS goes down. I want my spousal benefits to be able, at least, to cover my medicare…..Not sure it would cover it if the 75% goes into effect in SS cuts –plus the 30% cut in benefits for starting early. Those equations can be pretty complicated, can’t they?

    Sorry this is so long. Just something to think about.

    1. Hi Janette!
      This was so helpful! We are heavily contributing into a Roth 401K now, but I like the idea of living on a lower income with the taxes being lower as well. We are treating social security as an ‘extra’ for us. If we don’t need it, then we will invest the amount at 62. The math works out to be better if we take it. We’ll re-do the math when we get to that point.

  2. Hi Sharon, we are about 5 years older than you, I am actually about a year older than my husband. I have been at home raising the family all these years, but did work before the children. My husband is retiring in about 18 months. I have not taken social security at this point, and am planning to take Spousal Retirement Benefits once my husband decides to collect, which I have a feeling will be closer to his full retirement age. Anyway, are you familiar with the concept of Spousal Benefits- it basically lets the spouse with the lower benefit collect half of what the higher earning spouse is entitled to, if it is higher than what you would normally get. So in my case, I would only get about $430 a month at FRA, but with spousal benefits, I would receive about $1,800 (half of my husbands $3,600). He was a high earner his entire working life. So anyway, there are rules, such as the higher earner must have elected to begin taking social security, and both parties must be at least 62. Just wanted to throw it out there. Looks like you are in good shape.
    Unfortunately, we live in a very low cost of living area, so if we decide to sell our home of 35 years, we will actually have to spend MORE to buy a patio home here- at half the square footage- or spend more to move to Florida. We are so confused about our plans, as of now we may buy a place in Florida and keep the family home for the time being. It is paid off and doesn’t cost that much to maintain. Will have to see how things pan out. I will be following you on your journey!

    1. Hi Ellie! Yes, I will be taking the spousal benefit. It’s more than mine. I’m two years older than my husband, so I’ll be almost 64. We’ll have to see what happens when it’s time. As of right now, we plan on taking it.

  3. Sharon, The spousal benefit formula is a bit more complicated than I stated above, just google the term for an explanation. But it still could give you more than what you are entitled to based on your own work history, if you worked part time or earned a lot less than your husband.

    1. UPDATE – Thanks Ellie for the heads up on the way spousal benefit is calculated. After researching it and figuring it out, my husband and I have decided to wait until full retirement age at 67. I can start two years earlier than my husband. We are ‘betting’ that we live longer. We shall see. 🙂

  4. Hi Sharon, The possibility of lower taxes with the New tax brackets is a perfect opportunity supposedly for six years to put much more in Roth 401k and not have a dramatic drop in your take home pay.
    Having cash to tap for your living expenses before you qualify for Medicare could give you the ability to qualify for Obamacare with tax subsidies and plan where you tap for the rest of your budget.
    They closed some loopholes in the various ways married couples can claim SS and I do believe you can’t claim spousal till your husband reaches full retirement age so I think the first two years it would be your SS benefit. Mike Piper writes Oblivious Investor blog and a book on Social Security that I would recommend..
    Ages ago I wrote an email and in comments the importance of learning about the Social Security worksheet which categories impact how much of your SS is taxable. Roth Conversion before you get SS could be useful to you to lower RMD and have less of your SS taxable.
    If you are not tapping your HSA now remember to save all your medical receipts because you can have these reimbursed after you’re retired for another income stream, see the blog https://www.madfientist.com/
    for clarification ..

    1. Lara,
      Great tips. I’ve actually looked into Social Security (so.many.rules), but I’m thinking I will wait until 67. We met with a financial advisor (more to come on this one), but we weren’t impressed. He was ultra conservative, and when we told him we expected 8% on an investment that we wouldn’t have to tap for 12 years, he said that was WAY too high. He believed we would only get 4%, and that’s how he liked to play it. Of course, his history is that he was an accountant at Bear Stearns…and must have gotten really burned. He also mentioned that most of his clients were family. Good grief. We will try to find another one who has the same kind of info you have to help us navigate our best options. We were aware of the qualifying aspect of Obamacare, and asked financial planner about that — he had no clue. Unfortunately, we’ve been using our HSA, as the need arrives. And thanks for the info on the mad fientist — I just heard of that blog. 🙂

  5. Fritz At The retirement manifesto blog traces his journey five years out from early retirement.. Lots of great information . Michael Kitces Nerd’s Eye View blog is geared for financial planners but is a fantastic resource and Wade Pfau has some fantastic blog, articles and books. Christine Benz Does great articles on bucket strategies. J Collins has a great book and blog also. Knowledge is power but you would be wise with loving math to do an exercise in plugging in figures into the Social Security worksheet. Most financial planners do not gear their advice to a holistic approach of saving taxes on Social Security by setting up income streams. Dana Anspach blog called Sensible Money and on You tube does. I am a pretty conservative investor and only plan on 6% returns and looking back wards the last thirteen years of ,widowhood I’ve averaged 9%, but sequence of risk and inflation are important factors in retirement . Sincerely Lara

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