[USER]

I would like to conduct a completely unscientific poll. Here are the assumptions: my wife and I both retire at age 62-basically at the same time.

We will draw down our investment accounts to “pay our own way in life” for 5 years until age 67.

At least half of our assets will be held in a Roth accounts. House is paid off and no other debt.

Between age 62 and 67 our annual need will be 40K before compuliubded inflation. At age 67 our combined SS will be $4500/mo.

I would love to hear opinions of what the next egg will need to be in order to pull this off at 62.

Thanks!!

[Ron]

Your Social Security covers yearly expenses ($4500X12, $50K > $40K). You might say, “What about inflation?”, well Social Security will be adjusted for cost of living (even when you are not contributing and before collection; not I tracked this for myself in this exact situation).

I’m assuming you’ve both worked the minimum number of years so retiring at 62 does not result in adjusting your estimated amount.

So, it really doesn’t matter how much you have in retirement accounts and how much of it you are pulling between ages 62 and 67, assuming it’s at least $200K.

Note, I’m 62 and my Social Security payments exceed my expenses, so my retirement accounts are not being touched.

This is quite doable for anyone who has a low expense lifestyle.

[Bill]

To bridge the gap – $200k plus inflation plus insurance until you get to 65.

The bigger concern is what happens if one of you passes early and a significant portion of that SS monthly payment goes away?

[Kristin]

Personally, I would run numbers through a program like Boldin and play with some different scenarios.

You might also explore the option of the lower earner claiming SS at 62 and the higher earner waiting till fra or even 70 to maximize potential lifetime benefits.

[Christopher]

You’ll need close to $200,000 at age 67. $40,000/year x 5 years is $200,000.

I wouldn’t expect a reliable, appreciable return over such a short interval, so it should probably be held mostly in low-risk stuff.

At best, it’d pace inflation, plus or minus a bit.

[Jenny]

Why not have the lower income spouse take SS at 62, and the higher income spouse to take SS at FRA?

Then you need to spend down less on your portfolio.

Otherwise, you need $200k minimum for the 5 years

[Rick]

Based solely on your question and no assumptions by me, I agree with others that $200k works with the basic assumption that you can and will invest it conservatively yet able to keep up with inflation.

Today that is easy with 1-5 year treasuries well ahead of common retiree experienced inflation.

Maybe add another $100k to help with longer term inflation in case SS changes impact its ability to have an accurate inflation adjustment annually.

You would need more if/when one of you dies before the other but….now those assumptions are creeping in.

But as written, your needs are very basic and therefore require a very basic amount.

[Ron]

I would certainly encourage you to wait until aged 70 to take advantage of the additionally 32% increase in your SS check if you wait.

Here is why: if you predecease your spouse, and you were the high income earner, her SS check will stop and she will start receiving your large check amt.

If you start taking SS at aged 67, she will get that check amt but if you wait until 70, she will get this much higher (by 32%) monthly check for the rest of her life.

That will help her overcome the loss of yawl’s combined income from the two checks.

[Michael]

There isn’t really enough information. Directionally, you’ll need somewhere around $225-250k. to cover your base from 62 to 67.

You’ll need the $40k, an annual inflation adjustment, some taxes (half is Roth, half will generate taxes) and whatever else like insurance you need to replace pre Medicare.

Will you have any other funds or simply going to spend it down and live off SS?

An single premium annuity for $40k x5 years will cost you around $180k and might be a good use for that sort of contract.

[Gordon]

I am always concerned about folks under estimating the cost of retirement and the cost of aging. New roofs, cars, appliances, etc can be vastly under estimated.

Make sure you have all of this in your 40K guess.

I like it when people target 1.5-2x spending as a yearly baseline for the wtf’s that happen.

So, if it’s closer to 60k you’d need 1.5 million at 4% to pull 60k safely.

That can adjust down for the offset of SSI. Run a spreadsheet and over estimate your needs.

[Joel]

Of course you don’t elaborate on your overall expenses or your existing portfolio.

It’s certainly possible to just use your portfolio to cover this period, but to be safe it tends to be necessary to over-fund the portfolio, relative to what you will need after Social Security starts.

For some people this isn’t a problem. But if you are looking for a minimum to cover a 5-year stretch, a TIPS ladder is the best starting point.

If you want to see what it takes to cover the gap with just your portfolio, consider using a tool like firecalc.com.

[Author]

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