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Single 60 year old male.  Debt free with net worth of $2 million.  Rental property income about $1300 after tax and expenses.  SS coming in 2 years @ 62 estimated @ $1800, $2500 if wait to 66.4 

$1.4 million in cash trying to earn 1% today, the rest in real estate.

Dislike stock market, don't have appetite for risk. 

Health, be happy with 20 more years.

Job pays about $90K gross, $60K net but would like to quit.  Current lifestyle needs about $45K but let's suggest $60K in retirement to be conservative. 

Can I retire?  What investments would you make to do so? 
 

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What could have OP done better?

mihai124 (Dec. 01, 2016 @ 10:14a) |

Yeah if you take annuity, gotta make sure it pays for surviving spouse and/or descendants, possibly with a minimum fixed... (more)

Shandril (Dec. 01, 2016 @ 2:19p) |

The OP never came back. We're wasting our breath.

TravelerMSY (Dec. 01, 2016 @ 4:20p) |

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rated:
The consensus is that you can retire drawing 3-4% annually on a diversified portfolio of stocks/bond index funds. On 2MM, that's 60-80k/year in todays dollars. If your desired income is 60k and you've got 21.6k/year coming from SS, I'd say you're in good shape. I'd be sure to model the effects of drawing SS at later ages before deciding. FWF'ers correct me, but I think the net present value of starting social security later is higher the longer you wait to start.

If your portfolio of real estate has a higher return than the balanced stock/bond portfolio, then you can draw more. I'd highly advise you to start reading Bogleheads.org and also to model the various return and spend scenarios in Firecalc.

You're giving up a huge amount of return to have 1.4 MM basically earning zero. I'm assuming you just had a liquidity event and that money hasn't been sitting around for long.

Is the cash in a taxable or tax-exempt account like an IRA or 401k?

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allskate said:   Dislike stock market, don't have appetite for risk. 
 


With $1.4 million in a diversified portfolio, sure you can retire.

With $1.4 million in cash, you'll be broke in 20 years.

 

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allskate said:   Single 60 year old male.  Debt free with net worth of $2 million.  Rental property income about $1300 after tax and expenses.  SS coming in 2 years @ 62 estimated @ $1800, $2500 if wait to 66.4 

$1.4 million in cash trying to earn 1% today, the rest in real estate.

Dislike stock market, don't have appetite for risk. 

Health, be happy with 20 more years.

Job pays about $90K gross, $60K net but would like to quit.  Current lifestyle needs about $45K but let's suggest $60K in retirement to be conservative. 

Can I retire?  What investments would you make to do so? 

  With what you are doing, no (unless you seriously start dipping into principal). Your SS and rental income might adjust for inflation. But your 1.4mill, if not invested properly, may not. You dont have to take a lot of risk. But some risk to get say 2-2.5% (and keeping up with inflation) return on your 1.4mil and you can retire.
 

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Considering you want $5k/month in post-retirement income, and you currently have less than $2500/month in non-employment income - No, you should not retire now.  You could easily survive 20 years, and your money will probably outlast your natural lifespan, but waiting another 2 years means that with social security you may never have to draw down your assets at all.

Does your rental income include any mortgage/financing expenses that will eventually be paid off?

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With $1.4 million in cash, you'll be broke in 20 years.

 

Op will likely be dead in 20years

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dcwilbur said:   
allskate said:   Dislike stock market, don't have appetite for risk. 

With $1.4 million in a diversified portfolio, sure you can retire.

With $1.4 million in cash, you'll be broke in 20 years.

 

  Spending $60k/year will leave him with $200k cash plus his full real estate portfolio after 20 years.  And that's with zero rental income and zero interest income and zero from social security.  So no, he wont be broke in 20 years.

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yes, but 60k won't have as much purchasing power 20 years from now.

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Glitch99 said:   
dcwilbur said:   
allskate said:   Dislike stock market, don't have appetite for risk. 

With $1.4 million in a diversified portfolio, sure you can retire.

With $1.4 million in cash, you'll be broke in 20 years.

 

  Spending $60k/year will leave him with $200k cash plus his full real estate portfolio after 20 years.  And that's with zero rental income and zero interest income and zero from social security.  So no, he wont be broke in 20 years.

  he might be dead though

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TravelerMSY said:   yes, but 60k won't have as much purchasing power 20 years from now.
  But his interest income and rental income and social security income over those 20 years will be plenty to offset inflation.  He will still have close to a million dollars in net assets after 20 years, he simply will not be anywhere close to broke unless he loses additional principle beyond his annual draw.

The problem is that he will still face a drop-dead date at which point he will be broke, even if as ruffles says he'll probably be long dead by that time.  I'm only comfortable being retired knowing that I can be self-sustaining indefinitely.

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1%?  There's another thread here about Andrews FCU offering a 3% 84 month CD.  That's $42,000 a year income alone not counting your rental and SS income of over $30k. 

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Summary:

You need to come up with $5000 per month in income. I'm going to tack on a bit for taxes, call it $5500 total.

You have $1300 (rental) now and will have $3100 (including SS) in 2 years. So you need another $2400 per month or $29,000 per year, inflation-adjusted.

I'd say you need:

$4200x24 months = $100,000 cash (for the next 2 years)

then an income stream generating $2400 beginning in 2 years.

You don't get to count your real estate as an income-generating asset beyond the rental income you've already accounted for. Whatever you have in equity in your primary home doesn't generate income; your rental property equity generates income you've already counted.

Take out the $100,000 from your $1.4 million.

You're left with $1.3 million; can that cash generate $29,000 per year, inflation-adjusted, from age 62 to, say, 97 (35 years)?

Run it through Firecalc and tell us what you get.

My suspicion is you run out assuming any kind of positive inflation.

Personally I think you are the ideal candidate for an income annuity. Low risk, guaranteed income. You can probably get more income than you need and still have some cash in the bank.

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Of course you can retire... many people with no assets get away with all of the time. Maintaining the spend that you want? Maybe continuing working a low responsibility part-time job just to keep insurance and a little bit of cash coming in (like Starbucks, or something).

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bigeye said:   1%?  There's another thread here about Andrews FCU offering a 3% 84 month CD.  That's $42,000 a year income alone not counting your rental and SS income of over $30k. 
This is a great option for OP, assuming he simply doesnt want to go with stock/bond with lower risk.

However, I will not be comfortable putting 1.4 mil. (or any amount under FDIC/NCUA limits) in one institution. Particularly if it is all of my nest egg. If OP is married, perhaps the two can together get 1 million (two single and one joint account) covered. With appropriate POD designation, perhaps they can get the whole 1.4 mil covered by NCUA.

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Just to think, if you had invested wisely you could have retired 20 years ago!

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rufflesinc said:   

With $1.4 million in cash, you'll be broke in 20 years.
 

Op will likely be dead in 20years

  
It is a personal philisophical question: will you be happier if climbing into your death bed having just spent the last penny of your millions, or will you be happier in your death bed with your millions saved as a gift to others?
 

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1. I would not jump into stock market blindly right now. It is definitely shooting to the moon with street thinking that Trump will waive some magic wand - but higher interest rates and strong dollar are recipes for bad karma. But here is the thing - as some of the multinationals like JNJ hiccup due to dollar impact on their earnings, it might be a good time to pick them up. JNJ, for example, is almost yielding 3% dividend and when you look at 0-5 year horizon, the stock may actually go down. But if you are looking at 10-15 year horizon, I am going to bet that it will be significantly up from here. So if you think of such stocks as a long term bond, you would do fine - get your 3% and build at least some inflation protection. Think about it - you grab a bunch of these 3% yielding high quality stocks on a pullback and you are looking at earning 60K on dividends alone and most of it taxed at low rate.
2. As others said - at least go chase some high yield CDs. Earning 1% is a criminal waste of opportunity. You can look at bonds too.
3. Think about where your health insurance is coming from.
4. Social security likes to average 35 years of income (I believe). Do you have that covered? If not work for a few years to take care of that.
5. If I was in your shoes, I would delay the social security - all the way to 70 (or max delay age). Basically, use your money until social security kicks in and when it kicks in, by delaying it, you will get the max amount. That max amount would be more attractive in your later years since your are not investing aggressively.

Congrats on accumulating $2 million. If your gross income has been similar or lower all these years, and you have had aversion to stock market all along, then $2M on that much income is a job done really-really well. I think you can retire but you are somewhat on the borderline without doing something about that 1% return. If you fix that a bit, you will be in great shape.
 

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JiggleTheHandle said:   rufflesinc said:   

With $1.4 million in cash, you'll be broke in 20 years.
 

Op will likely be dead in 20years

  
It is a personal philisophical question: will you be happier if climbing into your death bed having just spent the last penny of your millions, or will you be happier in your death bed with your millions saved as a gift to others?
 

I think if someone has to ask if they have enough to retire, they won't have much to leave behind

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JiggleTheHandle said:   
rufflesinc said:   

With $1.4 million in cash, you'll be broke in 20 years.

Op will likely be dead in 20years

  
It is a personal philisophical question: will you be happier if climbing into your death bed having just spent the last penny of your millions, or will you be happier in your death bed with your millions saved as a gift to others?

  What about option 3 - spend your last penny when you expected to be dead, but find yourself still in good health...

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Glitch99 said:   
JiggleTheHandle said:   
rufflesinc said:   

With $1.4 million in cash, you'll be broke in 20 years.

Op will likely be dead in 20years

  
It is a personal philisophical question: will you be happier if climbing into your death bed having just spent the last penny of your millions, or will you be happier in your death bed with your millions saved as a gift to others?

  What about option 3 - spend your last penny when you expected to be dead, but find yourself still in good health...

  Is "broke" an qualification for Physician-Assisted Suicide?

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bigeye said:   1%?  There's another thread here about Andrews FCU offering a 3% 84 month CD.  That's $42,000 a year income alone not counting your rental and SS income of over $30k. 
  Just remember, the deposit is insured for only $250k.  If the CU goes out of business in 7 years, OP loses the rest of the deposit amount.

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ach1199 said:   
bigeye said:   1%?  There's another thread here about Andrews FCU offering a 3% 84 month CD.  That's $42,000 a year income alone not counting your rental and SS income of over $30k. 
  Just remember, the deposit is insured for only $250k.  If the CU goes out of business in 7 years, OP loses the rest of the deposit amount.

  
That is why you spread it out between multiple financial institutions.  You can find other banks with over 2% CD's which is double what he is trying to earn now.  

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jaytrader said:   
Glitch99 said:   
JiggleTheHandle said:   
rufflesinc said:   

With $1.4 million in cash, you'll be broke in 20 years.

Op will likely be dead in 20years

  
It is a personal philisophical question: will you be happier if climbing into your death bed having just spent the last penny of your millions, or will you be happier in your death bed with your millions saved as a gift to others?

  What about option 3 - spend your last penny when you expected to be dead, but find yourself still in good health...

  Is "broke" an qualification for Physician-Assisted Suicide?

  Is it "suicide" when you spend yourself broke and subsequently starve to death?

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Here's a calculator that's basically NPV for social security filing options:
http://www.bedrockcapital.com/ssanalyze/

For us, I was surprised at how close early/full/late filing worked out. That's some comfort that we can make a last minute decision and wouldn't be giving up too much if we did any early filing.

OP, your situation has many similarities to ours - rough dollar amounts and types of assets. Except we have very little cash, broad index investments instead. That's resulted in one big difference - we're about 10 Years Ahead of you. You've given up a great deal by avoiding stocks, but still have lots of time. If your risk aversion would really make you miserable over the stock market, then maybe your cash plan is best. But wanting to quit working and not being able to would make me a bit miserable.

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Yes you can retire. Social security alone will provide most of what you need. Consider turning some of that cash into a SPIA (Single Premium Immediate Annuity). This is a very boring insurance product and most states insure a portion of it- usually about $300,000 or so. I would actually consider getting one that is inflation adjusted (there aren't many) since inflation will be the real killer.

The rest should be invested. Read the stock series: http://jlcollinsnh.com/stock-series/ 

I would put it all in one of the following and forget about it, draw 3.5-4% annually:

VWIAX
VSCGX
VTINX

But the answer is yes, you may unequivocally retire.

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Chargum85 said:   Just to think, if you had invested wisely you could have retired 20 years ago!
  I agree with this.  But in some ways I'm risk adverse like OP.  I'm convinced stocks are going to crash at some point, but I feel  "Obligated"  to some degree to keep a certain amount of money in the market.  (I'm  just over half Ops age so I have a much larger investment horizon.  Other wise my money is just sitting their losing value.  I do keep a fair amount in cash emergency fund.  (Most not instantly accessible, but I could access within days if needed)  

Personally I would consider a diversified portfolio a much safer bet at 60 with OPs stats, compared to how likely working one more second is needed to "Secure" Ops future.  (I am not saying Op should invest, just making a comparison)

 I.e. I wonder if Op is risk adverse to the point of taking the biggest risk of all:  Working until he no longer has the quality of life to enjoy all he has worked for.  -  Or worse yet passes away shortly after retirement.

 

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Yes you can retire. I would recommend reading some finance books to understand your money. Since you're risk adverse that will be even more important. My question is what ways can you invest in yourself? (Examples: Is your home as insulated as it could be? , If planning to move, buy sooner to avoid buying at higher prices. Do you choose to exercise and/or eat healthy? Do you have / desire any hobbies that either create income or are a very little drain on income? Any debt what-so-ever?)

Since you're so risk adverse I would wait on SS since I doubt you're going to beat the increased monthly gains using risk adverse methods. If you're risk adverse, I assume you keep your money split between separate institutions / account statuses already? (I.e. Under $250K) Otherwise, I call BS on how risk adverse you are, and perhaps you should look into a diversified portfolio. That said, I agree with finding some FDIC accounts with higher interest rates. (You didn't list your location so I won't make specific recommendations other than Andrews FCU listed earlier.) Often times local credit unions have some good rates. The only requirement is often living in the area, or sometimes anyone can join by making a donation to a specific charitable organization. I personally prefer to use mint.com to track my accounts. It's a great tool when you need to have accounts at multiple banks.

Bottom line: why continue working? You could die tomorrow or live another 30 years. What if you only had 1 year to live how would that impact your decisions? What good is your money going to be to you in 20 years anyways? Get you a better retirement home!

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you can get immediate annuity that will pay 60k+ with 1.4m .

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ach1199 said:   
bigeye said:   1%?  There's another thread here about Andrews FCU offering a 3% 84 month CD.  That's $42,000 a year income alone not counting your rental and SS income of over $30k. 
  Just remember, the deposit is insured for only $250k.  If the CU goes out of business in 7 years, OP loses the rest of the deposit amount.

  Credit unions are not FDIC insured, they're insured by the NCUA (similar, but worth noting).

OP, holding that much cash at 1% is absurd.  At least build a CD ladder.  You're still going to lose the game trying to keep up with inflation over the long run, but at least you'll feel better getting closer to 2% in something FDIC insured.  If I were you, I'd invest at least 40% of my assets in a diversified stock portfolio.  Don't invest it all in 1 day, spread out your buys over time to mitigate some of the risk.  By leaving $1 million in cash at 1%, you are essentially losing, on average 2% a year (compounded over 30 years is not a pretty picture for that money).  

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allskate said:   Job pays about $90K gross, $60K net but would like to quit.  
  Sucks if don't like what you do every day. Can't find a more enjoyable job?

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No..keep working till your 72 and you will get about 100 dollars a month more in SS...

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No..keep working till you're 100. Then work some more. http://people.com/celebrity/oldest-american-worker-celebrates-10...

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Can't believe no one mentioned yet, but is your real estate returning ~2.6% annually? 1,300*12= 15,600 / 600k (min, OP does not specify) is 2.6% at best. OP, you need to find a high quality, fee only, financial advisor immediately.

You are obviously very hard working and saving, but incapable of managing your finances. You could have retired years ago with only minor tweaks in allocation. At least I hope you enjoy your job.

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Glitch99 said:   
JiggleTheHandle said:   
rufflesinc said:   

With $1.4 million in cash, you'll be broke in 20 years.

Op will likely be dead in 20years

  
It is a personal philisophical question: will you be happier if climbing into your death bed having just spent the last penny of your millions, or will you be happier in your death bed with your millions saved as a gift to others?

  What about option 3 - spend your last penny when you expected to be dead, but find yourself still in good health...

  Will be in 20 years

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 We shouldn't be too hard on him yet. We don't know if he held the 1.4 million in cash for a month or two or for the last 20 years.

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If this man can't retire there is no hope for civilization.

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http://blogs.wsj.com/experts/2016/03/07/why-investors-should-con...

There are payouts in the 5-6% range for a 60 year old. That could pay you 120k/yr now. Invest the 60k excess in whatever you like, and never run out of money.

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atikovi;19700924 said:No..keep working till you're 100. Then work some more. http://people.com/celebrity/oldest-american-worker-celebrates-10...
  
[l=This guy]http://][/l] http://en.wikipedia.org/wiki/Arthur_Winston [/l] worked for the Los Angeles Metropolitan Transit Authority until he was 100. He retired on his 100th birthday, then dies a month later. He should have kept working. He enjoyed his job cleaning buses. He probably would have driven buses, if the MTA would have let him.

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atikovi said:   No..keep working till you're 100. Then work some more. http://people.com/celebrity/oldest-american-worker-celebrates-10...
  Loren Joe Wade, Sr., 104, of Winfield, passed away Sunday morning, Nov. 20, 2016, at his home.
http://www.ctnewsonline.com/obituaries/article_f1518642-b19b-11e... 

"After retiring from the post office, he went to work for WalMart. He continued working for WalMart for over 30 years, retiring in June 2016."

Skipping 37 Messages...
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The OP never came back. We're wasting our breath.

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