My German neighbors, Arndt and Berta have been working a lot lately with investment advisors in advance of their early retiring out at 60. They have shared with me between 401Ks and IRAs and a brokerage account that they are sitting on approximately $3M large. That said, they have asked me as a former Fidelity Investments employee out of college, what kind of unforeseeable costs may be out there lurking for them. Obviously, I touched on the main ones of Healthcare, taxes, inflation, auto repairs and purchases, rising insurance costs, major surgery deductible and coinsurance costs, home upgrades and renovations, possible rural or hunting land purchases, vacations and trips, etc.etc. Personally I feel they are set up well, what say U and speaking from a retirees perspective, have I missed anything that I should share with Arndt and Berta??

Yeah, obviously they're set up well for retirement with $3M. At a conservative 4% draw rate they'll take in $120k a year before taxes. Enough to live a very comfortable life, especially if their mortgage is paid.

I wouldn't focus so much on the expenses side of things because they can obviously cover it even if it was all just held in cash. I'd instead make sure those assets aren't still invested in stocks, but are placed in bond-heavy funds or even something like Vanguard's Income Funds so that if they do happen to get extreme expenses, they aren't worried about it happening at a time that the market is down.

And frankly they should also be meeting with an estate attorney to discuss things like wills, power of attorney, and protecting assets from Medicare & look back periods if and when they should need to be in a long term care facility.

Assisted living/retirement home plans and costs.

Generally folks can get along without a lot of bonds if they have Social Security and/or a pension. The income stream from those acts like bond income. That is, if you have $25,000 in annual income from SS, that's equivalent to holding a half mil of bonds paying 5%.

$500,000 X 0.05 = $25,000

Me, I'm approaching my mid-70's and I hold virtually no bonds. The only bonds I own are in one mutual fund that's a balanced fund (mix of stocks and bonds) that I've held for decades.
Basically I'm 99% in equities and I like it that way.

They are sitting fine. No further contributions to 401k or Social security, time affords more attention to investments and sale shopping if you so chose. Folks should recalibrate expenses and or income every few years in retirement. They should consider new vechiles, house upgrades and spending $150,000 traveling. 20 years from now they will sayit was a wise choice they made.

If they are retiring early at 60. An unforeseen income could be social security.
About 10 years in retirement I will get SS, minus 40 percent windfall. Then the next year my wife would get SS.
Probably an extra 2500 a month I have not planned on.

They are fine, I thought you got them squared away a few months ago

Everybody go ask your neighbors how much money they have and post it up here

Bingo - Learn to spend and play. Most of us who retired early saved, invested and made sacrafices along the way. Retirement if comfortable like the OP - Go play and enjoy. You will get old, your health will deteriorate and you will die!!! Go enjoy!!!

3M will give them 11000 a month for 30 years, at 2 percent interest.
Plus SS.

https://www.mutualofomaha.com/calculator/how-long-will-my-money-last

I’m 81 and wife is 70. Both retired and debt free. I got us debt free about 10 years ago. We’re not high rollers unless you count her desire for a monthly trip to Oklahoma casinos. We don’t have a social group but have kids and grandkids over for dinner. We are both on Social Security and financially secure. Wolf is a long way from the door.

Spend some time riding 4 wheelers and fishing/hunting/shooting on my rural property in Montague County. I don’t live there. Starting to consider selling that place because arthritis is kicking my butt. I’m having to hire a guy to do some fencing because I can no longer do it. Hard for me to understand that I have physical limitations and pain after a lifetime of stomping my own snakes. Actually I resent the idea that there are things that I can’t do and have to pay others to do. Sold the cows a couple of years ago.

They are more likely to end up with 5m plus than zero if they stay vested. Absolutely no reason to diversify into equities , dividend stocks, fixed instruments!!!! Alot of happiness there for these folks

Chill bud, they willingly told me and maybe I've hidden the real identities....Maybe I wanted to become their long lost German Godson! Lol

These are great discussions to have. Gets people thinking about what, when and where in regards to their own futures.

Much more productive conversation results from this then topics arguing about what’s real country or does chili have beans

Real country - Merle or George J. and for Chilli, beans - some days and no beans - other days, lol...Glad you've enjoyed Arndt's and Berta's trials and tribulations.....

Do the neighbors have children? Are they financially independent independent themselves?

I’ve seen a few families get bled dry helping irresponsible kids or grandkids.

Great kids, both in their 20s and out of the house, self sufficient. Gustav works as a Glass Blow artist and Hilda is a RN nurse in a relationship with a hot shot, Orthopedist...

Instead of them making a guess go to www.firecalc.com - I have used it in my own planning - I retired in January at age 70 and am very comfortable with how much we can spend each year without being in the market with risk while still enjoying a great life with travel, etc.

Simply plug in the income they need, an average inflation rate (3-4 % historically), a conservative average rate of return on their money (I use 4%), plug in Social Security when they qualify and it will tell them how long their money will last. Very cool of you to help them out

Very cool

Same here... Mother-in-Law on my wife's Dad's side of the family (his and her 2nd marriage) is 84 and in dire financial trouble. She retired with a healthy portfolio that should have lasted into her late 90's, but dead-beat son from her first marriage has sucked her dry. My father-in-law has just enough in SS and a couple pensions to pay his nursing home costs, so he can't help her much. 10 years ago when they got married and retired together I would have never imagined them ending up broke.

Speaking of an estate attorney, does anyone have a recommendation for one in the Denton area?

We recently used Don Mills out of Flower Mound, TX so all his filings happen in Denton county; very good and highly recommend his services.

The oldest consideration about money is not how much you make or have. It’s how much you spend.

Although we are financially secure and debt free, inflation is a big consideration. Taxes are real. We recently sold one rent house that was 100% depreciated. That will have to be recovered at tax time. About to give the other one to my grandson and his wife.

I’m considering selling my 133 acres of rural property 70 miles from the metroplex in Montague County. Getting too old and arthritic to do it right and enjoy it. It’s junk land that the realtors call recreational property. Meeting a fence guy this afternoon. I can no longer do that. It will be a huge profit after 40 years of ownership. But again, taxes and realtor fees will take a bunch.

Ya know, this old age and arthritis was supposed to happen to other people. Not me.

You make it sound like it’s a burden. You should be thankful that your investments appreciated like they did. That “junk land” as you like to often call it has greatly appreciated, probably more so than any other investment you have made.

If it’s so junky and would be a hassle to dispose of, donate it to the children’s home, church or university of your choice. Would be tax free, would cost only a minimal attorney and title fee and would solve all the issues of the inconvenience of dispersal

DQ,

There are two things I would recommend. If their funds are not in Roth accounts, I would start converting them once they are at an age that allows it with no penalty and do it before they hit Medicare age so the extra income doesn't jack up their Medicare premiums. Also the most important thing I can add, if they are both in good health and enjoy each other's company, then with their financial situation they should consider retirement as soon as they can. I retired at 55 and we had 12 good years before my wife passed away. I am so glad I retired when I did so we could travel and do the things we dreamed of doing while we were young. Now I am still trying to figure out how to enjoy the rest of my retirement. My kids and grandkids are a true joy, but retirement is not the same when single.