How I Used Financial Planning for My Own Retirement
As I prepare to retire from my "day job" as an actuary, my own family became one of my most important financial planning clients.
What Are Our Goals?
Retire at age 62 1/2.
Send two daughters through college without debt.
Maintain consistent charitable giving.
Downsize our home after our youngest child graduates high school.
Cover anticipated long-term care expenses.
Adequately fund a special needs trust for our daughter.
Schedule a modest annual vacation, alongside a larger trip every five years.
Plan for major upcoming capital expenses (e.g., HVAC system, home painting, replacing vehicles).
Maintain complete confidence that we will not outlive our assets.
What Steps Did We Take to Ensure Success?
Special Needs Planning: Purchased a survivorship (second-to-die) life insurance policy designed to fund our daughter's special needs trust. Combined with her allocated share of our estate, this will ensure her long-term financial security after my wife and I are gone.
Social Security Optimization: Conducted a maximization analysis showing that optimal benefits can be achieved at age 62 under rules for a household caring for a disabled adult child.
Long-Term Care Coverage: Reviewed our retirement cash flows and identified a gap in long-term care protection. Given insurability and cost considerations, we opted against traditional long-term care insurance and instead secured "short-term care" policies designed to cover the critical first year of skilled nursing.
Risk Tolerance Alignment: Completed an investment risk analysis to evaluate our comfort level with market volatility, using the results to construct a portfolio mix aligned with our risk profile.
Monte Carlo Modeling: Executed RightCapital Monte Carlo simulations resulting in a 100% probability of success under our baseline assumptions.
Stress Testing: Followed up the Monte Carlo analysis with rigorous stress testing to evaluate "what-if" scenarios and potential economic shocks against our core assumptions.
Preparing for Year One of Retirement
Because I will be retiring mid-year, health insurance during this transition period requires special attention:
Without proactive strategy, earned income from the first half of the year combined with standard IRA distributions would push our taxable income too high, resulting in ACA (Obamacare) premiums exceeding $2,200 per month.
To optimize ACA premium subsidies, we planned maxed-out Traditional 401(k) and HSA contributions while working, followed by selective Roth IRA distributions post-retirement. This targeting brings projected premiums down to under $300 per month.
While we are utilizing Roth IRA withdrawals to manage income in year one, subsequent years will prioritize liquidating Traditional IRAs first to preserve Roth assets for tax-advantaged compounding.
Long-Term Health Insurance & Medicare Considerations
Medicare Strategy: When I turn 65, I will transition to Medicare. I am currently evaluating Medicare Advantage Prescription Drug (MAPD) plans versus Medicare Supplement (Medigap) coverage.
Support for Our Daughter: Post-retirement, our daughter will receive Social Security benefits and become eligible for Medicare (and Medicaid) two years later. I plan to enroll her in a Dual Eligible Special Needs Plan (D-SNP) to take advantage of targeted local benefits.
Here are some images showing the types of analysis I did.
