3 months into FIRE...

[bradaz2488]

Quote:

Originally Posted by explanade How do the calculators include or exclude medicare?

Good question. I have not come across a RETCAL tool that accounts for Medicare benefits, just SS benefits. I have accounted for medical expenses as a separate line item in my plan that increases 7.5% each year. When I'm 65 our medical expenses are ~16% of the total living expenses. I'm willing to bet this will not be enough especially if we develop a pre-existing condition. As I indicated in my original post healthcare was one of the biggest unknowns for ER planning. My thinking was I could either stay at a stressfully job and develop a pre-existing condition or quit and take better care of myself. I plan to always have high deductible heath insurance to keep the premiums low. Right now (at 49) I'm only looking at health insurance as protecting my wealth. I will have to continue to monitor/address this unknown every year and with Obama-Care who know how this is going to play out... I'll just focus on trying to stay healthy ..

[MichaelB]

Brad, welcome to the forum, and congratulations on getting out of the rat race alive and kicking.

There's nothing wrong with a large cash reserve, especially if it helps you sleep well at night. We keep this and next year's budget, along with some emergency funds and certain large one time expenses we know will happen, out of our portfolio calculations, that money is in a bank. For us the key is making sure the portfolio, without those $$, can still carry us.

Your health care projection looks light. If health care costs overall increase by 2X the CPI, yours will rise much faster because insurance rates will increase another 50% just for your age factor. While it might seem a bit overly cautious to plan for no SS or Medicare, planning to not be eligible for any subsidy does make sense and is our approach as well.

[papadad111]

Quote:

Originally Posted by bradaz2488 Hello papadad111... Yep, you guess right about the ex-blue badge. Are you a fellow blue badger? ... So I'm looking at SS and Medicare as "cream". If I get it then it will give me more funds to travel or want ever else I'm into at 67.... But that is just too far off right now ...

Ya...and am just as burned out as you were... i bet. Did you hit rule of 75? I wont make it at this rate -- 9 more years is not my plan of record.... and the benefits of getting to that stage (a bit of health insurance subsidy) are neutralized with Obama care assuming you can keep to 400% of poverty line as your "annual income"

For retirement, i missed it - did you have (and take) a lump sum payout ( were you eligible for minimum pension) or defer that as a monthly annuity at age 65 ? I know it's peanuts, but curious how that (and SS/medicare) factor into your equation.

One of my favorite blogs is by a guy named Joe who lives in Portland and retired at 40 after a stressful 15+ yr career as a blue badge. Anyway, he is now retired, generating a reasonable amount of passive income from real estate, his blog and online ventures, and covers other expenses via working spouse. he is a full time stay at home dad for a youngster. Anyway, good reading to see how others are spending their first months (years) in retirement. his blog is Retire By 40 and is pretty well done.

What kind of annual expense (in $K/year) are you projecting for the next 5 years in retirement? Every model that I use really is impacted by near term spending and drawdown --reflecting the critical importance of market returns and overall time value of money at work. Of course, everyone is different in assumptions - just curious in Arizona if house is paid off, assuming medical care, no kids etc what kind of budget you are setting out initially. $50K/yr, $60K/yr, $80K/yr. ?

[bradaz2488]

Quote:

Originally Posted by papadad111 Ya... Did you hit rule of 75? .... For retirement, i missed it - did you have (and take) a lump sum payout ( were you eligible for minimum pension) or defer that as a monthly annuity at age 65 ? I know it's peanuts, but curious how that (and SS/medicare) factor into your equation. What kind of annual expense (in $K/year) are you projecting for the next 5 years in retirement? ?

I was only 1 year out from hitting 75 rule. When I ran the numbers if I was to stay it did not have any significant impact the my model. The 75 rule does not buy you retirement. If I was 57 it would have because the heath insurance (now 7 years) would have bridge the gap to 65 for Medicare. I was really hoping for a VSP package. The last one they gave would have been ~9 month pay and 18 month health insurance. As you probably already know VSP packages mainly target people w/ performance issue & people that have reached the 75 rule to help clear the heard for the new blood. As you know VSP's are not always done every year and they change the qualifications & terms to fit company's needs, so I was not going to get into that wait OMY syndrome.

The minimum pension fund came as a surprise to me after I made the decision to quite. I was not expecting this at all. It was not a lot of money, but it was about the same amount if I was to stay for the 75 rule. So this help me feel better about not staying one more year to get the 75 rule benefits. I took the lump sum option and rolled it into an IRA to avoid paying taxes now and I will have control of how it gets invested. The annuity options was not a good options since I'm only 49. If I was 60+ then the annuity options may have been a better choice.

I do not see the importance of providing the exact amount ($) of my living expenses. I'm not trying to be a pain. I think I have provided the critical information that allows people to understand and compare my plan to theirs and provide feedback. I'm okay with providing what % of my expenses goes for what, but having the "exact" numbers in $ will be different for everyone's model. I know other people are comfortable providing the $ numbers, but I'm not.

The only info I have missed providing on my model it the buffer amount at the end of my plan (age 95). Right now my plan using MS Money Lifetime Planner show I'll still have ~50% of my current investment amount (today's dollars). This is using the 36X in investment funds, 6% return, 2.5% inflation rate, 7.5% increase in Med cost, buying a car every 7 years and assumes no SS benefits. This seems to correlate with FIRECal worse case estimate, but not clear to me if FIRECal shows today's or future dollars. If FIRECal is future dollars then I'll only have ~25%. When I run the Fidelity Retirement Income Planner I do run out of money at 95 for the 90% confidence level. Not sure why Fidelity tool is more conservative. My guess is that the 90% CL is using lower then a 6% average return for my AA. I'll keep playing around with it ....

Thanks for the link to the Blog, I'll check it out.....

[papadad111]

Quote:

Originally Posted by bradaz2488 I do not see the importance of providing the exact amount ($) of my living expenses. I'm not trying to be a pain. I think I have provided the critical information that allows people to understand and compare my plan to theirs and provide feedback. I'm okay with providing what % of my expenses goes for what, but having the "exact" numbers in $ will be different for everyone's model. I know other people are comfortable providing the $ numbers, but I'm not.

I understand. Anonymous boards are not always totally anonymous. That said, understand that Most users on here are financial voyeurs to some extent and love to see data.

One rationale for often getting this question is a financial one. In a worst case scenario, depending what you spend annually, you could perhaps significantly reduce expenses to offset significant and protracted market losses ...monte Carlo analysts on spending is almost as important as the Monte Carlo analysis on portfolio value and rate of return.

Simple example /. With a 2.0m portfolio but
Living in Los Angeles and spending 80k per year is very different from,say low cost oklahoma. If one were willing to move - one could temporarily or permanently drop expenses ....And if things really got bad, a move to lower cost area could make a huge difference between success or running out of cash later in life's.

National studies reveal most needs can be met with little stress on about 50k per year.... Of course this varies but its amazing joe many folks think they can live on 35k/year and find later that the lowest they can bring their budget to is a lot more ...

Generally 50K x 36 times = 1.8m in today's dollar is probably the lowest I would feel comfortable retiring on today and having money last 40+ years ....and the buffer would be SS if there is any at that stage. That also assumes possibility of near-full spend down and not leaving assets to heirs ...

Anyway, you are not exactly being a pain by not sharing. Just less insightful to fellow voyeurs/ readers- since many do share those details.

Finally - Well done. Congrats. Do you wake up with a different outlook on life ?

[bradaz2488]

Quote:

Originally Posted by biker4life Simple example /. With a 2.0m portfolio but Generally 50K x 36 times = 1.8m in today's dollar is probably the lowest I would feel comfortable retiring on today and having money last 40+ years ....and the buffer would be SS if there is any at that stage. That also assumes possibility of near-full spend down and not leaving assets to heirs ... Anyway, you are not exactly being a pain by not sharing. Just less insightful to fellow voyeurs/ readers- since many do share those details. Finally - Well done. Congrats. Do you wake up with a different outlook on life ?

Thanks for the feedback biker4life.... I agree with your simple example using the 36X of funds with the assumption of no SS and near-to-full spend down. For us no kids = no heirs and I been told you can not take it with you ... I have only found this site and been a member for 20 days so I guess I will need more time to become comfortable with full discloser...

As far as having a different outlook on life post ER.... Well it's still a very strange feeling and I'm still in the last stages of detoxing from the corporate world.. The closet thing I can compare it to is when I was a kid at the start of the long summer vacation. The feeling of complete freedom and being able to what I want (within the budget). I did not have a post ER plan of what I was going to do with the my life which is unlike me since I tend to be a over planner. I still have no regrets about leaving my job. I do miss the people, but not corporate life. It's a great feeling waking up each day like it is a Saturday. The challenge will be to make sure my days do not end of like the movie Groundhogs Day ....

[MichaelB]

Quote:

Originally Posted by bradaz2488 It's a great feeling waking up each day like it is a Saturday. The challenge will be to make sure my days do not end of like the movie Groundhogs Day ....

For me work was like the movie, and retiring was like the ending. Still is.

[bradaz2488]

Quote:

Originally Posted by MichaelB For me work was like the movie, and retiring was like the ending. Still is.

You are so right... I did not think of it that way. I guess my subconscious was making sure I did not fall back into the life.. Good catch...

[truenorth418]

Quote:

Originally Posted by bradaz2488 It's a great feeling waking up each day like it is a Saturday. The challenge will be to make sure my days do not end of like the movie Groundhogs Day ....

A little off topic, but I actually think "Groundhog Day" is a great movie to help people get their minds around ER. I watched it earlier this year when I was hitting a dry spell in my own ER experience and, though I'd seen the film many times, it had a particularly big impact on me when I considered it through an ER lens.

Remember.. when the Bill Murray character initially finds himself repeating the same day he undergoes several of the classic Kubler-Ross stages of grief such as anger, depression, bargaining, etc. He over-indulges and loses himself. He tries to kill himself. Ultimately, however, he accepts his situation and decides to make the most of it. He realizes that he has been given a unique gift and commits himself to making the most of it through self-improvement and connecting with others.

There is a scene where he is sitting quietly in the coffee shop reading poetry and he hears some piano music in the background. This inspires him to take up piano lessons, and by the end of the movie he has become an expert pianist! He makes friends in the town. He tries to save an old man's life.

His situation is similar to some of the retirement stories I have read here where the new retiree is lost at first, depressed, maybe bored. But the successful retiree learns that free time is actually a precious gift which can be used to better oneself, take up some new hobbies, become a happier, self-fulfilled person. And maybe even date Andie McDowell

[bradaz2488]

Quote:

Originally Posted by truenorth418 A little off topic, but I actually think "Groundhog Day" is a great movie to help people get their minds around ER. I watched it earlier this year when I was hitting a dry spell in my own ER experience and, though I'd seen the film many times, it had a particularly big impact on me when I considered it through an ER lens.

Thanks for giving me a different perspective on this movie. In my circle we would refer to "Groundhog Day" as a repetitive and mind numbing experience. The merry-go-round of normal life. I really did not think of the deeper meaning/message of the movie. It has been a long time since I watched it. I'll have to watch it again with my new ER lenses ... Maybe on Saturday ...

[papadad111]

How is retirement going ? Would love to get an update ? What have been your key learnings?


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[bradaz2488]

Hello papadad... Well it was 1 year into ER on May 1st and I still have no regrets leaving the Megacorp world. The new found freedom I experience everyday is worth more then the big paycheck I gave up. My mental and physical health has shown significant improvements as well as my relationship with DW has gotten better. It took me about 8 months to detox from the Megacorp culture. Since we have no kids my j*b defined who I was and it was hard to get over that mindset. It was hard to convince myself that it is okay to do "nothing" and just enjoy the freedom. As far as key learnings from my first year of ER I would say that I should have spent more time planning what I would do with the extra time. I just assume I would find things to do to occupy my time, but some days it is a struggle to find things to do. DW did quit her j*b and it is nice having her around the house, but she plans to go back to wo*k after the summer. I do see myself going back into the wo*k world (part time) sometime in the future, but I'm not there yet .... The ER financial plan is right on track. First year WR was 2.5% and it is not a challenge to stay on our planned budget. My next challenge is to figure out the healthcare insurance game. Looks like I'll have to enter the ACA system next year and I hope the cost w/ subsidies will be about the same I'm paying now with BCBS. Not looking forward to playing this game .... So my first year of ER was great. I know I'm still a ER rookie and have much more to learn as the unexpected realities of life take us down roads that you just can not plan for... Thanks for checking in on me....

BTW: As a fellow "blue badge" I hope the resent increase is stock price has put you closer to your ER goal ... take care..

[papadad111]

To be honest, I quit holding all but a few company shares after the Enron incident.

I thus remain very diversified so do not rely on company stock gains.

It's great when things are up but the past 15+ years have been very meager in terms of real appreciation gains (although dividend yield has historically been relatively good).

Congrats on 1 year. What are you considering as part time work? Any hobbies that transition to income ?


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[bradaz2488]

Same here.. I sold most of my shares ~10 years ago, but that was after the bubble burst. Lost $1M on paper with NQ stock options after the tech bubble burst. Could have retired at 37 vs. 49 ... Big lesson learn during that time: Do not keep all eggs in one basket (diversified AA) and try not to be greedy.

As far as what I want to do for part time work, I'm still trying to figure that out and I'm not ready to be on someone else's time schedule.. Love my freedom too much. I really have no hobbies that can converted to income. I know I do NOT what to do:
1) Work in a cube
2) Go to and/or chair meetings all day. Write up detail minutes that no one reads.
3) Prepare endless foil sets for upper management which in the end accomplish nothing.
4) Manage people: Write-up and deliver performance reviews.
5) Thinking about work 24/7. Always in "fire fighting mode". Waking up at 2am thinking about work.
6) Wake up every morning dredging going into work.....

Okay that's enough, I'm starting to get stressed out ....

[papadad111]

Ha ha. Good one. Yes I agree knowing what you DONT want to do is important.

I am kicking around the idea of a small business post retirement. I have a couple of ideas for which I Have a business plan , but no time to really do adequate customer and market research yet. Hope to get to that in 2015.

Any pitfalls to the annual / monthly post retirement budget ? That's my biggest concern with kids headed to college soon and aging parents ...

Are you leveraging cobra or already into ACA / Obamacare ? I can tell you that the estimates for insurance into budget keep going up and up. It's a worry for me and probably the biggest reason to seek some form of post FIRE "active" income.




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[bradaz2488]

No surprises with the post ER budget. I have kept very accurate records of expenses since 1999 so I know our spending habits. My goal was to ER with the same life style we had during work, but that means no extra travel and no new expensive hobbies. This years big ticket items for 2014 were painting the house and buying patio furniture and we are still on track to be on budget this year. We can cut our budget by 20% very easily if we had to w/o going back to work and even 30% if we sold the 2600sft house and down scaled to a small condo, I think (know) this would be much harder to do if we had kids.

The health insurance game was (is) one of my biggest pre/post ER variables. I did not go with Cobra because it was ~2x the cost I could get from an individual health insurance policy. We are both healthy and have no pre-existing conditions. We found a high deductible BCBS policy ($8K max OOP) for $410/month. I need to check if they are going to allow the 2 year extension, but I'm thinking I will need to shop on the ACA website for 2015 HC coverage. Based on the information I collected for 2014 coverage we could actually get a ACA policy w/ lower deductible and lower monthly payments (w/ subsidies), but sounds like premiums may go up significantly for 2015. We will have to see... Unfortunately healthcare will always be one of the BIG unknowns for all retires (young and old) and will require everyone to adjust their planned annual expenses as things change....

Good luck on your small business plan & goal... I wish I had that much ambition

[papadad111]

Same issue and fully agree. For me, A family of 4 for ACA without subsidies this year was quoted at 1400/month for a silver plan. The agent I talked to suspects it could go as high as 1750 in 2015 and 2100 by 2018 based on what he is hearing. That's a lot of money if not getting a subsidy.

I expect/planning my budget to be without subsidy for at least the first couple of years ( due to a prior deferred comp program that will pay out after leaving full time employment which will push income up above the ACA subsidy threshold) . By year 3, I suspect will be eligible for subsidies as the law today is written, but I fear the subsidies will be diminished or go away via law changes - just can't see how the system can support the subsidies at 400x poverty limit ... So guess it's good to plan for the worst and hope for something better than that !

At that rate healthcare would be nearly 50 percent of our budget- more if OOPocket fees are high ... Scary


We did a pre-emptive downsize a few years ago as the market was bottoming. Sold our big-ish house for a smaller one with some land and paid it off. It was really triggered by aging parents and seeing how they struggled living and maintaining a larger home with stairs to climb etc. Really got us thinking differently ...about what we need as our kids move to college and (hopefully) out on their own. For us it was a small 3 bedroom single story ranch...

Thanks for the insights. Feels like you are a person to have coffee with some time if I ever get to AZ! Take care and keep us all updates.... And congrats again for a great first year of FIRE




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[papadad111]

Brad !

Wonder how year 2 is going ??

What was your result with health insurance - did you go for ACA signup or did you continue on Blue Cross ?

How's the budget holding up ?

[Quantum Sufficit]

Congratulations Brad,


My situation is very similar. I am 49 and we are pulling the plug at 49, 3 weeks from now. Will have a little part time thing going just to keep busy but lots of swimming, sunshine, reading, home projects, RELAXATION in my future. Congrats. I too am at 38 x expenses. I saw a lot of us in your post. You engineering, me medicine. Either way, too stressful...too many bottom feeders to fend off. looking forward to what lies ahead...

[bradaz2488]

Hi bike4life.. Thanks for checking in on me. Yes, my 2 year anniversary of freedom from Megacorp will be May 1st. Time still flies even when you are retired. It took me about 8 months to fully detox form corporate life & culture. I was able to keep my BCBS heath insurance for 2015, but it went from $182/mo to $240/mo. Will not know until Nov if I will be able to keep this policy for 2016. Since AZ is one of the states that does not have it own exchange so the ACA subsidies are an unknown. On the budget side I'm actually $4K under "plan" for the pat 2 years and I do not feel like my lifestyle has change at all. My portfolio is $100k over "plan", but that can change any day with a healthy correction in the markets ... I have finally stopped running the various RE tools (weekly) to verify that my plan works under different scenarios. The biggest surprise for me is that I have no desire to find part-time work. I thought after 2 years I would want to find a no-stress part-time job but the thought of having to be back on a schedule makes me ill .... I still get that childhood excitement every Sunday night knowing I do not have to get up and go to w*rk Monday morning ...