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48 - Loooking to ER in 2017/2020. Is my plan real or I am dreaming?
Old 01-10-2013, 09:05 AM   #1
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48 - Loooking to ER in 2017/2020. Is my plan real or I am dreaming?

What a GREAT forum this has been! I found it two months ago and started thinking about my own retirement. I'm 48 and DW is 43. My Acct. is with Fidelity and have never met my rep..I'm planning to meet him for advise this quarter. My financial statistics are as follow:

Joint After Tax: 1600K
My 401K/IRA: 500K
DW’s IRA: 150K
============================
TOTAL 2250K

My Social Security: 20K(will take at age 70 in 2034)
DW’s Social Security: 9K(will take at age 62 in 2032)

No Pension for either of us

No Corporate Medical Insurance for either of us


I lost lots of money around .com crash and has about 500K loss which I can offset with Capital Gain in coming future, hopefully.

Kids' 529 Plan

DD’s 529: Age 16 92K May be Scholarship – No contribution
DS’s 529: Age 8.5 78K $375/Month Automatic Deposit
DS’s 529: Age 8.5 78K $375/Month Automatic Deposit

My house is paid up(700K value) but I do not count that in my asset. I’m planning to sell it in future and pay down payment for my boys’ house…probably 15-20 years from now.

I ran two scenarios….with 8% return, I’ll have 3060K in 2017. If I count 6% return for 7 yrs then I’ll have 3375K in 2020.

If I retire in 2017:
FireCalc w SS: 94.1% Success Rate for 40 years 120K
i-ORP w SS and 6% Return: 40 years(3.5% Inflation) 127K

If I retire in 2020:
FireCals w SS: 93.1% Success Rate for 37 years 135K
i-ORP with SS and 6% Return: 37 years(3.5% Inflation) 149K

I know assumption may not always come true. Just to give myself some buffer for plan to succeed, I’ll be putting away 25K/year in 401K from now till retirement which I’ve not included in above calculation.

I’ll be fine with 120K in 2017. I can take 25% cut for poor return years. Once I retire, my only income will be from capital gain/dividents. I ran obamacare calculator for family of 4(Health Reform Subsidy Calculator - Kaiser Health Reform) and the cost comes out to be around 9K with subsidy.

My questions are:
1) Am I dreaming or my plan is real?
2) Is the Kids education plan listed above enough?
3) Is 9K premium cost for Obamacare real? 400% poverty line will be around 104K in 2017 for family of 4. My MAGI will be around 100K.
4) Have I missed anything or any suggestions you may have?
5) I like results of i-ORP…Have I run the Calc correctly or entered any wrong info?
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Old 01-10-2013, 02:42 PM   #2
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We'll be starting to retire in that time frame and have about half what you have now. If folks don't think you're going to make it, then just shoot me now.
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Old 01-10-2013, 02:44 PM   #3
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You could retire right now if you cut your spending. I spend less than half what you plan to.
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Old 01-10-2013, 02:46 PM   #4
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Welcome aboard, 2020. Lots of good info here.

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Old 01-10-2013, 03:09 PM   #5
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Thanks Bicker/Lazarus/Omni. About 4%(including SS) is what I'm planning to spend. There is always some FEAR(I do not know why?) that I'll not be able to make it.
I budgeted 120K..because I live in NJ. Property Taxes and Utility alone cost around 18K per year. Then 9K for Medical Insurance with Obamacare subsidy and 6K for life/auto Insurance--about 33K right there. Mine and DW's family live close by so we really do not want to move out of NJ.
It has taken me 29 years of hard work and disciplined saving to reach where I'm today. My main goal is to have FI and spend lots of time with my Kids before they go to College. I still worry about Medical Insurance and wonder if obamacare calculator I ran above is real and that's is how much I'll have to pay. We're all healthy now but who knows what future holds for us! How are you guys planning to fund Medical Insurance during your retirement? Any plan/tips?
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Old 01-10-2013, 05:01 PM   #6
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Welcome retire2020.

My gut feel on your health insurance is it feels a little optimistic. Are you including deductibles in your 9k per year or just premiums? We'll have to wait for the real HI numbers, but I still just gut feel it it is light.

But not by much. If you just spend a little less, then you should be OK. The cap loss in your pocket is useful for 1.6M taxable nest egg. Might want to throw some of the more notorious cap gain producers in that bucket since you have that offset. You have a a somewhat unique situation there -- although I had a coworker in those shoes in 88 from the 87 crash. Last I heard (mid 90s) he was still burning off his loss.
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Old 01-10-2013, 05:02 PM   #7
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I'm a few years older, but have kids of similar age (10 and 12.)

The 529's look right on target from my POV. But if they're going to go to private/ivy schools - they're underfunded. I live in California - and budgeted for UC schools - and budgeted a higher rate of inflation on college expenses. I'm shooting for $100k/kid in today's dollars.
Are you going to continue to fund your son's 529's when you retire... or do you have a target amount, and then you'll stop funding them. That will effect your budget in retirement. (I had to budget for contributions several years into my retirement.) I found quicken lifetime planner was great for that. And firecalc can be adjusted using the pension/expense adjustments. (I budget including the contributions, then account for the freed up money by starting a non-cola pension = the contributions, when the kids are out of school on Firecalc.)

do you qualify for an obamacare subsidy on $120-135k/year? I thought the limits were less. (Have to go look again.)

I have to ask - does your daughter get a house downpayment too - or is it assumed she'll marry into money? I guess that struck me as odd that you'd only help the boys.
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Old 01-10-2013, 06:26 PM   #8
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do you qualify for an obamacare subsidy on $120-135k/year?
I wonder what is considered "income" for the purposes of the subsidy, and if it's through a tax credit how would one receive that if you're retired and don't pay income taxes?

Frequently Asked Questions
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How do premium subsidies work? People purchasing coverage on their own would be eligible for government subsidies (through a tax credit) towards their health insurance premiums based on income. Subsidies would be provided to people with family income between 133% and 400% of the federal poverty level. The most that families buying coverage in an insurance Exchange would pay towards a health insurance premium would range from 3.0% of income at 133% of poverty to 9.5% of income at 400% of poverty, with amounts at specific income levels specified in a table in the law. Subsidies are tied to a benchmark level of coverage based on actuarial value. And, subsidies would only be available through organized purchasing pools called Exchanges.
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Old 01-10-2013, 06:32 PM   #9
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JoeWras: I'm only including premium not deductible and 9K comes from the calculator I used(posted link earlier). Yes...like your coworker...I've been dreaming to offset my loss with Capital Gain since 2001.

Rodi: I'll continue funding my Kids 529 plan even in retirement which I've already calculated in my budget. My daughter has been doing very well in studies and might end up getting scholarship so I just stopped contributing into her 529 plan(92K already in her acct now) about six months ago. About house payment...ofcourse DD will get 1/3. But it's is so far away that she might have bought on her own but she'll get her 1/3 regardless when I sell the house. About Obamacare subsidy ---- If your income after all deductions is <400% of poverty level then you'll get some subsidy - that's around 92K for the family of 4 now but will be around 104K when I plan to retire in 2017(120K - other deduction like property tax etc..will put me around 95K). Kids can be covered on parent's plan until they're 26 so we'll be family of 4 until I reach 66 and DW 61. I'll then enroll in Medicare by 65 and will figure something out for DW for coverage between 62-65.
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Old 01-10-2013, 06:33 PM   #10
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I wonder what is considered "income" for the purposes of the subsidy, and if it's through a tax credit how would one get that if you're retired and don't pay income taxes?
for PPACA purposes income is your adjusted gross income on your tax return, plus tax exempt muni interest, plus overseas income excluded using FEIE. See more detail here http://healthreformgps.org/wp-conten...011-10-241.pdf

Retired people age 65 and older have Medicare. Under age 65 the credit is obtained the same as for working people, via the state health care exchanges.
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Old 01-10-2013, 08:56 PM   #11
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Thanks Bicker/Lazarus/Omni. About 4%(including SS) is what I'm planning to spend. There is always some FEAR(I do not know why?) that I'll not be able to make it.
I budgeted 120K..because I live in NJ. Property Taxes and Utility alone cost around 18K per year. Then 9K for Medical Insurance with Obamacare subsidy and 6K for life/auto Insurance--about 33K right there. Mine and DW's family live close by so we really do not want to move out of NJ.
It has taken me 29 years of hard work and disciplined saving to reach where I'm today. My main goal is to have FI and spend lots of time with my Kids before they go to College. I still worry about Medical Insurance and wonder if obamacare calculator I ran above is real and that's is how much I'll have to pay. We're all healthy now but who knows what future holds for us! How are you guys planning to fund Medical Insurance during your retirement? Any plan/tips?
Wow that is an expensive place to live. My wife and I are having no problem living on about 40K in Texas. Paid off everything and corp health care. Even so you can cut expenses and do it.

There is fear in stopping for sure. But my fear of dying at my desk was greater.
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Old 01-11-2013, 08:55 AM   #12
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Once the health care issue is resolved, I'll feel 100% confident. At this point, I'll have to continue working until obamacare unfolds and I get some clear picture. Also my children are young and none through college yet(youngest twins are 8.5 yrs old) tells me I should not stop now. My next checkup point will be in Jan 2017 in any case.
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Old 01-11-2013, 09:10 AM   #13
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Massachusetts already has a health care exchange working and I've used that to get an estimate for our healthcare costs beginning next year. https://www.mahealthconnector.org/portal/site/connector
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Old 01-11-2013, 09:44 AM   #14
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Thanks MichaelB. I live in NJ. Is there anything out for NJ where I can get an estimate? I read many of your posts on PPACA and you seem to know it well. Any take on my situation about health care? Are my assumptions about subsidy correct as listed above? Once I retire, I shall be able to control my income from dividents/capital gains and keep it below 400% poverty level for family of 4/5. For example, in 2017...I take 100K from dividents/capital gain and remaining 20K from the cash I keep in my savings account, will I be able to get subsidy? Currently 92K income comes around 397% so I am assuming it'll be 104K in 2017.
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Old 01-11-2013, 09:56 AM   #15
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New Jersey's health insurance exchange doesn't exist yet. As a matter of fact, the governor just vetoed the bill to set it up. This de facto sends New Jersey into the federal exchange, which is still being designed.

Full Disclosure: Someone very close to me is working on the second generation Massachusetts health insurance exchange.
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Old 01-11-2013, 11:04 AM   #16
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Thanks MichaelB. I live in NJ. Is there anything out for NJ where I can get an estimate? I read many of your posts on PPACA and you seem to know it well. Any take on my situation about health care? Are my assumptions about subsidy correct as listed above? Once I retire, I shall be able to control my income from dividents/capital gains and keep it below 400% poverty level for family of 4/5. For example, in 2017...I take 100K from dividents/capital gain and remaining 20K from the cash I keep in my savings account, will I be able to get subsidy? Currently 92K income comes around 397% so I am assuming it'll be 104K in 2017.
Thanks. You know as much as I do about the subsidy, which is what has been published so far. You are close to the upper limit, so it might not be a bad idea to plan for a bad case scenario where you are expected to contribute more to your total health case cost.
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Old 01-11-2013, 12:03 PM   #17
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With your savings, it looks like you are in good shape.

You may want to guarantee a portion of your retirement income and buy a FIXED annuity with some of your savings WHEN you retire (not now). Just don't let the Fido Advisor steer you towards any Variable Annuity or Life Insurance product for now.

Only bogeys are HC and College... Despite government intervention, HC inflation is uncontrollable and unpredictable, but you can beat the college racket by reading Lynn Oshaugnessy's 'College Solution' blog and book.
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Old 01-11-2013, 01:28 PM   #18
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ejw93..Thanks for your suggestions. I already started reading Lynn's blog.
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Old 01-11-2013, 08:27 PM   #19
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When you have won the game -STOP PLAYING!

The only things that can crush you are big losses or health disaster. Play it safe with the investments and enjoy those kids while you can.
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