FireAspire
Dryer sheet wannabe
I've been following here for several years and appreciate all of the wisdom. I check “Hi I Am” almost every day to see if someone like me has posted to give me more confidence that I can launch. But none of you is exactly like me, so I guess I’ll need to initiate the discussion. Here's my story and the 12 required answers:
DW and I are 55 year old empty nesters, frugal to a fault, and tired of the grind. We would like to leave full time employment in May 2020. The 12 answers are:
1. What are your expenses? Current expenses are $60,000 per year with healthcare covered by my employer. In retirement, I'm planning on $1000 per month for health care (see #2). Total budgeted expenses are $72,000 per year including health care, car repairs & replacement, travel, charity, and home related expenses/projects (1% of value). At a tax rate of 12%, that's about $82,000/year I need to cover. We could cut up to $7500 / year in discretionary spending.
2. Are you sure those are your expected expenses in retirement? I am confident with those expenses after tracking for 3 years. For health care, I will either use a Health Share Ministry plan ($450 per month) or ACA ($350 per month with subsidy). I plugged $1000 per month into the budget thinking that's conservative. We're both very healthy, but at least one of us is getting older. If expenses go over $1000 per month, we’ll enact the discretionary spending reduction plan to make up the difference. For long term care, I plug $250,000 into FIRECALC as the “always have” number. That would give us ~ $80k/year for 3 years, which seems to be about average for a LTC situation. If both of us need it, we’ll sell the house and get another $400k. I know it can go over that, but if I plan for every possible worst case, I’ll never get there.
3. No, really, did you account for giving money to your children or grandchildren for college or a home or something like that? The budget includes $300/month for supporting children and parents. We'll hold the line at that amount and hope it's less.
4. Do you plan on any major lifestyle changes? No. We'll spend a good bit of time camping and exploring, but it's cheap and covered in what we do now.
5. What are your sources of income in retirement? We will both have part time jobs that we like for at least 5 years. I have an offer that will pay $15,000 per year with great fun and flexibility. DW will also do something, but I used $15k for the first 5 years. I know I can make at least that much doing something I like.
6. Do you know what your pension really will be or are you just guessing? Pension is firm at $21,000 per year (joint survivor) starting at 65. No COLA.
7. Have you gone to the Social Security Administration website to calculate how much you will get from social security? The SSA calculator says I will get $33,300 per year at age 67 if I retire next year and contribute nothing more. I factor that down to $28,000 to account for a haircut. I didn’t go all the way to 78% hoping the politicians aren’t that stupid. If they are, I’ll enact the discretionary plan. DW's SS is less than half of mine, so we've budgeted for $28k X 1.5 = $42k/year starting at 67. If we get to 67 and all is well, we’ll postpone to 70.
8. Have you included taxes in your retirement income calculation? Yes. I ran it through Turbotax to get the 12%. Once we start pulling SS, we’ll save about $4000/year in taxes, but I didn’t factor that in.
9. What is your nest egg? We have no debt including home mortgage and we have up to date cars and toys. Assets are:
• 401k/IRA – $1,425,000 – AA is 65/35. I will be able to access the 401k through the 55 rule.
• ROTH = $15,000 – AA is 65/35. I wish I had pushed more to ROTH, but I didn’t.
• Brokerage = $101,000 – 100% stock (S&P)
• Cash = $40,000 emergency fund
• Total Assets = $1,581,000 @ about 65/35 AA
10. Is there some reason to believe that you will not live to be at least 85? No. 3 of our 4 parents are still alive and doing well at 80+. I use 95 for our longevity.
11. Once you know the answers to all these questions, did you run your numbers through FIRECalc? What does it say? FIRECALC says $81,968 at 100% certainty. I need $82,000, so I’ll sell something on eBay to make up the $32. I’ve also run it through Personal Capital, Fidelity, Engaging Data, and a cobbled up spreadsheet that I keep. They all say we’re in good shape.
12. If the unexpected should happen and someone dies prematurely, how much income will the survivor have, and will it be enough to continue with the same lifestyle? We’ve talked about this and we’re comfortable with the adjustment that would be needed. We both have cheap term insurance that we’ll keep until we’re over this hump or so old that it won’t matter much.
I’ll appreciate your thoughts.
DW and I are 55 year old empty nesters, frugal to a fault, and tired of the grind. We would like to leave full time employment in May 2020. The 12 answers are:
1. What are your expenses? Current expenses are $60,000 per year with healthcare covered by my employer. In retirement, I'm planning on $1000 per month for health care (see #2). Total budgeted expenses are $72,000 per year including health care, car repairs & replacement, travel, charity, and home related expenses/projects (1% of value). At a tax rate of 12%, that's about $82,000/year I need to cover. We could cut up to $7500 / year in discretionary spending.
2. Are you sure those are your expected expenses in retirement? I am confident with those expenses after tracking for 3 years. For health care, I will either use a Health Share Ministry plan ($450 per month) or ACA ($350 per month with subsidy). I plugged $1000 per month into the budget thinking that's conservative. We're both very healthy, but at least one of us is getting older. If expenses go over $1000 per month, we’ll enact the discretionary spending reduction plan to make up the difference. For long term care, I plug $250,000 into FIRECALC as the “always have” number. That would give us ~ $80k/year for 3 years, which seems to be about average for a LTC situation. If both of us need it, we’ll sell the house and get another $400k. I know it can go over that, but if I plan for every possible worst case, I’ll never get there.
3. No, really, did you account for giving money to your children or grandchildren for college or a home or something like that? The budget includes $300/month for supporting children and parents. We'll hold the line at that amount and hope it's less.
4. Do you plan on any major lifestyle changes? No. We'll spend a good bit of time camping and exploring, but it's cheap and covered in what we do now.
5. What are your sources of income in retirement? We will both have part time jobs that we like for at least 5 years. I have an offer that will pay $15,000 per year with great fun and flexibility. DW will also do something, but I used $15k for the first 5 years. I know I can make at least that much doing something I like.
6. Do you know what your pension really will be or are you just guessing? Pension is firm at $21,000 per year (joint survivor) starting at 65. No COLA.
7. Have you gone to the Social Security Administration website to calculate how much you will get from social security? The SSA calculator says I will get $33,300 per year at age 67 if I retire next year and contribute nothing more. I factor that down to $28,000 to account for a haircut. I didn’t go all the way to 78% hoping the politicians aren’t that stupid. If they are, I’ll enact the discretionary plan. DW's SS is less than half of mine, so we've budgeted for $28k X 1.5 = $42k/year starting at 67. If we get to 67 and all is well, we’ll postpone to 70.
8. Have you included taxes in your retirement income calculation? Yes. I ran it through Turbotax to get the 12%. Once we start pulling SS, we’ll save about $4000/year in taxes, but I didn’t factor that in.
9. What is your nest egg? We have no debt including home mortgage and we have up to date cars and toys. Assets are:
• 401k/IRA – $1,425,000 – AA is 65/35. I will be able to access the 401k through the 55 rule.
• ROTH = $15,000 – AA is 65/35. I wish I had pushed more to ROTH, but I didn’t.
• Brokerage = $101,000 – 100% stock (S&P)
• Cash = $40,000 emergency fund
• Total Assets = $1,581,000 @ about 65/35 AA
10. Is there some reason to believe that you will not live to be at least 85? No. 3 of our 4 parents are still alive and doing well at 80+. I use 95 for our longevity.
11. Once you know the answers to all these questions, did you run your numbers through FIRECalc? What does it say? FIRECALC says $81,968 at 100% certainty. I need $82,000, so I’ll sell something on eBay to make up the $32. I’ve also run it through Personal Capital, Fidelity, Engaging Data, and a cobbled up spreadsheet that I keep. They all say we’re in good shape.
12. If the unexpected should happen and someone dies prematurely, how much income will the survivor have, and will it be enough to continue with the same lifestyle? We’ve talked about this and we’re comfortable with the adjustment that would be needed. We both have cheap term insurance that we’ll keep until we’re over this hump or so old that it won’t matter much.
I’ll appreciate your thoughts.
