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Afraid of FIRE
Old 08-31-2019, 09:29 AM   #1
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Afraid of FIRE

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.
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Old 08-31-2019, 09:44 AM   #2
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I make no claim whatsoever to be an investment expert. With that caveat, it seems to me you're golden, but should reduce your stock to bond ratio. I think you have everything covered and the only danger would be some major correction that reduced your portfolio to less than a comfortable level.
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Old 08-31-2019, 09:48 AM   #3
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I’ll appreciate your thoughts.
Like so many posters here over the past years, you have everything you need to retire except the courage to do so. Not sure where you can get what you need as Amazon doesn't sell it. Many people load up on it when they or a loved one has a health scare, but I sure hope you can locate a supply before that happens.
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Old 08-31-2019, 10:03 AM   #4
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Welcome! That is one complete picture of where you're at. DH/me at a very similar place when we were 55 (born within 3 months of each other). DH considers himself FIRE, but he chose to keep a home based consulting business to keep in touch with friends/co-workers and his food science network. The megacorp became a flaming nightmare and his health was at stake.

You mentioned working part time in your scenario. I am not advertising this site (there is NO benefit to us suggesting this), but DH does very well with the part time consulting gigs he's gotten over the years. https://www.yourencore.com/
I don't know what your expertise is, but many professional fit the criteria. They've been very good to us and professional in every way. Only a suggestion if you are considering part time. Not sure I've ever mentioned this here before.



BTW, our net worth has increased considerably but we've had a bull market for 10 years.

This is an awesome forum, you'll learn much here (and make some friends).
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Old 08-31-2019, 03:31 PM   #5
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Just given the fact that you've gone into such great detail and given this so much thought, is a sure sign you're ready to go. Your numbers certainly say you're ready to go.

I just FIRE'd in June and I too was apprehensive about pulling the trigger. Let me tell you that this summer has been one of the best of my life and all apprehension is long gone. The freedom to get up in the morning when you are fully rested and do whatever you want to do each and every day is a true blessing.

Also, my health is much better. I had my annual physical at the doctor about a month after fire, and every number was better than last year already. I have lost weight, gained stamina and feel like I'm 30 years younger.

I've also found a very part time hobby j*b that I'd do for free, but actually get paid a little something to do it.

Set a date and follow through. You've earned it!
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Old 08-31-2019, 04:59 PM   #6
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Your financials look good to retire but just keep in mind “life doesn’t follow the spreadsheet, the spreadsheet should follow your life”. So plan on flexibility and adjustments as you go along the way.
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Old 08-31-2019, 08:56 PM   #7
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Welcome! You seem well-prepared, financially. It seems as if you have your projected expenses covered, but without any margin (except the p/t jobs). My only real concerns would be what if ACA dissapeared, and you had to pay more than $1K for health care, or what if SS really does take a 20%+ haircut? Does your budget include $ for replacement vehicles and home repairs? Are you sure you won't want to take up any new hobbies or do more expensive travel in retirement?

If not, you're good to go! If I were you, I'd probably w$rk another several years to add some buffer and see what happens with our insurance system. But if there's anything you want to do now, and you're able to lower your spending if the SHTF, then go for it! You won't get your annual "3-5%" of your remaining life back if you do keep w#rking.
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Old 09-02-2019, 07:55 AM   #8
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Welcome! You seem well-prepared, financially. It seems as if you have your projected expenses covered, but without any margin (except the p/t jobs). My only real concerns would be what if ACA dissapeared, and you had to pay more than $1K for health care, or what if SS really does take a 20%+ haircut? Does your budget include $ for replacement vehicles and home repairs? Are you sure you won't want to take up any new hobbies or do more expensive travel in retirement?

If not, you're good to go! If I were you, I'd probably w$rk another several years to add some buffer and see what happens with our insurance system. But if there's anything you want to do now, and you're able to lower your spending if the SHTF, then go for it! You won't get your annual "3-5%" of your remaining life back if you do keep w#rking.

Thanks for the replies. HNL Bill - I do have car replacement every 7 years and home repairs @1% of value covered in the budget. The healthcare issue does concern me, thus the "Afraid of FIRE" thread topic. My thought was that I'm being conservative given the current scenario and if it changes I'll only be stuck with 9 years of higher premiums, assuming Medicare doesn't change much. I would either adjust the budget or increase the PT gig a little to cover it.

I understand the desire to have a buffer "just in case", but I expect that would be a never ending list. If I have 100% FIRECalc, that covers every historical scenario and thus includes a buffer that would have worked in all cases ... right?
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Old 09-02-2019, 08:01 AM   #9
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The healthcare issue does concern me, thus the "Afraid of FIRE" thread topic.
Don't be afraid, FIRE is good...

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Old 09-02-2019, 08:22 AM   #10
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^^^Haha, one of the best scenes in movie history.
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Old 09-02-2019, 08:26 AM   #11
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.... 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. ....
Good news! You have likely overestimated taxes a little. Looks like you have $10k in for taxes.

If your income was $80,000 and it was all ordinary income, after the standard deduction your taxable income would be $55,600.... in the 12% tax bracket as you think.

So you'll end up with $24,400 taxed at 0% because it is offset by the standard deduction, $19,400 taxed at 10% and the remaining $36,200 taxed at 12%.... for a total federal tax of $6,284... or 7.9% of $80,000.

Less that the $10,000 you have provided, but perhaps some state income tax will be needed too. Even with $2k for potential state income taxes that $8,300/yr vs $10,000 a year.... every little bit helps.

It might be even lower since some of the $80,000 of income may be qualified dividends or LTCG and taxed at 0%.... and some of your cash flow might be from basis in your taxable account and that would be untaxed as well.

Other than that nit, your plan seems well thought out and in good shape. Looks like your "ultimate" WR will only be about 2.2% so you are all set. Congratulations.

Also, one of the best first posts I have seen. Just curious.... if you solve for spending at 9%% success rate using FIRECalc's investigate tab, what do you get?
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Old 09-02-2019, 08:34 AM   #12
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Good news! You have likely overestimated taxes a little. Looks like you have $10k in for taxes.

If your income was $80,000 and it was all ordinary income, after the standard deduction your taxable income would be $55,600.... in the 12% tax bracket as you think.

So you'll end up with $24,400 taxed at 0% because it is offset by the standard deduction, $19,400 taxed at 10% and the remaining $36,200 taxed at 12%.... for a total federal tax of $6,284... or 7.9% of $80,000.

Less that the $10,000 you have provided, but perhaps some state income tax will be needed too. Even with $2k for potential state income taxes that $8,300/yr vs $10,000 a year.... every little bit helps.

It might be even lower since some of the $80,000 of income may be qualified dividends or LTCG and taxed at 0%.... and some of your cash flow might be from basis in your taxable account and that would be untaxed as well.

Other than that nit, your plan seems well thought out and in good shape. Congratulations.

Also, one of the best first posts I have seen.
Will you be our accountant, please?
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Old 09-02-2019, 08:37 AM   #13
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Will you be our accountant, please?
Sorry, did that for 34 years... was pretty good at it... but I'm retired now.
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Old 09-02-2019, 08:49 AM   #14
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Sorry, did that for 34 years... was pretty good at it... but I'm retired now.
Good for you but for me. pb4uski, been so helpful in other posts. I've learned from you. Thanks for sharing.
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Old 09-02-2019, 12:30 PM   #15
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In the documentary "The Unknown Known" w/Donald Rumsfeld : "There are 1)known knowns, 2)unknown knowns, 3)known unknowns, and finally 4)unknowns unknowns(things we do not know that we do not know).
Things you think you know that are false are in that rabbit hole.
You seem to have covered all you currently know.

You financially seem* ready to implement your knowns, prepared for life's unknowns as a manner of speaking.
Pb4uski's actuarial review suggests you're golden also.

Best wishes & Good Luck!
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Old 09-02-2019, 07:54 PM   #16
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You're good to go !
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Old 09-03-2019, 07:44 AM   #17
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Go Baby Go.

My wife and I just hit our third year retirement anniversary yesterday. It has been great.

Good luck with your decision.
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Old 09-03-2019, 08:49 AM   #18
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Here's my story and the 12 required answers:
Huh? What are the "12 required answers" ?
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Old 09-03-2019, 09:00 AM   #19
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Huh? What are the "12 required answers" ?
Responses to these 12 questions: Some Important Questions to Answer Before Asking - Can I Retire?
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Old 09-04-2019, 05:46 AM   #20
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Good news! You have likely overestimated taxes a little. Looks like you have $10k in for taxes.

If your income was $80,000 and it was all ordinary income, after the standard deduction your taxable income would be $55,600.... in the 12% tax bracket as you think.

So you'll end up with $24,400 taxed at 0% because it is offset by the standard deduction, $19,400 taxed at 10% and the remaining $36,200 taxed at 12%.... for a total federal tax of $6,284... or 7.9% of $80,000.

Less that the $10,000 you have provided, but perhaps some state income tax will be needed too. Even with $2k for potential state income taxes that $8,300/yr vs $10,000 a year.... every little bit helps.

It might be even lower since some of the $80,000 of income may be qualified dividends or LTCG and taxed at 0%.... and some of your cash flow might be from basis in your taxable account and that would be untaxed as well.

Other than that nit, your plan seems well thought out and in good shape. Looks like your "ultimate" WR will only be about 2.2% so you are all set. Congratulations.

Also, one of the best first posts I have seen. Just curious.... if you solve for spending at 9%% success rate using FIRECalc's investigate tab, what do you get?
Thanks for helping me think though this, pb4uski and others. Here are responses to your thoughts:

I used TurboTax and my ever-evolving spreadsheet to estimate taxes. On $82,000 income, I got $6579 in Federal taxes and $3590 in state taxes (Idaho). That's $10,169 or 12.4%. I will defray that somewhat with dividends from taxable (~$2k) and potentially money from the brokerage, but I used 12%. Once I get to SS age, state taxes go way down since ID doesn't tax SS benefits and we get some federal relief. We'll save about $4500 in taxes at that point.

I noted your 2.2% WR. I've seen you draw that our before. Can you show me how you arrived there with mine?

If I solve for 95% in FIRECalc, I get $86,013. But I also get some the cold shoulder from DW.

Thanks again.
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