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Another Alaskan, working on the 12 Questions
Old 11-18-2017, 10:32 AM   #1
Confused about dryer sheets
 
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Another Alaskan, working on the 12 Questions

Hi from the last frontier!

DW and I are working on launching our second child, he's currently a senior in high school. The nest egg just hit the $1M mark, and I told myself that would be the time to see if early retirement was an option.

I am 55 and will reach 30 years of federal employment in 2020, shortly after I turn 58. With our pensions and anticipated portfolio ******** says we have 95% likelihood of being able to retire in 2020 spending 105% of current expenses.

Therein lies the rub. I don't have a good handle yet on our retirement expenses, particularly separating out the non-discretionary from the discretionary-but-vital from the what-the-heck-indulgences. I've always had a working date of 2025 for my retirement planning, and I confess to being caught a little off guard by the possibility of going five years earlier.

So it's time to enforce some self-discipline and rein in those sloppy financial habits. Credit card debt is first priority, as well as tracking expenses. I plan to pull all our records back to January of 2017 as well as start tracking every expense through 2018. I'm a tech head and would love to have all this information in digital form. I stopped using Quicken a decade or two ago, and looking at another thread it still seems to be one of those programs that's easy to hate. I'll probably go with GnuCash just because I'm a Linux user and it sounds like it has sufficient capability.

As we get our financial house in order and firm up our expenses numbers, one thing I'm looking at is how much to have in a Roth account. Unfortunately we have been oblivious to the potential advantage of Roth conversion so that's something I'll also be looking at before year's end.

Here's where we stand with the questions:

1. (Expenses) - working on it.
2. (Health care) - My FEHB will continue through retirement if I take an immediate FERS annuity. Am starting to drink from the fire hydrant that is info about Medicare.
3. (Major expenses) - Another question mark. Will have to firm that up, but house will definitely need some TLC before we sell it and buy smaller.
4. (Lifestyle changes) - I think this question and #3 will determine how long the OMY glide is beyond 2020.
5. (Sources of income) - FERS pension, PERS pension, SSA, TSP, DW's SBS and Deferred Comp, plus our handful of other IRAs.
6. (Confirmed pension income) Yes, the numbers are as accurate as can be short of requesting an estimate from the provider.
7. (SSA benefits) Mostly accurate, need to estimate what DW's benefit will be from her limited years of paying SS tax and allowing for windfall elimination.
8. (Taxes) 2016 tax year our marginal rate was 25%, need to get a better handle on tax strategy in retirement, unsure if dropping down to lower bracket is possible.
9. (Nest egg) All retirement accounts, really need to position myself with more cash. House has some equity which isn't in this calculation. Allocation is strong on equities, but I don't have a handle on DW's asset allocation yet.
10. (Life expectancy) Current life tables shows 83 for a male my age. I am planning on both of us living to 93.
11. (FireCalc) I use ********, and it gives me a 95% success with spending 105% of current spending.
12. (Death) I've been the significant breadwinner since DW left a toxic office job for a part time job she loves. So all my benefit calculations are with max survivor options. It's something to fine tune as we approach the final date.
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Old 11-18-2017, 05:10 PM   #2
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Welcome aboard. Seems that you are really dialing it in as the end date approaches. For tracking expenses, I just use an Excel spreadsheet that I made up myself. I buy almost everything on the credit card. When the monthly bill arrives, I merely categorize the individual charges and enter each subtotal appropriately. When I write a check, I enter it in the proper category. The hardest thing to do is remember to enter cash expenditures. Fortunately, they are few and recurrent (e.g. barber, dry cleaner, house cleaner.)
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Old 11-18-2017, 05:33 PM   #3
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Welcome!

For a benchmark on expenses, DH and I simply went thru historical actuals. IE, we pulled our checking history (since every CC or cash transaction eventually resulted in a debit to our checking accounts). We figured average the last 3 years, + healthcare, and then yay if taxes are less or any expenses go down in retirement that's just gravy.

We probably travel about the same rate so far, but we're only a year into RE, so I expect that to tick up a little, but we factored in plenty of wiggle room either way.
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Old 11-18-2017, 09:10 PM   #4
Confused about dryer sheets
 
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Thanks for the welcomes! I've burned most of a day doing more research and tracking down some of my expenses. Thankfully most of my banks do a good job making data available online. My credit union sucks in that regard though. I was able to go back six months, but for anything earlier than June I'll have to input by hand. Now I remember why I disliked doing this in Quicken years ago.

I saw a few online reviews for open source money management software and decided to try KMyMoney. It is fairly useful so far, I'm starting to fill in the picture with various accounts, loans, etc. It may take me a while to input some info from various paper statements, but I'm guessing I'm about two/thirds done with all of my 2017 year-to-date expenses.
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Another Alaskan, working on the 12 Questions
Old 11-19-2017, 06:29 AM   #5
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Another Alaskan, working on the 12 Questions

A few thoughts:

+1 on Gumby's approach. We use an excel spreadsheet which has the advantage of allowing you to personalize categories and add sheets for anything such as modeling taxes, summarizing Assets and liabilities, details of individual holdings, calculating AA and modeling different AA's, Etc. My spreadsheet has become the single most important document in our financial lives and now goes back to 1991. We have been tracking detailed expenses since 2004.

Have you attended the week long federal retirement seminar yet? DH was a federal employee and his agency allowed all employees and their wives to attend the retirement seminar anytime within 5 years of planned retirement. All expenses paid, including travel lodging meals etc. I'm not sure how different agencies handle it but I found the seminar to be fantastic. Specialists on the various aspects of retirement are brought in to lecture on their field and do Q and A. There was a lot of one on one counseling.

Regarding Medicare and healthcare in general, as FEHB is currently structured you will have terrific options and if you sign up for Medicare B, a decision you will need to make, one way or another, there are an increasing number of plans offered to federal annuitants, that dovetail nicely with Medicare-no copays, no deductibles, no OOP's(other than prescription copays) and some that provide a hefty ($1,200 to $1,800 annually for self plus one)HRA to offset Medicare B premiums. We just switched to a plan that is 289 per month for self plus 1 with a kick back of $1,800 per year to cover B premiums. We consider ourselves very lucky to be FEHB participants.


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Old 11-19-2017, 07:25 AM   #6
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Welcome!


Tracking historical expenses is a start. However, you may miss some major irregular expenses, like the house fix-up you mentioned, or replacing cars. Also, spending is usually different in retirement. You talk of moving, and a smaller house may save you on monthly expenses, but may not--for example, if you move to a place with HOA fees from one with none. Some retirees travel more or take on expensive hobbies now that they have free time, while others may spend less if they had high work commute costs. As I said, spending can be different, not necessarily more or less, but the more time and effort you put in to figure this out, the closer you should be.
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Old 11-19-2017, 08:23 AM   #7
Confused about dryer sheets
 
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I have not been to the retirement seminar yet, but that's definitely a must-do item. Up until this year retirement was always a thing to worry about down the road. Other than contributing the IRS maximum to my TSP and reallocating assets every couple of years I haven't spent much time on actual planning. So I've got a lot of work ahead of me... strike that, WE have a lot of work ahead of US, before we'll know if and when we can RE.

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Originally Posted by Golden sunsets View Post
A few thoughts:

+1 on Gumby's approach. We use an excel spreadsheet which has the advantage of allowing you to personalize categories and add sheets for anything such as modeling taxes, summarizing Assets and liabilities, details of individual holdings, calculating AA and modeling different AA's, Etc. My spreadsheet has become the single most important document in our financial lives and now goes back to 1991. We have been tracking detailed expenses since 2004.

Have you attended the week long federal retirement seminar yet? DH was a federal employee and his agency allowed all employees and their wives to attend the retirement seminar anytime within 5 years of planned retirement. All expenses paid, including travel lodging meals etc. I'm not sure how different agencies handle it but I found the seminar to be fantastic. Specialists on the various aspects of retirement are brought in to lecture on their field and do Q and A. There was a lot of one on one counseling.

Regarding Medicare and healthcare in general, as FEHB is currently structured you will have terrific options and if you sign up for Medicare B, a decision you will need to make, one way or another, there are an increasing number of plans offered to federal annuitants, that dovetail nicely with Medicare-no copays, no deductibles, no OOP's(other than prescription copays) and some that provide a hefty ($1,200 to $1,800 annually for self plus one)HRA to offset Medicare B premiums. We just switched to a plan that is 289 per month for self plus 1 with a kick back of $1,800 per year to cover B premiums. We consider ourselves very lucky to be FEHB participants.


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Old 11-19-2017, 08:32 AM   #8
Confused about dryer sheets
 
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Yeah, those costs are the big unanswered questions right now.

One thing we do know is that we're staying in Alaska for the foreseeable future. We recently bought some remote land and are building a cabin on it eventually for recreation and getaway opportunities.

We've also started talking about what we'll be doing with all this time, and knock me over with a feather but it turns out we have different notions of what retirement will look like. DW sees lots of travel in our future, and I see a small house with a large shop. A tinkerer's gotta tinker! So once we've worked out what's doable and get some price tags put on those future expenses we'll have a little more clarity on the future expenses and how they impact the timeline.

Edit to add: Downsizing the house is more of consideration of our future health condition than for a particular financial advantage. I'd like to have a place that I can comfortably live in until I become fertilizer. That means single floor ranch with few to no stairs. My folks are in their mid-80s and dealing with their house, which is a three-story adventure in itself. Plus I want a lot I can put a big shop on. Our current house is not conducive to a shop nor for aging gracefully.

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Originally Posted by RunningBum View Post
Welcome!


Tracking historical expenses is a start. However, you may miss some major irregular expenses, like the house fix-up you mentioned, or replacing cars. Also, spending is usually different in retirement. You talk of moving, and a smaller house may save you on monthly expenses, but may not--for example, if you move to a place with HOA fees from one with none. Some retirees travel more or take on expensive hobbies now that they have free time, while others may spend less if they had high work commute costs. As I said, spending can be different, not necessarily more or less, but the more time and effort you put in to figure this out, the closer you should be.
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