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Can we FIRE in one year at age 39 & 57?
Old 01-14-2015, 04:54 PM   #1
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Can we FIRE in one year at age 39 & 57?

Hi all! I have been following this forum for a couple years now, as well as MMM & Jacobís ERE site, but this is my first post to any site. I am currently 38 years old and started becoming interested in retirement planning in my late 20ís when I discovered that normal retirement planning calculators and methods could not give me any useful results for planning an early retirement for myself and my now 56 year old boyfriend. I must say that all 3 websites have been very helpful to me in attempting to devise my own plan. Like most people, I worry that my FIRE number is too low, or I am missing something in the plan. I am hoping that this is my OMY!!!

Stats:
  • Retirement savings goal: $1,250,000 (doable unless the market takes a big, long term crash)
  • Current savings: $1,155,000 (75% his, 25% mine incl. 457b|70% stocks, 30% low risk|63% deferred tax accts, 37% Roth or taxable acct)
  • Retirement date: 2/1/2016
  • Social Security: $20,000 in mid-2025 (reduced 20% from $25,000 given by SSA, just in case).
  • Estimated expenses less healthcare & taxes: $30,000 (based on 2014 expenses + inflation, not bare-bones)
  • Estimated healthcare/insurance/dental: $10,000 with ACA plan
  • Estimated income taxes: $4,500
  • Total estimated expenses: $44,500 not including large purchases (van, car, RV, garage addition)
  • Large purchases in retirement: $190,000 (Replace car (3x), large van (2x), travel trailer (2x), & garage addition, over a 40 year time period)
  • Primary Home value: $80,000 to $120,000 paid off & fully remodeled from the studs up the past 10 years.
  • Soon to be rental property: value=$120,000, mortgage=$58,000 @ 4.125%, about $20,000 in repairs needed before it can be rented. Hopefully we can rent it before the end of this year.
  • Rental property income: $7,500/year starting in 2022 when it is paid off. The gross income would be $12,600/year before vacancy, taxes, insurance, repairs, & other admin expenses. I plan on managing it myself. Hopefully the rent will cover all the property expenses until it is paid off.
  • I plan to work part time, at least until the rental house is paid off, but it is hard to put a dollar figure to my income. My boyfriend may also work part time, but there is no plan at this point. So, I donít include this income into the equation.
  • No pensions or annuities (rolling over the ďriskyĒ non-colaíd state pension I canít take for 22+ years into an IRA)
  • We donít have any kids. Hopefully my parents & step-parents can take care of themselves as they get older. They are slightly older than my boyfriend, but not nearly as responsible.

Action items that have to be completed before we retire:
1) Rehab future rental property & get it rented. We will be doing most of the work ourselves as we did with our primary home. Hopefully materials plus limited labor wonít exceed $20,000. The house needs to be rented at least 10 months a year or else it will add to our living expenses.
2) Finish paying off my student loan by the end of this year.
3) Take over control of boyfriendís retirement accounts from financial planner & save $6,000/year with DIY. The accounts are currently with Schwab. We might manage them there, or we might move everything to Vanguard. I already DIY my own accounts and a Vanguard Roth for him.
4) We may get married this year or next year to simplify things. I would like his SS someday as mine will be small since I only have 15 full time income years, and 7 part time income years. Being married will also reduce his RMD since I am almost 18 years younger (as will small Roth conversions until he is 70).

Notes:
1) I am only counting on one SS check at a time due to age difference. If we are both still alive when I can take full SS, it is icing on the cake. When he dies, I will hopefully get his amount of SS, though they could change the rules by then.
2) We will most likely self-insure for long term care. I will still be pretty young when he gets old, and can hopefully take care of him unless/until he gets really bad and has to go into a nursing home or memory care unit. It is hard to plan for myself as that may be 40 to 50 years away.
3) We are both pretty healthy & active, and he does not need to take any medications. I have a couple generic prescriptions and expect to pay for them out of pocket.
4) It looks like we can withdraw $50,000/year + fund large purchases according to FireCalc, if our starting egg is $1,250,000. I worry if I am filling out the Off Chart Income/Spending section properly: +$7,500 starting in 2022 for rental income, and -37,500 starting 2042 to estimate added long term care costs ($30K extra from 2042-2062) & the loss of rental income due to sale of property(-7,500). I have run FC from 30-57 years, looking for the worst case scenario. $50,000/year is $5,500 above our normal expenses and could be used for extra medical, extra travel, kept in savings, etc.
5) I worry because I see people on here with $2 million to $10 million saved, sometimes with pensions too, and they still donít think they can retire. We do live in a low cost area in the Midwest, but I feel we have the ability to move to other somewhat higher cost areas of the US if we really wanted to (except NYC, SF, LA, or DC). Am I kidding myself?
6) I really donít want to work full time any longer than I have to, am not happy anymore at my current job, and would feel bad if I switched jobs and then ďretiredĒ 1 to 2 years later. I would like to try doing other things outside my career to make money, own my own small business, and possibly collaborate with my boyfriend on something. I am also completely open to working as a part time or short term, full time employee/contractor in my career field (Information Systems related field).
7) Our dividends, interest, and capital gains have been more than our living expenses for at least the past 2 years, but these have been pretty good years for the market.
8) Sorry for all the information! I am trying not to forget anything. Please tell me we can FIRE next year, and I am not dreaming
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Old 01-14-2015, 04:56 PM   #2
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You can answer your own question by answering these: Some Important Questions to Answer Before Asking - Can I Retire?
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Old 01-14-2015, 05:26 PM   #3
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You can't retire without his money. If you break up then you have no claim to his money. If I were in your situation, I would not quit my job until I got married.
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Old 01-14-2015, 05:40 PM   #4
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You have to have a fallback plan for what happens to you if you split up before getting married or even get married and then get a divorce. You would not be eligible for your spouse's SS if you got divorced before being married 10 years. I am not sure what assets of his you would be entitled to if you got married and then divorced after 5 years or so, but that is something to think about. The reality is half of all marriages end in divorce, and you don't want to end up divorced and broke five years down the line.
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Old 01-14-2015, 06:46 PM   #5
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Welcome Dreaming...
I agree with aaron and daylate - you need to look at your retirement plan individually during the time before you get married. Your numbers don't work without his savings... so don't quit your job till you're married. This isn't a moral judgement -it's a legal/financial judgement.

In the meantime, save save save... and sock away a few more SS years.

Sounds like you guys are doing a great job at living below your means and saving...
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Old 01-14-2015, 07:48 PM   #6
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Welcome!

I agree with others that you will be dependent on your BF. If your career field is one that is hard to reenter after a multi year unemployment, that could be a problem if you have to go back to supporting yourself.

But if you can easily reenter your profession, then it may be fine.

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Old 01-14-2015, 10:41 PM   #7
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Thanks for the feedback. I have reviewed the thread "Some Important Questions to Answer Before Asking - Can I Retire?". It is a great resource!!!

As for marriage, I told my boyfriend that we have to get married before I quit my job to protect me in case he dies. He is OK with this as we have been together for almost 12 years and are best friends. Do most married couples calculate if they will both be FI if they get divorced before they retire? It is a smart thing to do, but I wonder how many people actually do it?

I would have to work another 4 years to be truly independent without a roommate, though I will cover 35-40% of our regular expenses in retirement through investment income, part-time income, and eventually rental income (the rental property is my house, the primary residence is his). We each need less money for retirement if we are together than if we are separate.
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Old 01-14-2015, 11:09 PM   #8
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Originally Posted by Dreaming of Freedom View Post
Do most married couples calculate if they will both be FI if they get divorced before they retire? It is a smart thing to do, but I wonder how many people actually do it?
The issue here is that you have not been married for 12 years or even 1 year so far, so if you split up before you got married or even afterwards you probably would not get half the assets your boyfriend / future husband accumulated prior to marriage and he has the bulk of the assets. Plus you might no longer being paying into SS during what are often a workers' peak earning years, you would not be entitled to his SS if you didn't marry or divorced before 10 years and presumably you would no longer be saving for retirement during your peak earning years. Fifty percent of marriages end in divorce. It is good to have a Plan B.

I don't know what most married couples actually do, but I have a lot of divorced friends who probably wished they had thought more about what would happen to them financially if they got divorced or their husbands left them before it actually happened.
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Old 01-18-2015, 10:31 PM   #9
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I went back to the drawing board and figured up what my income would be later in retirement once I got my own Social Security. I came up with $26,000/yr which includes about $10,500 of SS, after 20% reduction, using actual figures with zeros this year and beyond; and about $15,500 in income from 4% of investments, provided that they are the same value when I take SS as they are now. I am probably going to use a 3.5% withdraw rate per year until that point.

The numbers are still not quite as good as I would like for myself if I were on my own. I am thinking that I might work 2-3 more years and/or try to buy another investment property if the first one works out OK this year, and I can get a good deal. Or I might decide you only live once, one of us could die early, and we should enjoy life together while we can. I would have to make part time work a big priority though. Maybe I could get a prenup that says he has to stay married to me 10 years, or else give up a certain amount of money to make up for lost SS? I am kidding...mostly, but they do it in Hollywood all the time. I am not exactly the Hollywood trophy wife type though even though I am much younger...I am more of a "I will help you work on the car/house" type

I don't know if I can create polls yet, but it would be interesting to see how many couples do retirement planning and make sure each person would be OK if they got divorced.
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Old 01-18-2015, 10:54 PM   #10
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Originally Posted by Dreaming of Freedom View Post
I went back to the drawing board and figured up what my income would be later in retirement once I got my own Social Security. I came up with $26,000/yr which includes about $10,500 of SS, after 20% reduction, using actual figures with zeros this year and beyond; and about $15,500 in income from 4% of investments, provided that they are the same value when I take SS as they are now. I am probably going to use a 3.5% withdraw rate per year until that point.

The numbers are still not quite as good as I would like for myself if I were on my own. I am thinking that I might work 2-3 more years and/or try to buy another investment property if the first one works out OK this year, and I can get a good deal. Or I might decide you only live once, one of us could die early, and we should enjoy life together while we can. I would have to make part time work a big priority though. Maybe I could get a prenup that says he has to stay married to me 10 years, or else give up a certain amount of money to make up for lost SS? I am kidding...mostly, but they do it in Hollywood all the time. I am not exactly the Hollywood trophy wife type though even though I am much younger...I am more of a "I will help you work on the car/house" type

I don't know if I can create polls yet, but it would be interesting to see how many couples do retirement planning and make sure each person would be OK if they got divorced.
Like you, I would guess not many

The minute I even considered this calculation I would decide to stay single. There are many possible partners, but only so much money in the world.
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Old 01-19-2015, 01:41 AM   #11
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You have a good grasp on the basics. A few observations for your situation, which is a little atypical, given the age differences:

Quote:
Originally Posted by Dreaming of Freedom View Post
  • Social Security: $20,000 in mid-2025 (reduced 20% from $25,000 given by SSA, just in case).
  • Estimated expenses less healthcare & taxes: $30,000 (based on 2014 expenses + inflation, not bare-bones)
  • Estimated healthcare/insurance/dental: $10,000 with ACA plan
...
4) We may get married this year or next year to simplify things. I would like his SS someday as mine will be small since I only have 15 full time income years, and 7 part time income years. Being married will also reduce his RMD since I am almost 18 years younger (as will small Roth conversions until he is 70).
As you note, his SS will be larger than yours. Given that you are relying on his SS, and that you will be collecting it much later than him (and inflation will likely erode it far more), I would suggest you think of having him delay collecting it until he reaches age 70, if it would mean you would be able to collect a larger SS check when you reach full retirement age.

Quote:
Originally Posted by Dreaming of Freedom View Post
2) We will most likely self-insure for long term care. I will still be pretty young when he gets old, and can hopefully take care of him unless/until he gets really bad and has to go into a nursing home or memory care unit. It is hard to plan for myself as that may be 40 to 50 years away.
...
4) It looks like we can withdraw $50,000/year + fund large purchases according to FireCalc, if our starting egg is $1,250,000. I worry if I am filling out the Off Chart Income/Spending section properly: +$7,500 starting in 2022 for rental income, and -37,500 starting 2042 to estimate added long term care costs ($30K extra from 2042-2062) & the loss of rental income due to sale of property(-7,500). I have run FC from 30-57 years, looking for the worst case scenario. $50,000/year is $5,500 above our normal expenses and could be used for extra medical, extra travel, kept in savings, etc.
If you sell the rental property, what are you doing with the proceeds? Is that added to your investment portfolio, or will you use the lump-sum sale proceeds to pay for things?

You have to be careful with your projections on the LTC issue. If he needs to receive help in a care facility, that would easily run you $50,000/year MINIMUM in 2015 dollars. In addition to your annual expenses! Also, even if you think you are able to care for him at home, be realistic. Could you really pick him up and maneuver him around, bearing a majority of his weight, if need be? There may be some things you could do, but there are limits. So for you to add $30k extra for LTC costs from 2042-2062 isn't necessarily a slam-dunk safety measure. While the total $ in your budget is generous ($600k future dollars), keep in mind that he could need care in his 70s, and that taking an earlier hit to your budget with a much larger annual amount could have far different consequences than a smaller $30k line item starting much later.

Also remember that FireCalc actually gives perverse results for a time horizon of 40+ years, because there are fewer 40+ year periods to test against. So if you plug in a 45 year retirement, you might end up with a higher safe withdrawal rate - even though some of the more challenging retirement periods that would likely end in failure aren't adequately represented in those 45-50 year retirement spans.


Quote:
Originally Posted by Dreaming of Freedom View Post
5) I worry because I see people on here with $2 million to $10 million saved, sometimes with pensions too, and they still donít think they can retire. We do live in a low cost area in the Midwest, but I feel we have the ability to move to other somewhat higher cost areas of the US if we really wanted to (except NYC, SF, LA, or DC). Am I kidding myself?
It's a very simple question: are you able to live off of a 3%-3.5% withdrawal rate from your portfolio to meet your anticipated budget, with some fluff built in? And whether you want to live in NYC or Podunk, Alabama also completely depends on your budget. Are you ok with living in a very very low cost of living area that may not be as desirable, or do you want to live in a nicer area of a "somewhat higher cost of living area"? Only you can answer that question. "Feeling" like you have the ability to move to a higher cost area is irrelevant. Your future landlord won't give a hoot what your "feelings" are on whether you can afford it - your budget either will afford the higher cost of living or it won't. There isn't really any subjective component. Unless, that is, you are comfortable with merely assuming that you can somehow magically offset higher dwelling expenses, higher food costs, and higher everything-else-costs and will somehow make it work in a higher cost of living area.
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Old 03-26-2016, 12:54 AM   #12
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March 2016 update: Not yet retired.

Savings: 1.21 million, Net Worth: 1.36 million (25% mine, 75% his)

Living expenses past 12 months: $26,000 (not incl. Income tax, health/dental insurance, “rental house” mortgage/expenses, or main house remodel over $3,000). Could shave another $2,000 off if needed.

Estimated income taxes & health/dental insurance & expenses: $16,000/year.
Total est expenses in retirement: $42,000/year not including large purchases (car, van, travel trailer, new garage).

New retirement savings “number” is $1.3 to $1.4 million.

Other updates:

We are both still working full time. He can retire anytime, but does not even think about it. I would like him to retire the end of this year. I may retire 4/1/17 or 2/1/18 depending on my “stash” and status of rental house rehab & debt.

We still have 2 houses, and are finally moving into our main home after years of remodeling. The plan is to rehab the 2nd house and rent it this fall if all goes well (it needs a ton of work and $). It will be paid off by 2023, and then will net ~$7,500/year in today's dollars.

I plan to work another 1 to 2 years until age 41 or 42 to build up my own retirement fund and pay off the rental house rehab work. I will not retire until we are married and my house is rehabbed and rented for a few months. My boyfriend does not know when he will retire, although he has enough money to retire now at age 57. He is NOT good at looking into the future, but luckily he is fiscally conservative and we are usually on the same page about almost everything.

I did take over control of my boyfriend's retirement accounts from his financial planner, so we no longer have that pesky ~$5,500/year fee. I took over the accounts on December 31st, 2015 and despite the recent market roller coaster, things are not looking too bad.

I still do not know if I will wait nearly 20 years to take my state pension, or remove my contributions instead. The politicians are making the pension problems worse than they already are, and I worry it will be defunct before I am 59.5. I am planning to take my SS at 62, my boyfriend will take his as late as possible (between age 66.6 & 70), and then I will take the survivor's benefit when he dies. NOTE: we will be married before I retire.

I made some changes in FireCalc raising our income needs to $100,000/year for 5 years to simulate assisted living/nursing home needs for him. I also upped our large one-time expenses by $50,000 to account for possibly moving to a more expensive house/area. I do not include the proceeds of the sale of our main home as I figure it can help cover any additional expenses during the later years of my life. I am shooting for an initial withdrawal rate of 3.25% for us which would be further reduced by part time income, future rental property income, and Social Security. FireCalc says we look more than 100% OK for 48 years, though I could be alive longer than that.

My own independent retirement success numbers are not quite as good. I need to either work part time until I am 50ish, work full time for another 4 years, or pick up another investment property that will net at least $3,500/year. I will pay off my student loans this summer.

Our 2015 Dividends, Interest, and realized capital gains were still higher than our needs, though about $7,000 less than 2014.

I think things are starting to come together I think....I hope.


*I got an old thread warning, so I hope this update is OK.
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Old 03-26-2016, 02:25 AM   #13
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Thanks for the update. Sometimes the OMY is is good.
We have 6 years age difference and wanted to start ER together.
Almost 3 years ER now and life is good.
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Old 03-26-2016, 06:13 AM   #14
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If you have run your FireCalc properly and you are at 100% then you are in good shape. Well done.
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Old 03-26-2016, 08:19 AM   #15
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Just curious why you have not yet married,if you marry today you will have some spousal protection under SS. Right now to SS, you are just the girlfriend with no survivor or spousal SS benefits.
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Old 03-30-2016, 08:58 AM   #16
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[*]Estimated healthcare/insurance/dental: $10,000 with ACA plan
Is this amount for premiums only, or does it include accounting for the max OOP as well? Are you counting on ACA subsidies?

For us (ages 48 and 52), a silver plan without subsidies the premium for two in 2016 would run $12,480/yr and the max OOP is $7200/yr.

I don't expect we'd hit the max OOP every year, but you do have to figure in hitting it some years - maybe 50% of the time? (Just a guestimate I am making, no hard data to go on there.)

Also, FIREcalc doesn't inflate healthcare expenses by more than the CPI. I discovered Fidelity's RIP tool which is more conservative and inflates healthcare expenses by 7%. (ACA actually will likely increase by more than that, but this is based upon Medicare expected inflation - and is more realistic than CPI, IMO. BTW, have you accounted for the change in healthcare costs when you each hit Medicare?)

I recommend taking a hard look at projecting healthcare expenses and consider exploring your numbers with the RIP calculator in addition to FIREcalc.
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 03-30-2016, 09:43 AM   #17
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Hi Dreaming of Freedom.

You asked (last year) if folks had considered their plans if divorce factored in. I think many of us have looked at our plans if death takes out one of the parties... In other words - the impact if the a SS stream or pension is reduced due to the death of one party. Granted it doesn't involve splitting the assets - but it's a big enough impact it needs to be considered.

In my case - it made an impact on our plans if DH kicks the bucket sooner - he's already on SS and it's a chunk of our monthly income stream. As his legal wife - I'd get his SS (despite being under 62) until our kids are 18... then it goes away. I have 2 very small pensions that will come online... we chose joint survivorship for those to avoid a loss of the income stream. If I die first - DH would then collect *my* SS (and lose his) since mine is the larger amount.

All of these scenarios work because we're legally married. Not a moral issue - a legal issue with the way pensions and SS are handled with respect to spousal benefits.

To put it in perspective my dad never legally married my step mom because it would have had a negative impact on his and my step mom's income streams. She was collecting widow benefits from her first husband, Dad was collecting survivor benefits from my mom's pension. The income stream hit would have been $5k/month if they'd legally married. As my stepmom said - it's not like they were going to have kids (they were in their late 60's early 70's when they met). So the marriage thing can work both ways.
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Old 03-31-2016, 06:27 PM   #18
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I'm 40, 2 kids, FI but not RE. Married 6 years, DW 35.

Yes. We talked about it and NO, it wouldn't be possible . What would most likely happen is we split assets 50/50 and then weight it so that whoever has the kids (probably her because if we divorced I suspect it'd be ugly and she would fight like hell for kids and almost certainly win... I wouldn't take them from their mom... she's an amazing SAHM today). Then I'd probably go "back" to work (assuming I retired ).

If she wasn't my wife it's totally different. People have their own opinions on the institution of marriage... that's fine... unfortunately no one cares about the legal opinion people have. There the law matters.

If she married me today, she would not have the same claim on assets I accumulated while we weren't married. That gives me huge leverage. If she'd been living with me and helping during that time it would make things pretty unfair. There ARE laws protecting people in that situation but being legally married is pretty rock solid.

Of course my wife and I will NEVER divorce, but neither will the other half of people who eventually do .

As the person in our relationship who was the primary earner and she the primary "time giver" it's important that she have a solid way of getting the deferred value for her time. Money can be taken back... time not so much.

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Old 04-04-2016, 01:15 PM   #19
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We plan on getting married prior to my retirement. We have just been really busy and have not gotten around to it because it is lower priority than say fixing the roof, car, etc. Sadly, I have not even gotten around to putting together wills, but at least I got all the beneficiary information updated last year. We should be eligible for decent ACA subsidies as long as they don't go away. We could definitely handle a couple years here and there of $18,000 health insurance/healthcare expenses, though we would really have to cut back our lifestyle if we had $18,000 of health ins + healthcare expenses every year. How much should I budget for health insurance & healthcare expenses every year? What about Medicare & related expenses. We are both pretty healthy and do not have any regular medications that we have to take.

Is there a way to get access to the Fidelity RIP tool if you are not a Fidelity customer? I have used FireCalc, cFIREsim, & Quicken Lifetime Planner. I have also been working with a FP on a comprehensive financial plan through their "black box" software, but I am not sure how much I can trust it. Their software wants to always put us in the 25% tax bracket, and we have never been in that bracket, or plan to be in that bracket.
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Old 04-08-2016, 04:32 PM   #20
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Quote:
Originally Posted by Dreaming of Freedom View Post
We should be eligible for decent ACA subsidies as long as they don't go away. We could definitely handle a couple years here and there of $18,000 health insurance/healthcare expenses, though we would really have to cut back our lifestyle if we had $18,000 of health ins + healthcare expenses every year. How much should I budget for health insurance & healthcare expenses every year? What about Medicare & related expenses. We are both pretty healthy and do not have any regular medications that we have to take.
Go to healthcare.gov and price out a silver plan (the only ones eligible for subsidies, since that is what you are counting on) for the two of you. I used the premium plus half the max OOP in my modeling - not sure this is the best way, but, it is my attempt at a best guess (that half the time you may have bad years where you hit the max OOP).

You may find this thread useful:

how do I model for increases in healthcare spending?

Also, regarding Medicare, I found the information posters shared with me on this thread I started very helpful:

Budgeting for Medicare costs

Quote:
Originally Posted by Dreaming of Freedom View Post
Is there a way to get access to the Fidelity RIP tool if you are not a Fidelity customer?
Not sure, hopefully someone else will answer that! I do believe I read you can open some kind of free account, but I'm not sure.

Quote:
Originally Posted by Dreaming of Freedom View Post
I have used FireCalc, cFIREsim, & Quicken Lifetime Planner. I have also been working with a FP on a comprehensive financial plan through their "black box" software, but I am not sure how much I can trust it. Their software wants to always put us in the 25% tax bracket, and we have never been in that bracket, or plan to be in that bracket.
I believe you can choose your tax bracket in the RIP model.
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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