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Old 01-11-2012, 08:12 PM   #1
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Do We Dare...

Hello everyone! Like many others before me, I am a long-time lurker. THANK YOU for the knowledge and inspiration that has helped us make FIRE even remotely possible!

I am 50, DH is 59. I’ve always been a saver and DH has always been a spender, but after years of “nagging” him about not working until he dies, we finally have the same goal – to retire ASAP. I have documented our monthly spending for about a decade, so we have an excellent idea of our retirement budget, including health insurance, taxes, and a “sinking fund” for major repairs and car replacement. No debt except for a small mortgage that will be paid off next April.

Firecalc is at a 100% success rate if we assume that DH takes SS at his FRA of 66, but do we dare rely on receiving SS? We will need to withdraw 4.8% until DH’s SS starts in 7 years; the withdrawal rate then drops to 3.25%. I’ve already discounted DH’s SS estimate by 10% and I’ve assumed my SS will be zero (even though the estimate is about $1,800/month at my FRA of 67).

In order to have a 4% withdrawal rate without considering ANY SS, we would have to save about $600,000 more. By the time we save that, DH will reach 66 anyway, working the entire time instead of retiring early because of a fear that SS will no longer exist in just a few years.

Thank you for your thoughts or links to relevant threads!
Tazona
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Old 01-11-2012, 08:52 PM   #2
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Why the fear SS will not exist? The worst I have heard is that about 2030, benefits might be reduced to 75% of what they would be under today's SS. Not great, but not a disaster either. This assume nothing is done to change SS. I suspect we will see both the early retirement age and 'normal' retirement age raised a bit eventually. That should help keep SS OK. The real problem will be medicare, along with health care in general.
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Old 01-11-2012, 08:56 PM   #3
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Has DH thought about some part time work for a few years? That might help bridge the gap. I am 59 and worked PT for the past 5 years until my job ended a few months ago. It worked out well for me and my employer.
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Old 01-11-2012, 09:14 PM   #4
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Tazona,

If you are hitting 100% success rate with FIRECALC, have you played with it further to see how much you can withdraw for a 95% success rate? I'm wondering how much breathing room you will have in your budget.

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Has DH thought about some part time work for a few years? That might help bridge the gap. I am 59 and worked PT for the past 5 years until my job ended a few months ago. It worked out well for me and my employer.
I am planning on SS payments, but I also will have a lot of money for discretionary spending that I could cut back on.
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Old 01-11-2012, 10:25 PM   #5
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I think a 10% discount for DH's SS is prudently conservative and a 100% discount for your SS is TOO conservative. I would suggest that you include 90% of your SS or 50% of DH's SS, whichever is greater. The near-term implications of SS are overblown and misunderstood by the media headlines - any reductions would not be for quite a while and it is likely IMHO that there will be chnages made to put the system back on firm ground.

For those who RE, it is not unusual that the withdrawal rate is higher in the early years and lower in the later years when SS kicks in. And a 100% survival rate is a bit conservative too.

It sounds to me like you are ready.
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Old 01-12-2012, 12:04 AM   #6
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Originally Posted by Tazona View Post
In order to have a 4% withdrawal rate without considering ANY SS, we would have to save about $600,000 more. By the time we save that, DH will reach 66 anyway, working the entire time instead of retiring early because of a fear that SS will no longer exist in just a few years.
I struggled with much the same thoughts when we decided for DH to retire at 62 1/2 and for me to semi-retire at 56. There are certainly those who can say that they discount SS entirely and think of it as just gravy and can have a 4% withdrawal rate that covers all expenses without SS. And, that is a nice position to be in.

But -- it wasn't our position. For us to get to that point, DH would have worked until 66 (his FRA) and I would work full-time for a number of years. In our case we decided to have DH retire and I did go ahead and semi-retire. I basically do assume that at some point all of our SS benefits will be taxed and I have looked at what happens if I either receive no SS (which I think is exceedingly unlikely) or if I receive reduced benefits (which seems more likely). The bottom line is that if I received half benefits we would have to cut some extras but would be OK. If I received no SS benefits then we would have to make some fairly significant lifestyle changes but could still be OK if we made them. To guard against that possibility which I think is small we would have to work for years longer (or in my case would have had to work full time for longer) which has its own negatives. So we went for it although I did continue working reduced hours in part to mitigate against risks.
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Old 01-12-2012, 04:49 AM   #7
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This is what I also plan to do : work PT for a few years to help bridge the gap, mainly because of SS and Medicare-related uncertainties.
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I am 59 and worked PT for the past 5 years until my job ended a few months ago.
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Old 01-12-2012, 07:51 AM   #8
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There will undoubtedly be some SS changes but they will also undoubtedly be quite small for people who rely on it for a key part of their retirement. If there is a disaster sufficient to make SS simply stop (which appears to be your major concern) it won't really mater since the rest of your investments will be gone as well.

I would be more focused on the survivability of my portfolio than SS.
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Old 01-12-2012, 07:52 AM   #9
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Congratulations. By any reasonable measure, you are FI right now. You can always delay RE to add to your safety stack. But why? You can never get the time back. You are in a great position to take the plunge now and never look back. Hope you do and enjoy the new freedom.
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Old 01-12-2012, 08:18 AM   #10
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Quote:
Originally Posted by Tazona View Post
Hello everyone! Like many others before me, I am a long-time lurker. THANK YOU for the knowledge and inspiration that has helped us make FIRE even remotely possible!

I am 50, DH is 59. I’ve always been a saver and DH has always been a spender, but after years of “nagging” him about not working until he dies, we finally have the same goal – to retire ASAP. I have documented our monthly spending for about a decade, so we have an excellent idea of our retirement budget, including health insurance, taxes, and a “sinking fund” for major repairs and car replacement. No debt except for a small mortgage that will be paid off next April.

Firecalc is at a 100% success rate if we assume that DH takes SS at his FRA of 66, but do we dare rely on receiving SS? We will need to withdraw 4.8% until DH’s SS starts in 7 years; the withdrawal rate then drops to 3.25%. I’ve already discounted DH’s SS estimate by 10% and I’ve assumed my SS will be zero (even though the estimate is about $1,800/month at my FRA of 67).

In order to have a 4% withdrawal rate without considering ANY SS, we would have to save about $600,000 more. By the time we save that, DH will reach 66 anyway, working the entire time instead of retiring early because of a fear that SS will no longer exist in just a few years.

Thank you for your thoughts or links to relevant threads!
Tazona
Hi Tazona. You may have set the record for longest time between registering and making your first post! We're glad you finally did, though. From your numbers it looks like you have done well, and your FireCalc input seems very conservative if you are assuming reduced SS for one and none for the other. That would appear to me to be a low probability scenario - possible, but highly unlikely. A greater risk IMHO is you fall into the "one more year" syndrome and talk yourself into extending your working life to better prepare for risks that are not likely.
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Old 01-12-2012, 08:20 AM   #11
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Thanks to all of you for your responses. The financial media for years has been warning the public "not to rely on Social Security," but those articles are then followed by "how to maximize your Social Security benefits" . It doesn't seem like SS could just be turned off, especially for those close to retirement. Good idea, katsmeow, to assume SS will be 100% taxable. I will run a few more scenarios with various percentages of SS for both me and DH. Part-time work is also an option for both of us.
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Old 01-12-2012, 09:44 AM   #12
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Quote:
Originally Posted by Tazona View Post
Thanks to all of you for your responses. The financial media for years has been warning the public "not to rely on Social Security," but those articles are then followed by "how to maximize your Social Security benefits" . It doesn't seem like SS could just be turned off, especially for those close to retirement. Good idea, katsmeow, to assume SS will be 100% taxable. I will run a few more scenarios with various percentages of SS for both me and DH. Part-time work is also an option for both of us.
You will hear the "Don't rely on SS" mantra here as well but in most cases it is not because the writers believe SS will disappear but simply warning people that it isn't sufficient in itself to fund a quality retirement. Remember, a lot of people are counting on SS alone to get hem through old age. On the flip side, think about what that implies - SS has become an essential component of national life. No Congress will simply blow it away, they will tweak it at the edges or, if we go conservative enough, would transform it over decades.
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Old 01-12-2012, 12:36 PM   #13
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The folks you are hearing that say to not count on one penny from social security are probably politically motivated or even more likely the kind of Financial Advisor or Financial company you want to avoid.
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Old 01-13-2012, 07:06 PM   #14
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Also, changes to SS are unlikely to apply to your olde DH.
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