Hello! Soliciting input on retirement plan

[downrod]

Hello! Greetings from Michigan

I have been lurking, reading posts and replies, thirsty for knowledge, as our own retirement date is starting to come into focus. Our planned retirement date is May 1st, 2023.
I will be age 64 and my wife will be age 57 at time of retirement.

My wife and I make good incomes for the area that we live in. My income is approx. 110 K, My wife’s income is approx. 116 K. My job is not secure. As a matter of fact, there is a large cut coming next week and I do not know if I will survive the cut. My wife’s job is much more secure.

We have already downsized, selling our large house and bought our retirement condo. The condo was a cash sale with no mortgage. The condo is worth approx. 325 K.
We have zero debt. We have always paid cash for our cars and have never ran a credit card balance.

I have calculated our expenses to be 90K per year, after taxes. I will need to withdraw 111K per year

Our essential expenses are 62K per year. The essential expenses include a budgeted 22K expense for health care. This may or may not be a high estimate, but I believe that it should be a safe estimate. We are both currently healthy and take no medications.

The remaining 28K is spending on the fun stuff. Boating, vacation, 2 months rental in Florida, etc. (We hope to escape winter for a few months each year) These are expenses that could be cut back if necessary.

We have been contributing the max to our 401Ks for many years. We have also been contributing to our Roth IRAs, however only in recent years. The Roth portion of our portfolio is definitely lacking and I fear that it will have a negative effect on our withdrawal strategy.

I have ran FireCalc a few different ways.
If I leave the cash in our bank accounts out of it and just run the 1M in retirement accounts, I get a success rate of 56% for 40 yrs and 83.2% for 30 yrs
If I add the cash in, it lowers my equity position to 40% and I get a success rate of 78% for 40 yrs, and 99.2% for 30 yrs.

Here are our vitals:
Tax Filing Status- Married- filing jointly
Current Tax Rate – 22% (19% Calculated)
Age – 60
Spouse – 53

Pension- None
Savings and checking accounts - 235 K (2.5 yrs. expenses)
Investment Portfolio - 1M
401K and Roth contributions - 60K per year until retirement date
Asset allocation- Stock- 49% Bonds-36% Cash- 9% Other – 6%

Annual Spending plan – 90K Essential Spending 62K

Calculated Overall Expense Ratio 0.11%
Vanguard Advisor fee – 0.3% on approx. 550K - $1650 annually
(Thinking about dropping this and proceeding on my own.)

My IRA
Vanguard Total Stock Market Index – 106K
Vanguard Total International Stock Index – 53K
Vanguard Total International Bond Index - 75K
Vanguard Total Bond Market Index -174K
Industrial Property Trust- Non-traded REIT- 29K

My Roth IRA
Vanguard Total International Stock Index – 27K
Vanguard Total Stock Market Index – 3K

Wife’s IRA
Vanguard Total International Stock Index – 21K
River Source Variable Annuity – 28K

Wife’s Roth IRA
Vanguard Total International Stock Index – 16K

Joint Taxable Account
Vanguard 500 Index Fund – 3K
Vanguard Growth Index Fund – 3K
Vanguard Total Stock Market Index Fund – 65K
Vanguard Prime Money Market Fund – 5K

My 401K
MFS Growth Fund – 53K
American Funds Euro-Pacific Growth Fund – 18K
American Funds 2025 Target Date Ret. Fund – 49K
Stable Value- Guaranteed Interest Account - 65K 3% interest

Wife’s 401K
Vanguard Total Bond Market Index Fund – 94K
Vanguard Total International Stock Index Fund – 48K
Vanguard Total Stock Market Index Fund – 72K

Please comment on the feasibility of our plan. Let me know if you see anything that I am missing in my calculations. Asset allocation, recommendations, etc.
I would really appreciate the input.

 

[ivinsfan]

Welcome and thanks for such a detailed breakdown.

A couple things are jumping out at me. First of all the amount you have allocated for HI. It seems way too high. You will have one year to Medicare which will costs much less.

Since you have after tax cash/savings to live ACA healthcare should cost you little or nothing. You go on Medicare at 65 and your DW continues on ACA till she is 65. You will want to take a combo of cash and either IRA withdrawals to extend your ACA timeframe. Go to ACA threads and start reading. Second when will you pull the trigger on SS? It's very possible that with cheaper HC and 2 SS checks your core expenses will be almost completely covered.

 

[pb4uski]

No social security?

Taxes of $21k ($111k withdrawals less $90k of spending after taxes) looks a bit high... have you done a proforma return in TT or similar to verify that $111k of withdrawals would result in $21k of federal and state income taxes?

For health care, go to healthsherpa.com or your state exchange website and pretend that you just lost coverage to get an idea of the monthly cost of health insurance both before and after subsidies. +1 with ivinsfan that in a year after retiringyour costs should be a lot less once you are on Medicare.

 

[Dtail]

+1 on the ACA managed income concept.
Are you including SS in your Firecalc calculations?
If you get laid off, what is your plan to carry you until 2023?

 

[downrod]

Welcome and thanks for such a detailed breakdown.

A couple things are jumping out at me. First of all the amount you have allocated for HI. It seems way too high. You will have one year to Medicare which will costs much less.

Since you have after tax cash/savings to live ACA healthcare should cost you little or nothing. You go on Medicare at 65 and your DW continues on ACA till she is 65. You will want to take a combo of cash and either IRA withdrawals to extend your ACA timeframe. Go to ACA threads and start reading. Second when will you pull the trigger on SS? It's very possible that with cheaper HC and 2 SS checks your core expenses will be almost completely covered.

I am confused by your answer. I will go to ACA threads and start reading. I dont understand why my healthcare would cost little to nothing. Is that if I spend all of my cash savings to live on at first, thus show no income?

Right now it is my plan to take SS at my full retirement age of 66 yrs 7 months, and my wife at her full retirement age of 67
My SS estimate is 35K and my wife's is 31K. SS was calculated into my FireCalc projection

 

[HI Bill]

Welcome! Did your FIRECALC runs include future savings? If not, your success rates might be slightly higher.

I'd suggest taking the Savings and checking accounts - $235 K, and moving them to a money market account such as Vanguard's VMFXX. While it's not FDIC insured, you'll get dividends, and make about 2% right now. You're likely giving up ~$4,500 annually in earnings, and losing purchasing power vs. inflation.

His 401(k). Since you're over 59, rollover into the IRA once retired.
Her 401(k). Since she might retire between ages 55 and 59.5, she may be able to take distributions prior to age 59.5 without penalty. Suggest leaving in 401(k) in case of need.

Are you happy with those success rates? Most here go for 100%, but you're definitely giving up time for security that you may not need. I love the "Rich, Broke, or Dead" calculator, which helps put this in perspective. https://engaging-data.com/will-money-last-retire-early/

Good luck!

 

[downrod]

No social security?

Taxes of $21k ($111k withdrawals less $90k of spending after taxes) looks a bit high... have you done a proforma return in TT or similar to verify that $111k of withdrawals would result in $21k of federal and state income taxes?

For health care, go to healthsherpa.com or your state exchange website and pretend that you just lost coverage to get an idea of the monthly cost of health insurance both before and after subsidies. +1 with ivinsfan that in a year after retiringyour costs should be a lot less once you are on Medicare.

Yes. SS at full retirement age. 66 and 7 months for me (35K) and 67 for my wife (31K)

I calculated my taxes based upon 111K income. That putys me in the 22% bracket. Actually calculated, my tax burden works out to be 19%. Am I missing something here? If so, please advise

 

[downrod]

+1 on the ACA managed income concept.
Are you including SS in your Firecalc calculations?
If you get laid off, what is your plan to carry you until 2023?

I will look into the ACA managed income concept. I am completely ignorant about ACA. Thanks!

 

[downrod]

Welcome! Did your FIRECALC runs include future savings? If not, your success rates might be slightly higher.

I'd suggest taking the Savings and checking accounts - $235 K, and moving them to a money market account such as Vanguard's VMFXX. While it's not FDIC insured, you'll get dividends, and make about 2% right now. You're likely giving up ~$4,500 annually in earnings, and losing purchasing power vs. inflation.

His 401(k). Since you're over 59, rollover into the IRA once retired.
Her 401(k). Since she might retire between ages 55 and 59.5, she may be able to take distributions prior to age 59.5 without penalty. Suggest leaving in 401(k) in case of need.

Are you happy with those success rates? Most here go for 100%, but you're definitely giving up time for security that you may not need. I love the "Rich, Broke, or Dead" calculator, which helps put this in perspective. https://engaging-data.com/will-money-last-retire-early/

Good luck!

Yes. my FireCalc projection included us saving 60K total to our 401Ks and Roths until our retirement date.
I really am not happy with our projections. Although I do have a financial plan created by my Vanguard Advisor that shows us at 100%. That is part of my frustration. There does not seem to be a high correlation between these calculators

 

[ivinsfan]

I am confused by your answer. I will go to ACA threads and start reading. I dont understand why my healthcare would cost little to nothing. Is that if I spend all of my cash savings to live on at first, thus show no income?

Right now it is my plan to take SS at my full retirement age of 66 yrs 7 months, and my wife at her full retirement age of 67
My SS estimate is 35K and my wife's is 31K. SS was calculated into my FireCalc projection

Is it clearer to you now? Just read a few threads and put a question on them or come back here and ask. You have time to read and ask questions. I truly believe you don't need anything near 22K a year for HC.

That's what our comments about managed income refer to.

 

[HI Bill]

I calculated my taxes based upon 111K income. That putys me in the 22% bracket. Actually calculated, my tax burden works out to be 19%. Am I missing something here? If so, please advise

$111,000 income (assuming all comes from tax-deferred accounts), less MFJ standard deductions $24.4K = $86,600. Taxes are calculated as follows (2018 rates):

• First $19,400 at 10% bracket: $1,940
• $19,400-$78,950 at 12% bracket: $7,146
• $78,950-$86,600 at 22% bracket: $1,683

TOTAL: $10,769
Effective tax bracket = $10,769/$111,000=9.7%
IF you take some of your income from your taxable accounts, then the principal won't be taxed, and this will lower your income taxes further.

 

[ivinsfan]

Yes. SS at full retirement age. 66 and 7 months for me (35K) and 67 for my wife (31K)

I calculated my taxes based upon 111K income. That putys me in the 22% bracket. Actually calculated, my tax burden works out to be 19%. Am I missing something here? If so, please advise

My point from my earlier comment 35+31..66K close to your barebones that already includes 22K for HC.

 

[HI Bill]

Although I do have a financial plan created by my Vanguard Advisor that shows us at 100%. That is part of my frustration. There does not seem to be a high correlation between these calculators

There might be some incorrect or vastly differenct assumptions in one or the other of the calculations.

The first time I asked VG to create a retirement plan, we created 4 versions before it was mostly right.

Changing the inflation rate in FIRECALC or the spending model or the AA, can create wildly differing results.

 

[pb4uski]

$111,000 income (assuming all comes from tax-deferred accounts), less MFJ standard deductions $24.4K = $86,600. Taxes are calculated as follows (2018 rates):

• First $19,400 at 10% bracket: $1,940
• $19,400-$78,950 at 12% bracket: $7,146
• $78,950-$86,600 at 22% bracket: $1,683

TOTAL: $10,769
Effective tax bracket = $10,769/$111,000=9.7%
IF you take some of your income from your taxable accounts, then the principal won't be taxed, and this will lower your income taxes further.

What he said! Even with state income tax OP will still be well under 19%... unclear if OP's 19% was state and federal or just federal.

 

[Dtail]

I will look into the ACA managed income concept. I am completely ignorant about ACA. Thanks!

Healthsherpa.com and Healthgov.org will be your guideline links as to how much the ACA will cost you and your family.

See the below link for the details on what is included for "MAGI", which is the official version of taxable income that is used for ACA premium/OOP amounts.

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

Ask us questions. Many of us manage our MAGI income to low levels in order to minimize medical costs.

 

[downrod]

$111,000 income (assuming all comes from tax-deferred accounts), less MFJ standard deductions $24.4K = $86,600. Taxes are calculated as follows (2018 rates):

• First $19,400 at 10% bracket: $1,940
• $19,400-$78,950 at 12% bracket: $7,146
• $78,950-$86,600 at 22% bracket: $1,683

TOTAL: $10,769
Effective tax bracket = $10,769/$111,000=9.7%
IF you take some of your income from your taxable accounts, then the principal won't be taxed, and this will lower your income taxes further.

Duh!! I didnt take out my standard deductions. I like that result much better!
In that case, i will not need a 111K withdrawal. Time to do some calculations. I need to get 90K after taxes. Thanks! Good catch!

 

[downrod]

This community is awesome! So much great information!

 

[downrod]

By calculating my taxes correctly, (thanks to HNL Bill) I am able to lower my annual withdraws from 111K to 99K. I ran the new values through FireCalc and my new success rate is 100% for 40 yrs. I feel much better about things now. I will also deep dive the ACA information to try to get a better handle on what my actual health care costs might be.
Great stuff!

 

[Carpediem]

By calculating my taxes correctly, (thanks to HNL Bill) I am able to lower my annual withdraws from 111K to 99K.

This is the tax calculator I use for fed tax:

https://www.calcxml.com/calculators/federal-income-tax-calculator

 

[Bigdawg]

IOur essential expenses are 62K per year. The essential expenses include a budgeted 22K expense for health care. This may or may not be a high estimate, but I believe that it should be a safe estimate. We are both currently healthy and take no medications.

Just curious I guess but 40K/year on what? Essentials? Food, heat (you do live in Michigan), cable package?, Gas and car maintenance? You say you have no debt (house, car, etc...) Can't imagine 40K of essentials.

 

[downrod]

Just curious I guess but 40K/year on what? Essentials? Food, heat (you do live in Michigan), cable package?, Gas and car maintenance? You say you have no debt (house, car, etc...) Can't imagine 40K of essentials.

This is what it looks like:

Condo Costs

Condo Dues 3,924
Property Tax 3,875
Homeowners insurance 630
Maintenance 500
Spider Control 365

Utilities

Gas 882
Electric 815
Water 525

Groceries 6,240
Dining Out 5,200
Coffee 500

Health Insurance 18,000
Dental Insurance 720
Deductibles 3,000
Prescriptions 1,200

My Vehicle
Insurance 1,065
Fuel 2,340
Car Lease 3,300 We have never leased before, but we budgeted for it
Tabs 140
Maintenance 200

Wifes Vehicle
Insurance 1,039
Fuel 2,340
Car Lease 3,300
Tabs 140
Maintenance 200

Clothing 700
Personal care 1,000

Essential Expenses Total 62,140

 

[jIMOh]

Hello! Greetings from Michigan

Our planned retirement date is May 1st, 2023.
I will be age 64 and my wife will be age 57 at time of retirement.


I have calculated our expenses to be 90K per year, after taxes. I will need to withdraw 111K per year

Our essential expenses are 62K per year. The essential expenses include a budgeted 22K expense for health care.

The remaining 28K is spending on the fun stuff. Boating, vacation, 2 months rental in Florida, etc. (We hope to escape winter for a few months each year) These are expenses that could be cut back if necessary.


I have ran FireCalc a few different ways.
If I leave the cash in our bank accounts out of it and just run the 1M in retirement accounts, I get a success rate of 56% for 40 yrs and 83.2% for 30 yrs
If I add the cash in, it lowers my equity position to 40% and I get a success rate of 78% for 40 yrs, and 99.2% for 30 yrs.

Here are our vitals:
Tax Filing Status- Married- filing jointly
Current Tax Rate – 22% (19% Calculated)
Age – 60
Spouse – 53

Pension- None
Savings and checking accounts - 235 K (2.5 yrs. expenses)
Investment Portfolio - 1M
401K and Roth contributions - 60K per year until retirement date
Asset allocation- Stock- 49% Bonds-36% Cash- 9% Other – 6%

Annual Spending plan – 90K Essential Spending 62K

Calculated Overall Expense Ratio 0.11%
Vanguard Advisor fee – 0.3% on approx. 550K - $1650 annually
(Thinking about dropping this and proceeding on my own.)

My IRA
Vanguard Total Stock Market Index – 106K
Vanguard Total International Stock Index – 53K
Vanguard Total International Bond Index - 75K
Vanguard Total Bond Market Index -174K
Industrial Property Trust- Non-traded REIT- 29K

My Roth IRA
Vanguard Total International Stock Index – 27K
Vanguard Total Stock Market Index – 3K

Wife’s IRA
Vanguard Total International Stock Index – 21K
River Source Variable Annuity – 28K

Wife’s Roth IRA
Vanguard Total International Stock Index – 16K

Joint Taxable Account
Vanguard 500 Index Fund – 3K
Vanguard Growth Index Fund – 3K
Vanguard Total Stock Market Index Fund – 65K
Vanguard Prime Money Market Fund – 5K

My 401K
MFS Growth Fund – 53K
American Funds Euro-Pacific Growth Fund – 18K
American Funds 2025 Target Date Ret. Fund – 49K
Stable Value- Guaranteed Interest Account - 65K 3% interest

Wife’s 401K
Vanguard Total Bond Market Index Fund – 94K
Vanguard Total International Stock Index Fund – 48K
Vanguard Total Stock Market Index Fund – 72K

Please comment on the feasibility of our plan. Let me know if you see anything that I am missing in my calculations. Asset allocation, recommendations, etc.
I would really appreciate the input.

Before I analyze the investments, could you explain why the $111k withdraw for 90K in expenses?
NM saw these replies

$111,000 income (assuming all comes from tax-deferred accounts), less MFJ standard deductions $24.4K = $86,600. Taxes are calculated as follows (2018 rates):

• First $19,400 at 10% bracket: $1,940
• $19,400-$78,950 at 12% bracket: $7,146
• $78,950-$86,600 at 22% bracket: $1,683

TOTAL: $10,769
Effective tax bracket = $10,769/$111,000=9.7%
IF you take some of your income from your taxable accounts, then the principal won't be taxed, and this will lower your income taxes further.

By calculating my taxes correctly, (thanks to HNL Bill) I am able to lower my annual withdraws from 111K to 99K. I ran the new values through FireCalc and my new success rate is 100% for 40 yrs. I feel much better about things now. I will also deep dive the ACA information to try to get a better handle on what my actual health care costs might be.
Great stuff!

I assume this is for taxes?
What is the Roth contribution per year?
What is the expected Roth balance at time of retirement?

I would reallocate the highest expected return investments to the Roth.
Have you tried the flexible retirement planner?

 

[downrod]

Our Roth contributions will be around 5K each. Last year we were over the limit and had to take money out of the Roths. Our Roth accounts are severely lacking. This has been a mistake on my part.
I am guessing that my Roth will be worth about 55K at retirement and my wifes approx 35K

 

[Mmm Rrr]

Maintenance 500
Spider Control 365

Ew, the $365 a year for spider control makes me shiver!

 

[downrod]

Ew, the $365 a year for spider control makes me shiver!

We live on the lake. they are huge and they are everywhere! I have the exterior sprayed once per month from May to October