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Old 08-02-2019, 08:15 PM   #21
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pb4uski, thanks so much. Now that you've clarified all it feels funny that I couldn't decode your original calculation myself. So, this $23k is included in the 'perpetual fund' of 3.5% SWR that starts being used up as soon as they both stop earning income and start withdrawing.

When people do such back of the envelope calculations, I'm curious how close or far they are from the results run on FireCalc, Fidelity, etc.? I'll have to test on our own numbers and see what I get.

Thanks for your patience and walking me through
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Old 08-03-2019, 06:58 PM   #22
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Quote:
Originally Posted by jt999 View Post
Not from my wife but from Corporate.

Wife (46) and I (48) have 2 children. One child recently graduated college and started working in June. Our other is senior in high school and will begin college in 2020.

401Ks/IRA's - 1.205M (AA is 60% Stocks/20% Bonds/20% Cash Currently)

Home - FMV 450K (Paid)- remodeled kitchen last year. Needs about 20K of work. Plan to put on market 2020/2021 and move closer to my spouse's work.

Taxable Account - 56K

Savings - 97K - we like to keep more cash on hand than is needed but will not add to this going forward.

529 - 90K

Small Pension - 10-15K/annually

SS - 17K and 20K annually, estimated

No Retiree Healthcare

Total Net Worth ~2M

Net Income (after 401K contributions) - 20K Month - spouse doubled salary in last 2 years so this has jumped recently

Expenses - 6K Month

Looking for advice - Any recommendations for how we can deploy 220K annually to FIRE in ~Years? Our Savings Target is 250K Annually, of which 30K is Targeted for College.

We would estimate we need 9K/month after-tax for travel, healthcare, etc. for the 1st few years and then slightly less after a few years - we are considering moving overseas (dreaming of Italy) where we would pay higher taxes but lower healthcare.

We are open to 72T, Annuities, Roth Conversions - Or should we just continue to put money into the Taxable Account?
I've read the replies
Here are a few things missing in replies

1) No one has suggested annuities (I agree with this- don't need them)
2) Note that everyone is focused on savings rates, not the 60-40/ how your money is invested (I think this logic is correct, just pointing it out)
3) You did not give a time frame on selling house (adding $450k to portfolio) and then buying again (do you think the entire $450k would be needed).

Here is my math:
9k/mo=$108k annually
4% rule (x25)= $2.7 M needed ($2.7 M of invested assets). There can be a debate as to whether to sell house and include that, or sell house and set money aside to buy new real estate.

I also agree with the poster which used 3.5% instead of 4% based on retiring so young.

That math would be
3.3% (x33) $3.5 M of invested assets needed.

IMO the goal is max $3.5 M needed, however there is good probability you could retire on less than that- these factors would allow number to be less
1) Spouse income defers some of $108k annual need into retirement
2) the $9k monthly estimate budget is reduced
3) You adopt a withdraw plan which is flexible if market has a negative event early in retirement

You have $1.2 M now, need $3.5 M and estimate you can contribute $220k per year for 3 years into retirement. I do not include the cash or the house in these calculations. I would suggest the following

1) Invest new money with following priorities
1a) max out 401k/ tax deferred options
1b) invest in taxable accounts with consideration to dividend paying stocks (more on this later)
2) Look for money to double every 9 years. Meaning in 9 years, an 8% return would double the money. You want to retire in 3 years, money should double in 9. There are 6 years of waiting to pull trigger which could be debated. This double could take $1.4 M and turn it to $2.8 M which is minimum needed based on my first projection above.

For retirement, you need to think through how to take distributions. One reason I suggested dividend paying stocks for taxable account is if you can find a way to live off dividends while rest of accounts grow, you increase likelihood of success. There is more than one distribution technique from portfolio, and it appears you are more focused on accumulation than the distribution at this point.
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Old 08-04-2019, 07:33 PM   #23
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Well, Jim, the OP needs $9k/mo for the first few years and then $6k/mo. Would that change your math of the outcome?
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Old 08-04-2019, 08:31 PM   #24
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$3.5m is crazy. Less than half that. See post #6.

Quote:
Originally Posted by pb4uski View Post
I think taxable account is your best bet.... invested either in tax-free municipal bonds or in domestic equities that qualify for preferenced tax rates... and that is after maxing out any tax-deferred contributions since you'll be in a high tax bracket.

Prepare a plan using Quicken Lifetime Planner, included in Quicken Deluxe and higher versions. Also, you could use FIRCalc. I get the following rough numbers:

Spending once pension and SS start of $23k/yr.... $72k spending less $12k pension less $37k SS = $23k gap; divided by 3.5% SWR = $657k funding needed

$12k pension plus $37k SS = $49k pension income * (67-47-3) = $833k funding needed

$36k a year for travel, etc for first few years = $108k funding needed

Total funding needed = $1,598k

Currently have $1,205k tax-deferred savings + $56k taxable + $97k savings = $1,358k

Will add $660k over next 3 years, bringing total to $2,108k.

I think you can make it.
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Old 08-04-2019, 09:45 PM   #25
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Well, Jim, the OP needs $9k/mo for the first few years and then $6k/mo. Would that change your math of the outcome?
Yes, the purpose of my math was to give mins/maxes to set goals and expectations, not give a specific plan. I did not do a year by year analysis of spending when calculating macro savings amounts for goal setting.
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Old 08-05-2019, 06:52 AM   #26
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Yes, the purpose of my math was to give mins/maxes to set goals and expectations, not give a specific plan. I did not do a year by year analysis of spending when calculating macro savings amounts for goal setting.
You make yourself sound like Suze Orman there, and that is not a good thing around these parts..
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Old 08-06-2019, 12:37 PM   #27
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You make yourself sound like Suze Orman there, and that is not a good thing around these parts..
Hey, those trendy jackets don't come cheap!
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Old 08-09-2019, 05:46 PM   #28
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Thank You for the feedback. 3.3M - 3.5M was my original target but that was more of a 5 year plan so it's interesting that you arrived at basically the same figure. That would include investing the proceeds from the sale of our house in 1 year and renting for a few years. Our original target calculations showed that we has a reasonable chance do that in 5 years...essentially going from 1.3M + 450K to get to 3.0M+ if we are able to save ~200K annually in the brokerage with 8% return, that would get near the lower bound of that range (3.3M) but probably not in 3 years. Reality check, I suppose. After FIRE, we would like to rent and then possibly buy a property but would target limiting that to 300K so the 150K would remain invested. For now, our primary focus really is on adding aggressively to the brokerage.
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