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Old 08-09-2013, 07:52 PM   #1
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New Member, First Post, Can We Do It or Our We Crazy??!!!

So I have been coming to this site and reading for about a year. I signed up about a year ago but never posted anything until now.

So here is our situation.

43/42 years old. One child(21), that is raised and will be leaving the nest in 2 months. So we will be young empty nesters soon.

120K combined annual income (although my salary can add more with bonus)

Currently we have high 6 figures between tax deferred & taxable accounts, company stock and emergency savings. We currently max out 401K's and try to save an additional $5,000 or $6,000 a year as well.

Only debt is our home which should be paid off in 7 years.

We would like to try to retire in our early 50's but I just don't know if it is realistic.

I have several concerns,

1. Medical Insurance, I am guessing at least $1000 a month and probably more.

2. SS is projected to not have enough to pay out in full starting in 2033(about the time we would be eligible)

3. I have began to realize that a lot of our $$ will not be accessible until we turn 59.5

I have run the numbers through FIRE Calc and it seems to like our chances at anywhere from 95% to 100% success depending on a few variables.

One of the biggest things that I have a problem with is most everything seems to suggest that we should plan on 70% to 100% of pre retirement income. I really think for us it would be no more then 50%($60K) as we kinda like the simple life.

Thanks for the great site and thanks for reading my post. All input is welcome.
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Old 08-09-2013, 08:07 PM   #2
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The 70% of pre-retirement income may be appropriate for many people because in many cases working people take-home pay is ~70% of gross so if someone is living from paycheck to paycheck they would need ~70% in retirement too.

However, what is much more relevant is what you need to live. If you save 20% of the 70% you bring home and live on the remaining 50%, then all you need is 50%.

FWIW, our HDHI is currently ~$630/month and I expect in 2014 it will be $713/month but if I am successful in managing our income then our net cost will only be $408/month.

I think SS will be there, but it might be prudent to plan for 80% of what the SSA says you will receive.

As you noted, the trick to ER is to have sufficient taxable funds available to carry you from ER until 59 1/2 so you should consider dialing up your taxable account savings. At some point you may want to consider dialing down tax-deferred savings to the amount needed to capture any employer match and then divert some to taxable savings if you want to retire prior to 59 1/2.
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Old 08-11-2013, 08:02 AM   #3
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To the OP: I would not FIRE with less than 100% success rate from FIREcalc. Good luck whatever you decide to do. Welcome to the forum.
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Old 08-11-2013, 08:54 AM   #4
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Quote:
Originally Posted by Wishin 2B Fishin View Post
...

One of the biggest things that I have a problem with is most everything seems to suggest that we should plan on 70% to 100% of pre retirement income. I really think for us it would be no more then 50%($60K) as we kinda like the simple life....
I think you should try tracking your expenses very closely for the next 12 months (everyone needs a hobby haha). Then you can see how much you really spend, and you'll see what you could cut to get to a barebones budget if you needed to. That barebones budget really reassured us we were good to go as it is about 50 percent of our ER income.

By the time you reach your expected ER age the medical insurance costs should be more transparent imho so you will be able to budget for them more realistically.

All in all I think you should be good to go. Nice job of getting going while raising a child!
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Old 08-11-2013, 09:01 AM   #5
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See my responses in blue:

Quote:
Originally Posted by Wishin 2B Fishin View Post

I have several concerns,

1. Medical Insurance, I am guessing at least $1000 a month and probably more.

You should check out the ACA calculators and follow the many threads here on this. As long as your income is under 400% FPL (about 64k for a couple), you are eligible for subsidy and the monthly premium will be much less than 1k. Given your timeframe, you have years for the uncertainty around this to work itself out.

2. SS is projected to not have enough to pay out in full starting in 2033(about the time we would be eligible)

I'm personally not too worried about this because it's far off enough that I don't consider it in my SWR calculations (25-30 years away). The SS amounts are a substantial portion of my budget but I'm hoping to use a low enough withdrawal rate that my portfolio does not decrease much over time. If you wanted to take a haircut I would reduce SS by maybe 30%.

3. I have began to realize that a lot of our $$ will not be accessible until we turn 59.5

Look up the threads on 72t and roth IRA withdrawals. Alternatively you have a number of years to build up your taxable account and could spend that down (but I wouldn't reduce 401k contributions to do so)

I have run the numbers through FIRE Calc and it seems to like our chances at anywhere from 95% to 100% success depending on a few variables.

People are worried about Firecalc results now because they may be biased optimistically since by some measures we are at market highs in valuation. But again you have a number of years for this to "correct"

One of the biggest things that I have a problem with is most everything seems to suggest that we should plan on 70% to 100% of pre retirement income. I really think for us it would be no more then 50%($60K) as we kinda like the simple life.


70-100% of preretirement income can be way off for high income earners with simple lifestyles.

Track your expenses with a spreadsheet for at least a few years. Even if you have a general idea of where your money is going it can still be helpful. Don't forget to include in your budget long term and infrequent purchases (i.e. a new roof, new car).

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Old 08-11-2013, 10:51 AM   #6
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Welcome into the light. Like others have said, until you track your expenses, it is hard to say what % of pre-retirement income you will need. You have 8-10 years to track that, so you will know what you need. Also use the time to build up your taxable accounts. If you are still unsure when the time comes, work part time for a year or two. But you have a big head start on 99% of folks. Keep it up and you will be stretching a line before you know it.
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Old 08-11-2013, 12:24 PM   #7
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Bill Gates doesn't need 70 - 100% of his pre-retirement income to retire and neither do you if you saving a substantial portion of your income now. I see a lot of posts from people saying I don't know how much I'll spend in retirement. I plan to spend what I've budgeted. If I spent more than that I might run out of money.

We track our expenses now in a spreadsheet and then have lines for where things will change in the future - no more mortgage, no more kids at home, downsized house, etc. and leave padding for unexpected expenses.

The 70 - 100% figure comes from the investment industry where their objective is to keep as much of your money under their control as possible for as long as possible.
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Old 08-12-2013, 09:50 AM   #8
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Okay, thanks for the advise. I think my new hobby for the next few years will be to really track all expenses and get a few years to look at.

I did a rough estimate by looking at all bills paid for 1 year and subtracted out the house payment since it will be gone. Then I roughed in the rest and came up with a total.

Monthlies (Electric, Gas, Vehicle insurance, water, etc) = $10,000

Prop tax/insurance = $4,500

Gas/Hobbies = $6,000 - $8000 This is probably high but since this our hobby/entertainment I don't want to scrimp at all in this area.

Food = $6000

Medical insurance = $18,000??

We both absolutely hate(total distain) for long distance travel so no need to figure for that. We have our own little piece paradise where we spend the summers with good friends that is near by. We may take the occasional drive to one of the little coastal towns so I will set entertainment at $5000 (probably 1/2 that amount really because we are always on the river fishing)


So somewhere around 60K is probably pretty darn close, but I will start a complete tracking project going forward and compile a few years to look at.
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