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New want out at 50 Am I really there?
Old 12-26-2009, 10:38 AM   #1
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New want out at 50 Am I really there?

My wife and I are looking at retirement In April of 2011 when I am 50. We currently are right at $997k in cash and securities and will save another $95K by retirement. break down is $602K in 401K & IRA and $244K balanced portfolio of funds and $150K cash. Zero debt and $240K equity in our home no mortgage. We do not use our home equity as part of our planning and would use only as last resort. We have tracked our expenses for the past 5 years and asked our self what changes the expenses when we retire. We came up with $70K per year plus income tax. Of the $70K $15 K is very descretioary and could cut if needed. If we stop earned income on retirement date combined SS income at age 62 is $32k annuallycombined. Have budgeted health and long term care into the budget. The fire calculator says for a 42 year history we are 97.3% succsess rate using mixed portfolioand 70K expense. However other calculators I have used I need to have around $1.5 million to be set free? Is it the income tax piece? If so any easy formulas to calc income tax. We have no need to leave any money behind when we are gone. So are we really there or am I missing something?

Would like to hear from others

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Old 12-26-2009, 11:16 AM   #2
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I dunno...

We are a few years older. Have a larger portfolio. I still work part-time, and make decent money. Yet, I will admit to being a bit scared in the last market rout.

Of course having to support children through college and having two homes didn't help. I thought we have been frugal, but the truth is that we never really have a budget, and our annual expenses in the last 10 years have ranged from $40K to $110K+.

So, everybody is different. We are certainly different than many people here...

PS. After reading people's blogs on how they have a good life living on so little, and touring the country on a small RV, we feel significantly less scared. OK, no more European trips, but been there, done that... There would be many places in the US and Canada left to see. Oui?
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Old 12-26-2009, 11:40 AM   #3
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Sorry, it looks borderline or fail to me. My reasoning is that you are way too dependent on a good outcome for social security benefits more than a decade in the future. That's something that you have little control over.

Your expenses are rather high to me as well for a couple who has no house payment, but maybe you factored in $25,000 annually for health care?
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Old 12-26-2009, 11:43 AM   #4
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We are 52/55, retired and our portfolio is a little higher than yours expected on your last day of work. We also have a pension that covers a fourth of our yearly expenses and low cost medical benefits. We will both receive ss benefits.

We budget $40k (not including income taxes) a year and will stick to that as best we can. However, we have a $10k a year 'fluff' amount that can be used if absolutely necessary. I only take 3% from our portfolio each year because we have seen what can happen to the market and the economy. IMHO, taking 4% or more is risky.

$70k seems too high to me.....$55k seems a little too high as well. The other thing that concerns me is if one you dies, the social security received each month will drop.

My 2 cents.

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Old 12-26-2009, 01:45 PM   #5
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Quote:
Originally Posted by Trawler View Post
We came up with $70K per year plus income tax. Of the $70K $15 K is very descretioary and could cut if needed. If we stop earned income on retirement date combined SS income at age 62 is $32k annuallycombined. Have budgeted health and long term care into the budget. The fire calculator says for a 42 year history we are 97.3% succsess rate using mixed portfolioand 70K expense. However other calculators I have used I need to have around $1.5 million to be set free? Is it the income tax piece? If so any easy formulas to calc income tax.Would like to hear from others

Thanks
Thanks

I wish there was a way to predict future tax burden accurately, but taxes depend on too many individual and collective variables (e.g. where your retirement income comes from; what Congress decides to do; where you live).

For someone who depends on fully taxable pensions, the tax percentage may be higher than it is for someone who depends mostly on investment income. That could change if the person moves to a state that doesn't tax pensions. Property tax depends on your location, and so on. But taxes come out of your pocket, so they most definitely count as part of your expenses.

If you haven't done so already, recommend you come up with a tax amount that seems reasonable based on your individual situation, add it to your other predicted expenses, and run that through Firecalc. When I did that, I found I needed to work longer and save more

Good luck,

Amethyst
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Old 12-26-2009, 03:37 PM   #6
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I think one of the most of important questions to ask yourself is how flexible you are willing to be after you retire. Are you willing and able to cut expenses and/or take on some part-time work (or start a small business) if you need to?

I didn't feel 100% comfortable with my finances but wanted out of a miserable job situation badly. I left megacorp but have worked a few hours a week at a pt job (in a completely unrelated industry). That has helped keep me sane through the market downturn and I've not regretted my decision to retire for a minute. I'm about the same age as you.
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Old 12-26-2009, 03:40 PM   #7
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Welcome and sorry to say but 1.1 million is only going to give you 44k a year unless you have a pension you did not mention I'd keep working or really cut expenses .
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Old 12-26-2009, 05:12 PM   #8
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Welcome and sorry to say but 1.1 million is only going to give you 44k a year unless you have a pension you did not mention I'd keep working or really cut expenses .
I wondered the same, but then the OP wrote ...

Quote:
Originally Posted by Trawler View Post
..The fire calculator says for a 42 year history we are 97.3% succsess rate using mixed portfolio and 70K expense...
... so he might have other incomes.

In my case, our assets would far more than cover the lowest $40K expenses, but not enough for the $110K+ that we splurged one year. But oh, what fun we had that year...
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Old 12-26-2009, 05:34 PM   #9
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I think the OP is not counting income tax in his FC runs. I agree with the advice above to re-run the numbers using whatever you would have to gross in order to net $70k a year, say $83K or so. Many think that tax increases are an inevitable consequence of the Great Recession Rescue of '08.

I'd be curious as to how much you are budgeting for health insurance.

Have you considered ESR (early SEMI-retirement)? It's one way to ease things back while keeping the financial safety net active.
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Old 12-26-2009, 06:22 PM   #10
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I ran Firecalc with your roughly your numbers of $1.1 million and $32000 SS (assumed you and your wife were same age) starting 12 years after retirement and used a 42 year period and the success rate was much lower. This is based on spending of $70000 a year. So either I am not understanding your numbers and so entered something wrong in Firecalc or you did. What exactly were the numbers you entered in each field?

As far as taxes you can search and find a number of tax calculators. A lot depends on what portion of the $70,000 is taxable. If you retire at 50, are you just going to take money out of taxable accounts until 59 1/2 or are you going to do SEPP or what?

If you have $70,000 in come filing married with standard deduction the calculator I looked at said taxes for 2009 would be roughly $6860. That does not include any state income taxes and that assumes everything is taxed at ordinary income rates.
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Old 12-26-2009, 06:28 PM   #11
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In my case, our assets would far more than cover the lowest $40K expenses, but not enough for the $110K+ that we splurged one year. But oh, what fun we had that year...
I've had a lot of fun, but never $110k worth. I think I'd need my gaskets replaced and my front end aligned if I were to experience something like that!
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Old 12-26-2009, 07:04 PM   #12
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Thanks every one,
I need to go figure income tax in the fire calc as I did not origionally. Fidelity has a good cash flow analysis including tax bases on type of and income in today's tax world. My expense projection include our real estat tax but not income tax. One was curious how much we budgeted for health care and we budgeted $10,800 per year for medical and long term care. these figures were based on recent qoutes we recieved and current expenses. In the fire calc I entered the 70K and 42 years. Our SS income in the dates we would start to recieve. Wife could recieve three years earlier than I. Current total amount saved 997K and 95K savingsd before retirement in 2011. and balanced portfolio. We are flexible on working. My wife is a nurse and we have discussed a couple extra years with her being a traveling nurse or she has option of 16 hous week and can recieve healthcare. All income from SS and investments no pensions was used in fire calc. We have also considered moving to southwest FLA as no state or local tax and RE tax is much less than here in Ohio. Again do not need to leave behind any $$ and plan to spend the principal.

Thanks again for the replies and please come back with any other thioughts.
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Old 12-26-2009, 07:24 PM   #13
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The good news is your wife could easily get a nursing job in SW FLA . The bad news is the real estate taxes are not cheap and homeowner's insurance is expensive in SW FLA .
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Old 12-26-2009, 07:31 PM   #14
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Thanks every one,
In the fire calc I entered the 70K and 42 years. Our SS income in the dates we would start to recieve. Wife could recieve three years earlier than I. Current total amount saved 997K and 95K savingsd before retirement in 2011. and balanced portfolio.
I still get a lot less Firecalc success rate than you. I assumed in doing this that your wife's Social Security was 16k a year as was yours.

I wonder on the 95k savings. When you enter it are you entering it on the not retired tab? If you are you entering 32k roughly (i.e. 32k for 2009, 2010, and 2011) or what? The number on that tab for savings is an annual number so make sure you aren't putting 95k there.
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Old 12-26-2009, 07:35 PM   #15
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I've had a lot of fun, but never $110k worth. I think I'd need my gaskets replaced and my front end aligned if I were to experience something like that!
Ah! So that explains why I am now having high blood pressure, experienced shaky knees when on that ladder, and had one of my teeth falling out this year.












Actually, I looked at the records after the fact and found out that that year, we spent nearly $30K for home improvements. Add in a bit of travels and some miscellaneous expenses and we got there. However, DW was still working, I made good money that year, the stock market was rising, so who was counting?

We did our part to "stimulate" the global economy then. No wonder things got so bad when the music stopped, if you consider how many NW-Bounds there were...
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