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Is this correct?
Old 04-23-2005, 07:57 PM   #1
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Is this correct?

With the following data I get this with FIREcalc.

Current investments, 300K
SS, 500 in 18yrs.
wifes pension, 56,000 in 8 yrs.

I quit now and draw 20,000 till wifes pension kicks in and then increase the withdraw to 44,000. So total of $100,000 with pension.

I am 47 and the wife is 44. She is a middle school principle and she will have 28yrs of service and be 52 in 8 years, thus qualifying for the 80 and out rule. She enjoys her job but I'm sick of mine. The big thing is after she retires she can continue on with her health insurance at group rates. We own our home and have no debts so this is much more than we need to get by.

Are these numbers right? Seems to good to be true.

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Re: Is this correct?
Old 04-23-2005, 08:31 PM   #2
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Re: Is this correct?

Quote:
Are these numbers right? *Seems to good to be true. *
Go with your instinct there...

The SWR number around here is about 4-4.5%, meaning you could take out 4-4.5% of your $300k, so at best, you could take out $13500/year.
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Re: Is this correct?
Old 04-23-2005, 10:35 PM   #3
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Re: Is this correct?

Quote:
Are these numbers right? *Seems to good to be true. *
It sounds like you're drawing down $20K/year savings for eight years so at your wife's retirement you'll have consumed roughly half your portfolio.

The short-term trick is making sure that your $300K is reasonably certain to survive the next eight years with such a high withdrawal rate. For example it might be a bad idea to have it all in small-cap nanobiotech stocks, but a high-bond portfolio might do fine.

The long-term trick is figuring out how to obtain $100K/year in retirement for the rest of your life. If you optimistically survive the eight years to retirement with $175K remaining (a little portfolio growth?) and then kick up withdrawals from $20K to $44K, you'll only have four or five years before you've consumed your savings. You'll still be a good bit short of SS and you haven't mentioned what happens to your health insurance after she retires.

The bad news is that if you want a survivable 4% withdrawal rate of $44K/year (rising with inflation) then you're gonna need to start with $1.1M when your spouse retires.

The good news is that you might be able to live on a lot less than $100K/year. It all depends where you live & how you live. Or you could decide how much you're willing to work now to ensure that you have $100K/year in retirement.

But, yeah, the numbers are too good to be true.
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Re: Is this correct?
Old 04-24-2005, 04:47 AM   #4
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Re: Is this correct?

We wouldn't need to draw any of the 300K till she retires and even then could make it on her retirement. The deal with her insurance is we can continue to pay at her group rates, whatever that is at the time.

I was just plugging different numbers into Firecalc to get a withdrawl rate. I tracked all our spending last year and with two kids in college and us paying all their bills we spent 55,000 after taxes. I figure we could live very comfortable on around $40,000 after tax income once the kids are on their own. They should be out of school in a year or two. We have no debt.

So your saying Firecalc is wrong or I entered the data incorectly. I guess I'll have to do some more figuring. The problem is 8yrs is a long time and of coarse a lot can happen. The wife will currently tell you that she would go to work even if they didn't pay her. I am sick of work and don't think they could pay me enough to do it much longer.

So to be safe I guess I'll assume my savings will grow at 4% for eight years and see where Im at. $100,000 a year sure would have given us alot of extra.
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Re: Is this correct?
Old 04-24-2005, 10:32 AM   #5
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Re: Is this correct?

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So your saying Firecalc is wrong or I entered the data incorectly.
Well, FIRECalc isn't perfect but I think all the flaws have already been identified and this isn't one of them.

A frequent oversight (made by more people than just me) is entering withdrawals with the wrong sign.

But it sounds like your expenses can be lower than a 4% withdrawal rate...
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