Are we on the right track to FIRE

[JohnnTexas]

I just got back from a weeks vacation and the desire to FIRE is even more real.
I put together this attached spreadsheet.

I am currently 51. I would like to pull the trigger at 55 or 56. My wife and I both work and want to join FIRE at the same time. Youngest is a sophomore in high school now. College costs are covered as well as a future wedding.

Current portfolio balance is $1,820.000. No debt other than our house. Value is about $750K with $140K remaining. The $600K in home equity is not included in the $1.8M figure.

Some assumptions I made in calculating:
-3% annual growth on my portfolio balance
- will tap in to 401K of current employer at age 55 and use this to tide me over until 59.5 when other 401K balances would be available.
-my 2 pensions kick in at 65
- both wife and i will continue to contribute the max ($23K each) to our current 401Ks until retirement.
- SS for both my wife and I begin at 70. I discounted SS about 30% of the value for retiring early.
-assume annual spend of $150,000 until age 85 then drops to $100,000. This is very conservative. Includes healthcare until 65 and taxes. I cant imagine spending like that as we get past 80.
I reduced the portfolio withdrawal at age 65 to reflect the pensions kicking in and again at age 70 when the SS would kick in.

What am I missing.
Thanks for taking the time to review this info.

 

[Whisper66]

Your assumed spend rate appears pretty high. Suggest you take some quick runs with FIRECalc: A different kind of retirement calculator .

I took some quick looks with your numbers with firecalc. Depending on how I input your situation, I got a 75-85% success rate (ie...money outlasts you) with the current expend rate. That's a bit low for most people on this board. If the expend rate dropped to $115-135k, the numbers look good (~95% success rate).

I didn't see inflation / cost of living changes included which may be important if your pension is not adjusted for inflation.

I think the firecalc probability of success are suggesting a risk of poor market returns early in your retirement and/or cost of living changes that may deplete your nextegg too early for such a large spend rate.

 

[DrRoy]

I agree that you will want your probability of success to be 95%+.

 

[pb4uski]

30% discount for retiring early seems excessive. You can go to ssa website and get an estimate of benefit with no earnings from when you ER.

Have you run your situation through Quicken Lifetime Planner or Firecalc?

We retired at 56 with about the same size nestegg but much lower spending.

 

[Aiming_4_55]

- both wife and i will continue to contribute the max ($23K each) to our current 401Ks until retirement.

I didn't see the 401k contribution on the spreadsheet. The $23k each for the next few years, age 51 to 55, could help you feel better about your numbers.

Agree with others, 95% or better success rate on Firecalc should be targeted.

 

[HarveyS]

Agree that you need to add inflation. I model using 3.5% per year. A bit higher than some other models, but it's what I use. What has your auto/home insurance premium changed by over the last 5 years? Where is college paid for? 529 that is not part of nest egg I assume. Why not include home equity? Is it likely you will live in that house until age 95? Seems like a lot of house to keep up into your 80's.

What about income taxes. Are the taxes on div/income/etc. included in the 150k annual spend?

What about medical insurance? Is that covered in pension? Is there a co-pay? My medical insurance increased 76% from 2016 to 2017! (See comment on inflation).

I think you are on the right track because you are thinking about this, have a plan, and acting on it. Need to tighten the analysis a little bit (in my opinion).

 

[Scuba]

I suggest you estimate your spending by starting with what you actually spend and adjusting it. Healthcare, travel and entertainment will likely go up, at least until you can get on Medicare. Transportation, clothing and some other expenses may go down. Hopefully your taxes will go down. Make sure you include any one-to me when expenses also - such as paying off debt if desired or buying a new car, vacation home, etc. If you start with a budget based on actual current spending, I think it will be more accurate.

 

[MrLoco]

You have amassed an impressive amount of assets.

Just be sure to have the healthcare angle covered. You and your wife will have 10 years before MEdicare kicks in. That's a long time.

Also you mention that after age 80 you can't see yourself spending over 6 figures for annual expenses. That's 25 years from now. Inflation could rear its ugly head and again in 25 years I shudder to think where we will all be with respect to the cost of healthcare and LTC. That is the elephant in the room.

 

[rayinpenn]

I did notice you said h/c zero after 65? Look into supplemental insurance ...

 

[Hyperborea]

I reduced the portfolio withdrawal at age 65 to reflect the pensions kicking in and again at age 70 when the SS would kick in.

If you have manually set a reduction when those payments start then your calculations have a double reduction. FireCalc will automatically reduce withdrawals to include any new income streams.