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Can we retire now ?
Old 11-02-2013, 10:28 AM   #1
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Can we retire now ?

I am trying to figure out when we can retire and also if our AA is ok. I have tried to include all of the information that the Bogleheads group recommends.

We plan to earn $15,000 per year total in retirement for the next 5 years doing jobs that are more enjoyable and would like to retire now if possible. Please take the social security amounts on the spreadsheet into account also.

So the questions are:

Can we retire now ?

If not when ?

Should our AA change and if so how ?

Am I missing some other important question ?

My information is here:
https://dl.dropboxusercontent.com/u/236 ... 20Post.doc
and
https://dl.dropboxusercontent.com/u/236 ... nguard.xls

Thanks so much for your consideration.
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Old 11-02-2013, 11:50 AM   #2
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If you run your numbers through firecalc it will show about 4% of your 615k or a yearly amount of 24,600 dollars/year


you will be digging a hole in your nest egg

what about health insurance?

need to keep saving and at 60k a year that's great.

esplanner for 150 dollars will give you your answer .
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Old 11-02-2013, 12:04 PM   #3
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Your expenses spreadsheet looks to be missing things.
Home repair, insurance car and health, medical expenses, travel, personal care ( haircuts) , replacements, dental, food ( cannot be only $100 a month)

I'd look thru your checkbook and credit card statements and figure out how much you really spend every year.
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Old 11-02-2013, 12:17 PM   #4
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Quote:
Originally Posted by ducky911 View Post
If you run your numbers through firecalc it will show about 4% of your 615k or a yearly amount of 24,600 dollars/year

you will be digging a hole in your nest egg

what about health insurance?

need to keep saving and at 60k a year that's great.
I am seeing $400 month for food and $700 for health insurance on the second page of the second spreadsheet.
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Old 11-02-2013, 12:38 PM   #5
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I don't see a column for income taxes.

Also, several columns have identical numbers for every month in 2012. Are these estimates?
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Old 11-02-2013, 03:01 PM   #6
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we took the totals from last year and just averaged them by dividing by 12.
Does firecalc include social security ?
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Old 11-02-2013, 04:42 PM   #7
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Quote:
Originally Posted by rothlev View Post
Your expenses spreadsheet looks to be missing things.
Home repair, insurance car and health, medical expenses, travel, personal care ( haircuts) , replacements, dental, food ( cannot be only $100 a month)

I'd look thru your checkbook and credit card statements and figure out how much you really spend every year.
and income taxes!
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Old 11-02-2013, 05:08 PM   #8
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taxes should be $2,108 in retirement with $45K income if I'm calculating correctly.

Married Filing Jointly

Brackets
0 - $17,850 10%
$17,851 - $72.500 15%


Standard deduction $12,200
Personal deduction $3,900 x 2 $7,800
Total deduction $20,000

On $45,000 income in retirement
- $20,000
-------------
$25,000 taxable income


Tax on $17,850 @ 10% = $1,785
Plus Tax on remaining $2,150 @ 15% = $323

Total tax = $2,108
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Old 11-02-2013, 06:23 PM   #9
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Quote:
Originally Posted by coachz View Post
taxes should be $2,108 in retirement with $45K income if I'm calculating correctly.

Married Filing Jointly

Brackets
0 - $17,850 10%
$17,851 - $72.500 15%


Standard deduction $12,200
Personal deduction $3,900 x 2 $7,800
Total deduction $20,000

On $45,000 income in retirement
- $20,000
-------------
$25,000 taxable income


Tax on $17,850 @ 10% = $1,785
Plus Tax on remaining $2,150 @ 15% = $323

Total tax = $2,108
That might change when you start distributing from tax-deferred accounts. I know mine does. I red-line at the top rate when I hit 70.5 . My tax bill becomes my largest expense.
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Old 11-02-2013, 06:51 PM   #10
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how would it change? if i took all $45k from tax deferred accounts wouldn't i still get the deductions I listed and be in the same tax bracket?
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Old 11-03-2013, 04:16 AM   #11
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How do you know that you can earn $15k a year if you retire from your current jobs? Your plan seems to really depend upon that income. That is, it bridges the gap until SS.

I do think some of your expenses seem to be missing or else not clearly presented.

Things that I don't really see or have comments about?

I assume vet is veterinary and you are spending almost $2k a year on it. That usually implies that you have several pets, but I don't see any other pet related expenses.

Car maintenance seems low assuming it includes all car related expenses other than fuel and insurance. Does this include registrations, licenses plates, any tolls/parking fees? In any event, unless you have very new cars still under warranty you really haven't allowed much (if anything) for any significant car repairs. For this type of thing you often have to look at multiple years expenses (one year we had $6k in car repair while in another year we had nothing).

I see Costco as a category. Costco isn't a category. It is a place. It would be more beneficial to figure out what exactly you are buying there and then categorize it.

Miscellaneous at $200 is enough money that you should probably be categorizing it as something else. $200 is too much leakage to just be lumped into miscellaneous.

Clothing at $600 a year and shown as optional seems problematical. While some clothing purchases clearly are optional, you have all clothing in optional and that seems unrealistic. Also the amount seems low even for people retired. Shoes alone can be quite expensive and when you need to replace them, you need to replace them. It isn't really optional.

I see no category for personal care - haircuts, makeup, eye glasses, toothpaste, toothbrushes, dry cleaning, etc.

I see nothing for medical expenses other than $700 a month insurance. Insurance usually has deductibles and co-payments/co-insurance. Also, certain things usually aren't covered such as eye exams, glasses, dental.

Where do you get the $700 a month for insurance. Have you thought about how that may increase in the future. When DH retired our combined cost for insurance for him, our kids and me was a little over $300 a month. DH is now on medicare but I'm still on the retiree insurance. Our costs are now over $1000 a month. Let year, I expect them to be closer to $1400 a month. The point is that insurance can go up considerably from year to year.

You have nothing for entertainment other than cable. Do you never go to a movie, read a book, or go to any event that charges admission? Do neither you nor your wife have any hobbies? If you don't do either one of you plan to acquire any during retirement?

Your grocery bill seems sort of low. Maybe it is low because your dining out is high. That is both are shown at $400 a month each. Remember that if dining out is optional and you need to reduce costs and you eat out less, then your grocery bill will go up.

I'm personally not that big on travel. But even I have some travel costs to visit family or occasional vacations. You have no travel budgeted at all. Do you not every plan to visit anyone? Will you never, ever go out of town overnight for any reason?

Household expenses other mortgage are basically lumped together as home maintenance at $200 a month. While that might work for some years it seems low. Things you need to include in this: routine maintenance, repairs, household goods, furniture, appliances, yard maintenance. Repairs are both the minor ones that you might have every year plus the major ones that are costly but more rare (new roof, for example). While you might not think you will need furniture or appliances you usually will need them at some point. Appliances break. You might need a new dishwasher or even minor things like a new toaster. You might need to buy a new lawn mower (if you do your own lawn work) or you might need to have a tree removed.

I don't see anything for computers or electronics. Will you never buy any new computer or new software? Do you have no subscriptions to anything? Will you never buy an iPad or a new TV?

You didn't include income taxes.
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Old 11-03-2013, 08:06 AM   #12
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You need to think of three phases - now to 59.5 when you can begin drawing from tax deferred accounts without penalty and from 59.5 to SS (62 to 70) and from SS on. from a cursory look it seems that you don't have enough to carry you from now to 59.5 without early withdrawal penalties (or doing a 72t). What is your plan for from ER to 59.5?

I'm a big fan of Quicken Lifetime Planner (part of Quicken Deluxe and higher) and think you it would be helpful to you to go through it and see what it says as to your readiness.
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Old 11-03-2013, 08:59 AM   #13
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I also think the expenses are too low. Are you assuming one car or two? Do you plan on doing any travel? Food seems too low. Are you including LTC? Home maintenance on a $450K home can be high over time. Have you considered downsizing. I think you are cutting things a little too close with your numbers.

When calculating income taxes assume the worse case that one of you dies early and the other is now paying taxes in the single category. This makes a large difference in taxes. I think it is great that you have so much in Roth. That should help some with the tax situation down the road after RMDs kick in.

With regards to SS strategies, I would recommend that you look at the "one early, one late" strategy as your SS income is so similar. I would recommend that you consider that the husband take his SS at 62 and the wife take the spousal benefit at age 67, leaving her SS to grow. At age 70, she would then switch to taking her SS instead of the spousal benefit, which would give the largest survivor benefit when one of the two passes.
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Old 11-03-2013, 09:04 AM   #14
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Originally Posted by pb4uski View Post
You need to think of three phases - now to 59.5 when you can begin drawing from tax deferred accounts without penalty and from 59.5 to SS (62 to 70) and from SS on. from a cursory look it seems that you don't have enough to carry you from now to 59.5 without early withdrawal penalties (or doing a 72t). What is your plan for from ER to 59.5?

I'm a big fan of Quicken Lifetime Planner (part of Quicken Deluxe and higher) and think you it would be helpful to you to go through it and see what it says as to your readiness.
I agree except there are at least four phases:
Now to 59.5
59.5 to SS
SS to the death on one spouse
Then until the death of second spouse

I would add another phase if the spouses take SS at different times, which may be a good strategy for them.

We also use Quicken Lifetime Planner and it is helpful to plan the different phases. It can also help to try different strategies.
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Old 11-03-2013, 04:01 PM   #15
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My wife will be 59 1/2 in 2 years for access to her 401k.

We have adjusted the spreadsheet as requested and it can be downloaded here:
https://dl.dropboxusercontent.com/u/...6/vanguard.xls

Misc is still Misc as it is spent for anything not explicitly listed. Birthday gifts, concerts and general entertainment.

Clothing. We really don't need a clothing budget as we have tons of clothes and would buy things like shoes from Misc.

Haircuts fall under Misc. I cut my own hair at zero cost.

Toothpaste, toothbrushes fall under food.

Dry Cleaning is not an issue here.

Entertainment and travel, we have lots of hobbies and are not budgeting for travel at this time.
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Old 11-03-2013, 06:11 PM   #16
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If this is based on what you spend - why don't you add up (from your bank statements) your total debits from last year and see where it lines up.
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Old 11-03-2013, 07:11 PM   #17
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we did add them up. that is the budget for 2012 from actual amounts spent. I just had to categorize them better which I have updated in the spreadsheet.
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Old 11-03-2013, 07:43 PM   #18
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I think in general your expenses in your budget seem reasonable compared to what many other people spend. You can compare your planned spending to the Consumer Expenditure Surveys to get some baseline ideas of what other people spend:

CE Expenditure Tables

If you really focused on some of your expenses you could probably get those down significantly. We cut our electric bill by 2/3 just from tips in sustainable living books. Even if you just knocked it down $50 a month that is $50 X 12 months a year X 40 years equals $24K less needed in retirement funds. Your budget is tight at best so if it was me I wouldn't spend $400 a month on eating out. If you changed that to $100 a month, you'd need $144K less in retirement funding (300 savings X 12 months X 40 years). You could save a significant amount of money if you just went out once a week for lunch with a coupon, a Taco Tuesday special or to an early bird dinner special. If you aren't working you'll have more time to cook, try new recipes, have picnics, learn to make dim sum at home or many other cheaper alternatives than spending $400 a month on a non-luxury budget.

I am not sure about the income side of your plan. I also agree that you can't just assume you will find work for $15K a year if you don't have any specific skill sets or jobs in mind for part time work. If you started a side business now that made $15K a year that might be different. But you don't want to quit the well paying jobs you have now only to find out you need to work full time at a fast food place later to pay the bills.

As other have noted there are different stages in retirement so you need to use some kind of retirement planner that covers 30+ years into the future to really map things out long term, pre and post Social Security, and especially what happens to your income and expenses when one of you eventually dies or one or both of you need long term care.
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