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Looking for plan review after a lot of changes (Warning Long Post)
Old 09-02-2014, 01:03 PM   #1
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Looking for plan review after a lot of changes (Warning Long Post)

I have been here awhile and have read a lot of the post on this site; I posted in the “Hi, I am” our numbers and plan to move overseas when the DW is retired in 13 months. I see a lot of people on the board start with a budget and then plan to save based on that budget and what they feel is s a SWR over a period of time of life expectancy adding in “One time” expenses as needed.

I want to get any comments on how I did our plan and if I am missing something:

1. Started with a budget based on COL information I found on line for Ireland in 2014 and expected expenses (~$91K). This seems to be about 10% higher than our current area based on many different inputs, but is ~2X the top 20% National Average Net Income posted on line for Ireland. I also did one spreadsheet for staying in our current location, but downsizing McMansion and renting and based on our current COL.

The budgets include $1000 each month for miscellaneous items.

Medical, dental and vision for both is covered by DW who can carry hers’ over @ the same cost into retirement and is already taken out of pension; we also both have TriCare and VA available too.

Travel in the budget has been doubled to allow for more travel when DW is retired based on costs from current location to Europe and will provide even more once we are in Ireland since it will be cheaper to get to places we want to see.

Items in the current budget that go away have been removed from planning such as commute costs, work clothes, and tolls.

2. I add 2.5% inflation to all items in the budget each year starting in 2014 and plot out this COL in a spreadsheet for each year up to 25 years broken out for monthly spending. Annual COL/12 months.

3. I then put our post tax and life insurance deduction income (known and projected) in columns in the spreadsheet and total them up each month. Tax withholding is based on “Single Rate”, 0 exemptions, we normally get a refund. We also plan to setup residences in a state with no income tax before moving to Ireland.

4. I add in an annual 2% COLA adjustment for income streams that have COLA

5. I then subtract the monthly income from the monthly budget to get any short fall and then deduct that from our moneys starting with cash on hand in savings account and then start on my tax deferred saving accounts when I reach 59.5.

6. As more income streams come on-line we have a smaller shortfall until income exceeds projected spending at which time we start to save again.

7. I planned on an annual 5.5% return on investments and we are invested 84/14/2 equity/fixed income/cash. I have tested by putting in 0% ROI and still come out OK in FireCalc and all of the other calculators out there. I also, went to Schwab and had them run the numbers and they came up with a good to go in the standard model and MC models.

8. We have a WR of that starts at 2.8% that peaks at 4.27% in year 4 and goes down to 0% by year 7 of 25 year plan.

9. We both take SS @ 62 since most family members are already dead and most did not live longer than 80 years, pretty close the break-even point of SS, if we live longer than the break-even point we miss out on some money, but we discussed it and are willing to take that chance.

10. One thing not planned yet is ROTH conversion; this will need planning since our income will put us in the 25% bracket in year 5 of the plan before DW takes SS and her last income stream comes on line @ 65.

11. I built in calculations for RMD @ 70.5 for both of us into spreadsheet, but that is even more money that would probably be added to savings account.

12. I also did not plan on any large “One-time” expense since we would be renting and most of the “One-time” expenses come up with owning a home. Car payments are built into budget every year and vehicles we have are less than 1 year old and covered by warranty and maintenance plans. We have no kids and all debt will be paid off by the time DW retires.

13. Term life insurance is in place to cover pension lost if a person dies before all income streams come on line, than they will be cancelled @ a future date when no longer needed.

I know this is long, but the devil is in the details and I want to get the great advice I believe this group will provide.
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Old 09-02-2014, 01:17 PM   #2
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As a resident of Ireland you will be liable for brutal income taxes. Have you factored that in?

How your income tax is calculated
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Old 09-02-2014, 01:25 PM   #3
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Your health insurance may not be valid in Ireland. There aren't many VA hospitals in Ireland.
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Old 09-02-2014, 02:04 PM   #4
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As a resident of Ireland you will be liable for brutal income taxes. Have you factored that in?

How your income tax is calculated
Thank you for the post, I have looked into the taxes in Ireland and the Tax Treaty between US and Ireland to avoid double taxation, since most of our income is Government Pensions, SS, and Post tax savings and we would pay US taxes that income and my understanding is we would get a tax credit for that and would only owe taxes on any other income such as CG and dividends we have. If I am wrong on this please let me know.
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Old 09-02-2014, 02:09 PM   #5
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Your health insurance may not be valid in Ireland. There aren't many VA hospitals in Ireland.

Thanks for the reply, our primary insurance would be BCBS and we should be able to use that in Ireland and if not we can suspend it and purchase Ireland health insurance for a little more than what we pay for BCBS from one of the main three health care insurance providers. I then can claim any out of pocket expenses on TriCare plan.
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Old 09-02-2014, 02:24 PM   #6
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Quote:
Originally Posted by DFA View Post
Started with a budget based on COL information I found on line for Ireland in 2014 and expected expenses (~$91K). This seems to be about 10% higher than our current area based on many different inputs, but is ~2X the top 20% National Average Net Income posted on line for Ireland. I also did one spreadsheet for staying in our current location, but downsizing McMansion and renting and based on our current COL.
Have you tested this budget to see if it works? I think most here would agree the best budget is the one built from and proven with personal experience.
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Old 09-02-2014, 02:38 PM   #7
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Have you tested this budget to see if it works? I think most here would agree the best budget is the one built from and proven with personal experience.
Thank you for the reply, We have not tested the Ireland budget, I have been researching the costs for a couple of years and they seem to be in line, and the local budget is the one we have been using for the last 5 years and it works; I did reduce it by work expenses and increase the travel from $6,000/year to $12,000/year and added in $1,000/month for Misc expenses. I retired 9 months ago and we are ahead of the game when it comes to the budget and planned 5.5% ROI. When we downsize the McMansion we should reduce our costs more, but I did not change the budget for that giving us more cushion when that happens, home values in our area are up and we are looking at ~$150,000 in equity based on homes that have sold in our subdivision in the last couple of months.
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Old 09-02-2014, 02:43 PM   #8
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Cost Of Living Comparison Between Ireland And United States

"Local purchasing power in United States is 38.03% higher than in Ireland"

You can input the city where you live now and the one you will be living in, for more specificity.
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Old 09-02-2014, 02:55 PM   #9
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Cost Of Living Comparison Between Ireland And United States

"Local purchasing power in United States is 38.03% higher than in Ireland"

You can input the city where you live now and the one you will be living in, for more specificity.
Thanks for the reply, I use this site extensively, I put in Cork and Denver (closest city in the system) and looked at both the CPI including Rent at ~10% and Local Purchasing Power at ~24%, I reviewed the list of items and the price variations pulled out items we don't use or would not spend money on and was closer to ~13% higher than Denver.

I was surprised at the Average Monthly Disposable Salary (After Taxes) in Cork being less than Denver if the cost of living is so much more then Denver could you shed some light on this factor and if it is true number or not?
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Old 09-02-2014, 03:29 PM   #10
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I was surprised at the Average Monthly Disposable Salary (After Taxes) in Cork being less than Denver if the cost of living is so much more then Denver could you shed some light on this factor and if it is true number or not?
I have no experience with Denver, but I am a Corkonian born and bred and lived there till my mid 20s. I last visited Cork 3 months ago and those numbers look realistic to me. Be aware that there are fees for things you might not expect, eg there is a license fee for your TV!

With respect to disposable income, I presume you are aware that since the collapse of the Celtic Tiger and the debt crisis, unemployment and emigration have risen to record levels (though the latest unemployment figures are improved at 11.5%), that many Cork businesses have gone bust, and that the Irish people fortunate enough to have jobs (a) can't command the salaries that you would in Denver and (b) will be paying down the national debt to bond holders for the next 50 years, resulting in even more punitive personal taxation than before and (c) deterioration of social services. In other words, the economy is a basket case.

You knew that, I hope?
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Old 09-02-2014, 03:53 PM   #11
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I have no experience with Denver, but I am a Corkonian born and bred and lived there till my mid 20s. I last visited Cork 3 months ago and those numbers look realistic to me. Be aware that there are fees for things you might not expect, eg there is a license fee for your TV!

With respect to disposable income, I presume you are aware that since the collapse of the Celtic Tiger and the debt crisis, unemployment and emigration have risen to record levels (though the latest unemployment figures are improved at 11.5%), that many Cork businesses have gone bust, and that the Irish people fortunate enough to have jobs (a) can't command the salaries that you would in Denver and (b) will be paying down the national debt to bond holders for the next 50 years, resulting in even more punitive personal taxation than before and (c) deterioration of social services. In other words, the economy is a basket case.

You knew that, I hope?
Thanks for all the replies, it helps me a lot, we are looking at the Cork area, such as Blarney, Kinsale, and Cobh we love the area and would not be directly in Cork. We will be retired so the job situation would not be a factor, I had heard about the TV tax (about$150 per set). We are planning a budget of about 70k euros/year, numbers on most calculators say we could spend up to 95k euros/year and be fine, we would have a car and I have planned for the higher cost of fuel and insurance. We don't drink alcohol and would be cooking a lot of our meals at home, renting a 2 bed 2 bath. If the taxes get out of hand we can always go back to the US and deal with the IRS. My understanding is if you have personal health insurance you get faster treatment then using the social service healthcare system.
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Old 09-02-2014, 03:59 PM   #12
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Thanks for all the replies, it helps me a lot, we are looking at the Cork area, such as Blarney, Kinsale, and Cobh we love the area and would not be directly in Cork. We will be retired so the job situation would not be a factor, I had heard about the TV tax (about$150 per set). We are planning a budget of about 70k euros/year, numbers on most calculators say we could spend up to 95k euros/year and be fine, we would have a car and I have planned for the higher cost of fuel and insurance. We don't drink alcohol and would be cooking a lot of our meals at home, renting a 2 bed 2 bath. If the taxes get out of hand we can always go back to the US and deal with the IRS. My understanding is if you have personal health insurance you get faster treatment then using the social service healthcare system.

You are correct in those assumptions and if your budget is 70K Euros you should be fine. Kinsale and Cobh are two of my favourite places and I wish I could afford to retire there myself! Kinsale rents are more expensive as it is a tourist town. It's also convenient for the airport. Cobh would be nice because you could catch the train to Cork.


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