Age 52 How much do we really need to FIRE?

[momoney]

Living just on SS is not really fun, I know a fella that does and I can't say it's fun.

Yes, that's why I'm trying to figure out what the minimum amount needs to be to meet expenses.

 

[Fermion]

Living on SS doesn't sound so bad when the numbers are $38,400 and $19,200 (unsure why someone would take less than the 50%?)

 

[momoney]

I tried running a scenario as close to what info momoney gave us.

His SS $38,400, hers $17,200, both starting in 2036 and the pension of

$4,440 starting 2031 and I did assume it is inflation adjusted.
I get the minimum he should have as $1,050,000 for a 35 year retirement.

$62,000
35 years

I went with SS starting in 2038 and 2039 and pension in 2033 and NOT COLA.

I get $1,225,000.

 

[Music Lover]

Living just on SS is not really fun, I know a fella that does and I can't say it's fun.

There are plenty of people on this site that live comfortably on what SS pays due to a lifetime of smart choices and LBYM, but I assume they're not the same as the majority of retirees that didn't plan and rely solely on SS.

I only made a modest income and most people here could not survive on my monthly pension. But I knew what it would be before retirement and I set myself up to make that number work.

 

[Time2]

$62,000
35 years

I went with SS starting in 2038 and 2039 and pension in 2033 and NOT COLA.

I get $1,225,000.

Very good! Sound like you now have a good handle on it. You have not said what you have now, if you have enough at 52, you can find a fun job or serial jobs to pad the portfolio. If your not there, you still have working years to get closer. Even a few years living well below your means while working will help in that endeavor.

 

[bloom2708]

The OP can spend taxable and the Roth contributions. If most of the money is in pre-tax, then something like 72T would be needed.

I am 52 (wife 52) and the scenario points to working until 57 or so, even if the pay is lower. Lower pay and decent health benefits are pretty valuable. The pension does make it doable. I don't see how much is available to spend vs pre-tax.

I am currently working in a lower paying career to be in coast mode. We aren't saving as much, but we are also not tapping into our taxable or Roth. My wife is working part time at a pre-school.

We have 250k taxable, 400k Roth and the balance ($1.7) is in Trad/401k. The pension is the big difference. We have no pensions.

I've looked into 72T and Roth Conversions. I would use taxable to pay the tax on Roth Conversions. I think we could make it work, but are not willing to spend down at this point.

I'm going to tough it out to 57 and see what happens.

 

[momoney]

The OP can spend taxable and the Roth contributions. If most of the money is in pre-tax, then something like 72T would be needed.

At least you can now withdraw more with a 72T if you feel comfortable that your investments can replenish it.

However, IRS Notice 2022-6 sets a new ‘floor’ interest rate of 5% for calculating 72(t) payments, representing a substantial increase over the previous maximum of 120% of the applicable Federal mid-term rate. Thus, for a 50-year-old with a $1 million retirement portfolio, this means the maximum annual 72(t) payment increases from about $37,000 to over $63,000!

 

[momoney]

Lower pay and decent health benefits are pretty valuable.

Are the health benefits you have now cheaper or better than what you can get with ACA?

 

[Fermion]

The OP can spend taxable and the Roth contributions. If most of the money is in pre-tax, then something like 72T would be needed.

I am 52 (wife 52) and the scenario points to working until 57 or so, even if the pay is lower. Lower pay and decent health benefits are pretty valuable. The pension does make it doable. I don't see how much is available to spend vs pre-tax.

I am currently working in a lower paying career to be in coast mode. We aren't saving as much, but we are also not tapping into our taxable or Roth. My wife is working part time at a pre-school.

We have 250k taxable, 400k Roth and the balance ($1.7) is in Trad/401k. The pension is the big difference. We have no pensions.

I've looked into 72T and Roth Conversions. I would use taxable to pay the tax on Roth Conversions. I think we could make it work, but are not willing to spend down at this point.

I'm going to tough it out to 57 and see what happens.

If you just enjoy working another 5 years, go for it. I don't know what your current spending is, but you may be better off than you think if you quit now.

Say you currently make $100k a year combined (just a guess, I have no idea). You are probably only taking home $70k after taxes and contributions to your various Roth/401k. Of that $70k, maybe you are saving $10k more into your taxable. Thus perhaps you only need $60k to live on really.

If you think of all of your money in one big pot, you have a invested portfolio of $2.35 million. If you put half of that in 10 year treasuries at 5% it would generate $58,750 per year in interest income (put the other half in total stock market or S&P500 or similar). You would have about $28,000 in personal exemptions and considering if you were to do some financial maneuvering, you could tap into the Roth contributions tax free. You could get the $28,000 via a 72t, it is super easy, we did it last year. If it makes you feel good, you could even have the treasuries be in the 72t account so that it never goes down (goes up actually).

If you kept your combined MAGI around $30k to $35k, you would pay nearly zero taxes and zero for health insurance. The American dream!

 

[bloom2708]

If you just enjoy working another 5 years, go for it. I don't know what your current spending is, but you may be better off than you think if you quit now.

Say you currently make $100k a year combined (just a guess, I have no idea). You are probably only taking home $70k after taxes and contributions to your various Roth/401k. Of that $70k, maybe you are saving $10k more into your taxable. Thus perhaps you only need $60k to live on really.

If you think of all of your money in one big pot, you have a invested portfolio of $2.35 million. If you put half of that in 10 year treasuries at 5% it would generate $58,750 per year in interest income (put the other half in total stock market or S&P500 or similar). You would have about $28,000 in personal exemptions and considering if you were to do some financial maneuvering, you could tap into the Roth contributions tax free. You could get the $28,000 via a 72t, it is super easy, we did it last year. If it makes you feel good, you could even have the treasuries be in the 72t account so that it never goes down (goes up actually).

If you kept your combined MAGI around $30k to $35k, you would pay nearly zero taxes and zero for health insurance. The American dream!

Yes. Well stated. Our income is around $90k combined right now. Essentially we have 2 kids in college (near completion) and 1 in high school. My wife prefers we keep working at least for 3 years.

If I had another $250k in cash, I think it would be easier.

The Treasury rates are making it interesting. We could put our Trad IRA into Treasuries and 72T would keep the balance steady.

Keep Roths 100% stocks. That would put our stock percentage pretty low, but probably not the biggest issue.

I don't like working, but I have a pretty low stress, 40 hour gig right now.

Anything can happen with aging parents, so I'll just keep my head down until kid 3 graduates from HS. Her college savings is $100k or so and if she chooses well (probbly KU like her sister), she'll be good.

Good to have options. The OP is in good shape with the pension. I'd be more apt to do 72T with the pension.

 

[Alex The Great]

If you kept your combined MAGI around $30k to $35k, you would pay nearly zero taxes and zero for health insurance. The American dream!

It really depend on place where you live. In Santa Clara county (CA) with projected $25K MAGI I would have to pay $440 per month and $7K deductible for Blue Shield of CA HD PPO plan which is the only one PPO available to cover doctors I visit regularly. And even with this plan, one doctor is moving out of network in 2024.
Of course there are some $0 plans available but those are HMO like Kaiser which I would never sign up for since I have some chronic health issues.

 

[Fermion]

It really depend on place where you live. In Santa Clara county (CA) with projected $25K MAGI I would have to pay $440 per month and $7K deductible for Blue Shield of CA HD PPO plan which is the only one PPO available to cover doctors I visit regularly. And even with this plan, one doctor is moving out of network in 2024.
Of course there are some $0 plans available but those are HMO like Kaiser which I would never sign up for since I have some chronic health issues.

You have to compare apples to apples here. I assume that you would not get to pick and choose which plan your employer chose, so even if a person continued working, they might not get a Blue Shield PPO plan.

 

[Alex The Great]

You have to compare apples to apples here. I assume that you would not get to pick and choose which plan your employer chose, so even if a person continued working, they might not get a Blue Shield PPO plan.

This statement was about ACA only. With pretty much all employer sponsored plans I used to have during my career time all my doctors were ALWAYS in the network no matter which PPO plan has been offered by employer.

 

[Fermion]

About half of my employers offered HMO type plans

 

[momoney]

You could get the $28,000 via a 72t, it is super easy, we did it last year. If it makes you feel good, you could even have the treasuries be in the 72t account so that it never goes down (goes up actually).

If you kept your combined MAGI around $30k to $35k, you would pay nearly zero taxes and zero for health insurance. The American dream!

Is it a better strategy for him to use up the cash first and then set up the 72t for the 5 years until 59.5? Or start the 72t now?

 

[Fermion]

Is it a better strategy for him to use up the cash first and then set up the 72t for the 5 years until 59.5? Or start the 72t now?

I decided to start the 72t while we still had a big cash buffer such that the combined money from the 72t + cash equaled our spending needs while still keeping us at 0% tax and a health plan that costs 88 cents a month with a 600 per person max out of pocket.

 

[LakeRat1]

What would the number look like if you took SS at 62 ?? Why wait

 

[momoney]

What would the number look like if you took SS at 62 ?? Why wait

Assuming the spouse still gets 50% if taken at 62:

Reduced SS $26,316/yr =2033
Reduced SS $13,158/yr =2034

No COLA pension $4440/yr = 2033

$1,151,900 for 35 years = 100% success

$73,100 less than if taken at 67.

Not sure it's worth it if the spouse were to die early, the survivor will take a bigger hit on SS?

 

[momoney]

I decided to start the 72t while we still had a big cash buffer such that the combined money from the 72t + cash equaled our spending needs while still keeping us at 0% tax and a health plan that costs 88 cents a month with a 600 per person max out of pocket.

Wow! Is this a gold plan? It's still hard to believe the government does not penalize you for having a pile of cash.

 

[pb4uski]

What I mean is, after adding SS and Pension, I should be able to reduce the Portfolio amount and still get 100%. I can't, after adding SS and pension, if I reduce the portfolio below $1.74M the success rate drops below 100%. It is odd, I don't know what I am missing I have used Fircalc several dozen times and not had any problem.
Another day, I will try again.
OK, maybe I am just expecting to much change with the SS and pension.
First I set Portfolio at $1,250,000 and spending at $60,000 and 35 years.
The result is 72.0%.
Now in the "Other Income/Spending tab, I enter $38,400 and $17,200 SS to start 2036 and $4,440 pension to start 2031 and Highlighting the circle for Pension Income.
Then hit submit, I do get a tiny change up to a 73.7% success.
Now I run to see the minimum portfolio for 100% success with spending at $60k for 35 yrs, I get $1,740,000. Then I add SS of $38,400 and $17,200 in 2036 and pension of $4440 in 2031. I then can reduce the portfolio to $1,703,000 before not having 100% success.
I'm leery that having $60,040 additional income for 20 of the 35 years does not reduce the needed portfolio more.
Still confused, must be me, but I'm trying.

It worked fine for me. First, I replicated what I posted in post #31 above including $50k of SS starting in 2036. Then I went to the investigate page and solved for the starting portfolio at 100% success and it returned a result of $1,136,396. Then I went back and changed the portfolio balance to $1,136,396 and received the following result:

... FIRECalc looked at the 118 possible 35 year periods in the available data, starting with a portfolio of $1,136,936 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 118 cycles. The lowest and highest portfolio balance at the end of your retirement was $109 to $11,484,108, with an average at the end of $3,224,929. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 35 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%. ...

 

[twirler]

I lost my job and the job search is not going very well. (That's for another thread )

We have no debt.

I've calculated our expenses at:

$53,000 essential (with ACA healthcare).
$9,000 discretionary expenses.

Social security at 67:
Me: $3200
Wife: $900

$370 month pension at 62

FIREcalc is showing $1,750,000 has a 100% success for a 35 year retirement.

I concur with a lot of what's being said in this thread. You need to reevaluate your yearly spending. In short, it's possible but adjust your expectations in how much you spend yearly. Maybe learn bout frugality more? You will have a reduction in expenses from not working, however no one can predict the future and anyone who can is lying. Imagine you only had 40k to spend, would you still be able to make it? you can do this, but build in a buffer. Take on work you LOVE doing later in life, and you will find money will find its way to you in retirement.

PM if you want to dig into this more, happy to help.

Congratulations on your success.

 

[Fermion]

Wow! Is this a gold plan? It's still hard to believe the government does not penalize you for having a pile of cash.

No, it is a silver plan but they add cheese if you keep your MAGI at a magical place hovering just above 138% of federal poverty level. It is actually better than a gold plan.

 

[momoney]

I concur with a lot of what's being said in this thread. You need to reevaluate your yearly spending. In short, it's possible but adjust your expectations in how much you spend yearly. Maybe learn bout frugality more? You will have a reduction in expenses from not working, however no one can predict the future and anyone who can is lying. Imagine you only had 40k to spend, would you still be able to make it? you can do this, but build in a buffer. Take on work you LOVE doing later in life, and you will find money will find its way to you in retirement.

PM if you want to dig into this more, happy to help.

Congratulations on your success.

Thanks. This was an exercise to find the minimum amount needed to cover $62,000 in expenses and I appreciate all the help because it's less than what I originally thought it was.

 

[LakeRat1]

Assuming the spouse still gets 50% if taken at 62:

Reduced SS $26,316/yr =2033
Reduced SS $13,158/yr =2034

No COLA pension $4440/yr = 2033

$1,151,900 for 35 years = 100% success

$73,100 less than if taken at 67.

Not sure it's worth it if the spouse were to die early, the survivor will take a bigger hit on SS?

I would take SS at 62 I left the work force at 52, as well going on 10 years come January 25th, I turn 62 in March ..... Life has been great the past 10 years...... 6 Condos, 2 RVs, moved to Florida Full-Time, lost our houes in Hurricane Ian, sold what was left of the house and lot, moved to the middle of the state -- Winter Haven, still go back to the midwest during the summer months Life is Gooder Retired

 

[SevenUp]

I'm not the OP, just the complainer! As I've said, I've ran it plain, $60k income, $1.74M nest egg and 35 yrs, no problem 100% success.
Then I add in the SS and pension on the "Other Income/Spending" Tab.
It doesn't change a thing. Why?

Because you can't have greater than a 100% chance of success?