Curious about where I really stand

[DannysDaddy]

Hi everybody. I’ve been meaning to post my situation here for quite a while. I find myself flip flopping between confidence and anxiety all the time, specifically about what freedom I could be enjoying, if I choose to. A little bit of background… I’m 46, divorced, no kids, left a high stress job 2 years ago for something with a better schedule and less pressure. Jury is still out on whether I stick with this new career, but benefits are good. Health benefits and schedule, primarily.

Here are the numbers…
Investments $2.3MM ($1.5MM taxable. Remaining in IRA/Roth)
I’ve actually increased stock exposure in the last year. From 75/25 to 85/15.
Owe about $70K on my house. $300K market value, probably.
No other debts.

I make about $40K a year now and withdraw (mostly dividends) $30K a year from investments to supplement spending and pay down the house. Annual spend has been appx $50K (doesn’t include extra house payments), without any major vacations, which I’d like to take. Would obviously live extremely well at $72K per year withdrawal, but clearly doing fine now and likely anywhere in between.

I suppose my question for the group is about how good of shape I’m actually in here. Like I said, some days I feel great, others not so much. Ideally, I’d pull the plug further to an even less stressful job with more free time, if not for the benefits. I’ve even considered living abroad for a while.

Thanks for any input into my first community post.

 

[pacergal]

Welcome
$72000 is a bit over 3%, so you look good to me
Make sure you have figured out Health care, and your budget is firm.
46 is young to retire, but many do it. You probably have a good 40 year retirement, so staying under 4% withdrawal is reasonable.
Are you comfortable at that higher stock % if they drop significantly? Need to be "able to sleep at night"

Congratulations on your savings!

 

[DannysDaddy]

I was comfortable enough last year when they dropped. Managed to buy more, but obviously wish I had bought even more. The move from 75/25 to 85/15 has been the drift since the bottom. Just chose not to rebalance.

I guess we never really know if we took enough risk or too little until after the fact. I’m interested to hear how others balance portfolio risk/reward during early FIRE or partial FIRE, as I find myself doing now. My human capital is still what it was. Could easily (somewhat) go back to high paying job if I needed to. Lots to consider.

 

[teetee]

You are in good shape if you can maintain that living expense after losing the 40k/yr income. You will in better shape by removing the risk if you pay off your house. A net worth of 2.2m plus 300k house can withstand most of short term (within two years) major recessions.

> Could easily (somewhat) go back to high paying job if I needed to.

Sometimes finding the position not the problem. It is the staying that can be challenging. You got out the high stress job when you were 44 for a good reason. If I were in your shoes, that two year sabbatical will have to do miracle for me to get back in two years older.

 

[skyking1]

I see no figures in there for the change from company provided health care to buying your own. that is a significant number when played against 72K.

 

[DannysDaddy]

That’s the kind of real world advice I need skyking. How much of that $72K would get eaten up by ACA healthcare premiums and expenses? I have no reference. Hence why I’m currently in the lower stress, easier schedule job for now. Is a grand a month enough to budget for ACA or should it be more?

 

[Aerides]

That’s the kind of real world advice I need skyking. How much of that $72K would get eaten up by ACA healthcare premiums and expenses? I have no reference. Hence why I’m currently in the lower stress, easier schedule job for now. Is a grand a month enough to budget for ACA or should it be more?

No one can answer that for you as it's dependent on your location, coverage, family, and plan. You can, however, go to HealthSherpa or healthcare dot gov and get some solid ideas.

 

[pacergal]

You can model on healthcare.gov to see what your premiums could be based on income.

 

[24601NoMore]

That’s the kind of real world advice I need skyking. How much of that $72K would get eaten up by ACA healthcare premiums and expenses? I have no reference. Hence why I’m currently in the lower stress, easier schedule job for now. Is a grand a month enough to budget for ACA or should it be more?

ACA premiums are pretty much all over the place and vary wildly by area. The best thing you could do is to see what they are now for your zipcode. Suggest visiting Healthcare.gov, answering the questions, and seeing what comes up in terms of options.

In general, premiums are lower for people your age than me (late 50s) and DW (early 60s). But the deductibles tend to be massive regardless of age. Ours is $7K per person, which makes our insurance nothing more than essentially catastrophic coverage as we pay for everything out of pocket in addition to our $14K (albeit, that's for 2 older people) pre-subsidized premiums. The recent COVID legislation change allows us to now get subsidies even though our income this year will be above 4X Federal Poverty Level (FPL), but we were paying just about $14K/yr for 2 older people with $7K per person deductibles prior to the subsidy, which works out to be a little over $6K savings/yr total..

 

[DannysDaddy]

Thank you. Rates are indeed all over the place. Most of the plans seem to be high deductible HMOs. Didn’t expect a Cadillac plan, obviously. Looks like $7K annually is the average estimate. Premiums and actual care costs included. Not terrible, but certainly takes about $600 a month in sounding.

For now, FI seems to be a good stopping point, for at least another year. There’s comfort in knowing I can pull the plug at any time, and even more comfort in knowing that I’ve built a number of contingencies into the plan. Like my drivers ed teacher taught me, aim high in steering and always leave yourself an out.

 

[24601NoMore]

Thank you. Rates are indeed all over the place. Most of the plans seem to be high deductible HMOs. Didn’t expect a Cadillac plan, obviously. Looks like $7K annually is the average estimate. Premiums and actual care costs included. Not terrible, but certainly takes about $600 a month in sounding.

For now, FI seems to be a good stopping point, for at least another year. There’s comfort in knowing I can pull the plug at any time, and even more comfort in knowing that I’ve built a number of contingencies into the plan. Like my drivers ed teacher taught me, aim high in steering and always leave yourself an out.

You should also be able to qualify for a premium subsidy in 2022 (and also 2021, but it sounds like you're not ready to jump yet).

Find the second lowest cost Silver plan on Healthcare.gov for your zip code. If your income (let's say $72K) * 8.5% is lower than the cost of that plan, you'll get a subsidy for the delta. That currently only applies to 2021 and 2022, but "could" be extended depending on what Congress decides to do.

As an example..$72K * .085 = $6,120. If the cost of the second lowest silver plan is $10K, you'd get a $10,000 - $6,120 or $3,880 annual premium subsidy.

"Normally", you wouldn't qualify for a subsidy if your income was 4X FPL or higher. But Congress eliminated that threshold in the most recent COVID legislation for 2021 and 2022.

 

[marko]

I find myself flip flopping between confidence and anxiety all the time, specifically about what freedom I could be enjoying, if I choose to.

Welcome to the early retirement club! Most of us do that.

 

[OldShooter]

Oh, and for planning there is the certainty that the government health care rules (ACA, Medicare, etc.) will change multiple times over a long retirement, even probably over a short retirement. Good luck.

 

[DannysDaddy]

This has all been great information and motivation. I feel better about where I am and plan to enjoy being financially independent until I decide to pull the final plug. Could be a year or could be 20. Either way, I’ll be ready.

 

[Scrapr]

Like my drivers ed teacher taught me, aim high in steering and always leave yourself an out.

LOL...your drivers Ed was a discipile of Smith Driving Systems if he was using that terminology. The other 3 keys? Get the Big picture....Keep your eyes moving & Make sure they see you. We cover the Smith system with our fleet drivers. I like it a lot

 

[DannysDaddy]

The Smith Driving System. Exactly!!! Life lessons disguised as driving lessons. Lol.

 

[Present Aside]

I would take a look at healthsherpa and see where you end up based upon your situation. At my company as an active employee the out of pocket max is $4000 which is a few thousand less that an ACA plan but not exactly free. For retirees, it is the same. The retiree cost was just increased to the point where a subsidized ACA plan is hundreds of dollars a year less than the company plan. If you can control your income appropriately it is not unreasonable. I checked in a number of zip codes in multiple states and it really varies.

Government health care rules will definitely change but so do the employer rules. The future is always a crap shoot so plan accordingly and be flexible.

 

[Finance Dave]

Seems like you're in good shape...do you have young kids? Consider disability insurance and life insurance if so.

I could not sleep at night with an 85/15 portfolio...but I know many can. I tend to look at it like this...

In my lifetime we've had a few 30-35% downturns. Let's use 30%. If you have 85% in equities, and they drop 30%, then you've just "lost" 25.5% of your nest egg. Technically you've not lost it until you sell...but you get the point.

Also consider any future "large" expenses....
1) Do you have an elderly relative that will need your care?
2) Do you have kids for which you'll want to pay for their weddings or college?
3) Will you move to a state in FIRE with higher housing costs?

If so, build these into your modeling.

 

[Finance Dave]

And just as a side note...if we were to NOT get a subsidy, a silver plan here in Indiana would cost us $14,200/year. With the subsidy, we're paying more like $4,600.

As others have said, this varies a lot by location...but the above is ONLY FOR PREMIUMS

 

[DannysDaddy]

All good points. Thank you.

No kids to worry about. No elderly parents either. It’s really just me. My house should be paid off in a couple years at the current rate that I’m paying it down, which I consider to be one of those mental hurdles that should be the last drop in the bucket of worry. Currently in NV, so reasonable cost of living.

As far as 85/15 goes, I’m not completely without concern, but have learned to stand pat when the going gets rough. I did panic back in 2009, which taught me a huge lesson about staying the course. Luckily i was able to resposition back into the market and kind of regret not backing the truck up last year. My vanguard advisor talked me down, but the world was supposed to be ending, so there was that.

I suppose my failsafe is my human capital. My professional skills from my old career should always be in demand, even if I stay out of it for a few years while I’m in this less stressful gig. So I balance the potential for a higher spend possibility against the need to go back to work. The latter certainly wouldn’t be the end of the world, though not ideal. I know what I won’t do, thanks to 2009… sell.

 

[Dtail]

You might be able to control your MAGI which is the driver for the ACA medical premiums and deductibles, since you have a large taxable account.
In many counties in FLA as an example, one can keep the premiums below $200 monthly if one keeps their MAGI below 150% of FPL.

 

[EastWest Gal]

Don't forget the Supreme Court is soon to issue its ruling on the ACA case it heard a few months ago. That could affect most of us under age 65 on the forum. Another thing to keep in mind is that as you get older, premiums go up. An unsubsidized bronze plan in our zip code would be at least $20K/year for two 60-year olds. We haven't used our insurance yet this year except for two inexpensive prescriptions.