Did Anyone Retire with "Only" .75M$ Saved?

[gstillson]

Health insurance is pretty cheap right now for lower income. A couple in their 40s is paying maybe $100 a month for a really good policy with a max out of pocket of $750 a year.

Once you knock that out of the equation and if you live in a lower cost of living area, then I am not sure you need a couple million to live a pretty comfy life. You only need 10 years for SS credits and one spouse doesn't need any at all. Someone who retires at 45 might have 25 years of SS credits and be eligible for $1500 to $2000 at full retirement age while their spouse would be eligible for $750 to $1000. That is $2250 to $3000 a month at age 67.

Say you retired at age 45 with $1,000,000 and were able to live on $40,000 a year in a low cost of living area. By most calculators you will still have nearly $1,000,000 at age 67 when SS will boost your annual income to $67,000 or more (inflation adjusted). Not so bad.

 

[ziggy29]

Health insurance is pretty cheap right now for lower income. A couple in their 40s is paying maybe $100 a month for a really good policy with a max out of pocket of $750 a year.

...

Say you retired at age 45 with $1,000,000 and were able to live on $40,000 a year in a low cost of living area. By most calculators you will still have nearly $1,000,000 at age 67 when SS will boost your annual income to $67,000 or more (inflation adjusted). Not so bad.

I have trouble believing that a $40K MAGI for a couple will get you health insurance for $100 a month with OOP maximums of $750. It sure as hell didn't in 2014, the one year we had to use it, so it's hard to imagine it would now in most places. You may get a bronze plan for $100 a month, but there will be a lot more cost sharing, I'd bet closer to $5K a year in max family OOP.

You would also be subjecting yourself to a LOT of economic and political risk.

 

[RobbieB]

Don't worry, be happy!

And smoke 2 joints.

"I smoke 2 joints in time of peace and 2 in time of war, I smoke 2 joints before I smoke 2 joints and then I smoke 2 more"...

 

[NanaW]

I retired at 62 was so burned out less than 1m in the bank DH is still working we also have everything paid for except the house and we are doing better than I thought I have been putting my SS checks in savings so far and only use a bit when we do something special I am not as scared anymore

 

[bmcgonig]

I retired at 62 was so burned out less than 1m in the bank DH is still working we also have everything paid for except the house and we are doing better than I thought I have been putting my SS checks in savings so far and only use a bit when we do something special I am not as scared anymore [emoji39]

You seem scared to use sentences [emoji16][emoji16]

 

[ShokWaveRider]

You seem scared to use sentences [emoji16][emoji16]

That is how squirrels think and act. No Commas, No Periods, just a continuous thought/Action process.

 

[BuysToys]

Health insurance is pretty cheap right now for lower income. A couple in their 40s is paying maybe $100 a month for a really good policy with a max out of pocket of $750 a year.


<snip>

Insurance costs and deductibles depend completely on which county you live in. In my county, you can only get an HMO plan and the deductible is $6600 with a MOO of $7200. There are no other plans offered. I'd be surprised if a couple is only paying $100 per month for the premium.

 

[24601NoMore]

A lot of posters have mentioned pensions when talking about ability to RE..

I'd think in most cases if you don't have a pension (like us), that changes the answer pretty significantly..

Me, I'd be very hesitant to RE on $750K and no pension or other guaranteed income stream. That's only $26,250 at 3.5% SWR..

 

[24601NoMore]

Health insurance is pretty cheap right now for lower income. A couple in their 40s is paying maybe $100 a month for a really good policy with a max out of pocket of $750 a year.

Cheapest plan I can find in our area for the two of us is $886.52/mo, with a $7,900 per person deductible. That's for a bronze HMO.

Cheapest PPO I can find in our area is $1,532.16 with a $7,900 per person deductible. Also Bronze.

As others have mentioned, all depends on where you live and your ages..

 

[gstillson]

I have trouble believing that a $40K MAGI for a couple will get you health insurance for $100 a month with OOP maximums of $750. It sure as hell didn't in 2014, the one year we had to use it, so it's hard to imagine it would now in most places. You may get a bronze plan for $100 a month, but there will be a lot more cost sharing, I'd bet closer to $5K a year in max family OOP.

You would also be subjecting yourself to a LOT of economic and political risk.

Just because you spend $40,000 a year from your $1M portfolio doesn't necessarily mean that your MAGI is $40,000 a year.

Here is an example for a couple that has $200,000 of already taxed money in CD ladders, $200,000 in a taxable brokerage account, and $600,000 in a IRA or 401K:

Say they are lucky and their CD's are paying 3%. The $200,000 adds $6,000 to their MAGI. The taxable brokerage account pays an average 2% dividend, so another $4,000 to the MAGI.

Now their MAGI is $10,000. By taking $15,000 from the brokerage account, lets say half of which is subject to long term cap gains, their MAGI is now $17,500 yet they have $25,000 to spend. If they convert $5,000 of their IRA to Roth, their MAGI is $22,500, right above poverty level, and they qualify for the best silver cost sharing plan. They can pull $15,000 more out of the CD ladder to bring their spendable income to $40,000. Do any rebalancing in the 401K/IRA so their stock/bond allocation remains where they want.

Now the next year they have $185,000 in saving, $205,000 in the taxable brokerage account (the market returned 10% that past year), $5000 in a Roth and $655,000 in their 401k/IRA. They do a similar strategy, although with slightly less interest from their saving so they convert an extra $1000 to a Roth. The market returns 5% this year. Still they are at poverty level $22,500, paying no federal tax and getting a great silver cost shared plan.

They keep at this until the saving account is depleted ($200,000/$15,000 = 13 years) but at that time they have a Roth account with $80,000 of contributions and $70,000 of gains. They can pull $15,000 out of the Roth (the year 1 to 3 contributions) without changing their MAGI and use that money to supplement their taxable earnings. With a 5 year lookback on the Roth contributions, they could continue to do this for 2 more years.

So now they have lived 16 years on $22,500 while spending $40,000. Their CD account is depleted but their taxable brokerage account still has $50,000 in it. Their Roth account has $125,000 and their 401K/IRA has $1,100,000 (the market was fair over that 16 years). They are age 62, having retired at 46.

They could tap the Roth and 401K/IRA to continue their poverty level MAGI until they reach full retirement age or they could take SS early, or maybe even wait to take it at 70. They pretty much have not paid any tax for the past 16 years and have received over a quarter million dollars in health subsidies via premium and cost sharing. Life is good.

 

[gstillson]

As far as plan premiums go, I just did a test plan in Washington state in our area for a married couple, non smokers, born in 1973 (we are a little older but this is for someone retiring in mid 40s).

It looks like I was wrong about the $100 a month premium for a silver plan. The premium is $43.10 per month.

Max individual out of pocket is $600 and max familiy is $1200

$762.40 tax credit per month (but this doesn't begin to really explain the low max out of pocket, which is likely worth another $200 a month). So essentially even at a young 45, this couple is saving $12,000 a year on health insurance by keeping their MAGI low (I used $23,000, which is just above the poverty cutoff).

 

[cyber888]

Have not retired yet, but it is doable on $750K .. location is important

I live in the South where cost of living is much more affordable. So, if you are in the Carolinas, Tennessee, Arkansas, etc .. it is doable.

I live in the South and $1 mil here means you are pretty good. If I live in California, Chicago, New York, cost of living is just prohibitive.

 

[Scout]

Determine your expenses per year on average and add in additional as a buffer. Then divide that yearly expense number by the safe withdrawal rate wanted. Most people use 4%. That tells you the total nest egg you need to be able to retire and meet yearly expenses.



Take that big nest egg number and subtract from that expected total pension and subtract total expected social security.



What's left is the portion that you must come up with. You might be just fine contributing $750K to the pot as long as the rest of whatever you need is there from other sources like a pension and/or social security benefits.

All true, but reassurance from other’s success is nice

 

[NanaW]

Sorry was typing in car. Not driving &#55357;&#56841;

 

[Tiger8693]

A lot of posters have mentioned pensions when talking about ability to RE..

I'd think in most cases if you don't have a pension (like us), that changes the answer pretty significantly..

Me, I'd be very hesitant to RE on $750K and no pension or other guaranteed income stream. That's only $26,250 at 3.5% SWR..

SS is (essentially) a Pension and should be counted.

 

[Bruno]

Lot of people out there retiring on a lot less. It all about how you want or need to live.

 

[trumpeting_angel]

Sorry was typing in car. Not driving &#55357;&#56841;

It’s okay, @nanaW - everyone knew what you meant!

 

[IrishMoss]

All true, but reassurance from other’s success is nice

You're getting and can get plenty of that just reading the forums. I've not seen anyone claim they were worse off after retiring (early or on time or whenever).

Embrace the math! The math has been tested over and over and is not subjective.

 

[IrishMoss]

I was able to get a very good subsidy on my health insurance premiums/ACA because my taxable income is low and I'm making sure it stays low enough. Not having any earned income certainly helps. It's important to have different buckets of money to pull from, especially after-tax so withdrawals to live on will not be taxed or trigger cap gains.

 

[Digger1000]

I retired on less than that 2 years ago at age 51. In year 2 of my retirement I lived on under 2.1% swr of the original amount. Year 1 it was 2.6%. My net worth is 22% higher now than it was at retirement and that includes withdrawals. If I lose 50% of my net worth tomorrow it wont affect my life one bit. And my withdrawal rate would only increase to 3.5%(of that 50% less net worth).

 

[joeea]

That is how squirrels think and act. No Commas, No Periods, just a continuous thought/Action process.

How nice.

 

[Joe1954]

.75M is probably not enough

You have to look at the safe withdrawal rate of 4% and if that much would be adequate. 1M will give (usually) $40K/year. If you have pensions coming (e.g. SS, teachers retirement, etc.), you might be able to hold out until they kick in. We have been retired for 4 years now and have taken closer to 5% without losing principal. A year from now, I will start getting the max monthly from SS at which time we will go back to 4%. You also have to consider that inflation will reduce your spending power over time. Since we hope to leave “some” money to our children, my top priority is never dipping into my principal. Good luck with whatever you decide.

 

[SonofCohoes]

Less but we have a pension and rental income.

 

[Jamie1101]

Living like a king...

I retired at 53 from a GM production job with the "30 years and out" provision in 2005. Factory life could really suck but early on I realized the benefits package was way worth the aggravation so I stuck it out. In the early 1980's when IRAs started I maxed out my yearly contributions. I worked lots of overtime when possible and paid off my house early in 2000. There were only four years of house payments to worry about.

Pension, SSI, and Annuity bring me in just about $36K a year which affords me a great standard of living. You don't need a lot of money to spend to be happy....

With no debt and actively managed investments to fall back upon (which are a bit shy of the 1million mark) I can honestly say not having to worry about money has made this life of mine a great adventure. Will have to make withdrawals from my IRA in three years...

 

[NXR7]

Yes, and all pre-tax. But it's only been six weeks and two days so far.

I had intended to go on July 4th of 2020 because I'd be Medicare-eligible but life happened. My wife is no longer working but five years younger. So we are paying my COBRA for fourteen months because we want to travel and need good, nationwide coverage.

I have a meager pension that I filed for early and also filed for SS early but neither starts until July. Those will cover about 75% of essential monthly expenses (excluding healthcare) because we, too, live cheaply and live in an area where the costs are reasonable. One investment, the biggest chunk of the total retirement savings, pays the remaining 25% via dividends. This is my biggest risk area but one I'm comfortable with.

I had a small HSA at my last job that I can use to pay COBRA premiums (it's an exception to the normal rule of "HSA's cannot be used for healthcare premiums"). I have a small 401(k) from that last job that I have committed to healthcare and the two will pay COBRA through 2019. I'm on a 90% coverage low-deductible COBRA (high-cost) plan and will switch to a less expensive one at enrollment in November so the 2020 costs should be lower. Because I will transition to Medicare before my 18 months of COBRA are up, my DW "should" be eligible for another 18 months of COBRA. In any event, she has been saving for this eventuality for a long time due to our age difference so it won't be a huge burden. We hope...

Tomorrow is promised to no one. I've had too many friends and acquaintances develop cancers and pass away, two a lot younger than me (brain cancer). Another died at 3 AM the day after his 63rd birthday from cancer. I literally woke up the day after my 63rd birthday and my first thought was "I just lived longer than Denny." An older friend died from complications of Alzheimer's.

My stress levels dropped through the floor. My entire outlook on life has changed for the better. I worked full-time for forty-six years in a row. Everyone told me "You'll know when it's time" and they were right. Even though it was earlier than I planned it was time. Zero regrets. So far.

Ray