Feedback Requested for Portfolio Amount Needed - Borderline/Good/Comforable

[stan101]

First time posting. Really enjoy everyone's ideas and feedback on this forum.

I would like some feedback on what people think is needed for total portfolio retirement numbers based on 3 categories (Borderline, Good, Comfortable) with the data listed below.

I would like to retire at age 56 with an assumption of $0 W-2 income in retirement.

Question to you:

What dollar amount should my portfolio be for (1) a Borderline retirement number, (2) a Good retirement number, (3) a Comfortable retirement number (Comfortable meaning the minimum number for little money worries assuming no huge catastrophes.)

Data/assumptions below:

- 54 years old married 26 years to spouse who is 54 years old.
- 2 kids. One has real job with benefits. 2nd is finishing last 3 semesters of college and I am confident that she will get a good job after graduating in May 2023. (College is paid for by 529 so not a variable in this scenario. College savings strategy worked for both kids!)
- No real estate investments except primary home that is paid for.
- Only investments are portfolio and cash.
- Portfolio is 60% equities/40% bonds. Bond % includes cash holdings.
- Portfolio is 60% Taxable/40% Retirement (IRA, Roth, 401k)
- Portfolio is the typical index and low cost funds. Most bond funds are in retirement funds. Some balanced funds in taxable that give off some dividends.
- Some savings in HSA but nothing significant. Will max out limit next 2 years.
- No debt. I am debt-phobic.
- Lumpy expenses (cars, HVAC, home repairs, etc) are paid by wife's part time work that she will be doing for next 5 years.
- Good health (knock on wood)
- Estimating expenses in retirement of $100,000 per year after tax. $130,000 before taxes.
- Expenses have been running $64,000 per year consistently with minimal child related expenses. (Been tracking every dollar in Excel file.)
- Estimate $25,000 - $30,000 per year for healthcare plus some wiggle room to get total annual expenses to $100,000. This would include travel etc that we want to do in retirement.
- SS is $3300/mo @ age 67, $4100/mo @ age 70 for me assuming I work until 2023.
- SS for spouse is $900 @ 62, $1200 @ 67, $1600 @ 70.
- Live in low to medium COL area.

What dollar amounts (please list 3) do you think should my portfolio be? 3 Categories --> (1) a Borderline retirement number, (2) a Good retirement number, (3) a Comfortable retirement number (Comfortable meaning the minimum number for little money worries assuming no huge catastrophes.)

Thank you for your feedback and wisdom!

 

[Out-to-Lunch]

Welcome to E-R!

Okay, I will play. I would opine:
Borderline: $2.6M
Good: $3.2M
Comfy: $4M

 

[pb4uski]

First time posting. Really enjoy everyone's ideas and feedback on this forum.

I would like some feedback on what people think is needed for total portfolio retirement numbers based on 3 categories (Borderline, Good, Comfortable) with the data listed below.

I would like to retire at age 56 with an assumption of $0 W-2 income in retirement.

Question to you:

What dollar amount should my portfolio be for (1) a Borderline retirement number, (2) a Good retirement number, (3) a Comfortable retirement number (Comfortable meaning the minimum number for little money worries assuming no huge catastrophes.)

Data/assumptions below:

- 54 years old married 26 years to spouse who is 54 years old.
- 2 kids. One has real job with benefits. 2nd is finishing last 3 semesters of college and I am confident that she will get a good job after graduating in May 2023. (College is paid for by 529 so not a variable in this scenario. College savings strategy worked for both kids!)
- No real estate investments except primary home that is paid for.
- Only investments are portfolio and cash.
- Portfolio is 60% equities/40% bonds. Bond % includes cash holdings.
- Portfolio is 60% Taxable/40% Retirement (IRA, Roth, 401k)
- Portfolio is the typical index and low cost funds. Most bond funds are in retirement funds. Some balanced funds in taxable that give off some dividends.
- Some savings in HSA but nothing significant. Will max out limit next 2 years.
- No debt. I am debt-phobic.
- Lumpy expenses (cars, HVAC, home repairs, etc) are paid by wife's part time work that she will be doing for next 5 years.
- Good health (knock on wood)
- Estimating expenses in retirement of $100,000 per year after tax. $130,000 before taxes.
- Expenses have been running $64,000 per year consistently with minimal child related expenses. (Been tracking every dollar in Excel file.)
- Estimate $25,000 - $30,000 per year for healthcare plus some wiggle room to get total annual expenses to $100,000. This would include travel etc that we want to do in retirement.
- SS is $3300/mo @ age 67, $4100/mo @ age 70 for me assuming I work until 2023.
- SS for spouse is $900 @ 62, $1200 @ 67, $1600 @ 70.
- Live in low to medium COL area.

What dollar amounts (please list 3) do you think should my portfolio be? 3 Categories --> (1) a Borderline retirement number, (2) a Good retirement number, (3) a Comfortable retirement number (Comfortable meaning the minimum number for little money worries assuming no huge catastrophes.)

Thank you for your feedback and wisdom!

Welcome stan! There are numerous assumptions that you are making that are questionable.

First is taxes. If a Wisconsin married couple had $100k of income that was all ordinary income then their combined federal and state income taxes would only be $13k... not $30k. See https://www.irscalculators.com/tax-calculator

$25-30k for healthcare is way high. At your income level you'll likely qualify for a subsidized ACA policy. healthsherpa.com indicates an Anthem Bronze plan for two would be ~$1,150/month, but only $500/month after subsidies. And unless you are unhealthy it is foolish to assum that you will max out deductible evey year. So an ACA policy and $6k for deductibles, dentists and an eye exam would more likely be $10-15k rather than $25-30k.

It's unrealistic to expect that your retirement expenses will be 156% of your pre-retirement expenses each and every year.... in a year that you travel a lot perhaps... but not each and every year.

Once you are collecting SS, your wife will get a bump to her SS for spousal benefits. If she starts her SS at 67, then she'll get 50% of your PIA... or $1,650... not $1,200... so there is no use of her waiting until she is 70. Checkout opensocialsecurity.com to look at the impact of various SS claiming strategies.

But I'll play too... $1.8 to $2.0 million for $100k annual spending.

Now if you want to trim spending to $80k, then $1.3 to $1.5 million.

And add $0.2 million to those numbers if SS haircuts 25% in 2035 if Congress does nothing (and they are really, really good at doing nothing).

Spend some time at firecalc.com and work your way through the tabs across the top of the page.

 

[Dtail]

Welcome to our wonderful site.
I played around with Firecalc a bit with your known info.
Borderline: 2.6m
Good: 2.9m
Comfortable: 3.6m

However as PB4USKI mentioned, your healthcare expenses and taxes estimates appear to be very high and should be lower with more research needed.

If so, the numbers I mentioned can be cut by a decent amount.

 

[Closet_Gamer]

Another quick way to do the math, including taxes in the annual income requirement...

Borderline...(annual income need - SS)/.04
Good ... (annual income need - SS)/.03
Comfortable ... (annual income need - SS)/.025

I always like look at it this way because it places so much control in your own hands. For every $1 you take out of your annual costs you remove $25 - $40 of the needed nest egg.

YMMV.

 

[HarryHawk]

I retired 14 years ago at the age of 56. At that time my wife and I used Obamacare for our health insurance. Simply put, back then it was crappy insurance, I don't know how or if it has changed since then. We were paying $1200 a month, with a $12,000 annual deductible. Fortunately we never got sick, but if we had, basically our out of pocket annual cost would have been $24K.

THen at age 65, everything changed for the better. We went on Medicare. It is great insurance, at least to me seems very reasonably priced.

So, the point being your calculations change (for the better) for both drawing SS and paying for health care after the first several years of retirement. Of course then the next change comes when you have to start drawing rmd's (have yet to get there).

I will say overall, financially speaking things worked out for us much better and easier than I had originally anticipated. Good luck!

 

[Retireby45ish]

Once you are collecting SS, your wife will get a bump to her SS for spousal benefits. If she starts her SS at 67, then she'll get 50% of your PIA... or $1,650... not $1,200... so there is no use of her waiting until she is 70. Checkout opensocialsecurity.com to look at the impact of various SS claiming strategies.

.

I have a question about this. I don’t see where the 50% spousal bump is. For example for my situation the website says DW should start claiming at age 62. Her PIA is 1600. Then 3 years later I claim at age 70. My PiA is 2500.
So are you saying that for those 3 years she needs to apply and gets $2400? Then it goes back to 1600 once I start claiming?

Also, it says a 23% reduction in SS is a good estimation. I’ve been using a 40% in all my models. I honestly don’t see how they will cut at all…the devastation and uproar would be nuts. Thoughts on that?


I guess it’s not a huge deal for us since it’s only for 3 years. But every bit helps. Thanks.

 

[Surewhitey]

+1 on the tax & HI comments.

We are in a similar place & age. I have a spreadsheet that I did to customize my personal profile and $2 million is a good, rough estimate. This includes the lumps of cars, home maintenance and health events over 40 years. I adjusted the amount down to the $70k annually for our reality.

On the low side, we could do $1.5mm, high side $3mm.

If you "engineer" your earned income and keep your MAGI under $30-40k+/-, your health insurance & taxes will be practically non existent.

General ACA calculator link
https://www.gocurrycracker.com/aca-...lHRyF6TcvLuo4XGdB3H16-8rc_VJA-BXB9J3wEb9C3Ixg

 

[disneysteve]

$25-30k for healthcare is way high. At your income level you'll likely qualify for a subsidized ACA policy. healthsherpa.com indicates an Anthem Bronze plan for two would be ~$1,150/month, but only $500/month after subsidies. And unless you are unhealthy it is foolish to assum that you will max out deductible evey year. So an ACA policy and $6k for deductibles, dentists and an eye exam would more likely be $10-15k rather than $25-30k.

I'm struggling with this calculation myself right now. Is this a "plan for the worst and hope for the best" scenario? I've been using the max OOP as my estimate of healthcare costs even though I realize it's very unlikely that would happen, and certainly not every year, but we need to be prepared to spend that much if necessary.

 

[disneysteve]

OP, our situation is quite similar to yours and I've been poring over the very same questions.


I don't know how to break down the 3 categories you asked for, but I'd say anything in the neighborhood of $3M would be fine, and that's without accounting for SS. So the mid to upper $2M range should work well. Pretty much in range of the other replies.

 

[pb4uski]

I'm struggling with this calculation myself right now. Is this a "plan for the worst and hope for the best" scenario? I've been using the max OOP as my estimate of healthcare costs even though I realize it's very unlikely that would happen, and certainly not every year, but we need to be prepared to spend that much if necessary.

Yes, I see this happening all the time... people planning for medical costs of premiums and the full deductible each and every year even though in my experience very few households pay the full deductible each and every year. Way too conservative. Possible, perhaps but extremely unlikely.

Our real life experience was that our out-of-pocket health care costs... health insurance deductibles and co-pays, dental and vision for 2010-2019... 10 years... was $19k. But we are lucky that we are relatively healthy.

 

[pb4uski]

I have a question about this. I don’t see where the 50% spousal bump is. For example for my situation the website says DW should start claiming at age 62. Her PIA is 1600. Then 3 years later I claim at age 70. My PiA is 2500.
So are you saying that for those 3 years she needs to apply and gets $2400? Then it goes back to 1600 once I start claiming?

Also, it says a 23% reduction in SS is a good estimation. I’ve been using a 40% in all my models. I honestly don’t see how they will cut at all…the devastation and uproar would be nuts. Thoughts on that?


I guess it’s not a huge deal for us since it’s only for 3 years. But every bit helps. Thanks.

Since her PIA of $1,600 is more than 50% of your $2,500 PIA, spousal benefits will not apply to your situation.

But let's say that you had a couple the exact same age with a FRA of 67 where one was a SAHM and the other had a six-figure job... so one has a PIA of $1,000 and the other a PIA of $3,000. The SAHM claims at 67 and their benefit is $1,000. When the spouse claims at 70 they'll receive $3,720 ($3,000 * (1+8%*(70-67))). The SAHM spouse will receive as spousal benefit of $500... (($3,000*50%)-$1,000) which when added to the $1,000 benefit based on their work record brings their total benefit to $1,500... or 50% of the higher-earning spouse's PIA.

If the SAHM spouse claims earlier than their FRA then the $1,000 benefit is permanently reduced for taking benefits earlier than FRA.

On the last part, I agree with you. While if history serves the needed reforms will be at the last minute but I think the Congresscritters will eventually do whatever is necessary to assure that beneficiaries receive the benefits that they have been told they will receive because if they don't the uproar would cost them their jobs. On the other hand, if they don't then a wholesale change in the composition of the Congress might be a good thing so it's a backhanded win-win.

 

[disneysteve]

Yes, I see this happening all the time... people planning for medical costs of premiums and the full deductible each and every year even though in my experience very few households pay the full deductible each and every year. Way too conservative. Possible, perhaps but extremely unlikely.

Thanks for this. I guess I should dial back my estimate. That will make the numbers much more appealing.

 

[jkern]

My ballpark for just the "Good" number is about $3M.

 

[OldShooter]

Nowhere do I see that the word "inflation" has been mentioned.

 

[stan101]

pb4uski - Thank you for your response. I truly appreciate it, but holy acronyms Batman! I have to look up some of these like PIA (at first I thought PITA which is what this retirement planning is to me . Regarding expenses, our net expenses without taxes are about $65,000. This is without healthcare or lumpy. My forecast keeps the $65k exenses the same going forward (not counting inflation). I have to add healthcare and a little fluff to get to $100k/year. Grossing up for taxes is where I arrived at $130,000. I am hoping I am being conservative, but a 25% tax rate for fed and state does not seem out of line, but hopefully it is high. My numbers for healthcare may be conservative, but I don't want to be surprised.



Regarding SS, can I apply at 67 and suspend until 70 so my wife can take her SS at 67 and get 50% of my number at 67? I am not sure if we should both take at 67 or if she can still get the 50% bump if I wait until 70. I ran the scenario on Open SS and it said for spouse to take at 62 and then take spousal benefit at 69 1/2 when I apply at 70. Unfortunately she will only get spousal benefit for 6 months based on the Open SS recommendation.



I did spend some time on firecalc a few weeks ago and it looks good, but I like hearing from people who actually are in retirement or in a similar situation to me. Plus the actual thought of retiring scares the @#$% out of me. It is not the retirement or time issue because I can stay active until i croak, but the money issue has me confused even though I have been studying this stuff for 15 years and saving for 30+ years.

 

[disneysteve]

I did spend some time on firecalc a few weeks ago and it looks good, but I like hearing from people who actually are in retirement or in a similar situation to me. Plus the actual thought of retiring scares the @#$% out of me. It is not the retirement or time issue because I can stay active until i croak, but the money issue has me confused even though I have been studying this stuff for 15 years and saving for 30+ years.

Welcome to the club.

Firecalc has us at 100%.

Our CFP has us at 100%.

I'm typing this message from work on a 60 degree Saturday in the middle of February in New Jersey.

I think you and I both need to close our eyes and jump off the cliff.

 

[stan101]

Yes disneysteve, name the day and the cliff. Same here on firecalc and CFP (which I paid a few hourly and get the same answer that everything is OK). However, then there are these things ringing in my brain --> "bonds are no good with rates increasing", "cash is trash", "market is overvalued", "medical bills can BK you", "what about LTC". I lived through 2000 and 2008 but what if they repeat? I am game with jumping off a cliff with you, but need to pick a nice spot with sunshine because where I am the sky is grey and there is 4" of snow. The only problem I see with that plan is that you will land in a nice ocean with clear water and I will end up in the swamp next to you with gaters and piranhas. That is just how my brain works.

 

[levindb]

Just FYI...the File and Suspend option is no longer available. The spouse cannot get spousal unless the partner has already filed.

 

[RunningBum]

I retired 14 years ago at the age of 56. At that time my wife and I used Obamacare for our health insurance. Simply put, back then it was crappy insurance, I don't know how or if it has changed since then. We were paying $1200 a month, with a $12,000 annual deductible. Fortunately we never got sick, but if we had, basically our out of pocket annual cost would have been $24K.

You were not on ACA (Obamacare) 14 years ago.

 

[pb4uski]

pb4uski - Thank you for your response. I truly appreciate it, but holy acronyms Batman! I have to look up some of these like PIA (at first I thought PITA which is what this retirement planning is to me . Regarding expenses, our net expenses without taxes are about $65,000. This is without healthcare or lumpy. My forecast keeps the $65k exenses the same going forward (not counting inflation). I have to add healthcare and a little fluff to get to $100k/year. Grossing up for taxes is where I arrived at $130,000. I am hoping I am being conservative, but a 25% tax rate for fed and state does not seem out of line, but hopefully it is high. My numbers for healthcare may be conservative, but I don't want to be surprised.



Regarding SS, can I apply at 67 and suspend until 70 so my wife can take her SS at 67 and get 50% of my number at 67? I am not sure if we should both take at 67 or if she can still get the 50% bump if I wait until 70. I ran the scenario on Open SS and it said for spouse to take at 62 and then take spousal benefit at 69 1/2 when I apply at 70. Unfortunately she will only get spousal benefit for 6 months based on the Open SS recommendation.



I did spend some time on firecalc a few weeks ago and it looks good, but I like hearing from people who actually are in retirement or in a similar situation to me. Plus the actual thought of retiring scares the @#$% out of me. It is not the retirement or time issue because I can stay active until i croak, but the money issue has me confused even though I have been studying this stuff for 15 years and saving for 30+ years.

25% for state and federal income taxes is way out of line. If you go https://www.irscalculators.com/tax-calculator , select married filing jointly, put in $116,764 of unearned income and select to include Wisconsin income taxes it indicates a combined effective tax rate of 14.36% and after-tax income of $100,000... so the income tax bite is $17k rather than $30k. And in reality it will be less because the above assumes that none of that income is tax preferenced qualified dividends on domestic equities or long-term capital gains and in most cases at least some of your income would be in that category and the tax rate on that income is 0% at your level of income.

You cannot file and suspend... that option was closed off a few years ago and you are too young to use it. She'll get the spousal benefit from when you file when she is 69-1/2 until when you die.

 

[pb4uski]

I retired 14 years ago at the age of 56. At that time my wife and I used Obamacare for our health insurance. Simply put, back then it was crappy insurance, I don't know how or if it has changed since then. We were paying $1200 a month, with a $12,000 annual deductible. Fortunately we never got sick, but if we had, basically our out of pocket annual cost would have been $24K. ...

That would only be if you BOTH had significant medical expenses in a single year, right? What is the chance of that happening?

Our real-life experience was $19k of deductibles, co-pays, dental and vision over 10 years. Now we have been healthy and lucky, But to automatically assume max deductibles each and every year is foolish unless you really like working!