REtiring early at 57 and scared

[F.I.R.E User]

I would keep our tax return adjusted gross income in the $60-$65k range (I don't remember the exact amount, changed slightly each year due to interest and dividends) on our joint return. This gave me enough subsidy to cover pretty much 100% of the monthly insurance premiums for an Obamacare policy with $7k per person deductibles and max out of pocket. In the worst case we would spend $14k in a year in deductibles, but this only amounts to $1167 per month.....way below monthly premiums on regular policies. I would have to use some savings every year to cover spending, but it was well worth the savings in the medical area. We had several years with very low medical costs and hadn't spent anything on premiums for insurance we didn't use.

$1,167 a month is too expensive. Many pay under $500.

Calculator shows $531 a month with $75k AGI.

 

[InTheBasement]

Late to the thread but want to offer my suggestions and advice.

OP - I get where you are... emotionally ready to retire. I had been working towards retirement and had a bad meeting with my boss one week and gave notice the following Monday. It was liberating. But, as said, I'd been working on my plan, and getting advice here for over a year and was confident I was good to go.

Check out the link that was previously posted.https://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

As others have stressed - you need to be solid in your understanding of your spending. This is *all* inclusive: taxes, health care, lumpy expenses, discretionary stuff like travel, etc.

I found the best way to get confident I had a handle on my spending was to approach it from both directions. First: start from your gross income, deduct off things that will go away when you retire like 401k contributions, savings contributions, medicare and SS payroll deductions. You come up with a number that is the money that was spent... in theory. Second approach it from the other end- add up your fed/state taxes, household expenses, groceries, vacations, utilities...

The first few times my two numbers were off a lot from each other... so I looked at the bottom up spending for things I'd missed. I ran this excercize until the numbers were the same... I knew I'd figured out where my money was going.

Then in prep for retirement, I looked at things that would change: No more contributions to retirement savings.. different premiums for health insurance... food bill would change with more home cooking.

My biggest expense was our mortgage payment - and a month before I retired I paid off the mortgage. That meant a lot less cash needed a month.

I retired almost 10 years ago with a similar number, but also with 2 kids under roof. But we also had a granny flat bringing in income each month, as well as DH already being on SS. I was terrified.

For me the way I dealt with the fear was by getting super frugal for the first few years. I've eased up on that but I found there were things I cut in my fear, that I never missed... and therefore never added back to the spend.

Read the link above (FAQ)
Get super familiar with your all-in spending (taxes and healthcare included).
Run all the calcs, especially firecalc.
And if all signs say go... Pull the trigger.

Thanks for the advice. I have been running a very solid accounting of our expenditures over the past few years so I have a good handle on what is needed, including lumpy expenses. Also, we maintain an accurate accounting of income that is specifically what we bring home. So I consider my income as only what comes into the bank account. Deductions for 401K and other retirement accounts are not included. My math says that the income from interest/investment growth will be adequate to cover al the expenses as they are today. Considering that many of our expenses will reduce after retirement I feel like it will be fine. I guess the main cause of fear is that you never know what will happen down the road.

 

[InTheBasement]

What is your premium on healthcare?

I don't know yet. I have not really investigated the health insurance cost. I have been using $1500 per month as a guess at this point.

 

[pacergal]

You can go on your states ACA website and check cost of healthcare in your area.
I believe you can do it as a "guest" and not necessarily create an account.
It will give you a more accurate number than guessing.

 

[hotwired]

We're 58 and became "able" to retire at 53. Now to be fair, we live in central Maine, which is fairly low cost. Our personal budget is 52K, not inc. travel which is funded by 2 small apartment buildings we still own. But, I have a small web design & hosting business which brings in about 6K net per year, so that's "my money" if I want a splurge. We have enough in investments to provide 87,500 (SSWR = super safe withdrawal rate...little but not much lower than 4%).

We do budget "one off" expenses on our spreadsheet though, to sort of stress test our plan. 50K every 7-8 years for new vehicle, daughter's wedding, etc. We haven't really budgeted for extended care / nursing home but the current budget / portfolio surplus should cover.

You sound OK, but suitably worried. I mean, you hopefully have a long road ahead. I'd say make sure you have a good 3-4 years "salary" (maybe longer) in a bond ladder (50% nominal / 50% TIPs) but keep a good chunk of portfolio in stock to keep up with inflation, and to pad your portfolio during bullmarkets

 

[fuelie60]

$1,167 a month is too expensive. Many pay under $500.

Calculator shows $531 a month with $75k AGI.

the 1167 is not the monthly premium for insurance. it is the monthly amount if we had a bad year and had to pay out $14k in deductibles with zero insurance premiums

 

[hotwired]

Aca / hsa

Since most people did not focus on the healthcare costs of ACA (Marketplace or Obamacare), I will try to.

I used this calculator to get early estimates for ACA:
https://www.kff.org/interactive/subsidy-calculator/

Generally, if you keep your AGI below $40K, premiums for Bronze can be < $50/month. It starts to ramp up above $40K. My AGI this year was $43K and my Silver premium was $150/month. If you're very healthy, you may want to consider an HSA plan through the ACA , and then you'll be able to deduct $8300 per family.

BTW - I retired at 50 with $1.7M, and 7 years later I'm at $3.6M. We spend about $60-70K/year.

DW and I (58) opt for the HSA plan. We have had it for years, and it's like having cake and eating it too. 9,300 deduction, then we've scanned and categorized receipts since we opened it, so we'll get tax free withdrawals "paying ourselves back"

 

[orbops]

DW and I (58) opt for the HSA plan. We have had it for years, and it's like having cake and eating it too. 9,300 deduction, then we've scanned and categorized receipts since we opened it, so we'll get tax free withdrawals "paying ourselves back"

I thought having the HSA was going to be a real income saver that I could use to increase my Roth conversion! Turned out that last year, I had a quadruple bypass, my gallbladder failed, and my wife suffered internal injuries from getting t-boned by a snowbird. Got the $9,300 deduction, but ended up maxing out the HSA at $14K. Decided it wasn't worth having the HSA, and now our deduction is $6K for 2024.