Super confused... feeling DEVASTATED & hopeless... need advice on my plan?

[Gotadimple]

What matters is your earnings and not jumping into any more 100% guaranteed money makers.
There is no such thing..

Tropical: What Sunset said. The only people who actually earn from a 100% guaranteed money maker are the people who sell them - not the people who buy them.

You have some good advice here. Research them. Take the time to do that, and breathe. You are on the right path.

 

[Tropical]

Just have working income for 2 more years ~$25K or more, per year and you will have BOTH Social Security & Medicare.

You are so close it's a no-brainer decision.

Not sure why you collected 5 citizenships, other's here have a few as well, but 5 is pretty high. But it doesn't matter in the end. What matters is your earnings and not jumping into any more 100% guaranteed money makers.
There is no such thing..

I didn't collect those citizenships. I was not born in the US... got my citizenships when I was child (asides from one of them which I got recently) and I am very thankful to have them... it's always good to have options! I recently got my Hungary citizenship as I plan to retire there and have wanted Hungarian citizenship for very long time... my parents were born there so it was super easy to get.

Yes I agree I will make sure to try and get my 40 FICA credits... I plan to earn income in the US for the next 10 years at least... but how would I get enough credits in only 2 more years? I have only 8 credits so far... so this means I need 32 more credits... I can't accomplish that in only 2 years...

 

[MissMolly]

I would caution against advising her to put all her money in tax deferred accounts if she is planning to retire before 59.5 years old. She won't have easy access to that and will be back with her ALL CAPS and her BOLD WORDS and her multiple ? ? ? and !!! asking what to do now. It's exhausting to read these posts.

 

[lucky penny]

I have 5 citizenships. I haven't been in the US all the time so I have ONLY 8 credits for social security so far.

I am trying to see what I need to be able to retire on WITHOUT social security being included in the picture.

1M with 4% withdrawals is not going to last very long! It will be gone in 30 years time or less... or am I wrong?? For peace of mind etc I need the money to last at LEAST 40 years.

In your first post you say you want to grow your portfolio to $3 million in 20 years (because in 30 years your life "will be over"). Later you say your portfolio will have to last 40 years (starting at 65?) because you "will not be comfortable with 30 years" -- are you hoping to live to 105? Still not clear why you "need" such a large portfolio since you insist you live & can live very frugally (& maybe even for half as much in Hungary, which is your dream).

Your numbers are all over the place so it's impossible to advise you.

 

[Tropical]

In your first post you say you want to grow your portfolio to $3 million in 20 years (because in 30 years your life "will be over"). Later you say your portfolio will have to last 40 years (starting at 65?) because you "will not be comfortable with 30 years" -- are you hoping to live to 105? Still not clear why you "need" such a large portfolio since you insist you live & can live very frugally (& maybe even for half as much in Hungary, which is your dream).

Your numbers are all over the place so it's impossible to advise you.

I stated Colorado or Idaho is my dream because Hungary is mostly flat and doesn't have the same terrain/weather as Colorado or Idaho for example unfortunately... but due to healthcare costs and cheaper cost of living I might have to settle on Hungary.

What I need to figure out is, if I need 60k/year from my portfolio... what size does it need to be to last 40 years with 3% withdrawal rate.

 

[Tropical]

I would caution against advising her to put all her money in tax deferred accounts if she is planning to retire before 59.5 years old. She won't have easy access to that and will be back with her ALL CAPS and her BOLD WORDS and her multiple ? ? ? and !!! asking what to do now. It's exhausting to read these posts.

Please refrain from replying or reading any of my posts if you wish to be this rude (it is not necessary) and if my posts are so bothersome to you find something else to do with your time. thank you.

 

[MichaelB]

Let’s all remember to treat each with civility and respect.

 

[Fermion]

I stated Colorado or Idaho is my dream because Hungary is mostly flat and doesn't have the same terrain/weather as Colorado or Idaho for example unfortunately... but due to healthcare costs and cheaper cost of living I might have to settle on Hungary.

What I need to figure out is, if I need 60k/year from my portfolio... what size does it need to be to last 40 years with 3% withdrawal rate.

I missed the part where Idaho was a good location. We live in eastern Washington, just a stone's throw from the Idaho border. This area has trees (a lot of southern eastern Washington and Oregon is more like a desert) and mountains. Our county has the lowest sales tax in Washington (still pretty high but better than the 10.25% of Seattle). We are moving out of our apartment but our rent was $550 a month for a 1 bedroom right in town, across the street from a very cute park and the library. I think it is one of the 4 places in the whole USA you supposedly can live on minimum wage.

Healthcare in Washington at the $25,000 income level is essentially almost free. Things will change at age 65 obviously.

Idaho and Washington do get snow...do you like snow? We do.

This is last December, top of Calispell peak at 5500 feet. Ok, not the very top, I was chicken

 

[pb4uski]

I have 5 citizenships. I haven't been in the US all the time so I have ONLY 8 credits for social security so far.

I am trying to see what I need to be able to retire on WITHOUT social security being included in the picture.

1M with 4% withdrawals is not going to last very long! It will be gone in 30 years time or less... or am I wrong?? For peace of mind etc I need the money to last at LEAST 40 years.

You should play are around with FIRECalc. A $1 million conventional 60/40 asset allocation has a 95.9% success rate supporting $40k of inflation-adjusted with withdrawals with no SS.

If you expand the time horizon to 40 years, you would need $1,087,031 to support $40k inflation adjusted withdrawals for 40 years with no SS.

The real point is that it ISN't anywhere near $3 million!

Also, keep in mind that even running out of money after 40 years is sort of like a worst case scenario. From FIRECalc:

... FIRECalc looked at the 113 possible 40 year periods in the available data, starting with a portfolio of $1,087,031 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 113 cycles. The lowest and highest portfolio balance at the end of your retirement was $-487,546 to $9,059,303, with an average at the end of $2,270,415. (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 40 years. FIRECalc found that 5 cycles failed, for a success rate of 95.6%. ...

That means that only 5 of 113 possible 40 year scenarios ended up running out of money, for the other 108 scenarios the ending portfolio balance was between $1 and $9,059,303 and averaged over $2.2 million. IOW, 4% is conservative to preserve capital in case there is bad sequence of returns experience.

 

[pb4uski]

... What I need to figure out is, if I need 60k/year from my portfolio... what size does it need to be to last 40 years with 3% withdrawal rate.

At 60/40 AA.

... FIRECalc looked at the 113 possible 40 year periods in the available data, starting with a portfolio of $1,630,546 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 113 cycles. The lowest and highest portfolio balance at the end of your retirement was $-731,321 to $13,588,947, with an average at the end of $3,405,619. (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 40 years. FIRECalc found that 5 cycles failed, for a success rate of 95.6%.

 

[pb4uski]

Yes thanks I see that... this statement I found on google is scary! It's one of the reasons I will most likely not be able to stay in the US during retirement...

According to Fidelity Investments' 2022 Retiree Healthcare Cost Estimate, the average American couple estimates the total cost of healthcare in retirement to be $41,000; however, in actuality, the average 65-year-old couple retiring this year can expect to spend an average of $315,000 on healthcare expenses throughout ...Mar 15, 2023

I don't see at all where they are getting $41,000. Our actual costs for 2024 between Part B, Part D, Medigap premiums, Part B deductible and copays for Rx is about $10,000. Add in a 2 eye exams a year, 4 dental cleanings and 2 dental exam that that is still well south of $11,000 a year for us.

 

[Tropical]

I missed the part where Idaho was a good location. We live in eastern Washington, just a stone's throw from the Idaho border. This area has trees (a lot of southern eastern Washington and Oregon is more like a desert) and mountains. Our county has the lowest sales tax in Washington (still pretty high but better than the 10.25% of Seattle). We are moving out of our apartment but our rent was $550 a month for a 1 bedroom right in town, across the street from a very cute park and the library. I think it is one of the 4 places in the whole USA you supposedly can live on minimum wage.

Healthcare in Washington at the $25,000 income level is essentially almost free. Things will change at age 65 obviously.

Idaho and Washington do get snow...do you like snow? We do.

This is last December, top of Calispell peak at 5500 feet. Ok, not the very top, I was chicken

Nice photo! I love snow (can't imagine life without it... it's not the same without experiencing snow and the 4 seasons). I actually love cold weather and mountains. Hungary gets a little cold but is mostly flat and it doesn't get the same snow. It's not the same terrain or weather unfortunately.

My first choice actually used to be Washington.... then the more I talked to people who kept telling me Washington is "difficult to go off grid because of all the regulations". I know someone who moved from Washington to Idaho because of this they built their own house off grid in northern Idaho. Then the cost of land is more expensive in Washington. So that's when I start leaning towards Idaho... but Washington, Idaho, Colorado, Montana etc.... that is the weather and terrain I'm obsessed with... especially if it is more desert like areas.

I have also been researching which states have a cap limit on how much real estate property taxes can increase each year. This website is great and displays all this....

https://www.kiplinger.com/taxes/property-tax-cap-by-state

If I'm going to retire in the US then it's important my primary residence has all 3 of the below:

Assessment limit: Yes
Rate limit: Yes
Levy limit: Yes

Washington does not have an Assessment limit., so I worry this means my property taxes might increase drastically in one year? Because there is no cap on it like in Arizona for example which has:

Assessment limit: Yes
Rate limit: Yes
Levy limit: Yes

All this is very premature for me to be worried about.... but I enjoy at least having a general idea of which states in the US might work best for someone who is on fixed income so that they don't suddenly get taxed out of their own home via sky rocketing property tax increases. So being in a state which no "Assessment limit" worries me. This means my property tax can sky rocket from 3k/year to 5 or 6/year for example in Washington?

 

[Morgan22]

Thanks for your advice. I have to educate myself on the "self employed 401k". I was going to contribute to roth IRA, traditional IRA and taxable IRA... and/or money market account.... I need to brush on the the "self employed 401k".... now...

Yes, please keep educating yourself. You can only contribute to a Roth IRA, or a traditional IRA, not both. In addition, you can also contribute to a 401k. Keep in mind there are limits on contributions to these type of retirement accounts. In addition, you can also save money in a taxable brokerage account for which there is no limit as to how much you save.

If you work for another 15 to 20 years you'll have more than enough since you will also have Medicare and Social Security waiting for you.

You shouldn't be devastated. You are doing better than most Americans. You need to not chase get rich quick schemes. As others have said, slow and steady saving wins the race. Good luck.

 

[Texas Proud]

I read with amusement this thread... OP had zero plan except for what seems like a pie in the sky opportunity that went bust (I have heard this from so many people)...


Now realizes the problem and is running around with their hair on fire.. and stating things that are just not true...


My advice, you do NOT need a plan like you think... you do not need to move into a tent... you do not have to sell everything and become a monk..


What you need to do is sell your $600K house if it is too big for you... if you like it keep it... it is NOT a liability.. it is a HOUSE.. you need one (well, a place to live)...


Just look at your income and what you spend... cut out the stuff that is wasting money.. start to save the rest.... easy investments... S&P 500 to start or the total stock market fund... invest 15% to 20%... do not waste money on a FA as you do not need one yet.... open an account at Fidelity and use one of their fee FAs... most (maybe some) are pretty good... one of my sisters uses one and gets good advice...


DONE... no more running around with your hair on fire... BTW, it will take you years to get to where you plan to be unless you can increase your income a good amount... and no matter how you earn it you should be paying into the SS system...

 

[Tropical]

You should play are around with FIRECalc. A $1 million conventional 60/40 asset allocation has a 95.9% success rate supporting $40k of inflation-adjusted with withdrawals with no SS.

If you expand the time horizon to 40 years, you would need $1,087,031 to support $40k inflation adjusted withdrawals for 40 years with no SS.

The real point is that it ISN't anywhere near $3 million!

Also, keep in mind that even running out of money after 40 years is sort of like a worst case scenario. From FIRECalc:


That means that only 5 of 113 possible 40 year scenarios ended up running out of money, for the other 108 scenarios the ending portfolio balance was between $1 and $9,059,303 and averaged over $2.2 million. IOW, 4% is conservative to preserve capital in case there is bad sequence of returns experience.

Thanks for the info, it is very good news if I can get away with much lower FI number than 3M.

So sorry I am feeling a bit stupid here because I don't understand something. When I go to the FIRECalc and enter:

Spending: 40,000
Portfolio: 1,000,000
Full Years: 40

The results showed:
"Here is how your portfolio would have fared in each of the 113 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,120,937 to $12,410,499, with an average at the end of $2,594,861."

The negative $-1,120,937 is scary worst case scenario... but I want to see calculation based on 3% withdrawal, not 4%. Seems this is not possible with this calculator? I do not think I would feel comfortable retiring on only 1 million portfolio with 4% rule. The max I ever want to withdraw is 3% or even less. I need a buffer and peace of mind that I am not draining my principal too much.

 

[Tropical]

Yes, please keep educating yourself. You can only contribute to a Roth IRA, or a traditional IRA, not both. In addition, you can also contribute to a 401k. Keep in mind there are limits on contributions to these type of retirement accounts. In addition, you can also save money in a taxable brokerage account for which there is no limit as to how much you save.

If you work for another 15 to 20 years you'll have more than enough since you will also have Medicare and Social Security waiting for you.

You shouldn't be devastated. You are doing better than most Americans. You need to not chase get rich quick schemes. As others have said, slow and steady saving wins the race. Good luck.

Thanks so much for the info I had no idea I cannot contribute to both a Roth IRA and Traditional IRA account. Is this applicable even if let's say I didn't max out my Traditional IRA and put only 3k into it, I still can't the go and put 3k into my Roth IRA that same year?

I was going to max out both of them in 2024, oops, seems that would have resulted in a nasty penalty?

After I finish the bogleheads book I need to learn about what I can and cannot do with IRA accounts.

 

[Aerides]

The negative $-1,120,937 is scary worst case scenario... but I want to see calculation based on 3% withdrawal, not 4%.

You simply put in 30k instead of 40k.

Every single one of us can find one out the thousand scenarios that are worst case. But you hedge that with SS, and will probably see it disappear if you go with 30k vs. 40k.

Have you considered sidelining your small business and just going and getting a normal job with a 401k and sucking it up for 15 years? That would be a very safe way to go, in addition to your investments after you sell the house. Treat your business as a side gig vs. all or nothing.

 

[pb4uski]

Thanks for the info, it is very good news if I can get away with much lower FI number than 3M.

So sorry I am feeling a bit stupid here because I don't understand something. When I go to the FIRECalc and enter:

Spending: 40,000
Portfolio: 1,000,000
Full Years: 40

The results showed:
"Here is how your portfolio would have fared in each of the 113 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,120,937 to $12,410,499, with an average at the end of $2,594,861."

The negative $-1,120,937 is scary worst case scenario... but I want to see calculation based on 3% withdrawal, not 4%. Seems this is not possible with this calculator? I do not think I would feel comfortable retiring on only 1 million portfolio with 4% rule. The max I ever want to withdraw is 3% or even less. I need a buffer and peace of mind that I am not draining my principal too much.

Just change the $40,000 to $30,000. $30,000/$1,000,000 = 3%

If your maximum WR is 3% and you want to ignore SS then you will end up working alot longer than you reasonable need to.... but you do you... just don't whine about because it is all self induced.

 

[Tropical]

How do most FIRE retirees handle early withdrawal penalties?

Two issues:

#1: Forgive me if this a dumb question, but how do most people who accomplished FIRE with index fund portfolio in order to retire early at let's say age 40 handle early withdrawal penalties?

Because I assume most had a decent sum of funds in Roth IRA, Traditional IRA, Solo 401Ks etc which all have early withdrawal penalty.

I read there is 10% penalty, so they just pay the 10% and then pay income tax on the withdrawals they take from their taxable brokerage account of course?


#2: I like to keep things super simple. Having so many different accounts to choose from is driving me crazy. I'm self employed business owner and file my LLC as an s corp. I am confused which accounts I should even be using to start investing in.

 

[MichaelB]

Two issues:

#1: Forgive me if this a dumb question, but how do most people who accomplished FIRE with index fund portfolio in order to retire early at let's say age 40 handle early withdrawal penalties?

Because I assume most had a decent sum of funds in Roth IRA, Traditional IRA, Solo 401Ks etc which all have early withdrawal penalty.

I read there is 10% penalty, so they just pay the 10% and then pay income tax on the withdrawals they take from their taxable brokerage account of course?

People retiring early also have assets in taxable accounts. Very few people retire with only tax deferred savings and investments.

#2: I like to keep things super simple. Having so many different accounts to choose from is driving me crazy. I'm self employed business owner and file my LLC as an s corp. I am confused which accounts I should even be using to start investing in.

If you want to keep things simple then just open a taxable investment account. No problem.

 

[Tropical]

Just change the $40,000 to $30,000. $30,000/$1,000,000 = 3%

If your maximum WR is 3% and you want to ignore SS then you will end up working alot longer than you reasonable need to.... but you do you... just don't whine about because it is all self induced.

Whoops I see, that one was obvious but my chicken brain clearly missed it use 30k rather than 40k to mimic 3% withdrawal rather than 4%.

But I am confused how withdrawing 3% rather than 4% in retirement age would affect social security in any way?

 

[MichaelB]

But I am confused how withdrawing 3% rather than 4% in retirement age would affect social security in any way?

The withdrawal rate doesn’t affect SS. Read PB’s post again. All he is saying is by including SS in your future income stream you may need to have less portfolio assets, and he’s right.

 

[Tropical]

The withdrawal rate doesn’t affect SS. Read PB’s post again. All he is saying is by including SS in your future income stream you may need to have less portfolio assets, and he’s right.

Ah whoops so sorry I misread his post first time around.

 

[MichaelB]

Two issues:

#1: Forgive me if this a dumb question, but how do most people who accomplished FIRE with index fund portfolio in order to retire early at let's say age 40 handle early withdrawal penalties?

Because I assume most had a decent sum of funds in Roth IRA, Traditional IRA, Solo 401Ks etc which all have early withdrawal penalty.

I read there is 10% penalty, so they just pay the 10% and then pay income tax on the withdrawals they take from their taxable brokerage account of course?


#2: I like to keep things super simple. Having so many different accounts to choose from is driving me crazy. I'm self employed business owner and file my LLC as an s corp. I am confused which accounts I should even be using to start investing in.

We went ahead and merged these two threads. There’s just too much overlap and would lead to even more confusion, and we already have enough of that.

 

[Sunset]

...

Yes I agree I will make sure to try and get my 40 FICA credits... I plan to earn income in the US for the next 10 years at least... but how would I get enough credits in only 2 more years? I have only 8 credits so far... so this means I need 32 more credits... I can't accomplish that in only 2 years...

My mistake, my brain magically translated 8 credits to 8 years worth of credits.

So you are correct, you need 32 more credits for SS & Medicare. Which is only 8 years of working income.