We are very close and I am getting nervous

[Carpediem]

Once again thanks for all the replies. As a followup I decided to go ahead and have a Vanguard CFP prepare a final investment plan before we retire since there is no cost for this. I will make another followup post when I know the results.

Russell, Definitely keep us posted on what VG says. My situation and numbers are very similar to yours - including having kids back in MN! Firecalc says 100% but not having a pension nor retiree healthcare makes me nervous. Plus, we don't have near the amount of post-tax dollars as you so ACA subsidies will be tricky. Thank you and best of luck.

 

[HI Bill]

Ordinary income............... $95,000
Standard deduction............(24,400) for married filing jointly for 2019 (OP is married)
Taxable income................ $70,600

10% tax on first $19,400..... $1,940
12% tax on next $51,200...... 6,144
Total tax on $70,600........... $8,084

Depending on which accounts you tap first, all may not be taxable (e.g., principal on ROTH, principal on taxable accounts). If you withdraw 100% from tax-deductible accounts to minimize taxes later, it all is.

 

[pb4uski]

Depending on which accounts you tap first, all may not be taxable (e.g., principal on ROTH, principal on taxable accounts). If you withdraw 100% from tax-deductible accounts to minimize taxes later, it all is.

I agree.

The point of the post was to demonstrate to the OP that taxes would be a lot less than what he was expecting in his OP. In the OP he had $85k of spending (including health care/insurance) and was anticipating needing to withdraw $110k.

In post #3 my point was that if his spending was $85k net, then worst case his gross withdrawals would be more like $95k rather than $110k (big difference).

Then later in post #25 Dan4455 came along and asked for details of the calcullation.

 

[NoMoreJob]

You'll be fine Russ, but it's great that you're thinking ahead and planning. You've already received a lot of good feedback here.

I retired very early and have been dealing with retirement 'planning' issues since. So far, so good.

My advice is to be prepared to be flexible - both for true financial security and for your peace of mind. We went through '08-'09 downturn after retiring and it was nerve wracking. It helped that we were able (and willing) to cut discretionary spending to the bone and that we had a investment plan and stuck to it. It made us feel more in control when our investments were spinning out of control. We were even able to hold our breath and rebalance into stocks more or less according to our plan which was probably the hardest part, but it worked!

Financially you look to be in good shape but beyond that my main concern for you would be healthcare between jobs and Medicare. There are so many unknowns at this point that it is scary. I am now on Medicare but my wife still relies on ACA insurance and it's not a good feeling. Not only is it expensive (especially given the huge deductibles) but it complicates taxes and withdrawal plans and there's a lot of uncertainty. It could change for the worse at any time. More importantly, a serious illness could be disastrous. As an example I was always very healthy but was diagnosed with cancer almost simultaneously with going on Medicare. If my diagnosis has come a month or two earlier while I was on ACA insurance we could be in a completely different place today - me literally as my treatment options would have been limited. My advice is to make sure you think your health insurance situation through very carefully and, if possible, don't allow a break between employer and Medicare coverage.

Good luck with your planning and your retirement. It sounds like you're doing a very thorough job so far and I'm confident that you'll do well.

 

[jimmyv65]

I am about 1 year in. My advice on your calcs: 1) Estimated Taxes--make sure to have those in the mix 2) Budget in an amount for emergency repairs, etc. Seems like once you retire, everything breaks around your house.

 

[JJpop]

Just do not assume you will be getting a 7 pct return.I get very worried when I see people saying well if you only get a very conservative 7 pct return......

 

[Russ2020]

UPDATE – I just received my financial plan through Vanguard Personal Adviser Services (VPAS). Below are a few of the key points. VPAS normally runs the numbers so assets will last to age 100. We had them use ages of 95 for my wife and 93 for me. The data I gave Vanguard pretty much is identical to the data I gave in my original post. Vanguard also likes to use a dynamic spending model. Vanguard also set Social Security to be taken at FRA.

Dynamic Spending model as per VPAS.
We calculate your success rate with our dynamic spending model, which factors in changes to your annual spending amount, within the thresholds outlined below, based on your historical balances. Within the model, your annual spending will not rise by more than 5% (adjusted for inflation) in up markets and in down markets, your spending will not fall more than 2.5%. The success rate is only accurate if you enroll in the ongoing service and leverage Dynamic Spending.

Vanguard lists my total expenses as follows, including taxes.
2020 -$92,900
2021-$93,600
2022-$94,200
2023-$80,000 – The drop is due to Medicare kicking in but it does not reflect the Medicare tax or costs of additional coverage.

Success Rates
In this table they gave me success rates for different “basic living expenses”. Basic living expenses does not include healthcare. Which is why the first line of the table starts at $74,000. I didn’t ask why Healthcare is not part of basic living expenses but wish I had.
Basic Living Expenses
$74,000 – success rate greater than 99%
$94,000 – success rate greater than 99%
$114,000 – success rate greater than 99%
$134,000 – success rate 99%

Vanguards asset allocation recommendation.
Target allocation of 40s/60b
Stocks 17% U.S. Large cap, 7.5% U.S. Mid/Small Cap, 15.5% International
Bonds 20% U.S. Short term, 23%U.S. Intermediate, 5% U.S. Long Term, 12% International
I have resisted Vanguards recommendation for international bond exposure for the last few years but I am considering holding this asset class.

So that’s pretty much it. Overall it is good news. Vanguard would like me to sign up for their advisory services. I do hold Vanguard in high regard and at a cost of 30 basis points it is probably the best deal in the industry however it is still a big chunk of change. I think I can do this on my own. Again thanks to everyone who responded. Next thing to figure how to make my withdrawals. Vanguard recommends using all my taxable account first and do as much Roth conversion as I can but I will address this topic in a new post.

Russell