51M, Single, $1.2M, Ready to FIRE?

[jmmec]

Hi there,

I am a single 51 year old male and have been browsing this site pretty frequently.

I'm in the software industry and the writing is on the wall that my career is unlikely to last much longer, so I've been in the severe savings mode for many years now. I'm ready to retire, especially since I have several low-cost hobbies and other interests to pursue. Travel doesn't interest me since I love the mountains where I live where life and history is affordable and rich!

Here is my plan for funding retirement for the next 11 years before I can take SS & pension at age 62.

Summary:

Assets:

• $712k: taxable money market accounts (was earning 1.5% but going down)
• $125k: Traditional IRA (VMMXX)
• $370k: 401k (S&P 500 Index Fund)
• Total $1.2M where 69% is in cash/equivalent and 31% is in the market

Future retirement income at age 62 (11 years from now):

• $23.4k for Social Security
• $18.4k for pension (not inflation adjusted)
• Total $41.8k/year

Expenses:

• $25k/year though am budgeting for $30k/year including income taxes.
• Will increase spending (probably) at age 62+.

Plan:

For the next 11 years:

• I plan to live primarily off my cash savings, so say $330k if I actually spend $30k/year.
• I plan to qualify for ACA subsidies by keeping my income a bit higher than 138% FPL, so say $20k/year to keep things simple.

My $20k annual income would come from two sources, where it seems around $2500 of this will go to Federal & State & FICA Taxes:

• $7k/year Interest income on cash savings (assume 1% rate for now)
• $13k/year Roth conversion from my Traditional IRA into a Roth IRA*

* The $125k in the Traditional IRA will last about 9 or so years, after which I'll have to convert from 401k -> Traditional -> Roth, I guess?

Firecalc:

Here is a firecalc run, where I think I entered the information correctly, and it says 100% success rate:

https://www.firecalc.com/index.php?...oor=0&callprocess=Submit&FIRECalcVersion=3.0&

Is my plan workable? Any gotchas? Other considerations?

Thanks so much!

 

[Dtail]

Welcome to our forum.
I went through your Firecalc inputs.
Some changes:
Most folks use somewhere around 95 years old as the end date.
The SS number needs to be input as a yearly number, not monthly.
The Pension number also needs to be input as a yearly number, plus it should be an income number; currently it is input as an expense number.

After I made those changes, you are still good to go financially with a maximum spending yearly amount of 53k.

It appears you also have the ACA MAGI management number accounted for.

However with the Roth conversions, are you aware of the rules if the Roth account is less than 5 years from opening, in terms of having a penalty if under 59.5 years old on the use of the conversion amount?

 

[njhowie]

Based on your own calculations, the numbers work. It's always been my contention that anyone who has $1M should be able to retire - simply a matter of adjusting your lifestyle to how much you've saved.

However, even acknowledging that the writing is on the wall as far as work, try to just hang tight while the income is still coming. Wait to be shown the door - there could be some sort of severance coming.

Do you have a car? Chances are that it will need to be replaced within the next 11 years - you should probably budget for it.

 

[Golden sunsets]

Is there a reason why you have so much in cash? Did you just liquidate because of concern over the market or have you been continually in cash in your taxable accounts? I would suggest that such a conservative AA exposes you to inflation risk. Keeping 3-4 years in liquid investments such as a CD ladder and investing the rest in a balanced AA of equities and fixed income should last much longer.

Also, the best major for a post secondary education is that of software engineering. Surely you could sharpen your CV with updated relevant skills and find work with relative ease. Of course if you want to retire, that is within your grasp, so the choice is yours.

 

[Aerides]

Welcome, I think you're close, but not enough info:

Do you have a primary home that is paid for, and you've included normal repairs in your expenses? Appliances, floors, roofs, eventually, all need replacing.

Does your $25-30k annual budget include your HC premiums and deductible? Even if you qualify today for the best ACA plans and subsidies, that can change every year, and you've got a lot of years to account for. I say deductible, because one wonky test result can send you down the path of more tests, specialists, diagnostics, even if you're in great health.

Overall your investments seem a tad conservative, especially when most expect interest rates to go lower again. a 30/70 portfolio would not be recommended for a 51 year old by anyone unless you had much higher numbers and a very very low risk tolerance.

 

[WyomingLife]

I'm sorry about the w*rk situation; you are in good company, if that helps.

Some observations:

1. How solid are your budget numbers? Have you been tracking expenditures?

2. Further as to #1, you have provided no information on key aspects such as housing, etc. Are you certain you have taken all potential expenditure categories into account?

3. I don't necessarily agree that merely because somebody has $1M they can retire by adjusting their lifestyle by turning on a dime. If you are currently spending $60K/year, for example, cutting back by 50% could be quite challenging, particularly if some of those costs are fixed (e.g., housing).

4. How reliable is your pension? If your pension drops, you will effectively be living on SS plus a little at age 62, assuming your budget numbers are solid.

5. You are carrying inflation risk -- you are largely sitting on cash, and your pension isn't COLA'd. You could be retired for 45 years. Generally, the longer your stash has to last, the greater equity exposure you would want (there are different views here, however). Your plan isn't set up for much if any growth, in other words. In the early years, your plan is based on burning through cash. That would make me nervous, particularly if I didn't have a solid grasp of my budget.

Good luck.

 

[pb4uski]

You're golden. You had some errors in your FIRECalc entries.

• SS should be an annual amount... so $23,400 rather than $1,950
• Pension should be an annual amount... so $18,400 rather than $1,540
• Pension radio button should be clicked rather than off-chart spending (IOW, you had your pension in as an expense rather than income)

Also, a 30 year time horizon is probably too conservative for a 52 yo.. I would bump it up to 40 years.

Once you make changes, check out the Investigate tab.... specifically the:

Given a success rate, determine spending level for a set portfolio, or portfolio for a set spending level

Search for settings that will get a success rate of as close to 95% as possible (usually within 1%) by changing...
O Spending Level or O Starting portfolio value

and check the Spending Level radio button and then click on Submit.

I get the FIRECalc indicates that you could safely spend as much as $57k a year and still have 95% success or $55k a year with 100% success.

So splurge a little and enjoy your retirement!

ETA: I think you're being too conservative in Roth conversions, I would suggest doing Roth conversions to the top of your optimal ACA income level (399% FPL?... or lower) or the top of the 12% tax bracket, whichever is lower. (Or perhaps the top of the 10% tax bracket if you don't care to be so aggressive).

 

[Sunset]

OP - I didn't see a ROTH listed. If you don't have one, open one on Tuesday and put a few dollars in it.
This will start the 5 year clock on the IRS rule, which might be handy for you later.
Then whenever you do conversions, you can use this ROTH or a new ROTH, with the knowledge you started the clock.

Otherwise, I'd hang in there a while longer, as you are in a prime position (by working) to contribute heavily to 401K in stocks when they go down and come back in a few years.

 

[OldShooter]

During my Adult-Ed classes I throw in a pop quiz now and then. Here is one:

You’re 75 years old, healthy, and reviewing your financial situation. Which would you prefer?
​

1. You find that you’re running out of money.
2. You find that you’ve saved more money than you really need.

The discussion that goes with this quiz focuses on the difficulty of forecasting the future, including things like income needs, investment returns, inflation, etc. Since all of the underpinnings of any plan are so uncertain, the prospective retiree must plan to overshoot his/her needs just to make sure that their answer is never going to be #1.

OP: I am not commenting on your plan. It may be adequately conservative, but you'd better make sure! FIRECalc is not a forecasting tool.

 

[Rianne]

During my Adult-Ed classes I throw in a pop quiz now and then. Here is one:

You’re 75 years old, healthy, and reviewing your financial situation. Which would you prefer?
​

1. You find that you’re running out of money.
2. You find that you’ve saved more money than you really need.

The discussion that goes with this quiz focuses on the difficulty of forecasting the future, including things like income needs, investment returns, inflation, etc. Since all of the underpinnings of any plan are so uncertain, the prospective retiree must plan to overshoot his/her needs just to make sure that their answer is never going to be #1.

OP: I am not commenting on your plan. It may be adequately conservative, but you'd better make sure! FIRECalc is not a forecasting tool.

How can you ever be sure?

 

[mystang52]

OP: you factored in health insurance costs, so that's good. How about other infrequent but major expenses such as car, housing repairs (e.g., new roof), etc.?

 

[WyomingLife]

How can you ever be sure?

One can’t be sure. But here such caution is warranted because OP:

1. Provided no budget breakout, instead only what might be viewed as rounded ballpark estimates (25K/30K/“maybe more at 62”) that could reflect coming up with a budget to ensure FIRECalc success vice reflecting historical spend; and

2. Seemed to have mis-entered data into FIRECalc.

Yet some commenters are suggesting OP is “golden.”

To me, this instead looks like a less than ideal situation. Red lights flashing. OP needs to do a lot more homework.

 

[OldShooter]

How can you ever be sure?

Well, you can't of course. But you can be sure your plan is conservative and you can be paranoid.

 

[pb4uski]

One can’t be sure. But here such caution is warranted because OP:

1. Provided no budget breakout, instead only what might be viewed as rounded ballpark estimates (25K/30K/“maybe more at 62”) that could reflect coming up with a budget to ensure FIRECalc success vice reflecting historical spend; and

2. Seemed to have mis-entered data into FIRECalc.

Yet some commenters are suggesting OP is “golden.”

To me, this instead looks like a less than ideal situation. Red lights flashing. OP needs to do a lot more homework.

Poppycock.

Since I'm the only one who suggested that the OP was golden, I assume that that your comments are targeted at my response.

The OP needs to provide you with a budget breakout to get your blessing? Who the hell do you think you are?

The OP says that he has low-cost hobbies and spend about $25k a year. While I agree that $25k is low and the OP should verify their spending level and numerous other posters have suggested that, the reality is that even if his spending is $50k a year that he would still be at 100% success. How likely is it that the OP is off by such magnitude? Somewhere between slim and none.

 

[MuirWannabe]

OP,
Where do you live? You mention mountains and good history. I’m just curious.

 

[OldShooter]

Well, I certainly don't want to get into that fight but there I will point out a fundamental problem with most of the way this model-based planning is done:

From most of my career being involved in planning and managing large projects I know that any attempt to develop cost estimates strictly by detailed enumeration is doomed. It is impossible to identify and exactly predict everything that will happen in the future. So I advise my SCORE mentees and (formerly) project management students to have a budget line titled "ASIF." This stands for "Aw-S#its and I-Forgots." Depending on the project ASIF might be 20-30% of the total. The ASIF line gets some kind of a nice title before the plan is published, maybe it is even broken up as camouflage, but it is always there.

The other thing I have told people for years is this: "I have never gotten to the end of a project, looked back, and said: 'Gee, we planned that too carefully.' "

 

[Rianne]

The other thing I have told people for years is this: "I have never gotten to the end of a project, looked back, and said: 'Gee, we planned that too carefully.' "

I think that applies to life. I'd say the same thing on my death bed. But here we are in a ER forum discussing ER. I don't think anyone is throwing caution to the wind, but the OP stated he's read many of the posts before logging in with his question, laying out his plan. It looks like a great plan, to me. I think he's smart enough to make his own final decision. He asked for advice.

 

[WyomingLife]

Poppycock.

Since I'm the only one who suggested that the OP was golden, I assume that that your comments are targeted at my response.

The OP needs to provide you with a budget breakout to get your blessing? Who the hell do you think you are?

The OP says that they have low-cost hobbies and spend about $25k a year. While I agree that $25k is low and the OP should verify their spending level and numerous other posters have suggested that, the reality is that even if his spending is $50k a year that he would still be at 100% success. How likely is it that the OP is off by such magnitude? Somewhere between slim and none.

Who do I think I am? I'm a nobody. Not very smart. Here to learn. I'm certainly unwilling to read an anonymous post then tell the poster "you are good to retire." I like to make decisions based on a wealth of information. I recognize the internet for what it is. I'm cautious.

I think it is perilous to provide anonymous advice on the internet. More information is always good. Context is important.

I think posters on this board should be similarly cautious and prudent in providing advice, particularly when the advice is "quit." You are influencing lives presumably. The FIRE decision is a serious one.

But hey, if you are comfortable anonymously spouting off on the internet, telling anonymous folks to retire based on limited information, go for it.

OP, I wish you the best.

 

[pb4uski]

Well my friend, that is what we do here. Anonymous people ask questions and we anonymously give them our views and explain why... and in this case I said that IMO the OP was good to retire based on the facts and circumstances that he provided. While I would prefer a bit more information, the OP's situation isn't even a close call unless he has materially misrepresented something in the OP.

BTW, all of our posts are anonymous, so if that bothers you then this forum may not be a good fit for you.

We don't provide any guarantees. Caveat emptor. Posters can take or leave any advice that they receive and they are ultimately responsible for their decisions. We expect posters to wear their big boy (or big girl) pants.

While I agree that there are legitimate questions as to how realistic the $25k of spending is, in fact there are some forum members who live on that.

The OP had 100% success in FIRECalc with only 1/2th of his SS and pension input. Even if you entirely ignore the SS and pension, $1.2m at a 3.75% WR is $45k a year and 180% of what the OP says that he needs for spending.

So if it is reckless to suggest that someone has enough when they have 100% success in FIRECalc with spending that is 220% of their target spending, then I plead guilty.

If the OP ever checks back in I think we're going to find out that your concerns were overblown, so you're advising caution where caution is not warranted.... but we'll see.

 

[jmmec]

Thanks everyone for the comments & advice!

I goofed terribly with the Firecalc entries for SS and pension. Appreciate the corrections. Also appreciate driving home the point that Firecalc is not a forecasting tool which is easy to forget.

My pension is PBGC managed (single-employer program) since an earlier company I worked for went into bankruptcy. I understand that the PBGC single-employer programs are more financially secure compared to their multi-employer programs (unions), but there is still a risk that the PBGC will fail to meet my pension obligations. And likewise SS could get cut. I am depending on both SS & the PBGC pension being there in 11 years.

The $25k annual expenses is correct and does include taxes on the $20k/annual income + subsidized ACA costs. Since ACA subsidies could change, I was budgeting $30k annually to account for any changes there, or other unexpected expenses, but not both scenarios.

In terms of major expenses:

• Housing: the housing situation is somewhat convoluted and unique -- which is why I didn't mention it -- but it is accounted for.
• Health care: am in very good health right now; ACA will remain a huge financial concern.
• Auto: I own a 2016 Toyota 4Runner with only 22k miles and plan to replace it in 12-15 years unless it is still running fine (a friend has a 2008 model with 240k miles still running strong).

I have no debt; everything is paid in full.

Yes, my 31/69 (stock/cash) portfolio is far too weighted in cash and is at risk of inflation. I'm risk adverse but need better plans for growth.

Although it may sound like I am going to retire first thing Tuesday morning -- and it is tempting -- my intention is to stay put until shown the door. This is likely coming as soon as this year given the set of circumstances at work.

The advice given has helped me see some weakness in my financial position & planning, so thank you. I have much yet to learn....

 

[Dtail]

Thanks everyone for the comments & advice!

I goofed terribly with the Firecalc entries for SS and pension. Appreciate the corrections. Also appreciate driving home the point that Firecalc is not a forecasting tool which is easy to forget.

My pension is PBGC managed (single-employer program) since an earlier company I worked for went into bankruptcy. I understand that the PBGC single-employer programs are more financially secure compared to their multi-employer programs (unions), but there is still a risk that the PBGC will fail to meet my pension obligations. And likewise SS could get cut. I am depending on both SS & the PBGC pension being there in 11 years.

The $25k annual expenses is correct and does include taxes on the $20k/annual income + subsidized ACA costs. Since ACA subsidies could change, I was budgeting $30k annually to account for any changes there, or other unexpected expenses, but not both scenarios.

In terms of major expenses:

• Housing: the housing situation is somewhat convoluted and unique -- which is why I didn't mention it -- but it is accounted for.
• Health care: am in very good health right now; ACA will remain a huge financial concern.
• Auto: I own a 2016 Toyota 4Runner with only 22k miles and plan to replace it in 12-15 years unless it is still running fine (a friend has a 2008 model with 240k miles still running strong).

I have no debt; everything is paid in full.

Yes, my 31/69 (stock/cash) portfolio is far too weighted in cash and is at risk of inflation. I'm risk adverse but need better plans for growth.

Although it may sound like I am going to retire first thing Tuesday morning -- and it is tempting -- my intention is to stay put until shown the door. This is likely coming as soon as this year given the set of circumstances at work.

The advice given has helped me see some weakness in my financial position & planning, so thank you. I have much yet to learn....

When did you set up your Roth account and are you familiar with the Roth rules if you use it before age 59.5?

 

[HI Bill]

From most of my career being involved in planning and managing large projects I know that any attempt to develop cost estimates strictly by detailed enumeration is doomed. It is impossible to identify and exactly predict everything that will happen in the future. So I advise my SCORE mentees and (formerly) project management students to have a budget line titled "ASIF." This stands for "Aw-S#its and I-Forgots." Depending on the project ASIF might be 20-30% of the total.

In my consulting field, we either call these costs "Contingency", or just bury them in the estimate. We have to competetively bid most of our work, and Contingency can't be included, generally, either obviously or not. We lose bids all the time, the 10-30% contingency kills a bidder's chances. I've found that when preparing estimates, the most detailed estimates are the most accurate. If one bids with no contingency, then the project manager has to run a really tight project, and change management becomes of paramount importance. Jeez, I'm glad I'm almost RE and won't have to deal with this much longer!

 

[HI Bill]

Housing: the housing situation is somewhat convoluted and unique -- which is why I didn't mention it -- but it is accounted for.

Not knowing the details, 'convoluted and unique' sounds 'risky' to me. If there is a realistic possibility that you could be evicted, lose your place, etc., then THAT needs to be included in your budget. If you own your place outright and have tenants that could leave, then THAT needs to be included in your budget. Most of us here plan for most of the foreseeable 'what-ifs'. It's more costly, but safer over the long-run. From the very limited information you've provided, your three largest risks include:

1. Housing
2. Health Care
3. Inflation risk due to overly 'conservative' AA.

Best wishes!

 

[Car-Guy]

It's always been my contention that anyone who has $1M should be able to retire - simply a matter of adjusting your lifestyle to how much you've saved.

IMO, it depends.... Of course lifestyles matter "a lot". From my POV, at this point in time, 1m may be enough to safely retire on if you are ~70 with no debt and are okay with a simple lifestyle but probably not if you are ~50 even without debt, regardless of lifestyle choice. Too many unknowns in the next 20 and even more so out to 40 years to be reasonably safe. Health, (especially inflation), taxes, markets, etc, etc... Adding SS sure helps and a pension could make all the difference depending on the amount.

I'm also not sure how easy it would be for many to adjust their lifestyle at 50 if they have been living "well" in the past. So it depends....(IMO)

 

[pb4uski]

Not knowing the details, 'convoluted and unique' sounds 'risky' to me. If there is a realistic possibility that you could be evicted, lose your place, etc., then THAT needs to be included in your budget. If you own your place outright and have tenants that could leave, then THAT needs to be included in your budget. Most of us here plan for most of the foreseeable 'what-ifs'. It's more costly, but safer over the long-run. From the very limited information you've provided, your three largest risks include:

1. Housing
2. Health Care
3. Inflation risk due to overly 'conservative' AA.

Best wishes!

A couple thoughts.

First, the OP seems to me to be on top of things and is quite sure about the $25k of spending.... and has even thought through the PBGC guarantee of his pension. I'm giving him the benefit of the doubt that he can resonably assess the risk inherent in his convoluted and unique housing arrangement.

Second, assuming that the pension is money good and SS, he could spend up to $55k a year with 100% success according to FIRECalc.... so assuming hs $25k is solid that leaves $30k a year to address the housing and health care risks above. The inflation risk is covered off because he input only 31% stocks in FIRECalc.

So for any reasonable scenario he is in good shape. Now if his pension goes kaput and the PBGC fails and SS is haircut and his convoluted and unique housing arrangement blows up and ACA is overturned and some draconian plan put in its place then he'll be hurting... but he'll still be in better shape than the vast majority of people out there who will also be in a world of hurt.