59.5 And Sitting On The Fence

[nakadude]

The title says it all. The basics:

Annual expenses are around 90,000. That's the current fun lifestyle I feel like we could pull that back if necessary. Quite frankly the minimum to survive number is 3K (and that would be sitting at home everyday).

DW Income: 31,000 take home so about 40,000 per year pre tax.

401K, IRA 1,000,000.
Dividend Income around 3K a year.

SS 2300/month at age 62 about 2.5 years from now.
DW SS about 1500/month at age 62 in about 9.5 years from now.

The idea:
I FI in about 6 months and DW work for another 6 years. This would cover the Medical Insurance until I'm ready for Medicare. Am I missing something in this plan? The numbers in FireCalc look OK, but the Fear of the Unknown lurks in my mind. I'll be seeing a Fidelity FI (free since it comes with the account) to do some additional sanity checks.

 

[brett]

From my perspective the 3 month severance is not even worth throwing into the equation. Minor detail. Now...if it was 1-2 years that would be another issue.

 

[Al18]

Good luck on your results to date and making a plan. If you haven’t already done so, you can use Fidilety’s Retirement Planner to see your retirement projections. Or you can work with your Fidelity representative to use the Retirement Planner.

 

[LateToFIRE]

Is your $90K the after-tax figure?

 

[TheWizard]

Are you sure that both of you claiming SS at 62 is the best idea? Better to try for at least FRA unless your health is poor.

And $1M in tax-deferred isn't enough to fund a $90k annual budget. Try to get that up to $1.5M at least...

 

[LateToFIRE]

Are you sure that both of you claiming SS at 62 is the best idea? Better to try for at least FRA unless your health is poor.

And $1M in tax-deferred isn't enough to fund a $90k annual budget. Try to get that up to $1.5M at least...

Timing of SS is a hotly debated topic - one size does not fit all. If OP does not have much by way of taxable funds, then early SS could make perfect sense. You're also missing that the $90K will be partly offset by DW's earnings, and subsequently, their combined SS.

 

[nakadude]

That’s pre tax.

 

[street]

Are you sure that both of you claiming SS at 62 is the best idea? Better to try for at least FRA unless your health is poor.

And $1M in tax-deferred isn't enough to fund a $90k annual budget. Try to get that up to $1.5M at least...

Regardless of if you take it at 62 or 70 @ ~ 82 the game is 0 0. You will be ~ equal in SS payments at that time in your life whenever you take it.

IMO there is many more issues to look at then health when the best time for anyone to take SS.

 

[obsessed]

To be honest, I think you need to look harder at what your desired spending level is if you were to retire this year. There is a big difference between $90k and $36k ($3/month).

Then look to see if your financial situation supports that right now. I ran your numbers in Firecalc and I get about $80k in annual spending for a 95% probability of success so you are in the ballpark but not quite at your desired seats.

Realistically, a fun lifestyle budget will likely decrease as you get older but you and your spouse are pretty young still so that's a bit far off but something to consider (a reduced budget later on at some point).

 

[RetiredHappy]

I get the desire to no longer work but I can't see $90K annual spending on a $1M portfolio, which includes your wife working for another 6 years. It is going to be too tight for any sort of comfort. Also, if/when your spouse stops working at 58, there is a 7-year gap until Medicare. I don't know how much ACA subsidies that she can get then, between IRA withdrawal and 1/2 SS.

I am 61 yo and I pay $16K in health insurance premium per year for a Silver plan and get no subsidies.

 

[Morgan22]

I don't think you're there yet. Maybe another 2 to 3 years to build up your portfolio a bit so you can have all of your planned fun in retirement.

Also, think about the possibility of your wife not being able to work anymore. Disability, layoff, ageism does happen when we least expect it.
Or even not wanting to work anymore if you are retired and having fun without her. If you wait a few more years, maybe 4 to 5?, you could be able to retire together.

 

[Closet_Gamer]

This also seems on the edge to me. I’d put a few more points on the board.

 

[TheWizard]

I agree with recent replies for the OP to work a few more years.
You increase your nest egg by maybe a couple hundred K$ and you have less time where you're retired and the wife is not. A better team approach, perhaps...

 

[HI Bill]

This also seems on the edge to me. I’d put a few more points on the board.

Agree. I funded 100% of my needs and 100% of my wants before pulling the plug. If you wife has any reason she can't w#rk for the next 6 years, your too-tight assets would be stressed to say the least, unless you hit a really great sequence of returns on your investments (that could more likely go the other way).

 

[TheWizard]

It's nice when most of us agree on the path forward for a poster...

 

[Aerides]

The idea:
I FI in about 6 months and DW work for another 6 years.

Too big of a gap. When one spouse is obligated to keep working (for insurance, income, whatever) it can create friction, even if totally unforeseen. Even if "yes sure honey I'm fine working for years more!" - don't count on it. Sometimes it works, sometimes it doesn't.

 

[jazz4cash]

No where near enough info. Have you really thought this through? If you had and you really wanted constructive feedback I think you would’ve provided more info. Sorry if that sounds harsh. Is the job ruining your well being?

 

[Exchme]

Too big of a gap. When one spouse is obligated to keep working (for insurance, income, whatever) it can create friction, even if totally unforeseen. Even if "yes sure honey I'm fine working for years more!" - don't count on it. Sometimes it works, sometimes it doesn't.

Yes, this is a recipe for severe problems. Much better for both to work for now and then retire about the same time when the finances are in order.

OP seems to be missing some points about the math of the finances as well.

The IRA/401Ks will be taxed when the money comes out. Pulling money out at a pace to create 90K spendable cash will result in about a 10% overall tax rate, so the after tax value of the savings is more like $900K.

Also, either OP is unfamiliar with sequence of returns risk (SORR) or is thinking that the dividends are "free money" and only the withdrawals beyond the dividends count. But that's not how the SORR studies were done. The studies all included dividends as part of the return and still found that 4% of the original portfolio, adjusted for inflation each year, was about what was safe to withdraw.

After considering taxes, OP's plan is about 6.5% withdrawal rate for 6 years and then 5.5% thereafter, so very much in the "not safe" category.

As a bit of fine tuning, it's also generally advisable, especially for folks that don't have loads of extra money, for the higher earner to wait until older than 62 to claim SS as only the larger benefit continues when the first spouse passes. OP should check out opensocialsecurity.com and not only run the calculator and click on various points on the graph at the bottom, but also read about the reasoning.

 

[MarieIG]

Too big of a gap. When one spouse is obligated to keep working (for insurance, income, whatever) it can create friction, even if totally unforeseen. Even if "yes sure honey I'm fine working for years more!" - don't count on it. Sometimes it works, sometimes it doesn't.

This - and

I don't see the plan for your younger DW if you shuffle off this mortal coil sooner than expected, and leave her with a reduced survivor's benefit and (if still applicable) a mortgage.

 

[TheWizard]

Yes, it's definitely better to have an element of padding in your financial planning for retirement so that you can get through any downturns with a shoulder shrug, nothing more...

 

[pacergal]

OP--
I don't think you are there yet.
Speaking as someone who continued working after my husband retired, I can't imagine continuing for 6 years! I only worked for another 6 months, and that was hard enough. My DH was wonderful and made my work week easy (he did all the housework, and fixed my morning coffee and had dinner on the table), but it was still rough getting up and going out the door every morning.
Do not count on your wife working the whole 6 years, she may see you having all the fun and want to join.

I don't think you are financially ready yet with your savings, at the budget you desire.
Have you run Firecalc?
Have you honestly answered all of these questions:
Early Retirement & Financial Independence Community > Community Forums > Early Retirement FAQs:
Some Important Questions to Answer Before Asking - Can I Retire?