Am I close?

[333three]

Me: 48
Wife: 44

1.6 mm in taxable
330k cash
800k in IRAs
About 150k in business assets

Excluding cash, invested 45% US stock index funds, 15% international index funds and 40% bond funds (via Vanguard)

No debt. Own 220k home with no mortgage

Spend about 45k-50k annually. Does not include health insurance as that is currently PIF by employers.

Is this enough? If not, how much more?

 

[cat4ever]

Consult firecalc.com and plug in your numbers. You'll also need a social security estimate (see https://www.ssa.gov) and any pension info you may have to successfully use firecalc. For your expenses be sure to include federal and state income taxes you'll need to pay, especially if/when you plan to cash out of IRAs or pay capital gains as you cash out of stocks for living expenses.

Putting in 75K for spending and no SS or pension into firecalc, you are looking good for a 45 year retirement. SS will make you look even better.

Make sure your expenses are correct though, 75K including health insurance and taxes is fairly frugal, and I commend you if it works for you, but big "one time" expenses seem to pop up on a regular basis, e.g. new roof, new car, new tires, new furnace, etc.

others on here are better at this so they will probably chime in.

 

[CSdot]

Looks like you have done well. Especially the cash, the paid for house and the $1.6 taxable side of the equation, all of which are impressive.

What do you attribute your success to primarily?

 

[333three]

Consult firecalc.com and plug in your numbers. You'll also need a social security estimate (see https://www.ssa.gov) and any pension info you may have to successfully use firecalc. For your expenses be sure to include federal and state income taxes you'll need to pay, especially if/when you plan to cash out of IRAs or pay capital gains as you cash out of stocks for living expenses.

Putting in 75K for spending and no SS or pension into firecalc, you are looking good for a 45 year retirement. SS will make you look even better.

Make sure your expenses are correct though, 75K including health insurance and taxes is fairly frugal, and I commend you if it works for you, but big "one time" expenses seem to pop up on a regular basis, e.g. new roof, new car, new tires, new furnace, etc.

others on here are better at this so they will probably chime in.

I’m a little surprised you find it that frugal. It’s mostly just discretionary spending since we have no debt, so it feels like a lot to spend. While we are thoughtful about our spending, I don’t feel like we are lacking at all at this spending level. I’ve tracked all of our spending since 2013. This year, because of Covid, we spent much less- just over $40k

I agree about pop-up expenses. That’s why I question whether we have enough.

 

[Morgan22]

I think you're there. You have 2.73M of spendable assets. The 1.6M in taxable helps a great deal. You can easily control your MAGI to maximize your ACA cost sharing reductions.

 

[OldShooter]

History would predict that you'll retire sooner or more comfortably if you go to a more aggressive AA. 60/40 is probably OK entering retirement but DW and I were probably 90/10 until a year or two before we retired and glad for it.

 

[Dtail]

I think you're there. You have 2.73M of spendable assets. The 1.6M in taxable helps a great deal. You can easily control your MAGI to maximize your ACA cost sharing reductions.

+1 plus try Firecalc and you can estimate your number at 75% of the SS site estimated number.

 

[333three]

Looks like you have done well. Especially the cash, the paid for house and the $1.6 taxable side of the equation, all of which are impressive.

What do you attribute your success to primarily?

Thank you for the kind words. I’d have to sit down and really give your question thought, but off the top of my head, I would have to say good luck, what have turned out to be good decisions and a lot of very hard work.

 

[333three]

History would predict that you'll retire sooner or more comfortably if you go to a more aggressive AA. 60/40 is probably OK entering retirement but DW and I were probably 90/10 until a year or two before we retired and glad for it.

I’ve considered it a lot over the years, but this is the risk level at which we are comfortable.

 

[cfran]

History would predict that you'll retire sooner or more comfortably if you go to a more aggressive AA. 60/40 is probably OK entering retirement but DW and I were probably 90/10 until a year or two before we retired and glad for it.

Well that knife cuts both ways, glad you timed the market well. But fact is 90/10 is aggressive allocation when one nears retirement. 60/40 is conservative and I’m not sure I’d push a soon to be retiree into a more aggressive allocation, especially given the low withdrawal rate. Why take the risk I say?

 

[cfran]

Me: 48
Wife: 44

1.6 mm in taxable
330k cash
800k in IRAs
About 150k in business assets

Excluding cash, invested 45% US stock index funds, 15% international index funds and 40% bond funds (via Vanguard)

No debt. Own 220k home with no mortgage

Spend about 45k-50k annually. Does not include health insurance as that is currently PIF by employers.

Is this enough? If not, how much more?

If your expenses are accurate, and I have no reason to believe they aren’t I’d say you are tot good to go! Nice work.

 

[Gumby]

Does your spending number include taxes? If you are using FIRECalc, you need to gross up spending to account for taxes.

 

[333three]

Does your spending number include taxes? If you are using FIRECalc, you need to gross up spending to account for taxes.

No- the spending I indicated does not include income tax.

So enough? No?

 

[cat4ever]

My frugal comment was assuming that 40k-50k would be expected to cover all popup expenses, plus income and property taxes, etc. Personally I'd estimate that would bring base (recurring) spending down to about 30k-40k per year. Of course it's all relative and depends greatly on the COL where you live as well, and what taxes are like there (e.g. real estate tax, personal property taxes, state income taxes).

Expenses I think is the area in all of this that is easiest to get wrong so be sure to take everything into account.

 

[finnski1]

Me: 48
Wife: 44

1.6 mm in taxable
330k cash
800k in IRAs
About 150k in business assets

Excluding cash, invested 45% US stock index funds, 15% international index funds and 40% bond funds (via Vanguard)

No debt. Own 220k home with no mortgage

Spend about 45k-50k annually. Does not include health insurance as that is currently PIF by employers.

Is this enough? If not, how much more?

Well those numbers look very good to me, the only thing you would have to do, and it is easily done since you have a huge pile in the taxable column, is manage your MAGI for ACA subsidies and get your health care costs down considerably but even if you didn't it looks good to me.
I have also been tracking all expenses for 9 years and we average about $40-$42,000 per year as well.
No debts , no mortgage etc. and we don't lack for anything we want. Some on here have big discretionary travel budgets. We just don't care about travel all that much.
I am also a hard core DIY kind of person and save a lot of dough that way.

 

[333three]

My frugal comment was assuming that 40k-50k would be expected to cover all popup expenses, plus income and property taxes, etc. Personally I'd estimate that would bring base (recurring) spending down to about 30k-40k per year. Of course it's all relative and depends greatly on the COL where you live as well, and what taxes are like there (e.g. real estate tax, personal property taxes, state income taxes).

Expenses I think is the area in all of this that is easiest to get wrong so be sure to take everything into account.

That figure includes property and all other taxes, except income taxes.

So given that.... yeah or no?

 

[cat4ever]

That's why when I plugged your numbers into Firecalc I used 70K for your expenses. With that and a 45 year retirement, you still came out at a 100% success rate, so yeah! However please play around with Firecalc yourself and post specific questions you may have here.

 

[Gumby]

Assuming your taxable mutual fund account throws off 6% distributions every year, that would be AGI of $96,000 per year on which you'll need to pay taxes. Even if you don't spend all that, you'll still need to pay taxes on it. How much depends on the mix of long term capital gains and qualified dividends versus ordinary income, but it won't be zero. And, of course, any money you take out of your IRA will be ordinary income. It's unclear from your post whether your spending number includes property tax, but if not, it should be added.

As I mentioned earlier, FIRECalc does not do taxes. You need to figure out how much they will be and then add it to your spending number to see if your plan is sound. It probably is, but you should still do the exercise so you can be absolutely sure.

Another issue will be health insurance. With an AGI of $96,000 per year (from taxable investments), you won't be eligible for an ACA subsidy. You ought to consider adding $25 to $30k to spending for health insurance.

If, after adding in all taxes and health insurance cost, your total annual spending is about $90k or less, which would be about 3% of your portfolio value, then you should be golden. But you should run your own numbers rather than take the word of anyone here. We don't have to live with the results if we're wrong about that.


ETA: I see from your subsequent post that property tax is included, so that's good.

 

[cfran]

Taxes and health care will not run this family more than additional $40k/year. Hence he is still plenty good to go, it’s not even a stretch. That’s my 2 cents.

 

[Retireby45ish]

Assuming your taxable mutual fund account throws off 6% distributions every year, that would be AGI of $96,000 per year on which you'll need to pay taxes. Even if you don't spend all that, you'll still need to pay taxes on it. .

6% distributions (I assume dividends mostly) per year is really high. I’d say something like 2-3% is more accurate, isn’t it?

 

[Gumby]

6% distributions (I assume dividends mostly) per year is really high. I’d say something like 2-3% is more accurate, isn’t it?

One of my core holdings is Oakmark Equity and Income Fund (OAYBX). In 2020, the distribution was 4.2%. From 2017-19, it was 7.7%, 8.7%, and 8.5%. An assumption of 6% seems reasonable to me, but, as I said, the OP should run his own numbers.

 

[CardsFan]

6% distributions (I assume dividends mostly) per year is really high. I’d say something like 2-3% is more accurate, isn’t it?

I am pretty sure Gumby was including Cap Gain distributions. In our case div+int+cap gains on our mutual funds is about 5.5%. If the funds are more tax efficient, with little in the way of capital gains, then your 2-3% number is probably closer.

 

[Retireby45ish]

One of my core holdings is Oakmark Equity and Income Fund (OAYBX). In 2020, the distribution was 4.2%. From 2017-19, it was 7.7%, 8.7%, and 8.5%. An assumption of 6% seems reasonable to me, but, as I said, the OP should run his own numbers.

Ah this makes sense. Missed that.
Then perhaps, for the ACA subsidy it might be worthwhile to rotate into funds with less distributions.

I’m currently thinking of this as I’m a few years away myself and want to remain under that ACA cliff.

 

[Gumby]

My OAYBX holding is entirely in tax deferred, so I'm not particularly worried about its tax efficiency, which is admittedly poor.

 

[333three]

Hello all-

I just wanted to post an update and see if there are any new thoughts...

Our assets have increased and are now as follows:

1.8 mm in taxable at 60/40 (index and bond funds)

341k in cash

878k in IRA

I am still 48 and DW is 44.

We still own our home with no mortgage and I assume the value has gone up during this real estate frenzy, but I don’t count its value in my numbers since I need a place to live.

Our spending is still low.... last year I ended up spending about $40k and this year we are on track for the same. That includes property tax, but not income tax or health insurance. I don’t count income tax because if I retire, it will be substantially less than we pay now. I don’t include health insurance because it is paid 100% by my company (both of us).

If I retire, I think I may spend slightly more than I spend now because I would hope to travel more....maybe another 10-12k. Also, I would have to pay health insurance and some income tax, although I don’t know how much if I’m not working.

So... where do you think I stand? Am I close?