Do I have enough?

C

CindyBlue

Full time employment: Posting here.
Joined
Feb 28, 2017
Messages
807
Hello, long time reader, brand new member. I've enjoyed reading the posts on the forums here at FIRE.
I have a bunch of questions!
I'm thinking of retiring next year...I think I can make it even though I won't be able to access my pension (about $30,000 a year) until I'm 65, in three years, and will not take SS until I'm 66 (about $24,000 a year.) I'm working on the budget so I will know my exact expenses for a year. I am hoping to be able to live on $48,000/year here in California, and I think I can live on less (anyone have experience or an opinion on that:confused:)
I have about $500,000 in a 403b and about $100,000 in savings/checking for emergencies. My rent is about $1000 a month, my health plan until I reach Medicare age will also be about $1000 (I'm estimating high.) No other major debt/expenses/assets.
I want to do this, but I'm frankly afraid to take the leap. What if I have an unexpected health problem that wipes me out and I not longer have or can get a job to earn more money to help out the budget? (hiring isn't good for older folks right now...sigh...) I like my work, and could work one to three more years, but I've been doing it for 39 years now, and I'm tired and ready for a change.
Firecalc gives me about an 87%, though I do not know if the amount I should enter under "Spending" should be just what I need to spend (groceries rent, health, food, vacations, etc.) or should it include my tax budget (i.e., add about 20% to the $48,000 I think I need to live on)? I've been entering $60,000 to include the 20% tax rate I expect. If the amount I should be entering is only what I spend (not including taxes) it gives me 100%.
I am also hoping for some information about ESP Planner. I have no problem entering data, but I don't understand how to read the results, and can't find any information. Is there a page that explains the results?
 
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Welcome to E-R.org. I'll take a shot at some of your questions:

Firecalc gives me about an 87%, though I do not know if the amount I should enter under "Spending" should be just what I need to spend (groceries rent, health, food, vacations, etc.) or should it include my tax budget (i.e., add about 20% to the $48,000 I think I need to live on? I've been entering $60,000 to include the 20% tax rate I expect. If the amount I should be entering is only what I spend (not including taxes) it gives me 100%.
Click to expand...

You need to enter ALL your annual expenses in FIRECalc spending, including taxes. However, your 20% tax number is is likely higher than necessary.

One good way to estimate taxes is to use TurboTax or similar software to input what your sources and amount of income will be in retirement and see what your estimated taxes will look like. With the income numbers you mentioned I would think 10% might be a more realistic number, but using TT to do a "what if" tax return is the only way to be sure.
 
You are 61 now and will be 62 next year when you are thinking about retiring.
If you do retire next year, you will need to live on your savings for 3 years until your pension of $30,000 kicks in. Based on your estimates, you will need to supplement this with $15,000/year from your savings.
Then on your fourth year of retirement, $24,000 year from Social Security kicks in negating the need to withdraw from your savings.
Is that right?

You write that your health plan will remain the same.
Does that mean you will receive retiree health insurance?
How much is that a year?
 
Thank you - now I know what to enter under "Spending" :)
Is Turbo Tax free? And can I enter my information anonymously?
 
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Yes, that is right, except that I am 62 now.
No retiree health insurance. I will have to spend about $1000 a month (high estimate) until Medicare. I re-wrote my original post to reflect this clarification - thank you.
I can live on less the first three years if I have to. My estimate for the $48,000 is more than what I think I'm spending now per year. I just this year opened a separate checking account with $40,000 in it, and I'm spending out of only this account for this year from Jan 1 to Dec 31 (not trying to pare down, just spending normally.) This will give me a really good idea of what I actually spend, but it doesn't include taxes.
My DH will make about what I do when he retires. He is 9 years older than I am and still working, also. This is why I estimated the taxes at 20%. But I am trying to figure my retirement as if he isn't there. I need to know if I can make it on my own, not that I plan to be alone :)
 
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Thank you, I've read this article multiple times :) It's an excellent reference.
 
First - welcome!

Health care numbers sounds a bit high for someone your age. DH had a bronze HDHP for about $500/month last year - he went on medicare this year and has part B, F+, and D and it's only about $350/month for a better insurance (low deductible)... so your health care estimates seem high. You might want to check out healthsherpa.com or coveredca.com to get estimates on what is available for your zip code.

We're spending about $80k/year for a family of four in pricey southern california... But we have a paid off house. But it's possible to live fairly frugally, even in California.

I would keep working on getting accurate/actual spending numbers. One way to get a semi-accurate swag is to take your gross income then subtract out the the things that go away when you retire (FICA taxes, 401k/403b contributions, employer health premiums) then add in the stuff that you now have to pay in retirement (private health insurance, perhaps additional travel). I used this number when I first started "what-iff"ing my retirement plan...

As you've probably figured out - the most important number to get a handle on - unless you have unlimited funds - is the spending number. If you underestimate you'll end up running out of money... if you over estimate you may end up working past when you need to.
 
This is a great idea - I just took my paycheck and did as you suggested. Based on subtracting out what you suggested, I'm living on a lot less than my salary indicates, which idea matches with my own figures based on my actual paycheck.
The main thing that will slow me down is the health care. I do Kaiser, and it's expensive...the best plan (platinum) is around $1200 a month, as I remember. I am investigating plans that cost less, but I'm using the high cost as an estimate for retirement.
 
Welcome...
In our experience, we are spending less in (semi) retirement. It seems like when you move your focus from working to relaxing, you find ways to save money if you wish. Eating out less, because you enjoy making the meals and driving less (we sold the second vehicle) are two ways that come to mind. There is also more time to research spending (who offers the cheapest phone plan or internet?).

We found it helps to look at the worst case, then consider other options should you not be able to return to work due to illness. Would downsizing be an option? Moving to a lower COL area? Taking out a reverse mortgage? Home based business?

If you find you have many "plan B's", you should feel better!!

Best of luck!
 
Welcome Cindy - If your numbers are accurate, you should be ok to go.

So, from age 63 to 65, $48k x 3 years = $144, minus the $30k pension starting at age 65. With that you need $114k during the 3 years which you have majority in your current checking/savings ($100k). The shortfall ($14k) can come from this years savings and/or trim your expenses, leaving your 403b of $500k in your nest egg.

At age 66, your pension ($30k) and SS ($24k) covers 100% of expenses ($48k plus taxes). Your expenses covered without dipping into savings.
 
Interesting...I had never thought of using my savings for living on. I have always thought about keeping the savings as "backup." Dipping into any savings - 403b or saving accounts - is anathema to me! (I know I'd better get over that when I retire!) :) The plan in my head was to use the savings as backup for in case the well goes out or we have huge medical bills, and for "fun" money for travel. But now that you mention it, I do have enough if I use the savings to live on.
Either way, I've just turned 62 now (January girl here) so if I retire now, I'll need three full years (62, 63, and 64) of income until I can reach 65 and the pension.
I think I could make it to FIRE this year, too, but after finally writing it all out and getting such great advice and observations from you folks who have been there/done that, I am beginning to realize that this might be cutting it too close. If I have to deplete my savings to FIRE, it will make me worry all the time...and then what is the fun of retirement? I think I might just have to suck it up and work at least one more year. I'm lucky that I can, both from my end and theirs, and lucky that I like what I do, so if another year - or even two (shudder) - will give me more peace of mind, then I might just have to do it. My hubby is willing to work one more year, though both he and I have our days when all we want to do is "take this job and shove it" :) and after this discussion here, I now know that we actually could "shove it" if we reach that mental point. Things would be tight, but we could do it.
 
We are already pretty frugal. We get a kick out of reading the articles that tell you how you can cut back and save (clothing, laundry bills, eating out, etc.) when you are no longer working...we already DO all of these things, so we wouldn't realize any extra savings when we retire :)
I am a thrift shop queen already. We need (at least) two cars - we live out in the country. My hubby already does most of the cooking at home (and he's very good at it and he likes it - I am a lucky, lucky girl, and I know it :) ) We're pretty much stuck with our internet and phone out here, so no savings there. Moving would be very expensive - house prices out here on the west coast are insane, so we'd have to move to the midwest or east coast (the south is not an option - neither of us like hot weather) - and my hubby grew up in snow country and refuses to ever live in it again. Our house is about 900 sq. feet - we did the "tiny house" thing before it became popular on TV. :) We built it specifically to be very efficient and cheap and easy to care for (except for the stairs to the loft bedroom - that will be an issue as we age. And there are 2 1/2 acres to care for - that will be a problem as we get older, too.)
So "aging in place" is a good option for us - we planned for it about 25 years ago when we built the place.
 
You indicated that your husband works but you don't want to count his income, for the purposes of your calculations. Does your expense estimate of $48,000 include paying 100% of the costs for both of you?. If so then I would think that you would include some of his income in your total to offset your expenses, or reduce your expenses at least theoretically to reflect the reduced expenses you would have if you he weren't in the picture. One can live more cheaply than two - less food, fewer vehicles, etc.
 
CindyBlue said:
... The plan in my head was to use the savings as backup for in case the well goes out or we have huge medical bills, and for "fun" money for travel. But now that you mention it, I do have enough if I use the savings to live on....
Click to expand...

I'm sure I'll have the same issue, how to spend some of the money I've saved when the time comes for me too. I'm in coasting mode myself, trying to decide what I want to do with respect to RE.

For you, this year could be the time to figure a few things out, i.e. confirming expenses, possible roth conversions in the future, fancy hobbies or trips, etc.

While it's difficult to deplete your savings, you still have $500k in your 403b to be a rainy day fund. Mentally you are approaching the next phase of your life, so go at your own pace. Just know you have some options. Congrats.
 
I was thinking that two live more cheaply than one...the cost of rent or house payment alone would be split in half for two.
But the main calculations I've added in considering my sweetie is that I'm figuring that my taxes will be higher because of the double household income, plus I also doubled my guesses on the costs of rent/house payment and electric/phone/gas etc for my calculations, figuring that without him I'd be the only one paying those. We keep our accounts separate and pay bills half and half out of each of our separate accounts. I'd like to think both that I could take care of him "just in case" and also that if he wasn't there that I could do it on my own.
I know this is "overkill" but I figure that if I do the worst case scenario, than if that works out financially I'd be reasonably sure that a better case scenario will also work. This is for peace of mind - I am an inveterate worrier :)
 
"We're spending about $80k/year for a family of four in pricey southern california... But we have a paid off house. But it's possible to live fairly frugally, even in California."
That's pretty darn good!
I think I just don't want to end up eating cat food when I'm 90 because I got too eager to retire now and didn't work an extra year or two while I could (though now that I think of it, cat food would be too expensive - those little cans cost a lot!!)
 
CindyBlue said:
"We're spending about $80k/year for a family of four in pricey southern california... But we have a paid off house. But it's possible to live fairly frugally, even in California."
That's pretty darn good!
I think I just don't want to end up eating cat food when I'm 90 because I got too eager to retire now and didn't work an extra year or two while I could (though now that I think of it, cat food would be too expensive - those little cans cost a lot!!)
Click to expand...

My cat Herbie eats Appetizers. Two a day at $1.18 each, + litter + he has asthma ($10 a month for medication.) Thankfully he is our only child or I'd never save enough to retire! :)
 
Aiming_4_55 said:
Welcome Cindy - If your numbers are accurate, you should be ok to go.

So, from age 63 to 65, $48k x 3 years = $144, minus the $30k pension starting at age 65. With that you need $114k during the 3 years which you have majority in your current checking/savings ($100k). The shortfall ($14k) can come from this years savings and/or trim your expenses, leaving your 403b of $500k in your nest egg.

At age 66, your pension ($30k) and SS ($24k) covers 100% of expenses ($48k plus taxes). Your expenses covered without dipping into savings.
Click to expand...

+1

At 66 you'll be bringing in $54k a year... more than you need. So if you're really spending $48k a year your gap is $162k... $48k for the first 3 years (63-65) and $18k for one year (66) and you have over $600k saved.

Or another way to look at it is say you used savings to fill the gap between retiring at 62 and SS at 66... but at the $54k a year you will be collecting at 66 rather than $48k..... that would be $186k ($54k * 3 years + $34K * 1 year)... so you put $186k of your $600k of savings aside, leaving $414k. Using the 4% rule, but let's say 3.5% to be safe since you are retiring early, thats $14k a year of withdrawals from the $414k pot. So you should be able to spend as much as $68k a year ($30 + $24 +$14) from age 62 and still be ok.

As others have mentioned, you are probably overestimating taxes and you can put $44k of pension income and $24k of SS in taxcaster to get a good idea of your taxes.... or tax-rates.org has a tax calculator that can include state taxes as well.

Also, check out healthsherpa.com for health insurance plans (though who knows what will happen over the next 5 years it is still a place to start). If you are in good health you may find that the lower monthly premiums of a bronze level plan is more affordable that a silver, gold or platinum plan even after paying deductibles and co-pays... under the current rules if you have a health issue you can always chose to get a higher level plan at the next open enrollment period or if a qualifying event occurs.
 
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This is a great analysis! It is very encouraging!
I just tried $68000 in FireCalc with my numbers and they weren't too encouraging, though...sigh...
 
Nope, no WEP or any other issue with my pension.
 
Thanks for the tax estimator. I ended up with 17.9%, which is close to my estimate of 20%.
 
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