Hi, I suppose it depends, but...

L

Lazyfish

Dryer sheet aficionado
Joined
Feb 19, 2021
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Mckinney
Been contemplating, fussing over, weighing options, and fearfully considering pulling the trigger. Thought I’d work till 65 (60 now) but work environment is growing less palatable daily.

Found this website through another forum and have been grateful for the wisdom and insIght of those who post after I’ve spent some significant time lurking. Great aspect of this site is 16 plus years of history and the pre- and post- ER comments from folks who were contemplating ER, pulled the trigger, and have been living with it for a number of years.

DW is okay with ER but enjoys the freedom of spending limit (or no) she currently has. In retirement, Estimate 200k spending all in with pretty good flexibility.

Have obsessed over various online retirement calculators including Firecalc, I-Orp, RFP, and any other one available including Personal Capital’s. Thanks largely to this board, i have found more to add to my obsession activities.

So, the numbers:

Td401k 3200 tax deferred (70/30)
Company stock 500k after capital gains (net) to be invested on retirement
Investments 700k (60/40) Cap gains is taxable.
Roth 100k
300k cash


Everything I run has high probabilities of success. Biggest uncertainties are medical and LTC excluding predictive return estimates. This site has been like a firehose of info on conversions, managing taxable income, and insurance to get to Medicare.

So, can I?
 
Lazyfish said:
Been contemplating, fussing over, weighing options, and fearfully considering pulling the trigger. Thought I’d work till 65 (60 now) but work environment is growing less palatable daily.

Found this website through another forum and have been grateful for the wisdom and insIght of those who post after I’ve spent some significant time lurking. Great aspect of this site is 16 plus years of history and the pre- and post- ER comments from folks who were contemplating ER, pulled the trigger, and have been living with it for a number of years.

DW is okay with ER but enjoys the freedom of spending limit (or no) she currently has. In retirement, Estimate 200k spending all in with pretty good flexibility.

Have obsessed over various online retirement calculators including Firecalc, I-Orp, RFP, and any other one available including Personal Capital’s. Thanks largely to this board, i have found more to add to my obsession activities.

So, the numbers:

Td401k 3200 tax deferred (70/30)
Company stock 500k after capital gains (net) to be invested on retirement
Investments 700k (60/40) Cap gains is taxable.
Roth 100k
300k cash


Everything I run has high probabilities of success. Biggest uncertainties are medical and LTC excluding predictive return estimates. This site has been like a firehose of info on conversions, managing taxable income, and insurance to get to Medicare.

So, can I?
Click to expand...

Does your 200k spending including income taxes?
 
What are your Social Security estimates and at what age? Are there any pensions?
Just based on your posted numbers not including the above info, Firecalc would not return a 100% success rate.
 
Right, SS at 67 at about 36k for me, half that a year later for DW. Spending is net of taxes. No mortgage, ptomary house is paid off. Vacation home in CO to be paid off next year used for rental but income is not significant.

Thanks for the queries. No pension.
 
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Lazyfish said:
Everything I run has high probabilities of success. Biggest uncertainties are medical and LTC excluding predictive return estimates........So, can I?
Click to expand...

With your numbers, of course you can retire if you wish. Since our situation was quite similar to yours when we retired 6 years ago, I'll share our experience.

Wife and I retired in 2015 at 55/54 yrs old. Assets were ~10% less than you. No pension but plan to take SS at 62.

We purposely choose to spend more in retirement than we did pre-retirement. We have averaged $250,000 / yr which includes taxes on large yearly Roth conversions. Spend rate has averaged 5.4% when Roth Conversion taxes are included, 3.7% when not.

A quick Firecalc analaysis today yields a low success rate (~65%) at current spend rate. Dropping spend to ~200k / yr yields a high success rate (~95%). So "failure" is quite possible ... if we live long, investments don't do well, and we just blindly keep spending at these levels.

So why were we comfortable retiring when we did? Of course a bull market would make things easy but we couldn't count on that. (FWIW- our assets have grown about 15% even with such a large spend and not the best investment choices.) The main thing that made us comfortable to retire is the knowledge that we could make huge adjustments to our spending if needed. We could get to whatever Firecalc success we wanted by some combination of (1) not doing Roth conversions (2) cutting back monetary gifts / charity (3) cutting back travel and dining expenses.

So each year we rerun retirement numbers to see where we are and if spending adjustments need to be made. We are confident that we can cover even any health issues that come up, including LTC. Honestly if one of us got very sick or needed LTC, most of those cuts would come naturally anyway. So far, no major health issues and the market is good so no adjustments needed.

Hope this perspective helps. Good luck with your decision and eventual retirement.
 
Welcome lazyfish! If you haven't found them already, we have a helpful list of things to think about as you're making your ER decision:

Some Important Questions to Answer

It sounds like you are financially fine but hesitant to take what seems like an irreversible step. Many of us here were in the same boat and were reassured by others here that the ER waters were fine, and most of us were glad we did, me included. So post any more specific questions you have so we can help, and good luck with your decision.
 
Thanks Whisper for the insightful information and comparative basis. Very helpful. Also thanks to MBAustin for the link. Through my lurking I had read over that and it is certainly thought provoking.

Whisper, what drove you to opt to take SS early? Also, how are you handling health insurance.

Thanks in advance.
 
Lazyfish said:
....Whisper, what drove you to opt to take SS early? Also, how are you handling health insurance.
Click to expand...

Why will we take SS early? - See recent thread "timing SS start" for many ideas of when to take SS. Below are my reasons for taking early.....
- Wife and I are similar age and have similar life expectancies. Family history suggests a decent chance we could live into our 80's but just as likely either one of us could pass before 80. 90's isn't very likely for either of us.
- Wife worked at relatively low pay vs mine. So our combined SS benefits will be 1.5 x my benefits. After one of us passes, the survivor will collect 1 x my benefit.
- Studied many options on https://opensocialsecurity.com/ . My key conclusion was that taking at 62 would provide more $$ than taking at 70 UNLESS we BOTH lived past 80 yrs old. The longer we both lived past 80, the more benefit it would be to us to take it later. But honestly the additional benefit wouldn't make a difference in our lives. We do not need SS to be insurance against living longer than planned.
- Lastly, government will need to change the SS system again to make it solvent. The last couple changes I remember are taxing more of SS and raising SS full retirement age. I have no faith that future changes will avoid impacting current SS takers. So I'd prefer to take what I can early rather than hope future benefits aren't taken from recipients.

Health Insurance
- Currently we are covered under a company retiree health plan. As you may be aware, many companies are getting rid of their own health plans. If this happens, we will get whatever insurance we can. We will probably initially investigate healthcare sharing programs if we qualify. (https://www.kitces.com/blog/healthc...hm-medicare-lhs-samaritan-health-share-plans/ ). In any event, if the cost of health care is too high vs our costs today, we will consider if we need to reduce expenses to cover. As mentioned in first post, we have lots of room to reduce if desired.
 
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Whisper66 said:
With your numbers, of course you can retire if you wish. Since our situation was quite similar to yours when we retired 6 years ago, I'll share our experience.

Wife and I retired in 2015 at 55/54 yrs old. Assets were ~10% less than you. No pension but plan to take SS at 62.

We purposely choose to spend more in retirement than we did pre-retirement. We have averaged $250,000 / yr which includes taxes on large yearly Roth conversions. Spend rate has averaged 5.4% when Roth Conversion taxes are included, 3.7% when not.

A quick Firecalc analaysis today yields a low success rate (~65%) at current spend rate. Dropping spend to ~200k / yr yields a high success rate (~95%). So "failure" is quite possible ... if we live long, investments don't do well, and we just blindly keep spending at these levels.

So why were we comfortable retiring when we did? Of course a bull market would make things easy but we couldn't count on that. (FWIW- our assets have grown about 15% even with such a large spend and not the best investment choices.) The main thing that made us comfortable to retire is the knowledge that we could make huge adjustments to our spending if needed. We could get to whatever Firecalc success we wanted by some combination of (1) not doing Roth conversions (2) cutting back monetary gifts / charity (3) cutting back travel and dining expenses.

So each year we rerun retirement numbers to see where we are and if spending adjustments need to be made. We are confident that we can cover even any health issues that come up, including LTC. Honestly if one of us got very sick or needed LTC, most of those cuts would come naturally anyway. So far, no major health issues and the market is good so no adjustments needed.

Hope this perspective helps. Good luck with your decision and eventual retirement.
Click to expand...

Plus 1 Actually one of the most logical responses Ive read in awhile. Applaud your response!
 
Whisper66 said:
... So "failure" is quite possible ... if we live long, investments don't do well, and we just blindly keep spending at these levels.

So why were we comfortable retiring when we did? ... The main thing that made us comfortable to retire is the knowledge that we could make huge adjustments to our spending if needed. We could get to whatever Firecalc success we wanted by some combination of (1) not doing Roth conversions (2) cutting back monetary gifts / charity (3) cutting back travel and dining expenses.

So each year we rerun retirement numbers to see where we are and if spending adjustments need to be made. We are confident that we can cover even any health issues that come up, including LTC. Honestly if one of us got very sick or needed LTC, most of those cuts would come naturally anyway. So far, no major health issues and the market is good so no adjustments needed.

....
Click to expand...

Excellent analysis. Our spend is different, but our planning is quite similar to yours. Travel is > 50% of our post-tax spending, and roth conversion taxes are completely discretionary.

To the OP, with that big chunk in tax deferred, make sure to analyze Roth Conversions in your early retirement years. We've been converting to top of 24% bracket even in years where we'd otherwise pay no taxes. You'll find lots of discussions regarding whether and how much one might want to convert....
 
Don't forget that a fairly big portion of the money in your Traditional IRA belongs to the government. With a chunk that size, RMDs will likely drive you to the high tax brackets.

I would be concerned about your proposed spending level, that is really high compared to most posters on this forum who get by on a fraction of that. Personally, if I had to spend that much, I would want a bigger stash. I suggest a conversation with DW about cutting back on spending while you try to gut it out a little longer and then reassess.
 
Welcome to the forum.

You have lots of assets... but also a pretty high spend rate... A 4% withdrawal rate gives you a tad less than the desired $200k/year.

That said - it sounds like, if needed, you could lower your spending or sell the vacation home or some such... You have flexibiity if need be.

Retirement is awesome... I encourage people to do it. But if you'll be super sad if you have to cut back on spending if there's a big market correction or some such, then maybe pad the nest a little.

I got to retirement a different way... Cutting spending enough that my nest egg was big enough for the smaller spend - and those cutbacks were funneled into my nest egg... so it got me to the endpoint earlier than I'd expected. We're still living well... just not in the same ballpark as you. (Family of 4 at ~90k/year).
 
Great feedback Whisper, thanks for the glimpse into the thought process. I have similar concerns regarding the future finaglings of SS. DW’s side of the family lives to a century...mine not so much. Once the government takes, it isn’t likely to take less in the future. The comments from 2017ish are spot on and something foremost in my mind with regard to conversions. I’ve been spreadsheet whipping the numbers and used I-ORP but quickly learning how much I don’t know and have yet to learn. Wish the Roth side was a much bigger proportion but it is what it is. I apparently have taxes to pay to rest easier when RMDs start knocking on the door.

I had similar thoughts on LTC to self fund for the reasons you mentioned but was almost afraid to say them out loud.

It is a high spend and can be reduced significantly based on my budget. There is quite a bit of discretionary spending in there for travel, charity, and non-essentials. We could be plenty comfortable on much less. RE taxes are steep in Texas and we have quite a bit wrapped up in our home. We do have a home downsize at some time in the future that will help when we get old enough. I think my kids would kill me if I tried to jettison the place in CO, though. But, not their decision.

Thanks rodi and Exchme for your feedback as well.
 
I’ve found it helpful to slow down and reread the responses and wisdom imparted. Separating the logic offered from the emotion felt at the time (mine). It also was helpful to review my budget and reasses the discretionary spending after comments suggesting my spend rate was pretty aggressive. That was pretty helpful. Still have work to do on managing conversions vs keeping AGI such that I might be able a receive subsidies on ACA and minimize cap gains. At 18 mos cobra getting me to 62.5, and then 2.5 yrs to Medicare, it seems more reasonable. Company healthcare program is very good with them paying 100% of deductible. 2k gap to 100% coverage. Premiums are similar to gold premiums I think with cobra.

Biggest ticket items are HI, RE taxes, and car/auto insurance. Thanks again for the feedback. I find the “similar position” responses to be most comforting.
 
Looks good. My advice - have an agreement with DW for a "down" year. What you all agree a down year in the market would be, and what you all agree can be reduced in that year.

Also, what will the mechanism be for spending? Is it possible to create a unique banking account, and DW to use debit cards tied to that account only? She controls what/when - you both agree ahead of time to the amount (and frequency of deposits).

That helps with not "controlling", but allowing a more free spirit to have control, but also to have some type of known limits.

It's better to know and agree to whatever that is, to then make a plan accordingly.

If there's not much of a reduction, then that means more work in AA, having contingencies, etc. It's not undoable - but I think your better off having the discussion and agreement ahead of time.
 
Maybe you've said this and I missed it in your original post, but why are you taking COBRA at all? We were faced with COBRA and the costs were very high...so we went to the marketplace instead.

If your employer will be paying for COBRA or your income will be over the subsidy amount until 62.5...fine....just thought I'd mention this.

Good luck!
 
Retire48- I really like that approach using separate buckets target perhaps on essential or what I call fixed expenses and then a second for disretionary. I saw where some one posted that they make a decision on spending based on a set date each year relative to portfolio balance. Everything would still have to monitored/managed throughout the year.

Dave - I didn’t say. I just assumed. Perhaps the old adage applies but it would just be me and not u. But point made: assess options going in on plans, premiums, out of pocket max and coverage. Company pays the deductible, I’d be responsible for premiums and gap on the 18 month period. As you say, if properly managed could still be eligible for subsidies on silver plan saving quite a bit.

I’ve seen a lot about withdrawal plans in terms of what comes from which account and I-orp has that. Need to download the export file into excel (I think I can) and study the numbers. Also provides estimated taxes and conversions which I need to understand.
 
I would not be terribly concerned about covering your health care until 65 if you are currently 60 with those assets. For some of us early retirees (40’s and 50’s) those costs can be daunting. But at least you know for sure what Cobra would cost for the next 2.5 years, so you can compare that with other coverage options. You have built substantial assets so you should be fine for spending close to $200K. But if you really absolutely must spend the full $200K every year, you might need to work another year or two just to be safe.

If it was me I’d look for ways to cut back just a little and start retirement today. Life is short. 60 isn’t that early of a retirement age. Enjoy life while you can. Many of the simplest pleasure in life are absolutely free.
 
Finance Dave said:
Maybe you've said this and I missed it in your original post, but why are you taking COBRA at all? We were faced with COBRA and the costs were very high...so we went to the marketplace instead.

If your employer will be paying for COBRA or your income will be over the subsidy amount until 62.5...fine....just thought I'd mention this.

Good luck!
Click to expand...

My COBRA was about $500/mo lower than unsubsidized ACA. It looks like the ACA will be very affordable for 2021-2022. The graph in this article explains it well. The graph is too big to post here.
https://www.kff.org/health-reform/i...d-19-relief-proposal-on-marketplace-premiums/
 
@Ready - that great gives me some comfort. About 40% of that spend is discretionary so plenty of room to adjust. Have heard that enough now to realize that budget should be more conservative or plan on socking away a bigger cushion.

@eastwestGal - really good site, thanks! Bookmarked!
 
Well, gave notice for end of June so no backing out now. Had a good heart to heart with DW on spending and that was quite positive. Got domestic travel lined up through October with plans to visit friends in the Rockies and east coast by car so much to look forward to post retirement. The feeedback has been most beneficial so thanks to all. Nice to have some outside counsel sense-check my parameters. :)
 
Lazyfish said:
Well, gave notice for end of June so no backing out now. Had a good heart to heart with DW on spending and that was quite positive. Got domestic travel lined up through October with plans to visit friends in the Rockies and east coast by car so much to look forward to post retirement. The feeedback has been most beneficial so thanks to all. Nice to have some outside counsel sense-check my parameters. :)
Click to expand...

How exciting for you and your DW! Congratulations!
 
Congratulations! July 1 will be here before you know it, first day of retirement. Enjoy
 
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