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Old 02-14-2020, 01:32 PM   #1
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Join Date: Feb 2020
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I think we are ready now?

Iíve been lurking here for a few years so I thought itís about time I join and contribute. Iíve learned so much from everyone here particularly from members Midpack, pb4uski, Audreyh1, imoldernu, Gumby, Senator, Alan plus many others, thank you for sharing so much with us.

I was lucky to marry a saver like myself almost 30 years ago. We managed to save 15-20% of our salaries for many years and stepped it up whenever we could.

Our stats
ages- me 58, wife 55
No kids

tIRA=$622K at Vanguard, this was a previous 401k that was rolled over to an IRA when the company was sold.
401Ks=$1.1M still at our company 401Ks, will go to Vanguard when we leave work.
Roth IRAs=$410K Vanguard
After tax= $101K various banks
HSA= $12K
Total $2.25M
AA is currently 60/40

Our house is paid off its worth $475-500K
Autos are paid off as well with low miles so a new one wonít be needed for at least 5 years. Our budget includes replacements.

No pensions,

No retirement healthcare options from our companies

Neither of our companies 401Ks allow ďrule of 55Ē withdrawals at age 55. This is one reason why we continue to work part time.

SS will pay me $35.6K/yr at full retirement age 67, wife files at age 62 $18.4K/yr. These figures are assuming we stop working this year with no more earnings until we file. All of the SS planners Iíve used all recommend the same thing, wife files at age 62 and I file at age 70.

We both worked stressful jobs and it got to be worse the last few years especially with aging parents and the increased time we spend with them. It was harder to get all we needed to do into a 2-day weekend. I decided in 2018 to transition to part time. I kept all of my benefits but reduced my work to 3 days/week. My wife did the same a few months ago. Our stress level is now so much less we are really enjoying our lives again. We are thinking of fully pulling the plug early next year. Even with 4-5 weeks of vacation per year we use it all, we would like to take some extended trips of more than a month so it might be time to fully quit. Iíll also turn 59 in February 2021 so we can access my 401K and IRAs penalty free in August of next year.

Our expenses are $79K/yr including healthcare and budgeting for major expenses like cars/major home repairs etc. To test this, we have lived on an amount slightly less than this for the last year or so.

Firecalc gives us 100% results for a 40-year retirement on withdraws up to $114K/yr using the SS numbers above. If we reduce the SS payouts by 25% (if there is a cutback in benefits which I donít think there will be) we get 100% success with withdrawals up to $104K/yr, so I think we have a good buffer from our actual budget requirements.

If we keep our earnings below $67K/yr we can receive $1576.00 per month subsidy for ACA insurance. We can get a bronze policy with HSA for only $12.27/month. Our $79K budget used $500/month estimated health insurance, so thereís a buffer there too.

A problem we have is we should have saved more after tax. We were so intent on saving that we maximized our 401K and Roth IRAs each year, leaving little left for after tax savings. In order to keep our earnings below 67K for the ACA subsidy we may have to pull some from the Roth IRAs each year for the 7 years I have until I reach Medicare age. My wife has 10 years until Medicare.

Using the SS amounts we should receive I figured our withdraw rate. It comes to 2.5% at $98K/year withdrawals, 3% allows withdrawals at $107K/year. Our budgeted amount $79K is only 1.4% using the actual SS numbers.

Being savers for our whole lives we are having trouble transitioning to full retirement. We have always found it hard to spend money. I think we need some encouragement from others that we are good to go?
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Old 02-14-2020, 01:38 PM   #2
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Welcome NewEnglander! You have a solid retirement plan, your current assets and expenses well mapped out, and 100% results from FireCalc. I'd say that you are ready to launch.
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Old 02-14-2020, 02:18 PM   #3
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Welcome.

OP you made me look it up regarding your plan on SS:
SS will pay me $35.6K/yr at full retirement age 67, wife files at age 62 $18.4K/yr. These figures are assuming we stop working this year with no more earnings until we file. All of the SS planners I’ve used all recommend the same thing, wife files at age 62 and I file at age 70.

https://www.aarp.org/retirement/soci...y-spouse-dies/
AARP site says:
"If you claim survivor benefits between age 60 (50 if disabled) and your full retirement age, you will receive between 71.5 percent and 99 percent of the deceased’s benefit. (The percentage gets higher the older you are when you claim.)"

So this means, should you happen to die before your wife, and she has taken SS early, then she will get lowered benefits.
Statistically speaking it is normal for the wife to live longer.

Frankly, I have to wonder about the SS calculators, how they view survivor-ship income levels.

NOTE: If I'm wrong about this, let me know so I can start collecting SS
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Old 02-14-2020, 02:51 PM   #4
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I'm glad you decided to start posting, and your first is a great one! One question that popped into my head as I was reading is whether your $79k spending number is grossed up for taxes. I have been tracking our spending for many years and it is just that - how much we actually spend. But to generate that much money to spend, I need to earn/draw from portfolio enough to first pay the income taxes and then have that much left. As you probably know, FIRECalc also requires that the spending you input on the first tab be inclusive of taxes. Typically, when you are working, you look at your take home pay and the taxes are "out of sight, out of mind". At least, it was that way for me.
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Old 02-14-2020, 02:54 PM   #5
Confused about dryer sheets
 
Join Date: Feb 2020
Posts: 4
Quote:
Originally Posted by Sunset View Post
Welcome.

OP you made me look it up regarding your plan on SS:
SS will pay me $35.6K/yr at full retirement age 67, wife files at age 62 $18.4K/yr. These figures are assuming we stop working this year with no more earnings until we file. All of the SS planners Iíve used all recommend the same thing, wife files at age 62 and I file at age 70.

https://www.aarp.org/retirement/soci...y-spouse-dies/
AARP site says:
"If you claim survivor benefits between age 60 (50 if disabled) and your full retirement age, you will receive between 71.5 percent and 99 percent of the deceasedís benefit. (The percentage gets higher the older you are when you claim.)"

So this means, should you happen to die before your wife, and she has taken SS early, then she will get lowered benefits.
Statistically speaking it is normal for the wife to live longer.

Frankly, I have to wonder about the SS calculators, how they view survivor-ship income levels.

NOTE: If I'm wrong about this, let me know so I can start collecting SS
The $18.4K she would claim at age 62 is based on her own work record. My understanding is if I should die before her she could file to switch to survivorship on my benefit (100% of my amount) at her full retirement age if I didn't take early benefits. Is this not correct? It's only 2 years between when she turns 62 and I reach full retirement age.
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Old 02-14-2020, 03:06 PM   #6
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Youíre correct NE. If you take at FRA, as long as she is FRA or older she will get your full amount.
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Old 02-14-2020, 03:11 PM   #7
Confused about dryer sheets
 
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Quote:
Originally Posted by Gumby View Post
I'm glad you decided to start posting, and your first is a great one! One question that popped into my head as I was reading is whether your $79k spending number is grossed up for taxes. I have been tracking our spending for many years and it is just that - how much we actually spend. But to generate that much money to spend, I need to earn/draw from portfolio enough to first pay the income taxes and then have that much left. As you probably know, FIRECalc also requires that the spending you input on the first tab be inclusive of taxes. Typically, when you are working, you look at your take home pay and the taxes are "out of sight, out of mind". At least, it was that way for me.
Gumby- Yes I included Federal and state income taxes in that $79K. I figured based on $67K earnings , the max we could earn for ACA benefits.

Interesting actually disappointing is that our home state Connecticut recently phased out taxing SS benefits for singles earning 75K or less and couples earning 100K or less. They also are reducing state taxes on Annuity and Pension benefits BUT NOT IRA distributions! They are reducing state income taxes by 14 percent each year until it is totally phased out in 2025. Not counting IRA distributions sucks for us. So if we made the poor decision to buy an annuity we wouldn't have to pay state income taxes on that but since we have a traditional IRA we can't? WTF! I rolled over a 401K into an traditional IRA so those benefits are now state taxed where if I left it in the 401K they wouldn't be? I checked the state tax instructions , that does seem to be the case. Line 4D in the Fed 1040 form Annuity and Pension income is included but Line 4B IRA distributions is not. Very poor decision on Connecticut's part but it doesn't surprise me.
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Old 02-14-2020, 03:30 PM   #8
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Quote:
Originally Posted by NewEnglander View Post
Gumby- Yes I included Federal and state income taxes in that $79K. I figured based on $67K earnings , the max we could earn for ACA benefits.

Interesting actually disappointing is that our home state Connecticut recently phased out taxing SS benefits for singles earning 75K or less and couples earning 100K or less. They also are reducing state taxes on Annuity and Pension benefits BUT NOT IRA distributions! They are reducing state income taxes by 14 percent each year until it is totally phased out in 2025. Not counting IRA distributions sucks for us. So if we made the poor decision to buy an annuity we wouldn't have to pay state income taxes on that but since we have a traditional IRA we can't? WTF! I rolled over a 401K into an traditional IRA so those benefits are now state taxed where if I left it in the 401K they wouldn't be? I checked the state tax instructions , that does seem to be the case. Line 4D in the Fed 1040 form Annuity and Pension income is included but Line 4B IRA distributions is not. Very poor decision on Connecticut's part but it doesn't surprise me.
As I read the CT Form 1040 instructions, the deduction of 14% of pension income only applies if your federal AGI is less than $100k (for MFJ). This caused me several hours of headache, because the H&R block program did not initially implement that AGI cutoff, so I had to override the form. It appears to have been fixed in the latest update.

I am still unclear about the distributions from 401k, 403b or 457 plans. I looked in the applicable Connecticut General Statute (CGS 12-701(a)). It does not have a definition for pension and annuity income, which leads me to believe that the definition comes from the federal definition in the Internal Revenue Code. Looking at IRS publication 575, it appears to be the case that they are talking about plans that have been annuitized and have a regular periodic payout schedule, not about full or partial withdrawals after the end of service. If that is the case, then it makes sense that an IRA withdrawal is not included, because it is not annuitized but entirely at the direction of the taxpayer.

However, if the statute contemplates exclusion of straight 401k withdrawals from CT AGI, then the differential treatment between 401k and IRA distributions does not seem fair to me, especially for an IRA rolled over from a prior 401k. I am looking for better guidance
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Old 02-14-2020, 07:42 PM   #9
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Join Date: Dec 2016
Posts: 327
Why did you wait so long?


Not to be snarky , but you're at 100% on FIRECALC, you've put in almost 50% higher expenses than actual and you're asking if you're good to go!??!, c'mon man, it's a pretty silly question to ask
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Old 02-14-2020, 11:18 PM   #10
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Join Date: May 2018
Posts: 27
Quote:
Originally Posted by NewEnglander View Post
Iíve been lurking here for a few years so I thought itís about time I join and contribute. Iíve learned so much from everyone here particularly from members Midpack, pb4uski, Audreyh1, imoldernu, Gumby, Senator, Alan plus many others, thank you for sharing so much with us.

I was lucky to marry a saver like myself almost 30 years ago. We managed to save 15-20% of our salaries for many years and stepped it up whenever we could.

Our stats
ages- me 58, wife 55
No kids

tIRA=$622K at Vanguard, this was a previous 401k that was rolled over to an IRA when the company was sold.
401Ks=$1.1M still at our company 401Ks, will go to Vanguard when we leave work.
Roth IRAs=$410K Vanguard
After tax= $101K various banks
HSA= $12K
Total $2.25M
AA is currently 60/40

Our house is paid off its worth $475-500K
Autos are paid off as well with low miles so a new one wonít be needed for at least 5 years. Our budget includes replacements.

No pensions,

No retirement healthcare options from our companies

Neither of our companies 401Ks allow ďrule of 55Ē withdrawals at age 55. This is one reason why we continue to work part time.

SS will pay me $35.6K/yr at full retirement age 67, wife files at age 62 $18.4K/yr. These figures are assuming we stop working this year with no more earnings until we file. All of the SS planners Iíve used all recommend the same thing, wife files at age 62 and I file at age 70.

We both worked stressful jobs and it got to be worse the last few years especially with aging parents and the increased time we spend with them. It was harder to get all we needed to do into a 2-day weekend. I decided in 2018 to transition to part time. I kept all of my benefits but reduced my work to 3 days/week. My wife did the same a few months ago. Our stress level is now so much less we are really enjoying our lives again. We are thinking of fully pulling the plug early next year. Even with 4-5 weeks of vacation per year we use it all, we would like to take some extended trips of more than a month so it might be time to fully quit. Iíll also turn 59 in February 2021 so we can access my 401K and IRAs penalty free in August of next year.

Our expenses are $79K/yr including healthcare and budgeting for major expenses like cars/major home repairs etc. To test this, we have lived on an amount slightly less than this for the last year or so.

Firecalc gives us 100% results for a 40-year retirement on withdraws up to $114K/yr using the SS numbers above. If we reduce the SS payouts by 25% (if there is a cutback in benefits which I donít think there will be) we get 100% success with withdrawals up to $104K/yr, so I think we have a good buffer from our actual budget requirements.

If we keep our earnings below $67K/yr we can receive $1576.00 per month subsidy for ACA insurance. We can get a bronze policy with HSA for only $12.27/month. Our $79K budget used $500/month estimated health insurance, so thereís a buffer there too.

A problem we have is we should have saved more after tax. We were so intent on saving that we maximized our 401K and Roth IRAs each year, leaving little left for after tax savings. In order to keep our earnings below 67K for the ACA subsidy we may have to pull some from the Roth IRAs each year for the 7 years I have until I reach Medicare age. My wife has 10 years until Medicare.

Using the SS amounts we should receive I figured our withdraw rate. It comes to 2.5% at $98K/year withdrawals, 3% allows withdrawals at $107K/year. Our budgeted amount $79K is only 1.4% using the actual SS numbers.

Being savers for our whole lives we are having trouble transitioning to full retirement. We have always found it hard to spend money. I think we need some encouragement from others that we are good to go?

Your situation and numbers are very similar to ours, except for children. I look forward to following your progress into full retirement. Thank you for posting.
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Old 02-15-2020, 08:53 PM   #11
Confused about dryer sheets
 
Join Date: Feb 2020
Posts: 4
Quote:
Originally Posted by FREE866 View Post
Why did you wait so long?


Not to be snarky , but you're at 100% on FIRECALC, you've put in almost 50% higher expenses than actual and you're asking if you're good to go!??!, c'mon man, it's a pretty silly question to ask
I just put in the higher numbers to see how far I could go with spending and still get 100%. This has changed drastically in the last 1-2 years with the huge returns this year. The numbers I got just a year ago were considerably less. And as the say the market giveth and the market can just as easily taketh away.

your comment was a little snarky especially when you asked the same thing with similar numbers back on 12-11-2016,
your post

"New to this board--thinking of pulling the plug
I think my working days might be over, but wanted to throw this out there

I have more than 300x my monthly expenses and over 25x my yearly expenses in investments

FIRECALC retirement calculator has me at a 98% success rate and the Fidelity calculator has me with money left over assuming "below average" market returns

any thoughts?

thank you"
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Old 02-16-2020, 07:33 AM   #12
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Originally Posted by NewEnglander View Post
I just put in the higher numbers to see how far I could go with spending and still get 100%. This has changed drastically in the last 1-2 years with the huge returns this year. The numbers I got just a year ago were considerably less. And as the say the market giveth and the market can just as easily taketh away.

your comment was a little snarky especially when you asked the same thing with similar numbers back on 12-11-2016,
your post

"New to this board--thinking of pulling the plug
I think my working days might be over, but wanted to throw this out there

I have more than 300x my monthly expenses and over 25x my yearly expenses in investments

FIRECALC retirement calculator has me at a 98% success rate and the Fidelity calculator has me with money left over assuming "below average" market returns

any thoughts?

thank you"

My post from 2016 was significantly different in that my expense inputs were not 50% higher than actual like yours. If you spend 50% more than you actually do and it still says 100% success you should retire tomorrow! I was and am still not in that position!
If my spending was 50% higher than actual I'd be in big trouble!
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Old 02-16-2020, 08:21 AM   #13
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Welcome, great first post. Your plan is about as well thought out as we ever see here, congrats.

It’s spooky how similar your current situation is to ours 7 years ago, lifelong savers, similar net worth and spending, no pensions, no kids, DW 2 years younger than me. She even grew up in RI and we visit often.

The only big difference is we have about 2/3rds taxable and the rest in TIRA’s, I just started and plan to continue large Roth conversions for the next 6-7 years. As you note, you’ll want to carefully consider how you manage all your tax deferred and tax free money. If you haven’t already, start by looking carefully at what your “forced” income will be when RMD’s start - dividends, STCG, Soc Sec, RMD’s, LTCG, and any other mandatory income compared to your projected spending and taxes. You have plenty of time to reposition assets if you choose. There have been some good threads lately, but there’s no single right answer as there are always unknowns. I shared my thought process in detail, but it’s not right for everyone.

As for pulling the plug, it’s a personal decision depending on your risk tolerance, % secure income, how flexible your spending plan is, job satisfaction, longevity expectations, ending balance needs, etc. Some here rightfully sleep peacefully at night with an 80% probability of success while others “need” 200% to be comfortable. Only you can decide what works for you, knowing there’s no turning back for most of us.

Best of luck, it is a great group here, many immensely helpful and very smart members.
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Old 02-16-2020, 08:21 PM   #14
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I also have similar numbers, live in CT (Fairfield county) and am considering retirement later this year. I get 100% up to $130k burn. Still, I’m not sure. I’ve been working since I was 15 and don’t know anything else. Best of luck to you and please continue to share your progress.
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