Need a Nudge

[Arc]

I've learned a lot on this forum over the years - so thank you very much for that. We've worked and saved all our lives and now at age 55 I feel like we are in a good spot - but can use some validation and encouragement to jump!

DW and I are empty nesters with no debt and have always lived below our means. Financial picture below:

Tax Deferred 2.3M
Tax Free Roth 121K
Taxable 583K

Tiny Pension 7K / yr
Social Security 22K / yr in 2027 (me @ 62)
11K / yr in 2027 (her @ 63)

DW in Army Reserves until 2024 so health insurance not an issue until then. Will have 5 years afterwards until Medicare. Note: no Army pension as wife joined at age 45!

DW will earn 25K per year until leave Army Reserves.

Expecting Spending to bounce between 120 - 150K in the first 10 years of retirement - lots of discretionary dollars there to work with in a pinch. After age 65 expenses will reduce by HI (less supplemental) and a few years later expenses related to 2 trail horses (currently 15k / yr).

Mental dilemma has nothing to do with work issues - more than ready to depart that world. It's all about being sure the numbers work and the transition from building wealth to spending wealth without risking desired lifestyle. FIRECALC and ORP make me feel good though for some reason I need more. Can you give me that little extra nudge into the wonderful world of FIRE?

Thanks so much for hearing us out.

 

[COcheesehead]

The 10 most common retirement questions answered. This is a fairly decent blog.

https://www.theretirementmanifesto.com/10-most-common-retirement-questions-answered/

 

[Dtail]

Using Firecalc, did you use 150k for the first 10 years, plus did you use 40 years as your number of retirement years?

 

[Arc]

Using Firecalc, did you use 150k for the first 10 years, plus did you use 40 years as your number of retirement years?

Spent a lot of time using Investigate tab - spending level - at 95% - using both Constant Spending Rate and Bernicke RRP. That's how I arrived at the range. Does that make sense?

 

[COcheesehead]

Spent a lot of time using Investigate tab - spending level - at 95% - using both Constant Spending Rate and Bernicke RRP. That's how I arrived at the range. Does that make sense?

Play with the random returns option as well. That will give you a dose of reality regarding sequence of returns risk.

 

[WyomingLife]

Play with the random returns option as well. That will give you a dose of reality regarding sequence of returns risk.

Thanks for that advice, COcheesehead. For the "random performance" option in FIRECalc, what values do you recommend be used for "mean total portfolio return" and "variability"? I don't have a good sense of what those should be to validly capture historic market swings.

Again, thanks so much.

 

[VanWinkle]

I think you are doing very well saving and I commend your DW on her joining the reserves at 45.

I think you may have to rethink the first 10 years as your expenses may stress your accounts until SS kicks in which should be a little later than 62 if possible.

As a cost of living adjusted annuity, Social Security should be thought of as longevity Insurance and not taken early unless necessary due to finances or health.

Best to you and DW, I am hopeful you can make it work sooner than later.

VW

 

[COcheesehead]

Thanks for that advice, COcheesehead. For the "random performance" option in FIRECalc, what values do you recommend be used for "mean total portfolio return" and "variability"? I don't have a good sense of what those should be to validly capture historic market swings.

Again, thanks so much.

It all depends on your allocation. The mean return for a 60/40 is about 6-7% and the market can bounce around easily 10% or more. The more variability the more you want to lose your lunch with the results.

 

[COcheesehead]

Thanks for that advice, COcheesehead. For the "random performance" option in FIRECalc, what values do you recommend be used for "mean total portfolio return" and "variability"? I don't have a good sense of what those should be to validly capture historic market swings.

Again, thanks so much.

One of the biggest mistakes people can make is expecting a linear return on the portfolio. I just heard the other day that the market has only achieved its "average" return only 6 times. The rest of the results bounce all over the place.

So when people plug a static 5%, 6%, etc return into a spreadsheet, that is not reality.

 

[COcheesehead]

One more comment regarding FireCalc and Monte Carlo analysis in general. I heard it on a really good podcast I listen to. The results are based on many, many random scenarios, but we all only have one chance. Sorta makes you sit up and take notice of things like sequence of returns.

 

[ivinsfan]

I don't know what you pay for HI now, but I suggest you read a few of the threads pertaining to cost of HI coverage after 65, it can add up fast and your cost might not actually go down.

 

[WyomingLife]

One more comment regarding FireCalc and Monte Carlo analysis in general. I heard it on a really good podcast I listen to. The results are based on many, many random scenarios, but we all only have one chance. Sorta makes you sit up and take notice of things like sequence of returns.

Thank you so much for your comments above.

 

[RioIndy]

I had completely missed the "Investigate" tab in Firecalc until reading this thread!

OP I would say that with your nest egg being nearly $3M it's hard to imagine you not having enough so long as you have a reasonable asset-allocation. And though your yearly expenses are high at 120-150K but you say that includes "lots of discretionary dollars there to work with in a pinch", means you can easily cut back during market drops.

 

[MBAustin]

I concur that if you really have significant discretionary dollars built in for the first 10 years and are willing to cut back a lot on non-essentials if sequence-of-returns looks like an issue, you should be good to go. Or you could pick up some PT w*rk for a few years if needed.

If you are ready to leave the full-time w*rk world, pick a date and go for it. I would personally suggest planning something big soon after to give you something to point towards - a long trip, major home project, whatever. We took a Panama Canal cruise, my sister is planning a Canadian Rockies train trip for this summer right after she retires.

Keep us posted!