New and uncertain...

[Smilinggirl]

Hi everyone. I'm new and think about retiring a lot, but numbers don't come naturally to me the way they do to so many of you, so I would love some feedback. Here are some basics about me:

I'm 57. I own my home, which is worth about 430k. It would be reasonable to downsize to a home closer to 300-330k in my area as I age if I had to. My base budget is 42k per year. That includes money set aside for home/yard maintenance, car repairs/payment, funding an IRA, a little vacationing etc., but I'm hoping to travel more, so 45k is probably more realistic. I will continue to have 42k (not taxable) in income for the next three years without working, then I will have 30k per year (not taxable) for another 10 years after that.

If I don't work at all, I qualify for Medicaid from my state since my income is not taxable. If I can find a part time job bringing in about 1500 per month, I will be able to get silver plan insurance through ACA for roughly 350 month. I'd rather do that if possible, but for now I'm just playing out various scenarios. If I opt out of Medicaid and pay privately for a silver plan, it would be about 1k month. Insurance is one of my biggest concerns.

I currently have 20k in savings, 50k in a taxable account, 360k in IRAs (mostly traditional) and 30k in a 401k. For now, I plan to wait until I'm 70 to draw SS. This is another piece of info I need to do more research on, but for now I'm planning on about 1k month since I'd rather err on the side of being conservative. By the time I'm 70, my vacationing will probably be closer to home, so probably won't be as expensive.

I've used different online calculators to anticipate the likelihood of making this work, but welcome all input from the forum since this doesn't come easily to me. I know I'm kind of all over the place with my thoughts right now. Thankfully I have a secure job right now, so I can afford to start narrowing down what I want to do moving forward.

Thank you in advance for any guidance you can offer!

 

[1242Vintage]

Welcome!!!

I’m the same age and retired 18 months ago, right as the pandemic shut everything down. Strange and uncertain times for sure.

What I’m reading is your budget/expenses now until age 60 equals your income. Then from age 60 to 70 income drops and you’ll need to draw on what you’ve saved to make up the difference. Then beginning at age 70 and beyond you’ll rely on a combination of social security plus savings. Is that accurate?

Recommend as a next step you go through the process with Social Security to get an accurate estimate. They will calc it for you and give a report that shows what you can draw beginning at various ages. I did that and it was very helpful and reassuring. Then you can confidently lay out financial scenarios (income vs expenditures) based on timeframes (now until 60, 60-70, 70 and beyond), based on what you have saved, income and expenses.

Also FYI, cost of healthcare is also our biggest expense and concern for the future at over $2k a month now for wife and I.

 

[CaptTom]

First, I want to say that your grasp of basic mathematics is probably well above average. You've identified all the important variables and have done all the right calculations.

Beside health care, your biggest issue is probably going to be inflation. We've been very fortunate for the past five years or so that inflation has been minimal. Depending on who you ask, that may or may not continue. Some are predicting massive inflation, but there are always those who want to grab attention with dire headlines, so it's hard to know what's actually likely. We know there's already been quite a bump this year.

If you haven't already seen it, I like the calculator at ssa.tools, which gives you a step-by-step way to get the numbers 1242Vintage recommends, above.

Final thought: Don't be intimidated by some of the high rollers on this board. It seems they've sort of taken over from the old guard of penny pinchers who used to hang out here. There are still a few of us left on "shoestring retirements." By that I mean, we retired when it was possible to do so comfortably, not after we'd ensured a life of luxury and a 7-figure legacy.

 

[Romer]

Welcome, by your post I am assuming you are single without kids as that would change the equation

It would seem you have a grasp on expenses and your assets.

It comes down to a personal decision of what kind of retirement you want and what you want to do. What I mean by that is if there are hobbies you want to get into, will they age to your expenses? Do you want to travel more Internationally? Do you have money set aside for major Home repairs like a Furnace? Do you have money set aside for a car or major repairs to one?

These are just some examples of questions that may or may not be relevant to you. My suggestion is that you list all the things you can think of from an expense or desirement point of view and when you feel you have everything covered and considering inflation then that is when I would feel good to go.

 

[Closet_Gamer]

Congrats on thinking this through so diligently.

I'd suggest building a specific, line-by-line budget include set asides for some of the considerations mentioned like home repairs, etc.

My suspicion is that you will want to draw social security sooner so as not to eat into your nest egg. Ensure that you have thought through long term care insurance. You've got a solid nest egg but would find it difficult to fund a long nursing home stay through that nest egg.

You will find a wealth of knowledge here.

 

[ivinsfan]

Couple questions if you don't mind answering. Your comment about non taxable income make me wonder if you have been through a divorce.
You also mention your SS will be about 1000 at age 70. The reason this matters is that you might be eligible for a spousal SS that potentially could come online before age 70 without an age related deduction.

 

[OldShooter]

... I will continue to have 42k (not taxable) in income for the next three years without working, then I will have 30k per year (not taxable) for another 10 years after that. ...

This is a big part of your plan. How reliable is the payer and what would be your plan if all the money does not materialize?

 

[aaronc879]

I would suggest doing ROTH conversions every year. That would make it so you don't need earned income to qualify for the ACA. Do enough in conversions to get to the minimum to qualify for ACA which is around $18K if your state expanded Medicare. Do that every year until you qualify for Medicare. Seems like you should be good to go if you do that.

 

[Morgan22]

If I don't work at all, I qualify for Medicaid from my state since my income is not taxable. If I can find a part time job bringing in about 1500 per month, I will be able to get silver plan insurance through ACA for roughly 350 month. I'd rather do that if possible, but for now I'm just playing out various scenarios. If I opt out of Medicaid and pay privately for a silver plan, it would be about 1k month. Insurance is one of my biggest concerns.

If your income is 1500 per month I don't think you would need to pay 350 per month for a silver plan. I believe current law says that you will only have to pay about 1 - 2% of your income towards aca health ins. since your income would only be a little over 150% of FPL. (current law expires at the end of 2022). Just something to look into.

 

[Dtail]

I would suggest doing ROTH conversions every year. That would make it so you don't need earned income to qualify for the ACA. Do enough in conversions to get to the minimum to qualify for ACA which is around $18K if your state expanded Medicare. Do that every year until you qualify for Medicare. Seems like you should be good to go if you do that.

Agree that you should do Roth conversions.
At least do them until 59.5 years old in order to qualify for an ACA plan.
At 59.5, you can continue to do Roth conversions and/or start withdrawing from your tIRA and you can use those monies in a Taxable account to generate non taxable capital (hopefully) gains.

Check out Healthsherpa.com/Healthcare.gov to get some actual numbers on ACA plans.

As mentioned previously, is your non taxable income protected/safe?

 

[Out-to-Lunch]

Welcome to E-R!

 

[Edwalelah]

Hi! Welcome to forum!

 

[Surewhitey]

My mom & stepdad live on SS only, so anything is possible. If your next 13 years income is guaranteed, you should be ok, but not great. I'm typically the positive voice in the room, but you seem to have the minimum I'd want to have if I was single and lived simply.

I agree on the Roth conversions as there would be little to no tax on these likely. ACA will be your friend as long as it lasts. Simplifying the home expenses and shoring up the balance sheet makes sense to me. $300k seems high too, but I don't know your area.

Food inflation is really noticeable right now to me and is our biggest expense. Other inflation items are "extras" like cars, building supplies, etc. so may not affect you as much. Our #2 expense is insurances and expecting increases on this too.

 

[Koolau]

If your house is paid off, you have some serious money as a back up. I'm guessing you don't WANT to move - especially to a far-off location. BUT, if worse comes to worst, there are decent homes in very low cost of living areas for 100K or less. That could tide you over for quite a while.

More details would help us critique your situation, but I think you CAN make it work. You may have to be spending-flexible and be willing to do some pick-up w*rk from time to time. I agree that inflation may be your biggest enemy - sounds like you've figured how to deal with health care.

Welcome to the forum. Check back often.