45 and FIREcalc gives 78% success

[Sk08]

Again thanks for all the responses

Since adding SS to the FIREcalc was suggested a few times, thought we would add a rough estimate.
Using the amount we have in our portfolio today, it now shows 95% success.

Future vehicle replacement is something that we haven't put anything aside for, we were simply adding what we considered a reasonable car payment would be into our investments each month. Always thought that when the time came we would just sell some funds to pay for it. Not sure what is the best way to factor future replacement into the mix?
We added 2 future withdraws to FIREcalc using todays portfolio value, with a purchase amount larger than we hope to pay, just to be on the safe side, and it drops the SS figure from 95% down to 90%, and non SS figure from 87% down to 77%.

 

[pb4uski]

What I did for auto replacement was to just include depreciation as part of our spending... so if we spend $35k on a car and keep it 10 years then I add $3,500 to my annual spending to cover car replacements... it all evens out.

For the OP, I think that he will find that if he manages his income for good ACA subsidies that his needed spending will be more towards $3,100/month than $5,000/month and that his taxes will be negligible.

Are you including 75% of SS or all SS? Also, you probably need to use their tool to look at what your SS is if you stop working now... the amount shown on your SS statement presumes that you will continue working and earning what you earned last year.

Lots of moving parts... so count carefully.

 

[COcheesehead]

For future expenses like cars, house repairs, etc, I take a guess at a lump sum needed and divide by the years out from incurring the expense. So for cars I figure I’ll need $25,000 plus our trade for a nice car, so I add $5000/year into the budget assuming we’ll trade out in five years and then repeat. At some point, you’ll buy your last car so these come to an end. I do the same for all the other lumpy expenses. Fidelity’s planner has a good mechanism for planning for these with start and stop dates. For FireCalc, they have off chart expense boxes that you can use for these sporadic expenses.

 

[viking111]

True. It appears the composite CPI on Firecalc is around 3%, but Fidelity also uses a higher inflation rate (4.9%?) for medical.

Yes, 4.9 for medical. So that's a good thing. I don't really adjust for inflation every year but if I need medical I know they will adjust. So it's a nice cushion.

 

[Sk08]

Thanks for how you guys estimate future expenses. Seems nice and simple.

For the SS figure we used the tool for future earnings and entered 0

 

[teetee]

I skipped a lot of the posts in the middle but to me there is enough uncertainty that makes me feel I need to learn to like my job for the next 10yrs before feeling absolutely sure I had enough to retire.

With the house you have over 2m likely now so plus the 10 more yrs of income and consistent investing it would be a more comfortable retirement. You can still travel or have fun vacations, just have to adjust the emotion and as some said, do the retirement gradually.

 

[Retired Expat]

OP said 5k per month plus medical insurance so let’s call that 70k per year. Assuming you make it to 85 that is a 40 year retirement Quick back of envelope calc says you need 2.8 million saved. Sorry!

 

[CincyDave]

OP said 5k per month plus medical insurance so let’s call that 70k per year. Assuming you make it to 85 that is a 40 year retirement Quick back of envelope calc says you need 2.8 million saved. Sorry!

That works out to a 2.5% withdrawal rate which seems quite conservative. At 4% WR he would need $1.75M.

 

[karen1972]

I retired at 43 w/ a 85% success rate. The advise on here was not to, but for me my health was more important that the need to live in a fancy house which could be downsized to cover the difference.

1. I used https://ssa.tools/calculator.html, no future earnings and then took a 25% haircut.

2. I factored in $18k/yr for health care for the two of us assuming we might not get ACA subsidies or they may go away. When we get on Medicare, we will hopefully have a sizeable decrease in expenses.

3. I took all my "replacement items" appliances, cars, furniture, etc and created a spreadsheet with avg useful life, replacement cost and then calculated out a yearly run rate to put into the budget that for us is $4800/yr

4. we have about 20% discretionary in there that can easy be cut and another 10 if we have to squeeze.

The one thing I did not factor correctly was taxes as I hadn't planned to do as many Roth conversions but then with the market having such great returns, my taxable was growing way too fast. Given your % of tax deferred its something to consider. We also live in a new state now which added about 3% to our state tax bill.

With kids. Added expenses (Food grows as the kids grow, car/ins when they turn 16, activities especially if they get involved in traveling sports teams or you want to invest in speciality camps for coding/theater/etc.) And beyond college, do you want to put away extra for a wedding, grandkids, travel (as kids no longer live nearby).

I believe far more people fail because their budget numbers didn't factor in a myriad of things rather than the 85 vs 95% since as you can see its easy to waffle between those two numbers. My firecalc 85-90% is only a delta of $30k, 85-95% is $130k still not that big of a #...way worse to be off by $5k in the budget YoY.

 

[pb4uski]

.... The one thing I did not factor correctly was taxes as I hadn't planned to do as many Roth conversions but then with the market having such great returns, my taxable was growing way too fast. Given your % of tax deferred its something to consider. ...

I think the OP's tax-deferred is nil... mostly taxable with some Roth (tax-free).

... investments as of today $1.2M Taxable, $400k Roth. With 25k cash in savings. ...

 

[Sk08]

We went ahead and reread all the replies, and want to thank you all again. Some great opinions/suggestions.

We decided to do just plan on reevaluating in a year. Were pretty confident we could make it work now, but would feel more comfortable with a little bigger cushion.

 

[WhenIsItTime]

We went ahead and reread all the replies, and want to thank you all again. Some great opinions/suggestions.

We decided to do just plan on reevaluating in a year. Were pretty confident we could make it work now, but would feel more comfortable with a little bigger cushion.

Two thoughts for you:

1) I kept working until my yearly income, didn't change my retirement confidence or lifestyle. I think earning $3k and using ER healthcare is still very meaningful to you vs. immediately withdrawing $5k per month. In other words, hopefully drinding it out for another year or two will really help the confidence factor.

2) My first two full years of retirement, I have had to pay the full out of pocket limit for healthcare for myself. I was perfectly healthy prior. Things are under control health wise, which is stressful enough. Thankful finances are zero stress even in a bit of down market. Could have been a furnace, car, you never know. I did know if I quit working, I never wanted to go back.

 

[eyenitnoy]

Ages in household, 45, 44, and 12

Would love to get opinions about what % success rate from FIREcalc is enough to comfortably pull the plug.

A few details

No debt, paid for house with siding and roof replaced 3 years ago with steel that has 50 year non prorated warranty.
Vehicles are in good shape, but over 10 years old, so a big unknown of when and how much will be needed for replacement.

80% mutual funds, 20% bonds,
investments as of today $1.2M Taxable, $400k Roth. With 25k cash in savings.

Current take home is $3100 per month, employer pays for health insurance.
Plan on withdrawing $5000 per month, and need to pay for health insurance.

Wife stay's home, so just need to figure out when I can comfortably stop working. I feel I'm close enough that if something happens at work I will put my notice in, I actually find myself secretly hoping for a reason... perhaps they will close and relocate us. It was proposed a few years ago, but didn't get approved. I was not happy about it back then, but as crazy as it sounds would be happy if it happened now. Wouldn't get any severance if it happened, but would be a good and easy reason to leave.

Thanks for your opinions, I was pretty excited when I stumbled across this forum.

78% risk is fine IF you factor the following to points:

1) Most of these models use 30 years. If you live longer than 30 years, the model is no longer valid. Knowing your expected life expectancy is helpful. (I would just use the social security table that gives good information.)

2) Is your draw ($5,000 a month or whatever your number is) REALLY going to be the inflation adjusted draw? If you are wrong on this, everything collapses. Have you factored in federal, state, local, and property taxes? Have you factored in your social security income, and it's tax parameters including the cost of Medicare which is income sensitive? Have you factored in periodic predictable (appliances, cars, education expenses, new phones, new this, new that) and periodic unpredictable (you face an unexpected lawsuit, suffer identity theft, etc.) expenses in the budget? You need to amortize all of this carefully and factor that into the monthly draw. Many people screw up their monthly draw and underestimate it because they just forget about expenses that hit every ten years or so. A ten year amortized expense of $10,000 bumps up the monthly draw by $83-that is a 1.66% increase on your $5,000 a month number, more than enough to alter that 78% probability.

2) Have you factored in sequence risk? If you look at Monte Carlo simulations you will see a lot of the years that fail do so because of big drops in the initial years of retirement. Sequence risk needs to be managed. (Like a plan to go back to work if the market stumbles or a variable draw rate) Inflation is starting to rear it's ugly head, so sequence of return risk is very real.

from investopedia:

Sequence risk is the danger that the timing of withdrawals from a retirement account will have a negative impact on the overall rate of return available to the investor. This can have a significant impact on a retiree who depends on the income from a lifetime of investing and is no longer contributing new capital that could offset losses. Sequence risk is also called sequence-of-returns risk.

If these three factors are properly modelled, I would not be hung up on the 78%.
Life is a risk, plan, then roll the dice.

 

[pc95]

Ages in household, 45, 44, and 12

Would love to get opinions about what % success rate from FIREcalc is enough to comfortably pull the plug.

A few details

No debt, paid for house with siding and roof replaced 3 years ago with steel that has 50 year non prorated warranty.
Vehicles are in good shape, but over 10 years old, so a big unknown of when and how much will be needed for replacement.

80% mutual funds, 20% bonds,
investments as of today $1.2M Taxable, $400k Roth. With 25k cash in savings.

Current take home is $3100 per month, employer pays for health insurance.
Plan on withdrawing $5000 per month, and need to pay for health insurance.

Wife stay's home, so just need to figure out when I can comfortably stop working. I feel I'm close enough that if something happens at work I will put my notice in, I actually find myself secretly hoping for a reason... perhaps they will close and relocate us. It was proposed a few years ago, but didn't get approved. I was not happy about it back then, but as crazy as it sounds would be happy if it happened now. Wouldn't get any severance if it happened, but would be a good and easy reason to leave.

Thanks for your opinions, I was pretty excited when I stumbled across this forum.

With a 12 yro, imo I wouldn't want to stop working until he is out of high school at least.

 

[Dtail]

78% risk is fine IF you factor the following to points:

1) Most of these models use 30 years. If you live longer than 30 years, the model is no longer valid. Knowing your expected life expectancy is helpful. (I would just use the social security table that gives good information.)

2) Is your draw ($5,000 a month or whatever your number is) REALLY going to be the inflation adjusted draw? If you are wrong on this, everything collapses. Have you factored in federal, state, local, and property taxes? Have you factored in your social security income, and it's tax parameters including the cost of Medicare which is income sensitive? Have you factored in periodic predictable (appliances, cars, education expenses, new phones, new this, new that) and periodic unpredictable (you face an unexpected lawsuit, suffer identity theft, etc.) expenses in the budget? You need to amortize all of this carefully and factor that into the monthly draw. Many people screw up their monthly draw and underestimate it because they just forget about expenses that hit every ten years or so. A ten year amortized expense of $10,000 bumps up the monthly draw by $83-that is a 1.66% increase on your $5,000 a month number, more than enough to alter that 78% probability.

2) Have you factored in sequence risk? If you look at Monte Carlo simulations you will see a lot of the years that fail do so because of big drops in the initial years of retirement. Sequence risk needs to be managed. (Like a plan to go back to work if the market stumbles or a variable draw rate) Inflation is starting to rear it's ugly head, so sequence of return risk is very real.

from investopedia:

Sequence risk is the danger that the timing of withdrawals from a retirement account will have a negative impact on the overall rate of return available to the investor. This can have a significant impact on a retiree who depends on the income from a lifetime of investing and is no longer contributing new capital that could offset losses. Sequence risk is also called sequence-of-returns risk.

If these three factors are properly modelled, I would not be hung up on the 78%.
Life is a risk, plan, then roll the dice.

On point #2, if one uses 5k monthly (60k yearly) expenses on Firecalc, then the calculator is inflation weighting that expense for future years, so de facto the 78% success rate takes that into account.

 

[Sunset]

We went ahead and reread all the replies, and want to thank you all again. Some great opinions/suggestions.

We decided to do just plan on reevaluating in a year. Were pretty confident we could make it work now, but would feel more comfortable with a little bigger cushion.

I felt safe at 95% success rate.

I found tracking my spending was extremely reassuring once I finally started to do it.
I literally track every penny I spend, takes about 1 minute of time with my phone when I have an expense.
One year of use won't include the lumpy expenses: new car, furnace, water heater, A/C, painting house, health ins./ new carpeting/ furniture / tv / computer , etc.

People tend to be bad at knowing how much various things cost and forget about the extra money they really spend other than the pay check.
I use spending tracker on my phone as it's handy and easy and FREE.

 

[Gumby]

The earlier posters have given you some great advice and resources. I can't add anything more in that regard, but I will tell you how I made my decision about when to retire.

To start, let me say that I am and always have been a big fan of retiring early. That's why I've been a member of the board for 16 years, with a couple lurking years before that. And now that I'm retired, I love it enormously. But one of the things that was non-negotiable for the young wife and me was that our lifestyle, at least financially, must remain the same or improve after retirement. So we sucked it up and worked a few more years until we were qualified for pensions and retiree health benefits, which now, with social security, pays our regular expenses. We also continued to squirrel money away to buttress our portfolio. And now we don't have to worry about money at all. We spend as much as we ever have and will spend more once international travel becomes convenient again.

By contrast, if leaving my job a few years earlier meant I had to then stay home, drastically cut spending and worry continuously about running out of funds, I probably would not enjoy retirement at all.