Am I Ready?

[beachfire]

Mentally ready to retire from Mega Corp. Wrestling with the numbers. Have run FIRECalc and several other calculators. Any thoughts on how I should view financial readiness. Here are the numbers.

My wife and I are 54. Kids are out of the house and self sufficient.

Projected Annual Expenses = $100k (includes taxes and about $15k in discretionary spending that we can dial back on when needed).

No debt

$1.5m in qualified accts
$1.4m in taxable acts

Thoughts? Thanks for any feedback

 

[bingybear]

Have run FIRECalc and several other calculators.

What were the results from the calculators?
What did you use for health care cost, health insurance cost and long term care? Are these all in your expenses already?

Just a hand wave of the 4% rule... you look OK. I would expect no failures in FireCalc

 

[beachfire]

Firecalc was ok. I have health insurance accounted for in my budget ($18k / yr).

 

[2017ish]

Firecalc was ok. I have health insurance accounted for in my budget ($18k / yr).

Is that a sound number given your location?

For us, we would expect to spend more than that just for premiums if we go with an ACA-compliant plan. Other locations have different results.

 

[Whisper66]

My view is you are easily financially ready.........

Using Vanguard's Longevity Calculator (see link on front page of FIRECalc: A different kind of retirement calculator), the chances of you and your wife both living:
40 yrs = 1.1% (ie...7% x 16%)
35 yrs = 7.5% (ie...22% x 34%)
So for the sake of conservatism, run firecalc for 40 yrs.
With 1.9M of assets and ignoring any social security or other pension income (since you don't mention either):
Spending rate of 100k has 99% chance of success (money outlasts you)
Spending rate of 106k has 95% chance of success
I'd read those as excellent numbers for very conservative assumptions (very long lived, no decrease in spend rate, no social security).
Beyond those numbers, I see in other posts that you have a reasonably conservative asset allocation (60/40 or so) with the philosophy of low cost, simple investing. You also have been looking at your expenses closely so assume you have a good handle on those. You also have room to cut back expenses if you wish. Those are all key points I look for.

My only caveat is to ensure you know what you will do with your investments if we take a market downturn ... assuming you calmly ride it out and not sell out at a low point and thus bitten by the market sequence return risk, should be "good to go". Congrats!

 

[Blue Collar Guy]

Run to the retirement office. Your good. Enjoy your well earned retirement .

 

[imoldernu]

I hardly ever give advice, except when a young person under age 55 asks the question "should I...", and the answer is, if you can even consider retiring, "Do It".
If it doesn't work out, there's time to regroup.

It doesn't work in the other direction...

 

[freedomatlast]

Your numbers and circumstances are somewhat similar to mine and although you are a few years younger, I think you are good to go.

Any SS and/or pensions coming in as reinforcements in the years ahead?

 

[rayinpenn]

1. If you own a home have you included funds for a new roof etc. ?
2. Are your expenditures itemized and actually what goes out the door?

For example we run our household and live comfortably on my $120k salary. But that salary has all kinds of deductions like 401k savings, stock purchase plan etc.. there's also been a ton of expenses for the recent college graduate above and beyond tuition .. many will be gone (lucky to have landed a job) We actually spend around $7k each month and that dropping. If you think it is close make sure your budget is rock solid. Easy to do just look at the checkbook and track spending carefully.

I've agreed to a 3 day work week schedule going forward - Ive got enough but just like them paying my health costs.

 

[Koolau]

Have you planned any back-ups to your main plan? You mentioned cutting back as much as 15K. Do you know what that looks like? (Less travel, fewer meals out, downsize house, replace cars less often, etc.) Just a thought since YMMV.

 

[pb4uski]

Your initial WR is 3.4%... (100k/2.9 million) and I assume that you have SS on top of that so you are golden.... especially given that 15% of your expenses are discretionary.... what are you waiting for?

We retired at 56 with similar spending and less assets.

How much do you have in the $100k for taxes? It may be too much. Have you done a post-retirement tax calculation using TurboTax or Taxcaster or similar tool? Our federal taxes last year were close to nil and have averaged about 7% of income (including discretionary Roth conversions)... before Roth conversions they are nil every year.

 

[beachfire]

Thanks for all the feedback. Very helpful. We are expecting SS probably at age 67. I will take a closer look at post retirement taxes. I had a fairly small number in for taxes (10%). Also need to look at my health care number. But based on what I have seen on health Sherpa my $18k for premiums seems right. Very thankful to have a forum like this to get feedback from.

 

[euro]

I hardly ever give advice, except when a young person under age 55 asks the question "should I...", and the answer is, if you can even consider retiring, "Do It".
If it doesn't work out, there's time to regroup.

It doesn't work in the other direction...

Very good advice!

Yes, if your expense numbers are accurate then you are good to go!

 

[mrfeh]

Just a hand wave of the 4% rule... you look OK.

The 4% rule doesn't apply to a 54 year old.

For the OP - unless you have health insurance covered by a former employer, I'd rather see an initial withdrawal rate of 3% than where you are.

 

[pb4uski]

He is 3.4% based on $100k expenses and 2.9% based on essential expenses (total less $15k in discretionary) and both of those numbers ignore SS so his ultimate WR with SS would be even lower. That is low enough that I would be comfortable.

 

[Shanky]

HC at 18K seems low. Our premiums are slightly higher but that is before any HC spending on deductibles, copays etc. Overall you should be able to afford more for HC if needed with your current savings.

 

[pb4uski]

$18k is much more than our experience over the last 5 years but HI varies widely depending on where you live. We have no chronic conditions and use health services very little so our deductibles are modest... generally less than $3k a year.