Anyone FIRE on less than a million?

[teejayevans]

If this was 2014, all my remaining debt was paid off, and I had a million bucks invested, then I would just barely feel comfortable ER'ing. But I would probably keep working "just one more year" to make sure I have enough wiggle room for the decades ahead.
I say 2014 because that is when the government is generous enough to give me free/extremely cheap health insurance.
A million would get you $30,000-40,000 a year in spending. If that meets your projected expense needs then it should be fine.

If you wanted to move it up:
7/1/12, do the cobra thing for 18 months (which you have to do anyway), then 1/1/14 apply for obamacare.
TJ

 

[Onward]

Medicaid is managed state by state. In ours, you can't have more then $2k in assets.

So it sounds like in many/most states FIREees won't get any health care subsidies. If premiums rise as a result of the new laws, we will be worse off in 2014 than we are now.

 

[ERD50]

I just ran the link for a family of four. At $95K a year the credit is zero but at $90K a year the credit is over $6.5K. Wow, talk about effective marginal tax rate increases and a disincentive to earn more.

Has there ever been a time when the marginal tax rate was above 100%? Because that is what this represents. $5K more income and your taxes go up $6.5K.

Unfortunately, this may be lost on some people. I've heard from more than one person who thought getting 'bumped into the next bracket' thought that meant your take home pay went down, rather than the additional $ earned above that point got taxed at the higher rate.

-ERD50

 

[FIREd]

So it sounds like in many/most states FIREees won't get any health care subsidies. If premiums rise as a result of the new laws, we will be worse off in 2014 than we are now.

FIREees may not qualify for Medicaid, but if their income stays below 400% of poverty levels, they could still qualify for subsidies (correct me if I'm wrong).

 

[brewer12345]

FIREees may not qualify for Medicaid, but if their income stays below 400% of poverty levels, they could still qualify for subsidies (correct me if I'm wrong).

That is my understanding, but since I do not believe that the rules to implement the law have been written, I would not count on anything just yet.

 

[MasterBlaster]

Just curious if anyone has successfully FIRE'd on less than $1Million and DID NOT have a defined benefit pension plan from their employer.

I ER'd at age 29 with $59, a case of lentils, a taste for buzzard jerky, and a plan to use the system to my advantage.

I keep my livin' expenses low so that I don't have to work for the man. I'm not gonna let some corporation take my life away. Nosiree ! Between welfare and food stamps I git what they owe me.

Workin' is for suckers !

Stop workin' and start livin now ! The good life awaits you !

 

[TooFrugal]

If you wanted to move it up:
7/1/12, do the cobra thing for 18 months (which you have to do anyway), then 1/1/14 apply for obamacare.

I have thought of that, too. Not for me but my husband has a corporate job and that is where we get our health insurance. But I do wonder if the new health care law might be repealed at some point in the future. We have a number of years we have to cover yet before we could get Medicare. We have more of a concern with health insurance about his early retiring from corporate life than we do over the money part since we have a small business that brings in an income.

 

[kevink]

No, the asset test for "regular" Medicaid does not apply to the new health insurance plan. Rather than rehash everything here's the link to a long thread about this I started over on the Raddr forum:

Raddr's Early Retirement and Financial Strategy Board :: View topic - radical ER health insurance strategies

Agreed much could change between now and 2014, but the government is just not likely to be concerned with the miniscule % of the population that is ER'd, living off of substantial assets but with low taxable income, etc. Given the insanity of the system, gaming it seems like a moral imperative

 

[BigNick]

How is everyone handling health insurance?

1. Being in Europe.
2. Having an employer who extends beyond-the-basics cover to retirees for a 1% contribution. I could move to the US with my pension and be fully covered for life. I cannot justify this, but I'm not going to refuse it...

 

[Onward]

a long thread about this I started over on the Raddr forum

Interesting and helpful. Thanks.

 

[Keim]

MasterBlaster:

I really don't appreciate your posting pictures of my house and car. Please be more sensitive in the future.

Just kidding.

Actually that car is newer than mine.

 

[FUEGO]

If you wanted to move it up:
7/1/12, do the cobra thing for 18 months (which you have to do anyway), then 1/1/14 apply for obamacare.
TJ

I have considered exactly that! We won't have a million in the bank in 1.5 years. In 4 years? Maybe.

 

[FUEGO]

Is there no asset test for Medicaid? You qualify strictly on the previous year's income, regardless of whether it is earned or passive?

As others have said, no asset test (as of now) for medicaid eligibility with the new law. Income up to 133% Fed poverty level qualifies for medicaid (free insurance). Above that you pay some. I just checked family of 4, and at $44000 in income, I would pay $2500 or so for health insurance. And get an $8500 credit to pay for the rest of the premium.

I'll say that this new health insurance "freebie" took us a lot closer to FIRE. And we should be FIRE-ready a year or two after the 2014 start date, so we can see how it works and how to maximize our gaming of this freebie.

I think I might have to have a couple more babies to make sure I stay nice and close to the Federal Poverty Level. Gotta go, duty calls!

 

[NW-Bound]

Just curious if anyone has successfully FIRE'd on less than $1Million and DID NOT have a defined benefit pension plan from their employer.

I am sure it is possible, but it's too tough!

We have quite a bit more than that, but with no pension, no health care benefits, the expenses of two houses and a newly added thirsty RV, I am still w*rking part-time.

By the way, the part-time work also keeps me from engaging in more costly leisure activities. What ya do all day indeed!

 

[ncaraway]

We plan to ER with about $500k in savings. The key is that we won't be in the US, but in Taiwan, which has national health insurance. That will cost us (me and wife) about $100/month. Our in-laws will provide us with a modest condo. We've budgeted about $15-20k/year expenses. I will probably continue to do some part-time consulting for a few years just to be safe financially. We already live simply and frugally, so this won't be a huge step down for us as far as lifestyle goes. I don't see how we could ER in the US given the cost of health care.

 

[TooFrugal]

I don't see how we could ER in the US given the cost of health care.

It isn't just the cost but also even qualifying, at least for now. Supposedly that will change in 2014.

 

[mouschi]

I have not, but hopefully will have in the next 5-10 years. I plan on doing this through real estate. Rental income at perhaps $3,000/mo + existing residuals combined with low bills.

 

[SecondCor521]

I don't know if I will RE -- probably won't -- but my spreadsheet right now is set up for me to declare "FI" at about 45 1/3 with ~$600K in FIRE stash and annual expenses of ~$16K. No DB plan from the employer. Health insurance would be a high deductible catastrophic policy from Blue Cross at ~$59 / month.

Some of the above is probably stretching things a bit, but it is "possible" and it helps survive the workplace to have some hope.

2Cor521

 

[BigNick]

It isn't just the cost but also even qualifying, at least for now. Supposedly that will change in 2014.

It will be very interesting to see if a possible change of majorities in 2010, or even of President in 2012, will result is a reversal of this, now that quite a lot of voters who may have been against Obamacare will have started to plan their retirement on the basis of its going ahead.

 

[ziggy29]

It will be very interesting to see if a possible change of majorities in 2010, or even of President in 2012, will result is a reversal of this, now that quite a lot of voters who may have been against Obamacare will have started to plan their retirement on the basis of its going ahead.

The thing is, many insurers and corporations are already making changes -- mostly watering down their own plans or canceling some of them -- in preparation for the event, and don't expect them to restore everything even if many of the provisions were repealed. In that sense, we may be on the road to no return.

 

[nun]

Talking about health care subsidies, it looks like you would have to make less than 400% of the poverty level to qualify. For a couple, that would be roughly $50K / per year. Our planned retirement income would be just above that although, in bad market years, we may qualify. That could help soften the blow.

I found this nifty simulator yesterday that shows what impact Obamacare could have based on income:

Health Reform Subsidy Calculator

Healthcare is the big variable in my planning. If premiums continue to increase by double digit %ages each year I'm screwed, but I have options. I live in MA and the state is starting to get a handle on things. If my income is under 3x poverty (~$32k/year) my monthly premiums are $150. Over that income I can get a plan with a $2000 deductible and $5000 annual max out of pocket cost for $300 a month. If I stay in my job until I'm 55 I can get MA state healthcare for the regular premium (currently $100/month). If things get really bad I can always go back to the UK (I'm a US/UK dual citizen) and get health care from the NHS. All residents of the UK get health care "free at the point of service".

 

[scrabbler1]

According to that health reform subsidy calculator, I would receive a subsidy of about 80% of my health insurance premiums, a pretty hefty amount even for a single adult.

As Nun wrote above, if my HI premiums rise at double-digit rates (although a mere 10% would be most welcome after 2010's 20% increase), then I'm screwed. Well, not really screwed, just put in a tough spot until I qualify for Medicare in 18 years.

HI in 2010 overtook my monthly co-op maintenance costs (i.e. property taxes, general upkeep, co-op's underlying mortgage P&I) as my #1 expense. A few more 20% annual increases in HI and this FIRE thing is going to be tougher than I expected. I had budgeted for annual HI increases in the 7%-10% range, not 20%.

 

[W2R]

If you had a portfolio of less than a million, say $900,000, then at a 3%-4% SWR your annual withdrawal would be between $27,000-$36,000.

According to the U.S. Census Report, "Income, Poverty, and Health Insurance in the United States: 2008" this would have put your household income in the next to lowest quintile in 2008. So, between 20%-40% of American households would have lower incomes than you and are still surviving.

If, by any chance SS would ever figure into the situation, and you got, say, $12K/year from SS, then your income would be $39K-$48K. This would put your household income in the third quintile in 2008. So, between 40%-60% of American households would have lower incomes than you.

Health insurance subsidies are on the horizon. Still, many Americans in lower income brackets are not getting employer paid health insurance so even before the subsidies, your situation would be far from unique.

If your "need to spend" is average, then you may not have a problem retiring on this size of portfolio. I am not in that situation, but had I been I would have pulled the trigger because I don't spend much and was very motivated to retire. But still these decisions should be based on your individual desires. Knowing yourself is so important when deciding when to retire. If your needs and wants do not match this income, then wait.

 

[FinanceDude]

I think the bottom line is, if you have NO debt when you retire, and live in a state that is somewhat tax friendly, and are not jet-setting all over the globe, you can get by with less than $1million.

For folks that are 62 or older, you could take early SS and definitely do it, IMHO...........

 

[nun]

If you had a portfolio of less than a million, say $900,000, then at a 3%-4% SWR your annual withdrawal would be between $27,000-$36,000.

According to the U.S. Census Report, "Income, Poverty, and Health Insurance in the United States: 2008" this would have put your household income in the next to lowest quintile in 2008. So, between 20%-40% of American households would have lower incomes than you and are still surviving.

If, by any chance SS would ever figure into the situation, and you got, say, $12K/year from SS, then your income would be $39K-$48K. This would put your household income in the third quintile in 2008. So, between 40%-60% of American households would have lower incomes than you.

Health insurance subsidies are on the horizon. Still, many Americans in lower income brackets are not getting employer paid health insurance so even before the subsidies, your situation would be far from unique.

If your "need to spend" is average, then you may not have a problem retiring on this size of portfolio. I am not in that situation, but had I been I would have pulled the trigger because I don't spend much and was very motivated to retire. But still these decisions should be based on your individual desires. Knowing yourself is so important when deciding when to retire. If your needs and wants do not match this income, then wait.

Great way to put things in perspective.

My $600k will give me $24k income and I get another $24k from rent....I'm pretty much set except for the mortgage, once that is gone I'm golden.