Anyone here retiring with 1.5 - 2M, renting, and a LONG retirement?

[Safire]

Title is my question, in a nutshell.

I would really love to hear from those who are / have / will be retiring with less than 2M (1.5M - 2M), will be renting in retirement, and who have an unusually long retirement (45+ years) for any reason. In our case, our "retirement" includes our son's potential lifetime that will need to be funded by an inheritance from us as he is disabled and unlikely to support himself. The 1.5M - 2M figure at retirement comes from me assuming a 5% rate of return on our assets from this day until retirement.

How do you plan to remain financially solvent for the entire time period? Is it possible / doable? I am assuming NO SS and NO pension.

The reason I don't factor in SS & pensions in retirement figure assumptions is because I tend to believe the persistent opinions voiced by folks around me (and on many Internet forums) that SS might be non-existent by the early / mid 2030-s and given that pensions are only as reliable as the employer paying them.

Are we the only ones in the difficult situation above? Thanks for sharing!

 

[Aerides]

Sure, plenty of people are, but they probably aren't in quite the same situation as you.

I kinda get the feel that the sweet spot for retiring under 55, for two people, is around $2m + a paid off house. But you have the added expense of a medically dependent child, and continued rent, which means you have to plan for more unexpected stuff than most. If you could fix yourself into a relatively LOC area, that would help reduce the risk, but I think you'd want to retire with a nest egg higher than most to ensure you can always afford the best care for your son.

I guess it all depends on your expenses, which, with renting, are going to have more variability than most. In your shoes, I'd want to swing for a nest egg larger than average because of your potential extra hurdles.

(I don't tend to believe the "SS will be gone!" cries because I've heard them since I was in high school.)

 

[pb4uski]

... The reason I don't factor in SS & pensions in retirement figure assumptions is because I tend to believe the persistent opinions voiced by folks around me (and on many Internet forums) that SS might be non-existent by the early / mid 2030-s and given that pensions are only as reliable as the employer paying them.

Are we the only ones in the difficult situation above? Thanks for sharing!

....(I don't tend to believe the "SS will be gone!" cries because I've heard them since I was in high school.)

+1 with Aerides... I've heard the same thing for many years and it is rubbish... so, to begin with, I think it is total rubbish to assume that SS and pensions might be non-existent.

I'll listen to the SSA's Trustees rather than uninformed folks around me and on many internet forums.

The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034, the same as reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.

Note that many believe that the 2021 report will be a bit worse due to the impact of covid but 70-something percent is a lot different from 0%.

Also, any pensions are backstopped by the PBGC.

If you ever want to have a serious conversation on the subject, let us know.

According to FIRECalc, a $2m portfolio has a 95% success factor for withdrawals of $71,201/year for 45 years.... that is with a 75% equity allocation... the Investigate tab is your friend.

 

[RetiredHappy]

Under $2M and renting is going to be hard. We are certainly counting on SS being around in some form, even if it does not have enough to pay 100%.

We are in some ways similar in that I have a son whom I will always need to help him financially and I do it through annual gifting. Our retirement timeline for income generation is 60 years. I helped pay for his home and he manages his own bills. It is unlikely he will make enough to pay for all of his living expenses. We won't run out of money in our lifetime so he will have an inheritance. When our home is sold upon our deaths, it should generate another million or so. Similar issue but we have a larger nest egg.

 

[rodi]

I retired with under $2m... In fact just under $1.5 (not counting kids' 529's). But*** we had a paid off house. To balance that I had two teenagers under roof. Youngest just graduated high school and I'm grateful I have the 529 money to throw at his college.

I think it all depends on how much you withdraw (spending) from the nest egg each year and how you are invested.. You've seen the 4% rule mentioned... that assumes that you can take out 4% of your starting nest egg each year, adjust each year for inflation, and have a 95% chance of having enough money for a 30 year retirement. Drop it down to $3.5% and you are looking at sustainable for a longer period. This assumes you have money invested somewhere in the asset allocation of 70% stock/30% fixed income to 30% stock/70% fixed income.

So... it all comes down to spending. If you have 1.5M - you can safely withdraw 3.5% or $52.5K/year - and adjust for inflation. If you have $2M you can withdraw $70k a year. That withdrawal has to include taxes, health insurance, rent, *everything*.

If you are pulling out $100k from a $2M portfolio - that's a 5% withdrawal rate... you are *probably* ok - but if you run into a bad extended market, you could run out of money well before your 45 year horizon.

Does you child qualify for disability or some such that can help offset some of the expenses?

 

[qwerty3656]

I don't see a scenario where social security goes away. They will print more money before they let that happen - which brings me to my view of the likely scenario - high inflation (probably 70's style stagflation).

 

[FLSUnFIRE]

9 days till I FIRE myself at 47. Decision was made well under $2M for 2020 until OMY syndrome triggered by COVID delayed me. I was under $2M when I put in notice several weeks ago and am just over $2M now in liquid assets plus a house free and clear. Have a minimal pension at 60 but it's insurance/bonus as its value after 13 years of inflation is questionable.


My cashflow projections assume a 5.5% annual return and personal inflation rate of 3%.... of course returns and expenses won't be linear but for my spreadsheet playground, it's what I'm using.

 

[Dtail]

On a related note, have you set up a Supplemental Benefits Trust for your son or some similar protection type of asset holding vehicle?

 

[SunnyOne]

I'm drawing on the observations from COVID to try to envision how any future SS crisis might be handled - appears the govt was quite swift to avoid mass hysteria in the streets through stimulus and eviction moratorium. Now imagine that on another scale, except it's everybody's grandparents...yes, stagflation as an outcome.
My pension payments, although not a significant percentage of my overall income, come out of the US Treasury. I have to believe that if that well runs dry - again, see above.
Never been a fan of fear based theories.

 

[CindyBlue]

Also, any pensions are backstopped by the PBGC.

Um...not if you worked for a religious institution...sigh...

 

[Car-Guy]

I think a lot of us have kids that will need help for their entire lives... And it's not necessarily becasue of a "disability". You may have more company in that area than you might think. But that's another story...

As far as SS goes: for 40 years or more, I thought it would be gone before I saw a dime.... Well I've been collecting what is "owed" to me for over eight years now... (I earned/paid for it) I still think at some point it will probably change... Maybe it will be reduced or only given to those who really need it (means tested). Who knows what they will come up with.

On the surface, 1.5 to 2m with a 45 year time horizon seems like a bit of a stretch to me. Is the 1.5 to 2m tax paid or is it in some sort of tax deferred account(s)? (IRA's/401k's) Even more important would be your anticipated annual spend rates. 30 to 40k a year and you may be okay. 100k a year, probably not so much. Don't forget inflation. 45 years is a long time.


My initial thoughts anyway.

 

[cooch96]

I plan on semi-FIRE w/ $1.5M of invested assets in a couple years and full FIRE with $1.8M by 2030. I own my home but have no pension. 45 years is a very long full retirement; if I pull the plug in 2029 at 51, then that would mean I plan on living to 96. I suppose that's conceivable, but unlikely given personal and family medical history. I plan on using the VPW method: start withdrawing ~5% per year and slowly increase withdrawals each year to 10% and then take SS to make up the difference. This is the most rational method I've found and it complies with my risk and volatility tolerance.

I don't worry about running out of money from inflation or reduction in SS; I'm much more likely to die of old age, accident, or illness. But if my plan starts to tank, I'll adjust by adopting a more humble lifestyle. A more humble lifestyle to me means no international travel, one car for the household, and staying to cheap hobbies like gardening and hiking. Heck, I'll even give up single-malt scotch and bag groceries for 20 hours a week in my 60s if it means I didn't spend my 50s fighting traffic during the daily commute.

 

[Safire]

Thank you, everyone, for your replies!

To clarify, the entire 1.5M - 2M is after tax! We do have a "regular" brokerage a/c but that may have no more than 100K in the next 2 decades when we hit "retirement".

We also have a 9 months' worth of expenses in cash.

If you ever want to have a serious conversation on the subject, let us know.

According to FIRECalc, a $2m portfolio has a 95% success factor for withdrawals of $71,201/year for 45 years.... that is with a 75% equity allocation... the Investigate tab is your friend.

I absolutely want to have a discussion about SS, as my H is scheduled to retire right around 2034 although he wants to work for another 20 years. I'm a housewife, and don't have enough credits to collect SS on my own.

What is the investigate tab?

 

[RetiredHappy]

Thank you, everyone, for your replies!

To clarify, the entire 1.5M - 2M is after tax! We do have a "regular" brokerage a/c but that may have no more than 100K in the next 2 decades when we hit "retirement".

We also have a 9 months' worth of expenses in cash.



I absolutely want to have a discussion about SS, as my H is scheduled to retire right around 2034 although he wants to work for another 20 years. I'm a housewife, and don't have enough credits to collect SS on my own.

What is the investigate tab?

I did not realize that your husband is going to work until 2034. You have plenty of time to grow that 1.5M-2M over that 13 years! "Investigate tab" is a feature on FireCalc.com for modeling of "what if".

 

[rodi]

Again - the big question is spending. If you live in a low cost area and are frugal - the spending amount might make this a piece of cake. If you live in a high cost of living place and pay $3-5k/month rent (and still have to pay for everything else).... It might be less doable. There are plenty of folks who come to er.org and say "can I retire - I have $5M (yay) but I spend $350k/year... (which makes the $5M inadequate at that spending rate.)

The investigate tab is one of the tabs you need to look at in firecalc. On the first page you input your *gross* spending (inclusive of taxes, healthcare, etc.) and your nest egg. Then there are tabs along the top that you input any SS/Pension, asset allocation (eg if you are all cash - your 1.5M won't go very far because inflation will kill you). On the investigate page you have more variables you can play with.

 

[ivinsfan]

OP you posted almost this identical question three months back when you joined this forum.


Did the comments about paying rent or owning give you any clarity? What new thoughts do you have about some of your plans?


I don't see where you have actually told us your projected ages at retirement.


Can you explain what you mean about your 1.5-2m money being after tax? You say you only have 100K in a "regular" brokerage account.



Why do need a 45 year horizon?

 

[pb4uski]

Um...not if you worked for a religious institution...sigh...

Then you just need to keep the faith that the pension benefits will keep on coming.

 

[pb4uski]

Thank you, everyone, for your replies!

To clarify, the entire 1.5M - 2M is after tax! We do have a "regular" brokerage a/c but that may have no more than 100K in the next 2 decades when we hit "retirement".

We also have a 9 months' worth of expenses in cash.



I absolutely want to have a discussion about SS, as my H is scheduled to retire right around 2034 although he wants to work for another 20 years. I'm a housewife, and don't have enough credits to collect SS on my own.

What is the investigate tab?

Your use of after-tax is confusing as most regular brokerage accounts would be after-tax accounts. Withdrawals from regular brokerage/taxable accounts are not taxable.

Conventional IRAs, 401ks and the like are usually pre-tax accounts... withdrawals would be taxable.

Even if you haven't worked long enough to get credits on your own you would qualify for spousal benefits (assuming that you have been married more than 10 years). It gets complicated, but if you were born in the same year and both retire at your full-retirement age then you would receive an amount equal to 1/2 of his primary insurance amount. You can get more info on the web or also check out opensocialsecuirty.com. Then if he dies, you get his full benefit and yours disapears.

So if his PIA was $2,000/month then you would get $1,000/month... and $3,000/month for the both of you... and once one of you dies the surviving spouse would get $2,000/month for life.

The Investigate tab is to the upper far right in FIRECalc and allows you to look at numerous interesting possibilities.

 

[QuinnB]

I would second the comments made earlier about not counting out Social Security. I think you should count on SS being one leg of your retirement.

Even after the SS trust fund is depleted, as others said, the continuing SS tax revenue will be sufficient to pay about 3/4 of normal benefit amounts. So, if the average SS benefit is something like $1600, an average SS recipient would still get about $1200 a month. That is nothing to sneeze at in my opinion.

 

[Chuckanut]

FWIW, I ran mu retirement through FireCalc and a Monte Carlo retirement calculator assuming that SS would be cut 25% and my modest pension would be cut 10% and lose its modest COLA. I came just fine. I might have to watch my dollars more when traveling, and no new sports car or Tesla in the driveway every three years, but I would not do that kind of spending anyway.

While it's good to have a plan B just in case things take a prolonged turn for the worse, don't plan on disaster as a norm. If we did that, only Bill, Jeff and Warren wild ever retire.

 

[CindyBlue]

Then you just need to keep the faith that the pension benefits will keep on coming.

 

[indiajust]

You can look online to see how solvent the pension is and estimate the haircut you will receive. FICA is easy, as haircut has been public knowledge for a long time, 22%. So just subtract a quarter of your estimated benefit for budget number.

I hope to pay rent with it at best.

I exited in 08 with only a 100k or so in an IRA plus house and mortgage and 100k in taxable. I survived and thrived through lean times until house was sold and proceeds invested. Roses since then. Closing in on 2M and still 5 more years till official retire date.... 19 years from ER date.

 

[Souschef]

Between the two of us, we have an income of about $70K from SS and pensions. Using the 4% rule, that is the equivalent of $1.8 M.
BUT the key is always spending. We have NO debt, and our travel has been cut way back.

We are both on Medicare advantage, so the health care is pretty well covered.

 

[Out-to-Lunch]

Title is my question, in a nutshell.

[snip]

How do you plan to remain financially solvent for the entire time period? Is it possible / doable? I am assuming NO SS and NO pension.


[snip]

Are we the only ones in the difficult situation above? Thanks for sharing!

Honest question here: What are you hoping to get out of this discussion? This would help us craft answers. What kind of information can we offer that can help you?

20 years is a long time. None of us know what will happen during that time frame. Exactly what kind of information are you looking for?

 

[momoftwo]

How old is your disabled son?
Does he or will he receive SSI/Medicaid?
Have you created a Special Needs Trust for him?

We are recently retired; much older than you with slightly smaller portfolio, but a mortgage free home.
We are comfortable with low expenses, SS and small pension.

We plan our finances so that her half of our estate goes to her SNT.
This protects her benefits.
Our daughter is a big piece of our planning.