Can I Retire? - Round 2

[disneysteve]

Can I Retire? - Round Two

Back in February, I started a “Can I Retire?” thread and got some great feedback. A number of responses focused on the fact that I was including the proceeds of an anticipated inheritance that hadn't actually happened yet and to be careful about counting it before it did. Well, unfortunately it has now happened. The final numbers are turning out to be a fair amount more than I had estimated.

You can see the original thread here: https://www.early-retirement.org/forums/f28/time-to-play-can-i-retire-108075.html

I'm going to update the details here and see what everyone thinks with the new information. A couple of numbers aren't totally firm yet (like the final sale price of the inherited house) but these numbers are very close, still using a low end number for the house.

Me: 56y, 10m
DW: 57y, 6m

Current income: 240K
Pre-COVID spending: 84K
Current spending: 60K

Portfolio:
tIRAs: 857K
Roths: 423K
401k: 184K
Taxable accounts: 1.5M
Total: 2.96M

We have zero debt.

I'd like to retire as soon as possible. The 84K pre-COVID spending figure includes at least $6,700 of expenses that will go away upon retirement bringing us down to $77,300 (assuming our spending otherwise returns to pre-COVID levels which isn't necessarily true). If we can keep total spending all in to no more than 120K with insurance, taxes, and everything, with a 3M starting point, and starting SS at 65 or 67, I think we're probably good to go.

As always, I'm curious to hear everyone's thoughts.

 

[finnski1]

It's not clear to me whether your spending is "$77,300" or is going to approach $120k. Does the $77k include "insurance, taxes and everything" as you put it or are you up to $120k if you include all those.
Bottom line you need to know your total spending pretty well to be sure. There is a big difference to being able to sustain a 2.6% WR as opposed to a 4.1% WR. The latter would make me kind of apprehensive though many withdraw more than that.

 

[pb4uski]

Flip it around... $2.96m @ a conservative 3.5% WR is $104k... so you are good to go... and you have SS as the cherry on top.

Run FIRECalc with your numbers and select the spending level for 95% success on the Investigate tab.... I'm guessing it will be close to your planned spending level.

 

[Out-to-Lunch]

I was one of those who argued against retirement for you because of the uncertainty of the inheritance.

I would now say that you are in good shape.

What is your expected SS?

 

[aaronc879]

Don't waste time posting here. Get your retirement papers in ASAP.

 

[jebmke]

It's not clear to me whether your spending is "$77,300" or is going to approach $120k. Does the $77k include "insurance, taxes and everything" as you put it or are you up to $120k if you include all those.
Bottom line you need to know your total spending pretty well to be sure. There is a big difference to being able to sustain a 2.6% WR as opposed to a 4.1% WR. The latter would make me kind of apprehensive though many withdraw more than that.

I read it that gross expenses (the important number) is $120K -- ie. that includes EVERYTHING, all in. Core spending, health care, income taxes, non-recurring things like replacing cars, roof, furnace .... as they happen.

 

[RetireeRobert]

Don't waste time posting here. Get your retirement papers in ASAP.

^ ^ ^

+1

 

[disneysteve]

I was one of those who argued against retirement for you because of the uncertainty of the inheritance.

I would now say that you are in good shape.

What is your expected SS?

If I retire now, SS would be $3,000 at 67, $3,715 at 70, and $2,600 at 65.
I believe my wife gets 50% of that, right? (Her own benefit would be lower based on her work history.)

If so, claiming at 67 gives us $54,000/yr.

 

[disneysteve]

I read it that gross expenses (the important number) is $120K -- ie. that includes EVERYTHING, all in. Core spending, health care, income taxes, non-recurring things like replacing cars, roof, furnace .... as they happen.

Yes.


The $77,300 would be our routine spending, plus taxes and insurance and lumpy expenses. As I said, with COVID, our spending has actually been 60K so we are quite capable, and pretty content, spending less if need be. If being able to retire early means we need to keep the spending closer to that 60K mark, I think we're both okay with that.

 

[GravitySucks]

Enjoy your retirement.

 

[rodi]

First - sorry for you loss.

Second - congrats on having a fairly solid plan to retire now.

Some people find they spend less in retirement, than when working, because of time to do stuff for yourself vs having to pay for others to do it. (Cleaning, cooking, home repairs, auto repairs.) We found that to be true.

Others find they spend more in retirement because they have time to pursue expensive hobbies and travel. That's fine too... as long as the plan accounts for that.

With the large after tax account to work with - you can manage your taxes. Do some Roth conversions, maybe take advantage of ACA premium tax credits, etc. That should help your budget.

Now go put in your papers.

 

[Whisper66]

Don't waste time posting here. Get your retirement papers in ASAP.

+1

 

[Aerides]

Looks good. Budget on your pre-covid numbers and maybe up them a bit for inflation. Bake in some realistic health care numbers. Even good ACA low-cost subsidized plans come with a large deductible. But yeah, assuming those aren't crazy differences you can hand in your notice on Monday.

 

[kingfisher]

You are definitely good to go, and your tax burden might not be as high as you would think if you can structure your income correctly. ie: stay below certain level by using mostly money from taxable, and delaying SS. You can probably even do some ROTH conversion before you collect SS.

 

[Dtail]

You are good to go. Start enjoying the best time of your lives.

 

[Dtail]

You also should be able to make use of your taxable accounts to potentially achieve some sort of tax subsidy if getting medical on the ACA.

 

[disneysteve]

You also should be able to make use of your taxable accounts to potentially achieve some sort of tax subsidy if getting medical on the ACA.

That's what I'm hoping. The current limit is about 69K. I see no reason why we shouldn't be able to stay under that given the size of our taxable accounts. I do need to sit down with our CPA and review everything before I make any final decision to make sure I fully understand post-retirement taxes and how drawing from different places will play out.

 

[disneysteve]

Some people find they spend less in retirement, than when working, because of time to do stuff for yourself vs having to pay for others to do it. (Cleaning, cooking, home repairs, auto repairs.) We found that to be true.

Others find they spend more in retirement because they have time to pursue expensive hobbies and travel. That's fine too... as long as the plan accounts for that.

I think we'll fall somewhere in the middle. There are definitely things we pay a premium for out of convenience that we'll be able to spend less on when I've got more time. Grocery shopping, for example. I'm perfectly happy to go to 2 or 3 stores per week instead of one if I've got the time to do so. Now I do all of our shopping at one place on a once weekly trip because it's quicker and easier that way even though I know we're spending more than necessary. I wouldn't be surprised if we can't drop our food costs by 10-20% that way.

On the other hand, we'll likely spend more on travel because vacation time will no longer be a finite figure. I don't think we'll be jetting around the world because we still have our daughter at home and my elderly mother to care for, but probably more day trips and 2 or 3-day getaways. However, we'll also be able to better play the hotel rewards program games and utilize special deals and bonuses in the process to reduce costs.

And I'm definitely not counting on this in any way for retirement planning but my almost 91-year-old mother won't be here forever. Her portfolio is currently a bit over 400K and I'm the sole beneficiary of that when she passes so at some point I could potentially find myself with an additional few hundred thousand dollars added to the pot. Hopefully not anytime soon, but at nearly 91, who knows.

 

[Dean56]

Don't waste time posting here. Get your retirement papers in ASAP.

+2 You're good to go. Let the next chapter of your life begin.

 

[disneysteve]

Thanks for all of the replies. Now you've all got me a bit freaked out. Retiring soon wasn't in my plan but the numbers changed enough to make that a real option.

I've already reached out to our CPA to set up a meeting to discuss everything.

Much of the inheritance has been settled but not all of it. We still have a house and a car to sell and some non-retirement accounts to transfer. It will likely be a few months before all of the money is totally in my control. At that point, and especially if the market behaves itself between now and then, we could easily find ourselves in even better shape and ready to pull the trigger for sure.

Aah!!

 

[Exchme]

Sorry for your loss. I'm sure it would be a comfort for your lost loved one to know that your retirement now looks secure and I'll bet they'd be very happy with that use for the money.

Please share with us how the next few months go and the all important retirement countdown!

 

[disneysteve]

Sorry for your loss. I'm sure it would be a comfort for your lost loved one to know that your retirement now looks secure and I'll bet they'd be very happy with that use for the money.

My cousin was a big ER fan. He retired at 55. I think he would be pleased to know that what he left me will enable me to retire probably at 57.

 

[srblanco7]

My cousin was a big ER fan. He retired at 55. I think he would be pleased to know that what he left me will enable me to retire probably at 57.

Sorry for the loss of your cousin. The numbers work and the icing on the cake is that your inheritance and ER honors your cousin's memory. Enjoy ER!!

 

[NgineER]

So sorry for your loss!

Happy for your impending retirement!