Feedback on my ER plan

[MuirWannabe]

Suppose its what this community specializes in doing. I'd like feedback/comments/critique on my FIRE plan. Thanks for your help!

DW is already retired. I'm wanting to ER in March. I will be 53.

Annual expenses are $125,000-$130,000. I know this is high but I've tracked for some time and this is what it is. I'm pretty certain these expenses will decrease after about 10-15 years. But not in the beginning. These expenses are fully loaded with taxes, healthcare, and all other assumptions built in (hopefully).

Nest egg is ~$3.5 million with about 50/50 in taxable and tax deferred at an AA of 55/45. Low cost index funds. Hope to do some Roth conversions for the first few years. Also, expect about $25K annually from SS at 62 if we choose to file then. No pension or other income sources. Living solely off the nest egg and SS eventually.

Firecalc says 100% and other calculators look promising.

I'm excited to ER and confident in staying busy. In fact, my intentions are to probably thru hike the PCT next year shortly after starting my new retirement. Sort of a transition into a new phase of life.

At any rate, what are your thoughts? Am I covered? Would you do it?

Thanks!

Muir

 

[Senator]

Do you feel lucky? Well do you?

It seems a bit too close for comfort for me. Did you account for taxes? Healthcare? Any kid expenses, college or weddings? Or other major expenses? Do you have a fall back plan to cut expenses?

A quick 3.5% withdrawal rate calculation says $122,500, and that would include taxes. It would also assume you were allocated correctly almost 100% of the time. I would say you need more equities.

 

[NanoSour]

Hello MuirW,

I'd say you look more than ready to ER from a financial aspect. I hesitate to put the 100% success banner on any plan, but it would appear there is a high probability of success nonetheless.

To me, the big question is how willing are you to make adjustments to your lifestyle should that become necessary? When I took ER 2 years ago, I decided I was willing to adjust spending if necessary and even return to the work force if I had to. If that was the worst that could happen, I figured it was worth my freedom to take the risk.

If you are absolutely, positively set on spending 125-130K annually and it would kill you to live on say 80K, then you probably should just keep plugging along amongst the working.

JM2C

 

[REWahoo]

^ What NanoSour said.

Your numbers look good but I'd be a bit reluctant to pull the plug at 53 with expenses at that level unless you were comfortable cutting back some if the market dropped severely over the next few years.

 

[MuirWannabe]

Hello MuirW,

I'd say you look more than ready to ER from a financial aspect. I hesitate to put the 100% success banner on any plan, but it would appear there is a high probability of success nonetheless.

To me, the big question is how willing are you to make adjustments to your lifestyle should that become necessary? When I took ER 2 years ago, I decided I was willing to adjust spending if necessary and even return to the work force if I had to. If that was the worst that could happen, I figured it was worth my freedom to take the risk.

If you are absolutely, positively set on spending 125-130K annually and it would kill you to live on say 80K, then you probably should just keep plugging along amongst the working.

JM2C

Thanks for all the feedback so far. I am grateful.

I do have about 2.5 years expenses in cash should the market take a downturn. Also, of course, my expenses do include discretionary items such as vacation, entertainment, etc. So, I could make cuts if things went south although getting down to $80K is not likely. DW has some expectations.

From the comments so far, maybe I do need to keep working a bit longer. But that is not the answer I was looking for. What's wrong with you people? Help a fellow ER brother out

 

[LARS]

You don't mention anything about real estate. If you own a $1 million home, for example, in addition to $3.5 million portfolio that makes a difference in your situation IMHO.


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[REWahoo]

From the comments so far, maybe I do need to keep working a bit longer. But that is not the answer I was looking for. What's wrong with you people? Help a fellow ER brother out

You indicated you do have the capability to cut spending if needed - within limits. So there is no reason to keep working unless you have concerns you could not reduce spending and maintain the lifestyle your spouse has come to expect.

Tough call... unless you retire and tell her if she's not happy with the money she can go back to work: "Your turn, honey!"

 

[pb4uski]

I think you are fine. Your WR ignoring SS is 3.7%, which would be even lower after including SS and as you indicate, there is room to tighten the belt on the spending front is the stuff hits the fan.

 

[Ready]

Have you looked at how the numbers would change if you delayed SS until age 70 to maximize the benefit? Try running those numbers through Firecalc to see what impact it may have. I would not begin collecting SS at 62 given your high net worth. People who collect at 62 generally do so because they have no other alternative. Waiting until 70 is much better in providing yourself longevity insurance.

 

[523HRR]

I would be uncomfortable with your estimated withdrawal rate at your age. DW and I retired ~3 years ago, when I was 49 and DW was 52. We have no debt, and our withdrawal rate has been 2.0 - 2.5%...plus combined DB pensions representing 1.5 - 2.0 times annual household expenses that will commence payouts at age 60. Agree with recommendations above to stress test future cash flows to ensure that your projected success rate is something you are comfortable with.

 

[MuirWannabe]

I would be uncomfortable with your estimated withdrawal rate at your age. DW and I retired ~3 years ago, when I was 49 and DW was 52. We have no debt, and our withdrawal rate has been 2.0 - 2.5%...plus combined DB pensions representing 1.5 - 2.0 times annual household expenses that will commence payouts at age 60. Agree with recommendations above to stress test future cash flows to ensure that your projected success rate is something you are comfortable with.

Thanks for sharing your thoughts. A SWR of less than 3% is not something I've ever contemplated. I'd be working forever to achieve that objective. I know SWR discussions can go on forever around here. Personally, I'm comfortable with anything less than 4% or even at 4% as long as I keep an eye on things.

I have revisited the flexibility topic with DW. We are in agreement about making adjustments as necessary. She gets it and will not be shocked if some measures are required.

I am debt free and do own my home. The home is not included in my nest egg figure mentioned and is valued around $260K. I may take SS later than 62 if possible. It's a long ways off so will see when I get closer.

Muir

 

[ivinsfan]

Thanks for sharing your thoughts. A SWR of less than 3% is not something I've ever contemplated. I'd be working forever to achieve that objective. I know SWR discussions can go on forever around here. Personally, I'm comfortable with anything less than 4% or even at 4% as long as I keep an eye on things.

I have revisited the flexibility topic with DW. We are in agreement about making adjustments as necessary. She gets it and will not be shocked if some measures are required.

I am debt free and do own my home. The home is not included in my nest egg figure mentioned and is valued around $260K. I may take SS later than 62 if possible. It's a long ways off so will see when I get closer.

Muir

Nice to have an good agreement with your DW. I'm always surprised by the number of couple who don't agree. There seem to be quite a few where the stay-at-home spouse or the already retired spouse want the other half to keep on working indefinitely to be sure that they can have "everything" they want.

 

[Barber]

My DW agreed to reduction of spending so that she could ER and now after a few months is spending more than when working. She has more spendable hours. We have a 12 year age difference and I fear after I depart major problems will arise. I feel for her, but she wanted to ER. Beware of agreements !!

 

[pb4uski]

I would be uncomfortable with your estimated withdrawal rate at your age. DW and I retired ~3 years ago, when I was 49 and DW was 52. We have no debt, and our withdrawal rate has been 2.0 - 2.5%...plus combined DB pensions representing 1.5 - 2.0 times annual household expenses that will commence payouts at age 60. Agree with recommendations above to stress test future cash flows to ensure that your projected success rate is something you are comfortable with.

The flip side is that there is an argument to be made that you worked longer than you needed to if your WR is so low.

 

[jabbahop]

are your taxes and expenses projected or historical?

- Many find that there taxes go down (sometimes quite a bit) when they are withdrawing and have no salary coming in. Using something like taxcaster will give you a rough look at what you might expect. Ours will go down a LOT!

- some experience a decrease in some expenses (dry-cleaning, gas from commuting, eating out @ office, etc.) If you haven't already, It might be good to project what will go down as a result of not working and what will go up.

In my opinion you are asking a relatively conservative group about whether you are ok or not.


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[GravitySucks]

Personally, I'm comfortable with anything less than 4% or even at 4% as long as I keep an eye on things.


Muir

Me too. Think you answered your own question here.
Enjoy!


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[rodi]

I retired at a similar age with a smaller nest egg - but a smaller budget as well. That said - I have rental income, DH has started SS, etc.... Everyone's comfort level is different.

I had 100% from firecalc, Fidelity RIP said I was good to go, Financial engines gave me way more income than we use... And like you, we have some areas we can cut if we need to.

It was scary to pull the plug when there were folks here saying a 3% WR was too risky and you should shoot for 2%... but I figure if I stay agile we'll be fine. (FWIW - my WR is around the same as yours 3.5%)

I've also found that I'm spending less than planned in day to day life now that I'm retired. That's exclusive of the big trip I'm on - which was budgeted from separate funds. (Trip of a lifetime, won't do anything on this scale again.)

 

[Ready]

I'm generally comfortable with a 4% SWR. But there are days I change my mind and think I need to rely on 3%. I suspect my opinion on this will continue to evolve as time passes, as the markets perform, as I continue to read useless financial articles that express opinions on various topics...

 

[Koolau]

To be comfortable with anything close to a 4% WDR (at 53) I would need an iron clad agreement with DW AND myself that we WOULD cut back in the face of a significant drop in assets (assuming due to a bear market.) Imagine retiring in 1999 or 2000 and living through 2007, etc. While it's possible you would survive, it would be white knuckle to say the least unless significant cut backs were made along the way. Naturally, YMMV.

Muir, strictly out of curiosity, what one thing would you be willing and able to cut back on if need be? Would it be travel, eating out, other "non-essentials" or would it be more of an "across the board" cut back? No need to answer - except to yourself.

 

[cooch96]

$3mm+ and you own your home outright, plus future SS? And it sounds like you have a reasonable spouse?

Go for it, you're rich. If the SHTF, then you'll still likely be better off than 95-97% of the people in the richest nation on earth and will be better able to recover. If things get really dystopian, then no amount of assets will be able to save you and you'll have squandered some precious years toiling away for nothing.

 

[MuirWannabe]

To be comfortable with anything close to a 4% WDR (at 53) I would need an iron clad agreement with DW AND myself that we WOULD cut back in the face of a significant drop in assets (assuming due to a bear market.) Imagine retiring in 1999 or 2000 and living through 2007, etc. While it's possible you would survive, it would be white knuckle to say the least unless significant cut backs were made along the way. Naturally, YMMV.

Muir, strictly out of curiosity, what one thing would you be willing and able to cut back on if need be? Would it be travel, eating out, other "non-essentials" or would it be more of an "across the board" cut back? No need to answer - except to yourself.

In answer to your question. I'm allowing $15K for vacation expenses annually. $4500 for entertainment expenses. A bunch for dining. These 3 areas are major categories we could cut back some as needed. It would not be easy (for us) but I do believe we could get expenses down closer to $110K annually if we had to do so. That is much closer to a 3% SWR. I expect longer term this is exactly what will happen. But for the first few years I'm anticipating higher expenses. Not the most comfortable way to do it, but I think it reflects reality in our case.

It's interesting. I totaled my responses so far. Comes out basically 50/50. Half of people who've replied to this thread think I'm good to go. About half think I'm probably not. Not a resounding signal either way as I might have hoped. Still, I'm grateful for the replies and it has been a helpful thought exercise for me. FWIW, I'm still pretty solidly leaning to pulling the trigger end of March.

As has been said. At some point whenever you go...it's a leap of faith. I generally lean to being a conservative guy. But I'm really ready to take that leap.

Muir

 

[Ready]

This is a very conservative forum. If 50% of the members say you're good to go, I would take that as a very positive sign.

 

[jabbahop]

You could also try forgoing your inflation raises as well


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[TimSF]

Me too. Think you answered your own question here.
Enjoy!


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Good to go.

 

[FreeBear]

Hey MuirWannabe,

I'd say hit the trail, the PCT that is!! Your plan looks plausible, even probable, for long term success. Even if you did nothing to trim expenses, I suspect that kind of money would last decades. Of course, someone like you who has saved so well is likely to take defensive measures well before financial Armageddon. So have faith!

Do you have a minimum estate that you would like to leave? Makes a big difference in the odds of success.

Don't forget that you are balancing financial risk against health risk. How long will you and DW will be healthy enough to live your dreams?? The goal of hiking the PCT is no small dream.

I used to backpack about 10 years ago, before I married my DW. I married my DW because she was athletic and very outdoor-oriented. Well, she developed serious back issues and my dreams of backpacking with her in the High Sierra may have gone forever. I greatly miss sleeping beneath the stars in the backcountry. You just don't know what 10 years will bring, let alone a couple of decades.

You're close enough to go for it, then figure out the rest along the way. I look forward to hearing of your PCT exploits.

FreeBear (missing Bear Paw Meadows, backpacking the High Sierra)