FIRE Scenario - How are ya feelin' now!

[chinaco]

I thought I would take a poll. This has been done before, but I thought it would be interesting to see how people are feeling right now (economy on the ropes). There are too many variables to get this very accurate so I will limit the situations.

You are 50 years old married and fairly healthy. Kids are out of the house and seem to be making it. You would like to FIRE.

You do not have health insurance so you need to provide for it till 65 (medicare).

You have no pension except SS for you and your spouse.

You own your house.

Added - Your local economies costs are the national average (not the extreme highs like NYC or Silicon Valley or lows )



Please comment.

How much money would you need in your portolf

 

[OAG]

Opps, I voted $2.5MM but then actually read the constraints. Too old, among others. Null my vote.

 

[W2R]

I voted 1.5 million and I am assuming that your house is paid off, and you will continue living in it. (If not, add the balance left to pay on the house.)

I would have selected a lower figure if health insurance was not an issue.

Also, I would have selected a much lower figure if you were single, since I feel that married people often have less control over what their partner spends than they have over their own expenses. I know, I know, what a revelation!

Anyway, health couldn't cost more than half a million (I would certainly hope!) and 4% of a million is $40K. In an average part of the country (not Seattle, SF, or NYC), I would think a couple could live a pleasant lifestyle in a paid off house with $40K income plus SS (if you get it).

 

[freebird5825]

these two factors are the killer.
You do not have health insurance so you need to provide for it till 65 (medicare).
You have no pension except SS for you and your spouse.
i took a WAG at $1.5M based on several online calculators i had run for myself before FIRE.
no clue otherwise...

 

[REWahoo]

The situation you describe fits us almost perfectly - just add 10 years to the age 50 statement. Based on our three years experience in retirement, I'd have to go with $2M primarily due to the increases we've seen in the cost of health insurance premiums. If both you and your spouse aren't in excellent health and without pre-existing conditions, it can be a budget killer.

 

[ziggy29]

$1M for an income stream plus another $500K reserve for the health insurance situation, a total of $1.5M.

 

[Bikerdude]

I chose 3 million. I calculated a 3% withdrawal because of your age. If you can live on less than 90K per year you can reduce the amount accordingly.

 

[Moemg]

I would think somewhere between 1.5 and 2 mil. depending on your lifestyle .

 

[unclemick]

- you want the before coffee or after coffee opinion?

300k, a valid American Passport and a seriously bad attitude - er that was 93.

Two cups of coffee, whatever number an inflation calculator brings 300k up to, a renewed Passport, a better attitude - stylishly frugal instead of well you know.

I just paid $50 for two cups of coffee and a doughnut - they did throw in an oil/filter change, new air filter and a car wash.

The doughnut(from Dunking doughnuts) was ok.

heh heh heh - don't listen to me - even though being seriously wrong planning 1.3 mil at age 63(2006) - I have managed to bogey thru 14 yrs of ER without serious depraviation - a plan is good but don't fail to adjust to life on life's terms.

 

[W2R]

- a plan is good but don't fail to adjust to life on life's terms.

Now that is wise advice.

I think that those of us who have been poor/desperate at some time in our lives, know how to manage with very little income. We may not LIKE it, but we can and will adjust to income changes promptly as needed.

But those who have never been in dire straits may not know how to adjust, or may remain in a state of denial ("NOBODY can live on less than $xxxxx per year!").

I suspect that failure to promptly "adjust to life on life's terms" as UncleMick put it, could have serious economic consequences. So, those who have never been truly poor might want to pad their budget a bit to allow for the possibility of temporary poverty and associated learning curve. I have never been retired but this sounds sensible to me, anyway.

 

[Marquette]

I picked 1.5 simply because my current "boy, now this is living!" plan calls for 1.6 and semi-RE at 45. If I didn't have to plan on rapidly rising health care coverage and a 55 year timeframe (plan says spouse and I are going at 100, one way or another), then I could get by with less. I also don't feel comfortable at more than a 3% SWR and that 3% includes some wiggle room.

edit: I'd say 45 is reasonably close to your scenario of 50. I think the biggest unknown in this case would be planned mortality and what happens if you screw up and live too long. And, do you plan to FIRE FIRE or Semi-FIRE. Working a few hours here and there could greatly reduce your portfolio size needs, especially if that part-time work gives you access to group coverage at a rate lower than your individual coverage.

Note: All dollars are in current dollars.

 

[Walt34]

I'm the one who picked $500K, but we're in a situation that almost doesn't exist anymore. We have a defined-benefit pension with 100% COLA (for the Wash. D.C. metro area), medical, prescription, dental and vision coverage for life for 30% of the group premium. This becomes secondary to Medicare at 65. Zero debt, no mortgage. The only possible "gotcha" that I can think of is long-term-care coverage but only 5% of people end up needing that.

 

[F-One]

Chinaco's scenario sounds about like ours, I've generally used $1.7 mil as low (mortgage paid off) but would prefer closer to $2 mil. I am conservative when it comes to financial estimates.

 

[Nords]

I'm the one who picked $500K, but we're in a situation that almost doesn't exist anymore. We have a defined-benefit pension with 100% COLA (for the Wash. D.C. metro area), medical, prescription, dental and vision coverage for life for 30% of the group premium. This becomes secondary to Medicare at 65. Zero debt, no mortgage. The only possible "gotcha" that I can think of is long-term-care coverage but only 5% of people end up needing that.

Walt, this is a poll where you to play by Chinaco's rules. He's more interested in your opinion than your specific situation, which is why he's provided the situation.

Given healthcare inflation, I'd probably be pretty nervous about retiring on $1M these days.

 

[youbet]

It seems that little attention is being paid as to whether we're talking about a single or a couple. At our house, we see little econonmy of scale from living as a couple compared to two singles.

I'd say, given you have a strong urge to RE and are willing to live a prudent LBYM lifestyle, $1.5M for a single or $2.5M for a couple willing to leverage some common expenses.

Assumptions: House equity is included in the above figures, SS only other income, average med plan premiums, middle-middle class lifestyle including partaking of some travel, vacations, entertainment, etc.

 

[youbet]

temporary poverty and associated learning curve. .

For me, just because I know well how to live in poverty, I don't like it a bit. Having experience and knowing how to deal with poverty may eliminate the learning curve, but the memories of poverty left me more conservative in my financial plans, more willing to work longer, than if I'd had no experience with poverty.

 

[DblDoc]

I entered 2 million. The recurring theme seems to be the health care uncertainty... Does Wal Mart Canada need greeters?

DD

 

[unclemick]

Hmmm - is it time to hang from the windows and walk to school uphill both ways?

Or has the 18-24k per year budget of ancient threads on this forum fallen into the dustbin of history - slain by inflation and the falling dollar among other things?

It is always amusing to me that one often gets discussed without the other. Also given the range of ER's - the 'margin of safety' or wiggle room that an individual ER couple may feel comfortible with varies widely.

heh heh heh - ballpark I could halve or double my budget(IMHO) cause I'm a cheap bastard(and proud of it) - but I'm 'forced' forced mind you to party cause the clock is ticking and I'm not getting any younger.

 

[Notmuchlonger]

Almost 2 mill. But we are increasing our standard of living in retirement. So if push came to shove we could get by on quite a bit less.

 

[FIREd]

My target was and still is 1.5 million (in 2008 dollars). The current economic situation has not yet made me rethink my plan. But healthcare costs might be a factor when the times come. One thing seems to have changed however: my wife has decided that retiring in her 40's was not something she was interested in (she suffers from the "what would I do with myself all day long" syndrome). She would like to work until the age of 55. Based on current projections, we could reach FI at the age of 43-45 and, despite this new development, we will continue our aggressive savings plan to reach that goal (after all one never knows, she might change her mind again). But I have made no secret of the fact that I will retire as soon as we reach our target (I feel like we would have enough padding with a 1.5M portfolio to weather most situations). But if she wants to continue working for another 10 years (which is fine with me), that could give us some extra financial padding, plus 10 years of cheap health insurance.

 

[youbet]

heh heh heh - ballpark I could halve or double my budget(IMHO) cause I'm a cheap bastard(and proud of it) - but I'm 'forced' forced mind you to party cause the clock is ticking and I'm not getting any younger.

Right on unclemick!

I didn't RE until 58. Worked hard at tough, time-consuming jobs pretty much right up until the end. For me, it's important to have fun now and I'm glad that even the current slump in my portfolio performance isn't causing a big disruption in partying or fun-hog activities. At 60, it would be a big disappointment to have to delay fun-hog activities a decade when I probably won't enjoy them, if I can even still do them.

For folks fortunate to RE much earlier, I think things look a little different. For example, if at 50 I needed to postpone some fly-in fishing trips, canoe trips or that sort of thing a few years, it wouldn't be too big a deal. But at 60, postponing them adds the very real risk of never doing them.

Geezerhood isn't a prime time for pulling in your horns.

edited to add - current market performance/condtions is concerning enough that, at a planning pow-wow recently, we did prioritize some discretionary spending for the next couple of years so we'd know what we'd cut back on if things get worse....... But so far nothing actually crossed off the list.

 

[SecondCor521]

I voted $1M.

I excluded the spouse, because I don't have one and don't expect or plan to have one when I am 50. ("That's what you say now, 2Cor521..." I can hear you thinking and my parents saying.)

With a paid off house and kids on their own, and excluding healthcare, I can easily live on $15K in 2007 dollars. I would comfortably choose the 4% rule at age 50 under those circumstances for my basic living expenses, so that makes the basic nut $375K.

The balance of the $1M would be for health care between 50 and 65, just because you required it as part of the scenario.

In reality, I am seriously considering going nearly bare on health care -- such as with an extremely high deductible policy. I think most of the US has drunk some kool-aid by thinking that they must have health care coverage and health care no matter the cost. I think with anything, if the price gets too high, the only logical behavior is to evaluate the alternatives, weigh the risks and benefits, and make an informed decision. Other alternatives would be to go completely bare, or move to a foreign country and pay OOP.

2Cor521

 

[FinanceDude]

I picked $2 million because it was my planning number 12 years ago. Of course, I felt a 6% SWR was easily done at that time too.........

As far as AGE of RE, that is still being decided...........I don't know with the massive increase in health care whether pulling the plug super early is going to be feasible then.........

 

[citrine]

I am with you on this 2Cor521....1M will be more than enough for me, myself, and I.
It's a good thing I remain to live like a college kid....minus the crazy parties and roommates...and a lot cleaner!
I am honing up on my yoga and learning reiki to take care of the minor things like aches, pains, and clear chakras. I will be getting the highest deductible as well.

 

[Running_Man]

I entered 2 million as I am assuming a 3 percent withdrawl rate and allowing for greater than current inflation growth for healthcare. Just can't quite get the nerve to go for the 4 percent withdrawl rate at 1.5 million.