How much would YOU spend?

[ImaCheesehead]

What would you feel comfortable spending annually if you were in the following situation and retiring in 6 months? We have no children so have no need leave any legacy. We also have no LTC coverage so plan on paying those expenses from assets if necessary.

DH 62
DW 57

Invested assets:
2,500,000 total at Vanguard or equivalent broken down as:
1,586,000 retirement
860,000 nonretirement
55,000 Roth

Current allocation across all accounts 65/27/8 stock/bond/cash. While writing this out, I realize I have more in stock than I am comfortable with. I plan on reducing stock allocation to approx 55%.


SS and Pension:
Planning on taking his SS at 70 = 40k per year
Current pension = 9k per year until 2nd death, not inflation adjusted


Buckets:
Of the investment total, I am thinking to carve out $300,000 for a SS “bucket” allow 40k spending from age 62.5 to age 70 when his SS actually kicks in. I am taking my SS at 62 but not including it in retirement calculations as it will be only 12k per year. To be honest, his health is not great and at 62 he has already outlived his parents and sister. Assuming I outlive him, whatever I get will be some “frosting” and I don’t want to count on it.

Additionally, I am holding out a $100,000k bucket for a new car in the next couple of years and 1 or 2 years of unusually high out of pocket health costs or random lumpy expenses.

I have run scenarios thru Firecalc and know what it says, but that isn’t what I am looking for. What would YOU spend if this was your situation?

Summary:
$2,100,000 invested assets
+40k SS (or equivalent)
+9k Pension


Every opinion welcome!

 

[REWahoo]

$120 - $130K, including taxes.

 

[SecondCor521]

Here's how I would look at it:

$300k carve out for DH SS bridge
$60k carve out for DW SS bridge
$250k carve out for LTC

That totals $610k. From your $2.1m, that leaves $1.5m in round numbers (assume your carveouts earn $10k in interest or dividends somehow over the next 5-7 years if you're worried about the rounding there).

Since you're around 60 and your DH isn't in good health, I would plan on spending a full 4% of that $1.5m, which is $60k. Add back in the $40k SS for DH, $12k SS for DW, and $9k pension, that would total $121k all in.

When he dies, you'll lose the $12k SS and be in a worse tax situation. But by that point maybe you won't feel like or need to spend the whole $121k, and your expenses will drop a little when there's just one of you, so I don't think that's a big deal.

So I'd probably say about $120k per year - remember that's everything, including taxes.

 

[W2R]

[...]
So I'd probably say about $120k per year - remember that's everything, including taxes.

+1 I think you would be fine spending $120K per year.

But I'd only spend that much if I felt I was enjoying the results and getting some value out of it. To me that's an awful lot to spend.

In reality I'd probably end up spending $60K or so just because that's the type of lifestyle I am used to living.

 

[ImaCheesehead]

Yes, I am definitely including taxes in the total amount.

 

[Dtail]

My calculations are at the 115k - 120k yearly.

 

[ImaCheesehead]

Here's how I would look at it:

$300k carve out for DH SS bridge
$60k carve out for DW SS bridge
$250k carve out for LTC

That totals $610k. From your $2.1m, that leaves $1.5m in round numbers (assume your carveouts earn $10k in interest or dividends somehow over the next 5-7 years if you're worried about the rounding there).

Since you're around 60 and your DH isn't in good health, I would plan on spending a full 4% of that $1.5m, which is $60k. Add back in the $40k SS for DH, $12k SS for DW, and $9k pension, that would total $121k all in.

When he dies, you'll lose the $12k SS and be in a worse tax situation. But by that point maybe you won't feel like or need to spend the whole $121k, and your expenses will drop a little when there's just one of you, so I don't think that's a big deal.

So I'd probably say about $120k per year - remember that's everything, including taxes.

The 2.1 million already takes the 300k SS carve out into account, plus 100k more for a car (current investments are $2,500,000) and I am not including my SS at all.

You carved out an additional 250k for LTC tho, hmmmm....interesting. I will
think about that.

 

[Bir48die]

I'm in agreement for the most part but why on earth would you spend $100k for a car?

 

[NH Hiker]

If your DH is in poor health, do you want to wait till 70 for SS? Can you do spousal benefit?

 

[davebarnes]

I would:
1. Leave stock at 65%.
2. Take SS at age 62.

 

[MarieIG]

Me, I'd max out at 100k.

Take my SS at 62; and his at 70 to maximize survivor benefits.

With the cash set asides, I would not drop my stock allocation below 60%.

Even though no legacy needs, I would not aim on spending down to zero as should you need long term care - you want really GOOD long term care.

 

[MarieIG]

I'm in agreement for the most part but why on earth would you spend $100k for a car?

OP was also including some health related expenses in that set-aside.

 

[Cut-Throat]

I would:
1. Leave stock at 65%.
2. Take SS at age 62.

And at their age, most experts would say age in Bonds... I agree with SS at age 70 and age in Bonds.

 

[RunningBum]

Most of the numbers seem high to me. I roughly value the SS+pension at about $500K. That equates to $3M net worth. I'd probably go 3.5% WR, for $105K spending, reduced when SS & pension kick in such that the total is still $105K inflation adjusted. Maybe my calcs are off.

 

[ImaCheesehead]

OP was also including some health related expenses in that set-aside.

Yes, that 100k was for a car, unusually high health exp and other random lumpy items

 

[ImaCheesehead]

If your DH is in poor health, do you want to wait till 70 for SS? Can you do spousal benefit?

I don’t think there is ever a point where the spousal is higher than my own benefit. I think we are a classic SS scenario: younger, lower earner wife, older higher earner husband. The calculators I have tried have me going at 62, and him at 70. I sure hope he will live to 70, and then at some point I would have the inflation adjusted survivor benefit. I just am ignoring my benefit as it isn’t that much in the big picture

 

[ImaCheesehead]

I would:
1. Leave stock at 65%.
2. Take SS at age 62.

2. Mine (as planned) or his?

 

[ImaCheesehead]

Me, I'd max out at 100k.

Take my SS at 62; and his at 70 to maximize survivor benefits.

With the cash set asides, I would not drop my stock allocation below 60%.

Even though no legacy needs, I would not aim on spending down to zero as should you need long term care - you want really GOOD long term care.

Definitely not to zero. I do want to have options. One long term plan is to look for a CCRC. I worry though that he would not qualify by the time we would want to join one. I don’t know how strict their requirements are, and I don’t want to move to one when I am in my early or mid 60’s.

Thanks for your comments!

 

[street]

^ I would do the same and that would be for both of you.

 

[ImaCheesehead]

Most of the numbers seem high to me. I roughly value the SS+pension at about $500K. That equates to $3M net worth. I'd probably go 3.5% WR, for $105K spending, reduced when SS & pension kick in such that the total is still $105K inflation adjusted. Maybe my calcs are off.

SS and Pension together are 49k. At 3.5% that would be 1,400k equivalent. Added to my “after carve out” balance of 2,100k that would be 3500k NW, so pretty close to the 3000k you mentioned. 105 would come out to 3% of 3500k, but I definitely think that would make lots of people more comfortable than 4%.

 

[MarieIG]

Definitely not to zero. I do want to have options. One long term plan is to look for a CCRC. I worry though that he would not qualify by the time we would want to join one. I don’t know how strict their requirements are, and I don’t want to move to one when I am in my early or mid 60’s.

Thanks for your comments!

Depending on your DH's needs, you may be able to hire at home care for him, for a while. I did that for my DF. He did not want to go into a nursing home and we didn't want him there. (He got daily care from the family + I hired at home round the clock care, as he needed a lot of care the last two years.)

 

[NanoSour]

Ran your numbers through ESPlanner Basic and came out with total spending after taxes of $119,108. Don't know your state so I randomly chose MA with a tax rate of 5.3%.

That number is based on 4.0% real return across all accounts.

You can try this yourself. Google ESPlanner Basic.

 

[Perryinva]

$120k/yr, with COLA increases, IMHO. Adjust accordingly every 5 years or so. My $0.02. You don’t say what your current spend requirements are. We only really need $8k/mo, gross, including paying taxes, to be quite comfortable. We planned for $12k/mo so that there was plenty of cushion. I want us to struggle to understand what to do with excess income. I’m sure we’ll come up with something...

 

[ImaCheesehead]

Ran your numbers through ESPlanner Basic and came out with total spending after taxes of $119,108. Don't know your state so I randomly chose MA with a tax rate of 5.3%.



That number is based on 4.0% real return across all accounts.



You can try this yourself. Google ESPlanner Basic.

SD for us, so even better[emoji2][emoji2]

 

[ImaCheesehead]

$120k/yr, with COLA increases, IMHO. Adjust accordingly every 5 years or so. My $0.02. You don’t say what your current spend requirements are. We only really need $8k/mo, gross, including paying taxes, to be quite comfortable. We planned for $12k/mo so that there was plenty of cushion. I want us to struggle to understand what to do with excess income. I’m sure we’ll come up with something...

LOL, good problem to have!

I didn’t say what our current spend was as I was curious as to what others would do in my situation. The numbers have been fairly close, except for W2R, who agreed with the others on max spend, but wouldn’t spend that much herself.

The responses have surprised me a bit, I thought there would be more conservative suggestions because it always seems like I am reading posts from 2% ers.

I wouldn’t spend as much as most have suggested. Over the last few years we have averaged less than 55k per year, after taxes, but after retirement the big issue is health care expense and I expect that to increase our spending for some number of years.