Planning for 2023

[wannabefire]

I'd like feedback on our plan:

Early 50s couple, dual income, kids out of house and looking to possibly be done working in 2 years (coincidentally when youngest turns 26). Plan to add another $300k to the Assets before calling it quits. Also, planning for ~45k/year in combined SS at age 70 (assumes 25% haircut). No plans for going back to work if possible.

Current Net Worth

Assets
*Taxable	$2.0M
*Tax Deferred	$1.7M
Real Estate (2 houses)	$1.5M
Total Assets	$5.2M
Liabilities
Mortgage on house 2	$.4M
Total Liabilities	$.4M
Net Worth	$4.8M

* 60/40 Equity/Bondlike Allocation

Expected Expenses Year1

Expenses:
Fixed (includes $25k healthcare assumption)	$50k
Discretionary/Variable (includes travel & charitable giving)	$42k
Total	$92k

Does not include taxes


Here's my questions:
1) Reasonable to think we can be DONE in two years?
2) How would you adjust the Allocation for a 40+ year retirement?
3) What are we missing?

Thanks in advance for any feedback!

[38Chevy454]

Let's call it $3.5M invested assets in two years with your contributions for easy math. Using 4% withdrawal rate you can get $140K; or if you want to be conservative, 3% is $105K. Both of those are far above your $92K budget. That's before SS even adds to the safety factor.

No concerns for 2 years out, you could retire today if you want and still be plenty safe.


60/40 allocation works, but you need to know your risk tolerance.


Only question would be have you included all your costs like healthcare that may increase once you are not working? have you included taxes? Large house repair or upgradse expenses? New vehicles? What do you plan for long term care?

[Dash man]

I agree with was said above. Check on a plan for healthcare and budget for the big expenses. I think you’re good to go!

[wannabefire]

Quote:

Originally Posted by 38Chevy454 Let's call it $3.5M invested assets in two years with your contributions for easy math. Using 4% withdrawal rate you can get $140K; or if you want to be conservative, 3% is $105K. Both of those are far above your $92K budget. That's before SS even adds to the safety factor. No concerns for 2 years out, you could retire today if you want and still be plenty safe. 60/40 allocation works, but you need to know your risk tolerance. Only question would be have you included all your costs like healthcare that may increase once you are not working? (Healthcare is included at $25k/year) have you included taxes (Taxes have NOT BEEN INCLUDED)? Large house repair or upgradse expenses (Maintenance of $1200/year)? New vehicles (10k/year placeholder)? What do you plan for long term care (self funded, combination of HSA, possibly downsize home and available assets - as mentioned SS should provide a good cushion)?

Thank you for your response!

See above in Red

[pb4uski]

You're good to go. Even if the entire withdrawal was taxable you would need to withdraw ~$104k to net $92k to spend after federal and Colorado state income taxes.... $104k/$3.7m = 2.8% WR.... plenty safe. Good luck.

https://www.irscalculators.com/tax-calculator

[wannabefire]

Quote:

Originally Posted by pb4uski You're good to go. Even if the entire withdrawal was taxable you would need to withdraw ~$104k to net $92k to spend after federal and Colorado state income taxes.... $104k/$3.7m = 2.8% WR.... plenty safe. Good luck. https://www.irscalculators.com/tax-calculator

That calculator is very handy!!!

[jebmke]

looks fine. I would advise to not exclude taxes from any expense analysis. Taxes are our biggest expense, even though our tax rate is very low.

[Exchme]

Seems very likely that you are OK to retire, so the decision to work longer would be based on deciding which would you enjoy more (no objective right or wrong answer!)

a)working extra and then spending some more money on nice things, travel, vacations with kids, gifts to possible grandkids, inheritances for your heirs, etc.
or
b)more time to be retired during your healthiest years at your current standard of living

For asset allocation, you have a long time to fund and bonds are paying nothing, so I personally would run a somewhat higher stock percentage, but the main thing is that you run no higher than your stomach can stand in a downturn. If you increase your stock allocation now and then panic in a downturn, you would have been much better off not trying to reach for that extra bit of return in the first place.

One optimization you may not have thought of - put your bonds in tax-deferred. You need to slow the growth of that account. If there are a bunch of stocks in there and you don't make some withdrawals or Roth conversions, it could potentially double twice by the time you hit RMD age and then the tax torpedo goes off, especially after one of you passes.