We've hit our number, problem is the budget doesn't fit in it

[LarryMelman]

Quote:

Originally Posted by Ronnieboy Throwing out fictional round numbers: $2m in savings to produce $100k/yr in spending money. Have passed our number by 10%, but 85% is in tax deferred. House not close to being paid off. Annual expenditure is 125-150% of want we want/need (<$100k/yr)

Your "number"
a) was based on a 5% withdrawal rate, which no one here would recommend,
b) is supposed to generate $100K/yr "spending money" so you didn't consider taxes at all, making your withdrawal rate more like 7% or 8%,
c) you spend much more than you thought, requiring a withdrawal rate of perhaps 12%.

What kind of plan is that?

Quote:

Originally Posted by Ronnieboy we have never budgeted and I know we aren't about to start but we have been good at fitting our spending into what we have available.

I don't expect that many people on this forum can relate to that attitude at all. You spend "what you have available" and have very little savings outside of tax-deferred. How do you sleep at night?

[Blue531]

The typical general target is to get to a minimum of 25x your annual expenses in terms of reaching basic financial independence. That is the amount for a 4 percent swr. $100K (annual expenses) times 25 equals $2.5 mil needed, at minimum. Most seem to add a cushion to that before retiring by getting at least 30x. But since you live on $150K and you don't see a need to budget, the amount you need is at least $3.75 mil. To be on a safer side, multiply $150K x 33, you would need $4.95 mil $2 mil is only enough to live on $80K.

Life is about choices. You get to choose. If you still want to live on $150K a year, keep working and investing until you get the amount you need. If you really wish to stop working altogether, make the necessary changes to do so. This would require budgeting, sizing down possibly, moving to a cheaper area maybe, learning to live on less, not having everything you want, etc. Depends on which choice you want more. When you decide that, then you will know what to do.

You may very well have to keep working up until 59 and a half on a full time basis even. Or perhaps work full time for two or three more years and then cut back to part time. If all I had was in tax deferred investments, I would begin asap chucking as much of my income as I could into taxable investments until I thought it was safe to go part time, assuming that is before 59 and a half. It helps to have a sizable taxable brokerage account and/or a significant amount of cash if you want to leave the workforce before 59 and a half.

[pjigar]

Quote:

Originally Posted by Ronnieboy Hello everyone, Throwing out fictional round numbers: $2m in savings to produce $100k/yr in spending money.

$100K spend from $2M is truly fictional. Try to run your numbers in Firecalc and get a better picture. Get a count of your accurate current and future expenses before you run Firecalc.

[RetiredHappy]

Quote:

Originally Posted by RobbieB You are over "budget" by 50 grand a year yet have a 2% WR? Why do you even have a budget?

Because I love sitting in front of my Excel spreadsheet each day. I have done that for 20 years or so.

[pacergal]

OP--as others have mentioned, you haven't hit your number if your budget does not fit in!
Either adjust your budget to fit what you have saved, or work longer and save more.

[pb4uski]

Quote:

Originally Posted by pjigar $100K spend from $2M is truly fictional. Try to run your numbers in Firecalc and get a better picture. Get a count of your accurate current and future expenses before you run Firecalc.

Not really "truly fictional"... FIRECalc with $100k spending and $2m for 30 years is 73.6%. 95% success would be spending of $80,672.

Add in $25k of SS and your're up to 98.3%.

[ivinsfan]

Quote:

Originally Posted by pb4uski Not really "truly fictional"... FIRECalc with $100k spending and $2m for 30 years is 73.6%. 95% success would be spending of $80,672. Add in $25k of SS and your're up to 98.3%.

But he wants 100K of spending money so 100K plus taxes on 100K...

[Retired Expat]

Quote:

Originally Posted by Aerides I would say no, or that's one heckuva part time gig. OP, as others have said, if your plan was based on a budget of $100k, but reality is you spend $150k, then your plan needs to change. You won't retire and suddenly drop spending, no matter how much you think you'll save on commuting and work clothing.

Depends what their particular retirement looks like.

Retirement can be a chance at renewal and a fresh start. Think differently and develop new more healthful and frugal habits. At work they gave me a new laptop every year and I tended to replace my home computer regularly as well. Now on my 9th year with the same MacBook as when I retired. I will replace it when it needs it. Sure it could be faster but I have more time now!

Truth is we live better, eat better, are healthier than ever before and not going shopping as entertainment or getting a new car every few years has opened other opportunities for our money. We save more now in retirement than we used to while working simply from a change in attitude and approach. That money gets invested in things that make money or give us joy. Not spent just because.

People have a number in mind as to what is required to retire but it often has nothing to do with the retirement lifestyle they want or need. It is usually some arbitrary goal based on how many zeros are involved and not what the life they had cost. 2 million may be a lot for some and not nearly enough for others

I have had many multi millionaire clients who never retired or thought about it since their lifestyle was so expensive, multiple mansions, staffs, private jet, etc. That Petrus doesn’t come cheap. . But I realized I can’t tell the difference between a $200 Merlot and a reasonable $15 Malbec.

[Music Lover]

You have 2 options:

1. Keep working until you have enough money.
2. Learn to spend less.

There are plenty of people here who live on a fraction of $100k a year and who live quite well. But only you can decide what is a necessary expense or what is frivolous or wasteful.

[kcowan]

OP you have done some work on the revenue side. Now is the time to seriously put together a budget and see where there is fat you can shed. We did this and eliminated $20k without downsizing or hardship.

Plus how much PT is PT? Can you work extra hours until you manage the budget? Nothing brings it home like: If we spend that extra $10k, I will have to work 8% longer!

[Golden sunsets]

Quote:

Originally Posted by RetiredHappy Because I love sitting in front of my Excel spreadsheet each day. I have done that for 20 years or so.

Ha Ha. Me too.[emoji4]

[F.I.R.E User]

Quote:

Originally Posted by qwerty3656 There is a concept where if you leave your job at 55 (the IRS rule of 55) that you can get access to your 401k money w/o a penalty. If you leave early, I don't think it works

What happens if an employee leaves at 56?

[Aerides]

Quote:

Originally Posted by Retired Expat Retirement can be a chance at renewal and a fresh start. Think differently and develop new more healthful and frugal habits.

But that's a big risk. If you can't reduce your spending to your goal after retiring, it's too late. A lot of people have goals to do that - and grats to you for succeeding, but most people have more of an issue.

The OP also mentioned a plan to have paid of their mortgage by now... but didn't, and then says they spend what's available. So, they weren't even putting that extra $$ into the mortgage before determining what was actually available to spend. There's a big disconnect.

It's like buying an outfit too small and saying I'll lose weight by the time of the event in 2 weeks. Doesn't always work out, buy the outfit that fits.

[RetiredHappy]

Quote:

Originally Posted by Aerides It's like buying an outfit too small and saying I'll lose weight by the time of the event in 2 weeks. Doesn't always work out, buy the outfit that fits.

I still have several of them, new and not worn waiting to lose that weight.

[ThunderFIRE]

If you go to part time, you may likely lower your top tax bracket (by 2% or possibly even 10%, depending on your current income). In my opinion, that makes your pre-tax 401k contributions less attractive (especially with the small company match).

One of the best things I did was start investing any extra savings in a taxable account. It is one of the main reasons I can retire at 53 or 54 and not have to worry about accessing our 401k's until later in life.

[ivinsfan]

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Originally Posted by RetiredHappy I still have several of them, new and not worn waiting to lose that weight.

I don't have to buy too small I'm sure washer shrinks them when I am not looking....

[Out-to-Lunch]

Quote:

Originally Posted by F.I.R.E User What happens if an employee leaves at 56?

The rule is 55 or older.

[ncbill]

No info on what part-time would pay but a $100,000 income from only a tax-deferred account (assuming no penalties, so 55 or older for 401k) for MFJ is under $9,000 in federal taxes.

[RetiredAt55.5]

Quote:

Originally Posted by Out-to-Lunch The rule is 55 or older.

Technically, I think the rule is that you are eligible if you retire in the same year that you will turn 55. So, you can retire before your 55th birthday and be eligible.

[RetiredHappy]

Quote:

Originally Posted by ivinsfan I don't have to buy too small I'm sure washer shrinks them when I am not looking....

That too!