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

[pb4uski]

$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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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

That too!

 

[BlueberryPie]

OP, I guess your number wasn't calculated with the right input, so you haven't reached the right number

The good news is you can step down in stages. You are quite lucky that you have a job that can be scaled down to part-time, mine feels like an all-or-nothing job, and our company doesn't offer benefits for part-time employees

chin-up, or decide you're done and you need to make serious lifestyle changes to live with what you have now...

 

[Exchme]

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?



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?

+1

Classic case of lifestyle creep. Sounds like OP has no control of his spending and only saves the bit that goes into tax deferred where it's not so easy to withdraw. OP needs a wakeup call. These are peak earning years, so should be peak savings years, not spending it all and hoping to cut back to PT work while only roughly half way to FI.

OP is playing a financially dangerous game. Ageism is very real and showing the boss you are less than 100% committed is a good way to be out when you get into your 50's. And getting a comparable job will be much harder than for someone a decade younger. Asking to go part time is not only dangerous to the career, but he can't afford it. Cutting spending, by a ton or two, is the place to start.

 

[plex]

It is a little hard to comment on everything since this is a fictional fraction of whatever the OP's numbers actually are. As noted by others, I ran those numbers of 2.2M and spending of 125-150k, with a real tax rate of something probably in the low 20% range, and then two maxed social security benefits of $30k (which will also get taxed almost at 20%). Obviously with those numbers, it is impossible right now, the survival rate is 45% at 150k spending and 70% at 125k. The worst case in both has you running out in just 11-12 years, and living just on social security.

I doubt either spending level will work in just 1.5 years even at full time, you will need to get to 2.8M to be in the mostly safe range of 97% for $125k spending. So either you can't even switch to part time and need to work longer than planned, or you need to suddenly downshift your spending hard, which isn't really practical in just a bit over a year, unless you have done it for many years in the recent past.

I don't recommend not maxing your 401k just because it taxes you more later, you are in your peak earning years, and still need to save up a lot. Taxable is a terrible option for saving more money during peak earning years and when spending is $50k+, as you lose out on a huge tax benefit, even with almost no matching.

 

[indiajust]

I am confused by the numbers and statements. What about a rough ballpark method like Die with Zero. Years remaining alive times annual nut estimate, multiply by .7.

You seem to mention high costs several times. Excellent time to sell, downsize and rent in a LCOL location. Spend 5 years doing part time work and investing house proceeds. Then run your numbers again, reconsider buying.

 

[ncbill]

It is a little hard to comment on everything since this is a fictional fraction of whatever the OP's numbers actually are. As noted by others, I ran those numbers of 2.2M and spending of 125-150k, with a real tax rate of something probably in the low 20% range, and then two maxed social security benefits of $30k (which will also get taxed almost at 20%). Obviously with those numbers, it is impossible right now, the survival rate is 45% at 150k spending and 70% at 125k. The worst case in both has you running out in just 11-12 years, and living just on social security.

I doubt either spending level will work in just 1.5 years even at full time, you will need to get to 2.8M to be in the mostly safe range of 97% for $125k spending. So either you can't even switch to part time and need to work longer than planned, or you need to suddenly downshift your spending hard, which isn't really practical in just a bit over a year, unless you have done it for many years in the recent past.

I don't recommend not maxing your 401k just because it taxes you more later, you are in your peak earning years, and still need to save up a lot. Taxable is a terrible option for saving more money during peak earning years and when spending is $50k+, as you lose out on a huge tax benefit, even with almost no matching.

Probably a little too high...OP's effective rate is likely ~15%, federal & state (4.95% flat) combined.

 

[dawdmorgan]

72(t) withdrawals

Not sure if anyone has mentioned yet, but you can get to your 401k before 59.5 by taking 72(t) or SEPP withdrawals. It's a fixed amount you calculated based on an IRS formula and you take it out each and every year (or month) without the 10% penalty - until you are 59.5 and then do whatever you want. I started taking withdrawals at 45... You can split up your 401k if needed to get the right withdrawal amount as it is based on total balance at the start of the withdrawals.

 

[EastWest Gal]

Can you drop to PT and get benefits?

I think you could stop 401K contributions, but need to take that money and invest it in a low risk/no risk way and put it out of sight. I dropped 401K contributions when I first “retired”, went back to work for the next five years part time and never contributed again.

You need to focus on cutting spending. Base your “number” on what you actually spend.

Like the OP, I don’t keep a budget. We now spend less than our number indicates we can. Due to the wise folks on this forum, I sat down one weekend seven years ago and made a spreadsheet documenting our expenses, month by month, looking back for three years. We put almost everything on credit cards and pay them off each month. Everything else was recorded in the checking account, so it didn’t take much digging around.

Filling that spreadsheet out was an eye opener. It became obvious where we could cut spending. Mostly in monthly bills, which really add up. Switched to Ooma from traditional phone line. We cut some memberships. We changed our cell phone service provider. Cheaper gym membership, dropped in 2020 when we couldn’t go. Switched all our all our lighting to LEDs. Used a HELOC to put in solar, which doesn’t need to be fully paid off until we’re 95 years old. Dropped lawn and housecleaning service in retirement. Haircuts at the barber school. Timeshare was way more expensive than we thought, so we got out of it.

Another thing that showed is work related expenses. What expenses will be less in retirement?

Ask yourself some hard questions. Why isn’t your house paid off? Where are you overspending?

 

[MissMolly]

You all realize the OP has not been back on the site since they posed the question?

 

[EastWest Gal]

He posted in the thread twice. It's been a week. Doesn't mean he isn't reading. Who knows? I learn a lot from threads in which I don't post but only read.

 

[rodi]

What happens if an employee leaves at 56?

As others mentioned the 'rule of 55' is for people who turn 55 in a calendar year or earlier.

BIG caveat... not all 401k plans allow this. The IRS allows 401k plans to offer the rule of 55... but don't require it. You have to read the plan summary to make sure it is available before planning around it.

The alternative is to roll the 401k to an IRA and set up 72(t) withdrawals (also mentioned above.) Google it. The caveat with 72(t) is that you must follow the rules exactly, or possibly incur a big penalty.