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Old 01-17-2020, 08:07 PM   #41
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Budgeting and keeping completely out of debt are two great ways to ensure your funds last longer.
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Old 01-17-2020, 08:57 PM   #42
Recycles dryer sheets
 
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I focus on Adjusted Gross Income for the year, not "spending".
AGI includes Roth conversions, of course.
Levelizing your AGI from your 60s into your 70s is the best course.
This assumes, of course, that your income exceeds your actual expenses by a comfortable amount, which isn't the case for everyone...
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Old 01-17-2020, 11:38 PM   #43
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Just finished first year of RE, with the budgeted & actual spends within $100, & we breathed a sigh of relief.

Pulled out $79K, & the market made that up, plus $35K, so if the politicians don't screw things up, wife & I should be in petty good shape, indefinitely.
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Old 01-18-2020, 01:06 AM   #44
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so if the politicians don't screw things up, wife & I should be in petty good shape, indefinitely.

From your mouth to Godís ears. I donít have much faith in that group.
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Old 01-18-2020, 06:55 AM   #45
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Originally Posted by TheWizard View Post
I focus on Adjusted Gross Income for the year, not "spending".
AGI includes Roth conversions, of course.
Levelizing your AGI from your 60s into your 70s is the best course.
This assumes, of course, that your income exceeds your actual expenses by a comfortable amount, which isn't the case for everyone...

I'm not sure what that means, I can almost make my income whatever I want other than the dividends and interest from VTSAX. So I have a few things that I'm working at while generating enough income. I want to minimize taxes now and in the future and I want to do Roth conversions.
This year I had some income that I won't have in future years and I couldn't get a good handle on predicting my total income, (turns out I think I did). My plan was to Roth convert as much as I could staying in the 12% bracket. But, Like I previously said, I paying one of my childrens high tuition bill, I needed to generate income to cover that, so I sold LTCGs up to the $78,750* 0% tax limit and generated enough income and tuition money for 2020 in 2019. When I get towards the end of 2020, I'll be planning how to cause the lowest tax bill while generating the income I expect to need in 2021. Hopefully by then I'll be able to figure my tax bill more precisely.


*I had enough of a gain that I pulled out $126k, but only $78,750 of that was gains.
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Old 01-18-2020, 10:51 AM   #46
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Haven't had an issue with this. Have a pretty decent budget and have been within 5% of what I forecasted for four years. I built in some fluff but feel comfortable so far. Things can change but know SS in in the back pocket takes any stress off.
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Old 01-19-2020, 10:21 AM   #47
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I'm not sure what that means, I can almost make my income whatever I want other than the dividends and interest from VTSAX. So I have a few things that I'm working at while generating enough income. I want to minimize taxes now and in the future and I want to do Roth conversions.
This year I had some income that I won't have in future years and I couldn't get a good handle on predicting my total income, (turns out I think I did). My plan was to Roth convert as much as I could staying in the 12% bracket. But, Like I previously said, I paying one of my childrens high tuition bill, I needed to generate income to cover that, so I sold LTCGs up to the $78,750* 0% tax limit and generated enough income and tuition money for 2020 in 2019. When I get towards the end of 2020, I'll be planning how to cause the lowest tax bill while generating the income I expect to need in 2021. Hopefully by then I'll be able to figure my tax bill more precisely.


*I had enough of a gain that I pulled out $126k, but only $78,750 of that was gains.
Levelizing your AGI tends to keep your income taxes about the same year to year rather than having a big jump in taxes when you start SS and RMDs, for instance. And it keeps your Medicare IRMAA tier somewhat stable.

So I've been projecting my AGI for future years since I retired in 2013. My age 72 year (2022) is now my target with the change in RMD age.
So yes, I will continue doing moderate Roth conversions for two more years while avoiding the next higher IRMAA threshold...
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Old 01-20-2020, 12:44 PM   #48
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I set our first year of retirement spending at $50k, it end up at about $60k.
That's not a problem, we have plenty of reserve.
I'm going for the same $50k this year because last year was a very exceptional year for us. We had a hurricane and about $80k of damage to our home, most of it was covered, but we had some additional expense. I still have two kids on my dole. I have tried to get their expenses into another column to help me know just what our spending is, but I didn't get them separated well for 2019. In fact I slipped up yesterday and paid my son's tuition out of our spending account instead of the other money account. Only six months and he should be off our dole, and about two more years for my daughter, she's the expensive one, she going to dental school and we are paying the tuition, which costs more than our expenses last year.
Love my kids, but it will be nice when they are on their own.
Wow, paying for dental school is incredibly generous. In our pre retirement budget, we drew the "line" at grad school, but my wife and I will probably kick in most of their expenses for that as well. It will be significant but it really doesn't impact our retirement life style and as long as the schooling leads to good career possibilities, we look at it as ROI.

I have also given up trying to track the spending for my adult kids or detailed spending tracking in general. Why bother when I am no longer trying to maximize my savings to reach RE, and I've the wiggle room. Now keeping an eye on credit cards at the end of each month, tamping down on recurring expenses, and planning for lumpy expenses seems to be enough.
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Old 01-20-2020, 04:58 PM   #49
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Wow, paying for dental school is incredibly generous. In our pre retirement budget, we drew the "line" at grad school, but my wife and I will probably kick in most of their expenses for that as well. It will be significant but it really doesn't impact our retirement life style and as long as the schooling leads to good career possibilities, we look at it as ROI.

I consider we are so lucky to be in the position to be able to pay her tuition. Things have just worked out for us as far as our investment life.
A while back, using our SS statements, I used an inflation calculator and took our income from 1981 and found what that is in today's dollars. I put this in a spread sheet for every year until we retired. Our average income
over our married (savings) years, in today's dollars is about $72k. So we were not high earners, but good savers. We retired in the 94th percentile of the net worth of Americans. Our first year of marriage (1981) we earned
$18k and saved $6k, first time I ever saved any money was our first year of marriage.
To add to this, these last 9 years, when we had already accumulated a sustainable nest egg, the market just took off like a rocket!
We have everything we need and just aren't big spenders, so we have way more than we need, I expect the kids will get a nice inheritance, so why not give it to them now*, if it is for a great cause. We do have a trust and expect some of that tuition subtracted and the other child will get that same amount added to inheritance.
Also, I would hate to see my kid start life $275,000 in debt, after growing up with parents who never had any debt.

Quote:
I have also given up trying to track the spending for my adult kids or detailed spending tracking in general. Why bother when I am no longer trying to maximize my savings to reach RE, and I've the wiggle room. Now keeping an eye on credit cards at the end of each month, tamping down on recurring expenses, and planning for lumpy expenses seems to be enough.
I just want to put kids in another spending category because I want to know my spending. In our second year of retirement, so still need to get our real yearly spending pinned down.


*There is one downside, I like to crunch and watch the numbers. Writing these big checks, I may not always see the net worth get bigger, this year net worth grew 5% after all our spending, so that's good, but in a more normal 10% stock market, my net worth would have dropped.
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Old 01-20-2020, 05:34 PM   #50
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Originally Posted by imnontrad View Post
Budgeting and keeping completely out of debt are two great ways to ensure your funds last longer.
Exactly.
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Old 01-21-2020, 01:15 PM   #51
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Time2,

Your household has built up some spending discipline muscle we have yet fully developed. It is great that you are in a position to help your future dentist, especially when you put your selves in position to do so on modest income.

I am anticipating the day when we will all see our NW numbers fall on paper. That phase will be the litmus test for my naisant retirement budget.
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Old 01-21-2020, 02:50 PM   #52
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Time2,

Your household has built up some spending discipline muscle we have yet fully developed. It is great that you are in a position to help your future dentist, especially when you put your selves in position to do so on modest income.

I am anticipating the day when we will all see our NW numbers fall on paper. That phase will be the litmus test for my nascent retirement budget.

Our discipline was a way of life for my wife who was an immigrant. I notice 3 months after we married, we had $1,500 saved, having that money saved was new to me, that's when I jumped on the frugal bandwagon, and by the end of our first year we had accumulated $6,000. That year 1982 we earned $18,000 total. I have to admit we did get $586* as wedding gifts that was part of the $6,000. *(wealthy family :-)

As to the modest income, I still look back and I am amazed at how well we have done. I never felt like we were poor, and after crunching the numbers we were on average several percent above the US median income. I always thought our income was lower middle class. The real
kicker is compound interest, which we all have heard, but yes, after 37 years of saving, that compound interest really works. Our net worth is more than we earned over our 38 yr marriage.
I hope that is a little support for those just getting started.
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Old 01-21-2020, 02:58 PM   #53
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dental school and we are paying the tuition
Excellent planning Time2!

Too lazy to find a link, but a very common theme among ER folks encountering unexpected expenses is in the area of dental work... Need more as we get older and typically have no insurance... I assume you've worked out a "lifetime zero deductible dental care" agreement...
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Old 01-21-2020, 03:48 PM   #54
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Excellent planning Time2!

Too lazy to find a link, but a very common theme among ER folks encountering unexpected expenses is in the area of dental work... Need more as we get older and typically have no insurance... I assume you've worked out a "lifetime zero deductible dental care" agreement...

She has a couple of years of school left, maybe I can get that worked out! :-)
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Old 01-23-2020, 11:58 AM   #55
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Time2,

Two-saver couple on Median wage beats a one saver-one spendy couple, no matter the wage level, everytime I bet. Luckily, my DW only leans towards spendy :-)

I agree, compound interest is sweet, although I didn't save as well during the early years and played around with individual stocks too much for it to overtake my savings. Compound interest is really kicking in now in RE though!
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Thoughts?
Old 01-23-2020, 01:48 PM   #56
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Thoughts?

Just turned 59.5. Got 1.1mil in 401k, about 160K of it is Roth/after-tax. About 60k in savings/ira. I get a pension of about 2100/month. Wife gets SSI and a small pension and is on Medicare.

Live in Central Wisconsin. No mortgage or car payments. No kids. I've been tracking expenses for a year, minus some 1 time expenses for retirement (trust setup), we spent a touch less than our take home pay. About 5900/month vs 6050/month. My wife and I spend money like water and could cut back in a lot of areas such as I go out to lunch every day (8/day avg), eliminate cable TV and just keep internet (would go from 190/month to less than 60/month), go from 3 vehicles to 2, etc.

I also have a 40 acre woods that I use for hunting and firewood. Would plan on selling it some day, (10-20 years from now). Should be worth around 100K.

Our thought is to keep taxable income under ACA limit and take about 2500/month out of Roth until I'm 65 and then collect SSI. I can get ACA health for myself at less than 200/month.

We don't plan on traveling much. Do have a trip planned for New Orleans and possibly some driving trips to visit relatives. Wife would like to do some house updates, new flooring, redo the master bath, etc. Some of these I am skilled enough to do. I have a number of projects to do around the house and in my shop, so I won't be bored for awhile. I also hunt, fish and golf.

I have thoughts about cash work, such as maintenance/handyman for folks and firewood selling (we live next to a campground).

I'm also negotiating with my currently employer for 2 days a week at a very high hourly rate (not sure I want the headaches). I've worked in IT for over 30 years and am a senior technical person for them currently.

Bottomline, I think I can swing ER without having to work. But MAY work part-time. If I work part-time, then we would plan on living beyond the ACA limit and my health care would be about 500/month.

What are everyone's thoughts? Do you think we can swing ER? Reading some of your experiences where you spend more money in retirement than when you were working, makes me a bit nervous. I don't think this would happen to us, but until I'm retired, I won't know for sure.
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Old 01-23-2020, 02:45 PM   #57
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JayNak,

Hello and congratulations. You can post your info on the "Hi I am..." page to get feedback.

Copy your message, Goto "Community Forum", then start a new post and others will be able to see your introduction and provide you with their thoughts on your RE plan.
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Old 01-23-2020, 05:57 PM   #58
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Personal finance is personal of course so it's not surprising that a broad rule (like 70-80% of your working income) would not line up well to one's own situation, especially with the skewed demographic in this forum that is likely more in tune with their finances and have loftier retirement goals. The average Joe is likely scraping into retirement while allocating that other 20-30% during a majority of their work life towards supporting their kids, paying their mortgage, and savings.

Our strategy is about tracking expenses, identifying our retirement goals, and building a buffer with a healthy discretionary bucket. We currently don't budget in the strictest sense but we try to ensure our spend is focused while ensuring our savings goals are met first and then see how our spending is trending at month's end. However, I'm curious how easily mentally, we'll be able to turn on the taps in retirement and if we need to start with a budget to give us more confidence to spend.
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