Please critique our plan...

[crncrk]

We are planning for me to retire Jan 2024, and DW to retire Jan 2025.
Some background on us:

We have no debt, home is paid off. Two adult independent kids. LCOL area. No pensions, no inheritances, no employer health care benefits when we retire. Our fed tax is 22% and our state is 6%. We have always managed our finances on our own and plan to continue doing so. Mostly low cost diversified index funds.

I'm 57 85k salary
401k - 940,000
R401k - 80,000
RIRA - 295,000
Plan to take SS at FRA (67)- 34,000 yearly

DW is 51 110k salary
401k - 250,000
RIRA - 525,000
Plan to take SS @ 62 - 23,000 yearly

Joint Brokerage - 50,000
Joint Online savings- 100,000

Our 2022 spending will be 59,000 and this is consistent with the last couple of years.

Our annual contributions are:

Both max out RIRA (7,000 each)
Both max out 401k, (27,500 each) except beginning 3rd Qtr this year I stopped contributing and instead send that amount to the online savings account. We would like to build up 3 years worth of spending in this account. (My employer contribution is not dependent on me contributing)
Brokerage account 12,000 yearly.
We add to online savings account when possible.

We don't anticipate our annual spend being any less in retirement, it may even increase a bit.
We probably won't pull from the retirement accounts until 1/2025.
We plan to manage income to qualify for an ACA subsidy.
We estimate our total spend in early retirement including taxes and health care to be under 100k.

On 1/2025 we plan to begin pulling from my 401k, while watching our MAGI, then using Roth/Brokerage/Savings to fill in any gaps.

Do you see any holes in our plan, or ways we could improve?
Thank you

 

[street]

I'm far from an expert to give much detailed advice but I see a solid plan and goal setting which you have done.
With 2.5 million in reserve now with a couple years left till retirement I see no problem in your plan, and you should have expenses covered well. With SS income of ~56K that is going to cover most of your expenses. I do know you mentioned 100K expenses after ER but still should be fine to enjoy life.

https://firecalc.com/ Here is the calculator to see how you stack up with the info you enter.

One thing that is very important is to always leave room for the unexpected and all that goes with it.

 

[pacergal]

Your plan looks good. Agree with street--run firecalc to check your numbers and plan.
Also under the Forums is a FAQ sticky "some important questions to answer before you retire". Answer those honestly.
That and firecalc will give you some solid footing.

Welcome to the Forum!
There are some very knowledgeable folks here and many are willing to answer specific questions, so feel free to ask away.

 

[GalaxyBoy]

Welcome!

What they said above. I like that you omitted your house equity from your list of assets when planning for ER. You can't eat illiquid assets like a house!

You didn't say what your plan is for health insurance before Medicare age, but I suspect you're planning on an ACA policy?

It's good to run some numbers to get an idea of what your actual spending will be in retirement, including insurance, taxes, possibly Roth conversions, travel, and amortization of big-ticket items like replacement cars, roofs, water heaters, etc.

I expect firecalc might tell you "why are you waiting?" Good luck and congrats.

 

[aaronc879]

Have you checked to see if your company's 401K plan allows for penalty free withdrawals starting at 55? If it does then I would say you could retire anytime, no need to wait. If not, I assume your wife's retirement date of January 2025 corresponds with the time you turn 59.5? Then you would take out enough from your 401K to have enough MAGI to qualify for maximum ACA subsidies then use you cash or Roth accounts to cover the rest of your spending needs. That way your health insurance is basically free and you pay little to no income tax until RMDs start. You should be all good. Congrats.

 

[crncrk]

Thank you for the replies and the welcome. There is so much valuable information on this site.
The numbers do look good in Firecalc. We will keep building a buffer against the unexpected as Street mentioned.
My 401k does include the "Rule of 55" so that is another option.
Thanks again for the feedback.

 

[matjung]

I am too far into being an Index expert:
"cost diversified index funds."
Most funds have a bias towards the US.
You are diversified within your country only.
Then, a lot of indexe have a bias towards large cap tech companies.
The dot com bubble lasted - how many years?
We will find out, what survives Nasdaq & co this time.
When I look at your numbers, why do you wanna wait until 2024?
Do you expect to get a big bonus at the end of 2023?
Due to inflation, your spending might go up.

Do you pay rent / mortgage?
Money for a place to stay may go up.

Any thoughts about reducing to part time work?
Do what you enjoy most, not what you get paid for most.

 

[wolf]

Looks good. Just plan for medical insurance. Dental, Vision, not covered by medicare.
Should not be an issue. So long as you have a plan.
Good luck.

 

[crncrk]

Thanks for the feedback.
The reason I'm waiting until 2024 is just to build the cash account. Through our accumulation stage most of the money went into Roth and Traditional accounts.
Although we have a good handle on our spending, having more buffer for the unexpected feels right.
These forums are a great way to see how others do it. I have few in my circle of family and friends that are comfortable discussing finances.
We have been working and saving to get to this stage, and now that we are closer it seems like the real work is starting!

 

[Midpack]

It does look like you're in good shape. My only question is why are you planning on SSA at 67 & 62? Not an underhanded suggestion, just a question as you may have perfectly good reasons.

And as others have said, that's a very long time to handle health care expenses on your own, but I'm sure you realize what that will cost you both. I assume you're planned spending will increase significantly for health care.

 

[crncrk]

When I checked opensocialsecurity.com it showed the recommended strategy is for me to take at 70 and DW at 62. Also, DW's parents both passed before they were able to take SS. Although there is no current reason to believe she won't make it that far and longer, she has mentioned taking at 62. As for me, it would depend on how our finances are looking at the time I turn 67. I am open to waiting and it would leave her with more if I go first.

For health care, with the way our finances are split between Tax deferred, Roth, and Taxable/Cash, we should be able to manage MAGI for ACA subsidies.

Just typing this out sure gets me to thinking about all of the different strategies.

 

[Midpack]

When I checked opensocialsecurity.com it showed the recommended strategy is for me to take at 70 and DW at 62. Also, DW's parents both passed before they were able to take SS. Although there is no current reason to believe she won't make it that far and longer, she has mentioned taking at 62. As for me, it would depend on how our finances are looking at the time I turn 67. I am open to waiting and it would leave her with more if I go first.

For health care, with the way our finances are split between Tax deferred, Roth, and Taxable/Cash, we should be able to manage MAGI for ACA subsidies.

Just typing this out sure gets me to thinking about all of the different strategies.

Good answers, best of luck.

 

[Tiny]

We are planning for me to retire…

Do you see any holes in our plan, or ways we could improve?
Thank you

You are financially independent and can retire anytime, and your problems will not be financial for the rest of your life!

Go pursue those things that are most important to you, and care for those you love. Maybe take your kids and wife on a nice trip, build more memories, help them buy a house, etc. Nice work, and best wishes!

 

[ivinsfan]

You do need more cash to keep income lower for ACA suggest you both do only the minimum for a match ( for your DW) and do some cash. Concentrate on lower income until you hit 65 the ACA credit is not as valuable after one of you hits Medicare.. When you hit Medicare your HI will rise fairly dramatically. Read some ACA and Medicare threads to see how this works out, it's worth paying attention. Your spouse will need 12 years of ACA so at some point that might get fairly expensive. For that reason it doesn't really make sense for your wife to take SS at 62 ...it will add to your income. Looking at your ages you would have 2 SS checks coming for the last few years she needs an ACA subsidy and I might add it will be her most expensive years as well. Cash is king collect as much as you can, it's paying a decent return as well...



I don't know what your online saving account is paying but make sure it pays a good rate. VUSXX has an average 7 day yield of 4.33...


It's also nice to let the Roth grow tax free if possible..see how much cash you can put together in the next couple of years. aaron had some good comments about taxable income...Roth conversions can help out in that regards as well.

You have lots of options which is nice.

 

[marinauser]

I would spend the next couple of years building up you taxable accounts. The OP doesn't say anything about current expenses or living arrangements which makes it difficult to understand the $50,000 yearly expense total and how that will be allocated. Without that understanding, I am not sure whether there is a way to assess whether you have sufficient assets - especially with several years before any planned social security income.

 

[ivinsfan]

I would spend the next couple of years building up you taxable accounts. The OP doesn't say anything about current expenses or living arrangements which makes it difficult to understand the $50,000 yearly expense total and how that will be allocated. Without that understanding, I am not sure whether there is a way to assess whether you have sufficient assets - especially with several years before any planned social security income.

I think they certainly have sufficient assets, how to deploy those assets is the question.. HI costs can vary widely depending on taxable income so that's worth talking about.

 

[pb4uski]

It looks like you'll have sufficient access penalty free. You're 57 now and will be 58 when you retire in Jan 2024 but your DW will be working until Jan 2025. So'll you'll only have 1-1/2 years or less to live on taxable account money until you are 59-1/2 and have penalty free access to your retirement accounts. You have enough in taxable account fund and Roth contributions to get to 59-1/2.

What you might consider is to drop your tax-deferred contributons to only maximize any match and then save the difference after-tax to give you a little more cushion... or perhaps wait until 2024 after you are done and you only have her income and are in a lower tax bracket.

 

[crncrk]

Thank you all for taking the time to reply.
With DW maxing 401k, and me sending contributions to cash instead of 401k, we stay in 22% bracket and don't hit any other income trigger levels. Once I retire, DW can drop contributions to just getting match, and send the balance to cash. We can stay that way as long as she wants to keep working. We can live on one income, and stay in the 12% bracket.
We'll have enough cash and after tax to get me to 59.5
When she stops working and we need HI, we'll manage MAGI for an ACA subsidy.
I am starting to feel we have over funded tax deferred...but I'll whittle that down if there is room in the 12% bracket.
I see that her taking SS at 62 may not be the best strategy for ACA subsidies.
Our online savings is at 3.4% currently, and I will look for a better place to park the majority of that cash.

Great points, thank you.

 

[FREE866]

You're miles ahead of the game and deep in the endzone. No need to work another day---seriously. Don't go into work Monday--tell them you're done!




Congratulations!

 

[cyber888]

Congrats on your hard work to save. You can retire now. No need to wait. Jut do it.

Did you do some ACA calculations on healthcare.gov on your monthly premiums? Are you doing HMO or PPO ?