Is it possible..........

[JAB01]

Hello - I am a newcomer to the ER organization. I am 53 years old and am planning to retire at the end of 2018. My annual spending is estimated to be $100,000 per year in retirement (includes health insurance costs - premiums and out-of-pocket - of $30k per year until I reach Medicare) My portfolio is $2,300,000 - $1,300,000 is invested in an individual investment account (after-tax) at 70% stock / 30% Bonds and $1,000,000 is invested in 401k/IRA accounts at 70% stock / 30% Bonds. I am planning for a 40 year retirement period. I am assuming Social Security payments will be $18,000 per year starting in 2027 - the only other income will come from investment performance. I have run these numbers thru FIRECalc and it gives me a 95% success rate. What I don't understand with FIRE is how it handles tax - for example, I will have to pay Fed Income tax on my 401K/IRA withdrawls, but don't see how to model this in the portfolio ? Can anyone run these numbers and validate? I am excited to join this community to share my experiences and learn from the many other members! All the best!!

 

[Midpack]

FIRECALC does not "handle taxes," you have to include taxes in your spending as an expense like any other. No calculator can handle taxes as there is no way to accurately project what taxes will be over 30-40 years or so.

 

[Sojourner]

My annual spending is estimated to be $100,000 per year in retirement (includes health insurance costs - premiums and out-of-pocket - of $30k per year until I reach Medicare)

You didn't mention whether you're married or have children, but it struck me that $30k per year for health care seems quite high. Even if you're paying, say, $1,500/month for insurance, that's $18k per year, and even the worst plans have OOP maximums of around $7K. Perhaps you're adding a "fudge factor" to cover HC inflation and to be extra conservative in your budget calculations?

By way of comparison, I'm 49 and single with no kids, and I'm paying less than $5,000/year (before ACA subsidy) for a high-deductible plan with an OOP max of $6,500.

 

[Sunset]

You need to include the taxes in what you spend, so if you take out $100K per year, then you pay the taxes and what is left is what you "really" get to spend.

An important thing to know is how much will you spend per year in total.
This includes: mort/rent/property taxes/ State taxes/ Fed Taxes, groceries, etc...

Your number of $100K is suspiciously round.

 

[JAB01]

Thank You Sunset!

 

[Huston55]

Just a couple comments:

1. If you plan to remain in the Louisville, KY area during retirement, COL is relatively low so, $100k/yr spend is a nice lifestyle.
2. You didn’t mention what AA you plan during retirement. If you plan to change it, I suggest running FIRECalc scenarios with a range including your new AA.

As MidPack mentioned, FIRECalc does not include taxes separately. But, a good tool that will give you a reasonable estimate is ORP (link below). It will also help you do a bit of advance tax planning.

https://www.i-orp.com/delta/index.html

 

[JAB01]

Thank you for the reply! I am married and have 2 children on our insurance for next 6 years maximum. My 30k per year can from my current employers healthcare plan - total premium is $13k per year and OOP is $13k - crappy plan so glad to hear I may not have this same cost.

 

[JAB01]

Thank you Huston55 - I will definitely look into the tax link.