45 and FIREcalc gives 78% success

[Sk08]

Ages in household, 45, 44, and 12

Would love to get opinions about what % success rate from FIREcalc is enough to comfortably pull the plug.

A few details

No debt, paid for house with siding and roof replaced 3 years ago with steel that has 50 year non prorated warranty.
Vehicles are in good shape, but over 10 years old, so a big unknown of when and how much will be needed for replacement.

80% mutual funds, 20% bonds,
investments as of today $1.2M Taxable, $400k Roth. With 25k cash in savings.

Current take home is $3100 per month, employer pays for health insurance.
Plan on withdrawing $5000 per month, and need to pay for health insurance.

Wife stay's home, so just need to figure out when I can comfortably stop working. I feel I'm close enough that if something happens at work I will put my notice in, I actually find myself secretly hoping for a reason... perhaps they will close and relocate us. It was proposed a few years ago, but didn't get approved. I was not happy about it back then, but as crazy as it sounds would be happy if it happened now. Wouldn't get any severance if it happened, but would be a good and easy reason to leave.

Thanks for your opinions, I was pretty excited when I stumbled across this forum.

 

[REWahoo]

FIRECalc says that if the future 50 or so years are no worse than the past 100 or so, you have a little better than one in five chance of running out of money before you run out of you. Considering what is at stake, that's not a bet I would feel comfortable taking.

 

[pacergal]

Do you have $ saved for college, LTC plan, replacements for future(car, appliances, etc), healthcare costs planned.

78% is too low for my comfort level.

Check out this forum, answer the questions, and see how your plan is:
Early Retirement & Financial Independence Community > Community Forums > Early Retirement FAQs
Some Important Questions to Answer Before Asking - Can I Retire?

 

[Dtail]

Are you including any Social Security estimated income?

 

[Dtail]

Most folks who use the calculators typically wish for at least a 90% success rate. You could also have a fairly long retirement, so 78% is probably on the low side.

 

[Sk08]

Thanks for the replies so far.
I agree that 78% is on the low side. The sad thing is if I put in what my portfolio had about a month ago it gives a 92% success rate.

I don't factor in for Social Security when doing the Firecalc.

We have a 529 plan started and adding a small amount each month, might not be enough to fully fund it if I stop working, but a good start.

Health care is factored into the WD rate.

Haven't put much thought into LTC

 

[youbet]

Most folks who use the calculators typically wish for at least a 90% success rate. You could also have a fairly long retirement, so 78% is probably on the low side.

I think the 78% success rate already takes the length of retirement into account.

 

[bobandsherry]

I don't factor in for Social Security when doing the Firecalc.

Why not? That's like ignoring the value of a pension. Not sure of future value then discount it.

 

[pb4uski]

Ages in household, 45, 44, and 12

Would love to get opinions about what % success rate from FIREcalc is enough to comfortably pull the plug.

A few details

No debt, paid for house with siding and roof replaced 3 years ago with steel that has 50 year non prorated warranty.
Vehicles are in good shape, but over 10 years old, so a big unknown of when and how much will be needed for replacement.

80% mutual funds, 20% bonds,
investments as of today $1.2M Taxable, $400k Roth. With 25k cash in savings.

Current take home is $3100 per month, employer pays for health insurance.
Plan on withdrawing $5000 per month, and need to pay for health insurance.

Wife stay's home, so just need to figure out when I can comfortably stop working. I feel I'm close enough that if something happens at work I will put my notice in, I actually find myself secretly hoping for a reason... perhaps they will close and relocate us. It was proposed a few years ago, but didn't get approved. I was not happy about it back then, but as crazy as it sounds would be happy if it happened now. Wouldn't get any severance if it happened, but would be a good and easy reason to leave.

Thanks for your opinions, I was pretty excited when I stumbled across this forum.

Thanks for the replies so far.
I agree that 78% is on the low side. The sad thing is if I put in what my portfolio had about a month ago it gives a 92% success rate.

I don't factor in for Social Security when doing the Firecalc.

We have a 529 plan started and adding a small amount each month, might not be enough to fully fund it if I stop working, but a good start.

Health care is factored into the WD rate.

Haven't put much thought into LTC

If your current take home is $3,100/month, then why do you feel that you need $5,000/month in withdrawals. Sounds like it might be health insurance.

Have you looked to see if you managed your income what ACA subsidized health insurance would cost? Check out healthshera.com

I think it is foolish to totally ignore SS... include 75% of what you SS statement says that you'll get and if your wife is a SAHM then she'll get at least 50% of your PIA.

Have you considered just changing employers? Or downshifting to a part-time job rather than quitting entirely?

FIRECalc has a neat feature under the Investigate tab where you can have FIRECalc calculate what a spending level would be at a given level of success (default is 95%).

 

[Sk08]

Why not? That's like ignoring the value of a pension. Not sure of future value then discount it.

I didn't factor in SS because not sure it will be there when I get to that age, and not working for that many years makes it difficult to estimate the value, I felt if SS has something for me when eligible, it will be a little extra spending money.

 

[Sk08]

If your current take home is $3,100/month, then why do you feel that you need $5,000/month in withdrawals. Sounds like it might be health insurance.

Yes $5000 is for buying our own insurance, and $the 3100 that we are living on now is on the frugal side, it would be nice to have a little more


I think it is foolish to totally ignore SS... include 75% of what you SS statement says that you'll get and if your wife is a SAHM then she'll get at least 50% of your PIA.

Not really ignoring it, but just not wanting to rely on it.

Have you considered just changing employers? Or downshifting to a part-time job rather than quitting entirely?

Yes, like the idea of switching jobs, but live in a very small town and not much to choose from. I have been watching a part time job that I would enjoy, but the current semi retired people that have the job now look like they are in good shape and will be able to do the job for several years

FIRECalc has a neat feature under the Investigate tab where you can have FIRECalc calculate what a spending level would be at a given level of success (default is 95%).

Thanks, I will explore that feature in FIREcalc

 

[fisherman]

I was 43 when I ESRd. Almost 58 now and fully ERd at 54. I consulted about five hours a week on average while semi retired. This provided some extra spending money, a path to meet many new friends, and the ability to purchase the four social security credits per year needed to stay eligible for SSD and to receive a years service credit each year. This might help your numbers work.

Regarding college for your kid $100,000 is a good number to save or better yet expect them to have some scholarships if they go and help with the rest. Our oldest just recently finished his engineering degree and total cost to us after scholarships and including living expenses we helped with was about $30k. That left plenty to help with a house down payment which he is purchasing now and avoiding PMI as his savings from work and some of remaining college money proved 22% down.

Hope this is helpful.

 

[CincyDave]

Does your $5000 monthly spend need truly include everything? Taxes, medical premiums and other medical costs, big ticket items like car replacement, HVAC replacement etc? Does it include things like vacations, hobbies, entertainment?

With an 80/20 AA you could be subject to significant SORR. Average or better market and you're probably fine, but a protracted down market, maybe not so much.

I'm generally conservative when it comes to money, so personally, I wouldn't feel comfortable at 78%. Just my 2 cents.

Could you and would you go back to work if needed?

 

[Sk08]

Thanks fisherman, definitely like hearing about success story from a young age.

Helping our kid with college isn't a deciding factor for how long I will work. I don't know if that's greedy or not.

 

[pb4uski]

Have you looked at healthsherpa.com to see what ACA subsidized health insurance would cost? Since you would be living off of taxable account withdrawals, I suspect that your adjusted gross income would be low... interest, dividends and capital gains... and that you'll likely qualify for significant ACA subsidies that will result in health insurance cost that will much less than the $1,900/month that you are planning for... and possibly free if you manage your income correctly.

For example, according to healthsherpa.com, a 45 yo male, 44 yo female and 12 yo dependent with an income of $50k a year in Fargo would be eligible for an ACA subsidy of $1,166/month and would have a number of $0 cost ACA plans available to them.

Also, if your taxable account has some significantly appreciated positions, you may be able to do some gains trading and increase your basis at no tax federal income tax cost and if needed, increase your income so you don't need to rely on Medicaid for health care and can use low cost ACA health insurance instead.

 

[Sk08]

Does your $5000 monthly spend need truly include everything? Taxes, medical premiums and other medical costs, big ticket items like car replacement, HVAC replacement etc? Does it include things like vacations, hobbies, entertainment?

The $5000 is a rough estimate, and would cover day to day living expenses including vacations, we would have to dig deeper into the taxes. The big items, roof and siding on house is done. We have $25k for unexpected expenses.
The car replacement is the one big expense we don't have money set aside for. Been making a payment into our mutual funds for several years.


With an 80/20 AA you could be subject to significant SORR. Average or better market and you're probably fine, but a protracted down market, maybe not so much.

We talked about bringing the ratio down when it gets close to quitting work


I'm generally conservative when it comes to money, so personally, I wouldn't feel comfortable at 78%. Just my 2 cents.

Could you and would you go back to work if needed?

I don't want to "have" to go back to work, so would rather be very confident that we have enough before pulling the plug, but some part time work would be ideal, I just don't see anything available that I would like right now.


.

 

[Sk08]

Have you looked at healthsherpa.com to see what ACA subsidized health insurance would cost? Since you would be living off of taxable account withdrawals, I suspect that your adjusted gross income would be low... interest, dividends and capital gains... and that you'll likely qualify for significant ACA subsidies that will result in health insurance cost that will much less than the $1,900/month that you are planning for... and possibly free if you manage your income correctly.

For example, according to healthsherpa.com, a 45 yo male, 44 yo female and 12 yo dependent with an income of $50k a year in Fargo would be eligible for an ACA subsidy of $1,166/month and would have a number of $0 cost ACA plans available to them.

Also, if your taxable account has some significantly appreciated positions, you may be able to do some gains trading and increase your basis at no tax federal income tax cost and if needed, increase your income so you don't need to rely on Medicaid for health care and can use low cost ACA health insurance instead.

We did look at ACA a little. The plan that we might be interested in is high deductible I believe around $13,000 but $0 premiums.

The reason why we are thinking $5000 monthly WR, is our current $3100 does not leave a lot after bills, so the little extra would be for maxing out HSA and leave a little extra. We haven't sat down and estimated what taxes would look like yet, but it just be long term gains and dividends, so hoping not too terrible.

 

[MichaelB]

Sk08, once again, welcome to our community!

Your FIRECalc probability of success at 78% makes it compelling to have a solid understanding of your current and future spending needs. I would urge you to read this post by Gumby (here). In addition to ongoing spending you also will face unplanned spending for big ticket items, such as a new roof, wedding, and so on. A solid grasp of your future needs is a prerequisite to answering the question you ask in the OP.

 

[NgineER]

Welcome to the community.
It appears like you’ve been very successful in squirreling away money despite low take home pay. Or is it risky/speculative investing that got you there. A drop in success rate by 14% makes it seem like you had a significant drop in assets over the last month. Before pulling the plug I’d want to rely less on successful stock picking and speculation and invest in something more conservative like the S&P500.

 

[38Chevy454]

If you do a backwards calculation for the rough total investment required for needing $60K/yr and assume some different withdrawal rates:
4% for $60K = .04(X), X = $1.5M
3.5% for $60K = .035(X), X = $1.714M
3% for $60K = .03(X), X = $2M


You can see that you are a little on the low savings side if your budget is going to be $5K/mo or $60K/yr. That is why several of previous replies are suggesting you should keep working longer and up the savings before stopping work life. There are a lot more variables than just the simple numbers above, such as the SS addition in future years, the college expenses that are a short term increase for those years, and if you have any supplemental part time income.

 

[pb4uski]

We did look at ACA a little. The plan that we might be interested in is high deductible I believe around $13,000 but $0 premiums.

The reason why we are thinking $5000 monthly WR, is our current $3100 does not leave a lot after bills, so the little extra would be for maxing out HSA and leave a little extra. We haven't sat down and estimated what taxes would look like yet, but it just be long term gains and dividends, so hoping not too terrible.

You may want to look at https://www.irscalculators.com/tax-calculator

If you had $25,900 of ordinary income (interest, part0time earnings, etc) and $83,350 of qualified dividends and long-term capital gains... $109,250 of total income... then your federal income tax would be zero and you would have a negligible state tax according to the calculator.

Of course, you would probably want to manage your income lower for ACA subsidy reasons but the point is that if you stopped working and were living off of your nestegg then your taxes would be negligible.

 

[mystang52]

I'm a conservative guy by nature, so 78% would be too low for my comfort level. But 78% does not equal 78%.......At age 65 a 78% success rate would be more comforting than at your age. I was roughly your age when I was on a glorious vacation, and wished I could do that lifestyle full time. In other words, retire. But my finances weren't there, yet.
If I were you, I'd tough it out a few more years to get more financially secure. But I'm not you, so ultimately it's your decision. Keep in mind, though, that if your plan doesn't work out, there may be a lot of regrets at an age when you can't fix the problems.

 

[fisherman]

Thanks fisherman, definitely like hearing about success story from a young age.



Helping our kid with college isn't a deciding factor for how long I will work. I don't know if that's greedy or not.

Just a possible way you might make up the difference, ie work part time. I am very conservative financially so with an all in budget we went with a sub 3% withdrawal rate to start. That in firecalc gave us a 100% likelihood of success. It definitely worked out well for us and both our kids. The second of which will start college soon and his college fund is ready.

As others have stated make sure you truly have all costs covered like sinking funds for cars and a roof but also plan to meet you max out of pocket for insurance each year. Planning for max out of pocket is prudent as there will be a need a some point.

 

[Sk08]

Thanks for all the replies!
It definitely give us more to think about and help to not overlook something.

The current volatility of the market makes it difficult to be confident in pulling the plug.
I looked closer at the FIREcalc and as of right now it gives 87% success, when just a few days ago it was 78%, and about a month ago it gave 92%...

Were going to have to look closer at our 80-20 ratio, we don't have individual stocks, just mutual funds and 20% bonds

100% success through FIREcalc doesn't look too far out of reach

 

[NgineER]

You also want to make sure that you don’t go beyond 40 years or so to include the worst starting years for a 49 year retirement. Having longer timeframes exclude the worst staring years and can make your retirement outlook better.