Building the courage to take the plunge?...

[glasswave]

If I am going to retire this year (end of June), I must decide very, very soon.

Part of me worries if I have enough. ($1.2m in my TDRA, $170K in cash savings, $0 debt, $150k in credit-HELoC, my retirement age is 67, now I am 62.)
And causes me to think I might be better to wait another year. I also feel like their are a number of things I could finish at work to make quitting easier on my co-workers. If I work another year I will put about $15k more into my TDRA and likely build up $20 to $30k in liquid savings.

OTOH, I am not getting younger. I get 20.5% of my salary for 5 years if I retire now, also they keep me on the very good health plan for $300/yr until i turn 65. Whereas, if I retire next year only get 20.5% for 4 years.

I have worked so long, I am almost afraid to stop having money coming in. I did not think it would be that un-nerving.



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[street]

Do you know what your expenses are for a year?

 

[Luvtoride]

Yes, I was going to ask if 20.5% of your salary is enough for you to live on?

 

[jazz4cash]

Your descriprion makes It sound like you must decide now to retire in June or wait a full year. Are there any other options?

I do not understand the statement “my retirement age is 67, now I am 62.)”. What happens at 67?

 

[glasswave]

In general, my expenses run about $3000/mo. This is a guestimate.

My fiscal year runs about May 30th to may 30th. At which time I bring my balance to $3000 and put the rest in savings.

From my paychecks $3000/mo goes to my checking Some years I build my checking to $6000 or so. OTOH, some years I make a couple of pulls from savings to checking because I have incurred some big expenses.

I am planning on "paying myself" $4500/mo in early retirement. $3000 to checking and $1500 to savings. $1000/mo will come from my 20.5% salary payments, $3500 will come from my retirement/savings.

All of these numbers are "after tax" numbers.


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[glasswave]

Yes, I was going to ask if 20.5% of your salary is enough for you to live on?

I suppose I could try, but I'd never much be able to leave the house and would have to survive on Ramen packets like when I was in college.

 

[Koolau]

If you've done FIRECalc and it says you aren't ready, then I'd consider one more year. If FIRECalc says you good to go, I wouldn't wait. Good luck. I hope you figure it all out. Please check back often.

 

[glasswave]

Your descriprion makes It sound like you must decide now to retire in June or wait a full year. Are there any other options?

I do not understand the statement “my retirement age is 67, now I am 62.)”. What happens at 67?

Pretty much, I should work another full year as my "contract" (renews every year) goes from Jul. 1st to June 30th. I suppose I could just "walk out" at anytime, but I think that would kill my chances of getting the 20.5%.

At 67, I reach "full retirement age." My 20.5% stops then. OTOH, I could keep working until I will be 70, or even 73 if I wanted. I don't know how long you can keep going, but I know some have stayed on well into their 70's.


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[aaronc879]

If you only need to pull $3500/mo from your $1.2M retirement savings then I would say you are good. That's a 3.5% withdrawal rate. I assume Social Security will fully replace your 20.5% when you turn 67? Probably with a decent amount left over. I would take the money and run.

 

[glasswave]

If you've done FIRECalc and it says you aren't ready, then I'd consider one more year. If FIRECalc says you good to go, I wouldn't wait. Good luck. I hope you figure it all out. Please check back often.

I don't get that fireCALC site. I could never figure out if it was speaking in pre-tax or after tax dollars and I could not figure out how to make adjustments beyond the basic 2 or 3 questions it asks at the start. I see there are some youtube tutorials but I have not taken the time.

 

[Koolau]

I don't get that fireCALC site. I could never figure out if it was speaking in pre-tax or after tax dollars and I could not figure out how to make adjustments beyond the basic 2 or 3 questions it asks at the start. I see there are some youtube tutorials but I have not taken the time.

There are lots of help-aids available and we're here if those fail you. FIRECalc is pretty robust IMHO. It's worth the slog to hit it on the surface level (to get more or less a go-no-go answer.) THEN go into the details and do some "what ifs" and "wherefores". You might find you enjoy the exercise. In any case, it should at least give you an idea if you're short, close or an over-achiever in the FIRE world.

Best luck and let us know how it goes.

 

[glasswave]

There are lots of help-aids available and we're here if those fail you. FIRECalc is pretty robust IMHO. It's worth the slog to hit it on the surface level (to get more or less a go-no-go answer.) THEN go into the details and do some "what ifs" and "wherefores". You might find you enjoy the exercise. In any case, it should at least give you an idea if you're short, close or an over-achiever in the FIRE world.

Best luck and let us know how it goes.

Well then, I suppose I should just wait another year, because I cannot currently invest a large chunk of time into learning fireCALC. I still don't know if it is working in before or after tax dollars and how it deals with tax at all.


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[Ronstar]

I am planning on "paying myself" $4500/mo in early retirement. $3000 to checking and $1500 to savings. $1000/mo will come from my 20.5% salary payments, $3500 will come from my retirement/savings.



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You’re planning to take out $3500 from retirement/ savings and put $1500 back into savings?

Also, does your expense projections include big ticket items - cars, home improvements, etc?

 

[glasswave]

If you only need to pull $3500/mo from your $1.2M retirement savings then I would say you are good. That's a 3.5% withdrawal rate. I assume Social Security will fully replace your 20.5% when you turn 67? Probably with a decent amount left over. I would take the money and run.

Like I said. The numbers I was putting up are "after tax" amounts. I don't really understand how to compute in tax dollars because I have a hard time estimating what my taxes will be in retirement.

 

[glasswave]

I take it with any numbers put up on this site, it is understood that you have figured out what the tax implications are and worked that into the estimates. Is that correct? So when somebody says "my expenses are $5k/mo" is assumes that that $5k includes 1/12th of their annual tax burden? Is that what everyone presumes?


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[glasswave]

You’re planning to take out $3500 from retirement/ savings and put $1500 back into savings?

I have an "active account" that has both checking and savings. I use this account to try an monitor my yearly/monthly/daily living expenses. I have other accounts for the bulk of my liquid funds. So now, I have $3000 month put in my "active account" checking and the rest put in "active account" savings. At the end of my person fiscal year (late May), I reset my "active account" to $3000 in checking and $4500 in savings. My next check (I get 2 per month) brings checking up to $4500 and the rest goes in "active account" savings. On the next year I reset and repeat.

Also, does your expense projections include big ticket items - cars, home improvements, etc?

No, not really. I don't really know what those big ticket items are going to be, that's why I am always trying to put money in savings. I want to add AC and a new cloth top to my classic car. I don't know what those costs will be. I am also trying to get out of a storage unit because a big corporation ran out the retired couple that owned it and now they are ram-rodding price hikes and screwing over all the long-term tenants. I need to get another storage shed, but I do not know what that will cost.


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[Ronstar]

I take it with any numbers put up on this site, it is understood that you have figured out what the tax implications are and worked that into the estimates. Is that correct? So when somebody says "my expenses are $5k/mo" is assumes that that $5k includes 1/12th of their annual tax burden? Is that what everyone presumes?


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yes, at least for me. I include my tax payments as part of my expenses. Since I’m retired, my tax payments come out of my checking account, and are treated as expenses like every other checking account debit.

 

[equakesfan]

The standard deduction is $30k or $2500/mo. so your taxes will be pretty low on $4500/mo income.
You need to be very sure of your expenses The difference between $4000/mo. and $5000/mo. is life changing

 

[glasswave]

The standard deduction is $30k or $2500/mo. so your taxes will be pretty low on $4500/mo income.
You need to be very sure of your expenses The difference between $4000/mo. and $5000/mo. is life changing

Well, I can't be. At least not in the next 2 days and I probably never will be able to exactly account for all my expenses.

Instead, I am more just able to control broad generalities, so I avoid debt like the plague. I also try and avoid spending money and live a simple life. All I can tell you is that I put $3k per mo in my active checking and generally it's enough, often more than enough for my expenses. That said some years I need to make a couple of transfers from savings to checking.


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[USGrant1962]

If you understand your current (and desired retirement) spending you are halfway there. It seems like you are concerned about taxes, but at your suggested spending levels it doesn't seem like that is a big deal. And you don't need to be exact, just include a fudge factor of say 10% for taxes at the spending levels you have described.

Second, regarding your post where you say "And causes me to think I might be better to wait another year." Everyone leaves money on the table when they retire. Early, standard or late, it doesn't matter, you are leaving money on the table. Around here, we call your statement OMY syndrome, One More Year. You can always work one more year for money, when does it stop?

 

[Koolau]

I take it with any numbers put up on this site, it is understood that you have figured out what the tax implications are and worked that into the estimates. Is that correct? So when somebody says "my expenses are $5k/mo" is assumes that that $5k includes 1/12th of their annual tax burden? Is that what everyone presumes?


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Taxes ARE expenses so should be a part of your expenses for the purpose of retirement planning (and for FIRECalc.)

 

[Koolau]

Okay, we have a very rough (rule of thumb) method to see if you're close when it comes to invested funds and expenses.

Total your invested funds for retirement. Let's say it's 1 million dollars. Then multiply that by 4% to see how much of your stash you can spend the first year. So that's $40,000. OR if you have a handle on how much you need to spend per year (let's say it's $40,000 per year). Multiply by 25. (25 X $40,000 = $1,000,000). That's how much you need to retire and spend $40,000 the first year.

Give it a shot and see if you're close.

 

[RetireBy90]

If I understand all above then I would say you are finance wise prepared. You could take $48K per year from the $1.2M at 4% and then you have the payout from work and SS in 5-8 years.
You should also think about life after work. Are you ready with new stage without work friends and purpose to stay active. Also consider health. Being ready financially is only one pillar of successful retirement

 

[Aerides]

Get rid of guestimates and "all I can tell you is" - you can do better!

Go through your actual expenses line by line, dollar by dollar, with a 2-3 year look back. Get an actual total. Add up everything from cards, from bank debits, from checks written. Include property taxes, annual expenses, and then figure out lumpy stuff (everyone needs a new roof, a new car, eventually). Then figure in some line for income taxes, estimate healthcare, etc.

It doesn't take more than an hour or two to do that. But it's incredibly easy to be wrong with guestimates, and almost as easy to validate the real numbers. Avoid the temptation to say "oh I won't need to spend THAT thing again once retired" just keep it in there and assume it will be replaced by something else you don't know now that you'll want/need.

 

[WhenIsItTime]

Well then, I suppose I should just wait another year, because I cannot currently invest a large chunk of time into learning fireCALC. I still don't know if it is working in before or after tax dollars and how it deals with tax at all.


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Easy for me to say as I have an accounting/finance background... This comment must be in jest, but is kind of funny. Takes too much time to learn Firecalc, so gonna work another 2,080 hours instead.

I think you'll find many folks here who did retire, used a tool like Firecalc to learn the numbers, test scenario's, and build confidence/understanding of financial preparedness. Stick with it. Should make more sense and you change numbers, read fine print on each page, and see differences in outcomes modeled. Maybe a friend/family member you can confide it could help.