Fire possible?

[Blux]

Hello All,
My last thread was so old I couldn't respond.

Age 51, wife 49 as of today, happy birthday!

Net worth 2.5M, savings around 1.9M mostly tied up in 401 and roth accounts. Maybe 100k of that is non-retirement accounts. No debt at all. House worth maybe 400k in high tax state(illinois). Not likely to leave the state until parents pass on.

Both of us employed in small family business that not likely to make it out of Covid downturn. All of our skills are basically in a declining industry which is sort of depressing.

Anyway, been planning on ER for a long time and kind of wanted some advice on where we are and if it is even feasible to consider retiring if our business were to fail.

Couple of questions
1. Is the systematic withdrawal provision something that would make sense for us? Given we have 7 years to go before I turn 59.5 years old

2. Healthcare.....Obamacare if I can keep income low?

3. Possibility of working part time to get healthcare and some pocket money?

Now that there is some urgency I am panicking a bit.

 

[pacergal]

It depends.
You have a good savings, what are your expenses? and can you adjust them if needed?
ACA will probably be around awhile, go on your state website to check plans and cost to factor into your budget.
Part time is always an option for most people.

 

[Ncc1701]

This 72t Calculator might help you see how much you can withdraw without penalties: https://www.dinkytown.net/java/72t-...AAiyRNGSwlpqhkH8tuAAaAAq4EIjYEBIRGqwAjAC+QAAA

You are going to be constrained by that unless you have a substantial portion in Roth that has been there at least 5 years. Don't pay the 10% penalty...ever.

 

[Dtail]

Check out Healthsherpa.com and Healthcare.gov for medical insurance information in order to see premiums and deductibles.
The below link shows what types of income are included in the calculation of MAGI leading to the amount of premiums/deductibles.

https://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

Have you checked out Firecalc (retirement calculator) associated with this site to get a feel of are you financially ready for retirement?

 

[Blux]

Yes, I play on firecalc a bunch and feel pretty comfortable with several exceptions.
1. Healthcare is something I have never really had to budget for in the past.
2. Going from an Equity heavy portfolio to something far more conservative/income producing.
3. How to get the money to live on from now until 59.5 years old

 

[travelover]

How much is in Roth accounts? You can withdraw your principal from a Roth at any time, just not the earnings prior to 59 1/2, without penalty. https://www.schwab.com/ira/roth-ira/withdrawal-rules

 

[Blux]

Around 300k. Wasn't aware of the principal withdrawal being allowed

 

[Gumby]

My next door neighbor was retired for several years, after owning his own company for many years. He has now gone back to work part time driving a FedEx truck just to get the employee health insurance.

 

[Sunset]

Certainly one consideration is to let the business fail, before it drags you down.

Maybe get gov't handouts before business fails, like a saw a restaurant owner talk about in Chicago, but when you see you will have to empty your pockets to keep the business afloat, time to bail on business.

You may be eligible for UI because your business failed due to Covid-19, or lay-off one of you and that person can collect UI.

 

[foxfirev5]

Gotta say you need to do some research. This or any other forum is not where you going to find your answers. Sounds like you have enough $ but that just for me. Your results will vary. Also you have untold tax implications that you need to research.. Most CPA's are scorekeepers not effective planners in your situation. Best wishes.

 

[FLSUnFIRE]

I'm in a similar situation, the mental/planning/financial game I've been playing with is leaving the taxable ride so I can better control my income now (ACA and I expect some earned income for a while doing fun things) and putting that into FIRECALC with the period needed until other income sources (TSP/401K, Pension, SS) kick in... basically how far can I skate on taxable and at what risk. Tax codes really make things a mess for us!


I do plan to start 72t at some point just to get my hands on some $ and reduce forced withdrawals later as the balance will be quite huge if I don't touch it for another decade and a half. Once I do it could kick me out of ACA subsidy eligibility as it grows or if added to other income.

 

[HI Bill]

1. Is the systematic withdrawal provision something that would make sense for us? Given we have 7 years to go before I turn 59.5 years old

If you mean using IRS Rule 72(t) to make substantially equal periodic payments (SEPP), then, yes, it might make sense. You can apply this rule to a portion of your retirement assets (one account) or the whole thing. Assuming that you're 51, 120% of the federal mid-term rate is 0.42%, you apply the rule to $1.8M in assets, and your life expectancy is 33 years, you could take between ~$54-58K annually from your plan. These numbers are very rough and were calculated using 72tnet.com's online calculator, and they're not precise because I did not adjust for the DW's life expectancy, nor confirm the exact inputs. You'd owe federal and possibly state taxes, just not the penalty. If you use SEPP under 72t, be sure to follow the rules explicitly and record your plan, as the penalties for making a mistake are severe.


As others have said, you can take out what you put into the ROTH (principal) tax and penalty-free at any time. You just need to know the basis.

 

[pb4uski]

So you have $1.9m in 401k money, $300k in Roth and $100k in taxable.

How much do you need annually to live? Unless you are living large you probably have enough to retire, it is more a matter of penalty-free access.

400% FPL for Obamacare subsidies would be ~$69k a year for a married couple. Youcoudl do ~$61k via a 72t and have some reasonable leeway for other cources of income. And once you get to $69k of O-MAGI you could draw from taxable accounts (hopefully no gains) and if necessary, Roth contributions.

I wouldn't count on working part-time to get health insurance... possible, but I just wouldn't count on it.

But how much you need to live is a critical component that we need.

 

[ut2sua]

OP, if not already done, I would suggest changing your AA to 60/40 or 50/50 or 40/60 Stock/bond since it looks like most of your $ is in 401K. You can always change the asset allocation later once you are more comfortable with RE. Right now, it is probably not a good time to see your NW going down significantly (in case a market adjustment hit in the near future). In general, if you can keep your expenses to around 80K/year, you should be in relatively good shape (but this is just a rough figure). Good luck.

 

[RxMan]

You may want to shift more of your saving to the taxable account leading up to your retirement unless you can afford to add more to it without lowering the other contributions. I would find some health insurance quotes to see how that would impact your budget. You’ve done well and now it’s just a matter of proper planning to avoid excessive taxes and penalties. Good luck!

 

[Kay Burton]

Yes, I play on firecalc a bunch and feel pretty comfortable with several exceptions.
1. Healthcare is something I have never really had to budget for in the past.
2. Going from an Equity heavy portfolio to something far more conservative/income producing.
3. How to get the money to live on from now until 59.5 years old

1. Health is such a thing that can fail at any moment. This moment must be taken into account.
2. Depends on your goal, current expenses and desired standard of living after retirement. Considering the possible inflation rate. The world is heading into a good crisis because of Covid.
3. If you can find a part-time job with a good salary, good. If there is no such option, you need to look for other options.

 

[Blux]

Thanks for the advice everyone. Really busy over the weekend but plan on investigating some suggestions early this week