Getting excited in PA

[baseman250]

Hi all,

First post... kind of excited as I think the DW and I are close after years of living lean. I'm thinking ER in two years if we can figure out the healthcare piece.

--I'm 53, DW is 55. Kids are out of the house, educated and doing fine for themselves.
--No mortgage on a house valued at about $375,000.
--Real estate taxes work out to about $4800/yr.
--No loans on cars. (Two Hondas both just over 100k miles and 10 years old.)
--No debt.

My 401k - $650K (all pre-tax)
My Roth IRA - $85K
Her 401k - $100K (all pre-tax)
Her Roth IRA - $107K
Brokerage acct - $255K (in Vanguard ETFs to mirror target fund)

Two more years of contributions will add at least another $75K to the above.
Most of the above is in Vanguard target funds with AA of all coming out to about the following:

60/30/10 - stocks/bonds/MM

--I can quickly rebalance My 401K and both Roths without fees if advised.
--I can change to all Roth in My 401K for next two years (or more if I keep working) if advised.

The plan is to hold off until at least 67 for social security:

Me (at 67) - $2,600/month
Her (at 67) - $1,800/month

My 401k is "Rule of 55" eligible as long as I can hold out for another two years!

Combined yearly salary is about $140K, but considering we've been doing max contributions and adding to the brokerage account semi-regularly, living on $75-100K/yr should not be a stretch at all. Family history & lifestyle predict we could both live to 90.

Are we as close as I thing Firecalc is putting us at the edge, and Empower Retirement calculator (where my 401K is) looks very good. I must be missing something!

Thanks, Jason

 

[Bir48die]

Someone is bound to send you the list of "can I retire yet" pretty quick. I will say I was ahead of you in investment portfolio and my budget was pretty close. Main question is if you plan any travel or any major spending outside of your day to say expenses. To hit $70k before taxes gets you in the 6% WR range unless my math is poor. Most of your money is tax deferred so you'll be taxed on it. Also HI will easily be your number one expense. That could easily be over $1,500 per month easily even with a healthy deductible.

So, your job is to take at least a year and live on that budget less estimated HI and see how you do. Track spending very closely. Then you can see how confident you are. My wife had free health insurance and I still pay at least $12k in monthlies and deductibles

 

[baseman250]

Thanks.

I do have the ability to change 401k future contributions to Roth, but don't know if it's worth it. Anyone? That would be $50k in contributions over the next two years. The tax hit now will suck, but I can probably tolerate. Lots of things to consider; this being one of them.

 

[Mountain skier]

If you could reduce the expenses that would definitely help. Seems kinda high compared to most here.

 

[Dtail]

I ran the numbers in Firecalc and it showed a maximum spending rate of 68k yearly at a 100% success rate.
Thus I would state that you could be on the borderline to some extent.
Have you looked into the rates for the ACA and management of your MAGI in order to try and maximize your tax subsidies for the ACA?

 

[Aerides]

Welcome!

It sounds like you need to spend some close-up time with your expenses. You don't want to retire on "75-100 should be fine" - you want to have a real solid idea of what you'll need/want.

Look at your actual data for the past year or 3. Resist the urge to say "ooh well we'll spend less on clothing/gas when we retire" - for now at least. Just pull the info together. Then add in healthcare and taxes. Spread in costs for new cars, a new roof, big repairs, the kind of things you have every 5 years or so. Have a browse over on healthcare.gov to get an idea of prices for next year and then swag it in your plans, knowing it can change quite a lot each year.

Most people are going to want to placeholder-budget at least $1k per month for ACA expenses (an HSA account is good to start now if you can take it with you).

If your expenses really would be $100k per year, then even at a 4% rule (tight, not advised), your "nut" would be $2.5M. Most folks here would say go with 3% - 3.5% for your annual withdrawal rate. So this is why you see there's a big difference between $75 per year and $100. And why there's a big difference between "that should work" vs. "I know this is what we'll be fine with as a budget".

With 10 years between your RE and Medicare/SS, you'll want a good degree of confidence.

 

[SunBlueSky]

It is exciting thinking about retiring early!

If your $75,000 expense budget covers all the bases (health care, income taxes, home maintenance, car purchases, appliances/roofs, travel, etc.), then FIRECALC does give 100%. That is with your portfolio of $1.27M and including both of your Social Security amounts.

Making sure I included everything I might need in my annual expense amount is what gives me comfort.

 

[VanWinkle]

Thanks.

I do have the ability to change 401k future contributions to Roth, but don't know if it's worth it. Anyone? That would be $50k in contributions over the next two years. The tax hit now will suck, but I can probably tolerate. Lots of things to consider; this being one of them.

It will be to your advantage to have both Roth and After tax monies set aside to help you control your Income to get maximum subsidies for your health Insurance. Mine would have cost 2600 per month for a couple had it not been for the subsidies. You can pay anywhere from 0% to 50% of that figure if you can control your taxable income to under about 64,000 as a couple. Go to Healthcare.gov and play with the income amounts to see the subsidies in your area.

Good Luck to you,

VW

 

[CardsFan]

Not sure what you are seeing in Firecalc, but you are way short of a $75k spend at 95% success rate. I get around $55k (based on a 35 year retirement).

 

[baseman250]

I've been lurking off and on for a few years... wish I would have engaged sooner... Anyway, I'm already learning quickly what is considered next steps by the responses. Place where I was vague (expenses) is getting the focus, and tells me how important this really is. I wasn't joking about living lean, and with our incomes and no mortgage for many years, it's been easy to sock away the savings, but I need to know what that expenses number is. There's risk in ER, and not getting it right can have profound consequences. Thank you all for pulling me a little bit deeper into this adventure!

Welcome!

It sounds like you need to spend some close-up time with your expenses. You don't want to retire on "75-100 should be fine" - you want to have a real solid idea of what you'll need/want.

Look at your actual data for the past year or 3. Resist the urge to say "ooh well we'll spend less on clothing/gas when we retire" - for now at least. Just pull the info together. Then add in healthcare and taxes. Spread in costs for new cars, a new roof, big repairs, the kind of things you have every 5 years or so. Have a browse over on healthcare.gov to get an idea of prices for next year and then swag it in your plans, knowing it can change quite a lot each year.

Most people are going to want to placeholder-budget at least $1k per month for ACA expenses (an HSA account is good to start now if you can take it with you).

If your expenses really would be $100k per year, then even at a 4% rule (tight, not advised), your "nut" would be $2.5M. Most folks here would say go with 3% - 3.5% for your annual withdrawal rate. So this is why you see there's a big difference between $75 per year and $100. And why there's a big difference between "that should work" vs. "I know this is what we'll be fine with as a budget".

With 10 years between your RE and Medicare/SS, you'll want a good degree of confidence.

 

[baseman250]

What spending model & your portfolio settings did you use? Yeah, FireCalc is voodoo for me right now until I fully understand all of the different settings and which ones actually apply to our situation.

Not sure what you are seeing in Firecalc, but you are way short of a $75k spend at 95% success rate. I get around $55k (based on a 35 year retirement).

 

[Dtail]

Not sure what you are seeing in Firecalc, but you are way short of a $75k spend at 95% success rate. I get around $55k (based on a 35 year retirement).

Are you including the SS income at 100% of the amounts quoted?

 

[CardsFan]

What spending model & your portfolio settings did you use? Yeah, FireCalc is voodoo for me right now until I fully understand all of the different settings and which ones actually apply to our situation.

Are you including the SS income at 100% of the amounts quoted?

I set AA to what OP stated (60/40), included SS (full amount) at ages and amounts specified. I set investigate to find spending level at 95% success for 35 years. 30 years returned a slightly higher $58k.

The results I got were, frankly, what I expected. It takes closer to $2million to get at high success rate for $75k.

FYI, did NOT include the house value, as you need to live somewhere.

 

[baseman250]

I was on healthcare.gov months back, tried to entered a minimum of info as I wanted to stay below radar, but still got inundated with phone calls and voicemails from providers. I guess it's a necessary evil to getting real HC estimates as I don't remember learning anything directly from the website.

I ran the numbers in Firecalc and it showed a maximum spending rate of 68k yearly at a 100% success rate.
Thus I would state that you could be on the borderline to some extent.
Have you looked into the rates for the ACA and management of your MAGI in order to try and maximize your tax subsidies for the ACA?

 

[Dtail]

I was on healthcare.gov months back, tried to entered a minimum of info as I wanted to stay below radar, but still got inundated with phone calls and voicemails from providers. I guess it's a necessary evil to getting real HC estimates as I don't remember learning anything directly from the website.

Interesting that you were bothered just from entering info.
I think that between the healthcare.gov and the healthsherpa.com sites, one can receive some decent information.

 

[baseman250]

Thanks for taking interest. $75K is likely the high side, but as others have stated, you can't be vague with this number, and I need to figure out HC.

I thought the same thing about the house. We are thinking of downsizing; figuring we could pocket $100k from transaction if not a little more (I have my standards!), but will leave that out of the formula for now.

I set AA to what OP stated (60/40), included SS (full amount) at ages and amounts specified. I set investigate to find spending level at 95% success for 35 years. 30 years returned a slightly higher $58k.

The results I got were, frankly, what I expected. It takes closer to $2million to get at high success rate for $75k.

FYI, did NOT include the house value, as you need to live somewhere.

 

[baseman250]

Probably time to give it another shot. Thanks!

Interesting that you were bothered just from entering info.
I think that between the healthcare.gov and the healthsherpa.com sites, one can receive some decent information.

 

[Dtail]

I set AA to what OP stated (60/40), included SS (full amount) at ages and amounts specified. I set investigate to find spending level at 95% success for 35 years. 30 years returned a slightly higher $58k.

The results I got were, frankly, what I expected. It takes closer to $2million to get at high success rate for $75k.

FYI, did NOT include the house value, as you need to live somewhere.

I think you still need to recalc your numbers.
It appears to me that you are using the OP's SS numbers as being the yearly amounts and not the stated MONTHLY amounts.

P.S. I redid my figures and delayed the retirement for 2 years and now get ~75k at 100% success.

 

[baseman250]

Yikes! I just realized I entered SS numbers from SS website directly into Firecalc and didn't convert to yearly. Hmmm.

I think you still need to recalc your numbers.
It appears to me that you are using the OP's SS numbers as being the yearly amounts and not the stated MONTHLY amounts.

P.S. I redid my figures and delayed the retirement for 2 years and now get ~75k at 100% success.

 

[CardsFan]

I think you still need to recalc your numbers.
It appears to me that you are using the OP's SS numbers as being the yearly amounts and not the stated MONTHLY amounts.

P.S. I redid my figures and delayed the retirement for 2 years and now get ~75k at 100% success.

You are correct

Dumb mistake. I think it may be close, but possible

 

[baseman250]

This just got a little more interesting!

You are correct

Dumb mistake. I think it may be close, but possible

 

[Dtail]

You are correct

Dumb mistake. I think it may be close, but possible

No biggie.
In the end, the OP probably needs to get a better handle on overall expenses and especially healthcare expenses.
As many of us know, depending where one lives the ACA costs can vary widely at an apples to apples MAGI, even in the same state.

 

[SunBlueSky]

Hmmm, maybe I'm not using Firecalc the right way.

1. On Start Here box on the First page I input the Monthly Spend of $75,000, the Portfolio of $1.197M, and 35 years; hit Submit and that resulted in only 41.2% success.

2. Then, Income tab to enter the full SocSec amounts; submit; success rate of 80.7%.

3. Next, Not Retired tab to enter 2 years of $37,500 added to portfolio; 97.4% success.

4. Last, Your Portfolio tab, changed stocks to 60%; success went to 100%.

 

[SunBlueSky]

Hmmm, maybe I'm not using Firecalc the right way.

1. On Start Here box on the First page I input the Monthly Spend of $75,000, the Portfolio of $1.197M, and 35 years; hit Submit and that resulted in only 41.2% success.

2. Then, Income tab to enter the full SocSec amounts; submit; success rate of 80.7%.

3. Next, Not Retired tab to enter 2 years of $37,500 added to portfolio; 97.4% success.

4. Last, Your Portfolio tab, changed stocks to 60%; success went to 100%.

I will add that 36 years of retirement did not give 100%; so yes, I agree that is on the edge.

 

[Dtail]

I will add that 36 years of retirement did not give 100%; so yes, I agree that is on the edge.

Yes we are in agreement that ~75k spending produces 100% success, but right on the edge.
Thus, whether the expenses are 75k or closer to 100k makes a difference.