Peer Review Gut Check

[Cwilcox140]

Hey all. I love this forum and would love some insights from people who have retired early or are about to. I'm considering pulling the plug on work after 33 years in the same industry. I Would love to try my hand at something else but I want the steady income so money isn't an obstacle to either being fully retired or taking another job that is just for "fun". I'm married with grown children. We don't have any investments outside the IRA/401k realm so it's a little trickier. We have zero debt and would like about $10K a month after taxes but I buffered that up a bit. Appreciate the insights.
Me 52

• $2.6M - IRA
• $200K- Roth IRA (wish this was more)

DW 58

• $400K - 401K
• $100K- Roth 401K

My initial thoughts are that I use my $2.6M IRA to set up a 72T distribution. According to dinkytown that would generate about $150K a year in income at the current mid-term(120%) rate of 4.45%. The distribution method represents about 4.5% of our total liquid assets, so it's a little higher than the 4% SWR. After taxes that would generate a comfortable income. That would lock us in for 7 years but we would have DW's two accounts and my Roth if we have a major unplanned expense or the accounts/inflation grow faster than expected. Healthcare would be on the exchange and I'm planning on $1200 a month.

Am I up in the night? Is this doable?

 

[pb4uski]

That seems viable. No problem with a higher WR early in retirement before pensions and SS kick in... in fact that is very common and 4.5% would not be alarming at all.

 

[Koolau]

It sounds reasonable - especially since you indicate a willingness to possibly pursue another c@reer/j*b if needed or if enjoyable to you.

One suggestion would be to w*rk toward Roth conversions if the taxes can be managed, but you're gonna need a good chunk just to live on, so conversions might not w*rk for you. What will you do for Health Insurance? That can be tricky - especially with $150K "income."

 

[imjustawarrior]

What is your plan for medical? Is that included in your $10k/month number?

I would run it through firecalc and see how your plan works.

 

[Cwilcox140]

It sounds reasonable - especially since you indicate a willingness to possibly pursue another c@reer/j*b if needed or if enjoyable to you.

One suggestion would be to w*rk toward Roth conversions if the taxes can be managed, but you're gonna need a good chunk just to live on, so conversions might not w*rk for you. What will you do for Health Insurance? That can be tricky - especially with $150K "income."

Thanks. I was thinking of just picking it up on the exchange. I've budgeted about $1200/month for it. That seems high but I don't want sticker shock. I like the Roth suggestions and, if the balance grows, would look at that after the 72T is completed.

 

[Cwilcox140]

What is your plan for medical? Is that included in your $10k/month number?

I would run it through firecalc and see how your plan works.

The plan runs about 95.5% on firecalc which seems about right. I was budgeting about 1200/mo in that 10K per month budget.

 

[Cwilcox140]

Hey all. I love this forum and would love some insights from people who have retired early or are about to. I'm considering pulling the plug on work after 33 years in the same industry. I Would love to try my hand at something else but I want the steady income so money isn't an obstacle to either being fully retired or taking another job that is just for "fun". I'm married with grown children. We don't have any investments outside the IRA/401k realm so it's a little trickier. We have zero debt and would like about $10K a month after taxes but I buffered that up a bit. Appreciate the insights.
Me 52

• $2.6M - IRA
• $200K- Roth IRA (wish this was more)

DW 58

• $400K - 401K
• $100K- Roth 401K

My initial thoughts are that I use my $2.6M IRA to set up a 72T distribution. According to dinkytown that would generate about $150K a year in income at the current mid-term(120%) rate of 4.45%. The distribution method represents about 4.5% of our total liquid assets, so it's a little higher than the 4% SWR. After taxes that would generate a comfortable income. That would lock us in for 7 years but we would have DW's two accounts and my Roth if we have a major unplanned expense or the accounts/inflation grow faster than expected. Healthcare would be on the exchange and I'm planning on $1200 a month.

Am I up in the night? Is this doable?

-Will do Healthcare on the Exchange - Estimating $1200 per month (that's in the budget)
- DW will get SSN at 62 at ~ $2,000 per month
- I'm planning on no SSN almost due to being exempted for 15 years (WEP and GPO offsets)

 

[Surewhitey]

While I'm not an expert on 72t's, what happens if there is a downturn (substantial) & you are locked in to the 7+ years period? Are the amounts taken always a % or the same $ amount taken? I don't know the answer & curious.

I don't like to be a slave to the system, personally.

Healthcare is (gut feeling) a little low, but if you have checked it with a $120-150k income, not a deal breaker.

W*rking a little helps... What happens when you like it & make substantial amounts on top of the 72t?

Roth rollovers are in my future and a post tax amount to carry us through the 5 years of initial conversions. We can control our MAGI and be flexible to any amount needed.

 

[Exchme]

It's probably not optimal to claim SS at 62 for the spouse with the higher benefit. You need to know your numbers, so go to SSA.gov and get an estimate of your benefits, including your PIA.

Opensocialsecurity.com is a great tool for then optimizing benefits for a married couple. Generally, it's much better for the higher earner to wait to claim as that benefit continues even after the first spouse passes. The other major benefit of waiting (which is not captured by Opensocialsecurity.com) is that having age 65-69 after ACA and before SS is a nice window of lower tax years to do some Roth Conversions.

 

[Cwilcox140]

While I'm not an expert on 72t's, what happens if there is a downturn (substantial) & you are locked in to the 7+ years period? Are the amounts taken always a % or the same $ amount taken? I don't know the answer & curious.

I don't like to be a slave to the system, personally.

Healthcare is (gut feeling) a little low, but if you have checked it with a $120-150k income, not a deal breaker.

W*rking a little helps... What happens when you like it & make substantial amounts on top of the 72t?

Roth rollovers are in my future and a post tax amount to carry us through the 5 years of initial conversions. We can control our MAGI and be flexible to any amount needed.

I think you nailed one of my concerns. The 72T is restrictive. If the market takes a substantial dip then I’m still locked in at the exact same amount. I can work to reduce that risk. If it goes up quite a bit you can change your distribution method from annuitization formula to a required minimum distribution formula to take advantage. I wish a similar option was possible for a market dip. You may be right on healthcare. I checked it a few years ago. I’m feeling like this plan is a little tight based on my assumptions and risk of downturn without the option to manage that risk because of the 72T.

 

[Cwilcox140]

It's probably not optimal to claim SS at 62 for the spouse with the higher benefit. You need to know your numbers, so go to SSA.gov and get an estimate of your benefits, including your PIA.

Opensocialsecurity.com is a great tool for then optimizing benefits for a married couple. Generally, it's much better for the higher earner to wait to claim as that benefit continues even after the first spouse passes. The other major benefit of waiting (which is not captured by Opensocialsecurity.com) is that having age 65-69 after ACA and before SS is a nice window of lower tax years to do some Roth Conversions.

That makes sense about the Roth conversions. Thanks

 

[Cwilcox140]

I think you nailed one of my concerns. The 72T is restrictive. If the market takes a substantial dip then I’m still locked in at the exact same amount. I can work to reduce that risk. If it goes up quite a bit you can change your distribution method from annuitization formula to a required minimum distribution formula to take advantage. I wish a similar option was possible for a market dip. You may be right on healthcare. I checked it a few years ago. I’m feeling like this plan is a little tight based on my assumptions and risk of downturn without the option to manage that risk because of the 72T

I just checked the 2025 ACA rates and it’s quoting 790 on $150k for couple in my area. Seems low

 

[pacergal]

I would recommend running firecalc.
A straight 4% withdrawal on your 3.3million would give you $132,000 ( if I did my math right!) for 30 years, plus you. will have some SS.
In your 50's, you potentially have 30-40+ years.
It seems doable to me.

 

[Surewhitey]

I think you nailed one of my concerns. The 72T is restrictive. If the market takes a substantial dip then I’m still locked in at the exact same amount. I can work to reduce that risk. If it goes up quite a bit you can change your distribution method from annuitization formula to a required minimum distribution formula to take advantage. I wish a similar option was possible for a market dip. You may be right on healthcare. I checked it a few years ago. I’m feeling like this plan is a little tight based on my assumptions and risk of downturn without the option to manage that risk because of the 72T.

Maybe move into more conservative investments since you are taking it sooner than later?

 

[pb4uski]

Could set up a TIPS ladder with the projected 72t amounts and then invest the rest consistent with your AA to mitigate that risk?