Please stress test my plan

[joejetski]

I have been a long time lurker and value the opinions on here - This not really ER (compared to some of you), but earlier life choices would have prevented a comfortable early retirement. Lots going on below, so I appreciate any feedback positive or negative>
1. The basics:
Me - 61; DW - 52; 2 Stepsons - 1 in college - finances set. 1 Special needs (high functioning autism) 16
DD - 34 married with 2 DGD, 5 and 7.
DW and I are both FEDS; I can retire in October (62) as FERS with 26.5 yrs; DW will be at 57 with MRA +16
Pensions: Me - FERS (after 50% survivor election) $51K; State Govt - $5K; DW (delayed till 62) - ~$17K
Investments:
Me: TIRA (TSP and VG IRA) - $825K; DW: TIRA (TSP and Fido) - $750K (EST ~$1.2 MIL by 59.5) - Conservative 50-50 in TIRA; 70-30 in Roth (currently maxing TSP Roth contributions)
Me: ROTH (TSP) - $140K; DW (TSP and FIDO) - $150K 60-40 in TIRA; 80-20 in Roth (currently maxing TSP Roth)
Me Nontaxable (VG) $125K; DW - $15K
Emergency fund (Rental Property ($12K)
Real Estate - Primary Home (2012) Value -$775K; $350K equity - not figured in retirement strategy - new roof and new HVAC this year.
Rental - TH (2015) - Value - $550K; $250K equity - this is in our retirement strategy.
2 paid for vehicles - will likely need to replace 1.
General Strategy Going forward:
Me: Retire between Oct 2025 (62) and Jan 2027 (63) - Intending to go phased (50%) after I turn 62; DW will work till she is 57. Our combined income till 57 is ~ $200K
Special needs son turns 18 in 2026; Will begin SSI (he already has Medicaid benefits, DD waiver etc.) ~$960; also gets about ~$950/month child support - likely will be lifetime
I am also doing some of my bucket list trips (DW not interested in locations/activities) in the next 2 years.

Distribution (income Strategy) - we are in 24% FED Bracket:
1. I will draw from TIRA up to income threshold to stay in 24% bracket (1/3 spend, 1/3 add to taxable, 1/3 Roth conversion - retirement through 2030 (DW Retirement)
2. 2030 DW Retires March 2030; delay her MRA retirement - sell rental and keep income to minimum (should be in 12% bracket that year) to maximize profit from rental; Special needs son ages out of school at 22.
3. 2031 I claim SS (@ 68); DW claims @ 58 (exception based on being son's caretaker; Son moves from SSI to SSDI (22-23) - We will max out family max of ~$6000/month based on my benefit and wife getting half at 57 (not sure if this is the case so any SS experts please chime in here).

Healthcare:
FEHB - will continue into retirement; - I am on DW policy as she is legally required to maintain insurance for DS; We will be able to switch to me when she retires at MRA and postpones collection of pension.
Will need to work on Medicare strategy- probably Part B+ ?? - experts - please chime in here!
IRMAA may be an issue but plan to reduce my TIRA withdrawals between 65-67 due to look back period to minimize IRMAA.
I will also have a ~$45K FEGLI (life insurance - free after 65) policy for my final expenses, assuming I go first.

Goals in retirement
- travel, help out grandkids, provide for wife when I am gone. Small legacy for DD (we were never close and she is doing well financially).
- DW most of her investments will go to her son and funding SNT for special needs son.
Budget estimates
- GOGO (63-73) - ~$150-$175K
-SLOGO (73-80) - ~$80-$100K RMDS will like increase our income.
-NOGO (80-??) - ~$120-$150K LTC - if needed - hopefully can maximize in-home to keep costs low, may need to spend down my retirement leftovers if more is needed.

1. I think I am ready, based on other's plans comments received, and FIRECALC
2. Hoping that someone might ID a blindspot I didn't consider.
3. Would appreciate feedback from caretakers of special needs individuals, particularly any negative issues

Thank you in advance!!!

 

[racy]

This a common question at Bogleheads and they have a standardized format, here: Asking Portfolio Questions - Bogleheads.org

 

[Aerides]

As far your financials, it's hard to figure it out from what you've laid out as it's a bit confusing? But it does seem you've planned the details and have enough.

 

[target2019]

There are very good threads on Medicare choices.

At 65 you sign up for Part B. If you're off wife's insurance, you'll add a Supplement to Part B, and pick a drug plan. Eye care and dental are additional choices.

 

[bobandsherry]

Here's what Chat GPT has to say ...

### Financial Analysis and Stress Test Report

#### **Overview**
The plan outlined by "joejetski" is well-considered and comprehensive, addressing key areas like income streams, healthcare, family legacy, and special needs considerations. Below is an analysis based on the three questions posed:

---

### **1. Readiness for Retirement**

#### **Strengths:**
- **Diverse Income Streams:**
- Federal Employee Retirement System (FERS) pension, state pension, and Social Security ensure reliable income.
- Planned Roth conversions and TIRA withdrawals align with tax efficiency.
- Rental property incorporated into the retirement strategy to bolster income.

- **Investments:**
- Conservative allocation (50-50 for TIRAs) reduces risk in volatile markets.
- Total investments of $1.89M (TIRA, Roth, taxable accounts) provide a substantial safety net.

- **Emergency Fund & Debt-Free Assets:**
- Emergency fund and paid-off vehicles mitigate short-term financial shocks.
- Substantial equity in both primary and rental properties.

- **Healthcare:**
- Continuing FEHB coverage into retirement and Medicare integration minimizes risks associated with medical expenses.

#### **Potential Gaps:**
- **Inflation Risks:**
Budget estimates may need adjustment for inflation, particularly given a 20-30+ year retirement horizon.

- **Future Healthcare Costs:**
Long-term care (LTC) costs may outpace projections. Consider LTC insurance or additional earmarking of assets for this purpose.

- **Spousal Benefit Timing:**
Claiming Social Security for the spouse at 58 may reduce lifetime benefits. Analyze the trade-offs between early benefits as a caregiver and waiting to maximize payouts.

---

### **2. Identifying Blind Spots**

#### **Taxation:**
- **Required Minimum Distributions (RMDs):**
- Significant balances in TIRAs ($1.2M by 59.5) could result in high RMDs starting at age 73, pushing the household into higher tax brackets.
- Current Roth conversion strategy is sound but may need acceleration before RMDs to minimize tax burdens later.

- **IRMAA Implications:**
Withdrawal strategies may reduce taxable income during Medicare lookback years, but Roth conversions during high-income years could trigger IRMAA surcharges. A detailed income forecast is advisable to optimize timing.

#### **Special Needs Planning:**
- **Special Needs Trust (SNT):**
- The plan indicates funding for an SNT but lacks specifics. Confirm:
- The trust is set up to ensure your son remains eligible for SSI and Medicaid.
- Proper designation of retirement accounts to fund the SNT posthumously.

- **Caretaker Transitions:**
- As parents age, ensure alternate caretakers or trustees are named for the SNT to avoid disruptions in care.

#### **Rental Property:**
- **Market Risks:**
- Selling the rental property in 2030 may coincide with an unfavorable real estate market. Consider keeping flexibility in the plan to adjust timing based on market conditions.
- **Income Gap Post-Sale:**
- Evaluate how income will be replaced after selling the rental, especially in the event of unexpected medical or LTC costs.

#### **Longevity Risks:**
- The "NOGO" phase assumes higher costs due to LTC needs. While retirement leftovers are earmarked, the current structure may require significant drawdowns. Ensure updated projections account for scenarios where both spouses live into their 90s.

---

### **3. Feedback for Caretakers of Special Needs Individuals**

#### **Key Considerations:**
1. **Medicaid Waiver Services:**
- Ensure continuity of Medicaid waiver services as your son transitions into adulthood. These services can offset caregiving costs.

2. **Social Security Transition to SSDI:**
- Confirm eligibility for SSDI benefits based on your work record. The projected family maximum of ~$6,000/month appears feasible but should be confirmed with the Social Security Administration (SSA).

3. **Guardianship vs. Supported Decision-Making:**
- As your son turns 18, evaluate whether guardianship or a supported decision-making arrangement is needed to manage legal and financial affairs.

4. **Post-Retirement Care Plan:**
- Consider designating a family member or professional trustee to manage the SNT and oversee care arrangements after you and your spouse are no longer able to do so.

---

### **Stress Testing the Plan**

#### **Scenarios to Model:**
1. **Stock Market Downturn:**
A 20-30% market drop in the next five years could reduce portfolio balances. Assess if income needs can still be met without compromising growth potential.

2. **Higher-Than-Expected LTC Costs:**
- Model scenarios where LTC costs exceed $150K annually for both spouses. Confirm asset sufficiency.

3. **Premature Death of Either Spouse:**
- Ensure surviving spouse income is sufficient, particularly for maintaining healthcare coverage and special needs care.

4. **Prolonged High Inflation:**
- Analyze the impact of 3-5% inflation rates on retirement spending, particularly during the "SLOGO" and "NOGO" phases.

---

### **Recommendations:**
1. **Accelerate Roth Conversions:**
- Utilize the 24% bracket fully before DW retires in 2030 to reduce TIRA balances and future RMDs.

2. **Consider LTC Insurance:**
- Explore hybrid policies that combine life insurance with LTC benefits, ensuring flexibility in covering future costs.

3. **Establish a Detailed SNT Plan:**
- Consult with a special needs planning attorney to finalize trust structure, funding, and management.

4. **Monitor Investment Allocations:**
- Rebalance portfolios periodically to align with risk tolerance and retirement phases.

5. **Run Advanced Projections:**
- Use tools like FIRECalc, SSA projections, and Monte Carlo simulations to stress-test against worst-case scenarios.

---

### **Conclusion**
Based on the information provided, the plan is sound and well-prepared for retirement, with multiple safeguards in place. Addressing the blind spots identified will strengthen long-term viability and ensure financial stability for the family, including the special needs son.

 

[zekeboz]

Here's what Chat GPT has to say ...

### Financial Analysis and Stress Test Report

#### **Overview**
The plan outlined by "joejetski" is well-considered and comprehensive, addressing key areas like income streams, healthcare, family legacy, and special needs considerations. Below is an analysis based on the three questions posed:

---

### **1. Readiness for Retirement**

#### **Strengths:**
- **Diverse Income Streams:**
- Federal Employee Retirement System (FERS) pension, state pension, and Social Security ensure reliable income.
- Planned Roth conversions and TIRA withdrawals align with tax efficiency.
- Rental property incorporated into the retirement strategy to bolster income.

- **Investments:**
- Conservative allocation (50-50 for TIRAs) reduces risk in volatile markets.
- Total investments of $1.89M (TIRA, Roth, taxable accounts) provide a substantial safety net.

- **Emergency Fund & Debt-Free Assets:**
- Emergency fund and paid-off vehicles mitigate short-term financial shocks.
- Substantial equity in both primary and rental properties.

- **Healthcare:**
- Continuing FEHB coverage into retirement and Medicare integration minimizes risks associated with medical expenses.

#### **Potential Gaps:**
- **Inflation Risks:**
Budget estimates may need adjustment for inflation, particularly given a 20-30+ year retirement horizon.

- **Future Healthcare Costs:**
Long-term care (LTC) costs may outpace projections. Consider LTC insurance or additional earmarking of assets for this purpose.

- **Spousal Benefit Timing:**
Claiming Social Security for the spouse at 58 may reduce lifetime benefits. Analyze the trade-offs between early benefits as a caregiver and waiting to maximize payouts.

---

### **2. Identifying Blind Spots**

#### **Taxation:**
- **Required Minimum Distributions (RMDs):**
- Significant balances in TIRAs ($1.2M by 59.5) could result in high RMDs starting at age 73, pushing the household into higher tax brackets.
- Current Roth conversion strategy is sound but may need acceleration before RMDs to minimize tax burdens later.

- **IRMAA Implications:**
Withdrawal strategies may reduce taxable income during Medicare lookback years, but Roth conversions during high-income years could trigger IRMAA surcharges. A detailed income forecast is advisable to optimize timing.

#### **Special Needs Planning:**
- **Special Needs Trust (SNT):**
- The plan indicates funding for an SNT but lacks specifics. Confirm:
- The trust is set up to ensure your son remains eligible for SSI and Medicaid.
- Proper designation of retirement accounts to fund the SNT posthumously.

- **Caretaker Transitions:**
- As parents age, ensure alternate caretakers or trustees are named for the SNT to avoid disruptions in care.

#### **Rental Property:**
- **Market Risks:**
- Selling the rental property in 2030 may coincide with an unfavorable real estate market. Consider keeping flexibility in the plan to adjust timing based on market conditions.
- **Income Gap Post-Sale:**
- Evaluate how income will be replaced after selling the rental, especially in the event of unexpected medical or LTC costs.

#### **Longevity Risks:**
- The "NOGO" phase assumes higher costs due to LTC needs. While retirement leftovers are earmarked, the current structure may require significant drawdowns. Ensure updated projections account for scenarios where both spouses live into their 90s.

---

### **3. Feedback for Caretakers of Special Needs Individuals**

#### **Key Considerations:**
1. **Medicaid Waiver Services:**
- Ensure continuity of Medicaid waiver services as your son transitions into adulthood. These services can offset caregiving costs.

2. **Social Security Transition to SSDI:**
- Confirm eligibility for SSDI benefits based on your work record. The projected family maximum of ~$6,000/month appears feasible but should be confirmed with the Social Security Administration (SSA).

3. **Guardianship vs. Supported Decision-Making:**
- As your son turns 18, evaluate whether guardianship or a supported decision-making arrangement is needed to manage legal and financial affairs.

4. **Post-Retirement Care Plan:**
- Consider designating a family member or professional trustee to manage the SNT and oversee care arrangements after you and your spouse are no longer able to do so.

---

### **Stress Testing the Plan**

#### **Scenarios to Model:**
1. **Stock Market Downturn:**
A 20-30% market drop in the next five years could reduce portfolio balances. Assess if income needs can still be met without compromising growth potential.

2. **Higher-Than-Expected LTC Costs:**
- Model scenarios where LTC costs exceed $150K annually for both spouses. Confirm asset sufficiency.

3. **Premature Death of Either Spouse:**
- Ensure surviving spouse income is sufficient, particularly for maintaining healthcare coverage and special needs care.

4. **Prolonged High Inflation:**
- Analyze the impact of 3-5% inflation rates on retirement spending, particularly during the "SLOGO" and "NOGO" phases.

---

### **Recommendations:**
1. **Accelerate Roth Conversions:**
- Utilize the 24% bracket fully before DW retires in 2030 to reduce TIRA balances and future RMDs.

2. **Consider LTC Insurance:**
- Explore hybrid policies that combine life insurance with LTC benefits, ensuring flexibility in covering future costs.

3. **Establish a Detailed SNT Plan:**
- Consult with a special needs planning attorney to finalize trust structure, funding, and management.

4. **Monitor Investment Allocations:**
- Rebalance portfolios periodically to align with risk tolerance and retirement phases.

5. **Run Advanced Projections:**
- Use tools like FIRECalc, SSA projections, and Monte Carlo simulations to stress-test against worst-case scenarios.

---

### **Conclusion**
Based on the information provided, the plan is sound and well-prepared for retirement, with multiple safeguards in place. Addressing the blind spots identified will strengthen long-term viability and ensure financial stability for the family, including the special needs son.

Can't comment on the plan but as an aside i have been more and more impressed with AI (given as leery as I am on big tech/data in our lives - and this is coming from someone who has worked in the industry 25 yrs).

 

[pacergal]

Answer the questions from the forum posted by racy, they will give you some good guidance.
If Firecalc says you are good and you are comfortable with your numbers, I think you will do fine.
You have 3 legged stool: Pension, SS, and good savings. That's a good spot to be in.

 

[Koolau]

I'm pretty much "sold" on FIRECalc. If it says you're good then you're probably good to go.

Is DW on board with FIRE? If so, then I think I'd pull the plug, but I'm not you and YMMV.

 

[gwill1010]

Ugg, get boldin. Worth it with this many datapoints.

 

[2HOTinPHX]

Here's what Chat GPT has to say ...

Warning the Chat GPT policy here is not to post the entire chats. A short summary and your thoughts should be ok. Don't ask me how I know..