Retirement Plan 2.0 Stress Test

[Max Valerion]

My first post here brought quite the harsh reality to my previous plans. Though I wasn't happy with a lot of the advice I did take it to heart and continue to research and plan further. I am therefore posting my current plan here to "stress test" it since this site seems somewhat conservative and a very stark dash of reality if I am not looking at something correctly.

Plan is as follows, please let me know what you think.

Retirement sometime this year my age will be 52. I have enough cash set aside to get me through the year so regardless of when I pull the trigger my official retirement starts 1/1/27.

Total Assets $2,250,000.00 (of which $575,000.00 is in cash or brokerage accounts and $450,000.00 is in Roth account so these are my levers to control MAGI)

Proposed initial withdrawal $105,000.00. I plan to use Guyton Klinger with a minimum yearly withdrawal of $90,000.00.

Years 2027 - 2030 will be funded 100% with a CD ladder which eats up about $406,000.00 but hopefully protects against SOR risk.
Years 2031 - 2033 will be funded with CD ladder plus Roth contribution withdrawals to top off as needed.
My investments are totally untouched for the first 4 years of retirement and barely touched for the next 3 which I feel protects me from the current volatility.

Years 2027 - 2033 will have controlled MAGI allowing me to get ACA Healthcare for approx. $125.00 per month and max $2,000.00 OOP (using CSR 95 to max out the benefits).
I will closely control my MAGI and create income as needed by doing 401k Roth conversions yearly to get me to the CSR 95 levels (this is a close calculation, too low and its Medicaid and too high and I lose the CSR). The beauty of this is for the first 7 years of retirement I pay almost nothing for health insurance and federal income taxes. I have also budgeted additional money from 59.5 - 65 in case I run out of Roth funds to continue this trick through Medicare age and have to pay more for ACA + income tax.

My budget includes everything we spend right now completely unchanged but adds $24,000.00 per year for travel / emergency fund. At the time of retirement I will already have $40,000.00 in this account to get us started and every Jan starting in 2027 I will add $24,000.00 to it (or less if I have to change per GK withdrawal rules). We will never spend more on travel than this account has in it. Obviously massive emergencies can happen and I would need to adjust.

At age 70 I am eligible (obviously this could change) for $4,483.00 per month SS and my wife will get $1,808.00 per month.

I have run all of this through FICalc and I get 100% success including wife's SS and 97% if I do not include it. In my calculations I also budget $50,000.00 for a new vehicle in the first 7 years as well as $12,000.00 for new HVAC which I might need. Once I get to 65 I will have to reevaluate everything and see how well the market performed and then plan for retirement from then on.

Does this make sense? Note that I have no debt, house and all current vehicles are paid for and no other debt is present.

 

[FREE866]

For that 2.25 million that you have what is the current asset allocation? stocks/bonds/cash

 

[Max Valerion]

For that 2.25 million that you have what is the current asset allocation? stocks/bonds/cash

60% stocks, 20% bonds, 20% cash

 

[FREE866]

In my view, I always try to look at a very long term, big picture view.

If you're a relatively healthy 52 year year old , barring a tragedy, you have a 30+ year investment time horizon so IMO 40% in fixed income is super conservative. That said , volatility can be painful to watch so it's more about your own psychological temperament. You know yourself better than anyone on this board does.

 

[Max Valerion]

In my view, I always try to look at a very long term, big picture view.

If you're a relatively healthy 52 year year old , barring a tragedy, you have a 30+ year investment time horizon so IMO 40% in fixed income is super conservative. That said , volatility can be painful to watch so it's more about your own psychological temperament. You know yourself better than anyone on this board does.

I was kind of thinking once I get everything set for the first 4-7 years maybe the rest should be 100% stocks. The probability of losing money over 7 years is pretty low?

 

[DEC-1982]

>>> Years 2027 - 2033 will have controlled MAGI allowing me to get ACA Healthcare for approx. $125.00 per month and max $2,000.00 OOP (using CSR 95 to max out the benefits). <<<

Is that $2000 for the month or the year?

 

[COcheesehead]

I put your numbers into FI Calc using the Guyton Klinger strategy. I didn’t have all the data for that method because it asked for mins and max’s, but here are the results.

 

[Aerides]

Years 2027 - 2033 will have controlled MAGI allowing me to get ACA Healthcare for approx. $125.00 per month and max $2,000.00 OOP (using CSR 95 to max out the benefits).

That's very optimistic. Our best plan is now about $500 per month with our max OOP well over $15k for two ppl. If that is the price you've found for 2026, at least bake in some expectation that it will way outpace inflation for increases over the next decade. You're 52 you need this to work for a long time.

If you can estimate $1 per month for healthcare and still do it, then ok.

 

[Max Valerion]

I put your numbers into FI Calc using the Guyton Klinger strategy. I didn’t have all the data for that method because it asked for mins and max’s, but here are the results.

View attachment 62570

You have to enable the modified withdrawal rule which means you adjust every year depending on market conditions. You can also set a min withdrawal meaning you are only willing to adjust down that far.

 

[Max Valerion]

That's very optimistic. Our best plan is now about $500 per month with our max OOP well over $15k for two ppl. If that is the price you've found for 2026, at least bake in some expectation that it will way outpace inflation for increases over the next decade. You're 52 you need this to work for a long time.

If you can estimate $1 per month for healthcare and still do it, then ok.

Shouldn't I use the actual numbers I get for 2026? Yes this will increase but so will my withdrawal rate? This is with CSR 95 so maximum control of MAGI to show only $31,000.00 per year of MAGI (since I am using mostly cash to fund it I have no actual income except some minor interest and gains on CDs, I will have to use Roth conversions to even get to $31,000.00 of "income" and avoid Medicaid which I would not be eligible for).

 

[FREE866]

I was kind of thinking once I get everything set for the first 4-7 years maybe the rest should be 100% stocks. The probability of losing money over 7 years is pretty low?

Yeah, I mean the reality is that you're in great shape! So start with that! We all have our own experiences and thoughts , this is just my view on it. I retired over 9 years ago and plugged in all different asset allocations ( probably 50 times!) and came away with almost 100% stock being the way to go, but frankly I got lucky. Over the last year or 2 I've reduced to ~90% equity and that works for me.

 

[COcheesehead]

You have to enable the modified withdrawal rule which means you adjust every year depending on market conditions. You can also set a min withdrawal meaning you are only willing to adjust down that far.

It’s a foreign withdrawal strategy for me so I took a guess at what you wanted.

 

[DEC-1982]

Over the last 11 years our medical expenses on an annual basis have ranged from $10.9K to $21.7K. Includes all premiums.

Who knows when the next medical emergency might occur that is somehow not covered by insurance? These insurance companies are so tricky. Just look at United Health Care.

 

[Surewhitey]

Your writing is nearly identical to ours and I'm calculating my plan is 100% with the oversized cash/bond allocation.

I added ~$40k to current spending for increased go-go years & $1200/mo for ACA costs. We're ~.5m larger on total & post tax accounts and 3 yrs older, but very close...

DW is more conservative and doesn't "do math", so we're still going... But definitely w*rk optional.

 

[Max Valerion]

Over the last 11 years our medical expenses on an annual basis have ranged from $10.9K to $21.7K. Includes all premiums.

Who knows when the next medical emergency might occur that is somehow not covered by insurance? These insurance companies are so tricky. Just look at United Health Care.

Yeah that gets me back to what if'ing everything and then I never retire.

I think my plan is solid. The max OOP is clearly $2,000.00 with CSR 95 (basically tricking the system into thinking I have only $31k in income). I don't see why I would ever pay more than that? It is certainly something to think about and my idea is the first four years are set without touching my 401k so if things don't go as planned I can always get back on the horse and start working again.

 

[Dalton]

You can have healthcare costs beyond the max OOP, including non-covered services, out of network charges, balance billing charges (beyond what your insurance has agreed to pay). We hear all these stories about people going bankrupt due to health issues... a lot of them have health insurance and still get in big financial trouble. My favorite pasttime is riding my bike in the woods, up and down mountains, and I take a couple or few trips a year top pursue that. So, I remain cognizant that any of those out of town trips could end up breaking my budget. Then there's the possibility of cancer.

I'm basically doing similar to you, in regards to limiting my MAGI to keep it low, so I also have money market funds ("cash") in brokerage account for any money I need beyond my MAGI, except for me that money is more lumpy or emergency funds for "what if." In reality, I've had trouble spending my MAGI every year, so I typically end up doing a little tax gain harvesting at the end of the year. Oh, but I keep my MAGI above the maximum (for $0 premiums) so I pay some monthly premiums...lets me feel like I have some skin in the game, since my income taxes are less than $1k.

 

[Max Valerion]

You can have healthcare costs beyond the max OOP, including non-covered services, out of network charges, balance billing charges (beyond what your insurance has agreed to pay). We hear all these stories about people going bankrupt due to health issues... a lot of them have health insurance and still get in big financial trouble. My favorite pasttime is riding my bike in the woods, up and down mountains, and I take a couple or few trips a year top pursue that. So, I remain cognizant that any of those out of town trips could end up breaking my budget. Then there's the possibility of cancer.

I'm basically doing similar to you, in regards to limiting my MAGI to keep it low, so I also have money market funds ("cash") in brokerage account for any money I need beyond my MAGI, except for me that money is more lumpy or emergency funds for "what if." In reality, I've had trouble spending my MAGI every year, so I typically end up doing a little tax gain harvesting at the end of the year. Oh, but I keep my MAGI above the maximum (for $0 premiums) so I pay some monthly premiums...lets me feel like I have some skin in the game, since my income taxes are less than $1k.

Insurance doesn't cover cancer?

Edit I found this. Seems like the out of network nonsense doesn't apply any longer.

 

[surprising]

My strategy is pretty similar, having retired a year and a half ago at 51. Keep MAGI down for ACA, healthy brokerage and cash budget for pre 59.5 spending. I was on company paid COBRA that runs out end of this month. I was going to keep income low for ACA subsidies this year BUT then decided to sell one of our rentals which will put us way above MAGI ACA limit.

So now I am paying full price for cheapest, crappiest bronze plan -- at $1800/month for family of 3. That is a super shock to the system, PLUS the war and market sell off, and now I am trying to comprehend what it means for my retirement. We put the brakes on any excessive spending for now and put a pause on some major purchases we were planning.

Another worry for me is that we, and you, have over a decade to try to manage MAGI for these subsidies. That is a long time to artificially limit spending, especially during the go-go years. I don't want to sit around and rot away for a decade instead of living it up when we're healthy.

 

[walkinwood]

Yeah that gets me back to what if'ing everything and then I never retire.

If you want to retire, at some point, you need to make a leap of faith.

Your minimum of $90,000. How much of that is essential vs discretionary. Everyone has a different definition, so you should use your own. How much head-room do you have there if you should need to reduce your spending below that limit? Those are good exercises to do and document.

Speaking from our experience. We ER'd in May 2008. By March 2009, our portfolio was down more than 25%. So we had to tighten our belts in 2009 (reduced spending by around 25%), but we still had a good time that year because we still had enough for some (reduced) discretionary spending. We were using a 4% of Jan 1 portfolio value as our withdrawal "rule".

We worked for a while in 2010, but the markets were roaring back, and we had to help with family health issues, so we quit again. And haven't looked back.

 

[Max Valerion]

If you want to retire, at some point, you need to make a leap of faith.

Your minimum of $90,000. How much of that is essential vs discretionary. Everyone has a different definition, so you should use your own. How much head-room do you have there if you should need to reduce your spending below that limit? Those are good exercises to do and document.

Speaking from our experience. We ER'd in May 2008. By March 2009, our portfolio was down more than 25%. So we had to tighten our belts in 2009 (reduced spending by around 25%), but we still had a good time that year because we still had enough for some (reduced) discretionary spending. We were using a 4% of Jan 1 portfolio value as our withdrawal "rule".

We worked for a while in 2010, but the markets were roaring back, and we had to help with family health issues, so we quit again. And haven't looked back.

My calculations are for Guyton Klinger using a starting WR of $105,000.00 (so approx 4.6% of my starting balance) and then I have to calculate every year based on market performance. My WR can go up or down if things are good or bad. With this approach I am able to put in $90,000.00 as my minimum spending (if you don't do this GK always reaches 100% because it will just adjust your spending down to whatever is needed to make the plan succeed). So I have already figured in my minimum ($90,000.00 in 2027 dollars) so I should never have to adjust below that. If the market tanks enough to get me to $90,000.00 I keep that until it corrects, that is the lowest I have told the calculator I am willing to go. That all said I can realistically cut way down from that if I really needed to.

 

[engineernerd]

I haven't read the thread, but just in case nobody has already nudged you to spend some quality time learning all the ins and outs of FIRECalc (link at the top of this page, to the right of MEMBERS), consider yourself nudged.

Note that it has a lot of text which you should read carefully. And (not everyone notices this) it has seven input tabs across the top, from "Start Here" to "Investigate." Social security benefits should be entered in the "Other Income/Spending" tab.

One thing I don't think is mentioned in all that text is that income taxes are not modeled in FIRECalc, and should be handled by adding your best estimate of future taxes into your living expenses/withdrawal rate. Be aware that not only will your life circumstances change over the duration of your retirement, the tax code will also.

I recommend keeping the default Spending Model and portfolio type. That spending model is the most comfortable (no need for your lifestyle to yo-yo up and down based on the market), and the Total Market portfolio takes advantage of all the historical data that is the strength of this calculator.

I also recommend using the option "Investigate changing my allocation" (in the Investigate tab). If you get a flat-top graph with 100% chance of success across a wide range of stock allocations I recommend increasing your assumed withdrawal rate until you get more of a curve, so you can see the stock allocation that gives you the highest potential withdrawal rate.

 

[Dalton]

Insurance doesn't cover cancer?

Edit I found this. Seems like the out of network nonsense doesn't apply any longer.

View attachment 62572

It depends, I guess. I've known people that needed a specialist or wanted the best doctors and treatments (doesn't only apply to cancer, obviously), so they went to a hospital that was out of network. It gets very expensive. If you live in the "wrong" place, and/or have the wrong illness, you may have no choice, but to get treatment out of network.

 

[Koolau]

I won't take a "position" on your plan, but the medical stuff would be a plan killer for ME. I believe the best money spent is that spent on top-notch medical care. I would not have retired unless I had been CERTAIN that I could afford the very best coverage available for health care. You HAVE built in some slop (or slack) in your plan, so you'll likely be okay as long as you remain flexible on spending. Who knows? You might get lucky and not have a sick day until you got on Medicare.

All the best to you.

 

[equakesfan]

...I have run all of this through FICalc and I get 100% success including wife's SS and 97% if I do not include it ...

Are you using your entitled benefit or what you will get if you the law doesn't change? I use 75% of my entitled benefit as an estimate. If the law changes and I get the entire entitled benefit I can up my spending. I don't want to be in the situation where I have to cut spending or go back to work.
Did you calculate your wife's success rate if you are to pass early? One of my concerns is that I pass early and my wife lives a long life.

 

[Max Valerion]

Are you using your entitled benefit or what you will get if you the law doesn't change? I use 75% of my entitled benefit as an estimate. If the law changes and I get the entire entitled benefit I can up my spending. I don't want to be in the situation where I have to cut spending or go back to work.
Did you calculate your wife's success rate if you are to pass early? One of my concerns is that I pass early and my wife lives a long life.

Yes I have taken into account one of use passing before the other. Worst case scenario she collects my SS which is very likely to happen at some point. I have not taken SS reductions into account because I feel they are a political impossibility and I cannot mentally what if myself into never retiring. If I worry about every possible worst case scenario I will end up a very rich but very unhappy 60 year old.