zibazinski
Community Leader
Joined: Dec 24, 2010 16:12:50 GMT -5
Posts: 47,865
|
Post by zibazinski on Aug 24, 2017 11:09:19 GMT -5
I want a paid off house, a million in assets and some monthly income coming in. Then I feel I can relax. Until then it's a goal
|
|
tskeeter
Junior Associate
Joined: Mar 20, 2011 19:37:45 GMT -5
Posts: 6,831
|
Post by tskeeter on Aug 24, 2017 11:17:10 GMT -5
Folks should be aware than you can withdraw money from your 401K/IRA account before you are 59 1/2 without penalty. As I understand it, you must withdraw a specific amount every year. Similar to a RMD for those over 70 1/2.
For people considering retiring before 59 1/2, it's worth your time to research these options.
|
|
justme
Senior Associate
Joined: Feb 10, 2012 13:12:47 GMT -5
Posts: 14,618
|
Post by justme on Aug 24, 2017 11:39:42 GMT -5
I think you need to run the what ifs involving you dying at multiple ages and how your wife fairs.
Your plan is to live off 100k split equally between pension and withdraws. But when you die the pension goes down for her, if she kept the withdrawal rate the same she be living on 77k and be at a higher tax level. (Long married people like my parents forget the single brackets are way smaller - they make more than me in retirement but I pay a lot more in income taxes because I'm single.) But her expenses won't cut in half when you die. So unless what you eat, travel and other individual to you only expenses are equal to the 27k plus whatever her increase in taxes would be she'll have to withdraw more. And don't forget anything you do that she'd have to pay for that you do now like car maintenance if she can't do it.
|
|
Lizard Queen
Senior Associate
103/2024
Joined: Jan 17, 2011 22:19:13 GMT -5
Posts: 14,659
|
Post by Lizard Queen on Aug 24, 2017 12:07:56 GMT -5
They'll also ask why you need to spend so much money. I hang out there from time to time, and have read the entire blog. According to MMM philosophy, getting a handle on the expenses is key.
|
|
hoops902
Senior Associate
Joined: Dec 22, 2010 13:21:29 GMT -5
Posts: 11,978
|
Post by hoops902 on Aug 24, 2017 12:48:40 GMT -5
Sorry if I missed this, but what actual dollar figure are you anticipating getting from SS both for you and your wife and at what age? That seems pretty critical here.
I wouldn't feel comfortable retiring in your situation if it were only my pension plus the $1.2M saved up, but adding in even a minimal amount of SS could certainly help my comfortability. My concern would be the idea of taking out $50K/year. If the market goes down, you're in trouble. If the market doesn't move much, you've got about 25 years of withdrawals (which takes you to mid 70s, not great, and that's assuming you never increase that amount). So you need to grow that money, which means increased risk of losing that money. If you can decrease that amount to $30-35K based on getting some SS income, you can put that $1.2M somewhere safe and have money from that until your mid 80s which is a lot better).
My "goal" for retirement is essentially not to touch the savings for fixed expenses. Live off pension, SS, etc by getting my expenses down and under control (easier obviously in a LCOL area like I'm in), and then use the savings for variable expenses like gifts, travel, etc...which are simple to cut back on if the market tanks. That said, it's almost definite that my variable expenses will be far greater than my fixed expenses given that I'm likely to really be looking at fixed expenses of things like utilities, property taxes, and food when I retire, and variable expenses that are significant.
I'd want to have a much better handle on my expenses than "we get by fine spending $80K". There's a big difference if you spend $80K and could trim it to $75K if needed, or if you could trim it to $35K if needed. There's also often a big change in lifestyle/activities when you retire that I'd want to plan around as well (i.e. when my in-laws retired early, they play a lot of golf and travel a lot more, which means greater expenses than when they were working the last few years...my parents retired and spend most of their time locally which means less commuting costs of fuel and car usage). It would be rather easy for my in-laws to shave their budget if times get tough, they have a lot of variable spending. My parents could shave some business things (like buying rental properties) but couldn't cut their personal budgets much from what they are now.
|
|
Rukh O'Rorke
Senior Associate
Joined: Jul 4, 2016 13:31:15 GMT -5
Posts: 10,040
|
Post by Rukh O'Rorke on Aug 24, 2017 14:38:00 GMT -5
I want a paid off house, a million in assets and some monthly income coming in. Then I feel I can relax. Until then it's a goal I thought you were retired...did you go back to work?
|
|
Rukh O'Rorke
Senior Associate
Joined: Jul 4, 2016 13:31:15 GMT -5
Posts: 10,040
|
Post by Rukh O'Rorke on Aug 24, 2017 14:41:35 GMT -5
If you could live off the pension alone for worst case scenario, then I d say yeah. 1.2 million is not a lot for 2 younger retirees, id go for more.
|
|
brdsl
Familiar Member
Joined: Dec 28, 2010 11:56:10 GMT -5
Posts: 863
|
Post by brdsl on Aug 24, 2017 14:54:16 GMT -5
I would look at it from your spending side. You said 80k, but included one time costs.
What is the very least amount you can spend each year to survive?
I figure most people could make it 20 years on a million.
|
|
Rob Base 2.0
Well-Known Member
Joined: Feb 23, 2017 18:12:07 GMT -5
Posts: 1,538
|
Post by Rob Base 2.0 on Aug 24, 2017 15:28:18 GMT -5
I think you need to run the what ifs involving you dying at multiple ages and how your wife fairs. Your plan is to live off 100k split equally between pension and withdraws. But when you die the pension goes down for her, if she kept the withdrawal rate the same she be living on 77k and be at a higher tax level. (Long married people like my parents forget the single brackets are way smaller - they make more than me in retirement but I pay a lot more in income taxes because I'm single.) But her expenses won't cut in half when you die. So unless what you eat, travel and other individual to you only expenses are equal to the 27k plus whatever her increase in taxes would be she'll have to withdraw more. And don't forget anything you do that she'd have to pay for that you do now like car maintenance if she can't do it. yep i know to simplify things it would be living off $50 K pension and $50 K draw from $1.2 million retirement accounts. so if the dirt nap gets me before the old lady, tgen she only gets about half my pension. so for easy numbers lets say i croak first and she gets $25 K pension and same $50 K draw. But she also gets $750 K term life payout. that should cover the $25 K shortfall for quite a while
|
|
Rob Base 2.0
Well-Known Member
Joined: Feb 23, 2017 18:12:07 GMT -5
Posts: 1,538
|
Post by Rob Base 2.0 on Aug 24, 2017 15:34:47 GMT -5
Folks should be aware than you can withdraw money from your 401K/IRA account before you are 59 1/2 without penalty. As I understand it, you must withdraw a specific amount every year. Similar to a RMD for those over 70 1/2. For people considering retiring before 59 1/2, it's worth your time to research these options. u can also take out principal from a roth ira at ANY time (as long as it been in there at least 5 years)
|
|
Rob Base 2.0
Well-Known Member
Joined: Feb 23, 2017 18:12:07 GMT -5
Posts: 1,538
|
Post by Rob Base 2.0 on Aug 24, 2017 15:49:49 GMT -5
They'll also ask why you need to spend so much money. I hang out there from time to time, and have read the entire blog. According to MMM philosophy, getting a handle on the expenses is key. yeah the expenses i listed are high. I was just pissed at some peeps yesterday. so that was a quick off the top of the dome calculation. I was lazy and just used my take home and wife take home pay (which already has taxes and 401 k and stuff taken out already) not really "expenses". just what we have been live ng very comfortably on since my military retirement. can definitely be reduced a lot.
|
|
ken a.k.a OMK
Senior Associate
They killed Kenny, the bastards.
Joined: Dec 21, 2010 14:39:20 GMT -5
Posts: 14,106
Location: Maryland
|
Post by ken a.k.a OMK on Aug 24, 2017 16:00:04 GMT -5
There are things that change when you retire. No more 401k payments. Lower tax due to no wages, only pay on pensions, interest and dividends. My wife had a management job that required expensive clothes. A 2 car couple could go to a 1 car couple. We didn't because our second car was old and reliable and even if it sat for a week unused it was available. Maybe you bought lunches at work. Still thinking of more....
|
|
Rob Base 2.0
Well-Known Member
Joined: Feb 23, 2017 18:12:07 GMT -5
Posts: 1,538
|
Post by Rob Base 2.0 on Aug 24, 2017 16:12:00 GMT -5
Also peeps, once the house is paid off, expenses will DECREASE. Not planning to increase the lifestyle if that goes down. Maybe do a little bit more home improvements (but no where near a house payments worth).
|
|
Rob Base 2.0
Well-Known Member
Joined: Feb 23, 2017 18:12:07 GMT -5
Posts: 1,538
|
Post by Rob Base 2.0 on Aug 24, 2017 16:18:18 GMT -5
Sorry if I missed this, but what actual dollar figure are you anticipating getting from SS both for you and your wife and at what age? That seems pretty critical here.
I wouldn't feel comfortable retiring in your situation if it were only my pension plus the $1.2M saved up, but adding in even a minimal amount of SS could certainly help my comfortability. My concern would be the idea of taking out $50K/year. If the market goes down, you're in trouble. If the market doesn't move much, you've got about 25 years of withdrawals (which takes you to mid 70s, not great, and that's assuming you never increase that amount). So you need to grow that money, which means increased risk of losing that money. If you can decrease that amount to $30-35K based on getting some SS income, you can put that $1.2M somewhere safe and have money from that until your mid 80s which is a lot better).
My "goal" for retirement is essentially not to touch the savings for fixed expenses. Live off pension, SS, etc by getting my expenses down and under control (easier obviously in a LCOL area like I'm in), and then use the savings for variable expenses like gifts, travel, etc...which are simple to cut back on if the market tanks. That said, it's almost definite that my variable expenses will be far greater than my fixed expenses given that I'm likely to really be looking at fixed expenses of things like utilities, property taxes, and food when I retire, and variable expenses that are significant.
I'd want to have a much better handle on my expenses than "we get by fine spending $80K". There's a big difference if you spend $80K and could trim it to $75K if needed, or if you could trim it to $35K if needed. There's also often a big change in lifestyle/activities when you retire that I'd want to plan around as well (i.e. when my in-laws retired early, they play a lot of golf and travel a lot more, which means greater expenses than when they were working the last few years...my parents retired and spend most of their time locally which means less commuting costs of fuel and car usage). It would be rather easy for my in-laws to shave their budget if times get tough, they have a lot of variable spending. My parents could shave some business things (like buying rental properties) but couldn't cut their personal budgets much from what they are now.
I'm not sure how "critical" SS is. By that time house is paid off (expenses reduced by $20K a year). Once we start drawing SS we would downsize withdrawals from retirement accounts equivalently
|
|
ken a.k.a OMK
Senior Associate
They killed Kenny, the bastards.
Joined: Dec 21, 2010 14:39:20 GMT -5
Posts: 14,106
Location: Maryland
|
Post by ken a.k.a OMK on Aug 24, 2017 16:26:40 GMT -5
Our goal, which we stuck to, was not to use retirement funds. Now I'm 70 and had to take the RMD. Next year my wife has to also. We haven't denied ourselves of anything requiring money, living within our means. With this extra $80k we are looking at something to spend it on.
|
|
tskeeter
Junior Associate
Joined: Mar 20, 2011 19:37:45 GMT -5
Posts: 6,831
|
Post by tskeeter on Aug 24, 2017 16:41:58 GMT -5
There are things that change when you retire. No more 401k payments. Lower tax due to no wages, only pay on pensions, interest and dividends. My wife had a management job that required expensive clothes. A 2 car couple could go to a 1 car couple. We didn't because our second car was old and reliable and even if it sat for a week unused it was available. Maybe you bought lunches at work. Still thinking of more.... We project our taxes will go up in retirement. How can that happen? No more exclusions for heavy 401K contributions. Will get even worse as the mortgage interest deduction goes away. Most income, pension, SS, 401K withdrawals, will be taxable. I imagine quite a few YMers are in a similar situation.
|
|
Rob Base 2.0
Well-Known Member
Joined: Feb 23, 2017 18:12:07 GMT -5
Posts: 1,538
|
Post by Rob Base 2.0 on Aug 24, 2017 17:05:57 GMT -5
Thanks all. And again dont read anything into my replies. I appreciate all feedback; especially contradictory thoughts.
|
|
justme
Senior Associate
Joined: Feb 10, 2012 13:12:47 GMT -5
Posts: 14,618
|
Post by justme on Aug 24, 2017 17:25:53 GMT -5
I think you need to run the what ifs involving you dying at multiple ages and how your wife fairs. Your plan is to live off 100k split equally between pension and withdraws. But when you die the pension goes down for her, if she kept the withdrawal rate the same she be living on 77k and be at a higher tax level. (Long married people like my parents forget the single brackets are way smaller - they make more than me in retirement but I pay a lot more in income taxes because I'm single.) But her expenses won't cut in half when you die. So unless what you eat, travel and other individual to you only expenses are equal to the 27k plus whatever her increase in taxes would be she'll have to withdraw more. And don't forget anything you do that she'd have to pay for that you do now like car maintenance if she can't do it. yep i know to simplify things it would be living off $50 K pension and $50 K draw from $1.2 million retirement accounts. so if the dirt nap gets me before the old lady, tgen she only gets about half my pension. so for easy numbers lets say i croak first and she gets $25 K pension and same $50 K draw. But she also gets $750 K term life payout. that should cover the $25 K shortfall for quite a while Then I guess the question is would she be ok after the term is done since it'll probably be too expensive for you to buy another.
|
|
Rob Base 2.0
Well-Known Member
Joined: Feb 23, 2017 18:12:07 GMT -5
Posts: 1,538
|
Post by Rob Base 2.0 on Aug 24, 2017 18:40:56 GMT -5
yep i know to simplify things it would be living off $50 K pension and $50 K draw from $1.2 million retirement accounts. so if the dirt nap gets me before the old lady, tgen she only gets about half my pension. so for easy numbers lets say i croak first and she gets $25 K pension and same $50 K draw. But she also gets $750 K term life payout. that should cover the $25 K shortfall for quite a while Then I guess the question is would she be ok after the term is done since it'll probably be too expensive for you to buy another.
I brought a 30 year term in 2010. in 2040 my wife will be 67. If I push up daisies after 2040 (after my term life expires), pretty sure she gets some kind of SS survivor thingee? if not, as I keep emphasizing, house is paid off ($20 K less of expenses) and although I know expenses won't half when I croak, some will go down- no need for 2 cars, etc.....Also old lady will be close to SS age herself (I suspect they will raise the age by then a few years)
|
|
CCL
Junior Associate
Joined: Jan 4, 2011 19:34:47 GMT -5
Posts: 7,599
|
Post by CCL on Aug 24, 2017 19:46:14 GMT -5
Folks should be aware than you can withdraw money from your 401K/IRA account before you are 59 1/2 without penalty. As I understand it, you must withdraw a specific amount every year. Similar to a RMD for those over 70 1/2. For people considering retiring before 59 1/2, it's worth your time to research these options. You can also start withdrawing at age 55 if you are retired from that employer and the plan allows it.
|
|
hoops902
Senior Associate
Joined: Dec 22, 2010 13:21:29 GMT -5
Posts: 11,978
|
Post by hoops902 on Aug 24, 2017 22:07:55 GMT -5
Sorry if I missed this, but what actual dollar figure are you anticipating getting from SS both for you and your wife and at what age? That seems pretty critical here.
I wouldn't feel comfortable retiring in your situation if it were only my pension plus the $1.2M saved up, but adding in even a minimal amount of SS could certainly help my comfortability. My concern would be the idea of taking out $50K/year. If the market goes down, you're in trouble. If the market doesn't move much, you've got about 25 years of withdrawals (which takes you to mid 70s, not great, and that's assuming you never increase that amount). So you need to grow that money, which means increased risk of losing that money. If you can decrease that amount to $30-35K based on getting some SS income, you can put that $1.2M somewhere safe and have money from that until your mid 80s which is a lot better).
My "goal" for retirement is essentially not to touch the savings for fixed expenses. Live off pension, SS, etc by getting my expenses down and under control (easier obviously in a LCOL area like I'm in), and then use the savings for variable expenses like gifts, travel, etc...which are simple to cut back on if the market tanks. That said, it's almost definite that my variable expenses will be far greater than my fixed expenses given that I'm likely to really be looking at fixed expenses of things like utilities, property taxes, and food when I retire, and variable expenses that are significant.
I'd want to have a much better handle on my expenses than "we get by fine spending $80K". There's a big difference if you spend $80K and could trim it to $75K if needed, or if you could trim it to $35K if needed. There's also often a big change in lifestyle/activities when you retire that I'd want to plan around as well (i.e. when my in-laws retired early, they play a lot of golf and travel a lot more, which means greater expenses than when they were working the last few years...my parents retired and spend most of their time locally which means less commuting costs of fuel and car usage). It would be rather easy for my in-laws to shave their budget if times get tough, they have a lot of variable spending. My parents could shave some business things (like buying rental properties) but couldn't cut their personal budgets much from what they are now.
I'm not sure how "critical" SS is. By that time house is paid off (expenses reduced by $20K a year). Once we start drawing SS we would downsize withdrawals from retirement accounts equivalently
It's certainly less critical if you're going to reduce your withdrawal rate by at least $20K/year once your house is paid off. Going from a $50K withdrawal to a $30K withdrawal (or less with SS) makes a tremendous difference. Initially all I was seeing was "withdraw $50K/year, increasing for COLA slightly"...at which rate you are burning through your money much faster than I'd be comfortable with retiring with your plan. SS was "critical" in that I was assuming it served the same function as reducing expenses...at $50K/year you're burning through the money too fast, you need something, even something relatively small, to curb your withdrawal rate at some point.
The other reason I say it is critical is because there can be such a gap in SS income. If you're bringing home a combined $5k+ per month in SS income people are going to have a very different view of your plan than if you're combining to bring home $2k (or at least they should). It's really driving the answer to "How long does your $1.2M need to last you? Until you hit SS age? Or for the rest of your life?". That answer then drives a lot of risk exposure in terms of how aggressive your $1.2M needs to be, which in turn drives your risk of running out of money.
To me though, functionally I think a commitment to decrease expenses by $20K (as opposed to using that money for other fun things) when your mortgage is over hits the same mark.
Random question to consider though. You say your mortgage is $1600/month. How much of that is property taxes and insurance? Those won't be going away just because your mortgage is paid off, so it may not be a $20K savings.
|
|
Gardening Grandma
Senior Associate
Joined: Dec 20, 2010 13:39:46 GMT -5
Posts: 17,962
|
Post by Gardening Grandma on Aug 24, 2017 23:52:01 GMT -5
There are things that change when you retire. No more 401k payments. Lower tax due to no wages, only pay on pensions, interest and dividends. My wife had a management job that required expensive clothes. A 2 car couple could go to a 1 car couple. We didn't because our second car was old and reliable and even if it sat for a week unused it was available. Maybe you bought lunches at work. Still thinking of more.... We project our taxes will go up in retirement. How can that happen? No more exclusions for heavy 401K contributions. Will get even worse as the mortgage interest deduction goes away. Most income, pension, SS, 401K withdrawals, will be taxable. I imagine quite a few YMers are in a similar situation. Our taxes are just as high as before. We have no mortgage interest deduction, no 401k deduction; all of our income is taxable. We are paying more for health ins than before; that and taxes are our two largest expenses. We had blue collar jobs, so no real savings on clothes. We packed our lunches, now eat at home. Whike some expenses are lower, they are offset hy other expenses that are higher.
|
|
buystoys
Junior Associate
Joined: Mar 30, 2012 4:58:12 GMT -5
Posts: 5,650
|
Post by buystoys on Aug 25, 2017 9:04:18 GMT -5
Since you have some time before you make your decision, get a really good handle on your expenses. If you've tracked them closely for the past few years, that's great! That will let you see just how much money you really need to have to live on.
Our basic expenses right now are about the same as what we had when working. The categories changed drastically. Our tax bill has been zero for the past three years due to medical expense deductions. I know you probably won't have that much since you have TriCare for life. But take a look at your state tax laws. Some states don't include pension income as taxable, others do. Some don't tax SS while others do.
Another idea is to live in a lower cost of living area when you both retire. Have you considered that? We moved from NY to TX partly for that reason. We also have all my immediate family within 15 minutes of where we now live, so it was an easy choice for us to make.
Both planners I gave links for "say" that we can spend more than we currently do. We don't have kids so our estate will be left to charity. Neither of us is interested in spending more because we're pretty comfortable where we are. There's also a concern that one or both of us will need LTC at some time and we want to make certain there are funds to cover that cost. That's part of why I encourage everyone to use those links. They help take the emotion out of the decision and let you take a hard look at your numbers.
|
|
Deleted
Joined: Apr 29, 2024 2:47:38 GMT -5
Posts: 0
|
Post by Deleted on Aug 25, 2017 9:09:22 GMT -5
We project our taxes will go up in retirement. How can that happen? No more exclusions for heavy 401K contributions. Will get even worse as the mortgage interest deduction goes away. Most income, pension, SS, 401K withdrawals, will be taxable. I imagine quite a few YMers are in a similar situation. Our taxes are just as high as before. We have no mortgage interest deduction, no 401k deduction; all of our income is taxable. We are paying more for health ins than before; that and taxes are our two largest expenses. We had blue collar jobs, so no real savings on clothes. We packed our lunches, now eat at home. Whike some expenses are lower, they are offset hy other expenses that are higher. You don't have 401K deduction, but you also don't have to draw as much income right? I mean if you were making 80K/year before and putting 15K in tax preferred accounts, you should only need 65K to have the same spending power so isn't that the same as the deduction? Same with the mortgage deduction. Yeah, you don't get the $2500 tax cut, but you also don't have to pay the 10K in interest to get you that tax break.
|
|
teen persuasion
Senior Member
Joined: Dec 20, 2010 21:58:49 GMT -5
Posts: 4,043
|
Post by teen persuasion on Aug 25, 2017 9:13:41 GMT -5
Looks like somewhere around 2040 you have a whole lot of change going on. Your term life insurance runs out, you hit FRA/max (time to claim SS), and your mortgage ends (if I'm reading the OP right; I read it as get to age 50/$million - wife works 3 years more - and mortgage then has 15 more years).
SS is the big unknown here. Have you checked what you are eligible to receive (and wife)? Make sure that is based on retiring early - the default estimate is based on you continuing to earn the same as you are now until you file. If one of you dies before the other, the survivor gets the highest SS benefit of either of you, but it is obviously a loss of the lesser benefit when you were both collecting.
|
|
Gardening Grandma
Senior Associate
Joined: Dec 20, 2010 13:39:46 GMT -5
Posts: 17,962
|
Post by Gardening Grandma on Aug 25, 2017 9:54:32 GMT -5
Our taxes are just as high as before. We have no mortgage interest deduction, no 401k deduction; all of our income is taxable. We are paying more for health ins than before; that and taxes are our two largest expenses. We had blue collar jobs, so no real savings on clothes. We packed our lunches, now eat at home. Whike some expenses are lower, they are offset hy other expenses that are higher. You don't have 401K deduction, but you also don't have to draw as much income right? I mean if you were making 80K/year before and putting 15K in tax preferred accounts, you should only need 65K to have the same spending power so isn't that the same as the deduction? Same with the mortgage deduction. Yeah, you don't get the $2500 tax cut, but you also don't have to pay the 10K in interest to get you that tax break. Well, we do have to draw enough to keep up with inflation ( the cpi doesn't tell the whole truth), so our total income is about the same as pre-retirement. As a result, our taxes are about tbe same.
|
|
TheHaitian
Senior Associate
Joined: Jul 27, 2014 19:39:10 GMT -5
Posts: 10,144
|
Post by TheHaitian on Aug 26, 2017 10:11:06 GMT -5
Late to the party but I think OP will be fine if he retires at 50.
Think about this: he has 50k in pension that adjust for cost of living increase.
At a 4% withdrawal rate that is worth 1.250 Millions dollars. Most people don't even have that when they retire.
I think retirement might be more expensive vs prior if you do it like some of my friends parents: - one with 2 daughters have taken her daughters (and at time husbands) to Europe, Middle East and as recent as yesterday - they are still there China). She always wanted to travel and now can afford to do so but is widowed so take her daughters with her and pay for everything.
- another just took all his 5 kids and spouses/significant others to all expenses paid Panama vacation.
So basically I would say healthcare and those 1-2 annual trips go up significantly but the rest of the year they have normal, not crazy expensive lives.
|
|