Retirement reality

[disneysteve]

Another big factor is health care. I haven't done anything to look at what insurance will cost us when I retire so that isn't factored in at all. It's also why I'm thinking I may continue to work part time so I have insurance through work.

[corn18]

You're going through the same process I started a year ago. It was overwhelming the number of variables that I tried to look at all at once. As time goes by and unknowns turn into knowns, the picture will become clearer. I was just talking to my wife about this this morning. A year ago, I was asking myself if we could retire with only a 90% probability of success (Ps). Why the hell would I walk away from a $500k / year job? Just work a couple more years and make it 100%. As the year went by, and the unknown variables turned into known amounts, the Ps went up and up. Now we are at 100 Ps with room to spare. Nothing really changed from a year ago, but all the what if scenarios started to fall by the wayside. Now that we are close and we know we have enough, we get to plan our withdrawals. That is a lot more fun.

You'll find yourself doing the same thing. And that's ok. You have flexibility and that is the most important aspect of retirement planning.

I highly recommend that everyone join early-retirement.org. They are very helpful and they are all going through the same thing.

[disneysteve]

You're going through the same process I started a year ago. It was overwhelming the number of variables that I tried to look at all at once. As time goes by and unknowns turn into knowns, the picture will become clearer. I was just talking to my wife about this this morning. A year ago, I was asking myself if we could retire with only a 90% probability of success (Ps). Why the hell would I walk away from a $500k / year job? Just work a couple more years and make it 100%. As the year went by, and the unknown variables turned into known amounts, the Ps went up and up. Now we are at 100 Ps with room to spare. Nothing really changed from a year ago, but all the what if scenarios started to fall by the wayside. Now that we are close and we know we have enough, we get to plan our withdrawals. That is a lot more fun.

You'll find yourself doing the same thing. And that's ok. You have flexibility and that is the most important aspect of retirement planning.

I highly recommend that everyone join early-retirement.org. They are very helpful and they are all going through the same thing.

I greatly appreciate your input and guidance as I'm not far behind you on the retirement approach path.

Not all that long ago, my plan was to retire at 62. Thanks to my job change in 2017 and doubling my income, we've been able to sock away a lot more money the past 3 years, COVID tanked our spending last year, the market has rocketed up, and I realized that 60 would be realistic. Now, at 56, I've got what had been a "someday" inheritance turning into a "in a few months" inheritance which changes the equation again and to a significant extent.

But you're absolutely right that the picture becomes clearer with every passing day and the unknowns become knowns. We're not quite there yet, but we're not that far off.

[srblanco7]

This is exactly how you should be approaching it. I do the same thing. The key is how much pad do you want? That is what I struggled with and still do. If I put in a 40% market correction followed by the worst 35 years of market returns (1969-2004) with no SS benefits, I could never retire.

At this point, it is what it is as my wife always says. We will have what we have on 31 Mar and we will make it work.

I’ve saved, modeled, forecast, and planned for many years and we’ll continue being diligent with our approach. Nevertheless, my thinking is evolving to your wife’s wisdom. In the relatively near future (2-3 years), we’ll make the call to retire early and we’ll figure out how to make it work. At some point, time and freedom become more valued than 100% certainty of an outcome.

[LivingAlmostLarge]

You're going through the same process I started a year ago. It was overwhelming the number of variables that I tried to look at all at once. As time goes by and unknowns turn into knowns, the picture will become clearer. I was just talking to my wife about this this morning. A year ago, I was asking myself if we could retire with only a 90% probability of success (Ps). Why the hell would I walk away from a $500k / year job? Just work a couple more years and make it 100%. As the year went by, and the unknown variables turned into known amounts, the Ps went up and up. Now we are at 100 Ps with room to spare. Nothing really changed from a year ago, but all the what if scenarios started to fall by the wayside. Now that we are close and we know we have enough, we get to plan our withdrawals. That is a lot more fun.

You'll find yourself doing the same thing. And that's ok. You have flexibility and that is the most important aspect of retirement planning.

I highly recommend that everyone join early-retirement.org. They are very helpful and they are all going through the same thing.

Corn how old are you? What sort of things changed that made became known that affected your decision?

Right now just playing with firecalc if we stick to 2034 retirement and $0 SS and $0 contributions moving forward we are at 95.5% Ps. If we save $30k or the max 401k and Roth IRA until 2034 we have 100% Ps. But that unfortunately right now I just can't tell if we are going to be saving more than $16k/year (2 roth IRA and 2 ESA). we sit at 99.1%.

[disneysteve]

At some point, time and freedom become more valued than 100% certainty of an outcome.

Here's something that really changed my outlook.

We ended 2020 with our portfolio worth $295,000 more than we started with on January 1.
We put in about $100,000 of new money but also took out $25,000 to buy my car, so net inflow of $75,000.
If we back out that 75K, the portfolio grew by $220,000.
We spent about $72,000 for the year (probably a bit less actually).
Had we pulled that out, we still would have finished the year with $148,000 more than we started with.

Once I saw that I realized that we were actually closer to "the number" than I had previously thought. Obviously, it's dependent on market performance, but that's the 2nd year in a row the portfolio went up by ~300k.

[GoodLiving]

I was playing around with the firecalc and it showed that I could retire in a couple of 3-4 years which was a little scary to me. I knew that I was in a good place but I didn't realize how close it was. Now I really feel like I need to get serious about what I would like retirement to look like. I think 3-4 years is a little too fast for me but maybe 5-8. That would really put us in a good position. And knowing once I pass the threshold of possible, it might make things easier because it's a choice instead of a chore. Like Corn mentioned, there's a lot of unknowns in the future right now but as things get closer and clearer, it will be easier to see the plants.

[corn18]

Corn how old are you? What sort of things changed that made became known that affected your decision?

Right now just playing with firecalc if we stick to 2034 retirement and $0 SS and $0 contributions moving forward we are at 95.5% Ps. If we save $30k or the max 401k and Roth IRA until 2034 we have 100% Ps. But that unfortunately right now I just can't tell if we are going to be saving more than $16k/year (2 roth IRA and 2 ESA). we sit at 99.1%.

I am 54. Will be 55 in Mar. Wife is 51. The biggest unknown that turned into a known just last week was my separation package. If I put in $0 for that, retirement would be very tight. If I put in what I thought I would get, we were ok. I talked to my boss last week and we finalized the package. It turned out to be very generous. So now we have more money than we need. Talk about a stressful few months between when I asked to leave and when I found out the severance package.

The other big one was timing. Two things here:

1. The longer I work, the more money I make and can put into my savings. That's the leverage that working longer creates: you are adding to your retirement accounts vs. withdrawing from them.

2. I want to retire after I turn 55 so I have access to my 401k (luckily my plan allows this). I don't need the money before 59 1/2, but I want to do Roth conversions between 56 and 70 to get my 401k balance down to minimize RMDs. Any RMDs I have @ 72 will be taxed at 22%. I can do conversions between 56 and 70 @ 12%. 10% of my 401k is not a small amount of money.

Other little things were figuring out SS amounts and timing. Doing some what if analysis on if I die early and the impact that has on the survivor cash flow (taxes go up, SS goes down, my pension goes down, expenses go down).

Health care costs can be a HUGE issue if you are retiring before 65. For us, it didn't matter because of my military retiree medical coverage, which costs a whopping $600 / year. My friend is retiring as well and he is budgeting $24k / year for him and his wife. This seemed high to me, but they have pre-existing conditions and that's what the ACA medical coverage costs. I told him to look into planning his withdrawals to stay under the ACA limit so he can get subsidies. If he can't, then that is a huge expense.

And of course, the market has been very good. We were up $224k last year. Add my severance to that and that pushed us over the edge.

[disneysteve]

I highly recommend that everyone join early-retirement.org. They are very helpful and they are all going through the same thing.

Thanks. I just joined and made an introduction post. I used the same user ID of disneysteve there as well.

[LivingAlmostLarge]

I was playing around with the firecalc and it showed that I could retire in a couple of 3-4 years which was a little scary to me. I knew that I was in a good place but I didn't realize how close it was. Now I really feel like I need to get serious about what I would like retirement to look like. I think 3-4 years is a little too fast for me but maybe 5-8. That would really put us in a good position. And knowing once I pass the threshold of possible, it might make things easier because it's a choice instead of a chore. Like Corn mentioned, there's a lot of unknowns in the future right now but as things get closer and clearer, it will be easier to see the plants.

What sort of things are you looking for to elucidate retirement?

Corn congrats. I guess I"m just in the depressing phase of saving. Where you can't see the forest for the trees. We just need to keep on saving but I have no idea what else to do. I have a hard time picking a number even and sticking with it at this far out.

[srblanco7]

Thanks. I just joined and made an introduction post. I used the same user ID of disneysteve there as well.

I'm on there as well. Same username as on this board.

[corn18]

What sort of things are you looking for to elucidate retirement?

Corn congrats. I guess I"m just in the depressing phase of saving. Where you can't see the forest for the trees. We just need to keep on saving but I have no idea what else to do. I have a hard time picking a number even and sticking with it at this far out.

I was the same way. When I started looking for "the number", I got all cornfused and frustrated because there were so many unknowns. So I did the best I could with saving as much as practical until I could nail down some of the variables. The biggest first step is to nail down your spending. If you know how much per year you plan to spend in retirement, then you can get a good estimate on what you need to retire. My wife and I sat down two years ago and set our budget for spending and agreed to use that before we retired to see if we could live with that. We did and we could, so that helped a lot for planning.

[disneysteve]

I was the same way. When I started looking for "the number", I got all cornfused and frustrated because there were so many unknowns. So I did the best I could with saving as much as practical until I could nail down some of the variables. The biggest first step is to nail down your spending. If you know how much per year you plan to spend in retirement, then you can get a good estimate on what you need to retire. My wife and I sat down two years ago and set our budget for spending and agreed to use that before we retired to see if we could live with that. We did and we could, so that helped a lot for planning.

This.

Early on, really all you can do is save, save, save. When you're 10+ years from retiring, you really can't predict your spending with any accuracy. Five years out you've probably got a pretty good idea, and it gets gradually clearer with time. We are probably 2-3 years out at this point and the numbers are much firmer than they used to be.

Only once you know how much you will need can you know when you have enough.

[scfr]

I highly recommend that everyone join early-retirement.org. They are very helpful and they are all going through the same thing.

Thank you for this!

[GoodLiving]

What sort of things are you looking for to elucidate retirement?

Corn congrats. I guess I"m just in the depressing phase of saving. Where you can't see the forest for the trees. We just need to keep on saving but I have no idea what else to do. I have a hard time picking a number even and sticking with it at this far out.

It's easy to dream about things but when it's more clear, then I need to put more effort into planning. Which I have...I have come up with a plan through 5/2024. After that date, it is a little more up in the air but as that date gets closer, I know that I'll likely have a clearer vision of the future.