Since that 2017 post:
- We’ve had a very strong savings rate…nearing 50% of gross income.
- We have paid off the 0% auto loan and sold one of our cars.
- We’ve paid off our mortgage and downsized to a more livable house with improved location, walkability, and single floor living. (Unfortunately, we moved sideways in house value – we had hoped to spend less $$, but during the search decided that this time in our life wasn’t the right time for that.)
- We’ve improved our tax efficiency of investments via advice from that review – moving all bonds to tax-advantaged and international stocks to taxable.
- Moved 401k investments to Fidelity brokeragelink, where I can use Vanguard funds.
- Older child has graduated from college. Younger child has decided to attend an affordable state university.
- Sold rental property.
Our full portfolio details and retirement plan are below…along with questions from both DW and I. Even before her diagnosis, DW was scared that this is too early for me to retire, and she’d like to know if I am thinking sensibly. That said, I’d like to make sure I am thinking sensibly and doing the right thing for the family and myself as well.
Emergency Fund, Debt and Income
Emergency funds: 3 months of expenses
Tax Filing Status: Married Filing Jointly, two college-aged kids (one just graduated, one just started with plenty saved in 529)
Income Tax: (2020) 35% Federal, low% State. Effective Rate = 20.24%
Expenses: budgeted to be $145K/year until 55, then $130K until 65, then $120K at 65 and later (including taxes and likely heavy healthcare costs related to cancer – (premiums and out of pocket) with COBRA, then ACA, then Medicare.)
Ages: both early 50’s
Desired fund choice strategy: Three fund portfolio
Desired asset allocation: 65/35 (US/BND)
Stock % International: 20%
Size of Portfolio (excluding home equity & 529s): $2.7-2.9M
Home: ~1.5M value, no mortgage. HCOL location. (Likely here for next 10-20 years.)
Tax-advantaged assets (62.6%)
His 401k (50.8%) at Fidelity BrokerageLink
33.5% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)
17.2% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
Her Roth IRA at Vanguard (6.7%)
6.7% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
His Roth IRA at Vanguard (5.2%)
5.2% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
His HSA (1.4%)
0.2% Schwab International Index (SWISX) (.06%) – current year contributions
1.4% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%) – rollover at Fidelity
Taxable assets (37.4%)
13.8% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.11%)
18.1% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
5.5% Vanguard Total Stock Index ETF (VTI) (.03%)
Saving ~50% of gross income. Maximizing 401k, match, backdoor Roth, non-deductible IRAs for both, and the rest in taxable.
While employed, 4x of my base salary - ~$800K. Once retired, plan to have no life insurance coverage. DW has no coverage.
Have $2M umbrella insurance protection via our primary insurer. Sized via Kiplinger.com’s umbrella insurance calculator.
I plan to start at 70 with $3,577 monthly benefit.
DW plans to start at 62 and 5 months with $854 monthly benefit.
(We update AnyPIA / opensocialsecurity.com tools every year or so.)
North of $300K annually, including salary, bonus and RSUs. If I work another 4 years before retiring, most unvested RSUs at that point will continue to vest. Strong employer provided healthcare.
Hard to walk away from my peak earnings (another $1.5M of gross income if I worked until 6/2025), but need to make the time vs money decision at some point.
Part-time income ~$30K, flexible hours/location. No healthcare options through work. DW’s current plan is to continue to work part-time for several more years.
Diagnosed earlier this year, DW is fighting a type of blood cancer. She is being seen in a strong cancer center located within a half hour of our house. The current chemoimmunotherapy treatment appears very effective for her. Despite this success, the doctor has given the expectation that she will likely need a different treatment in ~5 years as this type of cancer is never truly cured. It is unlikely that DW will live until mid-90's like we had always expected based on her family history.
Older child has recently graduated from college with less than $5K of debt. Looking for job in tech in the Bay area. Until they have a job with insurance coverage, we will continue to pay for their health care costs.
Younger child started college career with ~6 years’ worth of college costs in their 529.
Health Care Coverage Plan
Our budget for health care expenses post-retirement is budgeted as:
COBRA for 18months
Out of Pocket: up to 7K/yr
Coverage Level: same as insurance while working.
ACA until 65
Premiums: 13K. (researched gold plan that covers cancer hospital, and estimated our income via i-orp)
Out of Pocket: up to 13.5K. Likely years with treatment will reach full out of pocket.
Coverage Level: like COBRA, including coverage at Cancer Hospital.
Medicare after 65
Confusing…but appears to be lower than COBRA and ACA…so won’t focus energies on this for now. Just budgeting same amount as ACA for now. Don’t want to waste brain cells on this now, as long as that conservative budgeting is good.
Treatment Costs for Cancer
Treatment costs this year will be capped at out-of-pocket maximum. It seems that if we focus on paying for good insurance, and budget for some years of full out of pocket costs, we should be ok financially through cancer treatments.
- $145K/year until 55
- then $130K until 65
- then $120K from 65 and later
Starting Retirement Proposal
- Would quit Tech MegaCorp job after 2021 annual bonus and biggest future quarterly stock vest. (9/2021)
- Major component of plan is to do some serious volunteering in a role I currently hold, with more time and energy to devote. This charity is very important to us.
Have used several retirement forecasting tools, including ERN's SWR spreadsheet, iorp, firecalc, and more. Have used fairly conservative projections:
- Budget for 50yr retirement, 40yr more likely.
- Holding no mortgage. Budgeting to move from HCOL 3br house to place worth ~60% as much in ~20yrs.
- Budget includes one inheritance; it is almost certain (I am POA). Conservatively estimated to happen in 15yrs. Likely will grow more than budgeted due to their 2% withdrawal rate.
- Another possible 1-3 inheritances, but not including them in budget.
- DW wants to continue working part time for next several years, but not including any of that in "can I retire" budgeting.
- If needed, and/or desired, I can go back to work, or start a new line of work.
ERN’s SWR spreadsheet
Retirement Horizon: 600 months (50 years)
Cash Flow Assist sheet:
3 budget eras: 4 years of 25K extra withdrawals, then 10 years of 10K extra withdrawals, then normal withdrawals.
Social Security: 854 per month for DW at ~62.5. Goes up to 1111 when DH turns 70. 3577 per month for DH social security at 70.
Result1: Spreadsheet calculates SWR of 3.68% (for cape>20 and spx at all time high) with social security cash flows and budget eras included.
~15 years, inheritance of $578K, 500K of it inflation adjusted.
~20 years, reduce home equity by $600K, inflation adjusted.
Result2: when you add inheritance and home equity cash flow, it changes to swr of 4.84%. That SWR is just a bit below $1K per month extra than is needed for all three budget eras.
Current Investable assets.
Social Security: 42.9 @ 70 for me. 10.2 @ 62 for DW.
Essential spending of 140, 125, 115 at 51, 55, and 65 [not all that spending is essential] – taxes not included in those amounts, since IORP figures those out.
Inheritance at 66 of 575K
House equity at 70 of 600K
3% spending inflation rate. 5% stock return. 2% bond return.
Result: 7K max, annual discretionary spending, on top of essential spending requirements.
Spending: 140,000 (couldn’t figure out how to do variable budget eras very well, so just picking this almost highest budget era)
Social Security: 42900 in 2040 and 10200 in 2032
CPI inflation (default)
Constant spending power (default)
.05% investing fees.
Long Interest Rate (default)
Add lump sum of $575K in 2036 (inheritance)
Add lump sum of $600K in 2040 (house equity)
Here is how your portfolio would have fared in each of the 101 cycles. The lowest and highest portfolio balance at the end of your retirement was $372,601 to $40,144,850, with an average at the end of $11,256,236. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 50 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.
A) DW wonders if we have enough money to have DH retire considering her health, cost of insurance, and potential out of pocket costs?
B) We have always talked of traveling when DH retires (which we have budgeted for), and I do not want to have to give up that plan due to lack of funds.
C) Is it wise for DH to stop work now when he is at peak earnings amount – walking away from $300K+ annually? DH continued employment for 4 more years would add significantly to DW’s feeling of security in a time filled with a lot of unknowns.
D) Should DH work until he is old enough (4 more years) to have RSUs vesting continue post retirement?
E) Why leave money on the table? (1.5 million of gross income if DH worked until 9/2025)
We have been planning towards retirement for a while - saving more and simplifying our lives.
DW’s health situation, and the new uncertainty of how long we’ll have in retirement together, added to my desire to retire sooner than later.
I feel that while working, I cannot focus effectively on family health, my own exercise and health, volunteering and other side projects.
I do not want to work longer than I must.
Thanks for any assistance.