Thinking we are close to winning the game

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AllMostThere
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Thinking we are close to winning the game

Post by AllMostThere » Sun Oct 15, 2017 8:08 pm

Hello Fellow BH’s,
I’ve posted a couple of times over the last year, but questions were light weight compared to this one. Since discovering BH group several years ago DW and I have really embraced the methodology of low cost index investing. As DW and I are from modest backgrounds, we have always LBYM and saved while limiting debt, so this was a perfect fit. I track our investments very tightly via Excel, so would like to have ~ $2.5M before ER, which we are targeting as 2020 when DD launches into College. Both me and DW are finding that our BS buckets are filling up at work and are both wondering if we could pull the plug sooner. We would really like to pull plug in 2018 or 19 with less than $2.5M target, but a level of fear is still there. Please review our investment mix below and provide your constructive feedback. My apologies in advance for the CAPS with the fund descriptions, but this is a cut and paste from my spreadsheet and hard to change.


Emergency Funds: Yes, 12 months in on-line money market
Expenses: $70K estimated, but need to confirm with better tracking of spending. Could actually be lower and I find it hard to believe we are spending nearly $6K per month. Healthcare is provided under DW Employer insurance and costs ~ $10K/yr. Could see this increasing additional $10K/yr should we leave - Driving expenses up to ~ $80K/yr.
Life Insurance: DH & DW, both have insurance thru employers at ~ 5X salary. Both have non-life threatening medical issues that make open market purchase very expensive. Will look into trying to keep employer group rate in RE or alternative insurance of at least ~ $250K each.
Debt: None. House and cars fully paid for
House Value: Fully paid with $325K value. Also, a paid for 2nd house that we will be selling soon and should net ~ $90K. Real estate is not part of any $ totals below.
Tax Filing Status: Married Filing Jointly. Two kids - DD: 15 yrs, DS: 11 yrs
Tax Rate: 28% Marginal / 18% Effective Federal Rate, 6% State Rate
State of Residence: Michigan
Age: DH – 52 yrs; DW – 54 yrs
Social Sec. @ FRA: $2,500 / month each
Desired Asset Allocation: 60% Stocks; 40% Bonds – Mostly low cost index funds with couple of key Vanguard funds
Desired Int’l Allocation: 15% of Stocks (Thinking of moving this closer to 10%)
Current Allocation: All tax deferred accounts held by Fidelity ~ $2.0M balance.

US Stocks 34.9%
International 14.8%
Bond 38.7%
REIT 10.4% (Several forum members have indicated this is may be high, so we may consider driving down to 5-7% prior to RE.)
Cash 1.2%

His Pension: Cash balance pension with $162K balance. $12K annual Employer contribution. I count this as part of my bond allocation. When I terminate employment, I can rollover to an IRA, which I think is my plan.

His 401K: $872K balance. Held by Fidelity. Max $24K annual contribution + $4.5K Employer match.

No ticker (0.080%) MIDCAP EQUITY INDEX 5.4%
No ticker (0.060%) BTC US DEBT INDEX T 18.3%
No ticker (0.160%) BTC EMERGING MKTS M 4.7%
No ticker (0.094%) TIPS INDEX FUND 4.5%
No ticker (0.062%) INTL STOCK INDEX 13.3%
VBAIX (0.060%) VANG BAL INDEX INST 8.5%
VGSNX (0.100%) VANG REIT IDX INST 8.9%
VIIIX (0.020%) VANG INST INDEX PLUS 14.1%
VSCIX (0.050%) VANG SM CAP IDX INST 5.3%
VWIAX (0.150%) VANG WELLESLEY ADM 17.0%

Available funds – Typical Target Date Funds 2020 – 2060 with 0.09 ER. No other Vanguard funds available. Other available funds are various Fidelity actively managed funds with high ER.

Her 401K: $779K balance. Held by Fidelity. Max $24K annual contribution + $7.5K Employer match. For funds held within the core funds, employer charges 0.20% record keeping fee (minimum 5% of total must be be held in core funds). Fee is avoided using Fidelity Brokerage link, so non-EFT Fidelity low cost index funds are used.

Cash 2.9%
No ticker (0.071%) TARGET DATE 2020 9.3%
FIBAX (0.060%) FIDELITY INTERMEDIATE TREAS BOND IDX PREM CL 10.0%
FPMAX (0.130%) FIDELITY EMERGING MKTS INDEX PREMIUM 4%
FSEVX (0.070%) FIDELITY EXTD MARKET INDEX PREMIUM CLASS 9.5%
FSITX (0.045%) FIDELITY U.S. BOND INDEX PREMIUM CLASS 13.4%
FSIYX (0.090%) FIDELITY INFLAT-PROT BOND INDEX PREMIUM 6.7%
FSRVX (0.090%) FIDELITY REAL ESTATE INDEX PREMIUM CL 12.9%
FSTVX (0.035%) FIDELITY TOTAL MKT INDEX PREMIUM CL 24.1%
FTIPX (0.100%) FIDELITY TOTAL INTL INDEX FD PREMIUM CL 7.2%

Available funds – Typical Target Date Funds 2020 – 2060 with 0.071 ER + 0.20% record keeping fee. Other available funds are various Fidelity actively managed funds with high ER + record keeping fee. We can use Brokerage Link to avoid funds from being subject to record keeping fees.

His & Her tIRA: $0 balance. Held by Fidelity. Both maintain $0 balance to enable Backdoor and Mega Backdoor contributions.

His Roth IRA: $85K balance. Held by Fidelity. $6.5K annual Backdoor + $7.5K annual Mega Backdoor contributions.

FIBAX (0.060%) FIDELITY INTERMEDIATE TREAS BOND INDEX PREM CL 19.3%
FSRVX (0.090%) FIDELITY REAL ESTATE INDEX PREMIUM CL 14.9%
FSTVX (0.035%) FIDELITY TOTAL MKT INDEX PREMIUM CL 50.3%
FTIPX (0.100%) FIDELITY TOTAL INTL INDEX FD PREMIUM CL 15.5%

Her Roth IRA: $110K balance. Held by Fidelity. $6.5K annual Backdoor + $5K annual Mega Backdoor contributions.

FIBAX (0.06%) FIDELITY INTERMEDIATE TREAS BOND INDEX PREM CL 18.5%
FSEVX (0.07%) FIDELITY EXTD MARKET INDEX PREMIUM CLASS 47.0%
FSGDX (0.10%) FIDELITY GLOBAL EX US INDEX PREMIUM CL 20.9%
FSRVX (0.09%) FIDELITY REAL ESTATE INDEX PREMIUM CL 13.7%

Her HSA: $20.5K. Held by Fidelity. $5,250 annual + $1.5K Employer contributions. We are using this as a retirement account, so self-funding out-of-pocket health care expenses.

FBIDX (0.14%) FID U.S. BOND INDEX INVESTOR CLASS 19.0%
FRXIX (0.23%) FIDELITY REAL ESTATE INDEX INVESTOR CL 12.6%
FSEMX (0.10%) FIDELITY EXTD MARKET INDEX INVESTOR CLASS 20.1%
FTIGX (0.17%) FIDELITY TOTAL INTL INDEX FD INVESTOR CL 16.0%
FUSEX (0.09%) FIDELITY 500 INDEX INVESTOR CLASS 32.3%

Taxable: $0, but will starting moving forward with one this year to invest ~ $12K annually (until retirement). Not sure if really needed as wife can theoretically access her 401K starting next year (55th birthday). Sale of 2nd house with $90K net could also be used to fund the after tax account.

529 Accounts – Will continue contributing $10K annually into the Michigan 529 for next few years to get the MI Tax deduction. Thinking kids are basically fully funded (or will be soon)

DD - $101K balance. $4k annual contribution. Also, $27K in Fidelity 529 that was basically funded with Fidelity 2% Visa card over past 15 years. ~ $1.2K will be annual contribution with CC 2% reward.
DS - $78K balance. $6K annual contribution

FIRECalc Results - Recent calculations indicate 100% success with the following assumptions:
$2M Starting value; 35 years in retirement
75% of SS income @ FRA (thinking this may be worst case)
Adding $100K / yr until RE
60% equities @ 0.15 expense ration
Retire in 2018 - $99K in annual withdrawals
Retire in 2019 - $107K
Retire in 2020 - $115K

Questions:

1) How are we doing? Have we won the game and can we retire sooner?
2) Any improvements you can suggest?
3) I’m thinking of lowering international allocation towards 10% of total. Thoughts?
4) As DW is turning 55 next year, I am really wondering if an after tax account is necessary as we can tap into her 401K at any time. Thoughts?
5) TIPS have really been unproductive over the past several years, so I am thinking of liquidating and putting proceeds evenly into US Bond Index and US Intermediate Treasury? Thoughts?
6) When pulling the plug for ER, what type of large expenditures should we be funding now? Roof on house is <5 yrs old, so good for next 15 – 20 years. House Furnace is new as of this past Friday. As we have hit our max out of pocket medical this year, I will be getting 2X hearing aids this year, which will be fully paid by health insurance. DW will be getting Lasik on eyes in next 1 – 2 years. Thinking we may want to get different newer car within next 1 – 2 years. What else?
Last edited by AllMostThere on Mon Oct 16, 2017 12:59 pm, edited 3 times in total.

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indexfundfan
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Re: Thinking we are close to winning the game

Post by indexfundfan » Sun Oct 15, 2017 8:21 pm

Try doing a Firecalc https://www.firecalc.com/ simulation.

Also, one of the big ticket item is healthcare. What is your plan / budget for it? Is that covered in your $70k expenses?
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indexfundfan
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Re: Thinking we are close to winning the game

Post by indexfundfan » Sun Oct 15, 2017 8:50 pm

Your portfolio is approx 60/40 and looks reasonable. After selling your second home, its value would be ~2.1m.

US Stocks 34.9%
International 14.8%
Bond 38.7%
REIT 10.4%
Cash 1.2%

Some comments:

o Do you want so much in REIT?
o I think you have too many funds. You don't need to replicate the entire US stock/intl/bond/REIT holdings in every account.
o Treat the entire portfolio as a whole and put each asset in the best location.
o For example, I would concentrate on putting bonds into the 401(k) and equity into the Roth.
o My own preference for international is that it is 1/2 that of my US stocks. I would be comfortable with 15%.
o Again, need to estimate and evaluate how you plan to fund healthcare before medicare.
o If your expenses are 70k, then the withdrawal rate is about 3.3%. Even though you have a longer retirement, it appears somewhat doable because you are not counting social security yet. When you run firecalc, make sure to model the cash flow when social security kicks in.
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sambb
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Re: Thinking we are close to winning the game

Post by sambb » Sun Oct 15, 2017 9:04 pm

Would not retire until 2020
downturn in market might change your mind, along with health insurance and college costs, and any changes to tax law
stay the course and keep working hard, would not retire earlier
you need your expenses after taxes, and after COLA, inflation, and still may have big ticket purchases (cars in the future, home maintenance, health, college)
Last edited by sambb on Sun Oct 15, 2017 9:39 pm, edited 2 times in total.

KlangFool
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Re: Thinking we are close to winning the game

Post by KlangFool » Sun Oct 15, 2017 9:12 pm

AllMostThere wrote:
Sun Oct 15, 2017 8:08 pm

Expenses: $70K estimated, but need to confirm with better tracking of spending. Could actually be lower and I find it hard to believe we are spending nearly $6K per month.

Tax Rate: 18% Effective Federal Rate, 6% State Rate
AllMostThere,

You can do a quick and simple sanity check on your annual expense.

Your annual expense = gross income - taxes - annual savings.

<<Tax Rate: 18% Effective Federal Rate, >>

What is your marginal tax rate? 28%? 33%?

A quick look says that your annual expense is probably more than 70K.

KlangFool

technovelist
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Re: Thinking we are close to winning the game

Post by technovelist » Sun Oct 15, 2017 9:18 pm

That $5,000/month in SS will be cut in half if (when) one of you dies.
Do you have life insurance against the possibility of that happening early in retirement, which is when it is the most hazardous to the standard of living of the survivor? 30-year term should be pretty cheap at your (relatively) young ages, assuming you are both in good health.
In theory, theory and practice are identical. In practice, they often differ.

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Garco
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Re: Thinking we are close to winning the game

Post by Garco » Sun Oct 15, 2017 9:31 pm

To the OP. Things look good to me, for the most part. I wonder how much you expect college costs to run. If your kids are thinking of private college, for example, you have to think in the range of $50-60K per year for each of them (tuition, room and board, travel, other expenses).

Back in the days when my kids attended costs were only about half what they are now.

Total 1-year cost of attendance at UM this year for MI residents is ~$29K per year. Inflate that conservatively at 5% per year to come up with an estimate for when your kids might attend. Alternatively, private college would be much more expensive. Hypothetically, plug in K-College. Total 1-year cost of attendance this year is ~$56K per year.

Dottie57
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Re: Thinking we are close to winning the game

Post by Dottie57 » Sun Oct 15, 2017 9:38 pm

When I started looking through expenses (check book), i could see spending of $30-$32k. I learned that I needed to add in health insurance and income tax for retirement years.

Health Ins from employer is $5550 a year. Am counting on 1k HI before medicare and after retirement. So expenses are much more than are out of the checking account.

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Pajamas
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Re: Thinking we are close to winning the game

Post by Pajamas » Mon Oct 16, 2017 12:26 am

I think you should be cautious because you don't have a good idea of your current spending, much less your future spending. Plus you have large but inexactly known education expenses upcoming and it is a full six years or more before your youngest starts. You need to take a hard look at your spending now and your projected spending, too.

The impetus seems to be dissatisfaction at work, which is making you want to give up on your current financial goals. It's okay to re-evaluate, but do so cautiously and deliberately. "Stay the course" doesn't only apply to your investment allocation during down markets.

A few things to consider:

Knowing that you COULD stop working now if you really had to can make tolerating problems at work easier.

Time your departure from work to your advantage, for instance, max out your investment contributions for the year before leaving, or leave at the end of June so that 18 months of COBRA puts you to the end of a year so that your deductibles don't start over during the year.

You can change your spending now so that you need less money.

Going part-time or working at home some or similar can relieve some of the pressure from work but still allow you to progress towards your financial goals.

randomguy
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Re: Thinking we are close to winning the game

Post by randomguy » Mon Oct 16, 2017 3:28 am

Dottie57 wrote:
Sun Oct 15, 2017 9:38 pm
When I started looking through expenses (check book), i could see spending of $30-$32k. I learned that I needed to add in health insurance and income tax for retirement years.

Health Ins from employer is $5550 a year. Am counting on 1k HI before medicare and after retirement. So expenses are much more than are out of the checking account.
You really need to figure out what insurance will cost you not what your employer pays. I wouldn't be shocked to learn that on the open market that your price will be 10k+.

As far as thing like roofs, cars, dental work,... they will keep happening in retirement. You need to account for them. Using the checkbook works but you need a lot of years of data to catch all these "one time events.

AllMostThere
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Re: Thinking we are close to winning the game

Post by AllMostThere » Mon Oct 16, 2017 4:54 am

indexfundfan wrote:
Sun Oct 15, 2017 8:50 pm

Some comments:

o Do you want so much in REIT?
o I think you have too many funds. You don't need to replicate the entire US stock/intl/bond/REIT holdings in every account.
o Treat the entire portfolio as a whole and put each asset in the best location.
o For example, I would concentrate on putting bonds into the 401(k) and equity into the Roth.
o My own preference for international is that it is 1/2 that of my US stocks. I would be comfortable with 15%.
o Again, need to estimate and evaluate how you plan to fund healthcare before medicare.
o If your expenses are 70k, then the withdrawal rate is about 3.3%. Even though you have a longer retirement, it appears somewhat doable because you are not counting social security yet. When you run firecalc, make sure to model the cash flow when social security kicks in.
Thanks indexfundfan. I have previously ran FireCalc with 100% success rate, but I will rerun with updated information and new dates. I will edit my original post with results when completed.
Yes, I have questioned this REIT allocation recently. I'm going to work on updating my tracking spreadsheet to include the REIT allocation from the key Index Funds (S&P, Total Mkt, etc.) as I may find the result may actually be more than 10%. I've been thinking of paring back to 5-7% in the near future.
I have replicated the US stock/intl/bond/REIT holdings in every account mostly to make it easier for my DW should I not be around in the future. In hindsight, I may agree that the number of total funds may actually be more confusing for her. It's just that as we are contributing to these accounts it also helps make balancing easier for me today. I'll start to look at additional consolidation methods to drive the total number of funds down. Also, good to know that my 15% Int'l allocation is not too concerning. Thanks.
Yes, I would agree that healthcare cost is the big unknown. I may actually want to consider additional $10K-$15K in my projected expenses to account for this BIG unknown. :oops:

AllMostThere
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Re: Thinking we are close to winning the game

Post by AllMostThere » Mon Oct 16, 2017 4:59 am

technovelist wrote:
Sun Oct 15, 2017 9:18 pm
That $5,000/month in SS will be cut in half if (when) one of you dies.
Do you have life insurance against the possibility of that happening early in retirement, which is when it is the most hazardous to the standard of living of the survivor? 30-year term should be pretty cheap at your (relatively) young ages, assuming you are both in good health.
Thanks technovelist (I like the handle :happy ). DH & DW, both have life insurance thru employers at ~ 5X salary. We both have non-life threatening medical issues that make open market purchase very expensive. Will look into trying to keep employer group rate in RE or alternative insurance of at least ~ $250K each. I'll make this a priority to research with independent dealer over the coming Holiday break.

AllMostThere
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Re: Thinking we are close to winning the game

Post by AllMostThere » Mon Oct 16, 2017 5:05 am

AllMostThere wrote:
Sun Oct 15, 2017 8:08 pm

Expenses: $70K estimated, but need to confirm with better tracking of spending. Could actually be lower and I find it hard to believe we are spending nearly $6K per month.

Tax Rate: 18% Effective Federal Rate, 6% State Rate
AllMostThere,

You can do a quick and simple sanity check on your annual expense.

Your annual expense = gross income - taxes - annual savings.

<<Tax Rate: 18% Effective Federal Rate, >>

What is your marginal tax rate? 28%? 33%?

A quick look says that your annual expense is probably more than 70K.

KlangFool
[/quote]

Thanks KlangFool. Fed marginal rate is 28%. As you and several others have pointed out, I really need to get a handle on my annual expenses. I'll work on yet another tracking spreadsheet in an effort to truly measure. Hopefully, I'm not too shocked.

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djpeteski
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Re: Thinking we are close to winning the game

Post by djpeteski » Mon Oct 16, 2017 6:06 am

Why do you need life insurance? Sure, keep it for now, but once you retire you can self-insure. That is one of the benefits of having everything paid for and 1.7m in the market.

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indexfundfan
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Re: Thinking we are close to winning the game

Post by indexfundfan » Mon Oct 16, 2017 6:26 am

AllMostThere,

The healthcare cost situation is fluid. If you haven't looked at the individual market before, you might be in for a rude shock.

I am in my late 40s and I ER'ed earlier this year. The premium cost a Bronze HDHP plan for my family of four is $12k+ this year. This is expected to go up by almost 60% to close to $20k next year (subject to final approval, will know for sure on Nov 1st).

But, if you can keep your MAGI to less than 400% of the (FPL) federal poverty level (about $98k), the premium cost to you will be capped to no more than 9.5% of $98k = $9.3k.

Of course all these are subject to changes from the law makers.

Keep this in mind as you try to figure out your own healthcare costs.
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Dandy
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Re: Thinking we are close to winning the game

Post by Dandy » Mon Oct 16, 2017 6:34 am

I think you are in good shape - congrats. Here are some things to consider before pulling the plug and retiring early.

1. As you have noted health insurance is a big question once you leave employment and have years to Medicare. Don't just guess at
whether you both can get affordable health insurance for the family -- be sure -- if that is at all possible. As you probably realize a major uninsured illness can wreck an otherwise nice "win".
2. How employable are you both once you pull the plug and retire? For many at that age there is a rapid decline in reemployment possibilities and in compensation. Others have good skills that fit reemployment even part time reemployment. The ability to get a job once you retire is a big safety net should you need it.
3. You have done a nice job of putting money away for your kids education. Make sure you have a good idea of the likely full cost of 4 years at a college you are considering. Sometimes the quoted tuition is somewhat like the tip of the iceberg when all the fees are accounted for. Have an acceptable back up plan e.g. junior college first, state college first or for the whole term.
4. Keep in mind that retiring in your late 50's does add 5 or more years to "normal" retirement and that is no small thing when considering withdrawal rates etc.
5. How will you survive if soon after you retire equities drop 50% and take 4 years to recover? You will be withdrawing money for living expenses and possibly education which you may not have experienced. The items above should help you answer this question.

If you have acceptable answers to the above you should be ready to go. If not at least you will have thought through the issues.

Leemiller
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Re: Thinking we are close to winning the game

Post by Leemiller » Mon Oct 16, 2017 7:37 am

Have you considered getting a different job(s)?

I saw a chart in a book once that showed how brutal entering retirement during a market downturn can be on a portfolio compared to a portfolio with the same average return that started with positive returns. I think it's fair to say that a market correction is coming in the next 0-3 years. Can you stomach that after retiring and stay the course?

Also, health care expenses are in flux right now. I'd get some quotes and then consider doubling. Can you qualify for long term care insurance with your medical conditions? That should be factored in or the possibility of paying out of pocket for care.

But congratulations for having done a great job. To me it isn't a question of if you can retire, more can you retire and maintain your current lifestyle over the period of your retirement.

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Re: Thinking we are close to winning the game

Post by KlangFool » Mon Oct 16, 2017 8:39 am

AllMostThere wrote:
Mon Oct 16, 2017 5:05 am

Thanks KlangFool. Fed marginal rate is 28%. As you and several others have pointed out, I really need to get a handle on my annual expenses. I'll work on yet another tracking spreadsheet in an effort to truly measure. Hopefully, I'm not too shocked.
AllMostThere,

You do not need a spreadsheet. Tell us your gross income and your annual savings. We could make a good guess at your taxes. we can get a fairly accurate estimate of your annual expense.

You are focusing too much on the tree and miss the forest.

Please note that all forecasts are based on your annual expense. If this number is wrong, the forecasts are useless.

KlangFool

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Re: Thinking we are close to winning the game

Post by technovelist » Mon Oct 16, 2017 3:34 pm

djpeteski wrote:
Mon Oct 16, 2017 6:06 am
Why do you need life insurance? Sure, keep it for now, but once you retire you can self-insure. That is one of the benefits of having everything paid for and 1.7m in the market.
The reason that retirees need life insurance is that the second Social Security payment is a very valuable asset, being equivalent to an annuity costing hundreds of thousands of dollars, especially when you consider the inflation adjustment. For people in reasonably good health, this can (and in my opinion should) be insured against early death of one spouse, which is the triggering event for the loss of income.

Where the two spouses have the same benefit, this is almost exactly equivalent to their each having a single-life annuity with no return of premium feature, which could also be insured against in the same way. It's more complicated when the benefits are different because, to oversimplify, it is the lesser of the two benefits that is lost when one spouse dies.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Thinking we are close to winning the game

Post by The Wizard » Mon Oct 16, 2017 4:59 pm

I would use the KlangFool method at a minimum to figure your current expenses, though some of this depends on how you manage new vehicle purchases and other big ticket items.

Beyond that you might want to ponder your discretionary expenses, such as travel, and decide how they might change in retirement.

I don't think there should be a big rush to retire just as you achieve Financial Independence. It's quite customary around here to work One More Year at the very least...
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The Wizard
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Re: Thinking we are close to winning the game

Post by The Wizard » Mon Oct 16, 2017 5:09 pm

technovelist wrote:
Mon Oct 16, 2017 3:34 pm
djpeteski wrote:
Mon Oct 16, 2017 6:06 am
Why do you need life insurance? Sure, keep it for now, but once you retire you can self-insure. That is one of the benefits of having everything paid for and 1.7m in the market.
The reason that retirees need life insurance is that the second Social Security payment is a very valuable asset, being equivalent to an annuity costing hundreds of thousands of dollars, especially when you consider the inflation adjustment. For people in reasonably good health, this can (and in my opinion should) be insured against early death of one spouse, which is the triggering event for the loss of income...
Interesting point, but I don't agree, especially in the OP's case with substantial joint financial assets.
The OP et ux are actually likely to exemplify the situation where after the first passes, the surviving spouse is in a higher tax bracket.

I cancelled my life insurance in my late 40s as I approached FI, so I'm not blowing hot air here...
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aristotelian
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Re: Thinking we are close to winning the game

Post by aristotelian » Mon Oct 16, 2017 5:47 pm

Expenses are the key. It is possible they are a lot less than you think they are. The question is how rigid is your $80k budget. If you can be just fine on $50k in the event of a downturn, then you have won the game. If it is more important to you to maintain your lifestyle than to stop working, then you may want to keep working.

If $80k is accurate, I think you are there. You have 25X expenses covered with your portfolio, plus a generous social security package. As long as $80K is accurate, I think you are good.

Agree with others, you should simplify that portfolio.

I would not worry about life insurance, especially if it is likely to be expensive. The survivor is going to be OK with $2M to spend on his or her own.

Does either of you hate your job less? Health insurance could be a game changer. I certainly think one of you could retire now. That is a no brainer.
Last edited by aristotelian on Mon Oct 16, 2017 5:50 pm, edited 1 time in total.

technovelist
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Re: Thinking we are close to winning the game

Post by technovelist » Mon Oct 16, 2017 5:49 pm

The Wizard wrote:
Mon Oct 16, 2017 5:09 pm
technovelist wrote:
Mon Oct 16, 2017 3:34 pm
djpeteski wrote:
Mon Oct 16, 2017 6:06 am
Why do you need life insurance? Sure, keep it for now, but once you retire you can self-insure. That is one of the benefits of having everything paid for and 1.7m in the market.
The reason that retirees need life insurance is that the second Social Security payment is a very valuable asset, being equivalent to an annuity costing hundreds of thousands of dollars, especially when you consider the inflation adjustment. For people in reasonably good health, this can (and in my opinion should) be insured against early death of one spouse, which is the triggering event for the loss of income...
Interesting point, but I don't agree, especially in the OP's case with substantial joint financial assets.
The OP et ux are actually likely to exemplify the situation where after the first passes, the surviving spouse is in a higher tax bracket.

I cancelled my life insurance in my late 40s as I approached FI, so I'm not blowing hot air here...
Sure, the survivor will be in a higher tax bracket.

But life insurance proceeds aren't taxable, which makes them even more valuable in that case.
In theory, theory and practice are identical. In practice, they often differ.

aristotelian
Posts: 3029
Joined: Wed Jan 11, 2017 8:05 pm

Re: Thinking we are close to winning the game

Post by aristotelian » Mon Oct 16, 2017 5:53 pm

KlangFool wrote:
Mon Oct 16, 2017 8:39 am
AllMostThere wrote:
Mon Oct 16, 2017 5:05 am

Thanks KlangFool. Fed marginal rate is 28%. As you and several others have pointed out, I really need to get a handle on my annual expenses. I'll work on yet another tracking spreadsheet in an effort to truly measure. Hopefully, I'm not too shocked.
AllMostThere,

You do not need a spreadsheet. Tell us your gross income and your annual savings. We could make a good guess at your taxes. we can get a fairly accurate estimate of your annual expense.

You are focusing too much on the tree and miss the forest.

Please note that all forecasts are based on your annual expense. If this number is wrong, the forecasts are useless.

KlangFool
Take a quick look at your last 1040. That would also tell us a lot.

AllMostThere
Posts: 20
Joined: Sat Dec 31, 2016 2:04 pm

Re: Thinking we are close to winning the game

Post by AllMostThere » Mon Oct 16, 2017 6:55 pm

KlangFool wrote:
Mon Oct 16, 2017 8:39 am
AllMostThere wrote:
Mon Oct 16, 2017 5:05 am

Thanks KlangFool. Fed marginal rate is 28%. As you and several others have pointed out, I really need to get a handle on my annual expenses. I'll work on yet another tracking spreadsheet in an effort to truly measure. Hopefully, I'm not too shocked.
AllMostThere,

You do not need a spreadsheet. Tell us your gross income and your annual savings. We could make a good guess at your taxes. we can get a fairly accurate estimate of your annual expense.

You are focusing too much on the tree and miss the forest.

Please note that all forecasts are based on your annual expense. If this number is wrong, the forecasts are useless.

KlangFool
Thanks KlangFool. Last year DH + DW gross was $240K. All retirement, 529 and general savings for last year was ~ $105K. While last year was exceptional savings rate for us, we've really been trying to knock it out of the park with savings these past few years since our house was paid off. Being debt free is liberating. :sharebeer

KlangFool
Posts: 6961
Joined: Sat Oct 11, 2008 12:35 pm

Re: Thinking we are close to winning the game

Post by KlangFool » Mon Oct 16, 2017 7:11 pm

AllMostThere wrote:
Mon Oct 16, 2017 6:55 pm
KlangFool wrote:
Mon Oct 16, 2017 8:39 am
AllMostThere wrote:
Mon Oct 16, 2017 5:05 am

Thanks KlangFool. Fed marginal rate is 28%. As you and several others have pointed out, I really need to get a handle on my annual expenses. I'll work on yet another tracking spreadsheet in an effort to truly measure. Hopefully, I'm not too shocked.
AllMostThere,

You do not need a spreadsheet. Tell us your gross income and your annual savings. We could make a good guess at your taxes. we can get a fairly accurate estimate of your annual expense.

You are focusing too much on the tree and miss the forest.

Please note that all forecasts are based on your annual expense. If this number is wrong, the forecasts are useless.

KlangFool
Thanks KlangFool. Last year DH + DW gross was $240K. All retirement, 529 and general savings for last year was ~ $105K. While last year was exceptional savings rate for us, we've really been trying to knock it out of the park with savings these past few years since our house was paid off. Being debt free is liberating. :sharebeer
AllMostThere,

Look at your 2016 1040 and state income tax form and you will find your taxes. Either look at your 2016 year end pay slip to find your social security and Medicare tax or we could estimate them at 7.65% = $18,360.

https://www.irs.gov/taxtopics/tc750/tc751

KlangFool

AllMostThere
Posts: 20
Joined: Sat Dec 31, 2016 2:04 pm

Re: Thinking we are close to winning the game

Post by AllMostThere » Mon Oct 16, 2017 7:18 pm

Pajamas wrote:
Mon Oct 16, 2017 12:26 am
I think you should be cautious because you don't have a good idea of your current spending, much less your future spending. Plus you have large but inexactly known education expenses upcoming and it is a full six years or more before your youngest starts. You need to take a hard look at your spending now and your projected spending, too.

The impetus seems to be dissatisfaction at work, which is making you want to give up on your current financial goals. It's okay to re-evaluate, but do so cautiously and deliberately. "Stay the course" doesn't only apply to your investment allocation during down markets.

A few things to consider:

Knowing that you COULD stop working now if you really had to can make tolerating problems at work easier.

Time your departure from work to your advantage, for instance, max out your investment contributions for the year before leaving, or leave at the end of June so that 18 months of COBRA puts you to the end of a year so that your deductibles don't start over during the year.

You can change your spending now so that you need less money.

Going part-time or working at home some or similar can relieve some of the pressure from work but still allow you to progress towards your financial goals.
Thanks Pajamas. Several of your comments are spot on and a couple give me something to think about. While DW & I both have high stress jobs, I would not say we are overly dissatisfied or hate our jobs as others have suggested, but rather we are starting to re-evaluate our future lives together. As we age & recognize that we are blessed with FI and a loving family, we find ourselves leaning towards wanting to be more involved with lives of our young children and aging parents. This combined with a lack of longevity on my fathers side (father and 3 siblings died before 70) increases our desire to explore the other side with being FIRE'd. My Father died after <5 years being retired, and my MIL died <10 yrs after retiring. I feel that both spouses got screwed. I don't want this to happen to me and DW (we've worked too hard!). Staying the course is good advice and I appreciate it. Waiting until 2020 is not overly sour tasting, but continuation of current Bull Mkt will make me happy dance sooner.

Excellent point on timing our departure to maximize investment contributions and avoid deductible reset. Haven't thought about that one. Both DW & I have skill set that is highly desirable in this area, so we could always contract our services on a PT basis should we reconsider or get pinched by an extended down market. Thanks for your inputs.
Last edited by AllMostThere on Mon Oct 16, 2017 7:24 pm, edited 1 time in total.

AllMostThere
Posts: 20
Joined: Sat Dec 31, 2016 2:04 pm

Re: Thinking we are close to winning the game

Post by AllMostThere » Mon Oct 16, 2017 7:23 pm

KlangFool wrote:
Mon Oct 16, 2017 7:11 pm
AllMostThere wrote:
Mon Oct 16, 2017 6:55 pm
KlangFool wrote:
Mon Oct 16, 2017 8:39 am
AllMostThere wrote:
Mon Oct 16, 2017 5:05 am

Thanks KlangFool. Fed marginal rate is 28%. As you and several others have pointed out, I really need to get a handle on my annual expenses. I'll work on yet another tracking spreadsheet in an effort to truly measure. Hopefully, I'm not too shocked.
AllMostThere,

You do not need a spreadsheet. Tell us your gross income and your annual savings. We could make a good guess at your taxes. we can get a fairly accurate estimate of your annual expense.

You are focusing too much on the tree and miss the forest.

Please note that all forecasts are based on your annual expense. If this number is wrong, the forecasts are useless.

KlangFool
Thanks KlangFool. Last year DH + DW gross was $240K. All retirement, 529 and general savings for last year was ~ $105K. While last year was exceptional savings rate for us, we've really been trying to knock it out of the park with savings these past few years since our house was paid off. Being debt free is liberating. :sharebeer
AllMostThere,

Look at your 2016 1040 and state income tax form and you will find your taxes. Either look at your 2016 year end pay slip to find your social security and Medicare tax or we could estimate them at 7.65% = $18,360.

https://www.irs.gov/taxtopics/tc750/tc751

KlangFool
KlangFool,
Yes, that's a near spot on estimate. Fed tax ~ $40K and State ~ $8.5K.

technovelist
Posts: 2446
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Thinking we are close to winning the game

Post by technovelist » Mon Oct 16, 2017 7:35 pm

AllMostThere wrote:
Mon Oct 16, 2017 7:18 pm
Pajamas wrote:
Mon Oct 16, 2017 12:26 am
I think you should be cautious because you don't have a good idea of your current spending, much less your future spending. Plus you have large but inexactly known education expenses upcoming and it is a full six years or more before your youngest starts. You need to take a hard look at your spending now and your projected spending, too.

The impetus seems to be dissatisfaction at work, which is making you want to give up on your current financial goals. It's okay to re-evaluate, but do so cautiously and deliberately. "Stay the course" doesn't only apply to your investment allocation during down markets.

A few things to consider:

Knowing that you COULD stop working now if you really had to can make tolerating problems at work easier.

Time your departure from work to your advantage, for instance, max out your investment contributions for the year before leaving, or leave at the end of June so that 18 months of COBRA puts you to the end of a year so that your deductibles don't start over during the year.

You can change your spending now so that you need less money.

Going part-time or working at home some or similar can relieve some of the pressure from work but still allow you to progress towards your financial goals.
Thanks Pajamas. Several of your comments are spot on and a couple give me something to think about. While DW & I both have high stress jobs, I would not say we are overly dissatisfied or hate our jobs as others have suggested, but rather we are starting to re-evaluate our future lives together. As we age & recognize that we are blessed with FI and a loving family, we find ourselves leaning towards wanting to be more involved with lives of our young children and aging parents. This combined with a lack of longevity on my fathers side (father and 3 siblings died before 70) increases our desire to explore the other side with being FIRE'd. My Father died after <5 years being retired, and my MIL died <10 yrs after retiring. I feel that both spouses got screwed. I don't want this to happen to me and DW (we've worked too hard!). Staying the course is good advice and I appreciate it. Waiting until 2020 is not overly sour tasting, but continuation of current Bull Mkt will make me happy dance sooner.

Excellent point on timing our departure to maximize investment contributions and avoid deductible reset. Haven't thought about that one. Both DW & I have skill set that is highly desirable in this area, so we could always contract our services on a PT basis should we reconsider or get pinched by an extended down market. Thanks for your inputs.
If you could do contract work, you might want to look into forming a corporation (if you don't have one). There are often a lot of tax benefits to doing that.
In theory, theory and practice are identical. In practice, they often differ.

KlangFool
Posts: 6961
Joined: Sat Oct 11, 2008 12:35 pm

Re: Thinking we are close to winning the game

Post by KlangFool » Mon Oct 16, 2017 7:47 pm

AllMostThere wrote:
Mon Oct 16, 2017 7:23 pm
KlangFool wrote:
Mon Oct 16, 2017 7:11 pm
AllMostThere wrote:
Mon Oct 16, 2017 6:55 pm
KlangFool wrote:
Mon Oct 16, 2017 8:39 am
AllMostThere wrote:
Mon Oct 16, 2017 5:05 am

Thanks KlangFool. Fed marginal rate is 28%. As you and several others have pointed out, I really need to get a handle on my annual expenses. I'll work on yet another tracking spreadsheet in an effort to truly measure. Hopefully, I'm not too shocked.
AllMostThere,

You do not need a spreadsheet. Tell us your gross income and your annual savings. We could make a good guess at your taxes. we can get a fairly accurate estimate of your annual expense.

You are focusing too much on the tree and miss the forest.

Please note that all forecasts are based on your annual expense. If this number is wrong, the forecasts are useless.

KlangFool
Thanks KlangFool. Last year DH + DW gross was $240K. All retirement, 529 and general savings for last year was ~ $105K. While last year was exceptional savings rate for us, we've really been trying to knock it out of the park with savings these past few years since our house was paid off. Being debt free is liberating. :sharebeer
AllMostThere,

Look at your 2016 1040 and state income tax form and you will find your taxes. Either look at your 2016 year end pay slip to find your social security and Medicare tax or we could estimate them at 7.65% = $18,360.

https://www.irs.gov/taxtopics/tc750/tc751

KlangFool
KlangFool,
Yes, that's a near spot on estimate. Fed tax ~ $40K and State ~ $8.5K.
AllMostThere,

Gross Income = 240K

Savings = 105K

Taxes = 40K + 8.5K + 18.36K = 66.86K

Annual Expense = Gross Income - Savings - Taxes
= 240K - 105K - 66.86K
= 68.14K

So, your estimate of the annual expense of 70K is quite accurate if your annual saving estimate of 105K is correct. It is not so hard at all. You do not need a big spreadsheet to calculate this.

KlangFool

smitcat
Posts: 667
Joined: Mon Nov 07, 2016 10:51 am

Re: Thinking we are close to winning the game

Post by smitcat » Tue Oct 17, 2017 6:43 am

KlangFool wrote:
Mon Oct 16, 2017 7:47 pm
AllMostThere wrote:
Mon Oct 16, 2017 7:23 pm
KlangFool wrote:
Mon Oct 16, 2017 7:11 pm
AllMostThere wrote:
Mon Oct 16, 2017 6:55 pm
KlangFool wrote:
Mon Oct 16, 2017 8:39 am


AllMostThere,

You do not need a spreadsheet. Tell us your gross income and your annual savings. We could make a good guess at your taxes. we can get a fairly accurate estimate of your annual expense.

You are focusing too much on the tree and miss the forest.

Please note that all forecasts are based on your annual expense. If this number is wrong, the forecasts are useless.

KlangFool
Thanks KlangFool. Last year DH + DW gross was $240K. All retirement, 529 and general savings for last year was ~ $105K. While last year was exceptional savings rate for us, we've really been trying to knock it out of the park with savings these past few years since our house was paid off. Being debt free is liberating. :sharebeer
AllMostThere,

Look at your 2016 1040 and state income tax form and you will find your taxes. Either look at your 2016 year end pay slip to find your social security and Medicare tax or we could estimate them at 7.65% = $18,360.

https://www.irs.gov/taxtopics/tc750/tc751

KlangFool
KlangFool,
Yes, that's a near spot on estimate. Fed tax ~ $40K and State ~ $8.5K.
AllMostThere,

Gross Income = 240K

Savings = 105K

Taxes = 40K + 8.5K + 18.36K = 66.86K

Annual Expense = Gross Income - Savings - Taxes
= 240K - 105K - 66.86K
= 68.14K

So, your estimate of the annual expense of 70K is quite accurate if your annual saving estimate of 105K is correct. It is not so hard at all. You do not need a big spreadsheet to calculate this.

KlangFool
That is a good technique and accurate assuming that there is no company match or account growth funds mixed into that savings rate.

lostdog
Posts: 630
Joined: Thu Feb 04, 2016 2:15 pm

Re: Thinking we are close to winning the game

Post by lostdog » Tue Oct 17, 2017 8:29 am

You don't have to fully retire. Is semi-retirement an option? You mentioned the BS meter getting high. Find something you like with a no or low BS meter full time or part time. Financial independence gives you options.
"Our life is frittered away by detail. Simplify, simplify." -Thoreau

KlangFool
Posts: 6961
Joined: Sat Oct 11, 2008 12:35 pm

Re: Thinking we are close to winning the game

Post by KlangFool » Tue Oct 17, 2017 9:09 am

smitcat wrote:
Tue Oct 17, 2017 6:43 am
KlangFool wrote:
Mon Oct 16, 2017 7:47 pm
AllMostThere wrote:
Mon Oct 16, 2017 7:23 pm
KlangFool wrote:
Mon Oct 16, 2017 7:11 pm
AllMostThere wrote:
Mon Oct 16, 2017 6:55 pm


Thanks KlangFool. Last year DH + DW gross was $240K. All retirement, 529 and general savings for last year was ~ $105K. While last year was exceptional savings rate for us, we've really been trying to knock it out of the park with savings these past few years since our house was paid off. Being debt free is liberating. :sharebeer
AllMostThere,

Look at your 2016 1040 and state income tax form and you will find your taxes. Either look at your 2016 year end pay slip to find your social security and Medicare tax or we could estimate them at 7.65% = $18,360.

https://www.irs.gov/taxtopics/tc750/tc751

KlangFool
KlangFool,
Yes, that's a near spot on estimate. Fed tax ~ $40K and State ~ $8.5K.
AllMostThere,

Gross Income = 240K

Savings = 105K

Taxes = 40K + 8.5K + 18.36K = 66.86K

Annual Expense = Gross Income - Savings - Taxes
= 240K - 105K - 66.86K
= 68.14K

So, your estimate of the annual expense of 70K is quite accurate if your annual saving estimate of 105K is correct. It is not so hard at all. You do not need a big spreadsheet to calculate this.

KlangFool
That is a good technique and accurate assuming that there is no company match or account growth funds mixed into that savings rate.
smitcat,

Great point! If there is employer match and it is added as part of the gross income, it needs to be added into the saving portion too.

KlangFool

Dottie57
Posts: 2256
Joined: Thu May 19, 2016 5:43 pm

Re: Thinking we are close to winning the game

Post by Dottie57 » Tue Oct 17, 2017 9:55 am

randomguy wrote:
Mon Oct 16, 2017 3:28 am
Dottie57 wrote:
Sun Oct 15, 2017 9:38 pm
When I started looking through expenses (check book), i could see spending of $30-$32k. I learned that I needed to add in health insurance and income tax for retirement years.

Health Ins from employer is $5550 a year. Am counting on 1k HI before medicare and after retirement. So expenses are much more than are out of the checking account.
You really need to figure out what insurance will cost you not what your employer pays. I wouldn't be shocked to learn that on the open market that your price will be 10k+.

As far as thing like roofs, cars, dental work,... they will keep happening in retirement. You need to account for them. Using the checkbook works but you need a lot of years of data to catch all these "one time events.
I was trying to point out that you do need to include insurance in your spending -since it is often hidden n a paycheck. And property tax and home ins is often hidden in mortgage payments.

smitcat
Posts: 667
Joined: Mon Nov 07, 2016 10:51 am

Re: Thinking we are close to winning the game

Post by smitcat » Tue Oct 17, 2017 10:43 am

I think your doing real well but the largest 'risk' I see other than a market drop and freeze in the support of children.
Your item #6 looks at potential high dollar items that might creep into your plans.
I believe that 2 children both under college and driving ages represent dozens of ways to affect the budget.
Your view can be that they will be on their own or that they will need to take loans if any such expenses arise but kids do not get cheaper as they get older unless/until they are actually independent.

mnnice
Posts: 233
Joined: Sat Aug 11, 2012 5:48 pm

Re: Thinking we are close to winning the game

Post by mnnice » Tue Oct 17, 2017 5:34 pm

indexfundfan wrote:
Mon Oct 16, 2017 6:26 am
AllMostThere,

The healthcare cost situation is fluid. If you haven't looked at the individual market before, you might be in for a rude shock.

I am in my late 40s and I ER'ed earlier this year. The premium cost a Bronze HDHP plan for my family of four is $12k+ this year. This is expected to go up by almost 60% to close to $20k next year (subject to final approval, will know for sure on Nov 1st).

But, if you can keep your MAGI to less than 400% of the (FPL) federal poverty level (about $98k), the premium cost to you will be capped to no more than 9.5% of $98k = $9.3k.

Of course all these are subject to changes from the law makers.

Keep this in mind as you try to figure out your own healthcare costs.
If you really only spend 32k then Medicaid maybe an option. We aren’t in Michigan but in my present location we will have more choices of providers on Medicaid than plans purchased off the exchange for 2018.

I think you golden and should of retired last year :wink:

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