others say I can follow this plan. what do you think?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

others say I can follow this plan. what do you think?

Post by chipperd » Tue Apr 30, 2019 7:28 am

Hello all,
Thanks for taking the time to read and offer your opinions.
Thinking about seriously downshifting my time at work and therefore reducing household income in a significant way. Thinking if this works, would fully retire in about 3 years.

Proposal: Reduce household income to 30k/year (not including pension)

The numbers (note that college expenses are fully funded from different account not listed below):

Age: 51, spouse age 49. Kids ages: 19,17 and 16

Total combined savings: $740k (30% domestic stock, 15% international stock, 35% bond and 20% cash)
-Roths(her's and his combined): $130k
-Traditional IRA: $125k
-her 457b (we can now access due to more than 1 year separation from service): $245k
-his 457b (can't access yet): $35k
-SEP: $125k
-Taxable: $80k (50K cash)

Pension: 48k/yr pre-tax. Currently being collected. 100% spousal benefit with COLA (no cap).

Health insurance for life for self, spouse. For kids until age 26. under $100/month for family. Becomes secondary after medicare kicks in.

Expenses: $6,650/month post tax dollars

Debt: Mortgage only of $235k @3.75% fixed. 28 years remaining. Cost of PITI included in monthly spending.

Taxes: current effective rate fed and state combined: 15%. Would be reduced to about 8% effective combined fed and state under proposed change. Some calculators say we would actually have a negative tax rate due to college expenses for the next few years.

Social Security at age 62 for self and spouse under proposed income reduction: Self: $1326/month. Spouse: $1248/month.

Feedback appreciated!

bloom2708
Posts: 6953
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: others say I can follow this plan. what do you think?

Post by bloom2708 » Tue Apr 30, 2019 10:10 am

I am 48, 3 kids 19, 16, 12.

Your numbers with the mortgage would be too close for me with 3 kids in or heading to college. A big correction would be tough.

We have no mortgage and more savings, but don't have the pension. The pension is great, but the mortgage, cars, insurance, college. It adds up.

What are your salaries before dropping to $30k? I would probably work until the youngest is 19 and through 1 year of college. Do you have college savings on top of what is listed?

I guess you can always drop down, see how the spending goes and increase income again if account balances are dropping faster than you like.

My plan will only work if I can do SS at 70. SS at 62 is too early for both to claim in my mind.

Tough to be close to the finish line but with a 30-40 year window to support the spending.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

delamer
Posts: 9293
Joined: Tue Feb 08, 2011 6:13 pm

Re: others say I can follow this plan. what do you think?

Post by delamer » Tue Apr 30, 2019 10:48 am

Your new pre-tax income would be $78,000/year but your current post-tax expenses are about $80,000.

So you’d need to withdraw from savings to make your plan work.

Is that your intention or am I missing something?

renue74
Posts: 1775
Joined: Tue Apr 07, 2015 7:24 pm

Re: others say I can follow this plan. what do you think?

Post by renue74 » Tue Apr 30, 2019 10:59 am

Sure. I think it could be done. The wildcard/iffy things I would be concerned with:

• kids college expenses & support during and immediately after college. what happens if a kid or kids want to spend a semester in Rome?

• mortgage. maybe consider moving to a cheaper home.

• health care and pension health. Is your pension safe? Is your health care safe?

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Tue Apr 30, 2019 3:37 pm

delamer wrote:
Tue Apr 30, 2019 10:48 am
Your new pre-tax income would be $78,000/year but your current post-tax expenses are about $80,000.

So you’d need to withdraw from savings to make your plan work.

Is that your intention or am I missing something?
Yes, that would be my intention
OP

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Tue Apr 30, 2019 3:39 pm

renue74 wrote:
Tue Apr 30, 2019 10:59 am
Sure. I think it could be done. The wildcard/iffy things I would be concerned with:

• kids college expenses & support during and immediately after college. what happens if a kid or kids want to spend a semester in Rome?

• mortgage. maybe consider moving to a cheaper home.

• health care and pension health. Is your pension safe? Is your health care safe?
Hi,
Thanks for the response.
College and related expenses are separate from the numbers listed and will be taken care of financially from a separate group of accounts.
We do plan to downsize in about 4-6 years, so mortgage will be less (as will property taxes)
Pension/healthcare is as safe as one could expect. Gov't pension/healthcare package.
OP

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Tue Apr 30, 2019 3:42 pm

bloom2708 wrote:
Tue Apr 30, 2019 10:10 am
I am 48, 3 kids 19, 16, 12.

Your numbers with the mortgage would be too close for me with 3 kids in or heading to college. A big correction would be tough.

We have no mortgage and more savings, but don't have the pension. The pension is great, but the mortgage, cars, insurance, college. It adds up.

What are your salaries before dropping to $30k? I would probably work until the youngest is 19 and through 1 year of college. Do you have college savings on top of what is listed?

I guess you can always drop down, see how the spending goes and increase income again if account balances are dropping faster than you like.

My plan will only work if I can do SS at 70. SS at 62 is too early for both to claim in my mind.

Tough to be close to the finish line but with a 30-40 year window to support the spending.
Hi,
Thanks for the thoughts. As I mentioned, college is paid for in full from a separate group of accounts .
Three cars all paid for and in good shape. Will sell one in a few years to go to two cars.
You mentioned that this plan is to close for your comfort. Can you let me know how close you see this plan mathematically?
Thanks

delamer
Posts: 9293
Joined: Tue Feb 08, 2011 6:13 pm

Re: others say I can follow this plan. what do you think?

Post by delamer » Tue Apr 30, 2019 3:43 pm

chipperd wrote:
Tue Apr 30, 2019 3:37 pm
delamer wrote:
Tue Apr 30, 2019 10:48 am
Your new pre-tax income would be $78,000/year but your current post-tax expenses are about $80,000.

So you’d need to withdraw from savings to make your plan work.

Is that your intention or am I missing something?
Yes, that would be my intention
OP
Assuming that you could continue to work a reduced schedule once your projected 3 years are up, it seems as if you are taking a reasonable risk.

SlowlySaving
Posts: 37
Joined: Wed Aug 02, 2017 7:49 pm

Re: others say I can follow this plan. what do you think?

Post by SlowlySaving » Tue Apr 30, 2019 3:58 pm

That pension and health for life is GOLD! Congrats for getting that.
You definitely could make it work. You can always cut costs if money gets tight.
Good luck!

bloom2708
Posts: 6953
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: others say I can follow this plan. what do you think?

Post by bloom2708 » Tue Apr 30, 2019 4:23 pm

chipperd wrote:
Tue Apr 30, 2019 3:42 pm
Hi,
Thanks for the thoughts. As I mentioned, college is paid for in full from a separate group of accounts .
Three cars all paid for and in good shape. Will sell one in a few years to go to two cars.
You mentioned that this plan is to close for your comfort. Can you let me know how close you see this plan mathematically?
Thanks
Let's say you can do it with the pension, $30k part time work and $10-15k withdrawal each year.

Where things will get interesting is if there is a big market swoon and you are withdrawing, not adding. Say the $720k becomes $500k and you take out $100k over the next 10 years. How low are you will to let your portfolio get before SS kicks in at 62?

These are tough questions. You can go to a lower stock percentage and not withdraw anything until 59.5. Is income enough to cover the tax + spending if you make $30k on top of the pension?

Have you done FireCalc simulations while changing a variable and seeing the impact? I think you need close to $90k pre-tax to support $6,700 spending each month.

I don't like taking SS at 62 for both. Really, it only depends on how comfortable you are and how much lower you can go from $6,600 spending each month if you have to.

It would feel pretty lean, but I know people that retire will less. Hopefully some others will tell me I'm all wet and give you the "all clear".

Spend time with FireCalc and related and test out the failure points. Good luck!
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Tue Apr 30, 2019 5:50 pm

bloom2708 wrote:
Tue Apr 30, 2019 4:23 pm
chipperd wrote:
Tue Apr 30, 2019 3:42 pm
Hi,
Thanks for the thoughts. As I mentioned, college is paid for in full from a separate group of accounts .
Three cars all paid for and in good shape. Will sell one in a few years to go to two cars.
You mentioned that this plan is to close for your comfort. Can you let me know how close you see this plan mathematically?
Thanks
Let's say you can do it with the pension, $30k part time work and $10-15k withdrawal each year.

Where things will get interesting is if there is a big market swoon and you are withdrawing, not adding. Say the $720k becomes $500k and you take out $100k over the next 10 years. How low are you will to let your portfolio get before SS kicks in at 62?

These are tough questions. You can go to a lower stock percentage and not withdraw anything until 59.5. Is income enough to cover the tax + spending if you make $30k on top of the pension?

Have you done FireCalc simulations while changing a variable and seeing the impact? I think you need close to $90k pre-tax to support $6,700 spending each month.

I don't like taking SS at 62 for both. Really, it only depends on how comfortable you are and how much lower you can go from $6,600 spending each month if you have to.

It would feel pretty lean, but I know people that retire will less. Hopefully some others will tell me I'm all wet and give you the "all clear".

Spend time with FireCalc and related and test out the failure points. Good luck!
Thanks for walking me thru your math thoughts and your input.

Fishing50
Posts: 361
Joined: Tue Sep 27, 2016 1:18 am

Re: others say I can follow this plan. what do you think?

Post by Fishing50 » Wed May 01, 2019 12:13 am

With the decision 3 years away, you have time to make the correct decision. Working and saving full earning potential is a possible solution. Reducing work for many years is also a long term solution to ease the transition and minimize withdrawals. Big ERN has some good analysis of how much money is needed to overcome a shortfall: https://earlyretirementnow.com/2018/05/ ... s-reality/
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Fri May 03, 2019 7:13 am

Thanks for the input and direction for further inquiry.

student
Posts: 4135
Joined: Fri Apr 03, 2015 6:58 am

Re: others say I can follow this plan. what do you think?

Post by student » Fri May 03, 2019 7:53 am

Since you have a separate college account, lifetime health care and your income will be above the median household income, I think it is doable but it may require you to adjust your lifestyle.

User avatar
Watty
Posts: 17602
Joined: Wed Oct 10, 2007 3:55 pm

Re: others say I can follow this plan. what do you think?

Post by Watty » Fri May 03, 2019 7:59 am

others say I can follow this plan. what do you think?
With the pension, healthcare, and seperate college savings cutting back to $30K a year in income should be easy. The worst case is that you would live on the pension and one Social Security check which might be a bit less than you were planning on but it would hardly be a dire situation. Once the kids are out on their own your expenses will also go down when you don't have three teenagers to feed and clothe.

A few things to consider though;

1) Will your expenses change if you semi-retire and have more time to spend on things like travel and hobbies? Be sure to also budget for things like dental care which you might have been getting as a work benefit.

2) How hard would it be to go back to working more in the future if you needed to?

3) What would your numbers look like if you were hit by the proverbial Mack truck(or less dramatically laid off) and the $30K in income stopped early?

4) How secure is the pension?

5) With three kids and lower income you can likely do a lot of Roth conversions in the 12% federal tax bracket so budget for that.

6) Your mortage payment is probably around $1,200 a month which means that you would need something like $1,400 a month in taxable income to pay it. That is around $17K a year(crunch your real numbers). A problem with that is that the way Social Security is taxed is complex and can result in you being in a higher than expected tax bracket. I would look at getting that paid off before you start Social Security to reduce your tax bill then.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

7) For a couple both of them starting Social Security at 62 is usually a very bad idea. Here is a website that will suggest a claiming strategy.

https://opensocialsecurity.com/

8) Estimates of future Social Security benefits usually assume that you will keep working at your current wage level until you are 65 or start Social Security. Be sure that you are using estimates that take your reduction in wages and your early retirement into account.
Last edited by Watty on Fri May 03, 2019 8:05 am, edited 1 time in total.

Ybsybs
Posts: 533
Joined: Thu Aug 28, 2014 4:28 pm

Re: others say I can follow this plan. what do you think?

Post by Ybsybs » Fri May 03, 2019 8:05 am

It seems to work for expenses as a couple. The unaddressed side I see is what the survivor spouse is left with. I suggest checking your numbers for His solo and for Hers solo. The numbers I've seen indicate a widow/widower will experience the same standard of living as a married couple if she/he still has 80% of the couple's income.

Dottie57
Posts: 7119
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: others say I can follow this plan. what do you think?

Post by Dottie57 » Fri May 03, 2019 8:18 am

Unless you hate your job I wouldn’t retire. The bugaboo to me is having a mortgage. If you don’t have that, it is golden. Pay it down and recast so the payment is less.

Is your wife working? If nt, can she start working?

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Sat May 04, 2019 5:02 am

Watty wrote:
Fri May 03, 2019 7:59 am
others say I can follow this plan. what do you think?
Thanks for the thoughtful and thorough response. Here are some answers that also may address other comments questions. Many edits for accuracy of responses. :
With the pension, healthcare, and seperate college savings cutting back to $30K a year in income should be easy. The worst case is that you would live on the pension and one Social Security check which might be a bit less than you were planning on but it would hardly be a dire situation. Once the kids are out on their own your expenses will also go down when you don't have three teenagers to feed and clothe.

A few things to consider though;

1) Will your expenses change if you semi-retire and have more time to spend on things like travel and hobbies? Be sure to also budget for things like dental care which you might have been getting as a work benefit.

We plan on downsizing the house in about 3 years and using the benefit (not listed here until now) of net proceeds of that sale to put a large down payment on a smaller, less costly home or perhaps condo. Should walk with about 160-180k and looking for a home of about 300k. Would like to take out a mortgage for the difference of about 130k. Also, the areas we are looking at have about 1/2 to 1/3 the property tax burden of our current location, so our property taxes will go from about 11k/yr to 3k-4k/year. That said, if we go condo, the initial cost would be a bit less, but monthly HOA fees + lower taxes would approximate our current property tax only monthly payment, so I consider that a wash.

2) How hard would it be to go back to working more in the future if you needed to?

Not difficult at all in my field. I have a masters, two licenses and 30 years experience. Consulting and part time work are very common in my field with non-profits/govt agencies. Doesn't pay much per hour relative to full time work, (35-45/hr) but I'll take it.

3) What would your numbers look like if you were hit by the proverbial Mack truck(or less dramatically laid off) and the $30K in income stopped early?

In that monthly spending budget, we could cut 2k and live close to the pension income. We both come from simple means with depression era grandparents have a large role in our upbringings. That 30k income is split between my one consulting gig (10k) and wife's 3 part time jobs (20k). I could increase mine as needed via additional pt. work, so income stream is diversified a bit in that sense.

4) How secure is the pension?

Pension is a state govt hazard duty pension. We have had it for 3 years now. More secure than a corporate pension in most cases, but nothing is 100%. Strong union and in spite of budget issues, no talk of cuts to current pensioners. But you never know...

5) With three kids and lower income you can likely do a lot of Roth conversions in the 12% federal tax bracket so budget for that.

Thanks, I'll check that out.

6) Your mortage payment is probably around $1,200 a month which means that you would need something like $1,400 a month in taxable income to pay it. That is around $17K a year(crunch your real numbers). A problem with that is that the way Social Security is taxed is complex and can result in you being in a higher than expected tax bracket. I would look at getting that paid off before you start Social Security to reduce your tax bill then.

Yes, that's just about dead on for our mortgage only monthly nut. Taxes and insurance about 1k/month addtl.
So maybe pay for next home in full? I do like the idea of a mortgage in retirement, which I know isn't what most may think.


https://www.bogleheads.org/wiki/Taxatio ... y_benefits

7) For a couple both of them starting Social Security at 62 is usually a very bad idea. Here is a website that will suggest a claiming strategy.

https://opensocialsecurity.com/

Thanks, will also check that out.

8) Estimates of future Social Security benefits usually assume that you will keep working at your current wage level until you are 65 or start Social Security. Be sure that you are using estimates that take your reduction in wages and your early retirement into account.
The estimates provided are assuming the scenario presented using the detailed, manual entry on the SS website.
The wife and I both started earning SS quarters very early in life due to the ability to do above the table, documented, farm work starting at age 13. We have both worked every year since until now (51 and 49 yo respectively). While those early quarters have mostly been replaced, those couple thousand per summer are better than zeros.
Per SS if we both worked until FRA (age 67), monthly benefits would be much higher for both: His: $2,362/month. Hers: $2,073/month. While it's tempting to work more to reach those numbers, I learned at a very early age, via my own medical crises, that time is worth more than$, thus I did some hard examining of our current situation and what I would like the rest of my years to look like and how I would like to spend my time. Thanks again for the though provoking response. Chipperd.

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Sat May 04, 2019 5:25 am

chipperd wrote:
Tue Apr 30, 2019 5:50 pm
bloom2708 wrote:
Tue Apr 30, 2019 4:23 pm
chipperd wrote:
Tue Apr 30, 2019 3:42 pm
Hi,
Thanks for the thoughts. As I mentioned, college is paid for in full from a separate group of accounts .
Three cars all paid for and in good shape. Will sell one in a few years to go to two cars.
You mentioned that this plan is to close for your comfort. Can you let me know how close you see this plan mathematically?
Thanks
Let's say you can do it with the pension, $30k part time work and $10-15k withdrawal each year.

Where things will get interesting is if there is a big market swoon and you are withdrawing, not adding. Say the $720k becomes $500k and you take out $100k over the next 10 years. How low are you will to let your portfolio get before SS kicks in at 62?

These are tough questions. You can go to a lower stock percentage and not withdraw anything until 59.5. Is income enough to cover the tax + spending if you make $30k on top of the pension?

Have you done FireCalc simulations while changing a variable and seeing the impact? I think you need close to $90k pre-tax to support $6,700 spending each month.

I don't like taking SS at 62 for both. Really, it only depends on how comfortable you are and how much lower you can go from $6,600 spending each month if you have to.

It would feel pretty lean, but I know people that retire will less. Hopefully some others will tell me I'm all wet and give you the "all clear".

Spend time with FireCalc and related and test out the failure points. Good luck!
Thanks for walking me thru your math thoughts and your input.
Edit: I took your guidance and plugged our numbers into quite a few retirement calculators, including firecalc. I'm not a huge fan of firecalc, as it demands a static spending amount over a the entire retirement period. In our case, once both of our SS kicks in, we won't be touching savings, and in fact adding to it at some points. That said, firecalc gave us a 93% success rate. Other calculators used: Ultimate retirement calculator, new retirement calculator and others all have us leaving this earth with multiple millions. My goal is to be able to gift our kids, while we are alive, or leave them 100k each (300k total). That's based on my upbringing and value system. If we pass with more than that, it goes to charity.

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Sat May 04, 2019 5:31 am

Dottie57 wrote:
Fri May 03, 2019 8:18 am
Unless you hate your job I wouldn’t retire. The bugaboo to me is having a mortgage. If you don’t have that, it is golden. Pay it down and recast so the payment is less.

Is your wife working? If nt, can she start working?
Hi. Thanks for the response. Yes, wife is working. Do you mind checking out my earlier responses to your point? I hesitate to get into the details again for duplicity sake. Thanks!

User avatar
JoeRetire
Posts: 3852
Joined: Tue Jan 16, 2018 2:44 pm

Re: others say I can follow this plan. what do you think?

Post by JoeRetire » Sat May 04, 2019 6:32 am

chipperd wrote:
Tue Apr 30, 2019 7:28 am
Proposal: Reduce household income to 30k/year (not including pension)
Total combined savings: $740k
Pension: 48k/yr pre-tax.

Expenses: $6,650/month post tax dollars
If your numbers are correct, you will have income of 78k/year and expenses of 79.8/year plus some tax expense.
To fund this 1.9k+ per year, you have $740k.

Unless I'm missing something, it certainly seems like you can follow this plan if you choose.
Don't be a lemming.

Dottie57
Posts: 7119
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: others say I can follow this plan. what do you think?

Post by Dottie57 » Sat May 04, 2019 7:28 am

chipperd wrote:
Sat May 04, 2019 5:31 am
Dottie57 wrote:
Fri May 03, 2019 8:18 am
Unless you hate your job I wouldn’t retire. The bugaboo to me is having a mortgage. If you don’t have that, it is golden. Pay it down and recast so the payment is less.

Is your wife working? If nt, can she start working?
Hi. Thanks for the response. Yes, wife is working. Do you mind checking out my earlier responses to your point? I hesitate to get into the details again for duplicity sake. Thanks!
Sorry, missed that.

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Sat May 04, 2019 10:08 am

JoeRetire wrote:
Sat May 04, 2019 6:32 am
chipperd wrote:
Tue Apr 30, 2019 7:28 am
Proposal: Reduce household income to 30k/year (not including pension)
Total combined savings: $740k
Pension: 48k/yr pre-tax.

Expenses: $6,650/month post tax dollars
If your numbers are correct, you will have income of 78k/year and expenses of 79.8/year plus some tax expense.
To fund this 1.9k+ per year, you have $740k.

Unless I'm missing something, it certainly seems like you can follow this plan if you choose.
Thanks for the reassurance. I'm figuring on 7-8k/year to take out of savings for about 10 years, then I'll probably take SS at 62.
Chipperd.

User avatar
JoeRetire
Posts: 3852
Joined: Tue Jan 16, 2018 2:44 pm

Re: others say I can follow this plan. what do you think?

Post by JoeRetire » Sat May 04, 2019 11:01 am

chipperd wrote:
Sat May 04, 2019 10:08 am
JoeRetire wrote:
Sat May 04, 2019 6:32 am
chipperd wrote:
Tue Apr 30, 2019 7:28 am
Proposal: Reduce household income to 30k/year (not including pension)
Total combined savings: $740k
Pension: 48k/yr pre-tax.

Expenses: $6,650/month post tax dollars
If your numbers are correct, you will have income of 78k/year and expenses of 79.8/year plus some tax expense.
To fund this 1.9k+ per year, you have $740k.

Unless I'm missing something, it certainly seems like you can follow this plan if you choose.
Thanks for the reassurance. I'm figuring on 7-8k/year to take out of savings for about 10 years, then I'll probably take SS at 62.
You'll obviously have plenty of money for 10 years of that drawdown.

You might want to consider if taking social security at 62 is best. https://opensocialsecurity.com/ could help.
Don't be a lemming.

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Sat May 04, 2019 12:45 pm

JoeRetire wrote:
Sat May 04, 2019 11:01 am
chipperd wrote:
Sat May 04, 2019 10:08 am
JoeRetire wrote:
Sat May 04, 2019 6:32 am
chipperd wrote:
Tue Apr 30, 2019 7:28 am
Proposal: Reduce household income to 30k/year (not including pension)
Total combined savings: $740k
Pension: 48k/yr pre-tax.

Expenses: $6,650/month post tax dollars
If your numbers are correct, you will have income of 78k/year and expenses of 79.8/year plus some tax expense.
To fund this 1.9k+ per year, you have $740k.

Unless I'm missing something, it certainly seems like you can follow this plan if you choose.
Thanks for the reassurance. I'm figuring on 7-8k/year to take out of savings for about 10 years, then I'll probably take SS at 62.
You'll obviously have plenty of money for 10 years of that drawdown.

You might want to consider if taking social security at 62 is best. https://opensocialsecurity.com/ could help.
Thanks. Someone else mentioned as well and I'll check that out. My health and the uncertainty of social security's future has me learning towards taking it at 62.

User avatar
JoeRetire
Posts: 3852
Joined: Tue Jan 16, 2018 2:44 pm

Re: others say I can follow this plan. what do you think?

Post by JoeRetire » Sat May 04, 2019 6:20 pm

chipperd wrote:
Sat May 04, 2019 12:45 pm
Thanks. Someone else mentioned as well and I'll check that out. My health and the uncertainty of social security's future has me learning towards taking it at 62.
Don't be afraid of any uncertainty with social security. Use the tool to analyze whatever it is you think will happen.
Don't be a lemming.

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Sun May 05, 2019 6:16 am

JoeRetire wrote:
Sat May 04, 2019 6:20 pm
chipperd wrote:
Sat May 04, 2019 12:45 pm
Thanks. Someone else mentioned as well and I'll check that out. My health and the uncertainty of social security's future has me learning towards taking it at 62.
Don't be afraid of any uncertainty with social security. Use the tool to analyze whatever it is you think will happen.
Hello,
I ran our social security numbers through the website. Thanks for the link. I'm a bit confused by the results, as it seems the calculator only totals through 2041?

Results: Using the strategy recommended by the calculator, my wife should file at age 62 and I should file at age 70, which would yield a total benefit of $707,803. If we both take social security at ages 62, that strategy would yield a total benefit of $625,060. A "lifetime" difference of $82, 743.

In my mind, the way I am wired ( a tad risk adverse at this point in my life, which is why I spend so much time considering this work reduction option), giving up a that almost $83k gives me peace of mind knowing I am not not taking 17k+ inflation out of savings every year for the next 19 years until age 70, and also gives me sequence of withdraw protection. I know that's partly an emotional response, but that is a factor for me.
That said, I wonder if the calculator does only total through 2041 (my age would be 74 at that point) as obviously I am planning to live beyond that year and the difference in filing status would only be larger. Those more accurate facts would be really important and could sway me one way or the other. Can you let me know if that assumption is accurate?
Thanks

dknightd
Posts: 1860
Joined: Wed Mar 07, 2018 11:57 am

Re: others say I can follow this plan. what do you think?

Post by dknightd » Sun May 05, 2019 6:51 am

I'm not sure if it only totals through a fixed year. I think it does some kind of statistical "chance of being alive" calculation.

Usually it is best for the high earner to delay claiming as long as possible. The primary reason for this is when one of you dies the other will get the higher of the two benefits. It is these survivor benefits which could be most important.

As others have said. You need to do projections for when both of you are both alive. Then projections for what happens when one of you dies. You want to make sure both work out.

My current plan is to delay till 70. I can always claim earlier if something strange happens.

User avatar
JoeRetire
Posts: 3852
Joined: Tue Jan 16, 2018 2:44 pm

Re: others say I can follow this plan. what do you think?

Post by JoeRetire » Sun May 05, 2019 7:30 am

chipperd wrote:
Sun May 05, 2019 6:16 am
I ran our social security numbers through the website. Thanks for the link. I'm a bit confused by the results, as it seems the calculator only totals through 2041?
It doesn't have a hard end date. It will project up until age 115.
Results: Using the strategy recommended by the calculator, my wife should file at age 62 and I should file at age 70, which would yield a total benefit of $707,803. If we both take social security at ages 62, that strategy would yield a total benefit of $625,060. A "lifetime" difference of $82, 743.
That's a common strategy. The higher earner delays until 70, particularly if the higher earner is older and male.
In my mind, the way I am wired ( a tad risk adverse at this point in my life, which is why I spend so much time considering this work reduction option), giving up a that almost $83k gives me peace of mind knowing I am not not taking 17k+ inflation out of savings every year for the next 19 years until age 70, and also gives me sequence of withdraw protection.
We each get to decide what is important for us and make our decisions accordingly. If giving up $83k makes you more comfortable, then perhaps it's money well spent. The truly risk averse would not consider retiring early.

For some, knowing that they have a higher benefit waiting for them would be more comforting, and would allow them more peace of mind while withdrawing a bit more out of savings now.
I know that's partly an emotional response, but that is a factor for me.
Lots of folks choose a social security strategy based on emotion rather than math.
That said, I wonder if the calculator does only total through 2041 (my age would be 74 at that point) as obviously I am planning to live beyond that year and the difference in filing status would only be larger. Those more accurate facts would be really important and could sway me one way or the other. Can you let me know if that assumption is accurate?
No, the calculator would not stop at age 74. I'm not sure what you are doing. What leads you to believe it is stopping at 2041?
The Year by Year Benefit Amounts table should have a row labeled something like "2041 and beyond" in it. Perhaps you missed the word "beyond"?

In https://opensocialsecurity.com/about/ you can see how the tool works.

You might also wish to play around with some of the advanced features of the tool.

If you check the Advanced Options checkbox, you'll be able to select a non-default Mortality table for the tool to use. In particular, if you choose "Assumed age at death", you can then enter the ages at which you and your spouse die. Choosing different ages and recalculating will show you what happens if you live a long time, or die young.
Don't be a lemming.

Topic Author
chipperd
Posts: 481
Joined: Sat Sep 24, 2011 5:58 am

Re: others say I can follow this plan. what do you think?

Post by chipperd » Sun May 05, 2019 8:22 am

JoeRetire wrote:
Sun May 05, 2019 7:30 am
chipperd wrote:
Sun May 05, 2019 6:16 am
I ran our social security numbers through the website. Thanks for the link. I'm a bit confused by the results, as it seems the calculator only totals through 2041?
It doesn't have a hard end date. It will project up until age 115.
Results: Using the strategy recommended by the calculator, my wife should file at age 62 and I should file at age 70, which would yield a total benefit of $707,803. If we both take social security at ages 62, that strategy would yield a total benefit of $625,060. A "lifetime" difference of $82, 743.
That's a common strategy. The higher earner delays until 70, particularly if the higher earner is older and male.
In my mind, the way I am wired ( a tad risk adverse at this point in my life, which is why I spend so much time considering this work reduction option), giving up a that almost $83k gives me peace of mind knowing I am not not taking 17k+ inflation out of savings every year for the next 19 years until age 70, and also gives me sequence of withdraw protection.
We each get to decide what is important for us and make our decisions accordingly. If giving up $83k makes you more comfortable, then perhaps it's money well spent. The truly risk averse would not consider retiring early.

For some, knowing that they have a higher benefit waiting for them would be more comforting, and would allow them more peace of mind while withdrawing a bit more out of savings now.
I know that's partly an emotional response, but that is a factor for me.
Lots of folks choose a social security strategy based on emotion rather than math.
That said, I wonder if the calculator does only total through 2041 (my age would be 74 at that point) as obviously I am planning to live beyond that year and the difference in filing status would only be larger. Those more accurate facts would be really important and could sway me one way or the other. Can you let me know if that assumption is accurate?
No, the calculator would not stop at age 74. I'm not sure what you are doing. What leads you to believe it is stopping at 2041?
The Year by Year Benefit Amounts table should have a row labeled something like "2041 and beyond" in it. Perhaps you missed the word "beyond"?

In https://opensocialsecurity.com/about/ you can see how the tool works.

You might also wish to play around with some of the advanced features of the tool.

If you check the Advanced Options checkbox, you'll be able to select a non-default Mortality table for the tool to use. In particular, if you choose "Assumed age at death", you can then enter the ages at which you and your spouse die. Choosing different ages and recalculating will show you what happens if you live a long time, or die young.
Ah, thanks for that advice. I didn't see that little check box with the option at the top. I re-ran using the advanced option and got the following:
The strategy that maximizes the total dollars you can be expected to spend over your lifetimes is as follows:

Your spouse files for his/her retirement benefit to begin 6/2035, at age 65 and 3 months.
You file for your retirement benefit to begin 7/2037, at age 70 and 0 months.
The present value of this proposed solution would be $797,245.

Altering to both of us filing at 62 yielded this result:
The present value of the strategy you selected is $694,342, as compared to a present value of $797,245 from the recommended strategy, a difference of $102,903.

So, that gives me much more accurate numbers to consider if the earlier filing with SS is worth the cost of just over 100k. I'll play around with the mortality aspect for a while as well. Thanks so much for the guidance!
Chipperd

User avatar
JoeRetire
Posts: 3852
Joined: Tue Jan 16, 2018 2:44 pm

Re: others say I can follow this plan. what do you think?

Post by JoeRetire » Sun May 05, 2019 3:35 pm

chipperd wrote:
Sun May 05, 2019 8:22 am
So, that gives me much more accurate numbers to consider if the earlier filing with SS is worth the cost of just over 100k. I'll play around with the mortality aspect for a while as well. Thanks so much for the guidance!
It's a great tool. The author, Mike Piper, did a tremendous job. I wish I was that talented.

For those of us who consider Social Security as "longevity insurance", it's good to be able to easily explore what happens if you or your spouse live to 90, or 95, or 100+ !
Don't be a lemming.

Post Reply