When we see questions on the forum where people post "I have $2mil or $3mil saved and wonder if I reached my FIRE # or my target,” or “what’s your number?” or “are we on track to retire early?” etc., should we assume the amount they are throwing out is their TOTAL balance to draw from to fully fund their retirement goals? From our perspective, we just figured they were only quoting their totals in 401ks, IRAs, taxable, etc. and that their numbers do not including any pensions, retirements, disability, or SS payments they will receive down the road. We do understand that not everyone will draw a pension and that SS projections by individual are varied. But just not sure if the assumptions should be calculated on all or some of your potential retirement income. Does this make sense?
For example in our case, we turn 56/49 this year, $754k annual income. We have roughly $3mil saved in taxable and non-taxable accounts and plan to retire in 3 years (end of 2021) and with additional investment and modest interest accumulation, we should see another $1mil in those accounts at that time. But in addition to that total above we will receive the following income in retirement:
- $35K annual COLA Military retirement (since 2002 - current)
- $19k annual COLA Tax-Free Combat Disability (since 2002 - current)
- $38K annual Non COLA Pension @ age 65 (2028)
- $66k annual Social Security benefits at age 70/63 (2033)
We figured the amount of our retirement income would be based on all the above Plus the SWR of 4-5% from our taxable accounts. Our planned SWR is more like 6% for first 5 years. When we draw Social Security and if hubby draws his pension later age 65, will reduce that down. Expenses in retirement (rough estimate) of around $200k to start, then will teeter off as we settled down and not travel as much. So are we missing something, or is there really no set way to calculate it since so many variables as to whats considered in the retirement income total? We also see that some people are accounting for the equity in their house, etc as well which makes it seem like an "Everyone in the Pool" calculation. We do not use any home equity in future calculations. When or if we sell, and the money goes in the bank, then we will account for it.
We aren't too set on having to withdrawal a specific amount each year until we have to at age 70 1/2. But if/when we need to, we can adjust our SWR to fit our lifestyle needs. That said, our question is more about the best advice on which totals to include in the overall calculation to get a better idea of what we are up against when we retire in a few years.
Appreciate the clarification and advice on subject!