Retiring at 60. Will I go bust before 80?

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Oxymora
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Retiring at 60. Will I go bust before 80?

Post by Oxymora »

Hello,
Seeking feedback on my retirement plan--

Emergency funds: Six months

Debt: No debt

Tax Filing Status: Single

Tax Rate: 14.11% (Marginal 22%) Federal, 4.4% State

State of Residence: Colorado

Age: 57

Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 10% of stocks

Please provide an approximate size of your total portfolio - $156k

Current retirement assets
Taxable
* 0% cash (for investing – do not include emergency funds)
* No taxable investments

His Traditional IRA at Vanguard
6% Vanguard Total Bond Market Index Admiral (VBTLX) (0.05%)
58% Vanguard Total Stock Market Index Admiral (VTSAX) (0.04%)

His Roth IRA at Vanguard
7% Vanguard Total Bond Market Index Admiral (VBTLX) (0.05%)
19% Vanguard 500 Index Admiral (VFIAX) (0.04%)
10% Vanguard Total Intl Stock Index Admiral (VTIAX) (0.11%)

Contributions

New annual Contributions
*$7500 his IRA/Roth IRA (or max allowable) into Vanguard Total Bond Market Index Admiral (VBTLX)


Questions:
1. I intend to retire less than three years from now when I turn 60. At 60, I will receive a small megacorp pension of about $400/month. I will take SS at 62. SS plus pension should conservatively provide an income of about $1500/month. I anticipate after retirement expenses of about $2200/month. Assuming no other retirement savings/income, will I be able to pay the bills for at least 20 years? Assume that I will have to withdraw $1800/month from my retirement savings for the first two years of retirement. Thank you : )
Grt2bOutdoors
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Re: Retiring at 60. Will I go bust before 80?

Post by Grt2bOutdoors »

1. What happens at age 80?

2. You will be cutting it very close between bust and success. Assuming the account grows to $200K at age 60, then you are withdrawing $22K for each of the next two years - you are banking on there is no downturn in the markets for which no one knows if the direction will be up or down. Assuming the markets are flat, the account goes down to $160K, if markets decline you will wind up with a lot less. I'm leaning towards bust.

3. Any possibility of taking a part-time job to age 65?
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RyeBourbon
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Re: Retiring at 60. Will I go bust before 80?

Post by RyeBourbon »

Very likely.

I would not be confident in this plan. Consider working longer.
delamer
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Re: Retiring at 60. Will I go bust before 80?

Post by delamer »

With your new contributions, you’ll have about $200,000 saved when you retire.

Take $43,000 off the top to cover your first two years. And that should be in cash equivalents when you actually retire.

That leaves you with $157,000. Wth withdrawals of $8,400/year, that’s a 5.4% withdrawal rate. Odds are very good that you’ll be OK, considering just your regular expenses. See: https://www.bogleheads.org/wiki/Safe_withdrawal_rates

However, you don’t have a lot of leeway for major, “lumpy” expenses like a new car or a major medical bill. And they inevitably come up. Even more so if you own a home that needs maintenance.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
bonesly
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Re: Retiring at 60. Will I go bust before 80?

Post by bonesly »

Oxymora wrote: Sat Feb 10, 2024 8:22 pm 1. I intend to retire less than three years from now when I turn 60. At 60, I will receive a small megacorp pension of about $400/month. I will take SS at 62. SS plus pension should conservatively provide an income of about $1500/month. I anticipate after retirement expenses of about $2200/month. Assuming no other retirement savings/income, will I be able to pay the bills for at least 20 years? Assume that I will have to withdraw $1800/month from my retirement savings for the first two years of retirement. Thank you : )
In just three short years invested at 70/30 is a likely balance-at-retirement in this range:
End-Bal Percentile
$158.7K 5th
$196.3K 25th
$227.3K 50th
$261.3K 75th
$306.5K 95th

$1,800/mo x 12 mo = $21.6K/yr in year-1 and with a +3% adjustment for inflation is $22.3K in year-2. Then you drop to the delta of $700 x (1.03^3), where $2,200 expenses - $1,500 pension/SS = $700.

There's virtually no chance of running out early with that spend-plan and starting balance. There's a 95% chance you'll have more than $158.7K in three years and that you could spend at a higher rate, even when pension/SS kick in.
Image

I will say that typical planning age is 95, not 80 so that's a potential concern.
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Wiggums
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Re: Retiring at 60. Will I go bust before 80?

Post by Wiggums »

I am concerned that your plan is less than the average life expectancy. I would seriously consider working longer.

You can withdraw $376/month from your savings if you withdraw $1,800/month between age 60 and collecting SS. Maybe $520/month if the market is good to your portfolio before retirement.
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student
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Re: Retiring at 60. Will I go bust before 80?

Post by student »

I have watched some of his videos and they are quite good. You may get some important information by watching it. https://www.youtube.com/watch?v=1H4wc17Mato
nordsteve
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Re: Retiring at 60. Will I go bust before 80?

Post by nordsteve »

Here's a visual of your situation on RBD.

https://engaging-data.com/will-money-la ... 00&mort=ss

I agree with the others that 80 is pretty young. If you change the retirement years assumption to 30 on that page you'll see that the chance of being alive and broke goes up substantially.
Topic Author
Oxymora
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Re: Retiring at 60. Will I go bust before 80?

Post by Oxymora »

student wrote: Sat Feb 10, 2024 9:12 pm I have watched some of his videos and they are quite good. You may get some important information by watching it. https://www.youtube.com/watch?v=1H4wc17Mato
Thank you for sharing the video!
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arcticpineapplecorp.
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Re: Retiring at 60. Will I go bust before 80?

Post by arcticpineapplecorp. »

what happens after 80?

do you not plan on living past 80?

what if you're wrong about that?
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Topic Author
Oxymora
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Re: Retiring at 60. Will I go bust before 80?

Post by Oxymora »

Grt2bOutdoors wrote: Sat Feb 10, 2024 8:40 pm 1. What happens at age 80?

2. You will be cutting it very close between bust and success. Assuming the account grows to $200K at age 60, then you are withdrawing $22K for each of the next two years - you are banking on there is no downturn in the markets for which no one knows if the direction will be up or down. Assuming the markets are flat, the account goes down to $160K, if markets decline you will wind up with a lot less. I'm leaning towards bust.

3. Any possibility of taking a part-time job to age 65?
Thank you for your comments!
1) Per the CDC https://www.cdc.gov/nchs/fastats/life-expectancy.htm, my family history, and my health issues, I don't expect to live much past 70.

3) A part time-job is possible, assuming I'm healthy enough to work. I'm exploring a pessimistic scenario.
Topic Author
Oxymora
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Re: Retiring at 60. Will I go bust before 80?

Post by Oxymora »

nordsteve wrote: Sat Feb 10, 2024 9:24 pm Here's a visual of your situation on RBD.

https://engaging-data.com/will-money-la ... 00&mort=ss

I agree with the others that 80 is pretty young. If you change the retirement years assumption to 30 on that page you'll see that the chance of being alive and broke goes up substantially.
Cool chart. Thank you for sharing!
Topic Author
Oxymora
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Re: Retiring at 60. Will I go bust before 80?

Post by Oxymora »

delamer wrote: Sat Feb 10, 2024 8:46 pm With your new contributions, you’ll have about $200,000 saved when you retire.

Take $43,000 off the top to cover your first two years. And that should be in cash equivalents when you actually retire.

That leaves you with $157,000. Wth withdrawals of $8,400/year, that’s a 5.4% withdrawal rate. Odds are very good that you’ll be OK, considering just your regular expenses. See: https://www.bogleheads.org/wiki/Safe_withdrawal_rates

However, you don’t have a lot of leeway for major, “lumpy” expenses like a new car or a major medical bill. And they inevitably come up. Even more so if you own a home that needs maintenance.
You make a good point about considering unexpected expenses. Thank you for sharing!
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Oxymora
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Re: Retiring at 60. Will I go bust before 80?

Post by Oxymora »

bonesly wrote: Sat Feb 10, 2024 8:49 pm
Oxymora wrote: Sat Feb 10, 2024 8:22 pm 1. I intend to retire less than three years from now when I turn 60. At 60, I will receive a small megacorp pension of about $400/month. I will take SS at 62. SS plus pension should conservatively provide an income of about $1500/month. I anticipate after retirement expenses of about $2200/month. Assuming no other retirement savings/income, will I be able to pay the bills for at least 20 years? Assume that I will have to withdraw $1800/month from my retirement savings for the first two years of retirement. Thank you : )
In just three short years invested at 70/30 is a likely balance-at-retirement in this range:
End-Bal Percentile
$158.7K 5th
$196.3K 25th
$227.3K 50th
$261.3K 75th
$306.5K 95th

$1,800/mo x 12 mo = $21.6K/yr in year-1 and with a +3% adjustment for inflation is $22.3K in year-2. Then you drop to the delta of $700 x (1.03^3), where $2,200 expenses - $1,500 pension/SS = $700.

There's virtually no chance of running out early with that spend-plan and starting balance. There's a 95% chance you'll have more than $158.7K in three years and that you could spend at a higher rate, even when pension/SS kick in.
Image

I will say that typical planning age is 95, not 80 so that's a potential concern.
Thank you for your detailed reply!
nordsteve
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Re: Retiring at 60. Will I go bust before 80?

Post by nordsteve »

Oxymora wrote: Sat Feb 10, 2024 9:46 pm
Thank you for your comments!
1) Per the CDC https://www.cdc.gov/nchs/fastats/life-expectancy.htm, my family history, and my health issues, I don't expect to live much past 70.

3) A part time-job is possible, assuming I'm healthy enough to work. I'm exploring a pessimistic scenario.
That value in the table is an average. In actuality it is a distribution of outcomes, like the blue line in table 1 here: https://siepr.stanford.edu/publications ... ted-states

If you have health problems, a good way to model that is that it shifts the peak in that chart. There is still some chance that you live past the peak - and that is what is causing the red area on the chart I posted earlier.
Wrench
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Re: Retiring at 60. Will I go bust before 80?

Post by Wrench »

As others have said, your plan is marginal. It might work, or might not. If you proceed, I encourage you to develop a backup plan should you live past age 80. Is there family that could help? Is public assistance available in your area to help defray expenses? For example, Meals-on-Wheels or subsidized senior housing? Even with health issues, it's impossible to predict longevity. In my lifetime, I've seen a disease, AIDS, go from almost certain death within a few years when diagnosed in the early 1990s, to a treatable, chronic condition when diagnosed in the late 1990s. It's impossible to know what medical advances in the next 20 years might impact your current health issues thereby extending your lifetime beyond what you might predict today.

Best of luck to you in whatever path you choose!

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skipper
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Re: Retiring at 60. Will I go bust before 80?

Post by skipper »

I use FIRECalc to answer my own pass/fail scenarios; for yours, I get only 77% success rate for age 80. If it were me, I would make adjustments to my plan so that this is 100%. If you work two more years until your SS@62 kicks in, then that changes to 100% success rate because you're adding more to portfolio before drawing and not having to bridge the SS gap. Not saying this is the gospel; one needs more thorough analysis and planning, but just to answer the thought question, it's my favorite.

I don't get into arguments over health and life expectancy; everyone gets to make their own determination. The wildcard for me in your scenario might be more wiggle room in your expense number. Good luck if you can pull it off! :beer

EDIT: I been playing around with your "less than three years from now" statement, because the when has a lot to do with the success rate. I can get anywhere from 77 to 94% success rate if I allow that you will work three full years from now and make three full years of contributions. Anyway, it's still not 100% with room to spare, which is what I want in my scenarios. I still say retire AND draw pension/SS all at once at 62. :beer
by Hyperchicken » Tue Feb 13, 2024 2:28 pm | | ... Dang. That rat and pellet thing is pretty depressing. | Guess I better get back to work.
radiowave
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Re: Retiring at 60. Will I go bust before 80?

Post by radiowave »

OP, here is the Vanguard Retirement Nest Egg calculator: https://retirementplans.vanguard.com/V ... gCalc.jsf Just another way to make "what-if" calculations.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
bonesly
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Re: Retiring at 60. Will I go bust before 80?

Post by bonesly »

Oxymora wrote: Sat Feb 10, 2024 10:04 pm Thank you for your detailed reply!
Sorry to say there's an error in the analysis above. I dropped you to $700/yr but that should be $700/mo x12mo/yr = $8,400/yr, which adjusted for 3 years of inflation is $9,180/yr. The update doesn't look as rosy, with only a 70% chance of not running out early (typically you want this to be >90%). :(

Again, apologies for the earlier error.

Edit: Note that I ran 60/40 here. Similar AAs are statistically indistinguishable (error bars all overlapped).
AA --- Success Rate
50/50 -> 70.1 ± 1.4%
60/40 -> 69.9 ± 1.5%
70/30 -> 71.8 ± 1.4%

Image
Last edited by bonesly on Sun Feb 11, 2024 6:18 pm, edited 1 time in total.
KlangFool
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Re: Retiring at 60. Will I go bust before 80?

Post by KlangFool »

OP,

1) Yes, you will not reach 80 years old if you do not cut your annual expense.

2) What is your gross income?

3) What is your current annual savings/investment?

4) What is your current annual expense?

"I anticipate after retirement expenses of about $2200/month"

5) This number is not realistic at all given your portfolio size, annual income, and actual savings.

6) Your real annual expense is significantly higher than that as per my estimate

7) How much of that can you cut?

8) What is your rent and/or mortgage payment?

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skipper
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Re: Retiring at 60. Will I go bust before 80?

Post by skipper »

@bonesly's revelation made me want to look again also. I thought I would have more fun with tighter estimates. Last time, I played fast and loose with your starting portfolio, not fully accounting for your 2-year bridge withdrawals. This time, I calculated your portfolio balance after 2 years using @longinvest's WAG numbers of 2% inflation and 5% stock, 1.9% bond returns (maybe conservative, maybe not). With your current 87/13 AA, that gives you a nominal of 4.6% return and a 0.048% ER. With you contributing $7500/year for two more years, then withdrawing $1800/month for two years, I get a portfolio balance of $159,477 to start your retirement with the following inputs:
  • 20 year outlook
  • $2200/month expenses (starting at 60)
  • $1100/month SS (starting at 62)
  • $400/month pension (non-COLA starting at 60)
  • portfolio adjusted/rebalanced to 70/30
  • new ER of 0.05%
This results in a more encouraging, but no less questionable, success rate of 91.7% using the historical data. If I have you retire at 62 so there's no bridge and two more years of contributions, I get a starting portfolio of $220,316 and a 100% success rate for 18 years (retiring two years later). There's cushion, but not much.

Now the bad news. FIRECalc lets me model your staggered situation of working two more years, taking a pension for two years, then adding SS two years after that. Taking all of the above and letting FC do all the lifting, I get pretty much the same answer I did the first time: 75.9% success rate. The reason is my two runs above assume you WILL get the stated returns in the first four years before SS; FC lumps those four years into the simulation, which I think is a more reasonable assumption. I would still be concerned about variable/increasing expenses over time and the threat of unfavorable SORR (sequence of returns risk) with 1/3 of your expenses coming from the portfolio. Good luck with your retirement planning. :beer
Last edited by skipper on Sun Feb 11, 2024 9:33 pm, edited 3 times in total.
by Hyperchicken » Tue Feb 13, 2024 2:28 pm | | ... Dang. That rat and pellet thing is pretty depressing. | Guess I better get back to work.
Topic Author
Oxymora
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Re: Retiring at 60. Will I go bust before 80?

Post by Oxymora »

Thank you everyone for your comments!
Sounds like I need to work longer, reduce expenses, or some combination of those.

Plan B is to take up base jumping without a parachute in my late 70s ; )
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skipper
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Re: Retiring at 60. Will I go bust before 80?

Post by skipper »

Oxymora wrote: Sun Feb 11, 2024 9:21 pm Thank you everyone for your comments!
Sounds like I need to work longer, reduce expenses, or some combination of those.

Plan B is to take up base jumping without a parachute in my late 70s ; )
See above or below; my latest full FC simulation suggests early 70s! :beer

https://firecalc.com/index.php?wdamt=26 ... rsion=3.0&
by Hyperchicken » Tue Feb 13, 2024 2:28 pm | | ... Dang. That rat and pellet thing is pretty depressing. | Guess I better get back to work.
delamer
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Re: Retiring at 60. Will I go bust before 80?

Post by delamer »

skipper wrote: Sun Feb 11, 2024 12:33 pm I use FIRECalc to answer my own pass/fail scenarios; for yours, I get only 77% success rate for age 80. If it were me, I would make adjustments to my plan so that this is 100%. If you work two more years until your SS@62 kicks in, then that changes to 100% success rate because you're adding more to portfolio before drawing and not having to bridge the SS gap. Not saying this is the gospel; one needs more thorough analysis and planning, but just to answer the thought question, it's my favorite.

I don't get into arguments over health and life expectancy; everyone gets to make their own determination. The wildcard for me in your scenario might be more wiggle room in your expense number. Good luck if you can pull it off! :beer

EDIT: I been playing around with your "less than three years from now" statement, because the when has a lot to do with the success rate. I can get anywhere from 77 to 94% success rate if I allow that you will work three full years from now and make three full years of contributions. Anyway, it's still not 100% with room to spare, which is what I want in my scenarios. I still say retire AND draw pension/SS all at once at 62. :beer
Chasing 100% versus 95% (or even somewhat lower) isn’t useful.

Absolute certainty just doesn’t exist, and aiming for 100% gives a false illusion of security.

There are virtually no scenarios where my husband and I end up running out of money in retirement. But there is one — we both end up in a LTC facility for 10+ years. But there is no point in planning for it; it will ruin us.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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skipper
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Re: Retiring at 60. Will I go bust before 80?

Post by skipper »

delamer wrote: Mon Feb 12, 2024 10:25 am
skipper wrote: Sun Feb 11, 2024 12:33 pm I use FIRECalc to answer my own pass/fail scenarios; for yours, I get only 77% success rate for age 80. If it were me, I would make adjustments to my plan so that this is 100%. If you work two more years until your SS@62 kicks in, then that changes to 100% success rate because you're adding more to portfolio before drawing and not having to bridge the SS gap. Not saying this is the gospel; one needs more thorough analysis and planning, but just to answer the thought question, it's my favorite.

I don't get into arguments over health and life expectancy; everyone gets to make their own determination. The wildcard for me in your scenario might be more wiggle room in your expense number. Good luck if you can pull it off! :beer

EDIT: I been playing around with your "less than three years from now" statement, because the when has a lot to do with the success rate. I can get anywhere from 77 to 94% success rate if I allow that you will work three full years from now and make three full years of contributions. Anyway, it's still not 100% with room to spare, which is what I want in my scenarios. I still say retire AND draw pension/SS all at once at 62. :beer
Chasing 100% versus 95% (or even somewhat lower) isn’t useful.

Absolute certainty just doesn’t exist, and aiming for 100% gives a false illusion of security.

There are virtually no scenarios where my husband and I end up running out of money in retirement. But there is one — we both end up in a LTC facility for 10+ years. But there is no point in planning for it; it will ruin us.
You are right, and there are scenarios where pass/fail trials at a high level can give clues to "Will I go bust?". There is a useful difference between 100% with cushion and ~70% success rates in a MC analysis. OP is willing to base jump without a parachute, so we really are looking at this at a high level; not trying to aim for a specific number. At least I wasn't. Our flying squirrel has a much better chance of landing on his paws by being more flexible in retirement date or expenses. FC is one tool, not the answer. :beer
by Hyperchicken » Tue Feb 13, 2024 2:28 pm | | ... Dang. That rat and pellet thing is pretty depressing. | Guess I better get back to work.
Exchme
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Re: Retiring at 60. Will I go bust before 80?

Post by Exchme »

OP:
Go to ssa.gov and get your actual SS benefit. At your age and in the 22% bracket, it seems like it should be higher than the $1,100/month you are using in your calculations (you said your private pension is $400 and your total income was $1,500).

Nobody mentioned the most obvious thing for a marginal retiree - spend down the bond portion of the portfolio to live on while waiting longer to claim SS. That increases the size of the only available lifetime, inflation-adjusted annuity. Some folks are concerned about the cash draw down, but if you die early as you fear, it won't matter and if you live a long time, you will be glad for the higher SS.

I would not count on being able to securely retire this soon, but since it is at least a couple years in the future before you need to decide, you can see how it goes. I would carefully examine spending to see what can be cut, both for now to boost savings and in the future in case markets are not kind or lumpy expenses occur.
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