Author Topic: Case study: How close am I?  (Read 7019 times)

albireo13

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Case study: How close am I?
« on: December 03, 2015, 04:26:18 AM »
I am 60yo, wife is 55. 
    Combined income = ~$240K
    Total Debt = $298K (mortgage only)

Savings/Assets:
    my current 401K =  $258K
    older pension   =  $206K
    wife's 403B =    $509K
    joint IRA =   $388K
    house equity  = +$125K

Other stuff:
    have 5 kids, youngest is 18 and finishing high school
   

  So, total retirement savings is about $1.3M.  Almost no savings in taxable accounts.  Since I am past 59.5yo, I treat my 401K as emergency fund.
I have a nice job but, frankly I have lost all energy for it. Been working there 30 years now and just can't summon any enthusiasm for going to work.
I can easily hang out another 3 years but, that would be pushing it.

  Biggest concern for FIREing:
 Our expense rate is ridiculous ... about $115K/yr.  We need to get that under control before I FIRE.

Some reasons:
    big house syndrome  ... too expensive to run and always seem to have $10K/yr repair expenses
    we both have long commutes (transportation/car costs)
    we have been trying to help the 5 kids with college savings
    too many pets (1 dog, 3 cats)
    several medical crises over the years have cost us $$$

My current plan in 2016:
    max out 401Ks
    sell house and move to rental or condo before the summer
    youngest son is off to college next year  ... simplify life
    get rid of cats ...  dog is old and good for another 2 yrs max.
    get expense rate to < $80K/yr by end of 2016

  I want to simplify life much more and shed excess material items.  I discovered MMM this year and wish I had discovered it a long time ago.
One wild card is that we have 3 aging parents still, with health issues. 
This will be a source of stress, distraction, and financial concern for the year.

   I would really like to retire within 3 years, to keep my sanity.  I hope to get a low stress/low hours job afterwards to keep busy.
Any thoughts, or advice?
   
   
   
 

former player

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Re: Case study: How close am I?
« Reply #1 on: December 03, 2015, 05:36:46 AM »
Hmmm.  Well, $1.35 in retirement accounts at a 4% withdrawal rate = approx. $54k per year.    How efficiently is it invested?

How much of that very nice current combined income is from your wife's work, and how does she feel about carrying on working if you retire?  Does that get you near your current spending rate?  What would you expect to get from your part-time downsized work?  Adding all that up while also sorting out your expenses could get you pretty close to being FIREd.

You don't say how much of your current expenses is down to the house.  How much would selling it save in total expenses, and what would be the expenses of the proposed new place? How much of your transportation costs would you save by not commuting to work?  Can you sell the second car if you retire?  How much are you diverting to college costs, and how many years of that are left at what rates (the older ones have hopefully graduated and launched into earning?)

If one dog and three cats are contributing the majority of your excess spending then I'm a monkey's uncle.  I bet your life is an exploding volcano of wastefulness that you could significantly cut down after reading MMM and browsing this forum.  Also, start selling off all your excess items, ready for your forthcoming downsize - you might find it more refreshing to put your energy into that rather than work.

Ageing parents in frail health: been there, done that.  Assuming that you are not providing them with routine financial support and that you can make the finances add up, I would highly recommend that you retire as soon as possible so that one of your retirement "jobs" can be to spend time supporting and socialising with them (assuming that you actually like them, that is).  The time, support and attention you could give to them if you are not working full time will be worth several times that big income you currently have.

If you really wanted to, and the side incomes and expenditure-cutting add up, I suspect that you could retire in about 6 months: it would be nicely tax-efficient for you to halve your year's income and you would have a summer with your youngest before sending him off to college.

aj_yooper

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Re: Case study: How close am I?
« Reply #2 on: December 03, 2015, 06:18:03 AM »
Welcome to the MMM Forum!  You have a good income and some nice savings already.

You received some very good advice from former player regarding turning your financial/budget ship and you've probably figured that your budget and returns from your investments don't match yet.   Personally, a 4% SWR seems risky to me, but opinions vary on that.  It will take some time, but your retirement could come faster than you think.

What helped us focus was to track our spending very diligently; we are using YNAB.  Getting a clear picture of your spending should clarify things.  You probably will discover many easy ways to diminish your 'exploding volcano of wastefulness' and improve the quality of your relationships and life. 

Best wishes.

albireo13

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Re: Case study: How close am I?
« Reply #3 on: December 03, 2015, 06:30:28 AM »
Maybe I should get YNAB and try it.    Is it better than manually tracking spending using Mint?

I fear that I only have a few years to make an impact on my retirement landscape.  I think the biggest thing I can do is reign in our spending and get in a habit of MMM living before pulling the ripcord.

  The pets aren't a major expense but, they are costing us > $3000/yr and that's just food, meds, and vet bills.  I'm not including >$500 in ruined clothes from cat urine and replacement cost of our living room furniture set which has been shredded by the cats!

House and utilities run $3900/month.  The other biggies are food, transportation costs, and college savings.

Total monthly expenses ran ~$8400 last year.  There's the problem.


Argyle

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Re: Case study: How close am I?
« Reply #4 on: December 03, 2015, 06:45:10 AM »
I'm puzzled by how the pets are costing more than $3000 per year — are they quite aged?

I personally am of the opinion that when you take on an animal, you take it on for life, as long as it has a good quality of life; you don't get rid of it when it's deemed a little too pricy or inconvenient.  Living beings are not like cars that can be discarded if you don't like the way they run.  Especially when your house and utilities are $3900 a month — you could cut massive amounts out of that alone before you got to a situation where discarding your pets would make much of an impact.  And how do your cats come to be peeing on clothes?  That sounds like a very unusual circumstance.  Really, there are umpteen ways to cut down your spending before discarding your pets.

hoping2retire35

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Re: Case study: How close am I?
« Reply #5 on: December 03, 2015, 06:46:51 AM »
you said you have $125k in equity in your house. Would DW be willing to downsize? This would save save the $10k per year and when advertised you could say "recent improvements include X, Y, Z."
I'm not sure about your area or her commute, but maybe you could downsize and move to walking/biking distance to her work. Of course, you don't insist she do this but maybe suggest it on some sunny day and let the magic happen. This would also ensure you only need one car. Then instant; no debt and lower expenses.

House and utilities at $3900! So sell house get something more manageable and with current equity you will basically cut expenses in half, with SWR of ~$50k you should basically be ok, especially with working part or if DW works a few more years. Im in early 30s so i don't keep up with actually retirement benefits too much, but I think you are eligible for SS soon too, which would really put you over the top.

hoping2retire35

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Re: Case study: How close am I?
« Reply #6 on: December 03, 2015, 07:01:08 AM »
$4500 a month still seems like a lot just for living(excluding house of $3900). We spend on utilities and food and transportation(cars paid for) about ~$1200 which includes diapers and all the food that gets vacuumed and thrown away. So that means $3300 or so in college expenses, PER MONTH! I am assuming you didnt have 5 sets of irish twins and currently have 4 kids in college. ~$3000 should be one semester at a reasonable state school tuition. Get them out of Ivy league school, up the grades to be eligible for scholarship, get a part time job or some combination. Obviously its unfair to the younger ones not to do what you did for the older ones, but there still must be some fat somewhere that could be trimmed.
I say all this hypocritically, since DW and I received a good deal of help and lot more than we think we will (be willing to) provide for our kids.

FrugalSpendthrift

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Re: Case study: How close am I?
« Reply #7 on: December 03, 2015, 07:19:06 AM »
I want to simplify life much more and shed excess material items.  I discovered MMM this year and wish I had discovered it a long time ago.
Your current plan is a good start, but first make sure your wife is on board.

aj_yooper

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Re: Case study: How close am I?
« Reply #8 on: December 03, 2015, 07:41:12 AM »
Maybe I should get YNAB and try it.    Is it better than manually tracking spending using Mint?

I fear that I only have a few years to make an impact on my retirement landscape.  I think the biggest thing I can do is reign in our spending and get in a habit of MMM living before pulling the ripcord.


Your income is very good so I agree that reigning in your spend is the key. 

Opinions differ, but for us tracking our daily spends with our phones and setting a budget with YNAB really helped.  The program does take some time to learn (it is not difficult), but we feel it has helped us focus better.  Mint tells you what happened in spending, while YNAB emphasizes the planning out of your spending.  We do it in great detail and it works for us; you can do a free trial and see if it helps.  Just takes a while. 

2Birds1Stone

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Re: Case study: How close am I?
« Reply #9 on: December 03, 2015, 08:50:03 AM »
You guys will be getting a nice chunk of change from SS as well.

I think you are in a VERY good spot. Spend the next year padding the accounts, downsizing life, etc.

If you can get your expenses into the $60-75k/yr range you will be golden long term.

albireo13

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Re: Case study: How close am I?
« Reply #10 on: December 03, 2015, 09:59:30 AM »
I've left out other costs that bring it up.
My wife is very on-board with downsizing so, that's not a problem.  Just need to sell the house.
However, she is not very good at showing shopping restraint.  We are constantly getting Amazon boxes in the mail!!

As for the pets, we aren't going to discard them.  The dog is a 12yo large lab and his meds alone are $108/mo.
I don't expect him to last more than 1-2 more years.
We have 3 cats ... one is aged and needs meds ($$), one is totally neurotic and pees on things at the slightest amount of stress, the third is an outdoor cat which shreds our furniture (despite having multiple scratching posts in the house).  They all started out as the "kids'" cats but, now that the kids are in college we are stuck with them.
Because of their health issues, we feed the pets with special diet food ($$$). I am hoping that in a year or so, the kids will be able to take on their cats.

We have 5 children.  Several are in college at the moment.  Two have finished college and are out on their own.

albireo13

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Re: Case study: How close am I?
« Reply #11 on: December 03, 2015, 10:14:04 AM »
Other sources of income:

  older pension = $1800/mo for life (from previous company)
  my SS  = $2700/mo      (at full retirement age  66yo)
  wife's SS = $2700/mo     (at FRA 66yo)

Just this adds up to $86.4K/yr gross.
If I add on a 4% SWR amount of $54K,  we'd have over $140K gross income in retirement!

  This is assuming that we can hold off on dipping into our SS until full retirement age.  I'd actually like to wait until 70 to max out the SS.

dodojojo

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Re: Case study: How close am I?
« Reply #12 on: December 03, 2015, 11:18:00 AM »
Talk to your vet about anti-anxiety medication for the two cats who are tearing up your home.  If you have tried behavioral management and it hasn't helped, I would consider medication as a last resort. 

I give my skittish cat a tiny dosage of generic prozac every other day.  It has helped restore order in my home and it allows her to live (mostly) peacefully with her sister.  Since I cut up a 10mg pill into 1.6mg dosages, a $9 prescription lasts for over a year.  The relationship between my sister cats was so bad at one point, I was despondent I was going to have to rehome one of them.  I spent 6 months doing a re-introduction process and since we live in a 1 bedroom apartment where the cats are never very far from each other, the vet recommended medication to help the reconciliation process. 

aj_yooper

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Re: Case study: How close am I?
« Reply #13 on: December 03, 2015, 01:00:19 PM »
Other sources of income:

  older pension = $1800/mo for life (from previous company)
  my SS  = $2700/mo      (at full retirement age  66yo)
  wife's SS = $2700/mo     (at FRA 66yo)

Just this adds up to $86.4K/yr gross.
If I add on a 4% SWR amount of $54K,  we'd have over $140K gross income in retirement!

  This is assuming that we can hold off on dipping into our SS until full retirement age.  I'd actually like to wait until 70 to max out the SS.

If you both held out to 70 on Social Security, you would also both be doing very well! 

So, with some house down-sizing,budget downshift, and Amazon detox, your household could be free, if you want to be.

dandarc

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Re: Case study: How close am I?
« Reply #14 on: December 03, 2015, 01:05:14 PM »
Talk to your vet about anti-anxiety medication for the two cats who are tearing up your home.  If you have tried behavioral management and it hasn't helped, I would consider medication as a last resort. 
We've used something called Feel-Away.  It is like an air-freshener that calms them down.  Seems to work.

albireo13

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Re: Case study: How close am I?
« Reply #15 on: December 03, 2015, 02:34:52 PM »
we are using Feelaway right now.  It works fine usually but, if we have a change in people in the house (family visiting over Thanksgiving, etc)
the cat turns into a pee-firehose!

Argyle

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Re: Case study: How close am I?
« Reply #16 on: December 03, 2015, 03:05:10 PM »
I believe it's Feliway.  Sure didn't work at my house, and expensive too.  :(

norabird

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Re: Case study: How close am I?
« Reply #17 on: December 03, 2015, 03:16:52 PM »
Selling the house and downsizing will be amazing. Track spending and cut out what you don't need--you will need less and less as you keep downsizing and your 'wants' fade.

For amazon, deactivate the 1 click option if you have it. If you're a prime member, drop it (I think the free shipping can be an inducement). Is this gazingus pin buying a la Your Money or Your Life? Maybe read that book together, it can help change how you see purchases.

dodojojo

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Re: Case study: How close am I?
« Reply #18 on: December 03, 2015, 06:07:09 PM »
Talk to your vet about anti-anxiety medication for the two cats who are tearing up your home.  If you have tried behavioral management and it hasn't helped, I would consider medication as a last resort. 
We've used something called Feel-Away.  It is like an air-freshener that calms them down.  Seems to work.

Tried everything.  Medication was the last resort--thank god it worked.  It was hard to gauge with Feliway; I used it off and on for years as my cats have a testy sisters relationship.  But it was powerless when my skittish went postal one day...there was no return.

albireo13

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Re: Case study: How close am I? ... update
« Reply #19 on: December 14, 2018, 06:06:22 AM »
Well, almost 63 now and time to update m status. 
Wife and I are still working,   We have downsized to smaller, more efficient house. The house cost was a later move but our cost to run the home
has dropped quite a bit.  The cats and our dog have moved on so we have no more pets for now.  My daughter moved back home with her dog but, that is temporary.    Our financial status:

Total tax deferred savings =  $1.38M.   (60% equities, 35%bonds, 5%cash)
Total lump sum pensions =   $1.2M   (taken in 2020)
Totals = $2.58M

Expected Social Security:
Me = $36,600/yr.     taken at FRA. 66+2mo
Wife = $34,700/yr.   taken at FRA  67


I've ran a quite generous retirement budget:
$110K/yr.  ($16K/yr for travel)
Our spending is coming into line now.  Only issue is still have several kids in college and not left the nest yet.

I plan to retire in 2020, and wife 2yrs after.
We plan to roll pensions into IRAs at retirement, instead of taking annuities.  Two reasons:
1. no confidence that pension plans won't be pilfered or mismanaged down the road
2. IRAs will give spouse 100% beneficiary rights automatically.  For same with the annuities, the payout drops enough to make lump sum attractive.

Firecalc shows 100% for 35yrs out


« Last Edit: December 14, 2018, 06:12:00 AM by albireo13 »

FallenTimber

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Re: Case study: How close am I?
« Reply #20 on: December 14, 2018, 07:43:54 AM »
Congratulations on making it to this point. If I were in your shoes, I wouldn’t spend the next 1-3 years working. I’d consider the next few years far too valuable to simply build up an extra cushion. You’ve spent a lifetime working. Go enjoy yourselves.

albireo13

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Re: Case study: How close am I?
« Reply #21 on: December 14, 2018, 08:13:38 AM »
Thanks.  We are a little nervous, with 2 kids still in college.  We plan to help them somewhat so they aren't drowning in college debt.  Even so, I plug in $20K for each kid over the next 2 yrs and it barely moves the needle in Firecalc.
I guess we're good to go. 

Now, just to convince my wife.   She is adamant that we keep working until all kids are out of college.

terran

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Re: Case study: How close am I?
« Reply #22 on: December 14, 2018, 08:21:46 AM »
Just throwing this out there -- why are you waiting? And why is your wife waiting even longer?

Have you played at all with @CCCA's "fun" calculator Rich, Broke, or Dead? I think it helps put things in perspective a little: https://engaging-data.com/will-money-last-retire-early/

albireo13

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Re: Case study: How close am I?
« Reply #23 on: December 14, 2018, 08:36:39 AM »
I want to go soon.  Convincing my is another story.

2Birds1Stone

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Re: Case study: How close am I?
« Reply #24 on: December 14, 2018, 10:06:26 AM »
As another forumite who has been following your progress over the years...........go spend time figuring out what you want to do for the next 30+ years instead of trading time for money you don't need.