Age: I'm 43 years old, the Mrs is 38
Children: none
Location: New Hampshire
Investments:
Total net worth is roughly 950k but should be about $1,020,000 at the end of 2017 (without any market growth or losses).
Roughly 600k will be in my 401k and 420k in a non-retirement brokerage account. Asset allocation is about 75% stock, 20% bonds, 5% cash.
Expenses:
After revisiting our detailed budget and factoring in future health care premiums, our monthly expenses will be about $4500 per month. This includes our mortgage of $815 per month which will be paid off in 15 years. We have no other debt.
Part time income:
My wife and I can easily bring in 1k per month each working 2 or maybe 3 days per week (no more than 20 hours a week). With 24k per year in income we would only need to withdraw 30k annually from our investments. We would keep working 2 or 3 days a week for about 10 years unless of course we fall into careers or find work that we both really enjoy.
Health Care:
I’m well aware that health care premiums are likely on the rise and there’s lots of uncertainty right now but based on our state and projected income, we can currently purchase a gold level policy for $425 per month on the exchange. The wife is not completely on board with a bronze level plan. She wants something comparable to our current employer paid health insurance. I’ve built in an extra $300 per month for our health care budget on top of the $425 per month, assuming premiums increase in 2018 (70% increase). If premiums don't increase that much then our monthly expenses will be lower.
Taxes:
We’ll keep taxable income low enough to pay 0% on capital gains and qualified dividends. I’ll rollover my 401k and implement a Roth conversion ladder over a period of years and not pay tax on the conversion as long as I keep the tax bracket low enough. We’ll have access to our retirement account before age 59 1/2. There’s also the 72T option if necessary.
Planning:
I’ve used two FIRE calculators and Fidelity’s retirement analysis and they all look successful between 90-100%. I’ve factored in 4 lump sum withdrawals- two for 10k, and two for 15k over a period of 40 years for large purchases (cars, roofs). The Fidelity analysis factors in 2.5% annual inflation.
In summary:
We both partially retire in 2018. Work 20 hours per week (or less) to bring in 2k per month. Withdrawal rate from assets will be about 3%. By the time we’re both 62, we’ll have about $3400 in social security and a pension (both inflation adjusted). I’ve reduced my social security estimate by 25% assuming social security will be cut by the time we’re 62.
With future income factored in, we really only need to fund about a 20 year retirement. Withdrawals from our assets will be minimal after 62. If necessary, once our mortgage is paid off, we can use that $815 toward health care if costs really increase that much when we're in our 50's and early 60's.
Thoughts on this plan? Retirement and investment calculators can only tell you so much. I think real life experiences from people already retired are important to consider. I'm also fairly new to retirement planning so it's very possible I'm overlooking something.
I've posted my original retirement scenario a couple weeks ago. That's why this is my 2.0 version.
Thank you for reading and commenting.
