Author Topic: How close am I? OMY? Please check my math, hold my hand....  (Read 2467 times)

DTaggart

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How close am I? OMY? Please check my math, hold my hand....
« on: August 29, 2016, 01:38:23 PM »
So hereís my current situation, 39 yo, married (heís 49), no human children, 2 fur kids (see avatar). I think Iím pretty close to FI and just want to throw my numbers out to the community for a sanity check.

Iím fortunate in that I have a pretty kick-ass retirement plan at my current job. Regardless of when I quit working, once I reach age 50 Iíll be able to begin collecting my pension at 2% of my final salary for each year of service (goes up to 3% at age 60). Iíll hit 10 years next month, so the benefit estimator says Iíll get ~1850/month when I turn 50 (obviously this goes up the longer I stay).

Our house is completely paid off, we plan on staying here for the foreseeable future. No debts.

Husband collects $263/month in VA disability which will continue for his lifetime.

Weíre currently spending around $2600/month. I expect that to be about the same post-FIRE except for health care. I think we should be able to get full subsidies for ACA (we have a good mix of retirement accounts to draw from so I think we can control our taxable income pretty well), but I expect some OOP costs will happen. Husband is enrolled in VA Health care (priority group 3) so thatís an option for him if ACA care doesnít work out for any reason. Dental will be OOP. Unfortunately I donít anticipate any reduction in work-related expenses because I donít really have any :) Work provides a take-home vehicle so I have no commuting expenses, Iím anti-social so I donít eat out, and standards are low so I donít have to buy pricey clothes.

So with the possibly increased medical costs Iím aiming for $3k/month in expenses post-retirement (probably a little high but it helps me sleep at night).

Iíve run this all through FireCalc and cFireSim and theyíre giving me about 92%-93% success.

The only other hiccup is I want to do some fairly major home renovations once Iím FIREd. Our house was built in 1960 and still has the original stove and oven! So Iím looking at pretty much a complete kitchen re-do and a bathroom too, because why not (no really, it needs it). Iím not looking at stainless steel granite everything type upgrades, but I do want quality stuff that will hold up. The house is only 1000 sq feet total so I donít think its going to be as costly as it might sound, and weíre willing to do much of the work ourselves. Iíve no idea how much to budget for this, $25k? Ideally Iíd do these projects before FIREing but I just donít have the time/energy/patience for work, life, and a remodel so itís going to wait.

Anyway, with the uncertainties of the house stuff and other vagaries of life, I feel like I should aim for $600 - $625k in total, but then I sort of think thatís too much and Iím wasting my life away. So I put it forth to you great Mustachian Community: How close am I to being done? What things am I forgetting to account for?

For the record, my job is tolerable but Iím really pretty burnt out and want nothing more than to sleep for a couple of months. I feel like Iím limping across the finish line here.

Here are all my numbers in hopefully easy to read format:
                  
                   Month       Year
Ret Expenses:     3000.00   36,000.00
VA Income:         263.00    3,156.00

Pension at age 50 (can start collecting in 2027)
                  1850.00   22,200.00


Current Assets:

My Roth IRA:        83,695.00
Hubsí Roth IRA:     68,916.00
My 403b:            57,253.00
Hubsí IRA:         150,487.00
My 457:             85,815.00
HSA:                25,196.00
Vanguard Taxable:   28,854.00
CDs*                31,466.00
Cash:                2,252.00

Total:             533,938.00

*I was originally aiming to keep a year or so of expenses in CDs, but I am now leaning towards keeping everything invested, so Iím moving the CD money to Vanguard as they mature. The cash is just waiting for more money to accumulate before being invested. Otherwise my asset allocation is 80/20 stocks/bonds.

Thanks for reading!

CrispRetirement

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Re: How close am I? OMY? Please check my math, hold my hand....
« Reply #1 on: August 29, 2016, 04:06:58 PM »
By my estimates, you're getting very close, but not quite there yet - especially with a remodel of that magnitude. After you retire, you'll probably need to do yearly roll overs from your traditional IRA/403b to a Roth because your other taxable accounts and Roth basis likely won't cover gaps between retiring and being able to withdrawal from a traditional pre-tax contribution plan(don't want to have to pay early withdrawal fees). Rolling over will add to your Roth basis 5 years after doing so. Just a couple questions:

1) Does your pension has cost of living adjustments?
2) Are you counting on social security?

If the answer is "yes" to both of those, you may be able to afford to roll over a larger amount.

Putting a 25k dent into your saving for a remodel is quite a big hit. Even without it, you may or may not fall short. The number seems high to me, but I've never had to do a large remodel. If you save enough to cover the entire 25k remodel in the next year or two, you should be able to retire because you will also have a higher pension at that point.

This is all based on estimates from a python simulation program I wrote (still working on kinks and not fully tested yet). My assumptions were 2.5% inflation, 6.5% return, COLA adjustments for your annuity and VA benefits, no social security, $16k yearly roll overs for the first 10 years of retirement, and a basis of $120k in your roth accounts. The estimate showed you about $6k short yearly before your annuity starts and full coverage until you are 80 and your husband is 90. Unfortunately your accounts run dry at about that point.

Just some food for thought, but it seems like you are close!

DTaggart

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Re: How close am I? OMY? Please check my math, hold my hand....
« Reply #2 on: August 30, 2016, 12:54:53 PM »
Thanks for the response CrispRetirement, I think you're pretty much confirming my estimates.

To answer your questions:
1) Does your pension has cost of living adjustments?
2) Are you counting on social security?

1) Yes, once the pension starts it will get annual COLA adjustments, but there won't be any adjustment to account for the ~10 years between my final salary and when I actually start collecting, afaik.
2) I assume we will both be eligible for SS when the time comes, but I'm not really factoring that in to calculations. I'm just considering it another layer of security for likely increased medical costs as we age.

After you retire, you'll probably need to do yearly roll overs from your traditional IRA/403b to a Roth because your other taxable accounts and Roth basis likely won't cover gaps between retiring and being able to withdrawal from a traditional pre-tax contribution plan(don't want to have to pay early withdrawal fees). Rolling over will add to your Roth basis 5 years after doing so.

Yes, the plan is to convert from the tIRA and 403b to the Roths at whatever level makes sense to minimize income taxes and maximize ACA benefits each year, then take from the Roths or taxable for spending. I can also draw from the 457 as regular taxable income without any penalties regardless of age once I no longer work for my employer (the 457 is awesome, I wish I'd understood it better sooner than I did!) I'm sure we'll have some amount of side hustle income too (hubby makes a little money doing photography) but I'm not going to depend on any of that.

I think for simplicity I need to just consider my retirement funds and the remodel funds separately. Basically subtract 25k from the balance of my cash or taxable account and go from there. By my estimates (and assuming the market cooperates) I should be around $604k total at the end of 2017, leaving 579k for retirement, which is giving me high 90's on FIREcalc and cFIREsim. And that ups my pension to $2060/month.

Sooooo close.

Gin1984

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Re: How close am I? OMY? Please check my math, hold my hand....
« Reply #3 on: August 30, 2016, 01:09:57 PM »
What happens if you die?  Could your husband support himself without your pension until 62? 

CrispRetirement

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Re: How close am I? OMY? Please check my math, hold my hand....
« Reply #4 on: August 30, 2016, 02:28:47 PM »
What happens if you die?  Could your husband support himself without your pension until 62?

While a little grim, this is a very good point. Does your pension have survivor benefits and would they be enough? Social Security should* be around for him to collect at 62 if something were to happen, but there could be two years that need covered before he would be eligible.

DTaggart

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Re: How close am I? OMY? Please check my math, hold my hand....
« Reply #5 on: August 31, 2016, 01:14:39 PM »
What happens if you die?  Could your husband support himself without your pension until 62? 

I guess he can finally go get a freaking job. KIDDING!! This is a great question, thanks for bringing it up.

So if I die before I start collecting the pension, he gets all of the money that I have contributed to the pension, plus interest. So, math time:
The last statement I have handy is from 2013, and says as of 6/30/13 I had $37,187 (contributions + interest). I went through all my pay stubs from then until now, and I've contributed another $24,459, giving us $61,646. I have no idea how much interest would have accrued since then and there will be another year+ of contributions (~$9k+) and interest. I assume he'd have to pay normal income taxes on whatever he got. Let's be conservative and just assume he nets $61k. Add that to the $579k we'll have in the stash at retirement time and that gives us $640k. At a 4% withdrawal rate that gives $25,600 per year, or $2,133 per month. Plus his VA income of $263 that's $2396/month.

Without me around, I think its reasonable to assume the following expense categories can be halved: OOP health/dental costs, clothing, gifts (no need to buy shit for my family), groceries, car registration, car insurance, and car service/replacement (since he'll ditch the 2nd car). That adds up to $542/month. Subtract that from our $3k planned expenses and we have $2458. Pretty darn close. We have some wiggle room in the budget with discretionary costs, so I think its doable, but do I want to leave him that close to the edge?

If I should die after I start collecting, he gets 60% of my pension amount, which would be $1238/month. Figure his expenses go down to the $2458 as described above. ($29,496/year, let's call it $30k).  I'm not sure the best way to model this situation in FireCalc and cFireSIM, mainly because the $579k stash will have been drawn down... but by how much? If I input a $579k stash with the 30k expenses, VA money and reduced pension income starting in 10 years, it's 100% success, but I don't think that accurately reflects the situation since we'll be drawing the $579k down faster until my early demise. I'll have to play with this. The good news is he'll be 60 years old by the time I start collecting the pension, so SS wouldn't be far away for him.

I sat Mr Taggart down last night and ran this scenario by him, and basically asked what he would want to do if I died before him. The first thing out of his mouth was that he'd leave CA and go somewhere with a lower COL. Apparently he's put a lot of thought into this! :) Our house is probably worth $400k (after the remodel work) so he'd have a lot of potential there. He has family in Ohio, although he didn't seem enthusiastic when I asked if he might consider relocating there. One of the ideas we've kicked around for our retirement days is getting a camper and slow travelling the US, camping and hiking, thru-hiking the PCT and AT, and this is what he said he would want to do if I died. I think he'd have enough money to be able to do those things, especially if he chose to sell or rent the house.

In any event, I need to play with the calculators and spreadsheets and see if I can come up with more solid numbers for this situation (if anyone has any suggestions, I'm all ears). I think worst-case scenario is I get 100-200k of term life insurance on me, which shouldn't cost too much.

Thanks again for the responses!
« Last Edit: August 31, 2016, 01:29:09 PM by DTaggart »

DTaggart

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Re: How close am I? OMY? Please check my math, hold my hand....
« Reply #6 on: August 31, 2016, 01:46:22 PM »
OK, I think I've figured out how I can run this through cFIREsim:

- Use a starting portfolio of $579k and initial spending of $30k
- Under additional spending, I add $6600 per year from the start of retirement until the year of my early simulated death - this is the difference between expenses of me being alive vs pushing up daisies (damn I'm pretty cheap).
- Under pensions I have his VA money ($3156) starting from year of retirement
- Under "other income", I have the two pension amounts: my 100% amount starting in 2027 and ending the year of my simulated death, then his 60% amount starting the year after my death until 30 years after retirement

Seem legit?

I've run this for a number of different simulated death years, all coming up high 90's. The good news for me is the success rate goes up a little bit each year I'm alive, so I guess he's got some incentive to keep me around :)