Author Topic: Old man money vs. young man money scenario - Firecalc  (Read 4974 times)

bo_knows

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Old man money vs. young man money scenario - Firecalc
« on: May 29, 2013, 03:47:10 PM »
It has always been my idea that my wife and I would save and save and save for retirement until a point in which if we stopped saving, our "old man money" retirement funds would grow and grow and grow until age 50-60, and we'd have plenty of money at our spending level.  After that crossover point, we have thought that each of us working 50% full-time until that age 50-60 would be in our best interests for health insurance for us and the kids, and longevity of the portfolio.  Plus, my wife requires the interaction and would otherwise volunteer if she wasn't working.

In my monthly run-ins with Firecalc, I put in the following information:

- $320k current "old man money" portfolio
- $60k/yr expenses (20% higher than normal expenses as a buffer)
- Retire in 5 years (age 36)
- Until retirement in 5 years, contribute $40k (401k with match) + $11k (Roth IRA) + $10k (529), or $61k total each year
- Inputted 50% of SSA's estimated benefit, including the fact that we'd retire early
- Inputted the value of my wife's pension, at age 60, assuming we call it quits at 36
- Inputted an income stream just barely enough to cover our expenses, from ages 36-50
- Inputted an "expense" stream to offset that income after age 50
- Inputted 2 portfolio changes to take out college money

Undocumented "safety buffers"
- Home equity not included anywhere
- We only put in 50% of SS's estimate. While I don't think people my age will get 100% of the current estimate, 50% is pretty conservative
- Cutting to 50% full-time employment will actually provide more money than we spend, therefore adding to the stash.

And, we get 98.9% success.

Summary: Firecalc tells me that we could stop contributing to retirement in 5 years, employ ourselves just enough to cover expenses for a decade, then entirely call it quits when the kids leave the house. 

It's all a very interesting situation.  I had never worked it out like that and always assumed we were 10-15 years away from anything resembling FI.  Moral of the story seems to be not to underestimate part-time employment in your equation.  I know that this is not "retired" in the eyes of the Retirement Internet Police... but it will certainly be easy sailing.

Since this is the "Ask a Mustachian" forum, tell me about your "old man money" "young man money" situations that might involve part-time work in your current industry.

Joet

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #1 on: May 29, 2013, 03:58:14 PM »
I never thought it made sense to differentiate the two because of (72t) withdrawls and Roth conversion in the 0-15% bracket possibilities.
Perhaps you've proved me wrong? Either way I remain un-convinced there's any reason to stop tax-advantaged savings to the maximum legal limit unless by some miracle I am expecting to have a higher tax bracket in actual or early 'retirement', whether partially/fully employed or otherwise making substantially less than I do now.

Out of curiosity, how much of a pension are you expecting @ 60 after retiring at (presumably... 35) ? sounds awesome

mlipps

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #2 on: May 29, 2013, 04:11:23 PM »
We've thought of doing something along those lines. Possible ideas include moving to delightful but expensive places for a few years where saving at our current rate would be challenging, like SF, Australia, or NZ, or maybe joining the Peace Corps while letting our portfolio stew a bit. That would be after we hit our target number, which will likely be around 40. Bonus is that our kids, if all goes according to plan, would be around high school aged, so it could be a cool opportunity for them to see a couple other cultures by moving somewhere else, then we could do the Peace Corps when they go off to college. Or something like that anyway.

bo_knows

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #3 on: May 29, 2013, 04:16:04 PM »
If you go by the traditional paradigm of retirement where you work and work and save until you quit completely, then you're correct. If you choose to have a part time income to cover your costs for X amount of time, the only advantage to more tax deferred savings would be to move up the full retirement age. If that is fixed, who cares?

bo_knows

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #4 on: May 29, 2013, 04:46:10 PM »

Out of curiosity, how much of a pension are you expecting @ 60 after retiring at (presumably... 35) ? sounds awesome

Based on her years of service and salary, if she quit at36, it would be 14k. Not worth a ton at age 60, but its something.

Jamesqf

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #5 on: May 29, 2013, 05:35:38 PM »
I've never thought of it that way, probably because I consistently refuse to even grow up, let alone old :-)

But as I've said before, I like the work I do.  Even without working more than 40 hours/week (and often less) I make quite a bit more than I spend, so I invest the excess, and for several years those investments have earned more than I spend (especially if I paid off the mortgage).  If I ever get to where I file for SS, that will also (by current estimates) pay me more than I spend. 

I think of those investments as survival.  If something happened so that I couldn't work, how long could I survive on what I have?

matchewed

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #6 on: May 29, 2013, 05:45:18 PM »
I treat it as one big bucket as I'm planning on doing a Roth pipeline personally. But maximizing contributions to tax deferred provide such good anticipated tax benefits.

But I do actually consider part time work in my plan. In about 7-10 years I could comfortably walk away from working but I'd like the part time job to -

a) pad the income for bigger expenses such as travel

b)perhaps medical insurance if necessary

And frankly I'm not even considering part time work in my current line of work. It is a possibility but I'm comfortable taking on any sort of job. I've stocked shelves at a grocery store before and I'm not afraid of doing it again for some extra buffer.

Southern Dude

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #7 on: May 29, 2013, 08:26:10 PM »
Your plan is very similar to my own roadmap. The only difference for me is that I don't think of it as a part-time job to cover expenses until the old man money is available. I think of it as an opportunity to do whatever job is awesome and interesting to me at the moment, but which has the added bonus of covering my expenses. Basically, you have enough in the bank that you can tell the asshole boss where to stick it and go work in a book store or coffee shop or whatever you feel like doing. Peace Corps is an awesome idea! Don't they also pay some kind of salary? I'm looking forward to the point where I have the courage to leave the rat race and look for the perfect "job". It's a totally cool opportunity to try something new and have a good time, and all the while my money in the bank is compounding over time. The problem for me is figuring out the number at which I'm comfortable leaving behind the big paycheck.

meadow lark

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #8 on: May 29, 2013, 10:01:40 PM »
My current plan is to work full-time 5 more years, then go to working 1 or 2 days a week.  I say current because I am constantly changing the plan.  My wife likes to work a lot more than I do, so she may stay working full-time.  We could live on just her working, or us both working part-time.  That would leave the nest egg we are saving now to sit for a few more years before we start tapping it.  Of course we would save enough (4%) to get our matching 2 %.

nktokyo

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Re: Old man money vs. young man money scenario - Firecalc
« Reply #9 on: May 30, 2013, 12:27:44 AM »
It's worth trying... you'll probably get bored and want to start a company or do something after retiring and the way you score points in this world is making money. You'll find a way.