Hi everyone. I have enjoyed reading many of the posts and appreciate how supportive all the members are.
Life Situation: I just turned 50 in January and my husband is already retired. We have no children and live in the income tax free state of New Hampshire. While NH is great to build wealth, once retired, we would probably move to a tax friendly state with much lower property taxes and a warmer climate. We also seriously entertain the possibility of spending at least a year in Europe (probably Spain) or even longer, where we would be able to enjoy the culture and the weather with a reduced cost of living.
My husband has become ill 7 years ago and thus forced to retire much earlier – he receives his Social Security currently. Juggling taking care of him and having a stressful job placed tremendous stress on me and during those years, leaving no time or energy to enjoy nature, life, culture, everything that life is all about. While I have always been a high earner, I no longer take pleasure in my job and find myself totally unmotivated at times. The only thing that keeps me going is the goal of attaining FI and early retirement.
Before my husband’s illness, we were globe trotters – we used to travel extensively, and when I retire, I would love for us to be able to live for a year or longer in Europe and be able to explore the culture, architecture, and everything that this old continent has to offer. We may even apply for a long-term visa in Spain and make Spain our base from which we can travel everywhere in Europe. My parents in law are in Sweden and we would be able to see them more often if we settle in Spain.
Gross Salary/Wages: My salary is ~$115,000. My net pay is ~$5850/month after taxes and 401k deductions (I contribute the maximum $24,500). My husband’s SS is $1400/mo.
Individual amounts of each Pre-tax deductions: I max out my 401k at $24,500/year (it was $18,000 last year and the years before).
Rental Income, Actual Expenses, and Depreciation: N/A
Taxes: Not itemizing deductions.
Current expenses:
Mortgage: $680
Property taxes: $500
Car, home, life insurance: $260
Entertainment: $50
Food: $500
Gas: $140
Car Maint.: $50
Utilities: $200
Personal care, clothes: 100
Internet, Netflix, Amazon, Phone: 130
Miscellaneous: 100
Dental Insurance:130
Medical Costs: $200
Total current expenses: $3,040
When I retire, our expenses will go up, as we’ll have to buy our health insurance and we’ll also have to budget for extensive travel. Therefore, for retirement, the following changes will have to be taken into consideration:
Add: medical insurance $2,000 for both me and my husband (I am budgeting high???)
Add: Travel: $800 – again high
Reduce property taxes by $200 – assuming we’ll move from NH where property taxes are atrociously high
Eliminate mortgage of $680 – as we’ll sell the home and if we buy something, we won’t take a mortgage but rather use our funds and the proceeds from the sale of our current home to pay for the house
Reduce car, home, life ins from $260 to $170, as we’ll get rid of one of the cars, and the life insurance policies will terminate
Eliminate medical costs as those will be covered under the $2,000 medical insurance category
Total Expenses in Retirement: $55,200 – that assumes we’ll use the proceeds from the sale of our home (around $150K) and use $100K of our funds to buy another home. Subtracting from $55,200, husband’s SS of $17K/year, leaves us with $38,200 of expenditures that will have to be financed by our savings.
Assets:
CD: $85,000
Mutual Funds (taxable accounts): $145,000
401K: $24,000
IRA: $711,500
Roth IRA: $74,500
Total Liquid Assets: $1,040,000
The market value of our home is approx.$265K
Liabilities: Mortgage balance: $108,000
Specific Question(s):
Based on the 4% model, if I decided to retire now, I would need $955,000 ($38,200X25), plus another approx. $100K that would go towards purchasing a new home to be paid in full ($157K from proceeds of sale + $100K from savings), for a total of $1,055,000. Am I conservative enough? Am I forgetting something? Is the 4% safe, or should I continue to save so that I secure a 3% withdrawal (38,200/3%= $1,273,333) plus $100K = $1,373,333. Based on my savings rate, I should be able to hit that number in a little bit over 2 years. I would feel better knowing that our withdrawal rate was only 3% and thus we have room to make adjustments, if necessary. I have not included any Social Security payments for me, as I don’t know what the future holds with SS.
Am I too conservative? Am I ready to retire based on the model above?
If we move to Spain and our expenses are reduced to $3500/mo, and we only have to fund $2100/mo from investments, are we going to be in a better place financially?
Is there something I’m forgetting?
Thank you so much for all you feedback and recommendations