Author Topic: Approaching FI requesting advice Finetuning plan for RE  (Read 2278 times)

BallSachary

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Approaching FI requesting advice Finetuning plan for RE
« on: February 03, 2024, 06:40:09 PM »
Life Situation: Age 32, IRS filing status Head of Household, 1 dependent (significant other), Monroe County Indiana, I'll be able to pull SS and FERS in 2053.

FERS Estimate 14k-22k depending on when I separate
SS Estimate 14k

Gross Salary/Wages:
103k


Individual amounts of each Pre-tax deductions
TSP- Max annually, T-IRA Max Annually

Actual Expenses: 22k Annually on average

Adjusted Gross Income: Expecting around 73k this year.

Taxes: Genuinely never paid much attention to this aside from minimizing AGI.

Current expenses: (2023 data pulled from Mint)
Total - $22,830.04

Food - $8412.60
Bills/Utilities - $5012.04
Gifts/Donations - $2268.71
Home - $1583.34
Taxes - $1372.84
Health & Fitness - $1057.39
Fees & Charges - $971.85 (Had my old Pokemon card Collection professionally graded, one time expense)
Shopping - $888.21 (Roomba and some black friday electronics, atypically high)
Auto & Transport - $566.53
Pets -$433.63
Entertainment - $262.90

Mortgage (until Mid 2037) - $440/mo, just shy of $200/mo is interest, remainder principle

Assets:
-Gross About 695K according to my spreadsheet

Retirement Fund(s)
$256,849.06        tsp - (50/50 S and C funds)
$48,692.99          T-IRA - (Admiral Share SP500 fund)
$24,650.36           Brokerage -  (Admiral Share SP500 fund)
$13,855.30           BTC (purchased for $600. I understand if you don't view it as more than a speculative asset)

$100,000              HYSA 4.95% - (100k kept for 5 years Cash on Hand/ Roth Pipeline)
$5462.12              Checking Acc - (rebalanced to 5k at end of each month)

-Property
$230,900             House
$13,174.84          Pokemon Card Collection
$2928.00             Truck

Liabilities:
Mortgage, $53,457.12 Remaining (Final payment Apr 2037)

Specific Question(s):

Seeking advice on how to incorporate and plan for Health Insurance when I separate from service. I've read up on the FPL ratios and applying, but would like reassurance form anyone that has done it. Projected to be able to RE around September of 2025.

I'm considering selling my home and purchasing another (max budget of 500k). In this scenario, I anticipate that I'd be able to pay off the home by 2029 and recoup my 5 year cash on hand by 2031.

Projected annual spending in top of budget home would go to 30k/yr bringing my needed CoH to 150k.

Planning to use a 5% withdrawal rate and adjust course if necessary.


Thanks to anyone reading and willing to throw in their 2 cents. All advice, questions, pointers appreciated.

(Edited to make easier to read and added a couple details.)
(Edited to update numbers and separate Retirement Savings from other Assets)
« Last Edit: March 22, 2024, 03:24:55 PM by BallSachary »

zolotiyeruki

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #1 on: February 19, 2024, 07:20:01 AM »
I can't say much about planning for health care and optimizing around the FPL, but here are a few thoughts:

1) you've done a fantastic job of keeping your expenses low and your savings rate high.  kudos!
2) what's your long-term plan with your SO?  That is probably the most significant as-yet-unresolved factor in your long-term finances.
3) do you plan to ever have kids?
4) I wouldn't count either your Pokemon Card collection or your BTC as assets.  Personally, I'd sell them and put that money into an asset whose value is set by something other than speculation.

Laura33

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #2 on: February 19, 2024, 09:24:24 AM »
Wow.  Congrats on those numbers -- really well done keeping the expenses low.  A couple of thoughts:

1.  Following on @zolotiyeruki:  think really hard of what you want your life to be over the next 50-60 years.  Your FIRE budget isn't what you're spending now, it's what you'll be spending in the future.  So if you plan to add kids, or to travel, or to get married, or whatever, you need to work those into your budget.

2.  When you're doing this future planning, limit your analysis to the assets you have specifically designated as retirement income.  That means your retirement plans, brokerage account, and the like, but not your house, cars, or any other assets you're not planning to liquidate.  It's great to have things like the Pokemon collection, but they're better viewed as a "just in case" backup plan, vs. part of the asset base you're counting toward the 4% calculation.

3.  On a similar vein, you have done a great job tracking spending, but does your budget account for periodic future expenses that don't hit in a particular month or year?  Things like a new roof for the house or new vehicle when one does?  It's easy to cover those things now on your income, but you want to make sure they are appropriate accounted for in your post-FIRE budget, when you won't have the giant firehose of cash to allow you to ride out those bumps.   

cannotWAIT

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #3 on: February 19, 2024, 11:34:21 AM »
What will your FERS and SS be? Are you planning to take SS at 62?

evanc

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #4 on: February 29, 2024, 12:54:23 PM »
Couple of thoughts, at current expenses of $22.8k/yr, you would need approximately $570,750 based on 4% WR. However, you can't spend the value of your home or your truck, so I wouldn't include those in my assets column. Rough math, this means your current assets are actually more like 430K in terms of LNW.

(ETA: of course this also means you could remove the mortgage expense from your bottom line)

You mentioned FERS in 2053, which has me curious on how many years of service total you have. In order to avoid a penalty, you ordinarily need to wait until age 62 for a deferred annuitant, but if you have 20 years of service, you can withdraw at age 60 (not sure if you have already considered that).

Finally, wondering how you are accounting for vehicle replacement, home maintenance, and other infrequent but large expenses.
« Last Edit: February 29, 2024, 01:00:20 PM by evanc »

BicycleB

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #5 on: March 05, 2024, 07:33:37 PM »
Re health care, the lower limit of income depends on which state you're in. Most states have one set of rules because they have accepted federal subsidy in this matter, other states chose differently and some of the qualification levels (income levels) are different. There's only 2 sets of rules, you just have to learn which set applies to whatever state you might retire in. Or, because you're quite young, simply verify that your resources will allow you to qualify for both sets of rules; that would mean you could comfortably retire in any state.

I suspect you'll be fine in all states and will not need to work until 2053. Check the details, though.

PS. With such a long timeframe, there is plenty of uncertainty about whether laws will remain stable. You can add a modest safety layer for that if you want.

BallSachary

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #6 on: March 22, 2024, 02:28:23 PM »
I can't say much about planning for health care and optimizing around the FPL, but here are a few thoughts:

1) you've done a fantastic job of keeping your expenses low and your savings rate high.  kudos!
2) what's your long-term plan with your SO?  That is probably the most significant as-yet-unresolved factor in your long-term finances.
3) do you plan to ever have kids?
4) I wouldn't count either your Pokemon Card collection or your BTC as assets.  Personally, I'd sell them and put that money into an asset whose value is set by something other than speculation.

Thanks for the reply! I'm reasonably satisfied with savings rate and spending. In hindsight there's a fair amount of waste during my early mustache years, but hey that's life I guess.

Long-term plan with SO is to just keep living as we are now. I'm currently disabled by long covid so there isn't much I can do. If things improve and nest egg continue to grow, we'll probably do some travel.

No plan to have children.

Fair enough about the BTC and Card collection. I just track them in that category because I can't think of a different categorization. I bought the BTC for $600 so I don't really mind just letting it ride and seeing how it ends up. The cards I probably won't ever sell. I just enjoy tracking their current market value.

BallSachary

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #7 on: March 22, 2024, 02:35:22 PM »
Thanks for the reply!

1) Copy that. I don't anticipate tremendous changes in my lifestyle going forward unless I recover from long covid. Even if I do, I'll probably just become an iron hermit lifting weights in my garage and mostly hanging out at home. Travel will hinge around portfolio performance to be sure.

2) Fair point. I'll probably edit my OP to make the distinction clear. I'm planning on using my cash savings for the 5 year transition to an IRA pipeline. After that a 5% withdrawal rate from the retirement savings.

3) I'm attempting to leave in that wiggle room, but not sure how to accurately account for it short of identifying the life cycles of every system in the house/car/etc. I do have the odd year where there are those issues. Had to put in a 14k heat pump a year or two ago for example.

Wow.  Congrats on those numbers -- really well done keeping the expenses low.  A couple of thoughts:

1.  Following on @zolotiyeruki:  think really hard of what you want your life to be over the next 50-60 years.  Your FIRE budget isn't what you're spending now, it's what you'll be spending in the future.  So if you plan to add kids, or to travel, or to get married, or whatever, you need to work those into your budget.

2.  When you're doing this future planning, limit your analysis to the assets you have specifically designated as retirement income.  That means your retirement plans, brokerage account, and the like, but not your house, cars, or any other assets you're not planning to liquidate.  It's great to have things like the Pokemon collection, but they're better viewed as a "just in case" backup plan, vs. part of the asset base you're counting toward the 4% calculation.

3.  On a similar vein, you have done a great job tracking spending, but does your budget account for periodic future expenses that don't hit in a particular month or year?  Things like a new roof for the house or new vehicle when one does?  It's easy to cover those things now on your income, but you want to make sure they are appropriate accounted for in your post-FIRE budget, when you won't have the giant firehose of cash to allow you to ride out those bumps.

BallSachary

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #8 on: March 22, 2024, 02:37:14 PM »
What will your FERS and SS be? Are you planning to take SS at 62?

FERS will be between 14-22k depending on when I seperate from service. I'll have 14 years of service this year.

SS is estimated right now at 14k

Yes planning on pulling both at 62.
« Last Edit: March 22, 2024, 03:27:40 PM by BallSachary »

BallSachary

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #9 on: March 22, 2024, 02:51:56 PM »
Copy that. I'll adjust my OP to reflect the distinction.

I've got just shy of 14 years RN. I'll almost certainly seperate before I hit 20, so I'd have to pull at 62.

I'm Just trying to leave a little wiggle room for when those sorts of things pop up. Not really sure how to go about proactively planning for them without plotting out the lifecycles of all of the systems in the house and vehicle.

Couple of thoughts, at current expenses of $22.8k/yr, you would need approximately $570,750 based on 4% WR. However, you can't spend the value of your home or your truck, so I wouldn't include those in my assets column. Rough math, this means your current assets are actually more like 430K in terms of LNW.

(ETA: of course this also means you could remove the mortgage expense from your bottom line)

You mentioned FERS in 2053, which has me curious on how many years of service total you have. In order to avoid a penalty, you ordinarily need to wait until age 62 for a deferred annuitant, but if you have 20 years of service, you can withdraw at age 60 (not sure if you have already considered that).

Finally, wondering how you are accounting for vehicle replacement, home maintenance, and other infrequent but large expenses.

BallSachary

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #10 on: March 22, 2024, 02:54:44 PM »
Yeah that checks out. My state took the federal subsidy and I think I'm all set to qualify.

The long timeline and uncertainty around law changes is a bit of a buzzkill. Especially since the LC disabled me.

Re health care, the lower limit of income depends on which state you're in. Most states have one set of rules because they have accepted federal subsidy in this matter, other states chose differently and some of the qualification levels (income levels) are different. There's only 2 sets of rules, you just have to learn which set applies to whatever state you might retire in. Or, because you're quite young, simply verify that your resources will allow you to qualify for both sets of rules; that would mean you could comfortably retire in any state.

I suspect you'll be fine in all states and will not need to work until 2053. Check the details, though.

PS. With such a long timeframe, there is plenty of uncertainty about whether laws will remain stable. You can add a modest safety layer for that if you want.

aloevera1

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #11 on: March 22, 2024, 03:53:41 PM »
Wow, your expenses are low!

Echoing comments about thinking more about the future.

You are still fairly young. Here are some questions you might want to think about:

- Do you plan to quit your job completely or just switch to something more enjoyable?
- Is your spouse planning to never work?
- Basically, do you expect incoming cash to stop completely after you retire?
- Do you have any fat in your budget that you would be able to trim if economy has a downturn or you have a big expense?
- How easy would it be for you to re-entry your profession? Or find alternative source of income?
- Contingency planning: how much cash do you need to have on top of your portfolio to carry you through bad market years?
- Future expenses you are underestimating - expensive pet issues, expensive health issues, unfortunate house expenses, relatives in dire situations, etc.

You have saved a lot - great job! However, you are running the ship quite lean so what about all those unpredictable situations? How would you approach those?

How much is your spouse abroad? Do they view your low expenses as something temporary or they are absolutely content and are going to stay content?

Good luck.

BallSachary

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #12 on: March 22, 2024, 04:47:01 PM »
Wow, your expenses are low!

Echoing comments about thinking more about the future.

You are still fairly young. Here are some questions you might want to think about:

- Do you plan to quit your job completely or just switch to something more enjoyable?
- Is your spouse planning to never work?
- Basically, do you expect incoming cash to stop completely after you retire?
- Do you have any fat in your budget that you would be able to trim if economy has a downturn or you have a big expense?
- How easy would it be for you to re-entry your profession? Or find alternative source of income?
- Contingency planning: how much cash do you need to have on top of your portfolio to carry you through bad market years?
- Future expenses you are underestimating - expensive pet issues, expensive health issues, unfortunate house expenses, relatives in dire situations, etc.

You have saved a lot - great job! However, you are running the ship quite lean so what about all those unpredictable situations? How would you approach those?

How much is your spouse abroad? Do they view your low expenses as something temporary or they are absolutely content and are going to stay content?

Good luck.

Good things to think about.

-When I separate form service, I plan to full on quit and not take up another job.

-SO can contribute financially if needed, but I plan for handling it myself.

-Yes, incoming cash will grind to a zero when I retire unless the situation becomes dire.

-As of this moment, there's around 3-4k per year that could be saved if there is a big downturn.

-I've never had a different job, so I can't be certain. I suspect that since i'm full time telework due to disability, it may be difficult to find another job as good as my current one.

-I don't know about how much on top of portfolio for bad years. I just do the cfiresim assessments and try to keep the success rate high. Not sure how you'd calculate that.

-For big unexpected expenses I'd just have to pay for them I suppose. Not sure how to calculate for big unexpected expenses. Worst case scenario I'd liquidate assets or god forbid ask my parents for a loan.

-SO is pretty on board.  The expectation is that we'll at a minimum maintain current lifestyle and as finances snowball maybe travel a bit.

Laura33

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Re: Approaching FI requesting advice Finetuning plan for RE
« Reply #13 on: March 26, 2024, 09:46:09 AM »
3) I'm attempting to leave in that wiggle room, but not sure how to accurately account for it short of identifying the life cycles of every system in the house/car/etc. I do have the odd year where there are those issues. Had to put in a 14k heat pump a year or two ago for example.

3.  On a similar vein, you have done a great job tracking spending, but does your budget account for periodic future expenses that don't hit in a particular month or year?  Things like a new roof for the house or new vehicle when one does?  It's easy to cover those things now on your income, but you want to make sure they are appropriate accounted for in your post-FIRE budget, when you won't have the giant firehose of cash to allow you to ride out those bumps.

Well the good news is that you just keep doing what you're doing:  track your expenses over years, then average them out. That will give you a good sense of what those periodic, lumpy expenses cost you if you pro-rate them over each year. 

The thing with the one-off expenses is that they're never actually one-off.  Sure, you likely won't have your Pokemon cards assessed again next year, but you may have your dishwasher break.  Most people are very, very good at tracking the routine bills, but they don't really think about those periodic lumpy ones. 

Ask me how I know.  ;-)  We developed an entire category called "special" when we did a very necessary home remodel, and when we finished, I thought, whew, that's over, we can go back to normal.  And then about 5 years later, I realized that even though the remodel was done, there was something filling up the "special" category every year -- a new vehicle, a new roof, etc.  So I couldn't really say my budget was X when I was actually spending Y on "one-offs" every year.

In terms of planning, I'd say just keep doing what you're doing, because if you're tracking every cent, you're doing much better than I did and already accounting for those sorts of extras.  And then, when you get close to your number, take a look ahead at likely upcoming expenses, from a new boiler, to new tires for your car, to dentalwork with a big deductible.  Get all of that done before you pull the trigger on FIRE.  Your FIRE number will already account for those extras, since it's based on what you've actually been spending, but getting some big things out of the way up front will give you a bit of a safety net by minimizing the amount of big stuff that is likely to hit you your first couple of years.