Case Study - 50yr old wants to retire in 8 years.

[Bigjones]

Life Situation:

Married, 2 girls (1 is 21, the other is 16),

Gross Salary/Wages: Before any deductions

Me: 3086.70 bi weekly
Wife: 3576.92 Bi weekly

Other Income: employer Match 401k:

Me $123.47
Wife: 142.21

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc. - whatever you have

Me: 401k $185.20 bi weekly , Health Insurance $420 bi weekly, life insurance $13 biweekly

Wife 401k $215.50 bi weekly, HSA $200 monthly, Health Insurance $55 bi weekly


Adjusted Gross Income: This should equal the additions and subtractions above.
Me: 1959.99
Wife: 2556.41


Current expenses: Provide breakdown and relevant details.  Aim to have “Miscellaneous” somewhere ~2.5%.  Much lower and you may be providing too much detail, much higher and you have an obvious problem of not understanding your spending.

Lights $200 includes heat month
Property Tax $1900 year
Food $800 month
HELOC $500 month(balance on home is $26,000)
Car insurance $1300 year






Specific Question(s): Providing a detailed breakdown is important, so is asking for specific information so we know what kind of help/advice you are looking for.

I need help figuring out if i will be able to RE at 58 yrs old in 8 years.  Wife is 3 yrs younger than i am. 

We currently have:

Wife's Standard IRA: $84,297.88
Wife's Roth IRA : $358.87
Wifes 401k: $30,593
My Standard IRA: $2843.08
My Roth IRA: 795.30
My 401K: $96837.77

Total $215, 725.90



.  We only owe $26,000 left on our home (HELOC). We own our cars and these should be good for another few years or so. 

Im considering moving  my 401k deferrals to $1000 bi weekly and wifes to $750 bi weekly. This would take advantage of the 50+ catchup on my 401k.

Here is where im really confused so im hoping someone can help here as well.  If i was to retire early at 58, how does this affect my SSI?  Medicare, Insurance etc.

SSI is telling me:

Age 70 (Delayed)   June 2040      $3,140 / month
Age 67 (Full)   June 2037      $2,443 / month
Age 62 (Early)   July 2032      $1,537 / month

SSI is telling my wife:

Age 70 (Delayed)   May 2043      $3,291 / month
Age 67 (Full)   May 2040   $2,579 / month
Age 62 (Early)   June 2035      $1,671 / month


Our home is currently worth about $115,000
We own a camp that is worth roughly $90,000

The plan would be to someday, sell both of these properties and move closer to our girls (down the road).  We would like to camp in an RV south or west from day after Xmas till about May to avoid the winter.  I should mention i would like to retire with about $50,000 annually to live on.

[Bigjones]

Am i missing any information that anyone would need to offer solid advice ?

[terran]

The estimates provided by the social security administration assume you continue to earn your most recently reported salary until you retire, so if you retire early your benefits will be less. There are a number of ways to figure out what your benefit will actually be, which I can help with. Do you have an account at https://www.ssa.gov/myaccount/ for both you and your wife?

Your expenses seem a little sparse. How closely do you track those? Cell/home phone? Internet? Non-food household supplies or other "stuff"? Homeowners insurance? Hobbies? Eating out? Gas? Irregular expenses (car repair/replacement, home repairs, appliances)? I would suggest you really nail expenses down by tracking closely for a little while if you don't already, and give some thoughts to irregular expenses. Basically, how confident are you about that $50k estimate?

How much do you have in the HSA and other savings in addition to the 401(k)'s?

[MDM]

If you use the case study spreadsheet mentioned in the case study sticky, what does that suggest for your time to FI?  Or other more sophisticated tools such as those described in Best and/or Recommended Retirement Calculator - Bogleheads.org?

You probably mean SS instead of Supplemental Security Income (SSI).

The 'SocialSecurity' tab in that spreadsheet allows you to predict your SS benefits in today's dollars, based on your SS earnings history and projected income.

[Bigjones]

Terran, yes my wife and I both have accounts as ssa.gov.

We have no money in our HSA currently, as it been going to pay for medical expenses almost as fast as we put money inside of it.  We have two daughters and my wife and I.  However my wife is the only one thats on a high deductible plan, so she maxes at like $3350.

We have been living on one paycheck for the past year, while ive paid down on our house from 77k down to roughly 26k.  I have no doubt that at this point, we could live on one salary.  I mean I would love to have more than 50k annually if its possible however im unsure if the numbers will bear that to be doable if i retire early vs stick it out and work till im 62-65.

My current expenses should be reduced in the next 2-3 years as my youngest daughter heads off to college.   My current expenses are my homes HELOC which i try to pay $500 a month on but dont have to.  Homeowners is $500 a year, Car insurance with kids on it is roughly $1100 a year, Lights are Heat are $200 a month, Food is very high at 1k per month, gas is roughly $250 a month, property tax is almost $1900 a year, Internet and Cell phones are currently $150 per month.  Im sure there are one offs, like my wash machine just died last night and that cost me $700 and things like that so

MDM - yes sorry i meant SS not SSI.

[Bigjones]

My biggest thing is needing a plan:

in 2021 starting next payperiod, i have the ability to Max out my 401k $26000 per year, Wifes $19500  , id also like to max out our IRAS this year as well if possible.


When im 58 my wife will be 55/56 and is it even possible for us to retire at this age, in trying to get to 62 or 65 somehow till SS/medicare kicks in.  Would we be able to still have enough savings at 65 to supplement SS so we can live comfortably and not worry.  Im just very confused on what to do.  I live in a tiny town without a real money manager that is able to help me be creative and think outside of the .... you need 3.2 million to retire at 65 etc.

[Bigjones]

I love this forum and this group of people, I really need you all now.

[Malum Prohibitum]

You are starting at $215,000 in retirement assets.  You intend to add (26,000 + 19,500+700 +6000)=$58,500 annually moving forward.  Using 8% (use whatever return you want if you do not agree), then you will have right at about a million dollars at 58.

That will spin off $40k at a 4% withdrawal rate, plus you have social security, but not at 58.

[MDM]

My biggest thing is needing a plan:

Following the Investment Order, and keeping decent track of actual spending so you can use that as a basis for projecting retirement spending needs, would be one reasonable plan.

Stick your head up every year or so to see how things are going, but otherwise doing the above shouldn't distract you from living your life.

[ericrugiero]

It doesn't sound like you have a great handle on your spending.  Making $173,000 per year with $215,000 in retirement plus $180,000 in real estate equity tells me that you are spending much more than $50K/year now (unless the high income is new).  What are you spending your money on and can you be happy cutting back? 

With your great income and low debt you should easily be able to retire in 8 years if you can live on $40K/year starting now.  If you really spend more like $100K then the answer is no.  There are lots of retirement calculators out there you can play with.  That would be a great place to start.  You just need to balance the spending rate and retirement date to suit your goals. 

[caracarn]

The estimates provided by the social security administration assume you continue to earn your most recently reported salary until you retire, so if you retire early your benefits will be less. There are a number of ways to figure out what your benefit will actually be, which I can help with. Do you have an account at https://www.ssa.gov/myaccount/ for both you and your wife?

I understood that your 35 highest earning years were what calculated your benefit, so you do not necessarily needed to make your most recent salary to earn the calculated benefit you just need to keep adding to your pool at levels where you out earn some year in the past.  I just logged into my SSA account and they now offer a spot where you can enter your future earnings.  I am now making about 60% less than I had (intentionally) and that shows I will drop $100 a month in benefit from the estimate.  Even is I drop it to $1,000/yr the benefit drops $300/month (on an estimate that is now $3,200/month), so is this exercise really that impactful?  I ran the $1,000 because if I stop working in 8-9 years and then am still 9 years from 67 with your method it would be a lot less than what I make now, so was trying to see work case as I will make more than $18,000 between now and my retirement age.

[reeshau]

You have a number of longer-term concerns, but I would also ask you about a tactical one:  how do you plan to access funds before you turn 59 1/2?

[Zamboni]

I think your plan to max all of your retirement options at this point (including the catch up contributions) is a sound plan. You also need to max out both Roth IRA's (I assume the IRA's you mention are Roth IRA's). It would be helpful if you provided more detail about that by editing your original post . . . apologies if I missed it in your follow up posts. How much is in 401K's versus Regular IRA's versus Roth IRA's? This is relevant information to your question.

Have you read the MMM post on having 25x your annual spend to retire?

I'll second (third?) the suggestion that you start tracking every dime you spend by recording it somehow. There is popular software called You Need a Budget (YNAB) or Dave Ramsey has software called Every Dollar. Both serve the same purpose. Plug all of your fixed expenses into one of those, or even just an excel spreadsheet that has categories if you are swift with Excel, for at least 3 months . . . and then also add in every discretionary dollar that goes out right down to 50 cents to buy nabs at the gas station. You might be spending more in a particular category than you realize. I've been tracking for years, not to restrict my spending but just to know exactly where it is all going.

Of course you can retire in 8 years if you are willing to adjust and live on whatever income you have at that time. Jacob from Early Retirement Extreme can retire on what you have now, probably.
The questions are: how much do feel you need to have to spend when you retire at 58?
How can you have that money accessible regularly from 58 to 60?

You are in the right place. Keep filling in info and keep reading and learning.

[Bigjones]

Thank you for your responses

I made the adjustments with specifics for IRA, Roth, 401k above in my original post.

Yes ive read that i would or should have 25x my spend for retirement however the struggle i have is factoring in my social Security which i will need in order to pull this off.   I wont be able to have 25X in 8 years.

Tracking spending is pretty difficult to judge what it might be in retirement as we spend quite a bit on daughter in college, helping her, currently paying her rent, food, cell, lights, internet, as well college expenses through the year.  We also spend more on food now that we will, one my youngest is out of the house.  A huge portion of our spending is food, not only groceries each week but the eating out budget.  We live pretty a plain lifestyle but we our food budget is outrageous.

How much would I like to have to spend in retirement, i would in an ideal world have 60k annually in todays dollars but im unsure if thats realistic or not and im willing to (more than willing) to try and reduce that if it means the ability to stay locked in on 8 more years of work till retirement.

Does one, draw down from retirement accounts from 58 till 62 or try and wait till 65 to get the bigger payout?  Ive also read that the SS estimates on their website are always low ball figures (unsure how much of that is true).  Im also not understanding how much my SS will reduce if i stop earning at 58 till 65 and if my wife stop earning at 56-62.  Then i have to think about how to access retirement money if its before 59.5.  So should i stop and not max my traditional IRA and instead MAx our Roths these next 8 years?

This I know, that my home will be paid for in the coming year. And that i believe I can max our 401ks and IRA's to try and pull this off.

I think your plan to max all of your retirement options at this point (including the catch up contributions) is a sound plan. You also need to max out both Roth IRA's (I assume the IRA's you mention are Roth IRA's). It would be helpful if you provided more detail about that by editing your original post . . . apologies if I missed it in your follow up posts. How much is in 401K's versus Regular IRA's versus Roth IRA's? This is relevant information to your question.

Have you read the MMM post on having 25x your annual spend to retire?

I'll second (third?) the suggestion that you start tracking every dime you spend by recording it somehow. There is popular software called You Need a Budget (YNAB) or Dave Ramsey has software called Every Dollar. Both serve the same purpose. Plug all of your fixed expenses into one of those, or even just an excel spreadsheet that has categories if you are swift with Excel, for at least 3 months . . . and then also add in every discretionary dollar that goes out right down to 50 cents to buy nabs at the gas station. You might be spending more in a particular category than you realize. I've been tracking for years, not to restrict my spending but just to know exactly where it is all going.

Of course you can retire in 8 years if you are willing to adjust and live on whatever income you have at that time. Jacob from Early Retirement Extreme can retire on what you have now, probably.
The questions are: how much do feel you need to have to spend when you retire at 58?
How can you have that money accessible regularly from 58 to 60?

You are in the right place. Keep filling in info and keep reading and learning.

[MDM]

Does one, draw down from retirement accounts from 58 till 62 or try and wait till 65 to get the bigger payout?  Ive also read that the SS estimates on their website are always low ball figures (unsure how much of that is true).  Im also not understanding how much my SS will reduce if i stop earning at 58 till 65 and if my wife stop earning at 56-62.  Then i have to think about how to access retirement money if its before 59.5.  So should i stop and not max my traditional IRA and instead MAx our Roths these next 8 years?

This I know, that my home will be paid for in the coming year. And that i believe I can max our 401ks and IRA's to try and pull this off.

How does the Investment Order apply for your situation?

Were you able to use 'SocialSecurity' tab in the case study spreadsheet to predict your SS benefits in today's dollars, based on your SS earnings history and projected income?

Another good SS resource (after you determine your likely "Primary Insurance Amount" using the above or other tool) is Open Social Security: Free, Open-Source Social Security Calculator.  What does that suggest for the two of you?

[Bigjones]

Recommended Strategy
The strategy that maximizes the total dollars you can be expected to receive over your lifetimes is as follows:

You file for your retirement benefit to begin 10/2038, at age 68 and 4 months.
Your spouse files for his/her retirement benefit to begin 5/2043, at age 70 and 0 months.

[Bigjones]

The only way that would be possible to wait that long to collect SS would be to drain my savings from 58-68 etc.  Thats if i can pull off what i describe above in maxing 401k, IRA, and HSA for next 8 years to go with 215k i have now.

[Chrissy]

You are starting at $215,000 in retirement assets.  You intend to add (26,000 + 19,500+700 +6000)=$58,500 annually moving forward.  Using 8% (use whatever return you want if you do not agree), then you will have right at about a million dollars at 58.

That will spin off $40k at a 4% withdrawal rate, plus you have social security, but not at 58.

You can retire in 8 years if you can live on less than $60k per year at that time. 

I start you at $200k, and add $51k/yr (the amount you managed to pay down the HELOC this year) + the $10k you're currently putting into 401ks.  But wait!  We've neglected your 401k matches!!!  How much are they?  Let's assume they're dismal, and you only get 2% each, ~$3.5k/yr.  So, you're saving $64,500/yr.  I used 7%, and get $1.052M in 8 years time.  If you sell the house and camp, that's another $200k, but you buy a very nice, used RV for... $60k?   So, $1.192M total to retire on, fairly conservatively.  That would generate $48k/yr at a 4% safe withdrawal rate, and I think you could very safely bump that up to 5% for $60k/yr for 10 years until you hit the age 68, the optimal point to take SS. 

Earning $170k/yr, your biggest expense is probably tax, so please, follow the investment order.  Also, read the JL Collins stock series and stop spending the money in the HSA:  https://www.madfientist.com/ultimate-retirement-account/

[MDM]

The only way that would be possible to wait that long to collect SS would be to drain my savings from 58-68 etc.  Thats if i can pull off what i describe above in maxing 401k, IRA, and HSA for next 8 years to go with 215k i have now.

Social Security at 62? Let’s Run the Numbers might interest you.

[Bigjones]

Thats VERY interesting!

The only way that would be possible to wait that long to collect SS would be to drain my savings from 58-68 etc.  Thats if i can pull off what i describe above in maxing 401k, IRA, and HSA for next 8 years to go with 215k i have now.

Social Security at 62? Let’s Run the Numbers might interest you.

[Bigjones]

Investment Order ?

WHAT           
0. Establish an emergency fund to your satisfaction   

I have ZERO emergency fund, but im going to begin starting first pay period of the new year, by putting in an amount each pay period moving forward.

         
1. Contribute to your 401k up to any company match   

If i contribute 5%, my company will match it up to 4%
       
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.   

I have no debts other than roughly 26k HELOC left
         
3. Max Health Savings Account (HSA) if eligible.

We are set up to Max this ($3600) for wifes plan, my family plan isnt eligible.

4. Max Traditional IRA or Roth (or backdoor Roth) based on income level 

plan is for 7k for me, 6k for wife


         
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - you earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           
6. Fund a mega backdoor Roth if applicable. 

You cant do this, while your still working can you?  My work will not allow me to move anything from 401k while still employed.
       
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield. 

Home HELOC is 4%     
     
8. Invest in a taxable account and/or fund a 529 with any extra.       

[Chrissy]

Investment Order ?

WHAT           
0. Establish an emergency fund to your satisfaction   

I have ZERO emergency fund, but im going to begin starting first pay period of the new year, by putting in an amount each pay period moving forward.

An emergency fund is just 6-12mo of expenses saved as cash in your chequing or savings accounts.  I assume you have some cash on hand...

6. Fund a mega backdoor Roth if applicable. 

You cant do this, while your still working can you?  My work will not allow me to move anything from 401k while still employed.

If your 401k allows, you can fund it with POST-tax dollars by up to an additional ~$37k/yr.  Then, you roll that over (called an in-service distribution) to your ROTH with no tax implications, because it was already post-tax money.  There, it then grows tax free forever, and you can tax distributions tax free because it's a ROTH.  It's quite the hack.  My husband's company not only allows it, but held a seminar on how to do it.  Unfortunately, we're cash-poor at the moment, and haven't been able to take advantage... yet!

7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield. 

Home HELOC is 4%     

Best to let the HELOC ride then, rather than pay it off early, because that money will earn more in the market.  But, lots of people pay down debt early just to be free of the psychological burden, which is also valid.

[MDM]

6. Fund a mega backdoor Roth if applicable. 

You cant do this, while your still working can you?  My work will not allow me to move anything from 401k while still employed.

Depends on your company's 401k specifics.  If it allows contributions to an After-tax 401(k) and also allows In-Plan Rollovers to Designated Roth Accounts, then this is doable for you.

[Bigjones]

I dont believe my 401k plan allows in service distributions but i believe they added a roth 401k , i can i use that ?

[Bigjones]

Chrissy, i literally have ZERO savings, its all in retirement and used everything to pay down HELOC.

My 401k plan doesnt allow for in service distributions, however i think we now have access to ROTH 401k.

Investment Order ?

WHAT           
0. Establish an emergency fund to your satisfaction   

I have ZERO emergency fund, but im going to begin starting first pay period of the new year, by putting in an amount each pay period moving forward.

An emergency fund is just 6-12mo of expenses saved as cash in your chequing or savings accounts.  I assume you have some cash on hand...

6. Fund a mega backdoor Roth if applicable. 

You cant do this, while your still working can you?  My work will not allow me to move anything from 401k while still employed.

If your 401k allows, you can fund it with POST-tax dollars by up to an additional ~$37k/yr.  Then, you roll that over (called an in-service distribution) to your ROTH with no tax implications, because it was already post-tax money.  There, it then grows tax free forever, and you can tax distributions tax free because it's a ROTH.  It's quite the hack.  My husband's company not only allows it, but held a seminar on how to do it.  Unfortunately, we're cash-poor at the moment, and haven't been able to take advantage... yet!

7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield. 

Home HELOC is 4%     

Best to let the HELOC ride then, rather than pay it off early, because that money will earn more in the market.  But, lots of people pay down debt early just to be free of the psychological burden, which is also valid.

[MDM]

I dont believe my 401k plan allows in service distributions but i believe they added a roth 401k , i can i use that ?

There are up to three options within a 401k;
1) Traditional (pre-tax)
2) Roth (after-tax)
3) non-Roth after tax.

#1 and #2 provide the usual "traditional vs. Roth" choice, and which you should use depends on your view of your current vs. future marginal tax rates.

#3 comes, if available at all, after you have filled your choice of #1 and #2.  For it to be really useful, your 401k must
a) allow contributions to it at all
b) allow either (or both) "in-service distributions" or "in-plan Roth rollovers"

You'll have to check your specific plan to see what it allows, because not all 401k plans are the same.

[Bigjones]

Here is where im confused.

Once i max my wifes HSA at 3600k
Once i max my 401k at 26k
Once i max my wifes 401k at 19.5k

That still allows me to put 7k in my Traditional or Roth IRA
That still allows me to put 6k in my wifes Traditional or Roth IRA

What is the advantage of putting in after tax money into a Roth IRA or doing a transfer, when i can directly put money into my Roth IRA directly ?

[Chrissy]

You're not doing one or the other, you're doing both (provided you have the money to do so):  $13k into Roth or tIra AND $XX in after-tax money into your Roth using the mega backdoor method.  The advantage is future tax avoidance.

EDIT:  You don't have enough to to this right now, so it's moot.  In fact, you need a cash cushion, so, you shouldn't max your 401(k)s, but just do enough to get the employer match.  Once you're topped up, you can up your contribution to the max.

[Bigjones]

ok so what your saying is

Me: Max 401k 26k
Me: Max IRA 7k
Me: Begin funding a Emergency Fund
Wife: Max 401k 19.5K
Wife: Max IRA 6K
Wife: Max HSA 3.6K

Anything else that i can spare put into a
Roth 401k to roll over to Roth IRA at some point

IS that right ?

[BikeFanatic]

Hi Big Jones  count me in on the folks that think you can make it in 8 years or so.
One suggestion I have is to track previous years spending by just adding up outflows from your checking accounts, this will be a start to tracking and you can see what your yearlly expenses really are.

Even if you find you spend 70 K a year, you also know you can cut back on some things and of course once your second daughter graduates college your expenses will go down alot. You may find that you and your spouse only really need 40K to live on.
By tracking your expenses year to year it will give you the confidence to jump ship when the time is right.

And as far as social security goes you should calculate that, one thing I found was to look at the box that says if you were disabled and you took disabilty today you would get this much----- That figure corresponds ( ballpark) to what I would get if I quit today and didn't earn any further Social security credits. ( I call it a ballpark because it was equivalent for me when I used that number against my actual calculation with a SS calculator, your mileage may vary,  best to use an actual calculator and type in the real numbers ).

[Chrissy]

1. Contribute to your 401k up to any company match.
Sounds like 5% for you and the wife:  $8,500   
         
3. Max Health Savings Account (HSA) if eligible.
$3,600 in wife's account.

4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
$13k for you and wife.  The rest to bank accounts until you have 6-12mo of expenses.  Then:
         
5. Max 401k 

[MDM]

ok so what your saying is

Me: Max 401k 26k
Me: Max IRA 7k
Me: Begin funding a Emergency Fund
Wife: Max 401k 19.5K
Wife: Max IRA 6K
Wife: Max HSA 3.6K

Anything else that i can spare put into a
Roth 401k to roll over to Roth IRA at some point

IS that right ?

Maybe. 

Taken what is written literally, the answer is "no" because the contribution limit of $19.5K (or $26K) applies to the total of traditional plus Roth accounts.

If you mean use option #3 from back a few posts: contribute to after-tax non-Roth and then do an in-plan Roth rollover to your Roth 401k, the answer is "yes".

[Chrissy]

Taken what is written literally, the answer is "no" because the contribution limit of $19.5K (or $26K) applies to the total of traditional plus Roth accounts.

Are you sure about this?  $19.5 or $26k applies is the limit he and the wife can contribute to 401ks.  He is probably over the income limit for tIRAs, but is certainly under the limit for ROTHs, which would be $7k for him and $6k for the wife, and doesn't have anything to do with the amount they put in their 401ks.

[MDM]

Taken what is written literally, the answer is "no" because the contribution limit of $19.5K (or $26K) applies to the total of traditional plus Roth accounts.

Are you sure about this?  $19.5 or $26k applies is the limit he and the wife can contribute to 401ks.  He is probably over the income limit for tIRAs, but is certainly under the limit for ROTHs, which would be $7k for him and $6k for the wife, and doesn't have anything to do with the amount they put in their 401ks.

Yes, given that he already assumes contributing $7k for his IRA and $6k for his wife's IRA.

Seems the question is what to do after all the above limits have been reached, so attention turns to after-tax non-Roth options....

[Bigjones]

So in reading the rules and because of our MAGI, it seems we would not see any tax benefits from a traditional IRA at this point.

[MDM]

So in reading the rules and because of our MAGI, it seems we would not see any tax benefits from a traditional IRA at this point.

So Roth IRAs it is.

[Bigjones]

ok this has been SO valuable, and I appreciate everyone helping.

Next question would be...

Lets assume that in 2028 when I'm 58 i now have roughly in the accounts using scenarios you have given above:

My 401k Balance : $441,669
Wifes 401k Balance: $279,167

My Traditional IRA: 5000.00
Wifes Traditional IRA: $144,964

My Roth IRA: $170,815
Wifes Roth IRA: $91,002

Wifes HSA: 17,657

Total could be roughly at 58yrs old based on 7%   $1,132,617

keeping in mind, that i will need to live until 68 before taking our SS benefits, how would i plan to exit these accounts?

[Chrissy]

You only have to make it from 58 to 59.5, and then you can access your retirement accounts without penalty.  BUT, you can always take the contributions back from ROTHs without tax or penalty, so you take $56k out of yours and the rest from your wife's ROTH to get you through those 18 months.

[Chrissy]

Separate but related question:  do you intend to COBRA your health insurance for that year, or buy from the marketplace with subsidies, or go on Medicaid?

[MDM]

ok this has been SO valuable, and I appreciate everyone helping.

Next question would be...

Lets assume that in 2028 when I'm 58 i now have roughly in the accounts using scenarios you have given above:...

If you retire after age 55, the IRS will allow you to withdraw any fraction from your 401k without penalty (it will be taxable, but no 10% penalty for early withdrawal).  The IRS allows this, but check whether your 401k plan allows partial withdrawals after retirement or if it is all or nothing.

Assuming you can take partial withdrawals from the 401k, using that until age 59.5 looks best.  After age 59.5, either IRA or 401k withdrawals will be penalty-free so it doesn't matter.

Note that "you" in all the above has to be read separately for each of you, as these are all individual accounts.

It's usually best to leave Roth withdrawals for last to get more tax-free growth.

Give Optimal Retirement Planner a try to see what it suggests.  Might need to take it with a grain or more of salt, but it's still likely a useful exercise.

[Chrissy]

Ooh, yes, the Rule of 55!  I should look into that more because it might apply to my family's situation as well...

[Bigjones]

https://www.i-orp.com/Models/M21130KfEGqYu6mw/MC.html

This report is interesting

[MDM]

https://www.i-orp.com/Models/M21130KfEGqYu6mw/MC.html

This report is interesting

One of those salt grains: I-ORP assumes 85% of SS benefits are taxable.  For the SS benefit and other income amounts shown, much less than 85% will be taxable so (assuming current tax law) your taxes may be several thousand dollars/yr less than what I-ORP thinks.

Anyway, it's a ballpark figure....

[Bigjones]

I’m struggling to understand some of this as some of the reports have my SS benefits for my wife and I after a few years WAY higher than what I’m showing on ssa.gov.  I’m assuming its factoring in COL, etc?

Using these numbers, i could possible retire a year earlier at 57 and still have plenty of money.

Is there a way to tell how much SS my wife and i will have have 0’s earnings for years 57/58 through 62

[hdatontodo]

...
Is there a way to tell how much SS my wife and i will have have 0’s earnings for years 57/58 through 62

You can download the SS calculator and manually enter all your years of earnings and have them stop at the latter years.

https://www.ssa.gov/oact/anypia/download.html

Sent from my SM-G960U1 using Tapatalk

[MDM]

I’m struggling to understand some of this as some of the reports have my SS benefits for my wife and I after a few years WAY higher than what I’m showing on ssa.gov.  I’m assuming its factoring in COL, etc?

Yes, "Essential ORP" uses some default inflation numbers.  You can use Optimal Retirement Planner - Extended Parameter Form if you want to look at Roth conversions, change inflation factors, etc.

Is there a way to tell how much SS my wife and i will have have 0’s earnings for years 57/58 through 62

Have you tried the calculator suggested previously? ;)

[Bigjones]

Well today felt great, was the first pay period of 2021.

$100 into the Emergency Fund (Bi Weekly)
$269 in to my IRA (Bi Weekly)
$230 into wife’s IRA (Bi Weekly)
$200 into wife’s HSA
$1000 into my 401K w a $125ish match (bi weekly)
$750 into wife’s 401k w a $147ish match (bi weekly)

Feels good to at least have a better plan, still working on the full plan.  I’m trying to figure out the SS numbers if i quit work at 58, I couldn’t figure out that SS calculator from above. But there are other sites that can do it as well i think.

[Chrissy]

Great job making changes so quickly!  You're on your way.

[Bigjones]

I did go to Firecalc and it has me with a 94.2% success retiring in actually 7 years....

FIRECalc Results
Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

Because you indicated a future retirement date (2027), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 6 years of preretirement plus 24 years of retirement, or 30 years.

FIRECalc looked at the 120 possible 30 year periods in the available data, starting with a portfolio of $218,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 120 cycles. The lowest and highest portfolio balance at the end of your retirement was $-334,015 to $3,169,646, with an average at the end of $1,295,907. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 7 cycles failed, for a success rate of 94.2%.


This is based on the following settings:

1. 218,000 current savings
2. Annual savings of $69000.00
3. My Social Security starting in 2037 @ $28800 per yr Based me working the next 7 years on the large 8k raise im scheduled for in June.
4. My wifes Social Security starting in 2040 @ 30888 per yr  based on her current salary
5. Spending Model - Constant Spending Power @ $60,000 per yr
6. Portfolio - Total Market
7. This includes a 100k deposit in 2030 from sale of camp.
8. I did NOT include sale of my home because the plan is to use those funds for an RV



Any thoughts?    How accurate and how much is everyone trusting this FireCalc?  I know there are still plenty of variables with the market and such, but i find myself now obsessed with trying to find ways to even work shorter before FIRE.

[index]

I did go to Firecalc and it has me with a 94.2% success retiring in actually 7 years....

FIRECalc Results
Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

Because you indicated a future retirement date (2027), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 6 years of preretirement plus 24 years of retirement, or 30 years.

FIRECalc looked at the 120 possible 30 year periods in the available data, starting with a portfolio of $218,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 120 cycles. The lowest and highest portfolio balance at the end of your retirement was $-334,015 to $3,169,646, with an average at the end of $1,295,907. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 7 cycles failed, for a success rate of 94.2%.


This is based on the following settings:

1. 218,000 current savings
2. Annual savings of $69000.00
3. My Social Security starting in 2037 @ $28800 per yr Based me working the next 7 years on the large 8k raise im scheduled for in June.
4. My wifes Social Security starting in 2040 @ 30888 per yr  based on her current salary
5. Spending Model - Constant Spending Power @ $60,000 per yr
6. Portfolio - Total Market
7. This includes a 100k deposit in 2030 from sale of camp.
8. I did NOT include sale of my home because the plan is to use those funds for an RV



Any thoughts?    How accurate and how much is everyone trusting this FireCalc?  I know there are still plenty of variables with the market and such, but i find myself now obsessed with trying to find ways to even work shorter before FIRE.

From your first post:

Your biweekly gross income - the deductions you listed does not equal the gross income you listed. you are about $500 off. Are these tax withholdings?

Looking through your income and expenses-

You are making 173k/yr combined
Insurance costs about 13.5k/yr
You are saving 10k/yr in 401k's
I'll assume your combined tax rate is 18% for federal and state

Using your gross salary numbers (net?) you all brought home $117.4k last year after tax and 401ks - you paid 51k toward the house and 22k in reported expenses so I am still getting about 45k in spending without reporting where it went. On a high level you spend about 67k last year.

Your new budget has you bringing home $94k then saving an additional 13k for Roth IRA's - so $81k after savings. This is quite a bit of money. It sounds like 2020 felt pretty lean to you while paying off the house. I would suggest you save the over 21k per year into am after tax brokerage for retirement or a savings account to help our your 16 year old daughter when she starts college. Get used to living on your new 60k per year budget. 

FireCalc is as accurate as the market data fed into it. Essentially, you need 6-7% average returns over the next 8 years to meet your goals and no large drawdowns in your first 10 years of retirement. FireCalc is saying historically that is a pretty good bet, but you are essentially betting on market performance to secure your retirement. SSI provides essentially 100% of your anticipated retirement spending at age 68 so you are basically calculating what the chance of saving 69k per year for 8 years will get you to 68.

Some questions I have:
What are you doing for healthcare prior to being eligible for medicare?
Are you accounting for taxes on your traditional 401k withdrawals in your 60k required spend?