Author Topic: I think I can retire...  (Read 4375 times)

HalfMustache

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I think I can retire...
« on: July 16, 2023, 07:08:40 PM »
Hello forum,

I’ve mostly been a lurker on this forum and blog since 2013. It has affected my thinking on work, saving, investing, etc. quite a bit. It feels strange to finally be posting this.

I’m finally able to consider retiring, so I wanted to share my plan and solicit any feedback. Does my plan have any obvious flaws? Is there anything important I’m not considering? Should I consider tweaking my investments at all?

Age: Early 40s, single (long term significant other, but that’s a level of complexity/detail we’ll ignore for now)

Location: Midwest United States, suburbs

Assets:

Brokerage account: $530k (100% VTSAX)
IRA: $20k (100% VTSAX)
Roth IRA: $120k (100% VTSAX)
401k: $460k (100% S&P500 fund)
Bank: $30k

Total: $1,160,000

I also own cryptocurrency, but I don’t want to provide any details here that would put me at risk of a $5 wrench attack.  But it could be a significant windfall over the next few years, so that adds an extra variable in the mix.

I do not own a house. My car is a paid-off 2021 low mileage compact.

If I retired now, here is what I would do:

1. Withdraw $40k/yr from my brokerage account. According to my rough calculation of cost basis, this would be about $5k in capital gains income. It’s possible I could reduce this with “mintax” or selling specific lots, but this is more of a worst case analysis.

2. Convert $44,625 - $5000 = $39,625 of my 401k (after IRA conversion) into my Roth IRA to start my roth conversion pipeline. This total income target is to stay in the 0% capital gains tax rate.

After federal and state taxes I should have about $35k/yr income, so $2916/month. I went through all my spending for the past year and found it was about $3,100/month on average without being particularly careful about my spending.

Monthly budget:

Rent: $1000
Utilities + Internet: $240
Car Insurance and property tax: $120
Health Insurance: $164 (ACA Bronze 8.4k deductible, price is after tax credit)

This should leave about $1400 per month for “everything else”. This seems highly doable. Am I missing anything important?

reeshau

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Re: I think I can retire...
« Reply #1 on: July 16, 2023, 07:29:37 PM »
What are you going to do with your time?  Will that have any significant one-time or ongoing expenses?

It's OK not to know, of course.  Maybe exploring new things will be your reason to retire.  But with so little detail, I have to bring up the question.

MDM

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Re: I think I can retire...
« Reply #2 on: July 16, 2023, 08:42:22 PM »
Quote from: HalfMustache link=topic=131608.msg3163986#msg3163986
2. Convert $44,625 - $5000 = $39,625 of my 401k (after IRA conversion) into my Roth IRA to start my roth conversion pipeline. This total income target is to stay in the 0% capital gains tax rate.
That $44,625 number is "taxable income" - and that comes after the standard deduction is subtracted, so you have more headroom than you think.

Depending on which Midwest state, the case study spreadsheet might give you a good picture of where your marginal rate breakpoints are.

Cassie

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Re: I think I can retire...
« Reply #3 on: July 16, 2023, 09:20:46 PM »
Do you have any pets? I have found that vet bills keep increasing as well as high quality food, etc. I adore my 2 Maltese but they have been a significant cost.

HalfMustache

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Re: I think I can retire...
« Reply #4 on: July 16, 2023, 10:21:15 PM »
What are you going to do with your time?  Will that have any significant one-time or ongoing expenses?

It's OK not to know, of course.  Maybe exploring new things will be your reason to retire.  But with so little detail, I have to bring up the question.

I have lots of hobbies, including things that might generate a small amount of income. That is definitely something I will not have any issues with.

All the expenses I currently have were captured in that approximately $3,100 a month I have been spending in the last year. I have a pretty high income right now ($8k/mo after taxes), so I haven't been nearly as frugal as I could be. The only new expense will be health care.

HalfMustache

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Re: I think I can retire...
« Reply #5 on: July 16, 2023, 10:26:34 PM »
Quote from: HalfMustache link=topic=131608.msg3163986#msg3163986
2. Convert $44,625 - $5000 = $39,625 of my 401k (after IRA conversion) into my Roth IRA to start my roth conversion pipeline. This total income target is to stay in the 0% capital gains tax rate.
That $44,625 number is "taxable income" - and that comes after the standard deduction is subtracted, so you have more headroom than you think.

Depending on which Midwest state, the case study spreadsheet might give you a good picture of where your marginal rate breakpoints are.

Thanks. I will give that a shot.

I'm also planning on running these numbers and assumptions by an accountant I was referred to. I have a M.S. in a stem field and somehow I still find our tax system confusing.

HalfMustache

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Re: I think I can retire...
« Reply #6 on: July 16, 2023, 10:31:40 PM »
Do you have any pets? I have found that vet bills keep increasing as well as high quality food, etc. I adore my 2 Maltese but they have been a significant cost.

I do. We have two dogs. One would qualify as medium/large and the other "jumbo" sized :-D

The food, treats, toys, etc. are captured in the $3,100/mo I have been spending in the last year.

Both dogs are pretty young, so I expect vet bills will be check up type expenses for the next 5 years at least. 

LifeHappens

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Re: I think I can retire...
« Reply #7 on: July 17, 2023, 10:05:21 AM »
The only new expense will be health care.
Have you priced out a new plan at your projected income level?

YttriumNitrate

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Re: I think I can retire...
« Reply #8 on: July 17, 2023, 10:19:03 AM »
Assets: ... Total: $1,160,000 ...  I also own cryptocurrency, but I don’t want to provide any details here that would put me at risk of a $5 wrench attack. ... I went through all my spending for the past year and found it was about $3,100/month on average without being particularly careful about my spending.
“If you've won the game, stop playing.” -- William Bernstein

If I were in your situation, I'd sell the crypto today.

HalfMustache

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Re: I think I can retire...
« Reply #9 on: July 17, 2023, 11:40:12 AM »
The only new expense will be health care.
Have you priced out a new plan at your projected income level?

Yes, at $44k/yr I priced out an ACA bronze plan at $164/mo after the tax credit. It's $8.4k deductible, but I'm fine with that. I'm just looking for "health disaster insurance". Only caveat is that price is approximate, since the actual enrollment isn't open yet. Or at least that is my understanding.

bacchi

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Re: I think I can retire...
« Reply #10 on: July 17, 2023, 12:12:55 PM »
The only new expense will be health care.
Have you priced out a new plan at your projected income level?

Yes, at $44k/yr I priced out an ACA bronze plan at $164/mo after the tax credit. It's $8.4k deductible, but I'm fine with that. I'm just looking for "health disaster insurance". Only caveat is that price is approximate, since the actual enrollment isn't open yet. Or at least that is my understanding.

You can get an ACA plan with a qualifying life event, which includes leaving a job.

HalfMustache

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Re: I think I can retire...
« Reply #11 on: July 17, 2023, 12:44:26 PM »
Assets: ... Total: $1,160,000 ...  I also own cryptocurrency, but I don’t want to provide any details here that would put me at risk of a $5 wrench attack. ... I went through all my spending for the past year and found it was about $3,100/month on average without being particularly careful about my spending.
“If you've won the game, stop playing.” -- William Bernstein

If I were in your situation, I'd sell the crypto today.

I almost addressed this because I figured this would be the general sentiment of the forum. And your suggestion may very well be the right answer - only hindsight will tell.

But I will say this. In early 2021, my crypto holdings became somewhat significant, due to price appreciation. One of my parents reflexively said "Sell!" when I told them the current value. But instead I decided to hold and ultimately sold a sizeable portion of it at 40x the value (40 times higher) later that year.

Crypto is undeniably risky, and at its core, most of it is a scam on some level. But had I taken my parent's advice, I would not be in a position to retire at all currently. Of course past performance, future returns, etc.

At the moment, I feel the possible reward outweighs the risk. I'm fully aware it could go to zero, so I'm not factoring it into the present retirement calculation. Likewise, I stand to gain a significant inheritance at some point. I put them both into the same mental category.

Villanelle

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Re: I think I can retire...
« Reply #12 on: July 17, 2023, 01:22:17 PM »
Assets: ... Total: $1,160,000 ...  I also own cryptocurrency, but I don’t want to provide any details here that would put me at risk of a $5 wrench attack. ... I went through all my spending for the past year and found it was about $3,100/month on average without being particularly careful about my spending.
“If you've won the game, stop playing.” -- William Bernstein

If I were in your situation, I'd sell the crypto today.

I almost addressed this because I figured this would be the general sentiment of the forum. And your suggestion may very well be the right answer - only hindsight will tell.

But I will say this. In early 2021, my crypto holdings became somewhat significant, due to price appreciation. One of my parents reflexively said "Sell!" when I told them the current value. But instead I decided to hold and ultimately sold a sizeable portion of it at 40x the value (40 times higher) later that year.

Crypto is undeniably risky, and at its core, most of it is a scam on some level. But had I taken my parent's advice, I would not be in a position to retire at all currently. Of course past performance, future returns, etc.

At the moment, I feel the possible reward outweighs the risk. I'm fully aware it could go to zero, so I'm not factoring it into the present retirement calculation. Likewise, I stand to gain a significant inheritance at some point. I put them both into the same mental category.

But what's the value of the "reward" if you have enough money already?  Why do you need to take on additional risk for money you don't need?  Wouldn't that money serve you better as security in case the dog gets sick and you get sick (and pay that $8k deductible) and your rent increased by 25% and your car dies?  Sure, you can argue the opposite--why not take on some risk with money I don't actually need?--but not doing so buys you more security while doing so at best gets you money you don't need. 

And I'd say the same thing whether it was crypto or an aggressive mutual fund or an individual stock holding, or anything similar, so this isn't an anti-crypto sentiment. 

nouseforausername

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Re: I think I can retire...
« Reply #13 on: July 19, 2023, 11:58:41 AM »
So what if you want to budget out some casino money for crypto.

You're operating from a position where can walk right now.

I'd personally be concerned about not having fixed housing costs, but it's working for you (and many others) just fine, especially in your ridiculously LCOL midwest sweet spot.

MinouMinou

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Re: I think I can retire...
« Reply #14 on: October 29, 2023, 08:24:55 PM »
Any updates, @HalfMustache ? Did you RE?

flyingaway

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Re: I think I can retire...
« Reply #15 on: November 20, 2023, 09:26:55 PM »
What do you plan to do in retirement? If you plan some travels to see the world, your expenses might increase a lot. Maybe the bitcoins will cover that.