Author Topic: Ready to Retire?  (Read 1716 times)

YttriumNitrate

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Ready to Retire?
« on: January 16, 2024, 08:43:44 AM »
Good peoples of the interwebs, the small company Iím working for is about to be no more. It seems like there is a decent chance some parts of the company will be acquired, but Iím not sure I care. Am I ready to sail off into the land of early retirement, or is there something Iím overlooking?

Situation:
Me 43, wife 42, kids 5 and 8, a dog, and two cats. Wife is a SAHM and may go back to work after youngest enters kindergarten. Expected income would be in the $20-30k range.

Financial Assets:
Brokerage Account$805,000
Roth IRA #1$343,000
IRA$108,000
Roth IRA #2$155,000
401k$225,000
Bank Accounts$25,000
529 Accounts$114,000
Total = $1.78 million including everything, $1.66 million excluding the 529.
Social Security Me @62=$1,740, @67=$2,471, @70=3,064 (todayís dollars).
Social Security Wife @62=$862, @67=$1,224, @70=1,518 (todayís dollars).

Real Estate:
ValueAmount Owed
Primary Residence*$502,000$208,000
Rental House**$225,000$80,000
Acreage #1 - To be sold$90,000-0-
Acreage #2 - To be kept$225,000-0-
*Not moving or paying off 3.25% mortgage
**The rental is a single-family home with long term tenants, and cash flows about $6,500 a year with minimal effort on my part.

Expenses:
Description2023 AmountFuture Estimate
Housing (PITI + Utilities)$19,000$20,000
Food/Pets/Household items$14,000$14,000
Acreage #2$6,700$1,300*
Vehicles (Insurance/Maint./Fuel)$3,900$4,000
Education$3,800$750**
Entertainment$1,000$1,500
Healthcare$1,500$6,000***
Home Improvement$500$2,000
Miscellaneous$100$2,000
*Significant decrease due to going from commercial to agricultural tax assessment.
**Youngest going from private preschool to public kindergarten.
***ACA Silver Plan with reaching about 85% of out-of-pocket maximum.
Total expenses for 2023 were $49,400. Estimated total expenses going forward are $51,550.

Factoring in the rental cash flow to offset some of the estimated expenses, it looks like I would need to withdraw about $45,000 a year. That works out to about a 3% withdraw rate. Am I overlooking anything major? The biggest unknown seems to be health insurance.

ATtiny85

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Re: Ready to Retire?
« Reply #1 on: January 16, 2024, 01:22:00 PM »
Taxes? ($0?, what state?)

Large lumpy expenses like HVAC, vehicle, roof? Just make sure you have enough flex / slush fund to handle that.


TreeLeaf

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Re: Ready to Retire?
« Reply #2 on: January 16, 2024, 01:50:02 PM »
I mean - the biggest unknown almost always seems to be health insurance...

But - there are millions of people on an ACA plan who make it work just fine. If health insurance is the fear that is holding you back from early retirement, then you will always be working a job just for insurance.

IMO - 3% withdrawal rate - you have more than enough to retire now.

YttriumNitrate

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Re: Ready to Retire?
« Reply #3 on: January 16, 2024, 02:51:59 PM »
Taxes? ($0?, what state?)
State is Indiana. With depreciation on the house, the taxed rental income is practically nothing. Indiana taxes capital gains as regular income at 3.25%. Factoring in deductions and maybe half of asset value being gains, state taxes might be a few hundred. I would expect federal taxes to be zero or close to that.

Large lumpy expenses like HVAC, vehicle, roof? Just make sure you have enough flex / slush fund to handle that.
I guesstimated 4x my actual 2023 home improvement spend to hopefully account for some of that. The $4,000 in vehicle expenses includes about $1,300 in new tires/brakes, so some years might be significantly lower. Luckily the roof and vehicles are all about 10 yrs old so I *hopefully* won't get hit with replacement costs right away. Bank account is current at about $25k, but upping that is probably a good idea.

Great Questions and Comments! Thanks!

YttriumNitrate

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Re: Ready to Retire?
« Reply #4 on: January 16, 2024, 03:04:06 PM »
I mean - the biggest unknown almost always seems to be health insurance...
But - there are millions of people on an ACA plan who make it work just fine. If health insurance is the fear that is holding you back from early retirement, then you will always be working a job just for insurance.
IMO - 3% withdrawal rate - you have more than enough to retire now.
Indeed, the company shutting down may be the kick in the butt I needed to get out of the rat race. The "one more year" syndrome is definitely strong.

jeroly

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Re: Ready to Retire?
« Reply #5 on: January 25, 2024, 09:55:23 PM »

Large lumpy expenses like HVAC, vehicle, roof? Just make sure you have enough flex / slush fund to handle that.
I guesstimated 4x my actual 2023 home improvement spend to hopefully account for some of that. The $4,000 in vehicle expenses includes about $1,300 in new tires/brakes, so some years might be significantly lower. Luckily the roof and vehicles are all about 10 yrs old so I *hopefully* won't get hit with replacement costs right away. Bank account is current at about $25k, but upping that is probably a good idea.

Great Questions and Comments! Thanks!
I think you need to do a significantly better job estimating your expenses. You are missing major categories like travel, major expense amortization, college savings, end-of-life expenses, etc., and you have broad catch-all categories which makes me think you're not actually tracking your expenses but are just ballparking it all.

However... with about $2 million in net worth and expectations of SS income in twelve years or so that will more or less pay for your current estimate of your expenses, you are good to go, assuming you are looking to 'die with zero.'

lhamo

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Re: Ready to Retire?
« Reply #6 on: January 31, 2024, 07:24:16 AM »
I know there are multiple threads debating the pay off/don't pay off your mortgage issue, but want to point out that with your family structure and relatively low cash-flow needs outside your house payment you may find that you get a BIG bump in various types of subsidies if you get rid of the mortgage sooner rather than later  Especially important for health care subsidies and financial aid for college.  We are multimillionaires, but because we are able to structure our finances so that our on-paper income is low, DD is getting a full ride to the state flagship university.  Her 100k+ college fund continues to grow.  Does it make sense?  No.  Is it fair?  No.  But it has made riding through some other bumps in our lives much easier because we don't have to stress about the financial piece.

YttriumNitrate

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Re: Ready to Retire?
« Reply #7 on: January 31, 2024, 02:31:50 PM »
I think you need to do a significantly better job estimating your expenses. You are missing major categories like travel, major expense amortization, college savings, end-of-life expenses, etc., and you have broad catch-all categories which makes me think you're not actually tracking your expenses but are just ballparking it all.
The numbers I posted were from compiling all bank/credit card statements for 2023 and dividing the expenses into categories. Everything is there.

Vehicles had some major expenses in 2023 so I kept that about the same in the estimate while I quadrupled home improvement expenses to account for less frequent but costly repairs.  I figure $114k in 529 plans with between 10 and 17 years to should more-or-less cover four years of in-state tuition. We don't do that much costly traveling these days. Perhaps that will change after I stop working, perhaps in won't. I haven't thought too much about end-of-life expenses. I'll have to look into how much should be allocated. Thanks for the suggestion.

YttriumNitrate

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Re: Ready to Retire?
« Reply #8 on: January 31, 2024, 02:46:44 PM »
I know there are multiple threads debating the pay off/don't pay off your mortgage issue, but want to point out that with your family structure and relatively low cash-flow needs outside your house payment you may find that you get a BIG bump in various types of subsidies if you get rid of the mortgage sooner rather than later  Especially important for health care subsidies and financial aid for college.  We are multimillionaires, but because we are able to structure our finances so that our on-paper income is low, DD is getting a full ride to the state flagship university.  Her 100k+ college fund continues to grow.  Does it make sense?  No.  Is it fair?  No.  But it has made riding through some other bumps in our lives much easier because we don't have to stress about the financial piece.
Thanks for the idea. It looks if paying off the house would drop our annual expenses by a little under $10k. A corresponding drop in realized income would make us eligible for medicaid which appears to have some pluses and minuses. I'll have to check into what other subsidies might be available with a $40k income as opposed to $50k.