Author Topic: Need help with a FIRE Plan  (Read 5120 times)

fmzip

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Need help with a FIRE Plan
« on: November 22, 2013, 11:20:20 AM »
Currently we have $500K saved.  40/60 pre/post retirement accounts

We contribute $40K annually into our 401K's (That will jump up to $45,500 in 2016)

We are 47/50

Expenses are $5200 per month, dropping to $3900 in 47 months, difference could then be invested.

SS benefits at 62: $1776 for the 47 year old, $775 for the 50 year old

I'd like to have $5200 per month in retirement income

We can assume a 7-8% ROI for assumptions.

How much longer do we need to work? :)

Any input would be greatly appreciated!

Thanks
« Last Edit: November 22, 2013, 04:40:47 PM by fmzip »

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Re: Need help with a FIRE Plan
« Reply #1 on: November 22, 2013, 11:39:05 AM »
How did you estimate your SS income? If you used the quick calculator, it is giving you an estimate assuming you work and earn at your current income level - which is incorrect if you retire well before that date.

If you have not done so yet, download the detailed SS calculator. It's the worst UI ever, but it will allow you to estimate SS based on retiring at some age before 62.

Also, check out your benefits will be if you wait until full retirement age or age 70. Unless you and/or your spouse have significant health challenges (and thus do not expect to live much past 70), it is always financially advantageous to wait until 70.

Watchmaker

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Re: Need help with a FIRE Plan
« Reply #2 on: November 22, 2013, 11:59:05 AM »
check out FIRECalc.  It's a great calcuator for early retirement using historic data.

matchewed

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Re: Need help with a FIRE Plan
« Reply #3 on: November 22, 2013, 12:00:32 PM »
http://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-hero-in-one-blog-post/ This will get you started on the foundations on figuring some of these things out.

Perhaps visit the FAQ, check out some basic calculators. When you have a firmer grasp on these concepts you can start formulating a plan. When you've got your plan you can test it against the best calculator out there IMO.

fmzip

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Re: Need help with a FIRE Plan
« Reply #4 on: November 22, 2013, 04:39:14 PM »
How did you estimate your SS income? If you used the quick calculator, it is giving you an estimate assuming you work and earn at your current income level - which is incorrect if you retire well before that date.

If you have not done so yet, download the detailed SS calculator. It's the worst UI ever, but it will allow you to estimate SS based on retiring at some age before 62.

Also, check out your benefits will be if you wait until full retirement age or age 70. Unless you and/or your spouse have significant health challenges (and thus do not expect to live much past 70), it is always financially advantageous to wait until 70.

I logged onto social security to get the exact numbers:

https://secure.ssa.gov/RIL/SiView.do

At full retirement age for me (67):
$2,674 a month

At age 70:
$3,332 a month

At early retirement age (62):
$1,825 a month

And for her:

At full retirement age (67):
$1,202 a month

At age 70:
$1,560 a month

At early retirement age (62):
$775 a month

I struggle with the FireCalc site. Can anyone provide us with a rough idea?

 I download the SS calculator you mentioned
http://www.ssa.gov/oact/anypia/download.html

I inputted all my earnings year by year but cannot go past 2013.

« Last Edit: November 22, 2013, 05:39:19 PM by fmzip »

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Re: Need help with a FIRE Plan
« Reply #5 on: November 22, 2013, 05:35:43 PM »
I understand your frustration with the downloaded SS calculator. (As I said, it's a horrible user interface. In this case, PIA stands for Pain In the A&&.)

FYI, any SS estimate other than the estimate from the downloaded calculator assumes you will work at your most recent income level until 62 or 67 or 70. (Not useful for those of us who intend to retire "early"!)

When using the downloaded calculator, did you input zero for the years you intend not to be working for money? (For example, for me, I input actual income each past year and zero from this year to ages 62, 67 and 70. I may work in future, but this gives me a conservative estimate.)

Here's the definition of PIA (Primary Insurance Amount): http://www.ssa.gov/oact/cola/piaformula.html

And the definition of MFB (Maximum Family Benefit): http://www.ssa.gov/oact/cola/familymax.html

Did you try cfiresim.com? (In your post, you say "FireCalc".) You'll need your estimated assets at retirement, year of retirement, withdrawal method choice, and estimated Social Security income for you and your spouse (including start year). It's very forgiving and you can play with different withdrawal methods, so don't worry about picking one for your first estimate.

fmzip

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Re: Need help with a FIRE Plan
« Reply #6 on: November 22, 2013, 05:49:13 PM »
I am understanding this calculator now.

So if I retire at 55 and collect at 62, the benefit for example would be $1700.60 per month.

But my question remains, mathematically, how do I know how many more years we need to work in order to maintain the same income. Do I guess at an arbitrary year and back into the number?

I might be working to 62 before I figure this out. I knew I should have paid better attention in math ;)

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Re: Need help with a FIRE Plan
« Reply #7 on: November 22, 2013, 06:39:27 PM »
Great progress!!

OK, now (or maybe tomorrow), try cFIREsim.com. Inputs: the detailed SS calculations, your anticipated assets at retirement, any post-retirement income (like a pension or part time work), ages and withdrawal strategy(ies).

Don't be intimidated by "the math". Pwn retrmnt.

Now you know, and knowing is half the battle.   ; )

fmzip

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Re: Need help with a FIRE Plan
« Reply #8 on: November 22, 2013, 06:53:20 PM »
My confusion lies in that how do I know what I will have for assets "when" I retire without knowing when "when" is??

Does that make sense?

justchristine

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Re: Need help with a FIRE Plan
« Reply #9 on: November 23, 2013, 06:28:10 AM »
For cfiresim, try putting your current portfolio balance and desired retirement income in at the top.  Then in the savings/income area enter how much you typically save each year for retirement.  Set that to start this year and end in the year that you set for a retirement date. Then you can play with the retirements dates to see when you'll have enough to retire.  Just make sure that as you play with the dates, you keep the retirement date at the top and the end date for your savings in sync.

fmzip

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Re: Need help with a FIRE Plan
« Reply #10 on: November 23, 2013, 07:45:47 AM »
For cfiresim, try putting your current portfolio balance and desired retirement income in at the top.  Then in the savings/income area enter how much you typically save each year for retirement.  Set that to start this year and end in the year that you set for a retirement date. Then you can play with the retirements dates to see when you'll have enough to retire.  Just make sure that as you play with the dates, you keep the retirement date at the top and the end date for your savings in sync.

Thank you! What is a safe success rate? Does it need to be 100%?

justchristine

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Re: Need help with a FIRE Plan
« Reply #11 on: November 23, 2013, 09:07:03 AM »
That's really a personal risk choice.  I've seen some people target 90ish.  Others aren't comfortable with anything less than 100%.  Personally I'm shooting for the date that gets me about 95% success.  When I hit that date I'll reassess my situation and current market conditions.

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Re: Need help with a FIRE Plan
« Reply #12 on: November 23, 2013, 09:36:04 AM »
One comment about "100%" success. This means that your portfolio / spending plan would have failed in none of the preceding historical periods cFIREsim models.

This does not mean it's impossible for that to happen in the future. But the model says it would take an unprecedented series of financial events to make it fail.

Also, play around with variable like choosing different withdrawal methods. ("Retire Again and Again" is one of the easier ones to understand.)

Finally, experiment with what working a part time job (or other minor income-creator) does for your performance. (Spoiler alert: even a small income stream in the first five years boosts performance big time.)

Have fun!