Author Topic: Are Post FIRE Expenses of 85K too high to make the leap?  (Read 7789 times)

tinybro

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Are Post FIRE Expenses of 85K too high to make the leap?
« on: August 23, 2016, 01:20:48 PM »
Hi All and thanks for your insights and acceptance. Me and the missus have a bit more than $1.1M in stash and yearly expenses of roughly $85K currently. Mortgage (small) will be gone in 4 more years (it's only %600/month now). coulsd be gone tomorrow--don't see the need honestly. No other debt.

I see examples of couples with significantly lower Post FIRE expenses than me & DW.

We don't live an exuberant lifestyle--we do like to go out & drink good wine, expenses that we could lower for sure. We do live in a HCOL area (Upstate NY) that we wouldn't leave or downsize.

SS will bring in approx. $40K annually when that day arrives.

We are 56 & 57 respectively and calculations (Firecalc/CfireSIM) with SS are rock solid.

Can we burn "hotter" expense wise before SS and not destroy stash?

My budgeting is VERY conservative, so maybe I'm overstating expenses?

I appreciate any help and insight.

Thanks.

neo von retorch

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #1 on: August 23, 2016, 02:09:32 PM »
Do you plan on taking SS at full eligibility age of 67? So 10 years burning $85k of $1.1M? That's nearly an 8% WR, so without doing any other calculations, I'd say it's pretty risky. You'd want to have roughly all of your stash available at age 67 to support the $45k expenses after accounting for SS, which is still... $1.1M. I don't think you can spend $850k over the next 10 years and maintain anywhere near enough of your stash.

I'd suggest you get a much clearer picture of your expenses, for starters.

Slee_stack

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #2 on: August 23, 2016, 02:21:07 PM »
Removing mortgage, you sit at $78k per.

At a 4% WR, thats a suggested $1.9M stash.

With a $1.1M stash, you'd be drawing it down at a 7%+ WR.  Presuming you are in a safe allocation (4% return), your investment worth will shrink to $681k over eight years (age 65).

At that point a 4% WR on $681k would be $27240.  Adding SS of $40k, you'd be at a total of $67240/year to live on. 

$11k/yr short of your $78k goal.

I only did rough calc with a Bankrate Savings Withdrawal calculator.  If all assumptions were correct, your stash isn't yet big enough to start burning at that high a rate yet.

The good news is you can reduce your annual expenses and make the numbers work.
« Last Edit: August 23, 2016, 02:23:36 PM by Slee_stack »

Rubic

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #3 on: August 23, 2016, 03:26:14 PM »
If my burn rate was $85K per year with a $1.1M stache, I'd seriously consider
deferring my social security benefits until age 70:

You would then mitigate against risks of:
  • longevity, outliving your stash
  • cost of living
  • market volatility in your later years

Eric

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #4 on: August 23, 2016, 03:44:59 PM »
If my burn rate was $85K per year with a $1.1M stache, I'd seriously consider

not spending so much money on stupid shit

Fixed that for you.  :)

Fishingmn

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #5 on: August 23, 2016, 04:02:50 PM »
When you say you ran Firecalc & cFire did you run them and get 100% success?

Personally, I always reduce my expected SS benefits to 70% of what the benefit calculator says just in case as it's been discussed that by 2030's there will only be 75% of the money needed to cover payouts. If they means test as a solution it could be cut even more with your assets.

To me there's no way I'd look at retiring with a 7-8% withdrawal rate.

We semi-retired late last year with expenses quite a bit higher than you have but we also have a lot of rental income and quite a bit more additional assets. Right now we are planning a 3% WR of those assets (after rental income). What I didn't really count on was more income but the DW is doing consulting for her old company and I'm selling more houses for clients than I expected so we actually will be saving money this year. So basically, a side gig might help you transition and not have to cut expenses.

AdrianC

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #6 on: August 23, 2016, 08:17:13 PM »
"We are 56 & 57 respectively and calculations (Firecalc/CfireSIM) with SS are rock solid."

What does this mean? What assumptions did you use? When do you plan to take SS?

At face value it looks like something's amiss in your Firecalc/CfireSIM results.

LAGuy

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #7 on: August 23, 2016, 08:43:30 PM »
What are you spending that much money on? I'm wondering if you're including your income and payroll taxes in your yearly spend? Perhaps that spend is including what you save as well? What I'm thinking is you're saying, "Hmm, we make $85k a year and it's all gone at the end of the year. So that's my spend."

Otherwise, that's a spend rate of just over $7k a month. Subtract your $600 mortgage payment and you're spending $6400 a month on...what? That's a lot of wine! I hope you're both driving Porsches to the wine tastings.

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #8 on: August 23, 2016, 09:55:30 PM »
Hi All and thanks for your insights and acceptance. Me and the missus have a bit more than $1.1M in stash and yearly expenses of roughly $85K currently. Mortgage (small) will be gone in 4 more years (it's only %600/month now). coulsd be gone tomorrow--don't see the need honestly. No other debt.

I see examples of couples with significantly lower Post FIRE expenses than me & DW.

We don't live an exuberant lifestyle--we do like to go out & drink good wine, expenses that we could lower for sure. We do live in a HCOL area (Upstate NY) that we wouldn't leave or downsize.

*snip*

Should that "%600" mortgage monthly amount be "$600" or "1600" or another number?  Does this include property tax and home insurance?

Don't answer this location question if it makes you uncomfortable:
Where "Upstate" are you that you consider it a HCOL?  Are you somewhere around Westchester and calling it "Upstate" because you are above NYC?  Or are you around Saratoga Springs-ish and in almost true Upstate before you hit the North Country?  Most of Upstate NY (true Upstate, in my biased WNY eyes that see all up through Saratoga as "Central") seems to me to be high-tax but not HCOL.

That spend number seems high for any place where you have just a $600/month mortgage payment (assuming that is the correct interpretation of the typo).  If it turns out that the $7K includes money to your 401k/retirement accounts, automatic deductions to your brokerage, and all of your high payroll taxes, then you might be in much better shape than it looks from your original post.

It might work well for you to look at all the actual financial activity for a recent month.  Please look at your bank statements and credit card activity for July 1 to July 31.  Any account that had activity, look and see what the activity was.  You should be able to give us at least a rough breakdown of where that $7K goes.  Obviously, more months of information would be better, but one month will be a good start.  Going forward, you should consider tracking your real spending and financial activity in a program such as Mint, YNAB, Quicken, or Gnucash.  Before you FIRE, you should have a VERY clear picture of what your true spending is.

Also, I think most of us would tell you that you should decide whether to pay off the mortgage immediately based on its interest rate, not its monthly payment.

Basenji

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #9 on: August 24, 2016, 05:51:35 AM »
We'll have a big spend only due to our HCOL mortgage at 2.85%, but we calculate to include it. As everyone says, it's the withdrawal rate that matters. Do a case study.

ender

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #10 on: August 24, 2016, 06:43:02 AM »
Removing mortgage, you sit at $78k per.

At a 4% WR, thats a suggested $1.9M stash.

With a $1.1M stash, you'd be drawing it down at a 7%+ WR.  Presuming you are in a safe allocation (4% return), your investment worth will shrink to $681k over eight years (age 65).

At that point a 4% WR on $681k would be $27240.  Adding SS of $40k, you'd be at a total of $67240/year to live on. 

$11k/yr short of your $78k goal.

I only did rough calc with a Bankrate Savings Withdrawal calculator.  If all assumptions were correct, your stash isn't yet big enough to start burning at that high a rate yet.

The good news is you can reduce your annual expenses and make the numbers work.

One thing to keep in mind is there are a variety of other factors here.

At age 57, I'm not sure what their life expectancy is, but it's probably not very likely both the OP and spouse will make it to 87/86 respectively. Depends on a lot of factors we don't know currently.

Also depending on how much the house is worth that can be a decent income source through either a cash-out refinance or reverse mortgage.

Libertea

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #11 on: August 24, 2016, 10:44:19 AM »
I think you are at significant risk of superannuation given that you have ten years before SS retirement age, and even at that point, your SS income is unlikely to cover all of your expenses.  So how to fix that....Everyone is going to be different, but if I were you, I'd either A) keep working until I had saved up double your current stash so I could maintain the current spending level, because an $80,000 withdrawal rate is reasonable from a $2 million portfolio over a thirty year time period.  Or B) figure out a way to cut my expenses in half if I wanted to retire now.  You seem reluctant to consider the second option, which suggests to me that continuing to work longer is the right choice for you. 

That being said, you could also consider a third hybrid option, which is working PT.  The idea would be to work enough to allow you to cover half your expenses from working and half from the portfolio.  With a $1.1 million portfolio and a $40,000 per year income, this would get you down to around a 4% withdrawal rate and hopefully mitigate the risk of you outliving your money.

arebelspy

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #12 on: August 27, 2016, 12:26:34 AM »
calculations (Firecalc/CfireSIM) with SS are rock solid.

Agree with needing more details on this.

If the calculations work out, and you've inputted everything correctly, you should be good.

It does seem something is amiss.  You're asking if your spend is too high, but we can't determine that for you.  78k with no mortgage does seem quite high to me, but if that's the optimized/efficient version and just on what makes you happy, that's fine.  If that is the case, then no, your spend isn't too high, but your stache is too low.

Again, add some more details on your cfiresim inputs (or just link to the run) and we might be able to advise more.

I like rubic's advice of delaying SS--it'll eat into your stache a bit more, but provide extra longevity insurance against stache failure.
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MustacheAndaHalf

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #13 on: August 29, 2016, 11:13:45 PM »
tinybro - How much of the $85k annual expenses is taxes on a high income?  When you're working, paying taxes might be your biggest expense but needs to be excluded for post-FIRE calculations.  And to sum up the general feeling, it would help to see more detail on your $85,000 / year expenses.

What percentage of the $1.1M is invested in stocks?  in bonds?  You mentioned retirement calculators, so I assume you already know these numbers.

Shane

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #14 on: August 30, 2016, 12:09:47 AM »
My understanding of OP's post is that cFIREsim/FIREcalc simulations of an $85K spend from a $1.1MM stash after starting to collect $40K/year in SS benefits is "rock solid," i.e. spending $45K/year from a $1.1MM stash would've been fine most times in the past.

Is this correct, OP?

It sounds to me like $85K/year isn't a rock solid minimum number for you. If you could cut that number down to $45K/year for the next 10 years, then, yeah, you guys should be fine. If you have to spend $85K, then you need to keep working for a while longer and save up some more money, because only $1.1MM in savings is going to be cutting it pretty close at that spend rate.

Stashing Swiss-style

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #15 on: August 30, 2016, 02:01:43 AM »
Posting to follow

2Birds1Stone

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #16 on: August 30, 2016, 06:29:40 AM »
Do a case study, I have a feeling you could easily pull the plug on work....we just need more details to give you sound advice.

SJS

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #17 on: October 20, 2016, 05:30:12 PM »
What will health care cost you?  It's costing us a bundle right now $1200/mo w/$6000 deduct. per PERSON.

AdrianC

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #18 on: October 21, 2016, 04:54:51 AM »
What will health care cost you?  It's costing us a bundle right now $1200/mo w/$6000 deduct. per PERSON.

If you (and OP) can keep your realized income low enough you can qualify for Obamacare subsidies:

https://www.healthcare.gov/glossary/federal-poverty-level-FPL/

For two people that's a MAGI below $64K.

Metric Mouse

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #19 on: October 22, 2016, 12:13:24 AM »
Removing mortgage, you sit at $78k per.

At a 4% WR, thats a suggested $1.9M stash.

With a $1.1M stash, you'd be drawing it down at a 7%+ WR.  Presuming you are in a safe allocation (4% return), your investment worth will shrink to $681k over eight years (age 65).

At that point a 4% WR on $681k would be $27240.  Adding SS of $40k, you'd be at a total of $67240/year to live on. 

$11k/yr short of your $78k goal.

I only did rough calc with a Bankrate Savings Withdrawal calculator.  If all assumptions were correct, your stash isn't yet big enough to start burning at that high a rate yet.

The good news is you can reduce your annual expenses and make the numbers work.

I used different assumptions and numbers, but found similar conclusions.  Drawing down the 'stache that fast for ten years would be pretty risky.

Shane

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #20 on: October 22, 2016, 01:36:35 AM »
OP hasn't logged in to his account since 8/23/16.

He posted once and then never again.

Maybe he didn't care for our suggestions? :)

Rubic

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #21 on: October 22, 2016, 07:18:13 AM »
OP hasn't logged in to his account since 8/23/16.

He posted once and then never again.

Maybe he didn't care for our suggestions? :)

I was about to suggest our moderator go ahead and lock this thread.

Pity.  It was an interesting discussion and I would have liked to have seen
the OP respond, assuming they weren't trolling.

arebelspy

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #22 on: October 22, 2016, 04:36:25 PM »
No need to lock it, in case they ever do come back, but probably no need to keep replying/bumping it until they do.  :)
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Metric Mouse

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Re: Are Post FIRE Expenses of 85K too high to make the leap?
« Reply #23 on: October 22, 2016, 06:05:49 PM »
OP hasn't logged in to his account since 8/23/16.

He posted once and then never again.

Maybe he didn't care for our suggestions? :)

Not even a thank you!