Planning for FI

[rosarugosa]

Lhamo struck a cord when she recently mentioned planning for FIRE and how there wasn't much discussion here on that topic. I think I'm within 5 years of leaving my corporate job, and I'm starting to think in terms of what my number is, and what I need to do to prepare for giving up the corporate paycheck. I realize that the number isn't hard and fast, since for example, I could leave the corporate job sooner if I took a part-time job in another field (with less stress and less commute and less meetings), which is appealing to me. So here is this kind of mental checklist I'm working on:

• Take care of home repairs/improvements ( with some focus on minimizing high-maintenance scenarios)
• Have at least one year of expenses in liquid savings (I just read this one on Vanguard and I'm mulling it over, but certainly having beefed up savings could only be a good thing)
• Calculate what DB pension would be at various ages to help decide optimal exit age
• Estimate where 401K account needs to be to allow a "safe withdrawal rate" that will sustain an acceptable standard of living
• Decide whether I do want to get another job and if so, what that would look like and projected earnings
• Anticipated health care expenses - my employer currently subsidizes retiree medical and dental, but it still isn't cheap, and that could change at any time. (The company does have a history of honoring whatever agreement is in place at the time one retires, with changes going into effect for new retirees). Need to also consider out of pocket costs, and the fact that medical costs will be greater for any years between retirement and age 65/medicare eligibility.
• Social security - I think it might be realistic to retire and not start to collect SS right away, waiting until I'm eligible for a higher benefit. I've read so many opinions pro and con for filing early vs filing later.

So what am I forgetting? Thoughts on any of the above?

[Lainey]

rosarugosa, I'm similar to you, but maybe about 2 yrs from retirement. I agree with your checklist above.

I'd add taking care of medical needs as much as possible now too, e.g., major dental work, colonoscopy and other age-related preventive care, vision checkups and eyeglasses, etc. As much as possible that can be done while you're still under your employer-provided health insurance.

And don't forget about fun stuff: check out what's available for retiree/senior discounts in your area for everything from museums to discount days at the movies. Your fun quotient can still go up when your budget goes down ..!

[rosarugosa]

Thanks, Lainey. I will check out the discounted fun options for sure! We have been keeping on track with our recommended health screenings etc. DH has some conditions that incur substantial (although not prohibitive) out of pocket expenses, so I'll need to plan on those coming out of our income stream as we currently handle them with an FSA through my employer. Actually, I think we could do an FSA with his employer. He works part time, so hopefully will continue his job beyond my departure from full-time employment.

[razz]

Check out the timing of basics such as a replacement appliances as needed or vehicles or roof for home?

[iris lilies]

The "safe withdrawal rate" over on that other forum is 4%. That is their collective wisdom although I don't know where it came from.

After years of saving strongly, I am getting ready to jump off the cliff of retirement with a lot yet unknown. I don't know how much my income will really be for the next year. I don't know what will happen after COBRA runs out; we will have a few years before we are eligible for Medicare. There is no way I could ever get a well paying job like the one I've got now, so it's not as though I have a fantasy that I could run out and get another job if I wanted to. I will never be able to get another job with health benefits, I know how tight the market is.

And, I don't really even know how much we spend a year. I could make Wild Ass guesses, but that's not useful. What I do know is that we are both capable of black belt tightwadery and I'm not scared of that. We know how to have fun on the cheap.

We will decide later about how to take Social Security later, but it's likely I will draw it as soon as I can, and DH will put his off for a while, or will draw on mine, or something like that.

The real issue is health coverage, and I am prepared to spend $100,000 on premiums from now until Medicare kicks it if it allows me to jump ship. I just hope that that is all I have to spend.

[Packy]

You know, you really can't have enough money. Just when you think you have enough money, you get to thinking: I really don't have enough money, and You figure: I will never have enough money. And, the same goes for insurance: You can never have enough insurance. It is better to buy insurance you don't need, than to let a chance to buy more insurance pass you buy. You never know when you might need more insurance, and you've got to have money for insurance, and you can never really have enough money. I know people waaaay up there, waaaay up North, in a place nobody ever heard of, where all they do is Eat Pizza & big, juicy fried pork tenderloins, (or bbq pork or big, thick juicy lockered-beef steaks), and then use the slightest excuse to get out and drive. Drive to Omaha during a blizzard or a hailstorm, just to look at a big leather davenport set that is on sale. And stop and eat pizza--the House Special--piled HIGH with oooeey-goooey mozzzzerrrelllie cheese and a full 3lbs of Bacon on it. Yummy! Even when the roads are completely coated with ice. That's why they need insurance, and they need money, and they never can have enough of it. They really can't. So, yeah---you need more money, and you need more 'surance. Everybody does. You can never have enough. Plus, you never know when that Merc-O-ree might need a steering column, and you kids will be too busy, hoeing & weeding & watering & applying chemicals to your beet crops and keeping them scwewy wabbits at bay, and you just ain't got time ta fool with it. Steering columns are now up in the $2500+ range these days; and a steering column here, and a steering column there, and another steering column over there, and pretty soon--you're talking some REAL money! For gods sake--call your agent TO-MOR-ROW and have him add a $10,000 rider on your policy that covers steering columns. The 60-70 dollars a month extra it will cost is worth every penny. So, it goes without saying: ya can't have too much money, and there is no such thing as too much insurance. No, there isn't.. See? Hope that helps you some. Thankk Mee.

[rosarugosa]

Good point, Razz. Our furnace is about 24 years old.
IL: The 4% is one of those venerable rules of thumb, that is supposed to be a rate at which you can draw down your assets without depleting them for at least 30 years.
Packy: Well you probably can't have too much money, but you can indeed have enough. That is why I want to develop a plan and stick with it instead of just waiting until it vaguely feels like "it's time." I realize it will always seem financially safer to work "just one more year," and while I would rather work until I die than to be destitute, it may very well be possible to avoid either of those outcomes.

[ApatheticNoMore]

IL: The 4% is one of those venerable rules of thumb, that is supposed to be a rate at which you can draw down your assets without depleting them for at least 30 years.

the vulnerable rule of thumb is probably false. Look you shouldn't ask me, except I was recently talking to a financial advisor for a family member and they say a lot of those "rules of thumb" were based on economic conditions that will never be seen again, what people came to see as normal that was in fact not normal at all, for instance an interest rate environment that will never be seen again, this near zero interest rate is closer to normal (not that it might not go up some of course, but compared to the interest rate many rules of thumb were based on). But you shouldn't take my word for it, just question what interest rate assumptions are built into the 4% assumption is all.

[kib]

When I decided to go FI very early, I made a clearcut mistake. I got nervous about cutting things too close and decided to set up Substantially Equal Periodic Payments out of my IRA account (you can access your money early with no penalty, as long as you agree to go on doing it annually until the money's all gone). In reality I never needed that extra spending money, so what I basically did over time was move all my money from tax deferred investments to taxable ones - minus annual income tax on the distributions, of course. So stupid, over 15 years I've probably lost $50,000 from this 'preparedness' decision.

So, point I'm making is that you can decide when to start taking SS, or if you need a SEPP plan for added income, when you actually run short of income; there's no reason to stress about it ahead of time or set up withdrawals that will injure your long-run returns "just in case".

Retirement is awesome! It's also flexible, option-filled, and reversible, especially for people in decent financial shape who have been planning for it. Don't let the media treadmill whisper in your ear about how you'll be doomed if you get off.

[Packy]

Good point, Razz. Our furnace is about 24 years old.
IL:
Packy: Well you probably can't have too much money, but you can indeed have enough

Yeah, But: About the time you think, "well--I got plenty o' money! Scads o' money! More money n' you can shake a stick at!" Well, you're getting cocky and overconfident. Your insurance agents will start calling, scheduling you for a review of your coverage, and first, you need a new outfit and a haircut to wear in for the appointment & money for lunch afterward(Pizza, Chicken, or a breaded, deep-fried Pork T the size of Montana)and you get to your appointments and your agents point out how you are dangerously underinsured or that there are major exclusions that you could drive a truck through. So, you gotta get out that checkbook, and up your coverage. Way up. See? Then, on the way home, that "check engine" light comes on your truck, a crew-cab with full power and all the bells and whistles. It's only 3 years old, but has 99,999 miles on it, from running around and driving the Graaaaandkids to Disney Land every weekend. So, you figure:since they take me to the cleaners fixing up an old truck like this everytime I take it in after that "check engine" light goes on, there's no sense in throwing money away on a clunker(pouring it down a rats' hole, as Dad used to say), I may as well bite the bullet and get a nice, clean, new, safe, nice,clean, shiny new one,with comfort galore: deep-pile shag carpet, all-leather, and the whole ball o' wax, in a color my wife likes better and is a whole year newer than my neighbors' truck. Except his don't have that comfort-controlled heated steering wheel that keeps your hands nice and toasty warm. See? It's one thing after another. Everything goes up, especially tickets to the game and satellite tv and big-screen TV's and sides of lockered beef. So, you can never have too much money, and you can never have too much insurance. Case Closed. That settles it. Next Caller, please. Hope that helps you some. Thankk mee.