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.

[rosarugosa]

ANM: I was counting on my 38+ pack year history to ensure I don't live TOO long! You are right about examining the underlying assumptions. My employer has tools for estimating retirement income scenarios, and some of the underlying assumptions are just CRAZY!
Packy: If anyone is going to rack up mileage driving the grandkids to Disney, it sure as h*ll isn't going to be me!

[pinkytoe]

I am nine months away from retirement so working on my list all the time. When I did an Excel chart of 2014 expenses, I realized that on present income we were putting at least 50% of that amount into savings every month. So I know that we can live on much less - just won't be able to sock away like that anymore which is fine. A big one on my list is to replace my car which I still haven't done. Oh and find a cheaper city to live in...

[rosarugosa]

Pinkytoe: That is an amazing savings rate; I am impressed!

[sweetana3]

Sometimes a lesson is to figure out retirement income and then plan a current budget on that amount. Then try to live on it and make decisions based on that retirement amount of income.

[SteveinMN]

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".
This is what we did: the SEPP (and several thousand dollars we'd saved up in readily-accessible accounts) was our safety net while I got my business going or ... well, whatever. The decision is not reversible, but it's not hard to deploy, so save it for if/when you need it. We've never needed it.


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. :)
When my former co-workers ask me how I like retirement, I tell them to get there as soon as they can. :)

About the media treadmill, though, there are some fields of endeavor (IL is in one of them, Information Technology) in which it is very difficult to step out and come back to anything resembling one's old job -- especially given a persistent age bias which exists in IT. However, if you're in decent shape financially, it isn't necessary to make the kind of money which you were, which just leaves the challenge of proving you're not overqualified for whatever job is being discussed.

[kib]

True. I didn't mean a specific career or employment opportunity could be recaptured, just that the decision to be retired, or 100% retired, can be reversed.

[rosarugosa]

My dream retirement job is to be a part-time support associate at the hospital where DH works. Sitting with patients, getting them juice, & calling for the nurse when needed. Or something similar. Simple, straightforward work with no meetings, and of course much lower pay than I'm used to, but that would be a perfectly acceptable trade-off as long as we can financially position ourselves to make it work.

[Blackdog Lin]

When I planned for my retirement, I knew basically that it was doable (we were living on our income-minus-40%-toward-retirement-accounts for several years - all I had to do was quit contributing to the retirement accounts), but the devil is in the details, as they say. I wasn't certain the retirement income would be enough, and was totally prepared to find a nice little part-time stress-free (unskilled, I am) job.

But thanks to Simple Living, (seriously!) I have been very happy to find any additional income isn't necessary. Once you decide you can be happy with so much less.....and that not having to set that alarm every morning is so much more than a trade-off for another new pair of shoes, or a new patio set, or a remodeled kitchen, or a trip to wherever.....you just might realize that you have plenty to enable a comfortable retirement.

[profnot]

I'm having fun making plans to retire and move to a new city, too.

OP - there are two things I don't see on your list
*Have a meeting with a fee-based financial planner to be certain I am as on-track as I think I am
*Investigate social and volunteer opportunities, especially if you are working with a group of people. Having gone from working in an office to working at home, I first enjoyed my solitude then I found myself missing being around people more.

There are organizations you can join which contribute to the community. The American Association of University Women has lots of branches. AAUW.org

Your alumnae/alumni association might have a branch near you. Or you can start one.

Book clubs. Ask at your local bookstores.

Garden clubs. Some maintain gardens in public land where the produce is donated to the local food bank.

Friends of the Library.

Think of something you can do that the community will use / appreciate. I taught free classes at the library. One fellow in town gives walks around our town's eagles' nests while telling us all about the birds. A doctor holds an annual "make valentines for your loved ones" at the community center as a fund raiser for an international charity.

It's a fun part of planning for retirement :-)

[rodeosweetheart]

My dream retirement job is to be a part-time support associate at the hospital where DH works. Sitting with patients, getting them juice, & calling for the nurse when needed. Or something similar. Simple, straightforward work with no meetings, and of course much lower pay than I'm used to, but that would be a perfectly acceptable trade-off as long as we can financially position ourselves to make it work.


I hear you. I would like that, too. The problem I have found is that often, volunteers do that sort of thing at the hospital. To get paid, one might have to do something like being a CNA, which is actually a brutal job physically, and CNA's are overworked terribly.

Maybe something else in the hospital setting, where you could use the skills you have already? Are you retiring in place, or thinkinf of moving? I think that is a huge aspect to retirement, if you go to a new community. We have spent 5 years in a place in SC that is more of a retirement community, and 1. pay is 30% or more lower for the same job, 2. you are in a very competitive environment for the lower level jobs, 3. volunteers do an amazing range of jobs for free, in the guise of "giving back to the communty."

If you plan to stay where you are, though, you could be scoping out this kind of work opportunity, and it might be a good idea to do that.

[bae]

But thanks to Simple Living, (seriously!) I have been very happy to find any additional income isn't necessary. Once you decide you can be happy with so much less.....and that not having to set that alarm every morning is so much more than a trade-off for another new pair of shoes, or a new patio set, or a remodeled kitchen, or a trip to wherever.....you just might realize that you have plenty to enable a comfortable retirement.

That was our big lesson when we "retired" 15 years ago as well. We'd planned for what we thought were going to be our post-retirement expenses, then once we'd settled in discovered we were spending considerably less than planned.

We likely could have retired several years earlier.

Our one big error was in not properly structuring our assets in some ways. When we "retired" our daughter was 2 years old, she's in college now, and I'm writing a $60k+ check each year, as our non-traditional retirement looks like free loot to pillage to the college financial aid office, which claims their policy is not to invade retirement capital or home equity. Ooops. Oh well, that was money I was going to leave to the University in my will anyways, they'll just get it a few years earlier this way, and likely not nearly as much as they would have seen.

[rosarugosa]

I've never used a financial planner, but that is something to consider. I do have two volunteer gigs picked out. I would actually like to start with at least one of them sooner, but I do put in a 60+ hour work week with commute, and I'm afraid of taking on more than I can handle.
DH already works part-time at the hospital where I would like to work, and I'm basing my ideas on what I've seen on their job postings. It seems like there are quite a few diverse opportunities.
I've never been interested in relocating, although I'm trying to open mind mind at least a little bit to that possibility.

[Teacher Terry]

WE paid off our home & did all the necessary repairs on it, etc. We both consult p.t. & will do this until we are sick of it. However, mine has turned into f.t. but that won't last forever so in the meantime we work from home, set our own schedule & are saving lots more $ for many trips.

[flowerseverywhere]

Only having one car which we don't use much has saved us a ton of money in retirement. We often walk to the library, ride bikes, swim in the community pool and play cards with friends. last night we had three couples over. I made lasagne, someone made bread, another person a salad and another dessert. We have twelve couples doing this, someone organizes it into six or eight people a house, we rotate houses and we meet once a month. It is so much better and cheaper than going out.
My flower gardens are spectacular and I have the time to grow my own plants from seed. Besides a few dress clothes for funerals and weddings, our wardrobe is jeans or shorts and t shirts (most of mine were free from blood donating, habitat and other volunteer organizations)

I especially save a lot of money on food. I have time to peruse the ads, and take time in the store to look for specials, compare prices and prepare meals. Almost everything is from scratch. Tastes better and better for you.

I would strongly everyone to track expenses. Some will change, but fixed expenses like property taxes, electric bills (which could potentially go up if you are home all day) all need to be reviewed. Our electric bill went down. I pay close attention to utilizing the sunshine through the glass, closing drapes on the shade side, hanging laundry etc. Some expenses will go away, but if you have spent your working years thinking you always wanted to quilt or do stained glass etc, those are expensive hobbies. Some people also want to do a lot of traveling. Be realistic about how you want your retirement to be. Medical is always a big unknown.

There are are so many things you can do to fill your time while making the world a better place. Meals on wheels, soup kitchens, volunteering for the scouts or at the library give back to the community. Or you can just go for long walks, read a lot, and smell the roses.

[Rachel]

OP, I just had one thought that I think hasn't been mentioned--if you are staying in your current residence you will want to have the roof and gutters checked. Also, be aware of property tax trends going forward. No one has the crystal ball to predict that exactly, but you want to just give it a thought.

Sounds like you have this pretty well figured out and are well on your way to a very happy FI!

[rosarugosa]

Thanks for the input, everyone!

Sweetana3: I'm actually doing this a bit backwards perhaps. I'm planning to leave my job when my alternate income streams would equal my current income stream. I know expenses in some areas will be less, but others seem to rise inexorably.


Steve & KIB: I'm trying to plan so we won't have to tap our tax-deferred accounts before age 59.5. If I retire in 5 years, I would be past that point, but we all know that even the best-laid plans can come apart.

Flowers: I love the idea of your rotating dinners with friends. More time for food prep at home will be a definite plus, although we are already pretty decent in this area.

Lin & Bae: Simple Living is definitely a plus in planning for life without a full-time paycheck. I'm far from being a black-belt Simple Liver, but I have truly come a long way, and this Forum and other online blogs/communities (MMM, GRS, Non-consumer Advocate) have really helped!

Teacher Terry: house is thankfully paid off.

Rachel: We did replace our roof in 2013, but we have some other items to address over the next few years. MA does have a law in place to prevent property taxes from rising more than 2.5% a year, but even so, they are now quadruple what they were when we bought our house 30 years ago.