Retirement Master Plan

Different retirement vehicles kick in at different times. If you are shooting for early retirement it is important to make a retirement schedule. You need to see what money is reliably rolling in and when.

At what age will you receive what income?

I have mapped out my own Schedule as follows. This post is still leaning toward the ‘accumulation’ phase as opposed to the ‘withdrawal’ phase as delineated by The Retirement Manifesto. This is because I figure I am still 7 years out from a ‘no work’ version of retirement.

Her Pension from Work kicks in at a MINIMUM age of 57 (2031)

Amount: $ 37,700 yearly

Amount: $ 3,141 monthly

This pension is 1% of her last 3 years average salary times the years she has worked there.

Formula = $ 145,000 X 0.01% = $ 1,450 X 26 years = $ 37,700/annual or $ 3,141/monthly

This is based on her working all the way to age 57, she would need to do this to keep her health insurance into retirement, but it is not exactly EARLY retirement now is it? We may have to revisit this. The big question is whether carrying her insurance into retirement is worth working 14 more years. (7 more than I plan to work).

Social Security kicks in at a MINIMUM age of 62 (for now) (2036)

His Amount: $ 1,498/month

Her Amount: $ 1,838/month

IF we wait until AGE 67;

His Amount: $ 2,235/month

Her Amount: $ 2,675/month

Like a Good Gen Xer, I don’t have faith I will ever really get my SS checks, but I figure why not be optimistic right?

Her TSP Annuity kicks in at a MINIMUM age of 55 (2029)

Balance of $750,000 translates to $ 41,670/annual

or $ 3,472/monthly

at $500,000 the numbers drop to $ 27,780/annual and $ 2,315/monthly

at $1,000,000 the numbers rise to $ 55,560/annual and $ 4,630/monthly

It’s hard to predict how much an account will appreciate in 12 years. (Here is how much my different accounts have grown). It is best to calculate several ranges instead. Federal employees have a great resource called the FEBS (Federal Employee Benefit Statement) accessible HERE.

The FEBS outlines all the various retirement scenarios for a government worker. Her above annuity has a survivor benefit to me of $ 20,868/annual.

This Annuity should last for at least 30 years.

His Annuity (401(k) and 403(b) could start at a MINIMUM age of 55 (2029)

Balance of $ 400,000 translates to $ 22,224/annual

or $ 1,852/monthly

I purposely set this one conservatively lower.

Stocks, Bond, Interest Income (no draw down)

At Age 43 = $ 1,089/month

At Age 50 = $ 1,530/month

Age 55 = $ 1,950/month

At Age 57 = $ 2,149/month

At Age 62 = $ 2,740/month

This income would be interest/dividend only, no touching the principal. I calculated this at a slow growth of just 5% a year. The plan is to plow more money that in each year, but I tend to be conservative with estimates. There is good reason to suspect this number will be way higher by Zero hour (age 50).

SO our income at the following ages will be; (not counting any active paychecks)

Age 50 = $1,530/month

Age 55 = $ 7,274/month

at Age 57 = $ 10,614/month

Age 62 = $ 14,541/month

As you can see, the income at the advanced ages is not the problem, it the passive income from now til Age 55 that I need to work on.

I am trying to calculate how to ‘cover the gap‘. Hence the mysterious photo of Stonehenge.

The main sticking point is that my children are only age 11 and 7, the youngest will still be in the house when I hit Age 50. (my original target date) Children are Wild Cards as far as predicting expenses. Why did we wait so long???

Healthcare is the other big stick in the mud.

I am hoping 7 more years is enough time for Washington to get its act together. Hoping for a single payer system.

I think the current state of health care and its foggy future is the single biggest thing holding people back from retirement. At least for those people with any money earmarked for retirement.

We have been stuffing my HSA (Health Savings Account) every year since I figured out what it was. I expect to have over $ 50,000 in it at age 50.

I still think we will stop working way before traditional retirement, but there still is a long road ahead. Luckily I like my job.

As far as housing goes, we will sell off our current primary residence. We will use the money from that sale to pay off the cottage. It has always been the plan to retire there. Then we will be debt free and able to live off a considerably lower budget.

Here is a look at the proposed retirement budget in 2024;

These are the fixed expenses of $ 2,065/month, added to this are discretionary spending and estimated health coverage costs;

For a total monthly need of $4,565 or $ 54,780/annually.

I have not really concerned myself with a drawdown rate because I will have more money coming in then going out. It is my intention to leave any leftover money to my children and grandchildren. I actually fantasize about a financial legacy that extends well beyond my children.

Given my natural ‘living below my means’ lifestyle, it looks like I will actually make money in retirement.

This cushion will allow me to give out charitable and familial donations.

I expect I will have to juggle what accounts I am drawing from, combined with what money to give away to avoid the worst of the tax bite. See Physician on Fire’s article to explore the Roth vs. taxable accounts discussion in more depth.

We currently save an automatic $62,000/year into retirement accounts.

I do not concern myself too much with Required Minimum Distributions because I will retire(hopefully) 20 and 1/2 years before they kick in.

By ever indicator it looks like I will end the game with more quarters than I brought to the arcade.

What is your target date?

The idea for this chain article came from Retirement Manifesto based an original piece by Physician on Fire. Several others including myself have followed suit; PlanInvestEscape, Mr. Groovy, The Green Swan,  My Curiosity Lab, Cracking RetirementThe Financial JourneymanRetireby40 , EarlyRetirementNow, Mr. 39 Months , 7 Circles , Ms Liz MoneymattersPenny and Rich , and atypicallife , New Retirement, and MaximizeYourMoney so far.

P.S. Mr. FireStation has a great article full of stats on the ‘retirement picture’ in America today.

 

16 thoughts on “Retirement Master Plan

  1. Looks like a great plan, Othala! Thanks for the shoutout on the Withdrawal #DrawdownStrategy initiative I launched today. I look forward to watching as your plan unfolds!

  2. Good info! Knowing when you want to retire is so important so you can plan the time of investment vehicles!

  3. You gotta love having income in retirement as opposed to whittling away at your nest egg. I’d love to have money coming in rather than shavings coming off, but it’s mostly a psychologicial difference.

    Cheers!
    -PoF

  4. Nice. Can’t beat a pension annuity as income floor to any withdrawal approach. That stability is important before eating into the nest egg. Especially with projections for market returns being on the low end from the like of Bogle and other elder statesmen or the finance world.

    We have found that you can’t plan this sort of stuff enough so good for you in getting your plan well formulated ahead of time. Make sure to refine it and check your assumptions often.

    Enjoyed reading this. Well done.

  5. Sounds like a great plan! I plan to ‘retire’ at 55. Hopefully, I’d be able to take advantage of the rule 55 provision of my 401K. I’m using the word retire loosely because I’m hoping to start my own company by then. If I get fired or laid off before 55, then I will have to resort to Plan B 🙂

    BTW, we have something in common– my kids are 7, and 11 (reminds me of the convenience store).

    • Given the ages of my kids, 55 would be way more reasonable than my hopes of 50, but it is good to have goals right?

  6. Hubby and I don’t have target dates yet 🙂 but it’s fun to read yours. I’m planning to blog until I’m at least 65.

    I dream about leaving a finanical legacy too. My nightmare would be that money squandered in 3 generations or less (as the saying goes and I’m observing it to be true…I like to dig historically prominent families and reading their stories.) If my lil nugget think it’s going to be a free lifetime trip to Hawaii, think again.

    7 and 11 are great ages! I think it’s kinda cute to be retired with still a kid at home. When I do want children I only want them later in life, much later. Preferably after we’re 40s…but that’s not recommended. Boo.

  7. You seem to have it made in the shade once you hit 55; the trick will be, as you said, “bridging the gap” until that time, assuming you want to retire before then.

    My situation is a lot different (no pensions or annuities), but we plan to ratchet down to part-time work before we eventually have a white russian with lunch every day.

  8. My target date for FI is December 31, 2025. By that time, my student loans will be paid off, the house is paid off, my investments should be over 7 figures. That gives me enough passive income to cover all my expenses. However, I do plan to keep on working. I love what I do. I just might not be at the same place.

  9. Thanks for the information, it will help me work through my plans as well. I’m looking at age 56 to be financially independent. Like you, I’m working on building up my funding for the 55 – 65 time period, in order to make it “over the hump.”

    Big unknown cost is healthcare, but unlike you, I am not looking forward to the country going single payer. I lived with government healthcare (US Army) and the scandals you are seeing at the VA will just be magnified. That is actual US government single payer healthcare – and I don’t think folks are going to like it.

    Still, its great that the folks in this community have the ability and smarts to plan for early retirement and be able to get it done. I look forward to future stories from you, and will link to you on my blog, so other people can see what you write.

    Great job!

    Kevin@39months

    • Please to ‘meet’ you Kevin, I sent your a direct email about formally getting on The Drawdown Chain and some other tips for new bloggers, let me know if you don’t receive it.

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