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. 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 Retirement, The Financial Journeyman, and Retireby40 so far.
P.S. Mr. FireStation has a great article full of stats on the ‘retirement picture’ in America today.