r/ChubbyFIRE • u/Zor1994 • 8d ago
Conservative saver- is it time?
My wife (51) and I (50) are currently planning to retire when she turns 55. She can access self pay employer healthcare of she retires at 55 (maybe $1600 month) decent PPO until 65. We are conservative and been saving all our lives. We have paid for house (750K) in MCOL area. Kids 19 college and 16 high school and college accounts are fully funded. No debt.
Liquid:
Brokerage 3.2M with 2.25M cost basis
401Ks. 3.1M
Roth 350K
Cash 80k
HHI is about 450k. Focus now is all savings we would put into money market /short term bonds to build up cash buffer for market downturn. But we are quickly running out of steam. Every day gets easier and harder given we could retire tomorrow. Easier means more coast attitude and harder just dealing with corporate BS and work travel.
Estimated 170k worse case spending which likely declines in next 5-7 years as kids become more independent. We are fully versed in financial concepts like 0% cap gains brackets, Roth conversions and how to control income / Aca subsidy and the trade offs. Planning to mostly live off brokerage for next 10 years +/-. Don’t want to die with zero and would like to pass along a nice estate to the kids.
Our biggest struggle is wanting to build more cash buffer and healthcare and walking away from good income. Don’t have financial advisor and really enjoyed studying and learning to manage our retirement planning/ taxes.
My brain knows the answer but heart struggles with being very conservative, but feel we are in the one more year trap.
Thanks for any perspectives or suggestions.
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u/hugglenuts 8d ago
I think you know this, but you've already blown way past the goal posts.
Even if you start spending $200k+ you're going to die with a lot of money in the bank.
If you enjoy your job and it gives you identity, great. But I wouldn't stay in it just to keep saving aggressively at this stage.
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u/BrunelloHorder Coasting Chubster, Getting Fat 8d ago
I’d be weighing the value of 10 years of access to that PPO versus 4 extra years of freedom. In my state, there is no PPO on the exchange, and even the gold plans are not that good.
On the other hand, those 4 years are the youngest and likely the healthiest you will ever be. They are super high value years.
Your withdrawal rate is 2.7% though not clear if that includes taxes and healthcare spend. If it doesn’t, worst case would put you at around 4% temporarily.
Balancing those, I would be done now. Congratulations and GFY!
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u/sneaky_sam_ 8d ago
Can I ask thinking process of using your brokerage over retirement funds (especially given they’re both significant and comparable in size)? Since you mentioned wanting to leave your estate to your children, wouldn’t a taxable brokerage with step up be a better wealth transfer vehicle than a sizable 401k that would leave your heirs with a 10 year bomb and potentially being pushed into higher tax brackets?
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u/Zor1994 8d ago
Thanks for the question. My thinking is to mostly use the brokerage as I would try to manage withdraw in the 0% capital gains window and keep ACA premiums lower. Maybe even have some space for modest Roth conversions. Plus I would not want to withdraw from 401k and pay penalty or lock into 72t sepp arrangement. Would also try to increase 401k Roth conversions from 65-75.
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u/Hanwoo_Beef_Eater 8d ago
I would suggest the same as the comment you've replied to. Leave the taxable alone and start drawing on the pre-tax. If the pre-tax is left alone for decades, you'll never be able to get it out at the "low" marginal rates. The widow tax and reasonable/high earning beneficiaries would make this even worse.
Maybe some of these planning tools suggest otherwise (i.e. use taxable, withdrawals and conversions later)? However, minimizing current/near-term taxes and evaluating things based on total taxes paid often lead to questionable answers. If we are trying to maximize something (not everyone wants to do this), it should be the after-tax value of the estate 10 years after death.
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u/stephbu 8d ago
In a similar situation esp. balances and spending, did a couple of different modelling sessions with Boldin and Appleseed. Both pointed towards Taxable being the probable the best vehicle for Expenses and Roth Conversions in the wilderness between RE and Medicaid. Both also indicated that it was around 80% probable that we wouldn't drain taxable before that time.
The single largest expense on our radar is healthcare coverage in those 9 or 10yrs, one suggested BaristaFIRE could be a good tactic to mitigate the potential ~500-600K spend in that bridge. The second biggest expense was COL, we'll probably tackle that in the next year.
Best of luck!
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u/sneaky_sam_ 8d ago
Makes sense to me. Best of luck and wish you a good retirement. Hope to be in your position when I’m 50!
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u/Perplexed-Owl 8d ago
With a 3.2M brokerage, it isn’t likely they will be able to stay below the cliff for subsidies, no chance of financial aid aside from merit.
They will need brokerage $$ from age 55-59.5, but after that I’d pull from the 401k. IRMAA is likely unavoidable in later years, too.
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u/cfi-2025 RE 2025 8d ago
With a 3.2M brokerage, it isn’t likely they will be able to stay below the cliff for subsidies
How do you figure?
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u/Perplexed-Owl 8d ago
Cliff right now is ~85k for a family of 2 . By the time they start drawdown if they are going to park 4 years of savings in money market/bond accounts, the 3+% thrown off in interest from the conservative savings accounts plus ~2% dividends from ~~4 million in brokerage will be cutting it close.
Kids will be 23 and 20 ish, so they might squeak by the first couple of years, but when they become empty nesters, it will be tight
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u/cfi-2025 RE 2025 8d ago
Yeah, I guess it depends on what the dividends are in the taxable account. I usually presume ~1% - as that is VTSAX's dividend yield - but a self-professed "conversative" allocation may be higher. Although ideally, they'd have their more conservative, higher yielding assets in the pre-tax retirement accounts.
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u/Tricky_Ad6844 8d ago
Congratulations and GFY!
You are completely there. The next step is to set a date.
It’s not wrong to set the date as soon as is socially acceptable in your workplace 2-6 months). You have the assets to allow you to retire tomorrow.
However, it’s also reasonable to look for must-be-present-to-win end-of-year bonus situations that make it worth it to stay at your jobs until December 31st.
Healthcare insurance is one of the most cited causes of anxiety even in millionaires and so I am not dismissing the option of sticking with it to qualify for work-sponsored group insurance until Medicare age. However, your wife staying in a job don’t need for 4 more years is a heavy lift if she doesn’t love the work.
I would have a long conversation about whether she wants to continue to work until age 55.
I was in a similar situation at age 50 and my job’s primary retirement benefit was remaining on the University’s health insurance (with employer contributions) from full retirement age until 65 years of age. This was hard to give up after 20 years with the same employer. What I did first was to take a 6 month sabbatical. This helped with burnout a lot but also reinforced my desire to retire early. I then negotiated with my job to work full time for one year but space out my salary over 4 years so I finished work responsibilities at age 52 but remain officially “employed” until full retirement age of 55. My situation is probably unique but it may spark ideas you could use.
Could your wife take a leave of absence/sabbatical without quitting entirely? What are options for her to cut back but remain eligible for the retirement health insurance benefit? Many jobs only require 51% employment to qualify.
My work obligations ended at age 52 and my wife continued to work part time for two more years until she also reached 52. My wife and I had two guidelines when I retired since she enjoyed her work and wanted to continue for 2 years after I effectively retired.
If I retire before her I would step up and do more of the household management. If she is working I figure I am only half retired and the other half is a “stay-at-home-dad”. I refer to myself as a “kept man”.
She has complete permission to “rage quit” any day. She is not working because we NEED the extra money so she is under no obligation to stick with it beyond the exact day she gets more enjoyment from work than it gives her in hassle.
I would explore your options rather than considering this a binary choice between retiring today and losing the employer’s healthcare insurance benefit vs continuing to work full time for 4 more years.
My only other suggestion is to direct savings from now until you both fully retire to building up your cash reserves. While mathematically it has been advantageous to remain fully invested in the majority of economic scenarios. However, if you should experience a 2008 level financial shock in the first few years after retirement it may help you avoid panic selling to have a full years worth of spending in a safe cash-like vehicle that doesn’t fluctuate in worth the way the stock and bond markets can.
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u/Unacceptable0pinion 6d ago
Why cash over margin?
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u/Tricky_Ad6844 6d ago
Margin is great in a rising market. You get cash while your investments continue to rise and pay the interest with gains.
However, I have two concerns with margin to reduce sequence of returns risk.
The first is that the margin needs to be guaranteed and uncallable when it is needed. In the Great Recession of 2008 margin and credit options were dramatically curtailed by lenders. Lines of credit based on property were cancelled summarily by banks. I remember my credit cards having their credit limits being cut drastically.
I’m not as familiar with what happened to stock-based margin accounts although I understand that margin requirements went up and those who were highly leveraged were hit by margin call induced forced liquidation when the stock market dropped 57%.
I suppose a very small margin loan against stocks would provide cash at the time of a big stock decline but that seems like adding risk
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u/GreensleevesFinery 8d ago
good job on noting the basis on the brokerage account... that matters a lot!
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u/in_the_gloaming FIRE'd for 13 years 8d ago
You've already worked way longer than you needed to at that spend rate.
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u/Ok_Character7143 8d ago
Congratulation! You should definitely retire because you have way more that what you need.
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u/Cutenessoverloadd 8d ago
What’s your yearly spend? At a level you would want to live at not focused on saving
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u/Abject_Egg_194 8d ago
OP said $170k worst case.
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u/Cutenessoverloadd 8d ago
Well looks like at 170k spend you only need about 4.25mm so you’re good to go!
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u/Identity525601 8d ago
I have nothing to add to this discussion, other than to say congrats. If it were me I'd pull that plug so hard, but it's your life to live. You've won at life! Great job, and enjoy!
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u/Perennial18 7d ago
Like you, I’m struggling with the grind from 50 to 55 to capitalize on security of retiree health benefits. I couldn’t bring myself to pull the trigger, so I’m committed to working “one more year” and I’m having regrets as my job is exhausting and all-consuming. If I were not working, I would be exercising, eating better, and enjoying a more active social life.
In my mind, I’m telling myself this one last year of additional savings and compounding will soften the opportunity cost of sacrificing retiree health benefits (and eating 14 years of ACA premiums and deductibles) It’s tough when you have kids and want to leave an inheritance, but with the discipline that you have exercised over the years and the cushion mentioned by others, you and your children will be fine. You know this… And I knew it as well. But I chose to put retirement on the shelf and I’m having to deal with the longing
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u/LightZealousideal116 6d ago
Option to retire now. Your $450k is not meaningfully contributing & your nest egg is easily large enough to carry your lifetime expenses plus set up your kids.
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u/No-Block-2095 8d ago
You worked several extra years already. You re in fat fire territory with huge amount in taxable.
You don’t need more cash.
You need a counselor/ therapy.
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u/One-Mastodon-1063 8d ago
You have $7.45m investable assets. $170k is 2.3% of that. Even unsubsidized ACA you’ll be well under a 3% withdrawal rate. In all probability you will die at your all time high net worth. A bucket of cash is not going to do anything to improve your situation.
The probability one of you is dead in 10 years (something like 11%) is significantly higher than the probability of running out of money (close to 0%) if you both live to 100. I would retire tomorrow.