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avidnyer
Joined: 24 Jan 2010
Posts: 3
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 Posted: Mon Jan 25, 2010 9:34 am Post subject: New to this Board. Can i retire yet? |
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54, single living in Manhattan, NYC. Own my co-op with no mortgage. Value today: 600K. Monthly common charge including taxes is 1,200 with an estimated 3% increase per year.
No debt.
Assets: 2 Million : Cash, Conservative stock and bond mix, Keough.
After looking at many calculators ( the best being AARP and dinkytown) I'm wondering if i could retire on about 80K per year, and actually how long that would last me. These calculators also never tell you what your taxes would be on that 80K either, so i find them a bit misleading. What WOULD i be paying in taxes on that type of withdrawl?
I lived very conservatively and don't own a car or buy big ticket items.
Any comments? |
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dab90south
Joined: 03 Jun 2008
Posts: 28
Location: Maryland
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| Posted: Mon Jan 25, 2010 5:00 pm Post subject: |
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welcome.
quick and dirty: 4% of 2M = 80k
taxes would depend on how you have the money invested. we have some in tax free bonds, so no taxes on that income. if you just have mutual funds and stocks and bonds, then you'd owe taxes on the interest and dividends.
print out a blank 1040, fill it in making assumptions (use last year's info for starters). how much cap gains, interest, dividends, that will tell you about how much your taxes will be. after paying taxes, the rest is yours to spend. and the nice thing is no FICA taxes are due on investment gains, unlike earned income.
work out a spending budget, where do you spend money and how much for each category. see what you need versus what you can safely withdraw.
good luck. |
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martha
Joined: 19 Apr 2008
Posts: 56
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| Posted: Mon Jan 25, 2010 7:46 pm Post subject: |
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| Sounds pretty good. Do you have health insurance lined up? That throws a wrench into some people's plans. |
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avidnyer
Joined: 24 Jan 2010
Posts: 3
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| Posted: Mon Jan 25, 2010 10:48 pm Post subject: thanks... |
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Well I'll keep the health insurance plan i have which I've been paying into myself for 20 years ( as i owned my business). It amounts to about 4,000 a year which i've factored into my budget.
Thanks to the other poster in regards to the tax situation.
The 80,000 from the 4% equation sounds about right to me. I guess I just wonder how many years that will hold up. |
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dab90south
Joined: 03 Jun 2008
Posts: 28
Location: Maryland
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| Posted: Mon Jan 25, 2010 11:55 pm Post subject: Re: thanks... |
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| avidnyer wrote: | Well I'll keep the health insurance plan i have which I've been paying into myself for 20 years ( as i owned my business). It amounts to about 4,000 a year which i've factored into my budget.
Thanks to the other poster in regards to the tax situation.
The 80,000 from the 4% equation sounds about right to me. I guess I just wonder how many years that will hold up. |
should hold up forever, if you have a balanced portfolio and don't blow your budget.
of our yearly budget, about 1/2 is covered by pension and SS, the remainder comes from tax free bonds. the value of the bonds is about 1/3 of our total investments, the remainder is in mutual funds (both large cap and bonds) and stocks. overall, about a 50/50 mix of stocks and bonds.
another rule of thumb: bond % should about equal your age. |
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avidnyer
Joined: 24 Jan 2010
Posts: 3
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| Posted: Tue Jan 26, 2010 12:08 am Post subject: |
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Thanks Dab for your replies ! May I ask your ages and at what age you "retired" ?
As far as stock/bond mix, im very cautious and have 35% in cash, 35% mutual, 30% bond. I know I know....too safe, but I'm working on that. LOL |
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Nords
Joined: 15 Feb 2004
Posts: 39
Location: Oahu
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| Posted: Tue Jan 26, 2010 9:37 am Post subject: Re: New to this Board. Can i retire yet? |
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| avidnyer wrote: | These calculators also never tell you what your taxes would be on that 80K either, so i find them a bit misleading. What WOULD i be paying in taxes on that type of withdrawl?
Any comments? |
Most of the retirement calculators skip the tax details by assuming that you'll pay taxes out of your annual withdrawal. One extremely detailed calculator, FinancialEngines.com, will estimate tax brackets on retirement income, but I don't know how far you can get into the website without being asked to pay $39 for a quarterly membership. It's a good calculator and worth the time for its extremely detailed data entry, but I don't know where they're stopping the new members these days. You'd have to decide if the $39 is worth it when there are other (free) methods available.
You could also estimate your taxes through IRS Form 1040-ES (http://www.irs.gov/pub/irs-pdf/f1040es.pdf). Depending on your filing status and your deductions your interest/bond income would be in the 15-25% bracket, and your qualified dividends/cap gains would be taxed at lower rates.
http://personal.fidelity.com/planning/tax/pdf/fidmatrix.pdf
FIRECalc (http://www.firecalc.com/) and other research (like the Trinity study) shows historical returns generally favor a 4% withdrawal rate for at least 30 years. Some research claims higher returns for some situations, a few claim lower. But that portfolio survival can also be affected by the asset allocation an the returns of the first few years. With your conservative AA, and if we don't repeat 2008-2009 in the next couple years, then you're probably fine.
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Youth may be wasted on the young, but retirement is wasted on the old. |
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dab90south
Joined: 03 Jun 2008
Posts: 28
Location: Maryland
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| Posted: Tue Jan 26, 2010 2:08 pm Post subject: |
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| avidnyer wrote: | Thanks Dab for your replies ! May I ask your ages and at what age you "retired" ?
As far as stock/bond mix, im very cautious and have 35% in cash, 35% mutual, 30% bond. I know I know....too safe, but I'm working on that. LOL |
laid off Jan last year, was 45 then. wife and I worked and saved well, presently drawing about 1.5% of assets to fill out the budget. haven't had a real job since, just one 3 day job late last year, paid under 3k gross.
have a one day job tomorrow, little walking around $$, doing some engineering consulting. |
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scrabbler1
Joined: 15 Aug 2008
Posts: 37
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| Posted: Wed Jan 27, 2010 1:21 am Post subject: |
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| dab90south wrote: | welcome.
quick and dirty: 4% of 2M = 80k
taxes would depend on how you have the money invested. we have some in tax free bonds, so no taxes on that income. if you just have mutual funds and stocks and bonds, then you'd owe taxes on the interest and dividends.
print out a blank 1040, fill it in making assumptions (use last year's info for starters). how much cap gains, interest, dividends, that will tell you about how much your taxes will be. after paying taxes, the rest is yours to spend. and the nice thing is no FICA taxes are due on investment gains, unlike earned income.
work out a spending budget, where do you spend money and how much for each category. see what you need versus what you can safely withdraw.
good luck. |
Well put. I designed a skeleton version of a 1040 form (and a NY State version) so I could better estimate my taxes due. I have a mix of taxable bonds, munis, and stocks all in mutual funds. The corporate bond fund I own has most of my non-IRA assets, as I have been draining the munis a bit because their tax-advantaged return is lower, if any, by being in a lower income tax bracket.
Avidnyer, I retired in 2008 at age 45. I live on Long Island and you can read my story in another somewhat recent thread. I used Fidelity's retirement planning worksheet and designed my own so I could determine and project my own expenses and income components for the next 15 years until my "reinforcements" arrive. That is, I can access my IRA at age 60, become eligible for SS at age 62 if I need it, and begin drawing my frozen pension at age 65.
Health insurance is in 2010 now my biggest expense, barely surpassing my overall co-op maintenance charges (which actually decreased by about 1% from 2009). My HI increased by 20% over 2009, and if that level of increase persists from year to year I will have to tweak my ER plan some more. |
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