Agreed. Retiring in your 30s with 2M seems really fraught. Sure you can live on 60-80k/yr in a low cost of living area. But at that age you’re likely to experience 2 recessions, where suddenly your nest egg plunges to 1.5M or less. And then taking 4% of 1.5M hits a lot different than 4% of 2M.
And in order to consistently beat inflation, which you’d have to do in order to pull 3-4% annually plus match inflation, you’d need a much larger exposure to stocks than typical retirees over 65. Which only serves to increase exposure to broader economic conditions.
And all of that is completely ignoring the skyrocketing cost of housing and healthcare - not just insurance but deductibles, out of pocket costs, and general cost of treatment.
Oh and don’t forget general life events - aging parents, kids, college, housing, etc.
All of the above are greatly reduced as risks when you’re >65, but at age 35 there’s just too much runway for financial issues to land. If I was wanting to retire today at 35, I’d probably consider 4-5M to be a more reasonable number. I’d plan on living off 2% withdrawals (100k), keep a chunk in conservative investments for economic downturns and emergencies, and allow the rest to grow in equities as a cushion.
Retiring at 35 means your retirement money has to sustain you through 50 years or so of life events — most of which will be without Medicare or Social Security.
That’s a lot of decades worth of broken furnaces, flooded basements, fallen trees, car accidents, expensive medical conditions and dental work, weddings and funerals, youth travel teams, college educations, unexpected inflation, long-term care for parents, economic downturns, etc.
And it isn’t easy to just jump back in the workforce into a high-paying job at age 45 if you haven’t worked for a decade. I would have to have a lot of cushion to get comfortable retiring that young.
We haven’t retired yet, but plan to soon, at younger than 59.
In order to keep expenses as low as before retirement, we paid off the house so that the money we were using for the mortgage each month can now be used for health care.
We aim to live on 2 to 2.5 percent of our nest egg (rather than follow the 4% rule), to give us cushion against economic downturns. We can’t decrease our base level routine expenses that much, so in the case of a huge dip in the market, our 2% draw might suddenly become 3%.
I understand that a lot of the FIRE followers assume they will take 4% every year. If there is a recession, and 4% of a smaller nest egg results in a smaller draw, they say they will just adjust their spending. But food and electricity costs what it costs; if you don’t have a lot of discretionary spending, there isn’t room for much adjustment.
So we decided a big financial cushion was the only way we could get comfortable.
So if I don’t have time to read the whole thread here, can anyone ballpark an annual cost for healthcare for my husband and I? Would like a placeholder number in my mind as we are a few (3-6) years from retiring. He would be mid 60s and me late 50s so I guess I would need to purchase a policy and he would need supplemental to Medicare. Both healthy (now). Would want ppo type plan. Are we talking $10k a year? 20k?
Medicare Part A (Hospitalization) is free for those who have enuf work credits. Part B is currently $175/mo (minimum) to buy; those subject to IRMAA ($203+k, MFJ) pay more. A Medigap supplement (Plan G which is typical) in my CA HCOL county is $100/mo for a 65-year old). Part D (pharmacy) can be as cheap as <$1/mo (for heathly) or hundreds if you take a bunch of meds.
Of course, just assume inflation for a few years. And assume Part B premiums will rise with age. (even the community-rated plans offer a discount for the 65-year olds). That same plan carrier (UHC-AARP) with community rating I quoted above for $100/mo at 65 with discount, is $200/mo at age 70.
All I know, after a truly miserable week at work, is that I want to retire Right Now. Except of course I can’t. (FWIW, my goal is 8 years from now, which doesn’t seem like that far away most of the time, but this week it does…)
For a PPO type insurance for 2, I’d keep the number closer to $20-25k a year (my employer’s COBRA is $1900 a month, and so were other similar plans) - just to be on the safe side; when your husband goes on Medicare, it will likely drop to $15k or so.
That seems reasonable. It may only cover a very high deductible plan for you, but that’s what I have (retiree deal, about $800/month; husband amount depends on if we did high IRA rollover/IRMAA). Depending on your retirement taxable income, you might qualify for ACA plans, but best to plan for worst case.
On The Retirement Answer Man podcast (I’ve listened to sooo many of these - thanks @Colorado_mom!) I believe the host says that a rough “high end” health ins cost estimate (via ACA - no subsidy) is about $24k a year.
That’s the number I’m keeping in my head when contemplating leaving work prior to 65/Medicare…It’s also about the number my company said I’d have to pay annually via COBRA for healthcare if I left - but that would just allow me to participate for 18 months.
If you are kinda close to retirement, exploring COBRA options via your employer may give you some useful info…
I retired at 42 so no cobra for me. But husband will go to age 62ish. (He’s 58) Daughter starts college in the fall so some depends on where she lands and her plans (law school etc). I’m playing with the 4% rule as income (plus our modest pensions, about 20k a year) but want to get a handle on expense side to be sure that will be enough. Figure we downsize, no mortgage, pay off cars, so our biggest fixed expense is health care (~20k) and property taxes. (~10k)
Those pre-65 years are the toughest for healthcare.
Had it been suitable for my job, I would have explored ramp-down options at my company to work 30 (or even 20) hours per week to keep my medical coverage. My manager was keen on it, but I worried there would be no reduction in the 50+ hour/week workload and stress.
My husband lost his job and was eligible for Medicare. My employer doesn’t offer medical so I had to scramble for coverage. I pay $914/mo - age 60, some health issues, $1300 deductible, see any physician. Medicare costs are $174.50 and $114/mo for the supplement.
One of our clients is learning a painful lesson. His executive level position was eliminated but he was kept on for a year as a consultant. Both he and his wife were Medicare eligible; she enrolled in Part A only, he did not. They had coverage through his prior employer but it’s considered COBRA. When they enrolled in Part B, they were told their penalty was close to $500/mo for each one of them. Medicare premium is also higher because of his income.
H doesn’t think we have enough $$ for me to retire now. I would really like to because I have a lot on my plate that’s not getting done.
I would suggest you talk to some local independent insurance agents - who will be familiar with various scenarios you present. They will have not only what is going on in your geographic area currently as far as costs/benefits, but may have some history on how things have changed and maybe some insight on where things are going. Then you can check in every so often - depending how far you are to ‘pulling the trigger’ on retirement - you currently are saying “three to six years” - but your analysis now may have it be closer to 3 years or closer to 6 years. There also is a ‘range’ for husband’s Medicare plus whatever you choose to have as supplement, however the larger portion of insurance cost will be with person who has to get to Medicare age later.
So this is an example with ‘Medicare penalty’ on the executive. As others have said “no one forces you to take Medicare” but they also don’t follow up with what might be the consequences down the road. I was unaware that ‘credible coverage’ did not include COBRA medical coverage.
I wonder with DH being retired if he is not willing to do some of the things that need to be attended to while you are continuing to work. Can you contract some of the things that need to get done that you do not have time for?
Also is your DH being reasonable about his idea of enough money for you to retire now?
Age gap between DH and me is only 4 months. I was a bit miffed when DH chose to retire 11 months before planned (I worked those 11 months until I turned 65 and could take Medicare and SS, with my 65th birthdate 4 months after his) but he was emotionally at the end of his ropes with his boss - and he knew we had enough in our retirement funds (thanks to my ability to work the investments and also finding our financial advisor who helped reduce our portfolio risk). But it was a bit of a blow that he stopped out at the top of his salary, while I was making much less with a more physically demanding job, due to career stoppage/SAHM for 18 years.
Typically in our area, employees pay about 25% of cost of their family coverage, and about 50% of the cost of single coverage, with employers paying the rest. If we would have needed to pay the COBRA cost from DH’s employer, it was $1,000 more than what I had to pay with picking up our family insurance with my employer (DH and I, but my employer coverage was for as many as qualified with our family coverage). Can obtain insurance with enrolled outside of ‘open enrollment’ period because there was a significant change (DH’s retirement/end of employer coverage) - just like you can add a newborn within 30 days of birth to your family insurance coverage. DH needed COBRA or my employer insurance coverage before he turned 65.
We pay more for the supplement than sabaray, and also pay additionally for a drug plan for each of us - but after our initial annual required Medicare deductible, we only pay some co-pay on certain drugs with each of our drug plans. We have a high end supplement (so we pay more) as it will pay what is left after Medicare pretty much anywhere in the US - so no worries with US travel.
I thought the game to play with health insurance was to manage your realized income to a level that allows for ACA subsidies? Investing in assets that don’t throw off cash income (or later on drawing from a Roth IRA) seems like a logical move.
I could even foresee circumstances where spending from a HELOC for multiple years and then paying it off once you transition to Medicare would make sense instead of selling appreciated assets or taking non-Roth 401(K) distributions.
A few years in advance of retirement doing a bunch of Roth conversions might also make sense to produce assets you can draw on without generating taxable income.
Anyone contemplating Roth conversions would need to look at their marginal tax rates while working vs the ACA 8.5% subsidy ‘surcharge’. Depending on income level, it could also be beneficial to realize capital gains in order to free up more cash, but it requires a low income level to remain below the zero percent capital gains threshold.
The current subsidies are scheduled to reset at the end of 2025, I believe. If that happens and they are reset to prior levels, subsidies disappear/fall off a cliff at an income level that is more of a challenge to remain below, depending on asset level and tax efficiency of taxable investments.