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So, can you retire at 55? If the ACA gets repealed and the states go back to those high risk pools, and you or your wife get significantly sick, you could go bust.
^^^ This ^^^
i've read President Trump wants to keep the "pre-existing condition" ban and also keep the "keep your kids on your plan 'til 25 (or whatever)" features of Obamacare.
i've read President Trump wants to keep the "pre-existing condition" ban and also keep the "keep your kids on your plan 'til 25 (or whatever)" features of Obamacare.
Assume no mortgage or other debts and no spouse.
25x salary? 40x? How much does a (small) pension reduce that number? I have seen lots of things about safe w/d rates but they seem to assume you are starting at an older age.
The thing that is mostly prompting this question is an older friend (64) wants to retire and was advised he "can't". He has a pension of sorts, which I think is fairly generous. No idea what he has for debt or other assets. But heck if 64 is too young what about the rest of us?
Income is a number many wage earners know. Which is the only reason why it is used. The number you need to project on is expenditures. When you earn money, you can either spend it or not spend it. So the quick and dirty way is to look at your net cash deposits that went into your bank for the year. Not your gross. That's your wages cash in. Now look at your bank statement at the beginning of the year. Get that balance. Now look at your bank statement at the end of the year, get that balance.
So if Beginning balance + deposit - expenditures = ending balance
That's how much money you spent. Now look at that money you spent. Maybe some was for installment debt. Will it go away eventually? If so, that will reduce your expenditures. Will you take more on later? If so, that will increase your expenditures.
To make it easy, let's assume you have no debt. If I retire early, I would imagine I will not see my expenditure level fall much, but each person can reset their number based on the lifestyle they plan on leaving. the spoiler is that your should then increase that number by an inflationary amount each year. So if you retire at 55 and live to 85, you may easily be paying double for everything that you consume now.
Now look at your income side. You could have a pension, social security, investment income, rents etc. Add it together. Are you positive? Great. Are you negative....uh-oh. How about the following year. Your expenses keep going up, did your income? Or is you income fixed.
To me, that's what makes rentals nice to have in retirement. Rent and inflation rate should go up about the same. It's also what scares me about annuities and fixed pensions. What seems like an adequate amount today may not be later on.
So I'd run the number with a couple situations. If I'm going early I would not bank on social security and see if I can still afford it...because if I'm tired today, I'm really going to be tired when I'm 75.
Assume no mortgage or other debts and no spouse.
25x salary? 40x? How much does a (small) pension reduce that number? I have seen lots of things about safe w/d rates but they seem to assume you are starting at an older age.
The thing that is mostly prompting this question is an older friend (64) wants to retire and was advised he "can't". He has a pension of sorts, which I think is fairly generous. No idea what he has for debt or other assets. But heck if 64 is too young what about the rest of us?
You need to total up what you will spend each year.
Then you need to figure out how much money you need to invest to give you the money you need.
After you do this then start to refine for inflation, health care costs, taxes etc.
Might be best to hire an hourly planning person for some help.
For example if you need 50,000 a year and invest your money in a safe goverment bond paying 2% interest you will need 2.5 million dollars to generate the 50,000 income.
I know Australia makes noncitizen "retirees" post a $1 mil. bond just to live there - they don't want folks that did not pay into the "free healthcare" (via HIGH TAXES) to get any of that benefit. If you get sick it is up to YOU.
Kind of makes a lot of sense and is the opposite of the U.S. - "Bring us your sick....."
I am a veteran (not retired) in the same situation - does anyone know if the Veterans Administration would help the 55 year old be able to retire and NOT worry about health care (or bridge the gap to 65)?
I know how bad "some" VA centers are from the news but if a person is in good health maybe in an emergency it may prevent bankruptcy.
Wealth at age 55 x Expected minimum annual rate of return => Expected maximum annual cash outflow is the safest approach I can think of. But it will be a big number.
Wealth at age 55 x Expected minimum annual rate of return => Expected maximum annual cash outflow is the safest approach I can think of. But it will be a big number.
You could also make a spreadsheet with more detail over time, starting at age 55 (t=0) for the rest of your expected life.
Future value of wealth wealth(t+1) = wealth(t)* (1+real annual rate of return on wealth) - annual expenditure(t).
Where the real annual rate of return = (1+nominal annual rate of return on investment)/(1+ annual expected rate of inflation) which can be approximated by nominal annual rate of return on investment - annual expected rate of inflation, if both are small.
i've read President Trump wants to keep the "pre-existing condition" ban and also keep the "keep your kids on your plan 'til 25 (or whatever)" features of Obamacare.
I won't believe it until I see it....and I hear the planning is all "top secret" in a basement with guards to ensure the details don't get leaked until it's voted on. That's what I like - blind government with the public let in on their fate when it is too late to do anything. Everyone needs to keep the pressure on to ensure quality, reasonable healthcare is available for all.
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