I'm currently on FMLA on group short-term disability. I expect to be terminated for performance reasons soon after the 90 days are up. I don't know if I'll be eligible to apply for group long-term disability or if I would be approved before termination. This won't be the first involuntary job loss, unfortunately, but it will be the last as I believe I'm unemployable. I probably don't meet the strict criteria for SSDI yet, but this could change.
I want to figure out if it's possible for us to keep our lifestyle without my salary. I have been the main breadwinner, so far.
Income :
My salary : $170k, but going away. Combination of STD/LTD/CA-SDI pays a max of 60% . STD is 90 days, CA-SDI up to 1 year, LTD up to 2 years.
My social security at age 62 if I never earn again : $28,308/year
SSDI would be $46,440/year if I eventually qualify
His salary : $35k (close to minimum wage)
His social security : have not run the numbers, but not likely to be much as he has worked fewer years than I have at low wages
Emergency funds : N/A, part of regular asset allocation
Debt : none. Home is worth between $1.8M - $2.2M. Both cars are paid off.
Tax filing status : MFJ
Tax rate : 22% federal, 9.3% state, subject to change (job loss)
State of residence : California
Age : 47 and 52. Both male. No kids.
Desired asset allocation : 90% stocks / 10% bond or cash equivalents
Current retirement assets :
Taxable : $659k, including $225k of unrealized capital gains
$143k cash (MMF)
$29k VWO, Vanguard Emerging Market, ER 0.05%
$103k VTI, Vanguard Total Stock Market, ER 0.05%
$208k IVV iShares S&P500 ETF, ER 0.03%
$176k VXF, Vanguard Extended Market Index Fund, ER 0.05%
My traditional IRA :
$1177k SPY, SPDR S&P500 ETF, ER 0.09%
My Roth IRA :
$413k SPY, SPDR S&P500 ETF, ER 0.09%
My 401k :
$45k FXAIX, Fidelity 500 Index, ER 0.02%
His Roth IRA :
$114k SPY, SPDR S&P500 ETF, ER 0.09%
Expenses :
Mandatory expenses were $89k :
$9k cars (insurance, registration, gas, 2 EV charger replacements, and one major repair)
$3k financial services (things like Costco, employer benefits like life insurance, credit card AF, umbrella liability)
$9.5k Groceries (mainly Costco)
$13.5k health ($6.5K of premiums through employer, rest is copays/OTC/one exercise bike)
$43.5k home ($15k of property tax, $4k insurance, the rest is mainly maintenance and some solar)
$2.5k pets (vet, cat food/litter)
$7k utilities (I count cable internet & smartphones as part of this)
$1k clothing & entertainment
Discretionary expenses : $32k
$11k my electronics
$9k his electronics
$4k dining
$8k travel
Obviously, we don't buy $20k of electronics each year, but we might travel more in retirement.
Health :
We both have serious medical conditions, including HIV. I also vision issues, osteoporosis (tscore: -4.0), bipolar 1. All of these contribute to a reduced life expectancy. Neither of us is planning to live to age 95, unlike some members of this forum.
It is much more likely that we will not make it past 80. But of course, there is no sure way to predict.
Having HIV means that we qualify for the California ADAP & OA-HIPP program as long as MAGI is under 500% FPL, which is $102,000 this year for MFJ. This covers COBRA , ACA and Medicare premiums up to $1938/month, plus some out of pocket costs such as most of our prescriptions.
Our healthcare expenses could actually go down as a result since we would no longer be paying any premiums and few copays.
This could save us as much as $9k out of the $13.5k of healthcare expenses we incurred last year.
On the other hand, auto & home insurance costs are soaring in California, as is the cost for labor (contractors). The house is huge, 4600 sq ft, and this is a major part of the budget. Utilities are going up way higher than inflation, too. My car may need replacement over the next 2-5 years, if my vision still allows me to drive by then.
The portfolio total is about $2.4M . Using total expenses of $121k and a 33 year retirement (to ages 80/85), Firecalc gives a probability of success of 70%. Using only the $89k of mandatory expenses, the percentage goes $96.7% .
And yes, I know Firecalc assumes a balanced portfolio, not 90/10. I can certainly change my asset allocation as needed.
But Firecalc does not account for any income taxes on the traditional IRA, or capital gains, or any social security benefits.
I'm somewhat unsure of how to account for all these factors.
My guess is that after wages and STD/LTD/SDI benefits disappear, I should probably first tap the taxable portfolio.
Our IRAs could be tapped before 59.5 via SEPP, but the IRS life expectancy table may be unfavorable (too optimistic) for us.
As I understand, if approved for SSDI, my IRAs could be accessed penalty-free (but not tax free, since most is in Traditional).
Otherwise, there would be a 10% federal penalty and 2.5% state penalty.
If we were to fall short of our goals, does it sound reasonable to take a reverse mortgage at 62, or is it better to sell the house then ?
I want to figure out if it's possible for us to keep our lifestyle without my salary. I have been the main breadwinner, so far.
Income :
My salary : $170k, but going away. Combination of STD/LTD/CA-SDI pays a max of 60% . STD is 90 days, CA-SDI up to 1 year, LTD up to 2 years.
My social security at age 62 if I never earn again : $28,308/year
SSDI would be $46,440/year if I eventually qualify
His salary : $35k (close to minimum wage)
His social security : have not run the numbers, but not likely to be much as he has worked fewer years than I have at low wages
Emergency funds : N/A, part of regular asset allocation
Debt : none. Home is worth between $1.8M - $2.2M. Both cars are paid off.
Tax filing status : MFJ
Tax rate : 22% federal, 9.3% state, subject to change (job loss)
State of residence : California
Age : 47 and 52. Both male. No kids.
Desired asset allocation : 90% stocks / 10% bond or cash equivalents
Current retirement assets :
Taxable : $659k, including $225k of unrealized capital gains
$143k cash (MMF)
$29k VWO, Vanguard Emerging Market, ER 0.05%
$103k VTI, Vanguard Total Stock Market, ER 0.05%
$208k IVV iShares S&P500 ETF, ER 0.03%
$176k VXF, Vanguard Extended Market Index Fund, ER 0.05%
My traditional IRA :
$1177k SPY, SPDR S&P500 ETF, ER 0.09%
My Roth IRA :
$413k SPY, SPDR S&P500 ETF, ER 0.09%
My 401k :
$45k FXAIX, Fidelity 500 Index, ER 0.02%
His Roth IRA :
$114k SPY, SPDR S&P500 ETF, ER 0.09%
Expenses :
Mandatory expenses were $89k :
$9k cars (insurance, registration, gas, 2 EV charger replacements, and one major repair)
$3k financial services (things like Costco, employer benefits like life insurance, credit card AF, umbrella liability)
$9.5k Groceries (mainly Costco)
$13.5k health ($6.5K of premiums through employer, rest is copays/OTC/one exercise bike)
$43.5k home ($15k of property tax, $4k insurance, the rest is mainly maintenance and some solar)
$2.5k pets (vet, cat food/litter)
$7k utilities (I count cable internet & smartphones as part of this)
$1k clothing & entertainment
Discretionary expenses : $32k
$11k my electronics
$9k his electronics
$4k dining
$8k travel
Obviously, we don't buy $20k of electronics each year, but we might travel more in retirement.
Health :
We both have serious medical conditions, including HIV. I also vision issues, osteoporosis (tscore: -4.0), bipolar 1. All of these contribute to a reduced life expectancy. Neither of us is planning to live to age 95, unlike some members of this forum.
It is much more likely that we will not make it past 80. But of course, there is no sure way to predict.
Having HIV means that we qualify for the California ADAP & OA-HIPP program as long as MAGI is under 500% FPL, which is $102,000 this year for MFJ. This covers COBRA , ACA and Medicare premiums up to $1938/month, plus some out of pocket costs such as most of our prescriptions.
Our healthcare expenses could actually go down as a result since we would no longer be paying any premiums and few copays.
This could save us as much as $9k out of the $13.5k of healthcare expenses we incurred last year.
On the other hand, auto & home insurance costs are soaring in California, as is the cost for labor (contractors). The house is huge, 4600 sq ft, and this is a major part of the budget. Utilities are going up way higher than inflation, too. My car may need replacement over the next 2-5 years, if my vision still allows me to drive by then.
The portfolio total is about $2.4M . Using total expenses of $121k and a 33 year retirement (to ages 80/85), Firecalc gives a probability of success of 70%. Using only the $89k of mandatory expenses, the percentage goes $96.7% .
And yes, I know Firecalc assumes a balanced portfolio, not 90/10. I can certainly change my asset allocation as needed.
But Firecalc does not account for any income taxes on the traditional IRA, or capital gains, or any social security benefits.
I'm somewhat unsure of how to account for all these factors.
My guess is that after wages and STD/LTD/SDI benefits disappear, I should probably first tap the taxable portfolio.
Our IRAs could be tapped before 59.5 via SEPP, but the IRS life expectancy table may be unfavorable (too optimistic) for us.
As I understand, if approved for SSDI, my IRAs could be accessed penalty-free (but not tax free, since most is in Traditional).
Otherwise, there would be a 10% federal penalty and 2.5% state penalty.
If we were to fall short of our goals, does it sound reasonable to take a reverse mortgage at 62, or is it better to sell the house then ?
Statistics: Posted by madbrain — Wed Mar 06, 2024 11:51 pm — Replies 15 — Views 1686