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Most of us enjoy hearing inspirational stories.
It’s even more rewarding when you get to play a small role.
Today’s article is a combination of both.
This one is special. A real-life case study on retirement planning.
I first heard Theresa’s story when Brad Barrett at ChooseFI reached out and asked if I’d be willing to help. In two sentences, here’s her “Rags To Riches” story:
Theresa had two children and was a single Mom on food stamps at the age of 25.
Today, at age 44, she’s married, financially independent (FI), and considering early retirement (RE).
She told her amazing story of moving from “Food Stamps to Financial Independence” on this episode of ChooseFI. I encourage you to take the time to listen, it’s one of the more inspirational stories you’ll hear.
At the 55-minute mark in the recording, you hear Theresa explain the struggles she’s having with figuring out her next steps, and Brad’s on-the-spot suggestion to reach out to a “retirement expert” in the community to help her sort out the “FI to RE” leg of her journey. In short, what would it take for her to transition to retirement?
- Brad followed up by sending me an email asking if I’d be willing to help.
- That email led to a series of Zoom calls with Theresa over the past month.
- Those calls have led to this article.
We’re helping her on the next steps of her incredible journey.
Today, we’re sharing the strategy we’ve developed for her to move through the “FI to Retirement” phase, with a deep dive case study and detailed recommendations. We’re also recording a podcast episode on ChooseFI to discuss the strategy.
If you’re within 5 years of retirement, this post is for you. Along the way, I think you’ll be inspired by Therea’s story. A real-life story of a woman’s journey from Food Stamps to FI to Retirement.
I invite you to come along for the ride…
Theresa was a single mom with two kids at the age of 25. Today, at 44, she's FI and we're helping her figure out how to transition to retirement. Click To Tweet
From Food Stamps To FIRE – A Case Study on Retirement Planning
It all started with this email from Brad:
Hey Fritz — hope all is well!!
Brad
Theresa’s Current Situation
The ChooseFI episode did an excellent job of summarizing Theresa’s journey. Our strategy will provide a roadmap for the coming years, presented as a case study on retirement planning. Before we jump to that, it’s helpful to provide a snapshot of Theresa’s current situation:
- Theresa is 44, husband Paul is 56.
- Paul retired earlier this year.
- Two daughters, 19 and 24.
- Savings Rate: 37%
To protect Theresa’s privacy, we will not be disclosing specific net worth figures during this case study.
When Can Theresa Retire?
The ultimate question on Theresa’s mind is when she’ll be able to join Paul in retirement.
We tackled that problem with two parallel exercises, each conducted independently to “test” the results against each other. The two approaches were:
- Spreadsheet Based: When will a 3.5% Safe Withdrawal Rate cover their retirement expenses?
- New Retirement: New Retirement Planner (with some bonuses thrown in by their CEO).
Below, we’ll review the results of each approach.
Building The Baseline Data
Both methods required a set of baseline data, so we started building spreadsheets as outlined in my series When Can I Retire.
In short, retirement is a math problem.
Income < Spending = Keep Working
Income > Spending = Retire
Unfortunately, figuring out those equations takes some work on the front end, and Theresa and I were diligent as we worked through her numbers. To be consistent, we used the same baseline data for both the spreadsheet and New Retirement Planner methodologies.
- How much will they spend in retirement (including healthcare)?
- How much will she save between now and her retirement date?
- What’s their Net Worth, and what are reasonable assumptions for market returns and inflation?
- What steps should they take to prepare their portfolio for the transition to retirement?
The more accurate the data, the more accurate the plan. As we worked together, we built a personalized spreadsheet to answer the critical questions outlined above. She took the exercise seriously and she put in some work to provide as much detail as possible.
The Current Position
Below is a snapshot of Theresa & Paul’s opening position, which is based on the detailed Net Worth analysis she provided using my free Net Worth template:
Key takeaways from the charts:
- Aggressive asset allocation, with 93% in stocks.
- 63% pre-tax holdings will require a thoughtful Roth conversion strategy.
Methodology #1: The Spreadsheet Model @ 3.5% SWR
Given the “math equation” nature of the retirement question, we focused extensively on the “Income” and “Spending” elements of the equation as we filled out the spreadsheets from my When Can I Retire Series. Since their income will come primarily from investment withdrawals, we calculated future income using a 3.5% – 4.0% Safe Withdrawal Rate against their projected “Retirement Assets” (Net Worth minus Non-Spendable Assets).
After completing their initial Net Worth statement, we had a series of calls focused on how their net worth would change between now and the date she ultimately retired. We built a new tab in our worksheet detailing her savings by year and projected her future net worth based on various market returns and annual savings rates. We had a session analyzing her actual spending patterns and how they were likely to change in retirement.
By comparing how much income she could generate from her investments each year (Net Assets – “Non-Spendable Assets” X Safe Withdrawal Rate) vs. her projected retirement spending (inflated each year), we could quantify the “gap” between retirement income and expenses. For our base model, we came up with the following (Red = income doesn’t cover spending):
* Numbers above represent (Spending Requirements – Other Income – Spendable Assets X SWR). Red means income is below spending, green means income exceeds spending.
In summary, if Theresa and Paul decide they’re comfortable with a 4% Safe Withdrawal Rate, “the numbers” say she could retire as early as 12/31/26. More conservatively, using a 3.5% SWR delays her retirement until 12/31/28.
At this point, Theresa is leaning toward early 2029 as a target retirement date (at age 50), with some flexibility to move it earlier based on how things transpire over the next few years. Based on our spreadsheet model, I agree this is a reasonable approach. We’ll see below if the date was verified using Methodology #2 (The New Retirement Planner).
Methodology #2: The New Retirement Planner
I strongly encourage the use of the New Retirement Planner (affiliate link) for any DIY’er working their way to (or through) retirement. It’s a powerful tool that simplifies all of the steps we took with our spreadsheets, and it offers more comprehensive planning (Roth conversion, tax optimization, scenario planning, downsizing, etc) than can be done in a simple spreadsheet. If a reader only wanted to follow one methodology, I’d start with New Retirement vs. a spreadsheet. The user interface is well done, and the graphics help you “see” the results of your alternatives as you finalize your plan. For my full review on the New Retirement Planner, check out my article “A Retirement Calculator Worth Your Time.”
Knowing I wanted to use New Retirement for this case study, I took the “crowd-sourcing” approach a step further and contacted Stephen Chen, the CEO at New Retirement. Would he be interested in our project with Theresa and, if so, what could he offer? Since Theresa’s already a New Retirement Planner user, he agreed to provide two valuable add-on services (for free) to support this project:
- A coaching call with a Planning Tool specialist, to verify Theresa’s data and answer any questions.
- A consultation with a CFP to review Theresa’s Planner output and provide guidance on the plan.
I should state that this was a valuable offer, but readers shouldn’t feel the need to necessarily pay the extra cost to access them. The planner is very strong on its own, and I’d encourage you to spend some time in the planner before deciding whether or not to pay for the extra services offered.
Regardless, Theresa was thrilled with the offer and both calls were extremely helpful. For the record, Theresa and Paul are planning on continuing to use the New Retirement Planner as their primary tool to track their progress and modify their strategy as she approaches retirement.
A special “Thank You!” to Stephen and the entire team at New Retirement for supporting Theresa and this case study.
Step 1: Confirming The Model’s Data
Theresa and I had a coaching call with Nancy Gates in October as Theresa worked through building her strategy in the New Retirement Planner. I can’t say enough about Nancy – she’s an expert on the New Retirement Planner and an absolute joy to work with. Theresa had several questions about the way data is handled in the calculator (e.g., how to change default assumptions, what various withdrawal methodologies meant, how to change Social Security claiming strategy, etc) and Nancy was able to answer every single one of them.
After the call, Theresa took a few more days to finalize her inputs in the New Retirement model, then sent an email request to Nancy to look things over one last time before our consultation session with the CFP.
Step 2: When Can Theresa Retire? New Retirement says…
Fortunately, the New Retirement output confirmed the conclusion we reached using Methodology #1, with early 2029 being a realistic retirement target for Theresa. The chart at the top of this section shows a 99% chance of success with the 2029 target date. For comparison, below is the output for a March 2028 retirement, which drops to a 93% success rate (still possible, depending on how things transpire over the next few years):
For fun, we also ran a scenario with Theresa retiring yet another year earlier, in March 2027. The chance of success dropped to 86%, confirming that 2028 – 2029 is a more appropriate target date for Theresa.
I should mention there are a lot of interesting dashboard charts available with the New Retirement model, but we have chosen not to share them since they include specific dollar figures. (To see some examples, check out my full review of New Retirement here.)
Step 3: Consultation With A New Retirement Certified Financial Planner
On November 10th, Theresa, Paul, and I had a Zoom call with New Retirement’s CFP, Bruce Lorenz. It was a valuable part of the exercise and gave Theresa and Paul a good opportunity to ask questions as they finalized their base case model. Bruce confirmed they were on solid footing for their 2029 target retirement, and also mentioned that they don’t necessarily need to achieve a 99% chance of success in the model. The more flexible their spending plans, the lower that percentage can be. He encouraged them to not necessarily rule out a retirement in ’27 or ’28, depending on how things evolve between now and then. He then dove into some details on areas of particular interest. For the sake of brevity, a few highlights:
Roth Conversion Modeling: Bruce walked through how to model Roth conversions in the NR planner, and we discussed the best timing for conversions. We considered doing conversions to the top of their marginal tax bracket in ’24 and ’25 (due to a potential change to tax law in ’26), but agreed it would be best to focus on building after-tax liquidity before retirement and wait until the “$0 income years” of early retirement to implement conversions (see “Retirement Strategy” below).
Reducing Stock Exposure: As Theresa approaches retirement, both Bruce and I suggested they consider reducing their 93% stock allocation, with extensive discussion on the merits of Building A Bond Ladder to protect the first 3-5 years of retirement (see Item #4 below for the final recommendation). In addition to the Bond Ladder, we addressed Theresa’s question on the merits of annuities. Bruce suggested annuities could be a viable option given: 1) today’s higher interest rate environment makes them more attractive, 2) Theresa and Paul have no pensions, and 3) the reality that Paul is 11 years older than Theresa and annuities could offer some longevity protection for Theresa. We encouraged them to take some time to review and determine if they’d be more comfortable with a “floor” of guaranteed income covering, perhaps, ~20% of their annual spending needs. This will be a longer-term decision that they’ll incorporate into their final Retirement Drawdown Strategy.
Umbrella Policy: Bruce suggested Theresa and Paul purchase an umbrella insurance policy to protect their net worth. Given the low cost (Bruce cited ~$200 for $1M of coverage), it’s a low-cost product that offers peace of mind. I supported the recommendation, and encourage any readers with a net worth over $1M to do the same.
Encouragement To Spend: Bruce wrapped up the call by challenging Theresa’s assumption that spending would decline in retirement. He encouraged them to discuss their dream retirement and activities they’d like to do together in their younger retirement years. We discussed the book Die With Zero (Amazon Affiliate link) and its message of enjoying activities while you still have your health. Theresa and Paul will run some alternative New Retirement scenarios over the coming months with higher spending in their early years to determine the impact on their plan.
It was a valuable discussion, and Theresa and Paul both expressed sincere gratitude to Bruce and the entire New Retirement team for being a part of this case study.
Strategy Overview – The Final Working Years
In this section, we’ll present the final strategy and tactical recommendations to better position Paul and Theresa for full retirement by 2028/29.
1. Continue To Focus On Growing Investments
Now that Paul’s retired, it will be more difficult to save on Theresa’s sole income. However, their current net worth is insufficient to cover their retirement spending, so Theresa will attempt to save 35 – 40% of her income. If they find they are unable to cover their current living expenses, they will reduce their savings rate to avoid withdrawing investments, realizing this may delay Theresa’s retirement date. In addition, Paul is considering part-time work while Theresa’s still working, and any “side hustle” income he earns will be used to build their nest egg and/or purchase “toys” for their retirement years.
2. Focus on Building Retirement Liquidity
To have sufficient liquidity for retirement, Theresa will be redirecting her savings effective in 2024. While she’ll still save up to the level of her employer’s match in the 401K, she’ll…
- …Increase her savings in her after-tax Fidelity brokerage money market account. She’ll begin to build the cash buffer for their Bucket Strategy, recognizing it will take several years to build to their targeted cash level (~3 years of spending). She’ll also attempt to save 80% of her annual bonus in the Fidelity brokerage account.
- …Increase her savings in a Roth IRA outside her 401k, which will provide funds she can also access without tax penalty post-retirement. These funds will continue to be invested in stocks to capture the longer-term growth necessary to offset inflation throughout retirement.
3. Diversify Tax Location of Assets
Theresa and Paul currently have 63% of their assets in pre-tax accounts. With Paul’s retirement in 2023 (and the resulting lower combined income/tax bracket), Theresa will redirect her new 401k contributions from pre-tax to Roth accounts. In 2023, Theresa had 20% of her paycheck diverted to her pre-tax 401(k). In 2024, she’ll reduce her 401k contributions to 4% of her pay (she gets an 8% match on savings up to 4%, so she’s “getting the match”) and direct those savings to her 401k Roth. With their lower income starting in 2024, this action will allow them to avoid increasing the 63% of their assets already in pre-tax accounts while minimizing the tax impact of contributing to the Roth.
4. Consider Asset Allocation Adjustments to Mitigate Sequence of Return Risk
To avoid Sequence of Return Risk, Theresa should reevaluate her Asset Allocation to determine if she should derisk her position. With 92.7% of their assets allocated to stocks, they do have an increased risk of being forced to make withdrawals amid a bear market early in their retirement.
One recommendation, especially given the more favorable interest rate environment, would be to establish a Bond Ladder. This would avoid the risk of owning bond market mutual funds (which have been in a bear market with the interest rate increases) while also allowing Theresa to earn 5-6% on the money required to cover their spending over the first 3-5 years of their retirement. I started implementing a Bond Ladder in our portfolio earlier this year, and provided all of the details on the approach in How To Build A Bond Ladder.
Theresa and Paul will also do more homework on annuities and determine if they’d like to layer in several tranches of annuities over the coming years to build a guaranteed income floor.
5. Practice Living on a Retirement Budget While Still Working
Ideally, Theresa and Paul will be able to live on their retirement budget in her final years of work, allowing her to save the difference. Her initial savings target of 37% will be a bit of a stretch goal, but she’d like to start with a more aggressive savings rate and only reduce it if they find they’re unable to live on the balance. It’s a reasonable way to easily “test” your budget by automating the process. Simply adjust your take-home pay by adjusting your savings, and you can easily determine a realistic spending budget without having to track all of the details.
6. Monitor Annually
As each year comes to a close, Theresa will update their Net Worth spreadsheet and compare it to the baseline model we developed for this case study. She’ll immediately know if she’s on track and if adjustments are required for the following year. In addition, she’ll update the New Retirement Planner and continue to use that model as her DIY guide through her final years of working.
7. Other Non-Financial Recommendations
While this case study has focused on the financial aspects of retirement planning, I’d be remiss if I didn’t touch on the non-financial preparations Theresa should take as she nears retirement. As I mentioned in Shining The Light on Retirement Blind Spots, the majority of retirees don’t realize the importance of focusing on the non-financial aspects of the retirement transition, and have a more difficult transition into retirement as a result. I’ve written dozens of articles on this topic (as well as a book dedicated to the topic, Keys To A Successful Retirement), and encourage Theresa to carve out some time starting 1-2 years before retirement to spend as much time as possible on the non-financial aspects.
Further Reading on non-financial planning for retirement:
- 20 Steps To Take In The Year Before Retirement
- The Ultimate Retirement Planning Guide
- 11 Lessons Learned On The Path To Retirement
- Introducing The 90/10 Rule of Retirement
- The Dark Side of Retirement
- The Ultimate Pre-Retirement Checklist
Drawdown Strategy Overview – The Retirement Years
As Theresa retires, they’ll experience the transition from the Accumulation Phase to the Withdrawal Phase. As I wrote in Our Retirement Investment Drawdown Strategy, having a strategy that extends through the retirement years is a critical element of retirement planning. Below are some steps for her to consider as she approaches and crosses “The Starting Line” of retirement, all of which should be incorporated into a written Drawdown Strategy before retiring:
1. Create A Retirement Paycheck
The biggest financial impact of retirement is the elimination of the paycheck. As I wrote in How To Build A Retirement Paycheck, retirees need to develop a strategy that provides an inflow of cash to meet their spending needs while living within their Safe Withdrawal Rate. Theresa is well on her way to developing this strategy with the steps she’s taking in her final working years (increasing liquidity, redirecting pre-tax contributions to Roth, building a Bond Ladder, and evaluating annuities), but the execution of this strategy will extend well beyond her retirement date.
2. Roth Conversions Vs. Health Insurance
With 63% of their portfolio in pre-tax accounts, Theresa and Paul would like to use the “low-income” years of her early retirement (and, before Social Security starts) to make Roth Conversions. However, they were also planning on using ACA for health insurance, and the subsidies they are planning on could be eliminated by aggressive Roth conversions. To counter this risk, Theresa is considering using a Health Sharing plan for insurance but recognizes these also come with some risk. Before retirement, she and Paul will evaluate their options to finalize their approach for balancing low-cost health insurance and Roth conversions. As I wrote in Health Insurance in Retirement: Unsolved, I was in the same position as Theresa as I approached my retirement. I figured it out, and I’m sure she will as well.
New Retirement has an excellent Roth Conversion Calculator (free for anyone) that Theresa plans to use after her retirement date. The goal will be to convert as much as they can annually while continuing to qualify for their ACA subsidies (or, alternatively, choose a Health Sharing plan) while also optimizing taxes and avoiding the IRMMA penalties. Also see: How to Model Roth Conversion Strategies in the New Retirement Planner.
3. Social Security Optimization: Theresa used the Open Social Security calculator developed by Mike Piper, which I featured in my article How To Determine When To Claim Social Security. Based on the model, Theresa and Paul are planning on implementing the model’s recommendation:
- Paul will delay his claim until age 70 (July 2037)
- Theresa will file at age 62 (February 2041)
Based on the model, this will maximize the net present value of their social security. For more details on the model, you can read all of the details in my article on the topic. As part of the “crowdsourcing” approach to this case study, I contacted Mike Piper regarding Theresa’s question about how to model retiring early and “having some $0 earning years.” She was concerned about retiring early and having her SS negatively impacted since she wouldn’t have a full 35 years of earnings in the SS benefit calculation. Mike provided this handy link to SSA Tools. In full transparency, I’ve not reviewed the SSA tool calculator, but Theresa said it was able to answer her question to her satisfaction.
Further reading on Social Security from ChooseFI’s 10/17 FI Weekly e-mail:
- How to Calculate Your Social Security Benefits from Social Security Intelligence
- Early Retirement and Social Security from our friend Sean Mullaney the FI Tax Guy
- Should You Trust Your Social Security Benefits Estimate from Social Security Intelligence”
4. Enjoy Life!
I was pleased that Bruce encouraged Theresa and Paul to re-evaluate their plan to potentially spend more in their early years of retirement. It’s hard to change a lifetime habit of saving, but learning to spend is an important skill to develop in retirement. We’ve worked hard to get here, and we should seek to fully enjoy our early years of retirement while we still have our health and can pursue our dreams. Of course, we need to balance that against financial responsibility, but the reality is that most “responsible” retirees spend less than they could. The value of learning to spend is becoming a more common topic in the FI community, as mentioned in ChooseFI’s recent podcast episode Spending For Happiness, which I encourage folks to listen to.
5. Conduct An Annual Financial Review
Despite the detailed plans Theresa has put together through this case study, life never plays out exactly as planned. Theresa and Paul will need a formal annual financial review process to manage their changing portfolio throughout retirement. As outlined in A Step-By-Step Guide For Your Annual Financial Update, this process allows a systemic approach to ensuring you don’t outlive your money and focuses on the critical steps necessary to optimize your portfolio (rebalancing your asset allocation, refilling your buckets, reviewing your spending, etc).
I know Theresa and Paul will be diligent in reviewing their finances. They’re on top of things, and their retirement looks bright.
I also suspect they’ll worry a lot less about money after retirement than they are in their final years of work. It’s a strange phenomenon, but The 90/10 Rule happens to most of us. When it happens to you, Theresa, I’ll be the first to say “I told you so.” Wink.
Conclusion
I’ve had dozens of readers ask me if I’d be willing to review their situation and provide advice on what steps they need to take to prepare for retirement.
I always say no.
It’s not that I’m rude. Rather, it’s a question of how to use my limited time to produce the most value for you, the reader. I seriously considered pursuing Retirement Coaching but decided against it. As you can see from this case study, providing individual advice is a lot of work. At this stage in my retirement, I feel my time is better spent writing articles that can help thousands of people vs. investing that same amount of time in individual coaching that would impact only one family. I trust you understand.
Today, I made an exception.
With her amazing story, I was honored to help Theresa and Paul figure out their next steps. It was also fun to participate in the “crowdsourcing” approach to help them finalize their retirement plans.
In the process, I hope I’ve also given you things to think about as you finalize yours.
PS – If you’re not using the New Retirement Planner (affiliate link) please take a look as our way of saying “Thank You!” to the New Retirement team for their support of this crowd-sourcing effort. If you’re a DIY’er, I believe you’ll find it of value.
Your Turn: What advice would you give Theresa and Paul as they figure out their next steps? Let’s take the “crowd-sourcing” approach to the next level. See you in the comments…
When you show Theresa& Paul’s net worth, and when you confirm he is 56 and 12 years older, I have to wonder to what extent was her FI as much a function of who she married – someone who must have been a diligent conservative in financial decision making who was able to retire at age 56, and to what extent is her 2029 RE a functions of the decisions her spouse made/will make regarding pension payouts, 2nd careers, Social Security, etc. and to what extent is it attributable to that amazing 37% savings rate.
I also wonder about the impact of being an empty nester – with what are obviously self reliant young adult children.
Great story, but potentially very unique and not illustrative of everyday, every person FIRE opportunities.
Thx. Jack
Hi Jack!
Theresa here. Paul had a been saving about 6-8% throughout his career & he took a big loss during The Great Recession in 2009. When we married in 2014 he had more in his 401k than I did but nothing too impressive. By this time in life we each made a good salary & received nice bonuses each year so we focused on paying off the mortgage.
It was when I learned about the FIRE movement in 2018/2019 that we decided to ramp up our savings rates which fluctuated from 30% to 45%. We are both naturally frugal because of our lean times in both of our pasts. Paul had a small pension that he took as a lump sum when he retired this year so that we could invest on our own & manage the drawdowns.
Plot twist! Our youngest moved back home after the ChooseFI episode was aired. Not a big financial setback to us but it’s helping her focus on community college & part-time work. She doesn’t pay us rent but she does pay for her cell phone bill & car insurance premium. She is otherwise paying for her own clothes, wants & fun stuff.
Jack,
I’ll add a unique twist to your comment. Had Paul NOT married Theresa, he would NOT have been able to take advantage of the early retirement package from his employer this year. I’ve reviewed their financials in detail, and I can assure you Theresa has contributed a strong share of their savings. I suspected some would conclude “Oh, so she married some rich guy,” but I can assure you her diligence and work ethic are well above normal and major contributors to her ability to retire early.
That said, there’s no doubt that being married makes FI an easier task than someone going solo. Both Paul and Theresa are in better positions as a married couple than they would be individually. And THAT, may be a core message that’s counters your argument that their situation is “very unique and not illustrative of everyday, every person FIRE opportunities.”
Also, a second main reason for writing this post (in addition to helping Theresa) was to demonstrate a process for any reader who is trying to figure out when they can retire. That message, I trust, will be something every reader facing a retirement decision can benefit from.
Great article! I don’t understand how the numbers lead to retiring earlier (2025) if the SWR is higher, (4%) and later (2027) if the SWR is lower(3.5%) . Can you speak to this?
Sandy
Sandy, thanks for the question, a brief example may help. Assume (for easy math) you have $1M. Using a higher SWR allows you to pull a larger $ figure from your portfolio, which means you can retire earlier. Here’s the math:
$1M @ 3.5% = $35,000/year
$1M @ 4% = $40,000/year
If you need $40k to cover spending, you’d be able to retire now at 4%. If you go with 3.5%, however, you’d have to continue working since you’d only be able to pull $35k from your portfolio, $5k short of your spending needs. Hope that helps!
Fritz, you are awesome. What a fantastic opportunity you provided for this couple! God bless you.
Hello Fritz,
This was a great post. You should consider becoming a certified financial planner. The process is really fun and interesting. I started taking the necessary classes @ age 56 while still working, passed the exam 1 1/2 years later (a scary experience for me I admit, as the exam took two days and was not computerized – I was literally shaking went I walked into the exam room my first day it‘s a computerized one day exam now). Classes were in person through a local university extension program where I met amazing instructors and classmates who were also career changers, many of whom are still friends. It took me another few years to gain the necessary experience (which you already have), but I finally got those CFP(r) marks in my early 60s, beginning the best years of my working life. I‘m now retired but am so thankful I had the opportunity to try a second career so late in life.
Best of luck to Theresa and Paul!
Sabine, thanks for the encouraging regarding the CFP. I considered it (and expect I’d enjoy studying for the exam), but the 3 years of required work experience have always been a deal breaker for me. Unfortunately, my blogging experience wouldn’t count toward that, since to my understanding the experience has to be with a financial planning firm and, at 60 years old, I have no intention of going back to work for 3 years to secure the CFP designation.
Proud of you for taking the plunge at age 56, and pleased to hear you’re enjoying your second career!
Contact Mary Beth Franklin @ Investment News – her writing counted as work experience.
I don’t want to sound negative because I’m sure that’s how my comment will sound and I don’t know how to add some cheereful lipstick on this ‘pig’ aka presentation. The story is fine and definitely inspiring and I don’t have any problems with it as Jack expressed above. My issue is this lack of transparency of the math behind the numbers despite the proclamation as a must read piece for people retiring within 5 years. To protect Theresa’s privacy, you could have deflated her numbers (NW, expenses, income, etc.) but shown the math so other people can really learn. I also tried to find the mentioned spreadsheets in the old series to no avail. Since I wasn’t inclined to play “I Spy” today I gave up looking for them very quickly. I think I prefer Big ERN’s case series which were much more clear and don’t involve guessing baseline numbers.
The story is great, but there is little to learn mathematically. However, thanks for the plug about New Retirement. I have an old account with them. I might need to splurge on an yearly subscription and play with my numbers there. BTW, since you’re a member of Rock Retirement Club, have you used their software? If so, how comparable or different is it from the New Retirement?
Happy Holidays!
No worries, Capito. We’re all entitled to our opinions, and I’m a big supporter of free speech. Sorry the lack of transparency on the numbers came across as a pig. Sorry about the “I Spy” game, I’ll have to go back to that series and have a look.
As for the RRC software, I’ve not tried their program. They’ve changed it several times over the years, and I lost my enthusiasm for re-entering all of my numbers when they changed programs. I’ve also found much less interest in running the numbers after I’ve retired (as I mention in my “90/10 Rule” article, it’s a strange reality of retirement that many folks focus much less on the numbers post-retirement).
Cool story Fritz. Quick question on umbrella insurance. I used to always have it when I owned a home but when I asked around, I could never find anyone that actually used it on a claim. It sounds sensible. Have you seen any real numbers on percentage of claims, etc.? All of the other insurance products (home, life, auto, health, LTC, etc), I was able to personally experience or find individuals that have benefited.
Interesting case study, thanks for sharing. I am wondering if part of the process included looking at how they would fare if each ended up single due to death or divorce?
Mrs. Groovy and I are currently threading the needle between ACA subsides and Roth conversations. We’ve found that as long as your AGI (including your conversion amount) doesn’t exceed 200 percent of the federal poverty level for your household, your ACA subsides will be unaffected. Here’s an example:
FPL for a family of two: $19,000
Income: $26,000
Less capital loss: $3,000
Less HSA contribution: $4,800
Pre-conversion AGI: $18,200
Roth conversion: $19,800
AGI: $38,000
I hope this helps early retirees who are getting ACA subsides and have a traditional IRA. Great post as usual, Fritz.
Since the first day of human cooperative living, we always have the 10% on top and the 10% on the bottom of the population theatrical drama.
The remaining 80% of the population is the actual foundation of the society that is steadily and cautiously moving toward progress (the NORMAL PEOPLE).
And if you are agree with this analysis, you will clearly see the bottom 10% is the fallen behinds in every generation (Boomer, X, Millenials and YaDiYaDi).
Note that this 10% on the bottom includes young children, elders and sadly young adults who chase “SHINY OBJECTS” and of course petty thieves.
What about the 10% on top? They are the early adopters of the leap in advancements and they are SELLING their version of understanding of the advancements.
Note that this 10% on the top includes the GENIUSES and the SHARKS.
Ironically, the top 10% and the bottom 10% have one thing in COMMON; they want the remainder of the 80% of the population pay for their livelihood.
So here is the million dollar question – are you willing to pay?
If you live long enough, the answer will be apparently and unequivocally “YES”.
When you are paying the 10% on the bottom, it is called “CHARITY”.
When you are paying the 10% on the top, it is called “INVESTMENT”.
As a member of the NORMAL population, all you need to figure out is the “Goldilocks” ratios of “CHARITY” and “INVESTMENT”.
Ignore all the dramatic noises as they can make you feel like there is something wrong with your life and it is urgently needed a quick fix.
The Retirement Manifesto is a good “INVESTMENT” if you are falling behind financially.