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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We recently retired at 61 with $5M in the bank - combination of investments and savings accounts.    Primary house paid off, $1M in equity.

Monte Carlo simulations reflect 93% probability of success

Mortgage on second home, $1,750/month for another five years.  Sell primary in five years, purchase downsize for $650K.

Plan on taking SS at age 67.

Financial plan reflects 2.75% inflation each year.

Our financial plan includes (each adjusted for inflation each year):
$200K LTC Insurance policy
$160K/year discretionary spending
$40K/year in travel up to age 75, $10K/year after that
$24K/year healthcare up to age 65, $12K/year after that
Two new cars every eight years.
Taxes on investment withdrawals

At 93, forecast is to have $5M left over, $2.5M with “bad timing” model, which reflects 12% portfolio downturn in first two years and increased inflation up to 4.75%.[/quote]

Sounds great. Can you recommend who did this retirement plan/portfolio for you?[/quote]

Early retired law firm partner here.  I haven't been on here in a while.  Some posters hate me for some odd reason ha ha.  But anyway . . .

A couple years ago Schwab did something like this for us for free.  It's something that many brokerage firms offer to clients with healthy balances in their accounts.  I found it to be helpful, as least in confirming where I thought we were and where we were going.

When I retired about 11-12 years ago I was in the early 50s with a net worth (including home equity) of about $4 million.  We were collecting modest rent from a condo and a basement apartment at the time.  We've since sold the condo.  I also took advantage of Rule 72(t) which another poster mentioned and withdrew without penalty a small amount from one of my smaller IRAs for a few years.  I also received a pretty large cash payment (mid 6 figures, I recall) from my firm as a return of my capital; it was tax free at the time since it had already been taxed in the years that the firm held it back in the first place.  Finally, the firm allowed us to stay on its health care plan with me paying the full premium (which I'd been doing the whole time I was a partner anyway).  And I eventually rolled over my 401k to an IRA and agreed to allow Schwab to manage it and diversify it away from just the S&P 500, where I'd always kept my entirement retirement portfolio literally from the get go.

In the 11+ years since I retired our net worth has more than doubled to what today is about $9.2 million.  $7.2 million of that is in liquid accounts (retirement and brokerage and money market); the remaining $2 million is equity in our primary and second homes.  During all this time we have lived very well while budgeting about $250k a year.

Because of our diversified portfolio, most years we have been able to structure things so we ended up paying little to no federal income tax (last year's total was under $200).  This hasn't always been the case.  A couple years ago, for example, we stepped in without a whole lot of notice to fund a kid's down payment on a house, which required us sell some things and raise our taxable income.  On the bright side, though, we learned a few things that we really hadn't focused on before and it's benefiting us now for future planning.

Specifically, there are various caps on taxable income where once crossed you loose significant tax breaks that taken together can really add up.  To name a few, the senior citizen 50 percent discount on your DC property taxes; the $12,000 Trump addition to your standard deduction, and the lowest tier of monthly Medicare premiums.  Knowing all this now made us realize that it's not smart to make Roth conversions in a vaccum while only paying attention to your tax rate.  The math is far more complicated due to all the moving parts and frankly is pretty confusing.

Anyway, having said all this, the real point is that you definitely do not need $10 million or more to retire comfortably.  We still don't have that and we've been more than fine for many years.  You have to take into account not only how much you have but what your fixed costs are.  If you don't have kids to put through college; if you don't have a heavy mortgage around your neck; and if you have access to some kind of reasonably priced health insurance you're three quarters of the way there already.  (In our case, we still have a mortgage on our primary residence but the interest rate was set at 1.7 percent for the first seven years and we have a couple years left on it so we haven't touched it.  We realize we're in an unusual situation on that score.)

We elected to take social security a few years early and still have basement rent coming in.  With those income streams to supplement our withdraw rate from our retirement and brokerage accounts has been lower than 2.5 percent, which any financial advisor will tell you is extremely conservative and ultimately can only lead to the balance going up.

Many on DCUM will insist, of course, that $250k a year isn't enough.  Personally, I disagree.  We are comfortably maintaining two very nice homes, with cleaners and yard workers for both; we travel abroad frequently; help out the kids extensively, eat well and often out; etc.  We really don't want for anything--we're not big on high end indulgences and never have been--and of course we've been conservative enough that if we ever did want or need something grand we could swing it.

Which brings me to my final point:  long term care insurance.  We elected not to buy a policy after being advised they're often not cost-effective and in our case we could comfortably self-fund long term care anyway if it came to that.

The bottom line is that everyone's situation is different, but personally I'd say that if your fixed costs are low (translation:  your kids are launched and your mortgage isn't crazy) and you have a few million saved there's no reason why you can't retire if you really want to.  You don't need $10 million for Pete's sake.  Not even close.

[/quote]
Nice to see you back! I responded to a post of yours last year to let you know you that your contributions to this forum made me less anxious about taking a VERA/early out from the Federal government last year. 14 months later, I’m beyond thrilled with this decision. [/quote]

Can you elaborate on structuring your portfolio so no federal income tax was paid ? Is it due to real estate depreciation or managing your stock portfolio in a specific way ?[/quote]

My situation may be somewhat unique.  I also know it's not going to last forever.  Eventually I'll be faced with some pretty hefty RMDs no matter what I do.

Having said all that . . .

I was an equity partner in my DC firm for about a decade.  My capital contributions were withheld from my end of year distributions each year, but were still required to be reported as income each year and therefore taxed each year.  After I retired all of my capital contributions were refunded to me in a lump sum.  It was a large amount, somewhere in the mid six figures, and having already been taxed it was returned tax "free."  Beyond that, I had maybe a few hundred thousand in a brokerage account outside of retirement, all in the S&P 500.  I added the capital account refund to that account and again put it all in the S&P 500.

Add all that up, and I basically started out my early retirement with around $1 million outside of retirement accounts. At the time, I was also bringing in about 60-70k a year in rents on the basement apartment and a condo that I've since sold.

Because my initial withdrawals from my brokerage account these first years of retirement were largely "new" money, the capital gains were minimal and I stayed in the zero percent capital gains tax bracket.  And on paper at least the rents were largely offset by legally claimed expenses, resulting in very little potentially taxable income there as well.  In the end, what little income I ended up having to report was erased by either the standard deduction or itemized deductions, depending on the year.

That's basically how things worked for many years.  And, thanks to the bull market, all of this time the balance in the account remained steady.  In fact, it's still $1 million+ today.

In more recent years my success in avoiding federal taxes completely has been more varied.  As I said earlier, I took a hit in 2024 from helping a kid out.  In 2025, though, paid virtually nothing.  Glancing now at my return, I reported around $150k in income, but more than half of that was capital gains taxed at zero and another 1/3 was social security (which we elected to take early).  Rents were zeroed out by expenses and not subject to tax.  And I itemized and had 43k in deductions.  Bottom line: virtually no federal taxes due, although I did pay DC taxes.

[/quote]

Thank you this is very helpful [/quote]

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