Dirt Cheap retirement FERS at 55

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So what kinds of adventures are you wanting to have while you still can, offroad? how long do you think you'll be able to do them before you can't? Just because others at work you see with bad knees and whatnot at 60, doesn't mean it has to be that way for you if you've been taking care of yourself, especially not smoking. I went on a professional trip to China years ago with a hyper 72-yo who worked for an east coast land conservancy after retiring as a math professor somewhere. I wanted to call him the energizer bunny, he was so hyper and full of beans and life energy. fun, almost exhausting to be around, mental energy as well as physical energy.
 
Boghie said:
OffRoad,

If you stay a resident of South Carolina (from your profile and assuming single), your $42K income will be taxed $9,300 (Federal + State) leaving you $32,700. That is $2,725/month or - if you prefer a 2 week paycheck - $1,260/pay period. You will pay the 7.5% Social Security/Medicare tax only on the $10K of work income so that reduces the take home to $2,660/month or $1,230 every two weeks.

So, your after tax take home is $2,660/month

Then you will have space rent (if at a campground), fuel, medical, food, utilities, entertainment, dining, clothing, repairs, and future replacement cost for your vehicle which you will have to have a huge down payment or pay in cash, etc... That brings up something, folks with no money get no credit. If you decide that the Mountain Man lifestyle isn't what you want than a house is a cash investment, renting will be difficult as well.

It can be done. But go in with both eyes open and don't expect the GenXers to vote for extended benefits. I would assume the 25% Social Security cut - and maybe even a 25% Federal pension cut. You can feel the ripples now as politicians (actually both sides if you listen clearly enough) start prepping the battlefield.

By the way, earning $42K/year makes you middle class - not poor. That means that you will be means tested in any Social Security fandango future politicians come up with to purchase the votes of their younger voters.

Again, it can be done. I remember living off that kind of income as a student.
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I don't think your estimate for state/federal income tax is accurate. I believe the total tax would be around $6,000. Maybe you didn't deduct the personal exemption ($4,050) and standard deduction ($6,300).
 
Boghie said:
I used the 'South Carolina Income Tax Brackets Estimator'. It apparently takes into account the standard deduction.

But, ripper, you are right. There are probably tax yak not included. Very rough estimate - but you should see Kaleforea!!!
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Glad I live in a state with no income tax and a lower-than-average cost of living...especially since my job pays the same in 48 states.
The federal tax for a single person earning $42,000 in 2016 claiming the standard deduction is $4,284.
 
offroad, I like your train of thought. It's refreshing to hear from someone who doesn't appear to require a large amount of retirement income. As long as you are content with the lifestyle that income provides and are a good money manager, which you appear to be, I think it would work.
Have you considered buying a multi-family dwelling and living in one of the units? I ask this because that's what I did many years ago following a divorce which left me with about nothing.
You can buy a 4-plex on the same terms (down-payment required and mortgage rate) as a single-family dwelling as long as you live in it. The rent from the other three units should be more than enough to pay for the mortgage payment, taxes and insurance. It could also lower your income tax since you can deduct depreciation, give you a hedge against inflation and allow you to build equity.
I realize not everyone wants to be a landlord, but it worked out well for me, especially when I was living on-site.

For myself, I think that instead of withdrawing $20k from TSP each year, I would withdraw 5% of the balance each year. For example, if your TSP balance was flat the first year, withdraw 5% of $380K ($19K) the following year. That way you could help to ensure that your TSP balance will remain sizable over time without it having a major effect on your income. That's what I'm planning to do, anyway.

I wish you the best. Hope it works out for you!
 
ripper said:
offroad, I like your train of thought. It's refreshing to hear from someone who doesn't appear to require a large amount of retirement income. As long as you are content with the lifestyle that income provides and are a good money manager, which you appear to be, I think it would work.
Have you considered buying a multi-family dwelling and living in one of the units? I ask this because that's what I did many years ago following a divorce which left me with about nothing.
You can buy a 4-plex on the same terms (down-payment required and mortgage rate) as a single-family dwelling as long as you live in it. The rent from the other three units should be more than enough to pay for the mortgage payment, taxes and insurance. It could also lower your income tax since you can deduct depreciation, give you a hedge against inflation and allow you to build equity.
I realize not everyone wants to be a landlord, but it worked out well for me, especially when I was living on-site.

For myself, I think that instead of withdrawing $20k from TSP each year, I would withdraw 5% of the balance each year. For example, if your TSP balance was flat the first year, withdraw 5% of $380K ($19K) the following year. That way you could help to ensure that your TSP balance will remain sizable over time without it having a major effect on your income. That's what I'm planning to do, anyway.

I wish you the best. Hope it works out for you!
Click to expand...


tried the real estate landlord thing. If you have any property problems (lead paint even if sealed, asbestos even if sealed, radon gas even if vented); and you tenants get any sickness; you will get sued for it. Or you can take a bath with landlord eviction process that could take months. not what I want for stress.

As far as 5% withdrawel. I like that idea. Actually might just make it half or whatever percentage I made in the previous year. so if I make 10% I will withdraw 5%.
 
offroad said:
I will have 27 years at 60


Sent from my iPhone using Tapatalk
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You qualify for the FERS Supplement at age 60 with 27 years service. Plus you qualify to keep your FEHB. At age 55 with only 22 years service you generally don't qualify for any FERS pension or supplement or FEHB unless you're on an early out or law enforcement. The most you could do is defer the pension until age 60.

Rules from Document 9921:
The special retirement supplement is payable if you retire with an immediate benefit and have at least
one calendar year FERS service.

*At the Minimum Retirement Age with 30 years service
*At age 60 with 20 years service
*Under the special provisions relating to firefighters, law enforcement personnel, air traffic
controllers, and military reserve technicians. (The earnings test does not apply to these
retirees until they reach the MRA.)
 
Clarification on the MRA +10 retirement. You can retire at the MRA with at least 10 years service, but it is subject to a reduction:
[TABLE="width: 256"]
[TR]
[TD="colspan: 4"]If you had 10 or more years of service and [/TD]
[/TR]
[TR]
[TD="colspan: 4"]retired at the Minimum Retirement Age (MRA),[/TD]
[/TR]
[TR]
[TD="colspan: 4"]your benefit was reduced by 5/12 of 1% for each[/TD]
[/TR]
[TR]
[TD="colspan: 4"]full month (5% per year) that you were under[/TD]
[/TR]
[TR]
[TD="colspan: 4"]age 62 on the date your annuity began. However,[/TD]
[/TR]
[TR]
[TD="colspan: 4"]your annuity was not reduced if you completed[/TD]
[/TR]
[TR]
[TD="colspan: 4"]at least 30 years of service, or if you completed[/TD]
[/TR]
[TR]
[TD="colspan: 4"]at least 20 years of service and your annuity[/TD]
[/TR]
[TR]
[TD="colspan: 4"]began when you reached age 60.[/TD]
[/TR]
[TR]
[TD="colspan: 4"]You could have reduced or eliminated this age[/TD]
[/TR]
[TR]
[TD="colspan: 4"]reduction by postponing the beginning date of[/TD]
[/TR]
[TR]
[TD="colspan: 2"]your annuity.[/TD]
[TD][/TD]
[TD][/TD]
[/TR]
[/TABLE]


Skorcher said:
You qualify for the FERS Supplement at age 60 with 27 years service. Plus you qualify to keep your FEHB. At age 55 with only 22 years service you generally don't qualify for any FERS pension or supplement or FEHB unless you're on an early out or law enforcement. The most you could do is defer the pension until age 60.

Rules from Document 9921:
The special retirement supplement is payable if you retire with an immediate benefit and have at least
one calendar year FERS service.

*At the Minimum Retirement Age with 30 years service
*At age 60 with 20 years service
*Under the special provisions relating to firefighters, law enforcement personnel, air traffic
controllers, and military reserve technicians. (The earnings test does not apply to these
retirees until they reach the MRA.)
Click to expand...
 
offroad said:
yes I know I will need to buy obamacare at $250 a month, plus $5000 deductible. rolling the dice on medical as most anyone really does.
Click to expand...
What are you doing for insurance now? I know you have to be enrolled in FEHB for 5 years in order to take it with you, but it is probably one of the best benefits Federal employees have. I think it is feasible to live on $40K/year, many people live on less. Check out $40K Challenge: http://lenpenzo.com/blog/40000-2 & http://lenpenzo.com/blog/id1283-if-you-cant-live-on-40000-per-year-its-your-own-fault.html

If I had not gotten VERA, I was looking at possibility of changing from FT to PT or taking more time off with LWOP until I reached MRA--my own version of phased retirement. When they furloughed us several years ago, I really like having shorter weeks/longer weekends.

If you are living off the grid/boondocking, how do you manage without a permanent address? One place you might save money would be to establish residence in state that doesn't have any state income tax. For those with state income taxes, many exclude some portion of certain types of income like pensions (note: some are based on age so may not be immediately available at MRA). It may be worth looking into different options as where you choose to live could also make a big difference in how far your money will go.

I think many people work so hard in maximizing how much they can get rather than looking at how much they really need.

Good Luck in whatever path you chose to take.
 
evilanne said:
What are you doing for insurance now? I know you have to be enrolled in FEHB for 5 years in order to take it with you, but it is probably one of the best benefits Federal employees have....

...

I think many people work so hard in maximizing how much they can get rather than looking at how much they really need.

Good Luck in whatever path you chose to take.
Click to expand...

Evilanne,

You raise TWO excellent points !!!

I, too, believe that carrying over FEHB benefits into retirement is SO important, and a "bennie" that is not appreciated or discussed as much as it should be !!! I've been retired for 4 years now (57 Y.O. ; MRA ; 32 years ; FERS...when I left...), but I wasn't going to go until I met that 5 year FEHB...long story !!! :D OTOH, for the younger Feds around here...who knows if that particular bennie will be available, when they retire... :eek:

Also : LOTS of discussion around here about how much money to make...and the media bombards us with "running out of money in retirement" scary stories... I'm with you....how much money do I NEED ???

Granted...a difficult question to answer ! ...but my advice to people contemplating retirement, both as Feds, or outside...is to ask : "Do you have a budget now ? Do you know how much you spend, and what you spend it on now ???" A key bit of information, in ANY "retirement planning" !!!


Stoplight...
 
I, too, believe that carrying over FEHB benefits into retirement is SO important, and a "bennie" that is not appreciated or discussed as much as it should be !!! I've been retired for 4 years now (57 Y.O. ; MRA ; 32 years ; FERS...when I left...), but I wasn't going to go until I met that 5 year FEHB...long story !!! OTOH, for the younger Feds around here...who knows if that particular bennie will be available, when they retire...

Also : LOTS of discussion around here about how much money to make...and the media bombards us with "running out of money in retirement" scary stories... I'm with you....how much money do I NEED ???

Granted...a difficult question to answer ! ...but my advice to people contemplating retirement, both as Feds, or outside...is to ask : "Do you have a budget now ? Do you know how much you spend, and what you spend it on now ???" A key bit of information, in ANY "retirement planning" !!!

Hello Stop, not to be one of the fear mongers but my mother who had dementia and alzheimers for nearly 18 years before she died went through nearly a million dollars in assisted living and nursing home facilities costs. Fortunately my dad was a triple dipper so she had retirement income and substantial investment income to see her through. She was overinsured with Medicare, FEHB, and Tricare and only paid minimal prescription costs. It can be extremely scary how these long term care costs can add up. I highly recommend that future retirees consider long-term care coverage in their retirement planning. Best of luck to all!
 
In recent years, LTC Insurance has been available through OPM (John Hancock), but it can get really expensive depending on your age and options selected. Each situation is different, but it seems like it would be better to set assets or a portion of your investments aside to cover these types of costs, if necessary, in the future.
Another Big Long-Term Care Insurance Premium Hike
Forbes Welcome



Reason to stay with FEHB (not rely on Obamacare):
Obamacare company shutdown leaves customers in a lurch, facing higher costs
Obamacare company shutdown leaves customers in a lurch, facing higher costs - Chicago Tribune
Forbes: Obamacare's Low-Cost Co-ops Going Bankrupt
Obamacare's Low-Cost Co-ops Going Bankrupt, Forbes Reports

 
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