2nd check with the fine folks here

[robnplunder]

I've posted the following about 6 months ago.

http://www.early-retirement.org/forums/f26/one-final-check-with-fine-folks-here-74457.html.

The consensus was that I may be taking a too much of risk to retire and I vowed to revisit the post 6 months later. Since then, the only change is that my investment portfolio have gone from $1.75M to 1.90M.

1. Ages = 53 (DW & I). Total asset = 2.25M (350k in house equity), SS in 10 years at 63 = $38k.
2. 45/55 investing.
3. Yearly expense = $100k and room for reduction if needed, Firecalc = 100% using Bernicke spending model. Fails otherwise. Willing to reduce it to $90k/year when push comes to shove.
4. Current income = 250k/year, current yearly asset increase = $200k/year
5. Pressure points to quit = desire to goof off rest of my life, and my psycho boss (otherwise, my job is ideal).
6. Conflict = 2 - 4 of OMY can add 350k - 800k to my ER fund which means I don't have to LBYM in ER, can travel the world, assist family members/relatives in financial need

Any input/suggestion will be much appreciated.

 

[sengsational]

Have you plugged your numbers into i-orp? You might be pleasantly surprised enough to bail out.

 

[2017ish]

....
The consensus was that I may be taking a too much of risk to retire and I vowed to revisit the post 6 months later. Since then, the only change is that my investment portfolio have gone from $1.75M to 1.90M.

1. Ages = 53 (DW & I). Total asset = 2.25M (350k in house equity), SS in 10 years at 63 = $38k.
2. 45/55 investing.
3. Yearly expense = $100k and room for reduction if needed, Firecalc = 100% using Bernicke spending model. Fails otherwise. Willing to reduce it to $90k/year when push comes to shove.
4. Current income = 250k/year, current yearly asset increase = $200k/year
5. Pressure points to quit = desire to goof off rest of my life, and my psycho boss (otherwise, my job is ideal).
6. Conflict = 2 - 4 of OMY can add 350k - 800k to my ER fund which means I don't have to LBYM in ER, can travel the world, assist family members/relatives in financial need

Any input/suggestion will be much appreciated.

Roughly speaking we are in similar situation, albeit with some changes in the numbers. We made the decision that #6 in your list was important enough to work several more years. We neither one have a psycho boss and generally speaking like what we do even with the time demands--and for more than half our lives, have been looking forward to traveling the world without concern.

Intensely personal call though. If we were willing to travel internationally just a month or two a year, and plan budget conscious trips, we could be finished now. Many/Most people would say we are nuts to still be working, as we could drop dead next week.....

 

[papadad111]

Just had my MiL and aunt visit us for my sons HS graduation and site seeing. MiL was fine but dear aunt huffed and puffed her way through the visit. At 72 it's likely her last big international trip unless her stamina and general health improves. Neither of their husbands could make the trip. They are all early to mid 70s. My mom could not make the trip due to health issues either.

My point: I see too many "old people" trying to travel the world and even when "successful" at least half are struggling through it as a bucket list item versus really being healthy enough to enjoy it.

I suggest to FIRE and if Travel is on deck, do it while you are younger and healthy. The window really is 50-70 for the majority of people - especially if u enjoy traveling with a spouse.

Really pay attention to what you want to do and make some decisions based on that.

 

[ulrichw]

Bernicke is aggressive (bogleheads has a discussion of it here: Models of spending as retirement progresses - Bogleheads), otoh it looks like you've put in at least a little bit of buffer in your spending estimate, so Bernicke may not be too bad.

Personally your situation feels borderline to me. If I were personally evaluating the possibility of ER, I'd want to be more conservative, because I would want to be really sure of being able to stop working once and for all.

The stock market's had a really nice bull run, which means that a lot of numbers look pretty good right now. Could you reduce your expenses by 30% if the market goes down? (You've said you could do so by moving out of the area, but it sounds like you'd only do it if there's a protracted downturn, meaning you might pull the trigger too late - I'd worry about carrying a few years of higher expenses forcing you to liquidate in a down market - a down market would also likely affect housing values and the time it would take to sell)

Overall, I'm conservative enough that I wouldn't pull the trigger in your situation. I'd probably pull the trigger at something closer to $3M investable assets (i.e., not including house equity) - or, of course, if your job situation takes a serious turn for the worse.

Edit: One factor that occurred to me after reading papadad's post - what are your expectations on health and physical stamina as you age? If you have a family history of deteriorating health, that might sway the decision toward retiring earlier.

 

[Gumby]

I want my standard of living to increase in retirement, and I'm willing to work just a little longer to make sure that is the case.

 

[papadad111]

I want my standard of living to increase in retirement, and I'm willing to work just a little longer to make sure that is the case.

Certainly we all can respect the attempt and OMY.

But to remind everyone In this game, the only thing that you can "make sure" of is death and taxes.

Standard of living, much like quality of life, can and does turn on a dime. While a few years may pad the bank account, The pendulum of time continues to swing and in an instant those "pad" years at the office and padding become meaningless/worthless when time become the valuable commodity (and can not be bought) ...

I hear it often. " before my stroke- before he started having heart problems... before xyz came down with C". It puts it all in perspective.

And I Just read an article about early retirees sharing a fear of early demise. Probably that's true for me

 

[Gumby]

There are, of course, no 100% guarantees in life, but I can stack the deck in my favor enough to be fairly confident in the probabilities.

 

[daylatedollarshort]

Personally I would not be 100% comfortable with that degree of spending / savings, unless it would be easy for you to find work at your current income levels again in case you had a poor sequence of returns early on.

We did 1099 work for half our old total household income the first year. We've been ramping down the work hours since. Right now, unless you plan to move and liquidate the house, you have 19 years of living expenses in savings. If it were me, as a very conservative investor and planner, I'd ideally either want the ability to work if need be or else have many more years of living expenses in savings than that.

With the ACA in place to get health insurance and the ability to either return to your old kind of work or do contract work for similar pay, there is not a whole lot of risk these days in taking a year off and seeing how you like it. But if a job fallback plan is not an option, I'd work longer, cut expenses, or maybe work part-time.

 

[rodi]

Robnplunder -
I retired with less investable assets - but also have some rental income and a slightly lower budget. Oh - and DH is already on SS.

I've been surprised at how much less we're spending (excluding travel). Even our home remodel projects are coming in on a lower budget than planned. Having the time to shop wisely, do work ourselves, and figure out where we really want to spend our money has saved us more than I anticipated. I also have less need to "consume" just to distract me from the workplace agony.

That said - our income was smaller before retirement so our abilty to build the nest egg significantly more each year was smaller ($200k/year is significant- our was more like $40k/year plus market increases).

In your case, with your budget, I would work OMY... but know that you can pull the plug of the psycho boss goes pyscho on you, and you'll probably be ok.

 

[wingfooted]

The consensus was that I may be taking a too much of risk to retire and I vowed to revisit the post 6 months later. Since then, the only change is that my investment portfolio have gone from $1.75M to 1.90M.


Any input/suggestion will be much appreciated.

Nice six month gain in your investment account.

You are close(r) but in my opinion, not quite there, and have an existing, well paying j*b. So at 53, another couple of years at a high pay rate seems workable. There is a certain amount of comfort knowing that if the boss does go 'psycho' - that you would probably be able to manage, albeit with some risk of belt tightening.

 

[daylatedollarshort]

I came across this article today on doing contract work. It might be a way to ease into ER -

Working 9 - 5 Becoming Less Popular
"Henry W. Brown ditched his fledging advertising career 11 years ago, sick of spending 15 hours a day at work and having "no life." Now he works 30 hours a week, juggling about four projects a year and earns a salary in the six figures designing websites and apps. Brown has time for two-hour yoga sessions, midday bike rides around his New York City neighborhood and lunch dates with friends. He also has more time for passion projects: He spent a month at an elephant sanctuary in Thailand this year, and he started a Facebook page called TheDogmatic, posting photos of dogs in shelters to help get them adopted. He never plans to work for just one employer again..."Everything about an office was such a waste of time to me," he says."

http://finance.yahoo.com/news/working-9-5-becoming-less-125244387.html

 

[Totoro]

I am trying the contract work route right now (after a seven month relaxation period). See where it goes.

The way the math works for me 2 months of work = 1 year of expenses. In addition 4-6 months of contract work = 1 year of employment work fulltime.

Obviously it all depends if you can find the clients and enjoy that way of life.

Every bit of income helps. I think most here would give you a "go" if you can keep income at around $40k per year. Depending on hourly rates that can be as low as 40 days of working (and 325 days of not working).

Then again, two extra years of full-time give you $400k of additional savings, which covers $40k per year until SS age.

Wouldn't go for 4 more years though if the current life doesn't add to your current best possible version of living.

Every year at this point is ~3% of your remaning life (90 - 53 = 37). You won't get it back, and your health can go very quickly. No use pampering mr. 85-years old if mr. 53-years old suffers for it. mr. 85-years old may not even exist.

One question though: is healthcare covered (including big surprises) within the $100k?

 

[NW-Bound]

I don't know what I would do in OP's shoes. I am retired right now with the same spending level, but with a bit more assets and we are older to boot (closer to that stinkin' golden age for Medicare and SS). And my children are independent and have professional jobs.

About achieving a higher standard of living in retirement relative to when one is working, even if one maintains the same lifestyle, hobbies, travels, it is a great improvement already when he does not have to show up for work and can goof around doing whatever he wishes.

And that value of free time varies with the individual. One may value it highly enough she is willing to reduce other living aspects and still thinks she's ahead. Who's to say?

 

[daylatedollarshort]

I've been surprised at how much less we're spending (excluding travel). Even our home remodel projects are coming in on a lower budget than planned. Having the time to shop wisely, do work ourselves, and figure out where we really want to spend our money has saved us more than I anticipated. I also have less need to "consume" just to distract me from the workplace agony.

Having more free time has resulted in huge annual savings for us - more time for price shopping, DIY, optimizing our taxes and financial aid for college for the kids, less carry out, time to think about and lower our energy and water usage, time to stay on top of the cable bill and renegotiate it every time they jack up the rates with no notice or warning, time to learn to play the credit card games for free travel - probably a couple hundreds changes, many of them small, but they all added up.

 

[robnplunder]

Good comments, all. Thanks.

One key factor I have been considering is downsizing/moving, trying to get the most out of my existing house equity. That will effectively reduce my yearly budget to $80k or even less. But that comes with moving away from home env. that I've known for the last 30 years & DS. I am grappling with the question if it's worth working one or two more years ($200k - $500k likely added to my investment asset) to stay in the current home env. A spin off option is, retire and see. If I need to downsize/move, do so when it make sense.

 

[NW-Bound]

In the earlier thread, you did not mention how much of your stash is after tax, hence can be tapped prior to 59-1/2.

I thought about stopping work when I was about 50, so looked into 72t distribution and found it too restrictive. I did not have enough after-tax money to last me till 59-1/2. In fact, I did not have enough money period.

So, I just did OMY after OMY of sporadic part-time contract work, and the problem eventually took care of itself. I finally stopped for real when my youngest was out of school, and a quick mental check showed that I had enough after-tax savings to last me till I could tap our 401k's and IRA's.

Working part-time a few more years turned out to be a great default solution.

 

[robnplunder]

In the earlier thread, you did not mention how much of your stash is after tax, hence can be tapped prior to 59-1/2.

I thought about stopping work when I was about 50, so looked into 72t distribution and found it too restrictive. I did not have enough after-tax money to last me till 59-1/2. In fact, I did not have enough money period.

So, I just did OMY after OMY of sporadic part-time contract work, and the problem eventually took care of itself. I finally stopped for real when my youngest was out of school, and a quick mental check showed that I had enough after-tax savings to last me till I could tap our 401k's and IRA's.

Working part-time a few more years turned out to be a great default solution.

500k is in pre-tax (410k, Tax deferred) accounts and I don't expect to tap into it before age 59-1/2. 100k/year budget also includes tax I'd be paying for cashing out of investment.

 

[NW-Bound]

OK. So, most of your money is in after-tax savings, while my situation is the reverse. I just look and see that 1/4 of my current stash is in after-tax, while 3/4 of it is in pre-tax.

And so, my after-tax can already carry me way past the age of 59-1/2 at the current WR. Darn, I am only 1 year from that magical age too.

Cursory look like this is all I do. No fancy-schmancy spreadsheets ever.

 

[Samz]

I may have missed this in the string...what is plan end? If I plug in living to 85, 90, 95 etc in most calculators it can make a difference.

Plugging in this and especially an amount and year I might get a relatively small inheritance when my parents are gone still gives me the creeps.

Also, you say without the Bxxx spending plan your run fails...is this giving your a probability of success under 70%?

 

[Willers]

I want my standard of living to increase in retirement, and I'm willing to work just a little longer to make sure that is the case.

+1

I can only share my experiences...

I have a different net worth amount, but much of the other numbers are similar. I decided to keep working this year because I do want to, as you listed, travel the world (or at least have the freedom to do so). I wouldn't be able to go out with the amount you list because of the failure rate without the reduced spending model.

I guess it all comes down to your spending flexibility. What I kept thinking about: if the market drops 20% tomorrow and doesn't recover (that is always possible), would I be OK with the lifestyle that would provide. I have discovered after much self-reflection that I don't have much so I'm hanging in there for a while.

What I also did was something you mentioned. I sold my high-dollar house on the lake (great life, but not-so-great costs) and added the equity to my stash. We're looking to buy something smaller cheaper.

I've also been spending a lot of time talking to my 80+ year old friends, of which I have a surprisingly large number, to get their takes on whether spending really does drop off the way Bernicke suggests. At least in our area, the general message is that it doesn't significantly until 75-80 at least. I think Bernicke overstates the drop a bit so maybe go for somewhere in the middle?

Good luck with your decision!

 

[MuirWannabe]

OP, I understand your dilemma. You are on the cusp of FI. So close you can taste it. And eager to get going.


I can 100% relate to all that. My numbers are different but my situation is similar. In the sense that my NW is higher but unfortunately so are my anticipated expenses. But I'm oh so close. For now, I've opted with the OMY scenario you listed. It sucks cause I just am burned out and very confident of being ready to enjoy ER. But I guess not willing to sacrifice further on the expense side (not my decision alone) to quit quite yet. And I want more buffer. All the usual reasons behind OMY.


I feel your pain.


Good luck!

 

[Live And Learn]

I would say if you HAD to retire then you would probably end up ok, as you'd do what you needed to do to increase your chances of success.

I planned on the same standard of living in retirement as before. I also planned for flat level of spending as I am assuming that I will hire more work out we age. My travel budget is meager, but we have never been big travelers and I'm quite happy staying in my little slice of heaven.

You really need to sit and determine what your priorities are. My priority was to get out a j*b that was slowing killing me with a rapidly filling BS bucket, without the stress of having to find a new j*b, so that I could spend more time on the things that are important to me. Once I reached a 3% WR I was done.

 

[robnplunder]

I may have missed this in the string...what is plan end? If I plug in living to 85, 90, 95 etc in most calculators it can make a difference.

Plugging in this and especially an amount and year I might get a relatively small inheritance when my parents are gone still gives me the creeps.

Also, you say without the Bxxx spending plan your run fails...is this giving your a probability of success under 70%?

85. Using Firecalc, 90 & 95 does not make much difference. Without using Bernecke option, Firecalc failure rate is about 75%. Using the Bernecke model is the right option for me though.

 

[robnplunder]

I've posted the following about 6 months ago.

http://www.early-retirement.org/forums/f26/one-final-check-with-fine-folks-here-74457.html.

The consensus was that I may be taking a too much of risk to retire and I vowed to revisit the post 6 months later. Since then, the only change is that my investment portfolio have gone from $1.75M to 1.90M.

1. Ages = 53 (DW & I). Total asset = 2.25M (350k in house equity), SS in 10 years at 63 = $38k.
2. 45/55 investing.
3. Yearly expense = $100k and room for reduction if needed, Firecalc = 100% using Bernicke spending model. Fails otherwise. Willing to reduce it to $90k/year when push comes to shove.
4. Current income = 250k/year, current yearly asset increase = $200k/year
5. Pressure points to quit = desire to goof off rest of my life, and my psycho boss (otherwise, my job is ideal).
6. Conflict = 2 - 4 of OMY can add 350k - 800k to my ER fund which means I don't have to LBYM in ER, can travel the world, assist family members/relatives in financial need

Any input/suggestion will be much appreciated.

4 months after I posted this thread, my portfolio is down a bit to $1.84M but my desire to retire has peaked. To prepare for ER, I've reduced my yearly budget to $90k/year. The push came to shove (see bold above). I started refinance process to lower my mortgage by a few hundred dollars/month. I looked into signing up process for ACA and found that I can qualify for subsidy if I stop trading stocks. Good bye, Dish & hello Netflix.