41 and Hoping to Retire by 50

[retiringby50]

DH is 43 and currently working (with benefits). I also work. Our total work-related income is about $140K.

We have about $350K in 401(k), and I inherited about $1M (which includes the proceeds from the sale of a home) recently. We have a rental property and our own home, and we still have about 20 years to pay those off.

The 401(k) mix as well as the inheritance is/will be distributed approximately like this in various mutual funds: 10% cash/money market; 30% bonds; 50% large/value stock; 10% international. The "will be" is in there because we haven't received the money from the house sale yet but have on the liquid assets.

Our child is 10. We have a separate account with about $50K set aside for college (left from another inheritance almost 15 years ago), and as far as I can tell, there's no aspirations to become a doctor or lawyer (or something that will require a more costly education than normal).

I know we aren't supposed to count on future windfalls, but the in-laws have much property and have designated 4 homes to us, but I don't anticipate receiving this until possibly 10 years after I plan to retire (and don't want to count on this as part of the equation).

Think it can be done successfully? If we lived to our 90's, that means 40+ years of no work-related income! My dad died in his early 90's, although my mom died in her early 60's from cancer (unfortunately, the women on her side of the family all died younger and from various cancers, so that's a bad sign for me). Love to hear thoughts, advice, comments, etc.

I also plan to check out the book tomorrow!

[Rambler]

Hi RB50

There are a few factors remaining that you haven't told us: will you contribute to your 401k and how much? What other assets do you have set aside for retirement? How much do you need/want to have, in current or inflated dollars (when you are 50)? Is the "retire by 50" phrase applicable to you or to your DH (two years difference)?

Your allocation is not too different than mine and I'm trying to be a little conservative in my planning with a 6.5% average annual return. If that is the case, and you do not plan to add to your 401k, then your anticipated assets for retirement will be about 2.1 million (at your DH's age 50, or 2.38m at your age 50). My anticipated "pull the plug" age is 48, not too different than yours, also planning to live into my 90s. My firecalc result says my SWR can be about 3.38% to get to a 95%++ or so chance of my assets living at least as long as I do. If we applied the same SWR, then you would have just under 71k in todays dollars available (inflation adjusted each year at about 3.5%) per year to fund your retirement living expenses.

I am assuming the proceeds from the rental property go to pay the mortgage and taxes. I assume no other inheritance or SS income.

I think that without further input into your 401k, you would be living dangerously if you pull the plug at 50, but that really depends on your income needs, what your wnat to do etc.

My advice: Try firecalc...put your own data, needs, and forecasts into it, and let us know what you come up with.

Good luck!

Rambler

[Dawg52]

Welcome! Looks like your well on your way to a nice retirement.

As Rambler said, plug in your numbers to firecalc. A great retirement planning tool. Fidelity, Trowe Price and others have good planning tools as well. Also, be sure to plan for health insurance. Many work hard to hit 'the number' but fail to secure health insurance before hand. No insurance can be a retirement buster. You probably are planning for this though.

Good luck with your plans.

[Coach]

retiringby50, you look like you're in pretty good shape to me. The big question is your budget in retirement -- without a pretty good answer to that one it's hard to say too much.

And Dawg52 is absolutely right, you need to have a solution to the health insurance question.

Coach

[mountaintosea]

I agree with Coach. I think "spending" is one of the more important factors you did not include. Depending on your spending habits now and in retirement, the amount you have or will have, may or may not be enough. Some people would find it more than enough, some not at all. But I think you can see that, by reviewing the posts on this great forum!

[retiringby50]

I tried firecalc but probably need to do a more thorough job. I estimated that our expenses will be $40K a year in today's money; that would include vacations, home improvements, and mortgage. I want to retire when I'm 50, so we'll just say in 9 years. DH is continuing to put away money in his 401(k), maybe about $6K/year. I had been but now have a contract assignment until the end of the year, so no 401(k) opportunity. The $1M inheritance and its earnings goes towards retirement as well, but after taxes, realtor fees, remodeling costs, and other things I've earmarked it for, the total is actual more like $740K (that was quick!).

Rent pays for mortgage, association fees, and property tax. Future inheritance: I know we're not supposed to count on this, but technically, my DH will be inheriting four homes (valued at a total of $2M - no mortgage - and rental income of $5500/month at today's rate). Assuming that his parents will live an extremely long life, we'll say in 20 years (yes, a lot can change in 20 years).

I'm quite concerned about health insurance. We were both unemployed at one point, and to save money, I tried to get non-COBRA insurance but was declined because I have sleep apnea. Neither one of us will be eligible for retirement health insurance (DH's company is fairly new, and even if I found a full-time job, 9 years is too short to qualify for retiree benefits). Any ideas on how to handle health insurance?

Appreciate all the answers and questions. Read Bob's book, waiting for workbook from amazon, which will help me a lot better. I'll work on getting a budget together. Baby steps...

[Rich_by_the_Bay]

Quote:

Originally Posted by retiringby50 I'm quite concerned about health insurance....

As you should be, and with lots of company. There is a great deal of material on this forum in that regard. If the next administration implements some type of universal coverage, you may yet be saved.

Meanwhile, see if your current policy provides what is often called "continuation" insurance. This is the ability to continue as a group member after termination, albeit at your own expense; similar to COBRA but indefinite duration and no 2% surcharge. Check if your state has a high risk pool (not optimal but at least something you can purchase).

Back to your OP, lacking major expense needs it sounds like you are there. FIRECalc is the best of the calculators I have found, worth a few minutes to learn. If your net spendable worth is greater than 25x your expenses at retirement, it's a good sign.