...42 year old with a family considering early retirement

[HunterGatherer]

I'm 42 and work in Silicon Valley for a pretty large Internet company. I was very happy in my job until a series of reorgs got me thinking about alternatives to my current position, one of which is early retirement.

Now that I am waiting for yet another reorg to come down, I feel like I'm at the point where I have emotionally moved on from my job (and not being sure of the future of the projects I am leading hasn't helped).

Thinking about and planning for a possible early retirement has led me first to the Bogleheads forum and then this forum, where I have been amazed at the quality of the people, discussion, and useful advice. I bought and quickly read _Work Less, Live More_, which provided a lot of practical useful advice. (I wrote a review for a book group I'm in if anyone is interested in reading it.)

There are a few aspects of ER that I am having trouble getting my head around and that I would like to ask about here, but first a little bit about my current situation:

Our ages are 42, 39, 8, and 6. We're all in good health (knock on wood). My retirement income would be about $100-120k, possibly higher with income from some part time consulting jobs. This income will come from withdrawal from my portfolio worth just over 7 figures and some commercial real estate that pays steady rent from a fast food corporation. We will either stay in California or move to Florida or maybe even Texas depending on events.

Here are some topics that I would like to get your thoughts on:

1. Health insurance

I asked about this on the Bogleheads forum and was referred here. Insuring my family is my biggest concern with ER at this point. COBRA from work is about $2k/month, including dental and vision. That seems very, very high to me.

I am working my way through the links in the FAQ and the excellent consumer guide that it referenced there.

I'm assuming that there is no shortcut to knowing what to do, and I'll have to educate myself about the insurance industry. Any tips? It might be relevant that we own our commercial real estate through an LLC.

2. Location location location

We are currently in Silicon Valley, where six figures doesn't go very far. Our house is practically paid for, but I still don't think we can afford to retire here long term. The intersection of my wife's desires (warm weather, good schools) and my desires (college town, larger house, low taxes) is leading us to consider parts of Florida or Austin, TX. How have other early retirees made this decision?

3. Kids

It feels vaguely selfish to retire when the kids are so young. On the one hand, we will be spending a lot more time together, and we will have the time to do more interesting things together. But on the other hand, they will have to forgo some things that are standard issue for their peers, like summer camps, gadget-y stuff that kids want, video games, etc...

I can convince myself that on the balance our kids will come out ahead in the long run, but it also feels a little like rationalizing my decision. Has anyone gone through a similar thought process and come to any great insights?

4. When to leave the job

There are a few events (like vesting of shares, making sure projects are transitioned) that make me want to stick around for a while. But how does one avoid the trap of staying "just a few more months" over and over? I imagine that there isn't a perfect time to leave, especially on one's own terms. My plan is to set a date and then work towards leaving on that date. What have other people done? It's important to me that I leave on my own terms and in a professional way.


Thanks for reading down this far. I started this post just wanting to say "howdy," but I wound up asking for a bunch of advice. I hope that's okay. Again, I really appreciate the quality of discussion and advice that I find on these forums. I hope one day that I can return the favor.

[ksr]

HunterGatherer, It sounds like you have a good handle on early retirement. Like you, I worked in a high-tech industry and recently semi-retired (I still do some part-time work, but in a completely different industry now) - I was 47 when I left the full-time job. COBRA would have been very expensive for me as well, and since I was planning on needing health insurance for more than the 18 months it provided, I went out looking for my own policy. You should be able to find a lot of info here on health ins. options; I ended up choosing a high-deductible policy with an HSA. One of the nice things about the HSA is that I can take a tax deduction for my HSA contribution each year. Websites like eHealthInsurance are very helpful in getting a handle on projected costs, although be aware that sometimes your actual premiums will be higher than the quotes you see on the website.

As for timing my exit, I picked a date well in advance, factoring in things like vesting of stock options, maxing out my last year of 401(k) contribution, vacation accruals, etc. to make sure I optimized that last year of employment. I also informed my boss that I planned to retire sometime wthin the next year or two (I left it vague but wanted him to have a heads up on it). I figured that would avoid my second-guessing dates based on ever-changing project deadlines. That part all worked out very smoothly for me and I was able to leave on good terms giving plenty of notice.

I can't really address the other issues you listed but I'm sure others will offer some suggestions. Best of luck!

[bizlady]

At 42 with a young family, "my portfolio worth just over 7 figures and some commercial real estate" is impressive, but may fall far short, especially if you expect a six figure set of expenses. The good news is that if something does happen to your job, you are set for a while.

I would suggest running some scenarios on FireCalc.com as well as some other financial calulators to see what that looks like.

Regarding your portfolio, consider too whether that part of your portfolio is in retirement plans like 401(k) or IRA where you may get hit with early withdrawl penalties as well.

Lastly, go to ssa.gov and see what impact your returting early will have on social security, and keep in mind that very likely, Social security and Medicare may change by the time you are eligible.

Good luck to you!

[FUEGO]

If you relocate to a lower cost of living area like TX or FL, I would think an annual income of $100k would cover plenty of toys and gadgets for the kids as long as you spend a little time managing a budget. Of course it all depends on what else you spend money on (boat, huge house, private school, fancy cars, extravagant vacations, etc).

[HunterGatherer]

@ksr: Thanks for the confirmation of exit strategy of picking a date and working toward it. I have a date later this year in mind. I like the way you gave vague notice to your boss without shooting yourself in the foot. I don't know who my boss will be in a few months, but handling it that way is something I'll consider. Also, I clearly have a lot to learn about insurance, so I'll have to roll up my sleeves and start studying. As someone on the Bogleheads forum posted, "Getting away from employer provided insurance is the key to freedom to work or not work as you please."

@bizlady: Thanks for your comment. I am concerned that long-term I won't be able to fully retire in CA. You are right that my portfolio is insufficient for this. I neglected to mention that there is an additional $1.3M or so in equity in my house that remains frozen if I stay in CA, but frees up if we move out of state. I love the Bay Area, but I'm facing the reality that it's not a long term option.

@FUEGO: This is why I think I'll be moving somewhere else. I've always joked that as long as I can get high speed Internet and Amazon delivers there, I'm happy anywhere. Such are the joys of being an introvert. But my needs aren't the only ones being considered in this decision. About buying a boat, I was surprised to read so many references to boats in _Live More, Work Less_ because I've had drilled in my head that buying a boat is one of the worst financial moves someone can make.

I am taking the family on a week-long mountain biking trip starting today, but I'll eagerly follow up on this thread when I return to civilization.

[DangerMouse]

Not sure that I have much to add. DH and I live in SV so we understand what you say about the COL.

Only question I do have, if you leave your current employer and relocate to either Texas of Florida, do either you or your spouse have the skills that would allow you to pick up part time work to generate a bit of extra income if you wanted? Do you think your skills would allow you to re enter the work force in a couple of years time if you found you did not enjoy not working - not that I think that would be likely?