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45 today and considering pulling the plug.
Old 04-30-2013, 12:36 PM   #1
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45 today and considering pulling the plug.

Hi All:


I currently have 1.2 million in liquid assets with a 65/45 stocks to bonds mix. My house is paid off and I have no debt. I am not married and probably won't. I live in New Jersey so I understand the cost of living is a bit higher than other places. I am in good health for the time being and hit the gym regularly. I understand health insurance is the wildcard here. I spend no more than 50K per year. Not big on travel other than an occasional trip to the casino.

So, what do you think? I wish I was typing this during a market correction. I'd be feeling better about a rebound.

Thanks in advance.
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Old 04-30-2013, 12:43 PM   #2
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Does the $50k you currently spend include health care and taxes? That level of spending is pretty high to sustain for 50 years or so.
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Old 04-30-2013, 01:03 PM   #3
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Does the $50k you currently spend include health care and taxes? That level of spending is pretty high to sustain for 50 years or so.
+1
I think a draw rate something closer to 3% might be more realistic at your age.
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Old 04-30-2013, 01:10 PM   #4
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I agree it appears you are a little short. Would you consider moving to a location with lower costs?
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Old 04-30-2013, 01:17 PM   #5
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As others said short(by a lot) with 45+ years to go. Why do not you wait for a year/two to see how Obamacare turns out to be HC costwise. I too live in NJ and stuck here at the moment - worst state expense wise(12K property tax + 6K for utilities...yikes).
By the way, Happy Birthday!
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Old 04-30-2013, 02:10 PM   #6
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I ER'd in NJ and then moved out of state to CO. Two major expense categories are very high in NJ - health insurance & property taxes. Moving out of state could save you quite a bit.

Traditional SWR methodologies take a percentage of initial portfolio and adjust that amount annually for inflation with no regard to the performance of your portfolio.There are other methodologies - like a fixed percentage of your portfolio at the start of each year, that may make more sense for someone your age. We use that methodology. However, your annual budget can swing wildly, so you need to make allowances for that.

Whether you can ER now or not - only you can decide.
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Old 04-30-2013, 02:22 PM   #7
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Too soon unless you are going to move.
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Old 04-30-2013, 03:14 PM   #8
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I am very similar in terms of age and assets but spend a bit less than half of what you do for a couple of reasons:
  • My SO and I do not mingle assets; so, I am only funding myself.
  • I live in fly over country where everything seems to be cheaper.


I am planning for this to be my last year with a W-2 and hoping Obamacare works out for me in the long term. Frankly, I am not sure how long it will take for me to decide that I am actually retired rather than just taking a sabbatical.


Good luck with whichever path you choose.
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Old 04-30-2013, 04:03 PM   #9
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As a very simplistic look at this, if you needed to consistently withdraw a certain amount (indexed for inflation) for 50 years (gets you to 95), the following is an example of what you could expect:

- at 2% inflation, and 4% return on investments, you could expect to withdraw 38,000 in the first year ... indexed at 2% each year thereafter.

- at 2% inflation, and 5.5% return on investments, you could expect to withdraw 50,000 in the first year ... indexed at 2% each year thereafter.

In both cases, you run out of money after approx 50 years.
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Old 04-30-2013, 05:24 PM   #10
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Quote:
Originally Posted by Space Mountain View Post
Hi All:


I currently have 1.2 million in liquid assets with a 65/45 stocks to bonds mix. My house is paid off and I have no debt.....

Thanks in advance.
If you have been working for the past 20 years I suspect that you would have a significant amount of Social Security accrued (under current law, at least). I worked 22 years after receiving my college degree and accrued close to $1M, in todays dollars, in SS (assuming a 30 year draw starting at age 70). For planning purposes I am assuming that 1/3 of this will be lost through "reform", but that sill leaves a significant amount.

I recently wrote up here how you can check your accrued benefit assuming that you never work another day of your life.

-gauss
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Old 04-30-2013, 05:56 PM   #11
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Have you entered your numbers in FIREcalc?
Quote:
Originally Posted by Space Mountain View Post

So, what do you think? I wish I was typing this during a market correction. I'd be feeling better about a rebound.

Thanks in advance.
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Old 04-30-2013, 08:14 PM   #12
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Originally Posted by Space Mountain View Post
Hi All:
I wish I was typing this during a market correction. I'd be feeling better about a rebound.

Thanks in advance.
I hear that ! When I enter my numbers into FIRECalc or the other calculators I use 90% of my portfolio. I'd prefer to use 80% but then the results say I can't retire.
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Old 05-01-2013, 12:13 AM   #13
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Quote:
Originally Posted by Space Mountain View Post
Hi All:

I currently have 1.2 million in liquid assets with a 65/45 stocks to bonds mix. My house is paid off and I have no debt. I am not married and probably won't. I live in New Jersey so I understand the cost of living is a bit higher than other places. I am in good health for the time being and hit the gym regularly. I understand health insurance is the wildcard here. I spend no more than 50K per year. Not big on travel other than an occasional trip to the casino.

So, what do you think? I wish I was typing this during a market correction. I'd be feeling better about a rebound.

Thanks in advance.
I agree with the others who think that $50k in annual expenses (for a single person, no kids) is high. I live in a high COL area (Long Island, NY), too, and my annual expenses are less than half that.

Health insurance is a big wildcard but with the PPACA going into effect fully in 2014 I will likely get a subsidy due to my low income.

I have about $1.2M in investments, about 1/3 in an IRA I lack unfettered access to for now. My overall AA is 42/58 stock/bond (BTW, 65/45 adds up to 110) because I need my portfolio to be more income oriented. The IRA is stock weighted while the taxable accounts are bond weighted.
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Old 05-01-2013, 01:15 AM   #14
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Quote:
Originally Posted by Space Mountain View Post
Hi All:


I currently have 1.2 million in liquid assets with a 65/45 stocks to bonds mix. My house is paid off and I have no debt. I am not married and probably won't. I live in New Jersey so I understand the cost of living is a bit higher than other places. I am in good health for the time being and hit the gym regularly. I understand health insurance is the wildcard here. I spend no more than 50K per year. Not big on travel other than an occasional trip to the casino.

So, what do you think? I wish I was typing this during a market correction. I'd be feeling better about a rebound.

Thanks in advance.
Hi, 65/35 or 55/45 stocks to bonds? Not that it's a deal breaker. My math came up to 110% (65/45). Cheers and congrats on the healthy savings.
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Old 05-01-2013, 02:45 PM   #15
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Hey Everybody:


Thanks kindly for the responses.

Couple things: My asset allocation is 65/35. (Stocks to bonds). My mistake earlier. Sorry. When we have a significant correction, I will rebalance more towards stocks. All of my current bond holdings are in tax deferred accounts. I mentioned 50k as topping out on my yearly spending. I probably won't come close to that. (Taxes & healthcare included). At a 3% withdrawal rate, (36k) I think I'll be OK in my first few years.

Again, thanks to everyone for the insight. Clearly, I am no wizard so the feedback here is GREATLY appreciated.

Space Mountain
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Old 05-01-2013, 03:20 PM   #16
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Hey Space, you're in good company here. I'm a couple years younger than you but our situations are very similar. I'm looking at no more than a 3% draw when I pull the plug, and I'd rather do 2.5% or whatever my investments throw off for income. My goal is to be able to do this at 45, and then decide how much longer I want to work for a cushion. I think you really need to get a handle on what you are comfortable spending as a % of your portfolio. As others have said, at our young ages, I wouldn't even consider more than 3%, and then I'd adjust fire each year depending on Mr Market.
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Old 05-02-2013, 12:00 PM   #17
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Will you continue to live in NJ after ER?
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Old 05-02-2013, 05:54 PM   #18
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Initially, I'd say No unless you can guarantee keeping your spending under $40. (adjusted for inflation).

If you pull the plug and need to go back to work at 50, what's the likelihood of you getting rehired somewhere? Just a rhetorical question.

I'm FIRED at 57, with a similar valued and allocated portfolio. We also have pensions and live in a lower COL area. We plan a 2% draw and about a $55k base budget (covered by pensions) and $20k for fun because we wish to travel a great deal. Another rhetorical question: if you don't leave yourself 'fun' money (an assumption from your comments) what're you going to do to have fun for the next 40 years? Fun is important.

Both of us have subsidized health care policies, through employers, combined about $700 a month; if that helps. The pension pays 75% of my premium. unsure of DWs. She pays about $100 month more than I. My share'sabout $300 a month, so I'm assuming DW has less of a subsidy than I through her pension. I haven't looked at Obamacare in detail, but I've seen numbers around $8k a year for someone getting a small amount of subsidies. Don't quote me though. that may be off base.

What about long term care? Maybe $250 a month for a policy? What about disaster requiring a large outlay of cash? There doesn't seem to be any margin in your game plan.

I think I'd be uncomfortable about retiring in your present position. FWIW.
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