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49 yr old father of 4 wants to ER now
Old 07-18-2016, 12:00 AM   #1
Confused about dryer sheets
Join Date: May 2015
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49 yr old father of 4 wants to ER now

I am so glad to run across this forum and learning a lot here.
DS and I are both 49, our plan was to ER at 54 when our youngest child going to college. However lately, I fell pretty fed-up with work and not looking forward to go back to the office each Monday morning. I check our numbers and run them on a finance calculator and I think we are good. I have been hinting to DS regarding ER but she thinks that we should stick with our plan. Here are the details:

Total 401K: 1M @ 60/40 (Her 350K, His 650K)
Cash Accounts: 500K (250K Saving AC, 150K Cash, 100K brokerage ac)
Home Equity: 500K (300K mortgage and home value 800K)
SFH Rentals Equity: 1.2M - Monthly income 4.5K after expenses
Non COLA pension 10K/Yr at age 55
Annual Salary: Her 70K, His 140K
Kids college funds: We've saved enough for their first 4 yrs

Annual expenses 90K;
Plan to pay off home mortgage when retire and use the 2K mortgage monthly payment to pay for medical insurance.

If you think that we are good to ER, any suggestion on how to convince DS.
Or she can stick with the original plan and agree with my plan to ER now - wishful thinking

Many thanks,

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Old 07-18-2016, 06:06 AM   #2
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Golden sunsets's Avatar
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WBfire; Welcome and a few questions:

Does the 90k in annual expenses include taxes?
Does the 90k include post retirement health insurance?
What will your social security be at 62, 67?
Have you plugged your info into firecalc?
How sure are you about your run rate-have you tracked expenses?

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Old 07-18-2016, 06:15 AM   #3
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Originally Posted by Golden sunsets View Post
WBfire; Welcome and a few questions:

Does the 90k in annual expenses include taxes?
Does the 90k include post retirement health insurance?
What will your social security be at 62, 67?
Have you plugged your info into firecalc?
How sure are you about your run rate-have you tracked expenses?

Also, add to the above:
Current ages of the kids?
How will your annual expenses change after the kids leave the house and hopefully not boomerang?
Are your rentals LT or planning to landlord in your retirement?

Your DS will probably oppose you quitting now (your salary is nicer after), but perhaps you can both negotiate a compromise say both or you alone quit at 51 and you cook/clean/run errands until she retires.
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Old 07-18-2016, 06:44 AM   #4
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Also what happens to that pension if you quit before 55?

It's probably not a good idea to count the equity in your home toward your retirement. You need a place to live.

Check with Firecalc but you may need a bit more to bridge the gap to SS and to your 401K. Have you figured major expenses, such as replacement cars, new roof, out of pocket medical expenses?

I agree with above posters. Track expenses and add in insurance costs.

If it's any help, I decided when I started residency that I simply could not imagine working until 65. My target was 55. 6 years into my first practice experience and I was hating the workload and the politics. In my career there was only one position I really enjoyed, but politics ruined that too.

Don't fret about hanging in there a couple more years. You have great income and should be able to save and invest well to give you a cushion.

Last, I hope you have enough for college. Tuition is increasing well above the rate of inflation.

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Old 07-18-2016, 08:25 AM   #5
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Are you in a HCOLA..that's quite a pricey house, I assume you plan to stay there.
On the paying off the house I don't think you have payed much attention to the ACA rules..that large wad of cash you have saved does not count as income for ACA purposes, I suggest you study up on that before you decide to retire.
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Old 07-18-2016, 09:28 AM   #6
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I just ran your numbers through ******** and the results look fine. I assumed your investment portfolio is $1.2M... current $1.5M less $300K to payoff mortgage. AA is $600K stock, $400K bonds, $200K cash. Included $54K/yr rental, inflation adjusted. $10K/yr pension at 55, no-COLA. You didn't mention SS, but I estimated your SS at 62 to be $20K and $14K/yr based on your age, salaries, and assumed retirement date this year (ssa quick calculator). Expenses at $90K to start, inflation adjusted, with healthcare covered by mortgage payoff. Assume taxes were in the $90K. College covered by other savings. Both retire this year, with 36-year retirement to age 85.

The historical analysis gives 100% success rate with average ending portfolio of $3.5M. This is not surprising because rental income covers 60% of your spend and is inflation adjusted. Excluding pension and SS, you only need to generate $36K per year from the $1.2M portfolio, which is a 3% initial withdrawal rate. That will drop to 2% when the pension starts at 55, and if the SS numbers are correct, you won't need withdrawals at all, after that point.

A big assumption however is that the rental income keeps pace with CPI. When I drop that assumption to a constant 1% inflation, the success rate drops to 93%. Still fine by most standards and 1% is probably too low. Plus you still have lots of other moving pieces to throw into the mix, such as:

1. Would I be better off keeping the mortgage and the $300K invested? Perhaps refinance at very low rate for 30 years.
2. When to take SS... 62, 66, 70?
3. Possibly reduce the cash in the portfolio to something like 5%?
4. Longevity... perhaps the analysis should go to 90 or beyond?
5. Spending profile... lots of reasonable options here other than $90K inflated forever. Kids leaving should drive that down.
6. Perhaps model downsizing the house at some point, and/or selling the rentals.

Anyway, congrats on getting to this point. In terms of convincing your spouse, I'd say you still have some homework to do to show that you've covered all the bases. But unless I've made an error in the assumptions, you seem to be in pretty decent shape. Good luck!

Retired at 52 in July 2013. On to better things...
AA: 55% stock, 15% real estate, 27% bonds, 3% cash
WR: 2.7% SI: 2 pensions, some rental income, SS later
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