Age 47 - Can I get out of the rat race and what the heck will I do?

[dmeister33]

I have been lurking for awhile and thought I would seek some advice.

I am 47, have a wife and 2 kids - I have worked hard for 25 years and am ready to get out of the rat race. My situation
- 1.5M in savings (not including home equity) 2/3 in 401K/IRA (non Roth)
- fairly aggressive but diverse investment strategy
- mortgage will be paid off next year (~500K value)
- kids 529 plans already set aside
- plan to retire at 50 (2015)
- current expenses $100K, save about 30-40K additionally annually
- planned retirement expenses should be the same until both kids out of college in 8 years, then will drop 25%
- SS will be about 40K/year between my wife and I at 67

In general, based on my calculations, I think I am on track to retire at 50. Am I crazy or am I missing anything? My other concerns are:
- will I have enough taxable money to draw from to cover me until we can draw from IRAs at 59 1/2 then from SS at 67?
- how much will health benefits cost for my family of 4 - I pay only a few grand annually through work now. Should one of us work just for benefits?
- if I am a Type A personality, will I be bored? I won't have anyone outside the family to hang out with if I retire early. Also not sure I know what I want to be when I grow up.

I know we can't plan for boomerang kids, market crashes, or major health issues. However, any thoughts or advice would be greatly appreciated. Thanks.

 

[bondi688]

It is getting late. so I cannot vouch for all my maths or thinking, and I am sure other members will chime in to give you advice. But to me, your margin seems to be very tight, especially before you can access the IRA at age 59.5. It is because your annual expense is 100k a year for the next 8 years until you are 55. Your present rate of saving will mean that you'll have something over 600k in your taxable account at age 50. But that has to last 9.5 years before you can access your IRA. And you would have spent 500k from the taxable pot by the time you hit 55, before the annual expense dropped to 75k.

Did you figure in health insurance cost in your 100K of expenses a year? Unless ObamaCare decreases premium drastically in the future, you will be amazed at how much it will cost to insure a family of 4.

After you start accessing your 1 million in the IRA at 59.5, 75k a year is over the 4% safe withdrawal limit until SS kick in at 67. And we have not figured in the impacts of inflation, and the amount you will need to take out to net you 75k a year before taxation, and we also assume no big market drop in the asset of your stock holdings in the next 12 years.

Congratulation on you having the discipline and ability to accumulate a net worth of 2 millions by 47. However, if you want to ER at 50, the way to make that a reality is to see whether you have to spend 100K a year, especially after the mortgage is paid for after 1 more year.

 

[jarts98]

Do you plan on having any income after 50? Part time job in a field you love but never pursued? Starting your own "thing", not so much to generate a large income, but because you've always wanted to? Any income from your spouse?

In looking at my own situation (which is actually rather close to yours), I'm amazed at how much further a nest egg can last with even a modest income.

 

[pb4uski]

I suspect that you are close, but the sources of funds from retirement to 59 1/2 may be an issue for you.

You could sketch out you plan in Quicken Lifetime Planner (which separately projects taxable and tax deferred portions of your nestegg) and see what it looks like. If it works in QLP, then you can stress test it in firecalc or Vanguard's Monte Carlo simulator.

You could get an idea of health care costs and subsidies that might be available to you by looking at Berkeley's health care cost calculator.

 

[Lazarus]

I would say no at your spending level. Can you get your costs down? If you can live on 50K a year it looks a lot better. You can access your IRA earlier than 591/2. The 72t method allows for it. You can draw Social Security at age 62 as well, of course a lower amount.

 

[Midpack]

- if I am a Type A personality, will I be bored? I won't have anyone outside the family to hang out with if I retire early. Also not sure I know what I want to be when I grow up.

Others have commented on $ already, but this one was also a concern of mine. I'd suggest you give it some serious thought, just hoping it will sort itself out may/not work. At least you recognize it's possible, some people do get bored & depressed though it may not be common. I found the Get-A-Life Tree exercise in How to Retire Happy, Wild & Free by Ernie Zelinski (local library) to be helpful WRT what will I do in retirement. There's a well worn thread on the subject here too http://www.early-retirement.org/forums/f47/faq-archive-but-what-will-i-do-all-day-30655.html

I know we can't plan for boomerang kids, market crashes, or major health issues. However, any thoughts or advice would be greatly appreciated. Thanks.

While you can't plan for everything that may happen, most people hedge somewhat for the unknowns. And I'd certainly plan on several market crashes, they've always happened in the past, and it seems unlikely that'll stop.

Best of luck...

 

[pb4uski]

....- if I am a Type A personality, will I be bored? I won't have anyone outside the family to hang out with if I retire early. Also not sure I know what I want to be when I grow up. ...

Well I'm Type A (or at least was) and I still don't know what I want to be when I grow up so I'll give you my experience but all people are different so YMMV.

When I first RE'd I was really uncomfortable with describing myself as "retired" so to some extent I framed it as taking at least a year off to figure out what I wanted to do. With my new found free time I began playing more golf and during the season I now play 2-3 times a week with different social groups I have joined and that has been a wonderful outlet for me as it combines social and physical activity. A year later now, I am more comfortable with the "retired" label and have no plans to return to w*rk but I may do some volunteer w*rk.

If you retire at 50, it is likely that it will be difficult to find people your age to do things with (depending on where you live I guess). The retired guys that I golf with are all older and at 57 I am probably the youngest, so at 50 you would be even more so but we don;t discriminate based on age (other than who gets to use the senior tees ). I had a close colleague where I once w*rked who retired at 50 (nice buyout package and family wealth) and I would occasionally see him and his major complaint was finding people near his age to do things with. That said, between the sports he was involved in and volunteer work he seemed quite content.

 

[rescueme]

I am 47, have a wife and 2 kids - I have worked hard for 25 years and am ready to get out of the rat race.

Get back on the wheel. You need to get more "experience" under your belt ...

Yeah, been threre - done that...

 

[bondi688]

"- if I am a Type A personality, will I be bored? I won't have anyone outside the family to hang out with if I retire early. Also not sure I know what I want to be when I grow up."--dmeister33

I did not comment on that early this morning when I replied. That is a question you have to ask yourself: why do you want ER when you do not know if you will be happy with it and do not know what to do with the free time ?
In my case, the ER was not entirely voluntary, but I am not unhappy nor rueful about it. I am enjoying the freedom and the absence of stress and demands from all sides. Yesterday, at the height of the passing snow and cold weather, I felt great at not having to venture out and fought the bad weather to go to work.
I do find, like others here, some negatives, I want to travel, but it is hard to get friends who can take the time off from work to come along with me.

 

[Live And Learn]

Hi dmeister - welcome to the forum !

I think you're VERY close but you'll need to be very careful with your spending. Our ages and numbers are very similar (I'm 50 and hoping to get out in the middle of next year before my 51st birthday).

Just a cut of a few thousand dollars goes a long way for portfolio longevity. Both FIRECALC and Vanguards Monte Carlo simulator prove that out. A combination of a few thousand less in spending plus a "hobby that pays" of a few thousand dollars a year can add a decent amount of cushion.

For me, I'm accepting that there will be a 20% chance that my portfolio will run dry when I am 85. From that point on I'll have to live on social security alone. I won't have much available for 'wants' but at that point I'll be able to say its the price I paid for 35 years of retirement !

 

[azphx1972]

Does your wife work outside the home? Based on the projected expenses of $100k per year for the next 8 years, and then $75k per year after that, I'm thinking that retiring at 50 seems pretty risky if there is no other income stream. I'd try to reduce expenses significantly, or continue to work to bring in additional income, or both.

 

[dmeister33]

No she stays at home. We may have to have one of us work part time for some income and benefits. Or I can do some consulting. I wanted to coach sports which I do now on the side but it only pays about 2k a season, thanks for the advice.

 

[dmeister33]

Thanks - from all the replies I have some figuring out to do. Consideration of myself or spouse working part time for benefits and some income, conversion to Roth or looking into the 72t option, and reducing expenses. Unfortunately my mortgage ending coincides with the college payments so it is a wash. Thanks for all the great advice!

 

[NanoSour]

You do look pretty good with just cutting back a couple thousand from the 100K numbers. OPR gave me quick results of 97K spending with your numbers. You should run it with more accurate numbers than I assumed for your particular situation.

Retirement Calculator - Parameter Form

Make sure to check the "Reality Retirement Planning". I think it is a better approximation than a fixed spending level till you're 90 years old.

Good Luck!

 

[Zeffen]

Quick note to add to all the others. I think if you can find the job of your liking (not based on income etc, the usual criterias) you can continue to work for another 5 to 10 years. By then you will be in great shape to retire. Remember, once you retire, your spending style will change. It will be harder for you to spend on luxury items etc... like when you had cash flow. Things do get tight. So enjoy the luxury of a regular paycheck, while you have it, continue to save and invest, and look for work you enjoy and work for 5 or 10 more years then - for sure you can retire ... and retire well.

 

[Midpack]

Remember, once you retire, your spending style will change. It will be harder for you to spend on luxury items etc... like when you had cash flow. Things do get tight.

While undoubtedly typical, 'things don't have to get tight.' Some people work long past FI and/or receive inheritance/windfalls and can then afford to live very well when they finally do retire. Spending doesn't have to change, it's all in when you pull the plug relative to planned retirement expenses.