Am I really this close?

[urn2bfree]

Turning 50 soon and never dreamed I could actually retire so soon. My Financial Advisor says different than FireCalc- and I am not sure whom to believe....but I so want to believe in FireCalc...please get me out soon!!!

So I am 50, married with two kids one about to start college, the other 5 years away from starting college... We have had great fortune in making and saving...each kid has about $200,000 set aside right now for college and beyond. We have obligation of $20000 left that we must pay off on the mortgage. We have accumulated $2.7 million in savings (about a third in IRA and pension plans). This money is invested 60/40 in DFA funds/high quality mix of bonds as advised by our advisor with the usual Rational splits of passive investment theory/strategy...we just started this last year but so far like most in the markets the last year, we are up nicely.

We currently spend around $70,000 a year not including what we pay on mortgage and savings. We can probably save at least $100000 a year for the next several...if I keep working ...but my Financial Advisor showed us simulations that only had us succeeding 86% of the time if we retire when I am 55....now I just discovered FireCalc this weekend and according to it, I should be able to retire right now.

Before I go to my Financial advisor (who makes 0.5% to manage my assets) asking for an explanation, does anyone have any thoughts or questions you think I need to ask him in particular? What am I missing here?

 

[golfnut]

Have you checked what healthcare premiums would be? I would guess around $12,000 per year for a family. Taking a conservative swr of 3% (you are only 50 yrs old), would provide $81,000 per year right now. In 5 years, you should be on easy street.


Given your small mortgage balance, why not pay it off?

Needless to say you are in great shape!
Just some random thoughts before I go to bed.

 

[Midpack]

You are in the ballpark to retire now, there is no absolute right or wrong. Your FA is being more conservative than FIRECALC or has some other motivation. And FIRECALC is a great tool, but it's not meant to give guidance, it just calculates the probability of success based on lots of history and the assumptions the user enters. Unfortunately those are all just assumptions and the results are based on the past.

Congrats on your achievements so far, you're way ahead of the curve no matter what you decide. Best of luck...

 

[bltkmt]

Wow, congratulations...you look to be in great shape! I am about the same age, with kids the same ages, but am about $1 million behind you...time to keep pushing!

 

[skyvue]

I would be retiring right now if in your shoes.

 

[RunningBum]

You look like you are in great shape to retire whenever you like...but...you need to look at your retirement budget, not your current budget. Health care could be a big add-on. Other things to consider is whether you'd want to travel more, or have budgeted for home repairs, car replacements, etc.

 

[urn2bfree]

Thanks for the comments. I was figuring on the health insurance being the biggest problem. I am anxious to get out ASAP- I hate my job now, but my wife wants to keep working for now and maybe for another 10 years, so we could get health insurance thru her employer. I bring home the bulk of the money. If I stop but she keeps working we could probably just get by on her salary with no more savings. For my estimates of retirement budget I think I have figured in about $5000 a year for car depreciation on 2 cars, $3000 a year on home improvements and $12000 a year for health insurance IF we have to pay the premiums. (we are both in excellent health now)
I also increased my budgeting for travel by about 40% and restaurants etc by 50% or more. We could do with less, we have for years....we don't want to HAVE to do it so I am trying to be as conservative as I can by over estimating on these items.

on the mortgage- while we could pay it off and do make some extra payments every month, it seems more advantageous to use current money to invest in our retirement fund than to pay off the loan given our tax bracket (the highest). The difference is slight but definitely favors not paying off early even with the extra cost in interest on the loan.

 

[bizlady]

Firecalc is only as good as the number you put in.

You say you spend around 70K now excluding mortgage, savings, and presumably health ins and income taxes.

Recalulate what you expect to spend in retirement, and taxes and health care can be a biggie. You say you have 1/3 of your 2.7 in savings and "pension plans". Sounds like you have plenty of access to cash before 59.5, but be sure.

Rerun your numbers assuming your wife quites and you have to pay for health care. If she keep sworking, that gives you a cushion. Make sure you understand the assumptions for earnings and inflation that your advisor gave you. Consider rerunning the number he used in Firecalc.

Seems to me that you probably are good to go if you have a good handle on your expneses.

 

[Trawler]

When I was reading you post I almost thought I wrote it as DW are in similar position except portfolio size. Good to see your are now looking at post retirement spending. As for differences in Fire calc vs finacial planner and other calculators I understand your concern about who to believe and found that for us the best way to sort thru all this is by taking each metric driver of the plan and coming up with what we were most comfortable with. The metrics we evaluated were Portfolio size, Asset Allocation, Rates of withdrawel, post retirement expenses, inflation , longevity and any $$ left behind for heirs. Every one has thier own level of comfort with each. I found the Fidelity Income planner was best for us in looking at each metric to determine our plan. Then looked at this forum and other sites to learn more about each metric and its impacts. Then at some point we came to undersatand that the calculators and many of the financial and longevity metrics are based on past not future and there are no gaurantee as to the future of any of it thus by using our best judgement based on the past we just need to have faith. One thing is certain in our minds is we have one shot at this life have faith and live your dreams. I will say based on our post retiremnt expenses at 72K if we had your portfolio I would retire today. For us we are looking at 2012.

 

[rescueme]

I found the Fidelity Income planner was best for us in looking at each metric to determine our plan.

I agree. Just be aware that FIDO has a few different calculators, but the full Retirement Income Planner (along with you supplying the finite budget items, line by line) is the best "free" one, IMHO, giving estimated year by year RMD's, taxes, and portfolio withdrawl rates.

The only drawback is that you have to be a FIDO customer - either commercial or company 401(k) plan) to use it...

 

[Arnie]

I have run my numbers using a variety of tools and never had anything approaching five years difference in the results. Obviously some tools use different means of calculating their answers (e.g averages, monte carlos, historicals like FIRECALC) - but if I entered all the same numbers & assumptions I usually got similar results. I don't suppose your planner has missed something big like SS.

Congrats on your situation.