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Can I retire NOW? I can't sleep! What do YOU think?
Old 08-04-2013, 06:55 PM   #1
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Can I retire NOW? I can't sleep! What do YOU think?

Thanks for reading this, my first post here. I am in a very unusual situation, I know many people would be pretty happy to be in my shoes but I am really worried and stressed about it...mainly worried if I will have enough $$ to actually retire now at age 51.

Long story short without any of the politics, I have decided to sell my share of a company that I am a stockholder in and will walk away with $2 million, lump sum, tax free. My wife and I own our home free and clear, worth about 500k. We have no debt or loans, we have 400k in a 401(k) and about 60k in Vanguard funds (mainly earmarked to be used for the 2 kids college), our oldest starts this fall. Our living expenses are going to go up soon because we will have to buy health insurance, the kids are starting to drive and go to college soon, etc but with those things considered, we think about 80 to 90 grand a year, at least for the first few years, will allow us to cover all living expenses and improve our lifestyle just a bit, like finally taking a real and well deserved vacation, once or twice a year. We have worked our butts off our whole adult life, tried to save and have lived fairly modestly. Sure, I can go get another job and I just might but I think I would like to try to retire early, especially since 3 coworkers about my age died in the past year, one of cancer, 2 of heart attacks...I always say "It's later than you think!" and tragedies like that really make me think about the time I have left...We have a proven and very trusted financial planner that other family members have used for years and he says I will be fine, he has met with my wife and I, tried to put us at ease, sent us all kinds of charts and projections, did a risk assessment, etc. I also have a family member who has worked at Vanguard for over 25 years and he laughs that I am worried and says I will be fine and I can do whatever the heck I want to do now...but I have a hard time believing it... and I have one wealthy friend that says "Don't even think about retiring, you won't have nearly enough $$!" I have used many different online retirement calculators with varying results, some won't allow entry of my unusual specifics. I know all about the 4% rule, the 25 x rule, subtract your age from 100 rule, allowing for inflation and cost of living adjustments etc but the big question in my head remains, do I really have enough to retire now? I know there are so many variables like rate of return on investments, how long I will live, etc and that I could ask 100 people and get 100 different answers but would like to hear your opinion. Thanks for reading my long post!
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Old 08-04-2013, 06:59 PM   #2
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What does FIREcalc say? From your post it looks like you will be fine. Welcome to the forum.
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Old 08-04-2013, 07:07 PM   #3
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Welcome to the forum Charlie Delta.

I think the reason you are getting many different answers from different people is that you are essentially trying to live on about 4% per year of your nest egg (assuming $2.4M and about $80-$90K expenses). The early studies suggested that a 4% withdrawal rate was very reasonable. However, they were primarily based on people retiring at 65, not 51.

To further complicate matters, the studies are now questioning whether 4% can be sustained over 30+ years in today's low bond yield marketplace. So, there is nobody that can give you a definitive answer on whether your existing nest egg will last forever.

I "retired" at 46 several months ago, and went through the same dilemma as you, although my expenses are not quite as high as yours. I was not planning on working any more, but I ended up finding a very part time opportunity that I really enjoy, and that pays enough for me to cover all my expenses so that I can let my nest egg stay in the market for the time being. I was convinced I would either never find an opportunity like this, or I wouldn't want it even if I did. However, life has a funny way of presenting you with options that you never even thought about when you're stressed out and only seeing the problems, not the opportunities.

You have certainly done very well to get to this point at your age, and there is no reason for you to stress out. Just relax, take some time off to clear your head and enjoy the down time, and then see how you feel. You may want to work again at something else, and you may not. You may also find that you can cut your expenses a bit without really noticing it, which would help to get your withdrawal rates down from 4% to 3%...which would make even the most conservative forum members here think you're good to go.

Good luck with it, and congratulations on doing so well! You will be fine.
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Old 08-04-2013, 07:40 PM   #4
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I agree with Ready and his line of reasoning.

Odds are good at least 75% that you should be fine. You are facing some certain additional expenses as the kids become teenagers, and some potential huge expenses for college. You also have a financial adviser who if he charge say 1% to manage the $2 million will substantially increase your expenses.

FIRECalc has some nice options to model a decrease in expenses once the kids are done with colleges as well as account for Social security. I think it is worth trying one more calculator.

One thing I am positive is you have earned and can easily afford a very long at least a year or two vacation/time to decompress.

Welcome to the forum.
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Old 08-04-2013, 07:42 PM   #5
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You have not mentioned any Social Security in your post. You may have already accrued significant SS benefits under current law.

In my case, after working for less than 25 years, DW and I both have accrued upwards of 1M each (NPV in 2013 dollars) in SS benefits (assuming 30 year draw starting at age 70). Even if 1/3 of this amount is discounted due to any SS reform, this is still a significant amount of money.

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Old 08-04-2013, 07:46 PM   #6
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Charlie Delta,

I was curious what type of situation do you have that you have been unable to model in the calculators?

I use to think that I had a similar problem with temporary income streams that do not last a lifetime, but I was finally able to figure out how to do that by using 2 streams (once positive and one negative) that start at different ages.

-gauss
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Old 08-04-2013, 07:52 PM   #7
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At 51 history would suggest you should probably be using 3% or so, not 4% or 25X unless you plan to expire at age 81. But run it through FIRECALC and see what it tells you, you can vary spending, age and/or success rate.

Some would suggest shooting for 2-2.5% for early retirement, assuming a 20-70% equity AA given today's equity valuations and/or economic growth outlook.

IMO no one should retire if they can't sleep though. You need to be comfortable with your spending/withdrawal plans, chances of success, risk tolerance, AA, contingency plans, etc. - and you need to fully understand your range of portfolio outcomes to get comfortable IMO.

If anyone gives you a definitive yes/no answer based on your post #1, you'd do well to ignore it...
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Old 08-04-2013, 07:57 PM   #8
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The simplest retirement planner is to divide your nest egg by your annual expenses and see the result -

$2.4M / 90K = 26 years worth of living expenses, which takes you to age 77.

$2.4M / 60K = 40 years worth of living expenses, which takes you to age 91.

Then adjust for Social Security, taxes, inflation, pensions, college, kids leaving home, downsizing, low and high rates of return, long term care needs, etc. and recalculate. If your expenses with kids are 90K they will probably decrease quite a bit once the kids are launched, unless you increase expenses for travel or hobbies at that time.

Do you have a detailed spreadsheet budget for now, when the kids are in college and post kids?

I don't know about you but that is too much for me to do in my head so I put it all in a spreadsheet and then use a couple of retirement planners to check my numbers. I use Firecalc and the Fidelity planner.

Another way to look at it is to say I have $2.4M, what kind of budget & house can be supported now and when the kids are launched to stay retired? Would I be happy with that budget and house size or would I rather work a bit longer?
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Old 08-04-2013, 11:04 PM   #9
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Quote:
Originally Posted by Charlie Delta View Post
I have decided to sell my share of a company that I am a stockholder in and will walk away with $2 million, lump sum, tax free.
Just curious how you are avoiding taxes on your gain? I'm guessing your basis in your shares is less than $2m.

I ask because I'm advising a friend who's in a similar situation to yours, and it looks like he will owe capital gains tax on his sale of shares in his company.
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Old 08-04-2013, 11:16 PM   #10
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I think you're probably fine but plug your situation into Quicken Lifetime Planner. It has screens to cover off the kid's college costs, SS and other items and will show you how your nestegg will last.
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Old 08-04-2013, 11:58 PM   #11
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Welcome to the forum, Charlie Delta. I agree with others who suggest a bit lower draw down rate - mainly because you could easily have one of you living to 90+. 40 years may be too long to count on 4%. Be sure to explore the forum to see what others are doing about being "flexible". Honestly, it's the only way to live without a regular pay check in my opinion. If you must use 4%, then a problem might develop which you could not overcome. But, if you can do 4% in the good times and then cut back for a few years when times are "hard", I see no reason you couldn't make it with your stash. In addition to whatever SS you will have coming, you also have your home. Most of us on the forum do not count our principle residence in our retirement stash, but we do know that it can be used as a back-up if need be. At some point one could sell out and relocate to a less expensive home (and maybe less expensive area) OR use one of the reverse mortgage strategies. Personally, I would never want to count on my home's value as a MAIN ingredient of my retirement plan, but, as a back-up - Let's just say I'm a belt and suspenders (and elastic waist band) kind of guy. YMMV Check back often and let us know how you are sleeping.
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Old 08-05-2013, 03:11 AM   #12
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We have 2 kids at home, one in college, the other to start next year. We have projected our expenses now and after kids are gone and find that we expect our spending to go down considerably once they are gone. So, for us, it has been helpful to look at our situation over the next few years and then to model it with a reduction in spending. The most helpful planners for me have been Firecalc and Fidelity RIP.
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Old 08-05-2013, 07:09 AM   #13
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Never ceases to amaze me how many times people seem to misuse/confuse inflation adjusted withdrawals or "constant dollar" (ie, "4% SWR") versus % of remaining portfolio or "constant percentage" - a very different methodology. The former has actual probabilities of success, the latter carries a statistical 100% probability of success (though potentially unworkable due to spending fluctuations).

Once again http://www.bogleheads.org/wiki/Withdrawal_Methods

Many newbies must be completely confused by answers they get...

And of course even an SWR 100% probability of success is no "guarantee" - it's just better odds. Some members here "can't sleep" until they reach a 200% probability of success (IOW, a nest egg 2X the 100% threshold).
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Old 08-05-2013, 08:56 AM   #14
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Hi Charlie Delta. Kindred spirit ! Welcome to the forum.

I am 50, my nest egg is $2.2mm and my annual expenses (after including health insurance for 2) is estimated at 90k per year. I am budgeting 30k annually for healthcare (premuim, deductible, out of pocket, etc). DH and I have no children.

All the calculators said I was fine and could retire this year. However, as my signature says, like you I was losing sleep worrying if I "had enough". As my signature also says, I've decided to stick it out another 2 years. I've set my goal at having 100% sucess to age 90 in FIRECalc, and 95% success to age 90 in Fidelity's RIP using only 85% of my portfoliio.

Calculators may tell you when you're financially ok to retire, but our guts need to tell us also.
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Old 08-05-2013, 09:03 AM   #15
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Welcome CD,

I went through something similar to your situation several months ago. I finally decided to ER at age 49 after investing $200 in ESPlanner and deciding to trust its output. I figured if I was serious about this decision, then it should be worth $200 to help make the decision.

When it was all said and done, ESP spit out a number I was very comfortable with and I just pulled the trigger. With the decision made, I look at it as a challenge to make this work for my family. It may not, but failure is part of life and the worst that can happen is I go back to work at some point in the future. I have no problem with that.

I will say I don't have nearly your assets and have 3 kids at home with future college expenses somewhere on the horizon. We live very well on $77K spending with a $225K mortgage. ESP says I could spend more, but LBMM has always been my mantra and is what got me to this point. Don't think it wise to change now.

Best of luck to you with your decision. If interested ESP can be found here.

Our Products | ESPlanner Inc.
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Old 08-05-2013, 05:31 PM   #16
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Please kindly be patient with us. Many of us here are not experts in finance or SWR calculations. For some of us, this website is the only place where we can discuss FIRE financial planning. And in my case, I can only read this website when I travel or when I have a few (rare) minutes available, which means not much time to think SWR through in great detail. Thank you.

Quote:
Originally Posted by Midpack View Post
Never ceases to amaze me how many times people seem to misuse/confuse inflation adjusted withdrawals or "constant dollar" (ie, "4% SWR") versus % of remaining portfolio or "constant percentage" - a very different methodology. .
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Old 08-05-2013, 07:44 PM   #17
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I want to echo what Midpack says about being able to sleep and being comfortable with your plans. If you are not sleeping well, that is a concern. How much better were you sleeping 6 months ago?
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Old 08-05-2013, 08:04 PM   #18
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Obbyn65, I think Midpack's concerns, which could come across as "impatience," are that people (like me!) who don't have a math background will get confused by the sometimes-erudite discussions of numbers, statistics, probabilities, on the forum. I know I greatly appreciate it when someone stops to explain the differences.

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Please kindly be patient with us. Many of us here are not experts in finance or SWR calculations. For some of us, this website is the only place where we can discuss FIRE financial planning. And in my case, I can only read this website when I travel or when I have a few (rare) minutes available, which means not much time to think SWR through in great detail. Thank you.
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Old 08-06-2013, 08:45 AM   #19
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Quote:
Originally Posted by obgyn65 View Post
Please kindly be patient with us. Many of us here are not experts in finance or SWR calculations. For some of us, this website is the only place where we can discuss FIRE financial planning. And in my case, I can only read this website when I travel or when I have a few (rare) minutes available, which means not much time to think SWR through in great detail. Thank you.
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Obbyn65, I think Midpack's concerns, which could come across as "impatience," are that people (like me!) who don't have a math background will get confused by the sometimes-erudite discussions of numbers, statistics, probabilities, on the forum. I know I greatly appreciate it when someone stops to explain the differences.
Exactly, thanks Amethyst.

Not a matter of patience. I guess I could sit idly by (and often do, we are all responsible adults) when I see answers that are based on assumptions wholely different from the (newbie) OP's question. Does the newbie always realize the answers are based on (very) different assumptions?

I am not suggesting other members ever do it maliciously, it's invariably an innocent mistake when it happens, but it's surprisingly often. With respect, would that be more "kindly" obgyn65?

But no worries, I am less and less inclined to attempt to intervene as the years pass...
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Old 08-06-2013, 08:48 AM   #20
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Where did the OP go? First and only post. He must be off counting his money.
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