Jack_Pine
Full time employment: Posting here.
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I caught that also. 9.3 in assets? Not sure why a person like that would need a board like this. Guess I am just jealous.
Can I retire on $3.1MM? Anybody here done it?
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I caught that also. 9.3 in assets? Not sure why a person like that would need a board like this. Guess I am just jealous.
If you can't live in Houston with 3.1M...
...I figured you lived in NYC or Seattle. Must be "the Heights."
...I figured you lived in NYC or Seattle. Must be "the Heights."
I was more than ready to retire earlier in the year but was having OMY syndrome. Then I got a big promotion, MUCH better pay and international travel opportunities. So I now like my job, so far. Had been pushing DH to retire for a while (even posted a thread about that) but now the tide has turned. DH's trying to convince me to quit, while finally ready for his own retiring. So we will see. We are in our mid 40s/50s, and hopefully it will still be "early retirement" by the time the joy of work finally diminishs.
Back to the OP, it's not the size of their $3.1M NW but the $150-200k annual budget that concerns me, and led me to suggest they either have to continue working or seriously cut back on spending.
Our avg yearly spend from 2008-2013 was $135k. Defintely areas we can cut back, but $30k per year I dont know. But then we've never really tried to. It's not like we're living over our heads, but we don't have a budget either. We spend what I make and we should be on a budget and putting money into savings beyond 20% or so I put into 401k.
daylatedollarshort
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We cut more than $30K, not including reduced income taxes, and it has been less painful than we thought it might be. I keep a spreadsheet. It is kind of like a game to me now. We switched to off brand ink cartridges ($2 cost and recyclable for $2 store credit), bought soap pumps that only use 25% the soap of regular pumps, weather stripped, price shopped car insurance, bought cars with better repair records and MPG, use the library more, cut out job and commute costs, and just over a hundred things big and small, many small, but they all added up.
If you do not cut your budget and take the severance now, when would you be able to retire? Are you going to have to make cuts to retire anyway eventually, if you retire at whatever age you planned before you were offered the current severance package?
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Live And Learn
Thinks s/he gets paid by the post
As others have said, you can't retire with 3.1mm and 145k in expenses with alot of confidence. I definitely hear you on not wanting to have to watch your pennies in retirement.
Do you have an itemization of the 135k in spending ? If you give that a look you may find ways to save that aren't painful. If not, then keep working. I know severance feels like 'free money' and its TOUGH turning it down, but unless you know that you can find another job at a comparable salary I'd let the company find me another role, do it with pride, spend the next few years looking at spending and creating a "budget" (spending plan), wait until I had 100% in FIRECALC and a comfortable shortfall age in FIDO's Retirement Income Planner, and retire when those stars align so you can sleep at night after you leave the workforce.
kcowan
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I think you have been informed that you can make it if you want to. You have to have the will to make the changes. It is a free 1.5 years that you cannot get any other way. Get serious about looking at all aspects of your finances and make changes to improve your lot.
You could try to cut expenses over the next few months to see how it feels. Over the past year, we have cut back on expenses to see how low we could go. Now we have a pretty good idea about how much we actually need in retirement. And it's less than we thought.
I think you've figured out that you could easily retire with $3.1 MM but you have to control your expenses. By not being tied to a job, you can look at moving to a lower cost location. You could (gasp!) move into a smaller and/or lower cost house after the twins head off to college. You could figure out where all $140K/yr goes and actually reduce (or get) the budget.
With $3.1 MM, you can definitely retire whether it is now or in 1.5 years. Heck, you have plenty to retire on now by controlling expenses. The retiree medical benefits help a little although you could get an ACA subsidy by manipulating your taxable income.
I'm retiring in a few weeks in Houston. My basic budget is nowhere near $140K but I've got a variable budget that would allow me to spend that much on traveling. I think if you look at what you spend your money on you will see definite ways to make it work. There are many nice areas of Houston if you want to stay in the general area. Housing is usually the largest single line item of any retirement budget.
I found that when my kids went off to college the overall expenses dropped significantly. No horde of kids routinely eating and drinking everything in the house on a daily basis. No free flow of $20+ in school expenses seemingly every other day. When they are in school, they're pretty much on their own. I told my kids I'd pay for tuition, fees and the equivalent cost of a nice dorm with full meal plan. They were expected to cover books, personal expenses and whatever else with summer or part-time jobs. The bank of "Dad" started to scale back operations.
With $3.1 MM, you can definitely retire whether it is now or in 1.5 years. Heck, you have plenty to retire on now by controlling expenses. The retiree medical benefits help a little although you could get an ACA subsidy by manipulating your taxable income.
I'm retiring in a few weeks in Houston. My basic budget is nowhere near $140K but I've got a variable budget that would allow me to spend that much on traveling. I think if you look at what you spend your money on you will see definite ways to make it work. There are many nice areas of Houston if you want to stay in the general area. Housing is usually the largest single line item of any retirement budget.
I found that when my kids went off to college the overall expenses dropped significantly. No horde of kids routinely eating and drinking everything in the house on a daily basis. No free flow of $20+ in school expenses seemingly every other day. When they are in school, they're pretty much on their own. I told my kids I'd pay for tuition, fees and the equivalent cost of a nice dorm with full meal plan. They were expected to cover books, personal expenses and whatever else with summer or part-time jobs. The bank of "Dad" started to scale back operations.
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Amethyst
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Hmm, I wasn't a member back when the board began, but...wasn't it started partly for the benefit of younger "dot-com millionaires" who wanted to know if their fortunes would last a lifetime?
Amethyst
Amethyst
+1 - this is the most practical and strategic advice I've heard so far regarding your situation.
Speaking of cutting costs, will your kids consider going to Texas state colleges? UT is an excellent university, and the tuition and living costs are much lower than, say Columbia or UCLA. Something to also plan ahead if you seriously consider retiring now.
Getting into the two premier Texas universities (UT and TAMU) can be difficult if you aren't in the top end of your class. It's a real disservice to some of the top high school grads of the state who are passed over by less qualified candidates only because these went to smaller high schools.
A way around it is to do the first year in a junior college. The dropout rate is pretty high and a high JC gpa is usually a ticket into the top schools on their sophomore year. Texas Tech, UH and other schools are also good public universities. Oklahoma and Louisiana have programs offering top Texas HS graduates in state tuition and scholarships to go to their top schools.
RunningBum
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Not sure about that as I wasn't around then either, but I always figured it was that and other common issues such as health insurance, tax issues, Roth conversions, bridging until you can access SS/pensions/retirement accounts, what to do with yourself, etc. All issues that don't really matter whether you have a 6 figure annual budget or low 5 figures.
REWahoo
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Not really.
Dory 36, who created FIRECalc and started this forum, was an IT guy working for an oil company in Saudi at the time.
In case you haven't seen it: http://www.early-retirement.org/forums/f32/the-history-of-early-retirement-org-53657.html
Both twins got into A&M automatically, both in top 10%. Son will prob get a National Merit Finalist which will cut his costs a lot.
People tell me our costs will go down a lot when they leave for school so that will help. But how much? We spend $13k on groceries a year. That has to drop.
But my medical insurance I think will go up. We pay about $1200 a year in premiums under my company. Retiree medical would be $10k per year. That's a huge increase. I've never looked at ACA, maybe that's a better route.
I'm going to get with the wife and see where we would be if we cut at least the easy stuff and took into account the kids leaving for 9 months a year.
People tell me our costs will go down a lot when they leave for school so that will help. But how much? We spend $13k on groceries a year. That has to drop.
But my medical insurance I think will go up. We pay about $1200 a year in premiums under my company. Retiree medical would be $10k per year. That's a huge increase. I've never looked at ACA, maybe that's a better route.
I'm going to get with the wife and see where we would be if we cut at least the easy stuff and took into account the kids leaving for 9 months a year.
Texas Proud
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+1 on this.... we also live in Houston and my son is in the top 3% of his class.... I have told him he can go to any university in Texas that is Texas supported..... if he wants to go someplace else he has to come up with the extra money somehow...
There is nothing wrong with 'local' universities... and the cost is much lower....
Opps... I see that you had responded... but left my post anyhow...
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How much is your mortgage payment/m? Any chance to downsize into a smaller/less expensive house, or pay off mortgage before you retire? Any car loans? Houston is not a super expensive COLA from what I've heard, yet your budget is quite high...
Congratulation to your twins and to you and your wife. That doesn't happen without some parental help.
I found my out of pocket costs for the kids went down every time one of them left for school. The older two were very active in sports and band. The money drain there was amazing and I didn't really notice it until it stopped.
Quicken or Mint would have been good for you to have started about 10 years ago. It's hard to beat recording your expenses in almost real time.
The next best way is to try to break out the big items. Housing (mortgage, property tax, insurance, utilities, maintenance, lawn crew, maid service, pool service, etc.) is your biggest line item in all probability. That's where your biggest savings can be found at your income level. Cars can also be a drain if you "deserve" high end luxury cars. Nice vehicles are pricey but I'm amazed what some of my "broke" coworkers drive. Work expenses should be looked at. You won't be wearing as many suits if you wear suits. Hardly anyone does in the Houston energy business unless you are very high up or working in financial services in some way. You can only look at your expenses with the records readily available.
Try to avoid what my wife always did when I tried to talk about cutting expenses. She always said she'd start cutting back at the grocery store. After the kids left, grocery savings have very little impact on most people spending more than $50k/yr in my opinion. The exception would be if you waste a lot of high end meats. Of course, dining out could be a real budget killer. When you retire, it's a good time to take up gourmet cooking if it appeals to you and your wife.
I told my kids they had to go to TAMU, UT, another public Texas university or have a good story. The two oldest went to TAMU in the College of Engineering. They youngest went to Texas State.
The desired degree is probably the best way to decide. All schools don't necessarily have equivalent "quality" degree programs in all majors.
MooreBonds
Thinks s/he gets paid by the post
Regarding taxes, you really need to do a quick and dirty sample tax return. Many early retirees are surprised with how much their taxes go down, living off of just capital gains and qualified dividends. (note: you need to also make your portfolio tax-efficient - there's a big tax difference between getting capital gains/qualified dividends taxed at 15% versus interest and short-term capital gains taxed at 28%+!)
But there can also be a boogeyman waiting in the wings when you start withdrawing from your 401k/IRAs, since that will be taxed at the higher 28%+. Same with your state tax return - each state taxes capital gains/dividends/401k/IRA distributions differently.
You very well could chop your income tax bill in half with just a few hours worth of work one-time in sitting down and putting your highest-taxed items in your deferred accounts, and lowest tax-cash flow in your taxable accounts.
Just keep in mind that taxes can and do change, and they might one day raise the rates on qualified dividends and capital gains...
We've been using Quicken since 1998, so we have every expense catagorized. That's how I know our average is near $135k. Never bought a new car and always pay cash and usually buy them out of state and ship them down and save maybe $4k-$5k. Never wear a suit. No dry cleaning bill. Maybe I'll post my expenses here but that will probably just open me up to ridicule.
aja8888
Moderator Emeritus
A lot of folks posted expenses here when going through this analysis. It would help you get another opinion or have some tough questions asked. It's not considered ridicule as many of us have gone through this exercise.
Then I'm really puzzled where your $135k/yr goes and $150k/yr budget comes from even counting in kids college. Just a back of envelope calculation:
$10k mortgage
$13k grocery
$10k retiree health insurance
$5k property taxes (I assume)
$5k car/house insurance
$50k in kids college
Any other big expenses? I'd say $120k for the next 4 yrs all in including taxes(4%+/- SWR), then $80k after that. A more realistic and sustainable approach.
