Can we and should we?

[big-papa]

Howdy from Austin, TX.

Me 53 1/2 working
Wife 54 1/2 housewife
13 year old daughter

Worked for a company for 20+ years and was laid off with a nice package in 2012. Joined another company shortly thereafter who then closed shop in Austin after 6 months. Package obviously not as good.

Was then out of work for 10 months and joined a new company this past summer. Hate it. Talked to boss about it and he moved me to another role a couple of weeks ago. Took two weeks, but still hate it. (good boss, though) Could very well be that I'm burned out on my industry. So, I'm either ready for an encore career or early retirement.

The stats.
~$2M in assets split roughly 60% in rollover IRA's and 40% in taxable accounts.
Have approximately $70-90K coming in the next few months due to a property we will sell in another state (not counted in the assets above). An unknown amount of that will be used for some work on the house we currently live in. A decision will need to be made to do "just enough" work on it to get it sold and then downsize OR do what we want to the house (within budget) and stick around for a while - at least until the kiddo starts college.
SS for the two of us would be around $36K at age 62.
We bought a 5 year Texas Tomorrow fund years ago for our daughter. So, tuition and fees are taken care of when college comes - everything else depends on whether she goes to college locally (and can live at home) or away.

Had a lot of time on my hands during the 10 months off, so did quite a bit to lower our cost of living. Also recently refinanced the house which improved things further. Net result: expenses are around $80K per year which includes health insurance based on what we paid for a subsidized exchange plan earlier this year before I went back to work. Can probably lower expenses a smidgen more, but that would require more cooperation from my loved ones.

Anyway, ignoring the money coming from the property sale and a possible lifestyle downsizing, Firecalc and my own backtesting makes me think we're in OK shape with around a $5-10K buffer per year.

So, what do you guys think?

Big-Papa

 

[travelnow]

Not really an answer to your question, but I was wondering what you did to lower your cost of living when your were off those 10 mos?

 

[rodi]

I'm in a similar position to you - and was burnt out on my career.
My assets were a bit less - but we have a nice rental income stream. Another difference is my husband is already collecting SS. I have one more kid, but no mortgage - so that may be a wash, budget wise. Our budget is $84k/year all in (taxes, insurance, everything.)

Have your run firecalc? What about Fidelity's RIP calculator?

You've accounted for insurance... does your 80k include taxes.

How does your wife feel about you retiring?

There's a very useful list of questions to see if you're ready.
http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

 

[big-papa]

Dropped comprehensive insurance on the older of the two cars
Dropped a mold rider on homeowners
We have a pool and my calculations showed a huge chunk of money going to electricity for the pump - found an online calculator that showed I was running the pump way too many hours per day.
Borrowed a friend's black and decker heat sensor and found a number of hotspots on the ceiling and added more insulation in the attic in those areas. Continued the incandescent bulb purge.
Saw that water bills were rising as my daughter ages (of course) so installed low flow shower heads.
Dropped cable - have Netflix, Amazon prime, a roku box, and Playon - more choices than time
Checked out a kill-a-watt unit from the library to help find phantom power usage in the house
Made a budget and continue to track. Of prime concern was the amount of $ spent at restaurants - fixed monthly budget for that.
Dropped landline and got an ooma - paid for itself in a few months
Bought my own cable modem - paid for itself in a little over a year
We live outside the city - changed who we use for trash pickup
Adjusted our life insurance policies downward since our savings is in good shape
Made sure we allotted budget for home repairs - ended up needing a new water heater earlier this year and some a/c work
I dropped the gym and personal trainer - cycled a 20 mile loop 3 days a week instead.
Wife still has a personal trainer (cheaper than mine was but still noticeable in the budget) and kiddo still takes piano lessons.
Switched mobile plan to a shared data plan which didn't reset the contract. Shopping for a new plan is high on the hit list once the contract expires.

Big-Papa





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[big-papa]

Hi Rodi
Taxes aren't included - since we'd be withdrawing from taxable accounts first, taxes are relatively low there since it's primarily capital gains - but I need to include it. Once we switch to rollover IRA's which would be right about the time we'd start social security, it looks like there would be an increase in the withdrawal rate, but effectively a lot of the social security would end up being used for taxes.

I've run Firecalc. Shows a pretty high chance of success (1 failure) up to between $95-100k. I had only done $90 before I first posted.
I've used fidelity's before but I haven't run it in 6 months or so - should do that again, especially since that's where all of our rollover ira's are. It also let us put in our other accounts as well - we have taxable accounts at fidelity, vanguard, and a small amount at schwab.


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[big-papa]

Also, what does my wife think? She was pretty tired of having me around the house for those 10 months - but I think I'd have a different mindset as a retiree vs. someone actively looking for a job - though would definitely need to split my time more than I did by just doing home projects and job searching - volunteer is one option. The other option is finding a much lower paying, but low stress job to keep myself busy and reduce the withdrawals for a few years. Need to think on that more.


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[big-papa]

Just ran Fidelity's calculator - shows safe up to around $90-$95K. Slightly more pessimistic than firecalc. ******** shows to be a bit more optimistic and calculates around $97K. But everybody is showing good between $90k - $100K.

By the way, we both have LTC policies. Very important for my wife since Alzheimer's is very prevalent in her family.

Big-Papa


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[wingfooted]

Seems a lot of potential FIRE candidates are in the same category of 'mid fifties and $2MM in assets'. It's a healthy amount of money of course, but even at relatively high withdrawal rates, generates less than $100K a year in income. The real gray zone of early retirement.

The decision here is more a personal one and also dependent on tolerance for risk.

With your expenses the withdrawal rate can take a limited amount of 'stress' - emergencies, market decline, high inflation, means tested SS or heaven forbid a divorce. So are you and DW comfortable with living without much buffer and potentially needing to throttle way back on lifestyle choices ? Become a greeter at Walmart in your mid 60's ? Or alternatively take a more conventional stance of a OMY for the next three to five years and further build assets ?

I also think it must be difficult to go back to work after an extended 10 month 'between jobs' period. Maybe you just need more time to adjust to the new schedule and new company ?

So I would conclude that yes FIRE is doable, but it has some not insignificant related risks.


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[Fred123]

FWIW, I ran a program that I wrote that uses a different methodology than FC or Fidelity, and I get a pre-tax 95% success rate at about $85K for your situation. At $90K, it was about 90%, and at $100K falls off sharply to 80%.

Just another data point to complicate your decision ...

 

[big-papa]

Hi wingfooted
You're correct - going back after 10 months was difficult. The company is actually a good one as is my boss. The complexities of why I discovered that my original primary role wasn't for me and why, despite having a new primary role, the secondary role I still have has the same issues are beyond the scope of this thread. But suffice it to say that it's the issue and there aren't a lot of other options inside the company that wouldn't require a relocation.

The original plan was as you mentioned - 3-5 year to further build assets. But mentally, at least at this company, I don't see it happening.

So, we think about the following:
True ER (this thread)
Switching jobs in the same field - I'm a manager/director, but I have thought about downsizing back to individual contributor - though training would be required to get back to speed on the latest tools
Downsizing to a lower paying job (no, not greeter at Walmart), but there seem to be a number of positions in central TX that I could use a subset of my skills and are in the $50K/yr range with benefits and are very much 8-5 jobs - which isn't the case in my current job and field. Definitely reduces the amount needed to withdraw, but haven't run the simulations to see what full withdrawals would look like after 5-10 years of doing that.
Wife could also go back to work and has talked about this - she's a programmer, but about 10+ years out of the industry. I think a few classes, online or otherwise, would knock the rust off and get her back to speed quickly.

Big-Papa

 

[heeyy_joe]

Mid 50's, a teenager and a mortgage is a tough nut for retirement, but doable. Only a general observation, but I think I hated every job i had after two weeks, and then adapted to like most of them.

 

[big-papa]

Hi heey_joe,
My experience has been likewise for the first two weeks. Problem is, it's been 5 months now at this job. Sleep issues, blood pressure up, and the dreaded feeling on Sundays seem to all be sending me the same message.

Definitely don't like having a mortgage, but I wanted to help further "layoff proof" our expenses, so refinancing was the best option and only truly possible while I am still working. Dropped about $400 off the monthly budget. Depending on employment and/or a house downsize, we will revisit paying it off as we have about $165K left on it. Even so, we are discussing doing just enough work on it to get it sold. So, depending on what the property in the other state sells for, what is needed from that for fixup, and what we could get for our current house, my calculations show we could pay cash for a smaller place without hitting our savings much, if at all. More thought needed there.

Big-Papa

 

[Live And Learn]

Hi Big-Papa. Welcome to the forum. DH and I are about the same age as you and your DW. Given the young age, I (personally) would not be comfortable retiring with anything more than a 3% WR, but that's just me. Everyone has their "tipping point" and their own risk tolerance.

So .... with $2mm x 0.03 = 60k per year. Vs budget of 80k / year. That's a shortfall of only 20k / year until SS kicks in. If you and DW each got a PT job making 10k per year I'd say "go for it".

 

[NanoSour]

Hello Papa and welcome to the community.

Maybe I missed it, but is there a pension in addition to SS that will kick in sometime down the road? Even a non-Cola pension can significantly change the picture for you.

Also, I took the liberty of running your numbers through ESPlanner Basic (the free version) and it spit out a spending level of $95,600 till age 100. That's in todays dollars and includes $20K for each of the years 2019-2023 for college expenses. I use ESPlanner Plus and reduce my standard of living from age 65-80 by about 2% per year. I believe this makes a lot of sense as you won't find too many folks in their 70's spending what a person in their prime earning years is spending. Many studies have been done on this aspect of retirement and again, it makes a lot of sense to spend more in the younger years.

Anecdotally, I retired about a year and half ago at age 49 with 3 children yet to put through college. My children are 6, 7 and 10th grade and we budget for 70K/year including a $1,500 monthly mortgage payment. With a month and a half left for the year, we're $5K under budget which will make for a nice Christmas for the family. Maybe even a nice ski vacation during school break.

You might want to check out ESPlanner. The paid version in $199, but IMHO worth every penny if you are seriously considering early retirement. I would never have pulled the plug without it.

 

[big-papa]

Thanks, NanoSour. No Pension. Or, rather, my wife is eligible for a small pension (non COLA), but the company has a buyout offer which we plan to take - and to rollover the funds to her IRA. That is already included in the ~$2M asset number.

 

[big-papa]

I did go back and look at medical costs now that the aca exchange website has all of the plans available. Did a little spreadsheet analysis similar to the thread going on now in this forum on Cobra. Daughter has one high-priced med (for which there is scheduled to be a generic by Sep 2015) and she and I also have a low priced generic med prescription. Previous aca plan we had during the 10 months had generics at $10 and $30 copay for doc visits, both deductible waived. Looking at this year's similar plan against a low cost HMO plan that doesn't pay much of anything until the deductible is met shows a little over $2K cheaper per year for total cost: meds + doc visits + premiums. Something to consider in the overall pulling-the trigger thought process.....