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Early retirement in my future?
Old 07-11-2013, 06:47 AM   #1
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Early retirement in my future?

Hi everyone! I just discovered this site and am new to the community.

I have recently begun considering early retirement because I am quite frankly frustrated with my job and no longer enjoy working where I am. I have been working at a MegaCorp as an engineer for the last 21 years.

I know early retirement is not really in my near future because I've got kids/college to pay for. But it would be nice to have a realistic early retirement plan to start looking forward to.

Personal info:
Wife and three kids (20, 17, 13). My goal with my kids is to 100% fund their education expenses. My 20 year old is a Jr at a school with an annual tuition/board expense of roughly $35K. Private high school for my 17 and in 2014 for my 13 year old that is $14K per year.

Salary:Me(49) $170K, Wife (46) $98K.

Savings:
My 401K: $638K
Wife 401K: $439K
Roth IRAs total: $32K
Stock:$364K
Municipal Bond Fund: $208K
Money Market: $68K

Debt:
Mortgage: $66K @ 4.5% paying down with additional $600 per month towards principle

Net Worth: $2.1M

Potential Retirement Benefits: My employer froze the companies pension. I'm not entirely sure how to best find out what the benefit payout would be at different retirement ages. I believe if I retired at 65 the fixed benefit is something like $30K per year. Not sure about my wife whose company did the exact same thing and froze their pension plan.

Annual Expenses: approx $110K per year. When the kids are out of the house, I know that my wife and I could reduce this.

Caveat: My wife is a cancer survivor currently in remission. She's very frugal with one exception - she absolutely loves to travel.

My one personal financial goal is to ensure that my kids start their career with zero debt. My oldest is likely to go on to graduate school, middle son is less likely to attend a 4 year school but we'll see. The youngest wants to be an engineer.

When I started my career I always assumed I'd work till 65. My Dad worked till he was 70, retired, and he and my mom now live comfortably, frugally and very contentedly. They modeled a frugal, saving oriented financial lifestyle that I have tried to emulate.

So.. early retirement. With college expenses ahead for 9 more years (till i'm 58), it seems that the earliest I should think of retirement is then. Seems a very long way off.

Any feedback?
Thanks
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Old 07-11-2013, 06:53 AM   #2
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Welcome to the forum!

Don't make the assumption that you can't retire before the kids are on their own. Also throw your numbers into FIRECALC. It might give you a good idea of where you stand today.
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Old 07-11-2013, 09:35 AM   #3
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Welcome aboard. Just pay off the mortgage with the money market already! No way that is earning 4.5%.
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Old 07-11-2013, 10:42 AM   #4
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Welcome to the forum!

Don't make the assumption that you can't retire before the kids are on their own. Also throw your numbers into FIRECALC. It might give you a good idea of where you stand today.
This!

Our retirement spending plan has us contributing to 529's 8-10 years into retirement. (We were older when we had kids, and have 10 & 12 year old kids.)

The money has to be budgeted for - but having kids in college (or pre-college) does not mean you can't retire... as long as your budget can be supported.

I did a lot of modeling to reassure myself I've got it covered. I'm a big fan of Quicken Lifetime planner (comes with the premier version of quicken.) Also firecalc lets you play around too... The way I handled the 529 contributions was included them in my original spending (first page) then showed a "pension" coming on line at the time that spending ends.

I will be retiring sometime in the next 0-4 years (holding out for a layoff package or my 55th birthday - whichever comes first) - and my eldest won't even start college for another 7 years.
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Old 07-11-2013, 11:26 AM   #5
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Originally Posted by LongTerm View Post

My one personal financial goal is to ensure that my kids start their career with zero debt. My oldest is likely to go on to graduate school, middle son is less likely to attend a 4 year school but we'll see. The youngest wants to be an engineer.
My rule is the kids are on their own for graduate school. There is also the fairness issue if one kid goes to grad school and the others don't.
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Old 07-11-2013, 11:42 AM   #6
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My rule is the kids are on their own for graduate school. There is also the fairness issue if one kid goes to grad school and the others don't.
+1

We also drew a very clear line regarding this - and stuck with it.

Now we are working on where to draw the line helping the five grandchildren with funding college...
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Old 07-11-2013, 01:29 PM   #7
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You're in pretty good shape already, LT.

Enjoy your next nine years with your family--lucky kids! Unless you've already told your kids you'll foot grad school, I second the above re not paying for it. We didn't for DS and surprise, he got a full scholarship that he might not have gone for otherwise.
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Old 07-11-2013, 02:30 PM   #8
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My rule is the kids are on their own for graduate school. There is also the fairness issue if one kid goes to grad school and the others don't.
We also did this.

If the kid really wants to go to grad school there are ways to pay for most of it without going into debt. Our DD graduates this summer with public health degree. She was TA first semester and Grad Asst the past 1 1/2 years. They paid her $18/hour + 9 free credits. Since grad school was only 12 credits/semester that meant she was able to self fund most of it (although she finally did borrow a few thousand from us to finish the last 6 credits for the summer).
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Old 07-13-2013, 07:30 AM   #9
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We also did this.

If the kid really wants to go to grad school there are ways to pay for most of it without going into debt. Our DD graduates this summer with public health degree. She was TA first semester and Grad Asst the past 1 1/2 years. They paid her $18/hour + 9 free credits. Since grad school was only 12 credits/semester that meant she was able to self fund most of it (although she finally did borrow a few thousand from us to finish the last 6 credits for the summer).
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+1

We also drew a very clear line regarding this - and stuck with it.

Now we are working on where to draw the line helping the five grandchildren with funding college...
We have set the same expectation.... undergraduate degree is on us but beyond that a post graduate degree is their responsibility. My eldest son is working hard to try and qualify for a PhD program in the sciences that provides full tuition reimbursement. His goal is to make it through a PhD program without having to pay for tuition at all.
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Old 07-13-2013, 07:52 AM   #10
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Welcome aboard. Just pay off the mortgage with the money market already! No way that is earning 4.5%.
I could do that... I've considered it, but the MM is sort of our emergency fund. Right now I'm paying an additional $600 per month towards principle and the loan will be paid off in a little over 4 years. If I double it to $1200 per month, I'd pay the mortgage off in 2 years.

But there's more to the story... right now, I get hit pretty hard by the IRS's Alternative Minimum Tax. So removing my mortgage interest will only increase the AMT amount I pay to the Fed's every year... Thereby again reducing the value to me of paying off the mortgage even earlier.

Thanks for the suggestion though... I'm going to reevaluate this again.
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Old 07-13-2013, 07:54 AM   #11
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Originally Posted by rodi View Post
This!

Our retirement spending plan has us contributing to 529's 8-10 years into retirement. (We were older when we had kids, and have 10 & 12 year old kids.)

The money has to be budgeted for - but having kids in college (or pre-college) does not mean you can't retire... as long as your budget can be supported.

I did a lot of modeling to reassure myself I've got it covered. I'm a big fan of Quicken Lifetime planner (comes with the premier version of quicken.) Also firecalc lets you play around too... The way I handled the 529 contributions was included them in my original spending (first page) then showed a "pension" coming on line at the time that spending ends.

I will be retiring sometime in the next 0-4 years (holding out for a layoff package or my 55th birthday - whichever comes first) - and my eldest won't even start college for another 7 years.

How do you plan on handling medical insurance? That's a big one for me since as I mentioned, my wife has had cancer and is in remission now. They tell us the type of cancer she had does recur so we need pretty solid medical insurance.
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Old 07-13-2013, 10:44 AM   #12
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We have set the same expectation.... undergraduate degree is on us but beyond that a post graduate degree is their responsibility. ......
Quote:
Originally Posted by LongTerm View Post
.....But there's more to the story... right now, I get hit pretty hard by the IRS's Alternative Minimum Tax. So removing my mortgage interest will only increase the AMT amount I pay to the Fed's every year... Thereby again reducing the value to me of paying off the mortgage even earlier.....
+1 for us on grad school, though I would consider a low interest loan shoud DD or DS ever decide to go.

On the AMT, don't forget to adjust for both a reduction in loan interest deduction and a reduction in interest/investment income though unless you are an investment guru I suspect the former exceeds the latter.
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Old 07-13-2013, 11:26 AM   #13
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How do you plan on handling medical insurance? That's a big one for me since as I mentioned, my wife has had cancer and is in remission now. They tell us the type of cancer she had does recur so we need pretty solid medical insurance.
Under the ACA insurance companies can no longer deny coverage due to pre-existing conditions. Several states have published the 2014 Health Care exchanges costs. If you do a search you can see if your state has published theirs. Otherwise there are a couple of generic rate estimators you can use:
National Health Care Calculator
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Old 07-13-2013, 11:28 AM   #14
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But there's more to the story... right now, I get hit pretty hard by the IRS's Alternative Minimum Tax. So removing my mortgage interest will only increase the AMT amount I pay to the Fed's every year...
You might want to check this. The AMT generally works to limit or eliminate the benefit of the mortgage interest deduction, so you may be getting little or no tax benefit from paying mortgage interest.
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Old 08-06-2013, 09:59 AM   #15
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Quick update....

I paid off the mortgage yesterday! Debt Free - As I was leaving the bank the banker said to me "You're living the dream!"

I guess I am

Now I am going to focus on investment strategy adjustments and savings.
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Old 08-06-2013, 10:07 AM   #16
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Congratulations! One step closer to financial independence. Be careful about being debt free ... it becomes an addiction.
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