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Early retirement on the horizon
Old 11-20-2009, 10:41 PM   #1
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Early retirement on the horizon

Hi all,

To cut to the chase, I'm 53, single and have $1,300,000 in 401(k) and savings. My home is half paid off.

It has occurred to me that I can retire in the next couple of years so am starting to think seriously about financial arrangements. Thanks for this website... it's very useful!

I've used a number of different online retirement calculators, including FIRECalc. Results range from $59K (FIRECalc) to $86K in annual withdrawals, which eventually would be supplemented by about $18K/yr in SS, so the totals range from $75K (FIRECalc) to $104K/yr. I'm basing my initial planning on the FIRECalc result, but will also see a financial planner.

So it looks like I'm in a fairly good FIRE position. Is there anything I should be considering?

I plan to travel (through house exchange) and also do some volunteer work overseas.

Anyway, just wanted to introduce myself and I look forward to learning much from this website.
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Old 11-20-2009, 10:48 PM   #2
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59k on 1.3M seems a little on the high side. That would be a withdrawl rate of 4.5%. I'm looking at heading out around age 51 at a <3% WR and won't go higher than that due to relative youth. If I were 65, I may take 4% max. Its all up to how much comfort you have with potential success/failure rates. Personally I stick to 100% success rates in firecalc, but honestly speaking there are no guarantees here.

Have you figured out "how much" you "need" to spend and "want" to spend?

R
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Old 11-20-2009, 10:51 PM   #3
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Hi there! That's probably because I currently have $1.3M but entered a FIRE date of 2011, so the calculated amount was higher.
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Old 11-20-2009, 10:52 PM   #4
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Annual withdrawals in the $59K to $86K range seem very high to me. That would be a 4.5% to 6.6% withdrawal rate. People around here like to keep their withdrawal rate below 4% (I'd keep it even lower for an early retiree). What assumptions did you input into these calculators?
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Old 11-20-2009, 10:57 PM   #5
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In response to your question, I haven't figured out a budget yet, but my current salary is $100k/year and I actually live on about $35K. As for future expenses, I have the option of moving overseas where health insurance isn't an issue, so that's one big expense I wouldn't have to worry about.
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Old 11-20-2009, 11:00 PM   #6
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Hi FIREdreamer!

The highest result was from the ING calculator, and I agree it's too high.

At my age, would 3.8% be more appropriate?
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Old 11-20-2009, 11:44 PM   #7
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Quote:
Originally Posted by ultimo View Post
Hi FIREdreamer!

The highest result was from the ING calculator, and I agree it's too high.

At my age, would 3.8% be more appropriate?
It depends how long you plan on being retired. As a rough guideline (and with no SS/pension), I use 4% maximum withdrawal rate for a 30-year retirement, 3.5% max for a 40-year retirement and 3% max for a 50-year retirement. Given your age, 3.5% could be appropriate. SS should allow you to have a higher initial withdrawal rate though, so maybe the 4.5% quoted by FIREcalc is not too far off after all. But, unlike what you wrote in the OP, the higher withdrawal rate quoted by FIREcalc won't allow your income to jump when you start receiving SS.

It's either:

You take $45,500 (3.5% withdrawal rate) from your portfolio for the length of your retirement and when you start taking SS, your income will jump to $45,500 + $18,000 = $63,500

OR

You take $59,000 (4.5% withdrawal rate) from your portfolio during the early years when you do not receive SS, then you reduce your withdrawal to $41,000 (3.1% withdrawal rate) and supplement it with $18,000 in SS.
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Old 11-21-2009, 01:09 AM   #8
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I like the latter of your suggestions. I'll spend some more time on the numbers and then check it out with my financial advisor.

The overseas volunteer work I plan to do will pay for airfare, accommodation and food (at a level equal to the average local person, which isn't much). That'll slow down my spending in the early years, so I can probably lower the withdrawal amount.

Many thanks for your advice.
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Old 11-21-2009, 09:50 AM   #9
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Welcome to the forum.

I chose Bob Clyatt's withdrawal scheme which uses 4% of the portfolio value. He has a way to limit volatilility in withdrawals when the portfolio suddenly slumps. Read about it, and other plans on Bob's Financial Website

Quote:
Is there anything I should be considering?
- Healthcare insurance for when you're in the US. You may run into problems if you have a gap in coverage, so research it well.
- Expenses. I found it very useful to track our expenses in detail for the years before ER.
- Fall-back plans. I speak from personal experience - they're important.
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Old 11-21-2009, 10:37 AM   #10
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Hi Neighbor!

Looks like you have it nailed with a couple more years to contribute and grow the nest egg along with plans for travel and social which will be very modest expense wise but rich in experience. Sounds like a fine set of plans to me.

Please do take the time to read up a bit on investing and put your armor on before meeting with a planner. Also, look into real Certified Financial Planners vs. those sharks only looking out for their best intrests via commissions. Also, since you are not pulling the plug till age 55 you may want to leave the 401K with the company assuming the plan is good. You can access money if over 55 when you retire.
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