Originally Posted by mattbaxx
I ...at 50. DW (48) ...Her current income ($3500/month) matches our current expenses.
What we’ve got:
$900K retirement accounts
$725K house, paid off
We can expect a bit of pension each at 55 ($2500/month or so, total)
It seems like a better adventure to jump in, tread carefully, and see what happens then to be overly cautious.
Anyway, nice to have this sounding board. I look forward to some viewpoints I have not previously considered.
Welcome to the forum! I am in about the same boat that you are in (Final Gut Check...Feedback?
) ...that being retired before/at 50.
I may get your numbers wrong, so adjust as you see fit. Expenses of 42K on investments of 1.1MM is about 3.8%.
Here is where I netted out. 4% withdrawal rate is to high (for my blood) for the potential number of years a 40-50YO would live. I looked everywhere and read everything I could about withdrawal rates. Here are some opinions: The Retire Early study on safe withdrawal rates - Millenniam Edition.
and otar retirement calculator
each sell their books/whitepapers for about 5$ for the electronic copies respectively:
How much can you safely withdraw from your retirement portfolio?
Unveiling the retirement myth
(Click books and look for the "green" copy for $5 on otar retirement calculator
I have no connection to either of these sites or individuals. I just felt they had some of the best supported information on SWR.
There are many other sources, but my net takeaway from all my reading is that with somewhere between a 40/60 and 60/40 mix (stocks/bonds) in a low cost, passive, index set of investments, a 3.1% withdrawal rate (WR) will survive 40+ years in all cases given any historical return.
(Doesn't work if something different happens in the future!)
I too have pensions and SS and a large additional amount in paid off real estate. In my planning, I ignored the pensions (PPlans can go away), SS (not sure what might happen with SS) and the Real Estate. I needed to feel confident that if everything went away and we had the worst sequence of returns possible, I could survive. YMMV.
If you include Pensions and SS and your wife works for 7 years to get you to pensions, your WR at 55 is 1% ((3500 expenses-2500 pensions)/1.1MM) Certainly doable!!! Obviously this ignores whether or not you have COLA on the pensions or whether or not you investments grow between now and then, but you get the idea.
Additionally, if you included the value of your home (downsize at some point), then you have more than 1.1MM...
My reality is that I budgeted at 100% of my pre-retirment expenses and am running a3% WR, ignoring PP, SS and RE. I'm treating these as safety nets.
What I have learned in a year and a half is
1) My budgets in general were good and I have been able to manage my expenses to adjust/be flexible enough to handle unexpected expenses and not spend in certain areas if I want something outside the budget (e.g. new bike).
2) I did not budget enough to keep/maintain my properties...I think that I underestimated these expenses. I used 100% of my pre-retirement costs on these, but as the house/tractor/dehumidifier/... age, I'm spending more on upkeep...keep this in mind.
3) Health insurance and health costs are the biggest unknowns. My health care went up 10% this year. I expect they may continue to go up in consistenly large increments. It may be that I have to give up more of my discretionary budget to pay for health care. This may also happen with Taxes.
NET NET: Many here are a decade(s) into being FIREd, I'm only in the second year. I think most here will tell you to jump in, be flexible and all will work out. I tend to agree with the caveat that you have somewhat of a budget and plan to work against, know what WR you are comfortable with, plan for some level of contingency (see 1-3 above)...beyond that, jump in be flexible and it will work out...