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ER before FI??? Help!!!!
Old 01-19-2018, 11:19 AM   #1
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ER before FI??? Help!!!!

Hi everyone, I'm 55 (wife is 52) with severe case of OMY Syndrome, and itching to move beyond mega-corp for next phase of life. Won't be fully FI til age 60 (former gov't employer's pension and retiree health coverage kick in), but able to ER much sooner if I can stomach some degree of taxable savings spend-down. Have 2 streams of side income that will ramp up during ER. Multiple Monte Carlo simulators and our financial planner have confirmed feasibility by the numbers.

BOTTOM LINE / REQUEST FOR OPINIONS: My numbers are nowhere near some of yours, but still solid. Would any of you consider ER under these circumstances, if full FI is still a couple years away and you'd have to draw on taxable savings between now and then? Is this a crazy thought? Figured that all of you would be best sounding board. Thanks in advance!

Here are the vital statistics:

Ages: 55 & 52
Net Worth: 1.1 m
Liquid Assets: 750 k (270 taxable, 480 tax-deferred or tax-free, diversified).
Debt: 0 (house is paid for)
My current income: 100k
Wife's current self-employment income: 8k and growing
Annual Expenses: 50k
College Expenses: 75k (total remaining for both kids combined)
Passive Income: 15k-20k
Pension Income: 20k (age 60)
Side employment: 15k (after ramping up during ER)
Health insurance: During ER, would qualify for ACA subsidy based on lower income (assuming that dominant local insurer remains on exchange)
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Old 01-19-2018, 11:35 AM   #2
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Looks like you are close.

If I understand you correctly after you retire and you pension starts, you will only need $15k a year from your portfolio.... ($50k spend - $20k pension -$15k side income).

At a 3.5% ER, that is ~$430k.

Plus, you need $75k for college expenses and if you retired now, $100k of pension replacement from your current age of 55 to age 60 when you pension starts.

So that is $605k and you have $750k so it seems that you are set.

One question would be is $50k reallly enough? That seems low but it depends on your lifestyle. Are there provisions in there for car replacements, a new roof when needed, a new furnace if needed, etc. Does it include health insurance AND a reasonable provision for deductible and co-pays? If you quit at 55 or before you are 60 do you still qualify for retiree health insurance coverage?

Also, do you or your wife expect to receive SS retirement benefits?
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Old 01-19-2018, 11:52 AM   #3
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Thanks, pb4uski, for great comments/questions. Within past 2 years, we positioned ourselves for low annual cost structure by moving into newly constructed home, buying 2 new-ish cars, etc. We both work at home. Total planned expenses in 2017 were 50k (right on target), and will get lower (assuming subsidized ACA coverage) in next couple years after some expenses terminate (car payment, daughter's rent at school, etc.).
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Old 01-19-2018, 12:20 PM   #4
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Welcome aboard and great monicker!

As P said, you're there or very very close. I retired at 60 with a planned portfolio spend down of 48-50K (plus a couple pensions) until we both apply for SS in late 2019. Of course, our burn rate drops substantially at that point.

Once you are confident in your $$ plan, get the hell outta there!!!!
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Old 01-19-2018, 12:27 PM   #5
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Edit- is that Knightdale NC? We are in Huntersville.
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Old 01-19-2018, 12:40 PM   #6
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Quote:
Originally Posted by pb4uski View Post
Looks like you are close.

If I understand you correctly after you retire and you pension starts, you will only need $15k a year from your portfolio.... ($50k spend - $20k pension -$15k side income).

At a 3.5% ER, that is ~$430k.

Plus, you need $75k for college expenses and if you retired now, $100k of pension replacement from your current age of 55 to age 60 when you pension starts.

So that is $605k and you have $750k so it seems that you are set.

One question would be is $50k reallly enough? That seems low but it depends on your lifestyle. Are there provisions in there for car replacements , a new roof when needed, a new furnace if needed, etc. Does it include health insurance AND a reasonable provision for deductible and co-pays? If you quit at 55 or before you are 60 do you still qualify for retiree health insurance coverage?

Also, do you or your wife expect to receive SS retirement benefits?
+1 Welcome to the forum. As pb4uski indicated if you and/or your spouse have SS, that would clinch the deal in my mind.
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Old 01-19-2018, 12:44 PM   #7
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One other thing to factor into your thinking is how long that $15k a year of side income will last since it is 30% of your spending.
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Old 01-19-2018, 01:43 PM   #8
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Welcome - I can't find mine most of the time either so I'm squinting at the computer screen now

If you haven't found them already, we have a helpful list of things to think about before you make a final decision:

Some Important Questions to Answer

As others have stated, you're probably close enough to go ahead as long as you are willing/able to be flexible on spending and confident that you really can ramp up your side employment after ER.

Glad to have you on board!
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Old 01-19-2018, 05:53 PM   #9
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Originally Posted by Red Badger View Post
Edit- is that Knightdale NC? We are in Huntersville.
Yes sir, Knightdale NC! Will attempt to PM you.
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Old 01-19-2018, 06:15 PM   #10
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+1 Welcome to the forum. As pb4uski indicated if you and/or your spouse have SS, that would clinch the deal in my mind.
Thanks so much for reply. Yes, I plan to take SS at 62 (another 20k/year). Wife will do same 3 years after me (+ 10k/year). So you're correct, once that SS starts flowing the picture is rosy. What all this means is that the spend-down period between now and FI is roughly 5 years. If market doesn't have another 2008 scenario, net worth shouldn't dip much at all.
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Old 01-19-2018, 06:39 PM   #11
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welcome.
If you are like most, you can make it work-keep on a steady budget and check your numbers after a year. Don't forget that your taxes should be less also, and that helps out.
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Old 01-19-2018, 06:40 PM   #12
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You don't state how many years of college your kids have remaining, but if your income drops from $100k+ to living primarily off of savings they may qualify for some financial aid. Living off of savings means that your FAFSA will look different than what you have filed in the past. Talk with the financial aid offfice(s) to find out what you need to do to update your application.
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Old 01-19-2018, 07:51 PM   #13
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You don't state how many years of college your kids have remaining, but if your income drops from $100k+ to living primarily off of savings they may qualify for some financial aid. Living off of savings means that your FAFSA will look different than what you have filed in the past. Talk with the financial aid offfice(s) to find out what you need to do to update your application.
This is an excellent point, BrianB. One of them is a grad student; FAFSA treats her as a household of one. The other has two years of undergrad left to go. I won't be pulling the trigger before beginning of 2019, but that would still be in time for his final FAFSA (2019-2020 academic year). Thanks
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Old 01-20-2018, 06:48 PM   #14
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Thanks everyone for the comments and well thought-out analysis. Much appreciated. For some of us (including me), approaching and crossing this threshold is weirdly frightening. Looking forward to busting thru that wall . . . soon.
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Old 01-22-2018, 11:39 AM   #15
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One other thing to factor into your thinking is how long that $15k a year of side income will last since it is 30% of your spending.
I was thinking this as well.

How long do you think you'll keep up that income? Until you're 60, 65, 70, dead?

That will influence how "close" you are imo.
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Old 01-22-2018, 01:11 PM   #16
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I was thinking this as well.

How long do you think you'll keep up that income? Until you're 60, 65, 70, dead?

That will influence how "close" you are imo.
Thanks, Ex. I've modeled that income only til age 60 (when pension starts), to be conservative. The part-time work consists of two gigs that I greatly enjoy and can ramp up when ready. Hope to continue doing both way past 60, though I shouldn't need to for income purposes.
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