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ER to Artist Endeavours!
Old 05-04-2012, 02:04 PM   #1
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ER to Artist Endeavours!

Hello all. Im totally fed up and ready to retire early am I in the right place? Id like to retire in 4-5 years; sooner is better. Both FireCalc and the Fidelity Retirement Planner seem to indicate that Im likely on track (marginal) BUT Id love a sanity check from a living, breathing entity. I dont believe it.



Im 53 and my DW is 45 and wed like to ER in the same year. We have a no CC debt (pay off balance) and just refinanced to a 15 year, 3% mortgage ($290K balance) that we are planning to pay down by Jan-2018. We pay $5K on the mortgage whose minimal payment is $2329 (including tax and ins). I expect that wed need $40K-$50K for living expenses after retirement and after the house is paid off. This figure includes about $500/person/month for medical insurance starting at ER.


My current salary is $125K and my DWs salary is $84K. I contribute 12% (with +4% company match) to a 401K and my DW contributes 15% (with +4% company match) which is about $36K/year. Mostly in Large and Small Cap funds with some international exposure. We will be adding about $15K/year to our cash fund. Im embarrassed to say that Ive chased the market on several occasions and as a result lost money when I should not have (sigh ). Ive lacked the education to invest wisely. I have about $340K in various 401K programs from several employees and my DW has about $80K. We will be getting pensions that Ive estimated to be $850 and $600 if we start at ages 59 and 55 respectively. SS will be about $1640 and $950 if started at age 62.


Would anyone be willing to help with a sanity check?
Thanks
Dan
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Old 05-04-2012, 02:59 PM   #2
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...Welcome to the forum. Your numbers sort of work but I wonder if you can really live on 40 to 50 thousand a year. 12 thousand of that going to health insurance does not leave you with much income compared to what you have likely been spending. I think you will really need to cut back on the spending over the next few years. Most people here would tell you to make a very detailed budget and see if you can live within it. This will tell you if you can really live on a much smaller income and will have the additional benefit of adding more to your investments.
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Old 05-04-2012, 03:10 PM   #3
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I expect that wed need $40K-$50K for living expenses after retirement and after the house is paid off.
This is an area where 'expectations' and estimations aren't accurate enough to allow most folks to sleep well.

Since you have a few years, the way to change the "expect" to a "know" is to track your spending, adjust for known changes after retirement (subtract work related spending, add medical insurance costs, etc.). I did this starting three years prior to retirement and I was able to refine my retirement spending forecast over that time to have a high confidence level of accuracy. Not a lot of work if you chop things up into a couple dozen big categories.
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Old 05-04-2012, 03:19 PM   #4
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Budgets ... and buying stuff. Those light bulbs have recently come on (about 20 years too late!).
I have broken down our expenses for the last two years and removed the useless "stuff" purchases while leaving hobby/entertainment/travel expenses in; albeit at somewhat reduced levels. That was where my $40K-$50K came in. The actual number was about $35K, so I was somewhat conservative. DW and I are both artists/craftsmen (craftspersons?) and enjoy hiking/skiing/site-seeing, so we entertain ourselves easily. We also only go out to restaurants about 1-2 times per month.
Next on my list is to de-clutter in a major way. This is mostly my issue as DW has always been good about not wanting "stuff". Her downfall has always been buying gifts for family ... to extreme excess..
We are actually looking forward to cutting down on spending ... how the heck did buying things cause stress
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Old 05-04-2012, 04:44 PM   #5
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Budgets ... and buying stuff. Those light bulbs have recently come on (about 20 years too late!).
I have broken down our expenses for the last two years and removed the useless "stuff" purchases while leaving hobby/entertainment/travel expenses in;
Since you only used 2 years of actuals, did you add in things like amortization of a new roof, car replacement, etc. Plus maybe an reserve for uncovered medical items like major dental work.??
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Old 05-04-2012, 05:21 PM   #6
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Budgets ... and buying stuff. Those light bulbs have recently come on (about 20 years too late!).
I have broken down our expenses for the last two years and removed the useless "stuff" purchases while leaving hobby/entertainment/travel expenses in; albeit at somewhat reduced levels. That was where my $40K-$50K came in. The actual number was about $35K, so I was somewhat conservative. DW and I are both artists/craftsmen (craftspersons?) and enjoy hiking/skiing/site-seeing, so we entertain ourselves easily. We also only go out to restaurants about 1-2 times per month.
Next on my list is to de-clutter in a major way. This is mostly my issue as DW has always been good about not wanting "stuff". Her downfall has always been buying gifts for family ... to extreme excess..
We are actually looking forward to cutting down on spending ... how the heck did buying things cause stress
You're going to love retirement with all those activities you already enjoy!

We spent the year before ERing somewhat tracking expenses but for about six months, cutting back to ridiculous lengths just to see what the bare bones budget would be (i.e., our former definition of the "lowest thermostat setting" in winter dropped by five degrees). It''s probably more helpful and accurate to track everything and to include the future big expenses, but I admit we didn't do that as we know believe hope we can easily cover those out of the nest egg. Sure enough every year there's been something (car, house renovation, etc.), so it is good to at least be aware of that, and smarter people than I have a budget line for it.

Also look at your projected income for what items will continue when one of you passes away--will there still be enough to cover expenses for the survivor?
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Old 05-05-2012, 06:20 AM   #7
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This is an area where 'expectations' and estimations aren't accurate enough to allow most folks to sleep well.

Since you have a few years, the way to change the "expect" to a "know" is to track your spending, adjust for known changes after retirement (subtract work related spending, add medical insurance costs, etc.). I did this starting three years prior to retirement and I was able to refine my retirement spending forecast over that time to have a high confidence level of accuracy. Not a lot of work if you chop things up into a couple dozen big categories.
+1. DW and I had a large income but it didn't make sense that we "couldn't" live on far less than 70% of our gross (the common wisdom). When we added up actual expenses for a few years (removing high taxes, two mortgages, college tuition, and very high savings) we were able to get a good handle on what we could really expect in ER. That equals peace of mind.
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Old 05-05-2012, 08:38 AM   #8
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Is there some reason why you are not contributing the max to your 401ks (17k + 5.5k catchup for you, 17k for DW -- with employer match on top of that)? Seems very doable given your high incomes. Taking that off the top will reduce any temptation to overspend. Out of sight, out of mind...

Your estimates for health insurance might be a bit low, unless you are allowed to stay on your company plan.

Definitely start tracking spending. You will probably find other places you can cut back.
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Old 05-05-2012, 08:56 AM   #9
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We live in a rural area with beautiful views, in a log home. 2 years ago we upgraded both our house and hobby barn (2000 sq ft) to heavy gauge steel roofs. They should last until we're long gone. Lawn work is minimal as we are surrounded by pine trees, buffalo grass and wild flowers. I did not budget for a new car, and since both of ours are approaching 100K miles, that is a logical thing to do. Medical has always been my bug-a-boo; I'm just not sure how to handle that. Ehealthinsurance.com gave me a HSA plan with premiums of under $400 for both of us ... for now. I just can't figure out where that might be 5 years from now.

We've been concentrating on building an appropriate cash balance plus adding to our mortgage (3x principal) to pay it off early. I'll now turn to raising my 401K to max out that saving too. I was torn between raising my 401k contributions or paying off the mortgage even sooner.

Thanks for all the insight; seems that while I'm approaching this correctly, I need to attend to the details of planning.
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Old 05-05-2012, 10:22 AM   #10
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What are those artist endevours you mentioned? I must admit I am curious since I hope to go that direction myself when I retire.
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Old 05-05-2012, 12:41 PM   #11
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Chuckanut,
Well, unfortunately I have WAY too many artistic endevours. Currently, I'm a full time "Rocket Scientist/Engineer", and my wife is a Software Engineer (coming from a Fine Arts degree and Graphics background).

I have a languishing side business as a High End Custom Knife Maker specializing in using meteorites. I'm also a sculpter, do lapidary and jewelry making, chain mail jewelry, planning to make some thrown pottery pieces and do some ornamental ironwork to decorate our house. I've put aside my most of my woodworking except for wood turning (whew!).

My wife paints, sculpts and also wants to dabble in thrown pottery (we have a huge kiln). We personally built an entire 2-story post and beam building (2000 sq ft) by hand over the last several years just to house our "hobbies" and to have our niece and nephew over to encourage their creative sides. So, I think I'm set for things to do if I can just get into ER!!!
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Old 05-05-2012, 07:22 PM   #12
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I have a languishing side business as a High End Custom Knife Maker specializing in using meteorites. I'm also a sculpter, do lapidary and jewelry making, chain mail jewelry, planning to make some thrown pottery pieces and do some ornamental ironwork to decorate our house. I've put aside my most of my woodworking except for wood turning (whew!).

My wife paints, sculpts and also wants to dabble in thrown pottery (we have a huge kiln). We personally built an entire 2-story post and beam building (2000 sq ft) by hand over the last several years just to house our "hobbies"
Wow! Mega-talented family! Are you on Etsy to sell your work, or just local? Sounds like you have some definite supplemental income as well as great activities to make ER an exciting new stage in your lives. Very cool
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Old 05-05-2012, 08:37 PM   #13
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MBAustin,
Mostly these days we just feel tired.

I have to narrow down my interests just so I can de-clutter and get a bit more focused. I don't sell on Etsy, mostly just through my website (I don't know if I can post a link) and in the past at a variety of knife shows. I have made a reasonable side income in the past and have sold to people throughout the world. But after moving to Colorado, it took several years to build a shop, get my equipment out of storage and get back into creating knives. Turns out you can "need" as much equipment as you can imagine , and for me that measured in the Tons. Ouch ... $$$

I would like to be able retire without having to rely on a second income. That said, there is no way DW nor I will ever stop creating all the thousands of things we have in our minds.
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Old 05-07-2012, 01:45 PM   #14
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Welcome!
I saw a reference to a book "Your money or your Life" on this forum. I'm about 2/3's of the way through right now. It's a good read about how to view money and see where your money is going (and change it - if it's going to things that don't earn you satisfaction.) I suggest giving the book a read, and doing the money tracking it suggests. I'm in the process of that and it's eye opening.

As far as your budget - do you include taxes in that budget? Unless the money is all coming from Roths - there will be income tax on the traditional IRA withdrawals. I came up with a spending budget - then had to up it to account for taxes I'd need to pay to come up with my net spending budget.

You and your wife sound very interesting to me. I have a lot of artistic friends (I'm soooo not artistic - but appreciate art.)
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Old 05-08-2012, 03:15 PM   #15
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It's on my reading list ... Amazon is getting lots of my money these days as I've really gotten "dedicated" to ER. Health, Finances, Living simply, etc.

What I haven't found is the magic method to pull back ER by about 3-4 years. Dang ... I'm ready!
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Old 05-08-2012, 03:29 PM   #16
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It's on my reading list ... Amazon is getting lots of my money these days as I've really gotten "dedicated" to ER. Health, Finances, Living simply, etc.

What I haven't found is the magic method to pull back ER by about 3-4 years. Dang ... I'm ready!
Steelart99 - check out the library where you are.
Ours allows me to reserve a book online and they bring it in from other branches (or put me on a waitlist)... I get an email when it's at my branch ready to pick up.

Free is a good price, IMO.
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Old 05-10-2012, 03:39 AM   #17
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Welcome to the forum, Steelart99.
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