Getting Serious about Early Retirement

[bookman51]

I posted a while back, but I am getting more serious about early retirement.   I feel just burnt out and ready for something else.  Almost age 59 and wife is 58.  We are both in good health right now.   Trying to figure out what all we need to think about if we retire.

Assets are largely in TIAA-CREF  (yep college prof)
   about $1.1 million, including IRAs
Another  $75,000 in supplemental retirement in
         Vanguard Star
About $125,000 in mix of I and H U.S. Savings Bonds (dull but put them long time ago from an inheritance)
Another $100,000 in mix of CDs, money market accounts and checking; 
So about $1.4 million total but then I  pay a hefty tax as I pull out funds from the tax deferred stuff such as the Savings Bonds, etc.
House all paid for at about $250,000.

Own farmland at about $540,000, which kicks off about $31,000 pretax income on cash rent.  Taxes on it is around $4500 annually, then, of course, income tax both state and local after that.  It is inherited farmland and plan to pass it along to next generation in family so selling and putting it into something with better return not a desired option at this time.

Current income, not counting land, is a shade over $100,000.  Sure is hard to give up that regular check, but after while sleeping well at night and feeling good during the day may be worth it!

Oh yes, wife semiretired now with part-time pin money type job.  Flex hours but no benefits.


I can do some considerable change in TIAA-CREF now regarding stocks, bonds, etc.   I can switch the Vanguard Star into other Vanguard Funds just  with a phone call, but current return does not seem too bad.   The U.S. Bonds are probably just an overly cautious safety net.   I am working to get the cash into something with more return, but I do like to a some readily available.   
Seems health insurance is the big kicker...and then perhaps long term care.   Any advice on that....and anything else I should be considering?

 

[jdw_fire]

Have you determined what your expenses will be in retirement?  That is the important question when you are trying to determine if you have enough to retire.

 

[retire@40]

If you wait any longer, it won't be early retirement.

 

[perinova]

Re Your concern about health insurance:
You can check http://tnhis.com/statebystateguide.htm
An HSA personal insurance may not be as expensive as you think depending where you are (or want to go).
Also since you are now age 59 you aren't very close to medicare?

Glancing at your data it seems that the land brings you after tax return similar to the what a "SWR" portfolio would. $2M assets (except house) would be plenty to generate $80k. With SS that's probably about your current $100k income. Did you check Firecalc?

It looks like you are there.
Let us know when you decide to leap. CONGRATS.

 

[tomz]

Re Your concern about health insurance:
You can check http://tnhis.com/statebystateguide.htm

These rates are based on someone who is 34 years old and healthy.  In Fl, where I will be living, they don't have community rating so someone who is in their 50s and has preexisting conditions will pay a lot more than what this site says.  For example, Aetna has a 5K HSA policy (10K for a couple) for a 55-year old couple at $383 per month, if you are healthy.  If you take advantage of HIPAA and have a preexisting condition, the monthly premium could be double that.

 

[rs0460a]

Also since you are now age 59 you aren't very close to medicare?

Medicare does not "start" till age 65.  Any "ER" (regardless of age) before that point will have to be accounted for by either employeer or personal medical insurance.

- Ron

 

[Coach]

Bookman, if you haven't yet, you might want to talk to TIAA-CREF about financial planning assistance. I don't know how much this offering varies by institution, but with less than your level of assets I have an assigned TC representative who is helping me out with overall financial planning at no charge.

Coach

 

[perinova]

These rates are based on someone who is 34 years old and healthy. In Fl, where I will be living, they don't have community rating so someone who is in their 50s and has preexisting conditions will pay a lot more than what this site says. For example, Aetna has a 5K HSA policy (10K for a couple) for a 55-year old couple at $383 per month, if you are healthy. If you take advantage of HIPAA and have a preexisting condition, the monthly premium could be double that.

Thanks for the precision I am starting to understand better the health insurance problem for my own use. Only 5 states have community rating and they have -not surprisingly- the most expensive policies in the country: NJ NY VT ME MA

 

[bookman51]

Yes,  I had a personnel rep from TIAA-CREF go through financial planning with my wife and me.   According to him we "may be able to retire in the year 2006."  He figured it on expense need of $84,000 a year, and I suspect we can cut back on that a lot.  However, he also assumed the rate of return of 6.1%, which is based on our current retirement allocation.   It estimations are based on us spending down our cash savings and not using TIAA-CREF for another three or four years, which is about the time we would also getting Social Security.  Plan A was to wait until 62 but now Plan A is tire retire as early as possible while still having enough funds and health to enjoy life.  I obviously need to get the health insurance in order.  I have not looked at the site yet or checked local options (obviously a  must).  Thanks

 

[jdw_fire]

Yes,  I had a personnel rep from TIAA-CREF go through financial planning with my wife and me.   According to him we "may be able to retire in the year 2006."  He figured it on expense need of $84,000 a year, and I suspect we can cut back on that a lot.  However, he also assumed the rate of return of 6.1%, which is based on our current retirement allocation.   It estimations are based on us spending down our cash savings and not using TIAA-CREF for another three or four years, which is about the time we would also getting Social Security.  Plan A was to wait until 62 but now Plan A is tire retire as early as possible while still having enough funds and health to enjoy life.  I obviously need to get the health insurance in order.  I have not looked at the site yet or checked local options (obviously a  must).  Thanks

Using FIREcalc with your numbers of portfolio = $1.4 million; inflation adjusted W/D = $84,000; Lifespan of Portfolio = 40 yrs; and treating your rental income of $31,000 like an inflation adjusted pension; I get a success rate of 99.2%.  So provided you can fund your living expenses, taxes and health insurance with the $84,000 (inflation adjusted) W/D you are financially prepared to retire.

 

[bookman51]

Yes, I have went through FIREcalc a several times, but I think you did a more sophisticated analysis than I did.   Thanks jdw.   I talked with the TIAA-CREF financial planner yesterday.   At 62 (three years away), I would be at 118% of needs with Social Security, but given the stress of the job (yes there is stress in academia), that does little good if my health fails.  I am at 100% now of needs now.  TIAA-CREF does projections out to 30 years, which would put me an age far beyond when my father and mother died or my grandparents on either side of the family died.  The Rep's quote was "you will not run out of money."  Of course that is predicated on current spending, historical return rates, etc.  and, being of agricultural background, as farmers say, "In times of drought, all signs are off."  So if everything tanks I will be in bad shape, but along with everyone else.   My wife and I have absolutely no debt (including house and cars).   We probably can adjust down on $84,000 on living expenses.  Still big ?? is health insurance and I am check on that.   Frankly, I am planning pulling the plug next week and getting on with a new phrase in my life.   Thanks for the thoughts and help.

 

[bookman51]

I check on Blue Cross and Blue Shield.  For about $490 a month we can get a $3,600 deductible, then 80/20 to $20,000.  There is a $10,000,000 max.  For $700 a month we can get a $3,000 deductibel and 100% coverage after the $3000.  They have all sorts of plans, but all cost money   Any comments

 

[Texas Proud]

Isn't it always a hoot to read about other... you are a college prof and want to get OUT of the rat race... I am a financial slave at a major bank and want to get out, but INTO teaching!!! I look at it as a bridge... do something you like and make money at it... and still have flexibility to do other things when you want or need.

 

[MooreBonds]

I check on Blue Cross and Blue Shield. For about $490 a month we can get a $3,600 deductible, then 80/20 to $20,000. There is a $10,000,000 max. For $700 a month we can get a $3,000 deductibel and 100% coverage after the $3000. They have all sorts of plans, but all cost money Any comments

Well, if you go with the cheaper plan, you save $210/month ($2,520/year). If you make it 7 years to Medicare without any claims, you save $17,640 (plus accumulated interest if placed in a CD).

If you have one large operation/claim, you are on the hook for 20% of the difference between $3,600 and $20,000 (or, $3,280).

If you do have one claim, your insurance rates would likely rise more...but they would rise regardless of which plan you have. Also, going forward, I would hazard a guess that the higher deductible/lower cost plans would probably tend to have lower $/lower % increases in premiums (all other things being equal). So, assuming you won't have a maor claim every year, I'd pick the cheaper plan.

 

[bookman51]

Isn't it always a hoot to read about other...  you are a college prof and want to get OUT of the rat race...  I am a financial slave at a major bank and want to get out, but INTO teaching!!!  I look at it as a bridge... do something you like and make money at it...  and still have flexibility to do other things when you want or need.

I think something about the grass being greener on the other side of the fence applies.   After 40 years, grading papers weekends and evenings, spending 50-60 hours a week trying to fulfill the combination of teaching, research, and service; serving on committees that never end, etc. etc. gets old.  Maybe as an adjunct you will not have to worry about tenure, publications, etc...and with your financial background you may get paid a decent salary...it may be a very good thing for you.   Wish you well but take a good look before you leap.   Lots of things you may not like going on beyond those ivy covered walls  

 

[bookman51]

Well, if you go with the cheaper plan, you save $210/month ($2,520/year). If you make it 7 years to Medicare without any claims, you save $17,640 (plus accumulated interest if placed in a CD).

If you have one large operation/claim, you are on the hook for 20% of the difference between $3,600 and $20,000 (or, $3,280).

If you do have one claim, your insurance rates would likely rise more...but they would rise regardless of which plan you have. Also, going forward, I would hazard a guess that the higher deductible/lower cost plans would probably tend to have lower $/lower % increases in premiums (all other things being equal). So, assuming you won't have a maor claim every year, I'd pick the cheaper plan.

Thanks for the good analysis.  Obviously I am not in business, economics or finance in higher education.

 

[haha]

Do you have tenure? If so, why not just do a unilateral readjustment of your hours?

Ha

 

[bookman51]

Do you have tenure? If so, why not just do a unilateral readjustment of your hours?

Ha

conscience!

 

[haha]

conscience!

Hang around here for a while; we'll help you "right size" that pesky conscience. 

Ha

 

[bookman51]

Hang around here for a while; we'll help you "right size" that pesky conscience. 

Ha

Interesting thing about most academics,  the number of classroom hours per week are not all that much usually (9-12) in better school, not all that many office hours a week either.  However, most of my colleagues put in a lot of hours in preparation, grading papers, committee work, research, writing, etc.   What could be a 30-35 hour week if one had no dedication (or conscience) is usually a 50-55 hour week if one cares.     They do this without someone looking over their shoulder.  In one sense in the life of the mind, it is hard to get away from work.  One does not clock out at 5.  Most highly enjoy what they are doing, and even love teaching.  However, burnout occurs from endless committee meetings, meaningless evaluations, departmental infighting, unappreciative students, etc. and etc.   Sure, not hard to retire on the job, but most don't.   Conscience.   

 

[Caroline]

bookman -- I've been taking Community College courses lately, just for my own edification. I've got some truly dedicated, committed, involved teachers who make the time spent with them a joy and a pleasure, and a couple who just don't give a rat's behind about their students. They show up late and unprepared, leave early, cancel classes at will, and ignore similar behavior by their sudio workers (studio is closed when it's supposed to be open, ceramics aren't fired, software isn't loaded and computers aren't installed, etc. etc.)

On behalf of the students who care about these things, let me say "thank you very, very much!"

All that being said, maybe you could adjust the "endless committee meetings, meaningless evaluations, etc" conscience, and keep the "I love teaching" conscience intact. I have a professor friend who has gotten VERY good at avoiding the committees and the infighting. He refuses to participate in the latter -- he has found that there are plenty of other folks who actually LIKE that kind of thing and he leaves it to them.

I have no direct experience in keeping half a conscience alive -- my megacorp conscience is a burnt cinder at this point... the ashes aren't even smoking anymore.

Caroline

 

[bookman51]

bookman -- I've been taking Community College courses lately, just for my own edification.  I've got some truly dedicated, committed, involved teachers who make the time spent with them a joy and a pleasure, and a couple who just don't give a rat's behind about their students.  They show up late and unprepared, leave early, cancel classes at will, and ignore similar behavior by their sudio workers (studio is closed when it's supposed to be open, ceramics aren't fired, software isn't loaded and computers aren't installed, etc. etc.)

On behalf of the students who care about these things, let me say "thank you very, very much!"

All that being said, maybe you could adjust the "endless committee meetings, meaningless evaluations, etc" conscience, and keep the "I love teaching" conscience intact.  I have a professor friend who has gotten VERY good at avoiding the committees and the infighting.  He refuses to participate in the latter -- he has found that there are plenty of other folks who actually LIKE that kind of thing and he leaves it to them.

I have no direct experience in keeping half a conscience alive -- my megacorp conscience is a burnt cinder at this point... the ashes aren't even smoking anymore.

Caroline

I suppose but when the enthusiasm goes, it goes.   I would prefer not to wait so long that my students and coworkers know that my heart is not in it.

 

[dumpster56]

Teaching in america today..

Try it in one of americas inner cities.

I have had enough, been their done that! Newark NJ for 25+ years.

I gotta get out of that place.

 

[bookman51]

Well, I turned in my resignation on Tuesday.  Talked with the head of the institution on Wednesday.  I think it went okay. Working through tomorrow and than taking all my vacation time.  Life is a gamble whatever one does. I spent my career doing the right things, and I am tired of those who cannot build and thus spend their time destroying.   Look forward to spending time with wife and family and doing what I want to do every day.  Yes, I know not every day is going to be good, but it has got to be better.  Wife and I saved for rainy day and it is raining.   Thanks to all those who added their advice, etc.

 

[brewer12345]

That's great, bookman. I'm sure you'll find that you have saved up a very wide umbrella indeed and the rainbows will be coming out directly.