Great Gig but I want to Retire

[Johanson]

Hi everyone. I'm new here as you can see. I'm single with adult children and I'll be 52 in November and will have 28 years with a mega corporation in October. I've been in my current position for 9 years now and it requires extensive travel. I cover the western 2/3 of the US and I'm usually on the road every week with a few breaks every couple of months where I catch up working at my home office.

I have a bit over $400K in my 401K, $11K in my ROTH IRA, my cash and carry pension is about $155k. I believe if I were to take it now with the annuity option, I would get about $800/month. It goes up 5% every year I wait to draw on it. If I wait to retire in 5 years, it will be about $210k or $1200/month. I really don't have any other savings.

So, I love my job. I'm a SME/technician that works with various branches and districts as needed and although my primary role is to deliver solutions, my secondary role is to mentor other technicians. I get paid overtime so any time working or traveling, including waiting in a Sky Club, is paid for. So are all of my meals and travel expenses. If it wasn't for my two dogs, I'd sell my house and rent a room from my son (my retired next door neighbor takes care of them).

Anyhoo, I don't really have any specific questions right now but I thought I'd introduce myself. I'd really like to retire in 3 or 4 years but may go as long as 5 or 6. I think I could retire at 55 but I'd also like to sell my low $200k house and buy a $300-400K house with some acreage on a lake in Northern MN and perhaps a small condo in FL. That is going to take a lot more than what I project I'll have at 55. Also, I'll be needing a new vehicle about then too.

Thanks for reading!

 

[NanoSour]

Welcome Johanson. Sounds like you have a well grounded plan. Glad to hear you like your job. Not many are that fortunate. Especially after 28 years at a Megacorp.

 

[Winter]

Welcome Johanson! I am excited for you and your future. It sounds like you have things figured out and are well on your way to retirement. And Minnesota is so beautiful, you should be able to find a lovely place there.

 

[Katiek]

Welcome. If you aren't already doing so, start tracking your expenses very closely. This will give you useful detail when you really calculate whether you're ready to FIRE

 

[Sunset]

Welcome.

You do need to save some money outside of your 401K and Roth.
Since you must earn a bunch, and the company pays for meals, travel, etc. It is a good opportunity for you to pack away a stash.
This will be useful to have money to spend without increasing your income.

Plan on doing the catch-up to 401K when you hit 50.
You didn't mention debt at all.

 

[stepford]

Plan on doing the catch-up to 401K when you hit 55.

Aren't catch up contributions allowed from 50 on? I would hope the OP is already making them.

 

[Sunset]

Aren't catch up contributions allowed from 50 on? I would hope the OP is already making them.

Oops... you are so right, I'm going to fix my post so it's not misleading.

https://www.irs.gov/retirement-plan...oyee/retirement-topics-catch-up-contributions

"
Catch-up contributions up to $6,000 in 2015 and 2016 may be permitted by these plans:

• 401(k) (other than a SIMPLE 401(k))
• 403(b)
• SARSEP
• governmental 457(b)"

and "You can make catch-up contributions to your traditional or Roth IRA up to $1,000 in 2015 and 2016. "

 

[Golden sunsets]

Hello Johansen. Welcome. No one has pointed this out yet, but your savings seem very modest, particularly if you plan to drain them for an upgraded house and new vehicle, not to mention a possible condo in Florida. With SS not starting until 62, at the earliest could you exist on $1,200/mo, with the increased expenses of owning a $400,000 home. Where would the cash to upgrade/buy the home/condo come from? Would you be taking on debt? As others have pointed out knowing your expenses in retirement will be crucial.


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[Dawg52]

Hello Johansen. Welcome. No one has pointed this out yet, but your savings seem very modest, particularly if you plan to drain them for an upgraded house and new vehicle, not to mention a possible condo in Florida. With SS not starting until 62, at the earliest could you exist on $1,200/mo, with the increased expenses of owning a $400,000 home. Where would the cash to upgrade/buy the home/condo come from? Would you be taking on debt? As others have pointed out knowing your expenses in retirement will be crucial.

I think the OP needs to run his numbers through firecalc with his projected future expenses and savings. That will give him a better idea what he can do and when.

 

[Johanson]

Thanks all! As far as debt goes, I owe $140k on my house and have about $8K in 0% interest CC debt. I expect the 8K to be 0 by next summer. Otherwise, I have no other debt. At that point, I plan on doing catch up contributions.

I don't plan on drawing SS until at least age 67 and may wait until 70. I'd be looking at about $3400/month from SS then.

I've been running numbers through firecalc and I should be fine financially if I wait until 2022 to retire. It would be a little iffy before then. I have a $100K withdrawal in 2022 for the purchase of a home plugged into the calculation. I'll assume I'll still have a modest mortgage at that point forward.

I'm also toying with becoming a part time contractor when I retire for a year or two. As of right now, I would be looking at $110-150/hour. If I could work the equivalent of 1 week/month, I'll do it.

Thanks again for all the input. It's greatly appreciated.

 

[Sunset]

I need to raise my rates

I'll try not to harp, but OP has a low savings rate considering it's going to take 12 months to pay off the CC.
Perhaps OP needs to track carefully expenses per day, to know and see exactly where it all goes, some folks are pretty surprised when they do this.

Consideration should go to how useful is a certain expense, for example since OP does extensive travelling something like full cable subscription would hardly be worth it, but lawn service could be very valuable.

 

[pb4uski]

....I'm also toying with becoming a part time contractor when I retire for a year or two. ...

What I did for the last 8 or so years of my career I worked part time... initially 80% and later 50%, which was the minimum needed to get employer subsidized health insurance. At one point I was 80% and traveling too much so I was able to downshift to 50% and travel less. For me, working part-time wiht benefits was better than working as a contractor.

 

[CaliKid]

You are talking about a second home but I am not sure you can afford the $300-400k first home you are talking about. If I were in your shoes I might re-calculate as it seems a bit aggressive to me.

 

[Johanson]

I need to raise my rates

I'll try not to harp, but OP has a low savings rate considering it's going to take 12 months to pay off the CC.
Perhaps OP needs to track carefully expenses per day, to know and see exactly where it all goes, some folks are pretty surprised when they do this.

Consideration should go to how useful is a certain expense, for example since OP does extensive travelling something like full cable subscription would hardly be worth it, but lawn service could be very valuable.

My savings have doubled in the past 4 years and my income has risen quite a bit as well. It's going to take 12 months to pay the CC because that's how long I have 0% interest. Why pay it off sooner?

My company reimburses me for my phone and Internet so it comes out to about half of my cable bill. My retired neighbor who takes care of my dogs mows my lawn. He's pretty cheap.

What I did for the last 8 or so years of my career I worked part time... initially 80% and later 50%, which was the minimum needed to get employer subsidized health insurance. At one point I was 80% and traveling too much so I was able to downshift to 50% and travel less. For me, working part-time wiht benefits was better than working as a contractor.

The mega corporation I work for has no way to employ someone part time or I might do that. I'd like to work 25% of the time so contracting might be the only way to do that.

You are talking about a second home but I am not sure you can afford the $300-400k first home you are talking about. If I were in your shoes I might re-calculate as it seems a bit aggressive to me.

That may be true. Looking at properties again today, I'd say my range is closer to $250-300K.

 

[pb4uski]

...The mega corporation I work for has no way to employ someone part time or I might do that. I'd like to work 25% of the time so contracting might be the only way to do that.....

My mega-firm had an established process so it made it easier. In short though, salary and all was just a % of FTE... vacation accruals were a % of a FTE, etc. Only thing that was same as a FTE was health insurance.

You may need to be a trailblazer, but from their perspective, perhaps 50%-80% of Johanson is better for them than 0% of Johanson so they may be willing to play ball. That is the way our firm looked at it.

Since in my firm we all worked on multiple clients, I was part time for many years and very few of my clients had a clue, and the same with many of my colleagues. The only time it ever came up was on one project where a client wanted me totally dedicated to the for a 6 month project and we solved it by me agreeing to increase my % from 50% to 80% for the duration of the project and the client was happy with that outcome.

Our firm would do 25%, but at less than 50% they would not provide health insurance, so it would be 25% of what an FTE got across the board.

 

[Golden sunsets]

Thanks all! As far as debt goes, I owe $140k on my house and have about $8K in 0% interest CC debt. I expect the 8K to be 0 by next summer. Otherwise, I have no other debt. At that point, I plan on doing catch up contributions.

I don't plan on drawing SS until at least age 67 and may wait until 70. I'd be looking at about $3400/month from SS then.

I've been running numbers through firecalc and I should be fine financially if I wait until 2022 to retire. It would be a little iffy before then. I have a $100K withdrawal in 2022 for the purchase of a home plugged into the calculation. I'll assume I'll still have a modest mortgage at that point forward.

I'm also toying with becoming a part time contractor when I retire for a year or two. As of right now, I would be looking at $110-150/hour. If I could work the equivalent of 1 week/month, I'll do it.

Thanks again for all the input. It's greatly appreciated.

Where is the $100,000 withdrawal in 2022 to come from? I don't see any taxable savings of significance in your current portfolio? And the cost of a new car as well?


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[Johanson]

Where is the $100,000 withdrawal in 2022 to come from? I don't see any taxable savings of significance in your current portfolio? And the cost of a new car as well?


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From the 401K.

 

[pb4uski]

You may want to rethink that as there would be a very significant tax cost to taking our $100k in a single year. If that was your only income that year, between federal and state income taxes you would pay over $24k in taxes. you may want to try to find a way to spread it over a number of years to soften the tax cost.

http://www.tax-rates.org/income-tax-calculator/?action=preload&ref=embed_refer_taxbrackets#undefined

 

[Johanson]

Good point! If I scale back my housing plans I won't need to withdraw $100k. My current residence should be nearly paid off by then.

 

[Sunset]

My savings have doubled in the past 4 years and my income has risen quite a bit as well. It's going to take 12 months to pay the CC because that's how long I have 0% interest. Why pay it off sooner?
.....

Good point with the CC at 0%

Good work on the savings, although it all looks to be in 401K.
Having some outside a tax shelter provides you with great flexibility in spending which is something you want to do in 2022.

 

[Potstickers]

Are you maxing our your 401K this year and each of the years until you retire? (With catch-up contributions) Do you get an employer match?

Does your employer pay you actual cost for meals or do you get a per-diem for meals and incidentals while on the road? I stashed away quite a bit while I was a five night a week traveler on a per diem by choosing to eat much less expensively several days a week.

Either way, you should be able to sock away a bunch more into regular (not tax advantaged) savings while you're traveling this much since you aren't buying food and stuff at home and you probably don't need to keep your home heated/cooled to quite the same degree you need to have it when you're living there. (I realize you have a dog, so I'm just suggesting minor adjustments, not major ones.) Having a nice pot of money that is not in a taxable account is very handy -- no restrictions on when or how you use it.

Living leaner now would seem to put you in a much better position to make your dreams a reality in five years.

 

[Johanson]

Are you maxing our your 401K this year and each of the years until you retire? (With catch-up contributions) Do you get an employer match?

Does your employer pay you actual cost for meals or do you get a per-diem for meals and incidentals while on the road? I stashed away quite a bit while I was a five night a week traveler on a per diem by choosing to eat much less expensively several days a week.

Either way, you should be able to sock away a bunch more into regular (not tax advantaged) savings while you're traveling this much since you aren't buying food and stuff at home and you probably don't need to keep your home heated/cooled to quite the same degree you need to have it when you're living there. (I realize you have a dog, so I'm just suggesting minor adjustments, not major ones.) Having a nice pot of money that is not in a taxable account is very handy -- no restrictions on when or how you use it.

Living leaner now would seem to put you in a much better position to make your dreams a reality in five years.

I haven't been maxing out my contributions but I will do that next year after the CC debt is paid off and I will also max out my ROTH IRA contribution. Right now my company matches me 75% up to 8% of my salary. Another thing I started last year that makes me want to kick myself is that my company, when I started, used to match based on how much you earned. About 20 years ago, they changed that to how much your salary was and didn't include overtime. In my defense, back then, you couldn't make changes very often either. Anyhoo, now what I do is I boost my contributions up to max or near max based on the OT I've earned for that 2 week pay period. Now Uncle Sam gets far less than he used to and I get to save far more tax deferred income.

My employer pays actual costs only. I wish it were per diem but it hasn't been that way for about 25 years and I didn't need it then.

You're right about lowering the heat, raising the AC setpoints. I actually have two yellow lab but I also live in MN, where it's extremely cold in the winter and can be unbearable hot in the summer. So, the amount of money one can save is minimal. I did replace all of my windows last year though to help minimize my energy bill. That's why I have CC debt. I put it all on my Delta Reserve card then transferred it all to the Chase Slate card with 0% transfer and 0% interest for 15 months. I ended up taking 4 international vacations last year (hell, enjoy life while you're young, I say...plus I get 28 days of vacation!) so I didn't pay it off. Just a couple of weeks ago, I transferred the remaining debt and some I racked up from the two international trips I took this year from my Reserve to an Alliant Credit Union account that also had a 0% transfer and a 0% interest rate.

The pot of money you mention is basically my ROTH IRA. I just started contributing to it almost a year ago. I think I'm doing pretty well for having it for only 11 months. I still have money I can contribute to it for this year. But, I also made some dumb mistakes trying to get rich quick. I don't do that any more.

Aloha from Honolulu! I just flew in today for the week (double time and a half for today and more OT when I return!). Next week is Tulsa and then I hope to work from home for a couple of weeks. I really do have a good gig. I just wish I could take my dogs with. I'd never retire.