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Hello from NJ - help with early retirement concerns
Old 05-16-2017, 01:46 PM   #1
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Hello from NJ - help with early retirement concerns

Hello! This is a great forum, have been lurking for a while.

I am 48yo male and live in NJ (suburb of NYC). I currently have approx $310k in a 401K. My wife is 44 and has a job with a govt pension. She's been there 21 years and plans to work until she's 65 (she likes her job!). So she will have over 40 years of service (assuming she doesn't leave the job for some unforeseen reason) and so a very nice guaranteed pension.

We currently owe approx $270k on our mortgage (30yr fixed, just bought the house so still have 28 years to go). Our combined gross income is approx. $140k.

I have been playing around with online calculators but I seem to get different results depending on which one I use. My goal is this:

I'd like to retire early, at 55 (7 more years). At that point my wife will be 51 and will still be working another 14 years. We are both covered under her health insurance so we would not need to purchase HI. I figure I should have around $500K by age 55. Does this seem doable?

My concerns:

-We don't have kids so I worry about long-term care expenses. I know little about LTCI but I'd imagine it can be very pricey. And I'm not even sure if it is considered a wise purchase.
-We like to travel and eat out etc. I'd say our entertainment expenses are higher than most. I want to continue to do this after retirement (my wife will still be working but she does get a lot of vacation time each year so we plan to travel a lot even before she retires).
-On an emotional level, I worry about depending on her pension and health care to allow me to retire early. We get along great and the chances are extremely remote - but I've seen older couples get divorced. You never know. I don't like being financially dependent on anyone including my spouse.
-I also worry somewhat about the dynamic if she is still working for so many years while I'm retired. Will it lead to friction? Will she resent my always being around the house? Will I resent her never being around?

So there you have it. Long post, sorry! Any advice would be welcomed from those who managed to make it all the way to the end. Thanks for reading.
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Old 05-16-2017, 02:52 PM   #2
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(1) you didn't mention how much you currently spend per year. You will need to have a good handle on how much you plan to spend once retired to be able to understand if it's doable.
(2) Your estimated savings of $500k when you are 55 should be able to support something in the ballpark of 20k of yearly expenses if we assume a 4% withdrawal rate and normal investment portfolio. Add that 20k to your other income (wife salary or pension, social security, whatever) and that's a ballpark of what you will be able to live on if you retire.
(3) LTCI - Can't answer much about this. We've chosen to just stick with our basic health insurance and let the cards fall as they may. We're hoping that as we get older and incur more health expenses, we won't be doing as much so the money to fund health issues will come from not spending elsewhere. Who really knows..?
(5) 500k sounds to me like a small amount to retire on at 55 yrs old but we are missing many key facts to really provide a good opinion. If your wife is happy to work several more years, and gets a good pension, and you watch your expenses closely....maybe not an issue at all.
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Old 05-16-2017, 03:18 PM   #3
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Originally Posted by 4thand11 View Post
-We like to travel and eat out etc. I'd say our entertainment expenses are higher than most. I want to continue to do this after retirement (my wife will still be working but she does get a lot of vacation time each year so we plan to travel a lot even before she retires).
-On an emotional level, I worry about depending on her pension and health care to allow me to retire early. We get along great and the chances are extremely remote - but I've seen older couples get divorced. You never know. I don't like being financially dependent on anyone including my spouse.
-I also worry somewhat about the dynamic if she is still working for so many years while I'm retired. Will it lead to friction? Will she resent my always being around the house? Will I resent her never being around?
I hesitate to answer questions on the "will we have enough" financial part of retirement. But I'll take a stab at the questions I quoted. I ER'd 4 years ago, and DW continues to w*rk. Financially, we had agreed that we want to maintain our lifestyle. We like to take 2 vacations a year, and several sporadic overnights within driving distance, and do not foresee changing that. So, from that angle it was all systems go for my ER.
I joke to people that I'm a "kept man" because DW pulls in the only paycheck. But it is a joke - I brought in significantly more money when I w*rked so the reason we have the nest egg that we do is more from my pay and bene's than DW. So, I don't feel guilty or "dependent."
Lastly, before I pulled the plug I asked my wife repeatedly if she would resent continuing to w*rk. I reminded her that she would wake up to go to w*rk and see me sleeping in bed. And, she will often come home from w*rk and see me on the couch. She was - and remains - fully supportive. It helps that she likes her j*b (teacher), and conversely I was burned out.
I suggest you take a hard look at your finances and lifestyle to make sure your ER is viable. And, be 100% certain your DW will truly be supportive of your ER, before you actually do the deed.
P.S. I'm also North Jersey resident.
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Old 05-17-2017, 12:52 AM   #4
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I'd say you better stay on good terms with your wife

Is your wife working for Federal, State or Local Government? You may want to consider what her ER options are and how much she is putting away in her retirement account. What are your expectations and her expectations of how things would be if you retired that much earlier? Having to work vs wanting to work could lead to issues or resentments if you are not both on the same page. I think you need to look at the finances to make sure you are both taken care of in the long run. Your wife's perspective on when she would like to retire could change. If the calculators are all over the place...something is missing or not adding up, either expenses or incomes.
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Old 05-17-2017, 04:37 AM   #5
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I retired three years before DW finally did this past year. She doesn't have a pension. But had valuable stock options she was waiting to vest. I also had health issues driving me to ER. But we did a financial plan to make sure it would work if something happened to her and she couldn't work.
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Old 05-17-2017, 04:49 AM   #6
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You have a couple of scenarios to consider but you gave no spending requirements so we do not have enough to go on yet.
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Old 05-17-2017, 05:57 AM   #7
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$500k in investments "should" net you about $20k/year at 4%, but at 55 many would recommend a 3-3.5% rate. At 3.5% that's $17.5k/year and $15k/year at 3%. If you and your wife have problems in the future, that's your budget until you can collect SS to supplement it. If you and your wife stay together, you can have that on top of her salary until SS kicks in and her pension starts.

If you're confident in your marriage and that is enough to cover your expenses, then it works. If it's not enough to cover your expenses, then it doesn't work. Since we don't know your numbers (spending etc), I can't get any more specific than that.
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Old 05-17-2017, 07:45 AM   #8
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We're getting some negative vibes from what your saying about your retirement situation. And you live in New Jersey, a high taxed place in both state income taxes and property taxes.

One Ace In the Hole for any retiree is having little or no money owed on their residence. And with 28 years to go on the mortgage, you're not in the optimal situation.

My wife and I only eat out about once per week on average. And while working, I saved until it hurt--and lived far below our means. I don't get the impression that you're saving enough money to retire that early.

And while your wife intends to work until age 65, it's a long time from now. And family situations change and some people's health doesn't hold up until 65. Frankly, all my friends and relatives are not working past 60.

And don't count the government pension to be a done deal as many such entities are going exclusively to 401K type programs--even the U.S. Gov't. And many State and Local governments' pension programs are fiction--i.e. California and Chicago.

Preparing for Early Retirement just takes a great deal of sacrifice and living below one's means. It also requires years of making good investment decisions and saving monies far more than just a company or governmental pension.
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Old 05-17-2017, 09:57 AM   #9
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Many thanks for all the replies.

To be honest I don't have a good handle on our spending yet. I guess I'd better work on that first. I do try to "pay myself first" by putting money into my 401k above and beyond what is required for my company match. However I agree with those who say I probably need to spend less/save more if I want to retire early.

Regarding my wife's pension, it is NYS pension. According to the info in her most recent statement she would be entitled to 76.5% of her FAS if she worked until 65 and retired with 41 years of service credit. The estimate is approx $77k per year factoring in projected wage increases... it also has a COLA adjustment. We are certainly counting on the pension as a source of income in retirement but I am not sure how worried I should be about defaults or reductions in benefits, or how to budget for such an eventuality.

Yes the mortgage is an issue and it would be great to have it paid off. I am looking into making extra principal payments but have not done so yet. We got a very low rate so I don't think refinancing to a 15yr loan would benefit us too much vs. making extra payments on our current loan. In general since the rate is very low my thoughts have been it is better to save more in my 401k than to pay the mortgage down early.

I think my next plan (aside from a better budget on what we are actually spending each month) - is to have a serious talk with my wife regarding her plans for the future and also look at my options regarding myself working a little longer (perhaps until 60) to save more or pay down the house, and/or continuing to work part-time post-retirement to supplement income from savings.

I have also been looking into CCRCs as a possible option for us when we are older, there seem to be some really nice ones out there in California (where we would love to retire) but I suspect the entrance fees are astronomical. That's an item for a different thread altogether I guess!

Retirement finances are confusing, I am glad I found this site and will keep reading the threads to gain valuable advice from others who have done it. Thanks again!
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Old 05-17-2017, 11:18 AM   #10
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Based on what you've told us, and your desire to move to California, you have a long way to go to financial independence.
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Old 05-17-2017, 01:55 PM   #11
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My wife and I are middle class and have been banking the max in our 401K's over the last 15 years. That coupled with a State Pension and a paid off house is the only way I forsee being able to semi-retire early. Luckily, our state will pay our healthcare at age 60 but I can see where the Legislature may remove some of that benefit to retiree's down the road. Hence, although we have planned well, we have to stick pretty tight to a budget in order to make ER work.

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Old 05-18-2017, 05:29 PM   #12
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The good news is you have $140K income per year. The bad news is you're probably not saving a big chunk of it. I would closely look at your monthly expenses and see how you can save. Suggestions are to drop cable TV, the 2nd cellphone, reducing dinners out to once per week and reducing other wants. Try aiming for saving 30% of your gross income, and increasing it yearly. You may have enough to retire in 10 years.
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Old 05-18-2017, 06:06 PM   #13
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The good news is you have $140K income per year. The bad news is you're probably not saving a big chunk of it. I would closely look at your monthly expenses and see how you can save. Suggestions are to drop cable TV, the 2nd cellphone, reducing dinners out to once per week and reducing other wants. Try aiming for saving 30% of your gross income, and increasing it yearly. You may have enough to retire in 10 years.
I live in NJ.
The basic cable and lowest speed internet is $45.

As an aside, my unemployed friend pays $140. I told her to call Comcast and do what I do. She told me she hasn't gotten around to it. You wonder with people why saving $100 a month isn't something to do right now.
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Old 05-19-2017, 07:48 AM   #14
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Several years ago, after using Quicken in fits and starts, I finally signed up for Mint. It makes tracking your expenses nearly painless. By the time we retired, I was thoroughly familiar with our monthly expenses, including where economies could be made, where it was futile, and what sorts of things seemingly popped up out of nowhere. Until you have a firm reality based budget, I'd recommend adding at least 10% as a finagle factor.
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Old 05-19-2017, 08:55 AM   #15
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Several years ago, after using Quicken in fits and starts, I finally signed up for Mint. It makes tracking your expenses nearly painless. By the time we retired, I was thoroughly familiar with our monthly expenses, including where economies could be made, where it was futile, and what sorts of things seemingly popped up out of nowhere. Until you have a firm reality based budget, I'd recommend adding at least 10% as a finagle factor.
+1 for Mint. It has its occasional quirks, but for a free money management site, it's been tremendously useful. By having one spot to check everything, you'll notice errors, random fees or fraud sooner than at your statement (if at all).

Regarding the house husband issue, I'd imagine a good way to solve that potential problem is by not being a "house husband." Pitch in, take some things off her plate and create more time for the two of you. Grocery shop during the day, do the laundry after breakfast, cut the grass in the afternoon, have dinner ready when she gets home, fix things around the house that have been on the to-do list for weeks or months, etc. Retirement is supposed to open up worlds of free time... since she's working and you can't just hop in the RV and tour the country, leverage your free time to create free time for both of you on the nights and weekends.
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