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How early is ER?
Old 07-23-2015, 11:43 PM   #1
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How early is ER?

I'm 35 with a stay at home DW and three kids. I'm in a cushy government j*b. I'm currently with a negative net worth , but clawing my way to being worthless. Yup, one day I want to be worth nothing then I can start looking towards being worth something.

I'll be eligible to retire with a pension at 55 that will give me 69.12% of my final year's salary. I currently live on 74% and so long as I pay off my debt I'll be under that 69% easily. It might even feel like I'll be getting a raise when I retire.

I can retire earlier at 53 if I wait two years and defer my pension until 55 while living off of my 457 plan. My pension would be 64.8% of salary in that scenario.

I know I have years to go, but how early is early? I'm one of the lucky Americans that is out at 55. I know it's early compared to most but kind of normal for my line of work. I even have grand illusions of being out 50 or earlier. That for sure is RE. Here's a toast to no more than 7,242 days until retirement.


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Old 07-24-2015, 02:11 AM   #2
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There are members here that range the gamut in ages. Retiring at 55 or 53 puts you in the mix for early retirement. I retired at 52.5... so in that window, and pretty darn early compared to the norm... Not Fuego early, or Brewer early... but early compared to my peers.

You mention that you're living on 74% of your income currently, and your pension will give you 69% of your income. Personally, I'd try to pay down debt and build savings so that you aren't exclusively reliant on your pension. Pensions can be mucked with - changing the COLA calculations (if it's a COLAd pension), messing with health care calcs.

My advise... Keep track of what you're spending and make cuts that reduce your monthly spend... Little cuts like changing your cell phone provider, changing or eliminating your cable bundle, greening your house to reduce your power bills... I was able to cut my budget by several thousand without ANY lifestyle impact by looking at these things. I applied that extra income to debt reduction (paid down my mortgage) and increased 401k contributions. Then I somehow found some extra money and put that towards savings.

Cutting spending gets you to ER faster in 2 ways. 1) you increase your nest egg, 2) you reduce your budget in retirement.... after all, if you can live comfortably on a smaller budget pre-retirement, it's not a hardship to live comfortably on the same budget post retirement. That second factor shaved 2 years off my retirement date... and trust me - I live comfortably, not miserly.
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Old 07-24-2015, 06:54 AM   #3
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Can you share with us some details of how negative your net worth is and your anticipated timeline to reach " worthless " status? Is your status due to student loans, underwater mortgage, cc or medical debt or some other catastrophic event? I don't want to appear nosy, but you've put it out there and our forum members are a kindly and helpful bunch full of encouragement and great insight.
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Old 07-24-2015, 08:14 AM   #4
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Pensions can be mucked with - changing the COLA calculations (if it's a COLAd pension), messing with health care calcs.
+1

This would be my major concern about relying too much on the promise of a pension 20 years down the road. Considering the enormous budget shortfalls of our federal and (most) state governments, I would expect with near 100% certainty that pension benefits will be reduced over time. In which case, you need to be more proactive about reducing your spending, increasing your savings, and being smart with your investments.
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Old 07-24-2015, 11:01 AM   #5
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+1

This would be my major concern about relying too much on the promise of a pension 20 years down the road. Considering the enormous budget shortfalls of our federal and (most) state governments, I would expect with near 100% certainty that pension benefits will be reduced over time. In which case, you need to be more proactive about reducing your spending, increasing your savings, and being smart with your investments.
+2.

Just last year they tried to make a small reduction in active duty military pensions which most would call a sacred cow as far as the federal government goes. I'm going to guess that over the course of the next 50-60 years, they'll try again.

In our lifetime they've made massive modifications to the FERS system. For the most part, people get grandfathered in, but with 20 years left in the hopper before you get your pension, IMO putting all your eggs in that basket isn't a great plan. It could work out, but I see a lot - a LOT - of folks in the military who are staying in for 20 assuming the pension will be enough and then they are alarmed when they run the math after taxes (all the active duty tax breaks go away) and survivor benefits that the pension doesn't go as far as they thought it would.

DB plans are great, and I'm fortunate to be on track for one of the best there is, but there's no way I'm counting solely on that. I'd strongly recommend taking the advice of others and figuring out a way to grow your savings over the next 20 years.
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Old 07-24-2015, 11:08 AM   #6
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I know I have years to go, but how early is early?
as early as possible but no earlier
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Old 07-24-2015, 11:33 AM   #7
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I think most of us would consider retiring at 55 as an early retirement. I think you are free to define early retirement in any way you wish.

I retired at 61.5, and they haven't kicked me off the forum for that. When I first arrived, I wondered! But I was welcomed anyway. It turns out that I am not the only one here who retired at such an advanced age.
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Old 07-24-2015, 11:37 AM   #8
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my goal is to be retired longer than I was w*rking, which requires an early retirement and a long life - so 55 hopefully


they key, I believe is to lbym, save save save and avoid retirement landmines between 45 and 55
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Old 07-24-2015, 12:13 PM   #9
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Before your hair turns gray. 😄
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Old 07-24-2015, 12:29 PM   #10
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30-39 - Crazy Extreme Early
40-49 - Extreme Early
50-59 - Early
60-67 - Normal
68-75 - Late
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Old 07-24-2015, 01:08 PM   #11
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I have $60k in CC, student loan and car debt. I rent, but the house will eventually be willed to me.

A few years ago I was walking up a short flight of stairs and was winded. I decided at that point to exercise. I lost 40 lbs. that's how I feel about my debt now. It'll take me about 2 years to drop the debt.

My current savings rate is 10.5%. After debt is paid it'll go up to 25%. I've already lost my interest in cable now the hard part of convincing others in my family but they're coming along.

I know my pension system is in good financial shape. I know that can also change quickly and ultimately voters have the power (as they should). Every time changes are suggested or instituted they've always grandfathered us.

I certainly don't want to rely on my pension. If DB plan works out I'll have a fat basket elsewhere. I've been concentrating all other savings to deferred comp because distribution isn't restricted like IRAs are. In my deferred comp I'm not restricted to just what the 457 offers. I self-direct into Schwab from there. Should I be putting away to other places?


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Old 07-24-2015, 01:21 PM   #12
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Thanks for sharing. Given your pay down timetable and planned savings rate thereafter, your negative net worth does not seem that daunting. The trick will be to make sure that you achieve those goals, while maintaining a tight reign on spending and hopefully have the full support of your spouse and children. I don't know what your cable bill is, but have you considered netflix, amazon prime video and hulu plus to replace or replicate the programming that your family now enjoys. Also I found an interesting website called Couch Tuner http://www.couchtuner.la/
which is totally free and provides free access to all episodes of most popular current and past programming including premium channel series like Homeland, Game of Thrones, The Affair, etc. which is great. I watch it all the time on my computer. I assume there must be a way to mirror my computer screen over to my flat screen TV, but I haven't tried yet. There is also Sling TV with 20 channels for $20/mo.

Good Luck.
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Old 07-24-2015, 01:28 PM   #13
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Thanks for sharing. Given your pay down timetable and planned savings rate thereafter, your negative net worth does not seem that daunting. The trick will be to make sure that you achieve those goals, while maintaining a tight reign on spending and hopefully have the full support of your spouse and children. I don't know what your cable bill is, but have you considered netflix, amazon prime video and hulu plus to replace or replicate the programming that your family now enjoys. Also I found an interesting website called Couch Tuner Couch Tuner TV Videos FREE:
which is totally free and provides free access to all episodes of most popular current and past programming including premium channel series like Homeland, The Affair, etc. which is great. I watch it all the time on my computer. I assume there must be a way to mirror my computer screen over to my flat screen TV, but I haven't tried yet. There is also Sling TV with 20 channels for $20/mo.

Good Luck.
Chromecast works for "casting" your computer screen to your tv.
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Old 07-24-2015, 02:42 PM   #14
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MONEY magazine has an article this month on bundling different services depending on your viewing habits to cut cable. I'll probably do this.

I've turned into my father going around the house turning off the lights.


Only three ways to get to other side of that hill: climb up, go around or dig through. I won't pretend it's not there.
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Old 07-24-2015, 03:13 PM   #15
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MONEY magazine has an article this month on bundling different services depending on your viewing habits to cut cable. I'll probably do this.

I've turned into my father going around the house turning off the lights.

Only three ways to get to other side of that hill: climb up, go around or dig through. I won't pretend it's not there.
You have company
Mr B leaves lights on, I turn them off. It's pretty comical.

My Mom used to do that. I am following suit. It adds up over time.
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Old 07-24-2015, 05:08 PM   #16
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With respect to the amounts you are saving in deferred comp, are those amounts just unsecured claims against your employer? Also, is there a timetable when those amounts must be paid out?

My only concern is that you may end up with a heavy exposure to one entity if you focus all your extra saving there. Would you be able to put some of the money in a Roth IRA or a other post-tax savings just for some diversity on credit exposure?

Congrats on your potential pension and on your focus on what you need to do for your future. It sure sounds like you know how to focus on achieving a goal,and I'm sure your efforts in the financial area will pay off as well.
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Old 07-24-2015, 06:50 PM   #17
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With respect to the amounts you are saving in deferred comp, are those amounts just unsecured claims against your employer? Also, is there a timetable when those amounts must be paid out?

My only concern is that you may end up with a heavy exposure to one entity if you focus all your extra saving there. Would you be able to put some of the money in a Roth IRA or a other post-tax savings just for some diversity on credit exposure?

Congrats on your potential pension and on your focus on what you need to do for your future. It sure sounds like you know how to focus on achieving a goal,and I'm sure your efforts in the financial area will pay off as well.

I don't know if my deferred comp is an unsecured claim. That's something I'm absolutely going to look into. I'm partial to the deferred comp because when I leave employment I'm not restricted by the 59 1/2 age distribution. But if it's unsecured I'm going into IRA instead.

I'd choose a traditional over ROTH because I just really need the tax benefit right now. I'd love to diversify tax exposure but that'll be down he road.

I know 20 years seems like a long time to plan, yet so many of my co-w*rkers say it's gone by in a flash. I wish I could start my career over again, but I can't. So I just tell my preteens strive to save half


Only three ways to get to other side of that hill: climb up, go around or dig through. I won't pretend it's not there.
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Old 07-24-2015, 06:52 PM   #18
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To answer the question asked: any age starting with a 5 or less is "early" to me.

Right now I'm wrestling with "how early is too early?" understanding that age is different for everyone. First, do I have to get a "real job" at 42? Second, if not, do I want to get a "real job" at 42? If so, why?

And then I think, "I've got four years to think about this!" and move on to something else.
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Old 07-26-2015, 07:09 PM   #19
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30-39 - Crazy Extreme Early
40-49 - Extreme Early
50-59 - Early
60-67 - Normal
68-75 - Late
Agree.
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Old 07-26-2015, 07:17 PM   #20
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I suppose I'll shoot for early retirement and dream of extreme early.


Only three ways to get to other side of that hill: climb up, go around or dig through. I won't pretend it's not there.
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