Is it possible to retire now (40's)?

[AbbA]

Quote:

Originally Posted by joeea Have you gotten a handle on what your expenses will be in retirement, including taxes, healthcare, and everything you want to do? You should get your numbers from ssa.gov and use them in https://opensocialsecurity.com to start to consider when you each should begin to collect your benefits. You should consider spending a few hours with a fee-only fiduciary financial adviser. This will help you get a clearer picture of where you stand relative to your goals. I suspect you'll find that you are in great shape and that this will help ease some of your worries. Good luck.

Not sure how much I can trust a FA... That's probably a topic for another day.

I don't think I can see very far into the future. My assumption is that if all goes well, today's spending of $55k would remain the same or be a bit lower in retirement, but medical/dental insurance premiums/copays/OOP expense would need be added on top of $55k.
Non-discretionary expenses would be $25k-$30k for the two of us (food, car expense, property insurances and taxes, and utilities), so I add another $20k-25k for travel/fun/discretionary which can be cut down if needed.

Payments for today's tutoring/children's activities could be part of our travel budget. After traveling quite a bit with the kids in the USA and Europe, I don't know if I'll feel like flying so much unless I can stay long in one place. My husband feels the same way. The kids keep us very busy that we appreciate quiet whenever we can get.

Tax estimating is not easy, but I don't think they would be very high until RMD's kick in. How do other people estimate taxes? Play with Taxcasters, TT by using various income amounts?

[FlaGator]

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Originally Posted by AbbA Hi, I would love to present details about our finances and seek opinions and guidance. I must admit that even though I work in accounting I'm not thrilled about analysis on PF stuff. Some people (e.g. pub4uski) are able to deconstruct numbers and tell whether a poster's 'pot' is in great shape or not. So here it goes…. Bear with me as it's long. My DH will turn 51 quite soon and I'm 44. We have 2 children: 8th and 5th graders. We live in a city in one of Southeast states (somewhere between GA and VA). Our house that we bought new is paid for. Two Toyota sedans were bought new and are 17 & 8 y.o. Our expenses have ranged between $55k and $60k a year over the last 5-6 years. We don't have cable or any streaming subscriptions and haven't owned Apple products thus far either. I would say that $35-40K are necessities (including $5k for tutoring). DH earns $160k and I earn $85k. However, my salary used to be $65k before this year. I left my previous employer in Jan'19 after 15.5 years. I don't think I landed in a better place either. OTOH, if I hadn't come to this company, I probably wouldn't have left the old place either. I suppose the extra $20k and better commute seduced me out of the toxic work culture, but after 7 months here I can tell that corporate America sucks and if I was sure everything would be fine when I didn't earn another dime I would be out yesterday or last year. I sometimes (often actually over the last few years) think that I would love to be a SAHM, clean our house at my pace, go grocery shopping on the weekdays when traffic is calmer, exercise after driving kids to school, read or do some bigger jobs like paint a room or two, research laminate/vinyl flooring/carpet because after living in our house for 16+ years it could use some updating. However, I think I'm prone to anxiety because I have so many fears. I'm afraid that our savings will drop a lot after I stop working. What if my SAHM dream wears off after a while and I begin thinking I'm not contributing my full 'worth' to our family. What if my DH loses his job or god forbid becomes ill after losing it? Health insurance has always been through DH's employer. DH would like to continue working until at least 55 if not longer. However, since his multi-national company likes performing reorgs you never know when one of them might affect his position. Therefore I would like forum's opinions on our finances as if neither of us works anymore. Our saving journey for retirement didn't start until 2000. We were born and raised in Europe. 529 Plan has $70k ($40k in Vanguard total stock & int'l funds + $30k in Vanguard bond fund) and not included in the below numbers. 401k's: mine is $400k and his is $800K. Roth IRA's: $125k/each x 2 = $250k Have been saving in HSA through DH's plan. Its balance is $40k. Taxable accounts (mostly dividend blue-chip stocks) are worth $700k (yield close to 3% combined). Cash savings or rainy day fund: $140k + $110k in I-bonds though hoping I-bonds could be earmarked for children's colleges. Total is $2.4M or $2.3M if I-Bonds go to the college pot in case we cannot cashflow or save more for college expenses. Overall try to keep 70/30 AA (more conservative in 401k's since we don't have bonds in taxable if we ignore I-Bonds). We should get some miniscule NON-COLA pensions but I don't know how to value them. DH's company discontinued his pension plan in 2011. Today its balance is $70k and it seems to earn some interest because it grows $1,500-$2k/year :-(. Fidelity forecast tool says that he'd get $600/mo. at age of 65 if he stopped working on 8.31.19 (whatever that means). He might be allowed to take a lump sum at that time too (this is my vague recollection talking). I know for sure that my former employer does NOT allow to take a lump sum. After leaving the company, I received a letter saying that my monthly benefit would be $1,100/mo. under the single-life annuity form of payment if I begin taking in 2040. However, I can receive a reduced benefit starting in 2030 or if I change it to joint annuity. I tried to calculate our SS benefits using this link: https://www.fool.com/retirement/2018...t-formula.aspx If I did it correctly, I got $1,260/mo. for myself and $2,360/mo. for my husband. I hope that SS will not disappear in our lifetime and will get at least 80% which would be $1k/mo. for me and $2k/mo. for DH or $36k/year for both of us. If I quit, we lose my $19k contributions to the 401k plus additional savings in our taxable account. DH contributes $24k to his pre-tax 401k + $5-6k to HSA (the rest is co. match). His co.match to 401k is 10% or $16k. Questions to the forum: 1. I have never tried FireCalc yet...have to read on how to use it. If anyone has fun running scenarios on it, maybe you can tell me what answer you get and I'll compare to mine later. 2. I've heard that when you have a good size savings it's not as meaningful to save towards the end. Supposedly, there is a snowball effect at that point. Would it be applicable in our situation? 3. What do you think the sequence/methods of using our assets should be in order to be 'tax efficient'? A) Is it better to start getting reduced pensions starting at ages of 55 and do reduced Roth IRA ladders or wait until 65 so we can increase Roth IRA conversions? 4. I know if my DH is in good health shape and continues working, I could easily quit working now, but if we're both out, healthcare is a huge wild card especially in the current political environment 5. Are there any resources/books to read to keep positive attitude about life? I'm a terrible worrywart!! I tend to worry about my children, my husband, my parents. It somehow in my mind ends ends up being a financial destruction if anything happened and therefore I should continue working. I haven't experienced a panic attack but would like not to worry so much. 6. The older child wants to be a doctor , so guess what I worry about? How in the world can we pay for that education? I personally hope she changes her mind in HS. If not, then I hope she goes to study in Germany. If not, maybe she'll be super smart and lucky to get scholarships, etc. If not, then I'm concerned about her being so deep in red before getting that MD. Thank you so much in advance!

First, you should be very satisfied with the lives you have built and what you have done with them Your story confirms the idea of America as a land of opportunity is still alive

I tend to start with the high level and use detail to confirm/refute. My high level on your situation:

1. About $1,000,000 in post-tax accounts ($700K + $140K+ $100K). Straight line math, that's 15+ years at your current $60K annual burn rate. That will get DH to 66 (SS eligible) and you to 59.
2. About $1.1 million in tax-deferred. In 15 years when DH is 66 (assuming taxable account is drawn down first), this would be ~2.5+ million at 6-7%. Should be enough to get both you to the end.
3. $70K in 529s with with 4-7 years before drawing down. Make the kids go to state schools, get all the state-based scholarships and call it good. No loans, they can work to fill the gaps. The potential MD has a long academic road ahead, and if she's not "super smart", she probably won't make it. I don't think you should feel compelled to pay for it.
4. If there is marital agreement, max out your benefits (401K, etc.) and leave your job soon to be a SAHM. You can afford it, and the years ahead for your kids are critical, and being able to support their activities, and just be a positive presence in their lives, will pay off for them. And you
5. I am a single parent (father, mom's gone) and I have seen the difference between Moms and Dads. My late wife shared many of your concerns-health care, possibility of layoff and loss of income, the generic "what if" that could complicate things. They are well-founded. In my experience, they are low probability events. You have to get comfortable with the risk of those, or get comfortable believing you can adjust and work through them if they happen. My kids and I were able to deal with the death of their mother, my retirement at 55 and a relocation. All of us are doing fine, so it's possible. Sample size of one

The best part is you have choices, something many don't have. As long as you continue to be prudent in your decisions, you will be OK

[AbbA]

Thank you, FlaGator, for your constructive answer. I liked how you broke down the numbers for me. It's very helpful while I study FireCalc. Your story also shows that it is meaningful spending time with the kids before they leave the nest and while you're alive. I feel sad that your wife didn't have the chance to see her children grow.

Yes, I quite frequently feel that we're such slaves to the money in this country. I was against materialism, but now I'm guilty of constantly thinking about money. I know a few stay at home moms who live in our neighborhood. Lately, when I drive by houses each morning on the way to work, I always wonder: Do they worry about money or savings, do they regret not working... I think I envy them more than the other way around (of course, they don't know about our piggy bank either).

One question: Do you think that our pensions are pretty much worthless because you didn't mention them in your high level review?
I'm not sure if my thinking is wrong, but if inflation stays 2-2.5%, my $1,100 pension will be worth 50% in 20-25 years. If that's correct, then it's not too awful for a few years in retirement. Even today some families of four manage to keep their food budget at $500/month. It could be sufficient for two people for some time. Just need to hope inflation doesn't shoot up.

I appreciate your response, FlaGator.

To All,
Thank you for your comments thus far.
I didn't address one thing yesterday, but I would like to do it now.
Being an accountant doesn't make me a great financial planner because I am OK dealing with the past or today's money but I am not very comfortable forecasting 20-40 years into the future. It feels so abstract. That's how I feel about our pensions...They're not-cola's, so I feel like I probably worked for money that will have little value .

However, I will try to challenge myself and check FireCalc soon for better or worse.

[FlaGator]

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Originally Posted by AbbA Thank you, FlaGator, for your constructive answer. I liked how you broke down the numbers for me. It's very helpful while I study FireCalc. Your story also shows that it is meaningful spending time with the kids before they leave the nest and while you're alive. I feel sad that your wife didn't have the chance to see her children grow. Yes, I quite frequently feel that we're such slaves to the money in this country. I was against materialism, but now I'm guilty of constantly thinking about money. I know a few stay at home moms who live in our neighborhood. Lately, when I drive by houses each morning on the way to work, I always wonder: Do they worry about money or savings, do they regret not working... I think I envy them more than the other way around (of course, they don't know about our piggy bank either). One question: Do you think that our pensions are pretty much worthless because you didn't mention them in your high level review? I'm not sure if my thinking is wrong, but if inflation stays 2-2.5%, my $1,100 pension will be worth 50% in 20-25 years. If that's correct, then it's not too awful for a few years in retirement. Even today some families of four manage to keep their food budget at $500/month. It could be sufficient for two people for some time. Just need to hope inflation doesn't shoot up. I appreciate your response, FlaGator. To All, Thank you for your comments thus far. I didn't address one thing yesterday, but I would like to do it now. Being an accountant doesn't make me a great financial planner because I am OK dealing with the past or today's money but I am not very comfortable forecasting 20-40 years into the future. It feels so abstract. That's how I feel about our pensions...They're not-cola's, so I feel like I probably worked for money that will have little value . However, I will try to challenge myself and check FireCalc soon for better or worse.

Thank you for the kind words. Mom had a good run and knew she was leaving solid kids behind . All I had to do was not mess it up

Sorry for not addressing your pensions and SS. They are significant, about 50% of your current spending once received. You will need to "adjust for inflation" obviously, and including them should give you even more comfort.

As for the future, it's a guess. Probability favors the prepared, and I think you've done a good job of working the odds. Spending some time with Firecalc and other forecasting tools will be helpful, if only to help you see historical performance is on your side.

[Vacation4us]

I agree an employment gap for you is much harder. I have a friend who was in accounting left and was a SAHM for 10 plus years and complained her pay was lower than when she left. She is now at 50 and divorced getting her CPA. Retirement is just a dream for her.

[gwraigty]

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Originally Posted by AbbA I know a few stay at home moms who live in our neighborhood. Lately, when I drive by houses each morning on the way to work, I always wonder: Do they worry about money or savings, do they regret not working... I think I envy them more than the other way around (of course, they don't know about our piggy bank either).

I've been a SAHW, then later a SAHM, since my marriage in 1992. No regrets. No worrying about money, even in the days when my husband didn't make much. He handed over the finances to me and I made it my "job" to made sure we had a surplus every month to save and, later on, to invest. It was easy for me, because my identity was never wrapped up in what I ever did for a paycheck. (I had a 4 1/2 year stint in accounting myself.)

We're both 56. The total of our financial accounts is close to yours, even though my husband still doesn't make what yours makes, and I've not brought home a paycheck in our marriage. We don't want for anything financially. It can be done.

[AbbA]

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Originally Posted by gwraigty I've been a SAHW, then later a SAHM, since my marriage in 1992. No regrets. No worrying about money, even in the days when my husband didn't make much. He handed over the finances to me and I made it my "job" to made sure we had a surplus every month to save and, later on, to invest. It was easy for me, because my identity was never wrapped up in what I ever did for a paycheck. (I had a 4 1/2 year stint in accounting myself.) We're both 56. The total of our financial accounts is close to yours, even though my husband still doesn't make what yours makes, and I've not brought home a paycheck in our marriage. We don't want for anything financially. It can be done.

Thank you for posting! I think your and FlaGator's comments were the most or even the only encouraging and inspirational on this thread. It doesn't mean I didn't appreciate reading the other views. They were very realistic for sure.
The most unique thing I heard was voices of a potential divorce. I was/am more worried for my spouse not to get sick with some terrible disease. A divorce didn't even cross my mind! I'l probably have to create another thread w/poll to ask how many people save and prepare for retirement while accounting for a potential divorce in their numbers. Yes, divorces are kind of popular in this country . It's probably a good idea to build a cushion into a retirement portfolio for this reason, but then how many years do people delay their retirements to build up this kind of security...Uhh, I didn't consider such an option in my marriage (yet).
Like you, I'm also a CFO and CEO and secretary in my house. My DH has no inclination to learn anything about finances. If you asked him what funds he has in his 401k, he'd say he has Vanguard and it's stocks and bonds. He wouldn't be able to name even one index fund correctly . We do some credit card churning... I have to tell him which CC to use for gas, groceries, etc. so we maximize cash back or point earning. OTOH, he's a great cook and educator for the kids!!

[Dtail]

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Originally Posted by AbbA Thank you for posting! I think your and FlaGator's comments were the most or even the only encouraging and inspirational on this thread. It doesn't mean I didn't appreciate reading the other views. They were very realistic for sure. The most unique thing I heard was voices of a potential divorce. I was/am more worried for my spouse not to get sick with some terrible disease. A divorce didn't even cross my mind! I'l probably have to create another thread w/poll to ask how many people save and prepare for retirement while accounting for a potential divorce in their numbers. Yes, divorces are kind of popular in this country . It's probably a good idea to build a cushion into a retirement portfolio for this reason, but then how many years do people delay their retirements to build up this kind of security...Uhh, I didn't consider such an option in my marriage (yet). Like you, I'm also a CFO and CEO and secretary in my house. My DH has no inclination to learn anything about finances. If you asked him what funds he has in his 401k, he'd say he has Vanguard and it's stocks and bonds. He wouldn't be able to name even one index fund correctly . We do some credit card churning... I have to tell him which CC to use for gas, groceries, etc. so we maximize cash back or point earning. OTOH, he's a great cook and educator for the kids!!

Everyone has different skills that they bring to the relationship.
My DGF doesn't understand our finances except on a high level review which I go through with her monthly.
I went through a divorce and it cost me plenty, but would not have worked years longer just in case of that possibility. Life happens and we all get through it.

[ivinsfan]

Quote:

Originally Posted by AbbA Thank you for posting! I think your and FlaGator's comments were the most or even the only encouraging and inspirational on this thread. It doesn't mean I didn't appreciate reading the other views. They were very realistic for sure. The most unique thing I heard was voices of a potential divorce. I was/am more worried for my spouse not to get sick with some terrible disease. A divorce didn't even cross my mind! I'l probably have to create another thread w/poll to ask how many people save and prepare for retirement while accounting for a potential divorce in their numbers. Yes, divorces are kind of popular in this country . It's probably a good idea to build a cushion into a retirement portfolio for this reason, but then how many years do people delay their retirements to build up this kind of security...Uhh, I didn't consider such an option in my marriage (yet). Like you, I'm also a CFO and CEO and secretary in my house. My DH has no inclination to learn anything about finances. If you asked him what funds he has in his 401k, he'd say he has Vanguard and it's stocks and bonds. He wouldn't be able to name even one index fund correctly . We do some credit card churning... I have to tell him which CC to use for gas, groceries, etc. so we maximize cash back or point earning. OTOH, he's a great cook and educator for the kids!!

Grey divorce is one of the fastest growing areas of divorce. I never said you should continue to work for that reason. My comment was if you cut things close without allowing for losing your spouse through either death or divorce you could find yourself in a very challenging position. You can buy term insurance if healthy but you can't buy divorce insurance. You would be most vulnerable here since your DH plans or needs to continue working.

[karen1972]

Welcome, this forum has such good advice.

If your child does want to become a doctor the other thing is to talk and look at programs that will forgive debt. googling "Health Professional Shortage Area" should lead you to a host of programs. Hopefully they can get involved in high school medical program to try it out. I know my niece wanted to be a nurse but then couldn't handle sticking a needle in anyone so that ended that without any money spent.

As others said health care obviously is a big deal. Its not just the money though, the ones offered on the exchange often excluded good hospitals and doctors. We had better luck when United offered individual plans, but when it stopped BCBS had almost a monopoly and got super greedy and kicked out the two best health care groups (from my opinion).

Others touched on the other aspects of retiring, its just a lifestyle change which you both need to be comfortable with. My honey said he was fine my becoming a SAHW but when he is stressed about work there are occasional snarky remarks about well one of us has a job... its not been a huge deal, but it is always there at little a little bit especially when their job starts to suck real bad.

[gwraigty]

Quote:

Originally Posted by AbbA Thank you for posting! <snip> Like you, I'm also a CFO and CEO and secretary in my house. My DH has no inclination to learn anything about finances. If you asked him what funds he has in his 401k, he'd say he has Vanguard and it's stocks and bonds. He wouldn't be able to name even one index fund correctly . We do some credit card churning... I have to tell him which CC to use for gas, groceries, etc. so we maximize cash back or point earning. OTOH, he's a great cook and educator for the kids!!

You're quite welcome!

My husband managed his finances fine when he was single. He just doesn't like to do it and was happy to pass it on to me. Have you documented how you do things, just in case? I created a document that I regularly update and save to a flash drive. I prompt my husband to save it to his flash drive.

[gwraigty]

Quote:

Originally Posted by karen1972 My honey said he was fine my becoming a SAHW but when he is stressed about work there are occasional snarky remarks about well one of us has a job... its not been a huge deal, but it is always there at little a little bit especially when their job starts to suck real bad.

Um, please don't present this as something normal with being a SAH spouse. My husband has NEVER made a snarky remark to me about it. In fact, just the opposite. Any remarks have been how he values what I've done, and continue to do.

In your case, it sounds like he's really not fine with it, after all.

[ivinsfan]

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Originally Posted by gwraigty Um, please don't present this as something normal with being a SAH spouse. My husband has NEVER made a snarky remark to me about it. In fact, just the opposite. Any remarks have been how he values what I've done, and continue to do. In your case, it sounds like he's really not fine with it, after all.

+1 or as my SonIL likes to say 90% joking, but it's the other 10% that is really what you are thinking.

OP this is an example of things changing, one spouse is OK with bringing home all the bacon but things can change. They have negative changes in their work life or health issues or simply feel pressure and/or burned out.

[ncbill]

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Originally Posted by karen1972 Welcome, this forum has such good advice. If your child does want to become a doctor the other thing is to talk and look at programs that will forgive debt. googling "Health Professional Shortage Area" should lead you to a host of programs. Hopefully they can get involved in high school medical program to try it out. I know my niece wanted to be a nurse but then couldn't handle sticking a needle in anyone so that ended that without any money spent.

No need to take on debt at all:

https://en.wikipedia.org/wiki/Health...arship_Program

[AbbA]

Quote:

Originally Posted by karen1972 If your child does want to become a doctor the other thing is to talk and look at programs that will forgive debt. googling "Health Professional Shortage Area" should lead you to a host of programs. Hopefully they can get involved in high school medical program to try it out. I know my niece wanted to be a nurse but then couldn't handle sticking a needle in anyone so that ended that without any money spent.

Thanks, Karen. This is an interesting alternative I never heard about. I'll have to ask around if the HS my kids will go to offers something similar. If not, it wouldn't be bad to volunteer at a hospital...Of course, it wouldn't be easy to find such a place for a teen to volunteer considering liability and underage things.

[AbbA]

Quote:

Originally Posted by gwraigty Um, please don't present this as something normal with being a SAH spouse. My husband has NEVER made a snarky remark to me about it. In fact, just the opposite. Any remarks have been how he values what I've done, and continue to do. In your case, it sounds like he's really not fine with it, after all.

You both post good examples. One's spouse was ready and welcomed the change of having a SAHW or SAHM while the other might feel some resentment on the bad days.
My DH would be fine I think as long as I don't assign him to do projects after his work. I recall one situation when we bought our house just before I found a job a few months later and this was before children. I had all that bursting energy to look for new furniture, buy paint, paint garage, etc. My DH would come home in the evenings and I would lay all my plans of where we should go shopping, what we would need to plant, what to buy, etc etc. After a few weeks he made a remark "You know, I think it would be good if you found a job soon and then we would see how much energy you would have after 8-9 hours of work in the office"... Boy, was he right!! OTOH, I was glad I had those few months before finding that job. Anyway, those days of carefree energy are over and I realize how one wishes for relaxation after a long workday and crazy traffic.

[cbslc]

I'm in a similar situation. DW is 49 and retired 2 yrs ago. I'm 47 and getting more fed up with healthcare IT everyday. We however don't have children. The only reason I keep on, is 1. $$ and 2. I can work from home in current job. But even with that work from home, I'm getting closer to FIRE.
I found firecalc was too simplistic to model what we have. The optimal retirement planner was better at handling more of my stuff: https://www.i-orp.com/Spend/index.html
But neither and for that matter none of our wealth managers can model a good way to spend our money. We have 401k's, 403b's, 457b's, I series, lump sum annuities, lifetime annuity (tort), CD's, Municipal bonds, tiny amts of state retirements...
And nothing can spit out anything close to what assets to tap first, second...
Unfortunately, how you spend your money before 59.5 can have a big impact.
Have you figured out how to attack your retirement savings?

[samcat]

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Originally Posted by AbbA Thanks for the reminder. Yes, he's insured. $500k term insurance will expire in 8 years and another $250k will lapse after he turns 65. $160k is through his job while he's employed.

Do you have any life insurance outside of work? I think SAHMs need life insurance also. He would need help paying someone to do the work you would be doing as a SAHM.

[samcat]

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Originally Posted by AbbA No, it's not. Yep, I wonder what other people do about it too. What would be good websites to start looking up available plans for individual states? If families don't qualify for ACA plan (which I hear/read is crumbling), how/where to they look for private insurance plans? I know that BCBS is in many states including ours, so I would guess I can visit their website, but aren't there websites that aggregate information of various plans and let you compare?

We have a cost sharing medical plan. Have had it for almost two years and it has worked great. Ours is Christian Healthcare Ministries. There are a few different plans out there.

[gwraigty]

Quote:

Originally Posted by samcat Do you have any life insurance outside of work? I think SAHMs need life insurance also. He would need help paying someone to do the work you would be doing as a SAHM.

That depends. We never took out life insurance on me. My husband never paid anyone to do his cooking and cleaning before he met me. He wouldn't have done so if I'd died.