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Looking to quit work and retire early.
Old 08-03-2019, 06:20 PM   #1
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Looking to quit work and retire early.

Hello Everyone.

I come to the site regularly to read members post's and have learned a lot by doing so. Thus, I have now decided to post and get some advice from members.

I am a 60 year old male, turning 61 in November, and my wife is 52. My wife's 24 year old son currently lives with us and has a full time job.

We are looking to move from NJ to either TN or SC . This would mean we would quit our jobs. I currently hold full-time employment with $100K/year salary and carry the health insurance for wife and I. My wife works part-time with @ $30K/year salary.

At this time, it is undetermined whether my wife's son will move with us.

We currently own a town home with a 30 year mtg @ 3.625% and 24 years left on the mtg. We have a $228K principle balance on the loan of $258K. Town home valued at @ $370K - $380K.

Assets include -
$70K in non-IRA CD's, $86K in IRA CD's. CD's have average APR of 2.5% and terms of 1 years and 1.5 year.
$41K in bank savings accounts.
IRA - $420K
ROTH IRA - $116K
Brokerage - $62K
Wife IRA -$49K
Wife ROTH IRA - $46K
$115K in my 401K account invested in Fidelity 500 Index fund

My equity IRA and Brokerage accounts are made up of 53% common dividend paying stock's, 30% REIT's, 10% Preferred Stock, 6% BDC's and 1% CEF's. My wife’s IRA equity accounts made up of 67% common dividend paying stock's and 33% REITs.

As it stands now, my equity accounts throw off $37,400/year in dividends. My wife's throw off $5,000/year in dividends. We would not be able to access her dividend income until at least when she turns 59.5 years of age. The CD's deliver @ $4,000 of interest per year.

We basically would be using the dividend's and interest to live on. Plus, I am thinking that I could also pull S.S. In November of next year when I turn 62. That would be @ $2,100/mth.

So, our plan would be to sell our town home here in NJ sometime in the Spring/Summer of next year. If we sell for @$375K, we would clear somewhere @ $135K. We would either move to apartment in eastern TN or SC somewhere south of Charlotte, NC. The apartment's we have been looking at in these areas would have monthly rent anywhere from $1,000/mth for 1 bedroom (son does not move with us) to @ $1,300/mth (son moves with us).

Given that I would be quitting my job, we would most likely secure health insurance through the ACA.

While in apartment, we would determine if we wish to build a house in a HOA based community complex that offers amenities such as pool, clubhouse, etc. such as what Lennar builds in the Fort Mill SC area or D.R Horton and Smithbilt builds in the Knoxville TN area. We would look to utilize an asset depletion mortgage to purchase with $100K down payment.

Doing some of the math of mortgage payment and taxes in these areas, we could pay same or less in monthly payment (P.I.T.I) vs paying rent.

This is a big decision to make, but if we could do this, it would give us freedom to enjoy ourselves and do the things we want to do vs getting up each work day at 3:30am to deal with the rigors/stress of a job .

Looking for some thoughts and suggestions from members on our plan of action to throw in the towel on a hectic life and to start early retirement.

I hope I provided enough information for everyone.

Thank you and very much appreciated on folks thoughts.
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Old 08-03-2019, 06:49 PM   #2
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Looking at it objectively, it seems a little light. Also, to be on the safe side - forget the CD interest as far as income goes. When those CDs mature in a year, you'll be lucky to renew them for more than 1%.

Now, I'm thoroughly of the belief that anyone can make it on $1M if they want to. It's simply a matter of the lifestyle you want to live.

What you need to be concerned with is the "what if" with regard to how you're investing the money.

Once you move, you might also consider taking a part-time job to pay for the groceries, incidentals, and have some spending money and you're not simply relying on your savings/investments for everything.

If wife's son moves with you - begin charging him the $300/month differential in rents between the 1BR and 2BR and maybe another $100/month for food, utilities, etc. You're no longer going to have the job to support him. He's an adult - let him contribute some for his living expenses.
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Old 08-03-2019, 09:48 PM   #3
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Quote:
Originally Posted by big8pointer View Post

I am a 60 year old male, turning 61 in November, and my wife is 52.

We are looking to move from NJ to either TN or SC . This would mean we would quit our jobs. I currently hold full-time employment with $100K/year salary and carry the health insurance for wife and I. My wife works part-time with @ $30K/year salary.

**snip**

Assets include -
$70K in non-IRA CD's, $86K in IRA CD's. CD's have average APR of 2.5% and terms of 1 years and 1.5 year.
$41K in bank savings accounts.
IRA - $420K
ROTH IRA - $116K
Brokerage - $62K
Wife IRA -$49K
Wife ROTH IRA - $46K
$115K in my 401K account invested in Fidelity 500 Index fund
To me the quoted text is most relevant.

Question- I see $130k in income- what are your expenses?


I see $1 M in assets spread across the accounts

In general, the $1 M in assets would generate $40k in income (lots of assumptions in that statement, but doable).

So would $40k in investment income+SS be enough to live on?
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Old 08-03-2019, 09:54 PM   #4
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Looks a bit lean to me if you will be needing to get a full mortgage for your next home, with moving expenses, and having to pay for health insurance, while also potentially supporting a third family member, and his related expenses, with no extra income coming in other than investments....no SS, or pension.
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Old 08-03-2019, 10:51 PM   #5
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Originally Posted by njhowie View Post
....If wife's son moves with you - begin charging him the $300/month differential in rents between the 1BR and 2BR and maybe another $100/month for food, utilities, etc. You're no longer going to have the job to support him. He's an adult - let him contribute some for his living expenses.
+1 What we did with my DS is we charged him $400/month rent while he lived at home. When he moved out he would get all the rent that he paid back. So the longer he stayed, the larger the incentive for him to move out became.

We called it the DS Freedom Fund and I would give him a statement of the balance every couple months or so.

He was effectively paying to save his first, last and damage deposit money.
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Old 08-04-2019, 04:57 AM   #6
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Originally Posted by njhowie View Post
Looking at it objectively, it seems a little light. Also, to be on the safe side - forget the CD interest as far as income goes. When those CDs mature in a year, you'll be lucky to renew them for more than 1%.

Now, I'm thoroughly of the belief that anyone can make it on $1M if they want to. It's simply a matter of the lifestyle you want to live.

What you need to be concerned with is the "what if" with regard to how you're investing the money.

Once you move, you might also consider taking a part-time job to pay for the groceries, incidentals, and have some spending money and you're not simply relying on your savings/investments for everything.

If wife's son moves with you - begin charging him the $300/month differential in rents between the 1BR and 2BR and maybe another $100/month for food, utilities, etc. You're no longer going to have the job to support him. He's an adult - let him contribute some for his living expenses.
Correct on the part-time job. Have given thought to doing that as well to supplement income. We would certainly charge wife's son monthly rent while staying with us if he did move with us. The amount would be what you indicated, somewhere about $300/month.

Much appreciate the reply.
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Old 08-04-2019, 05:04 AM   #7
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Originally Posted by jIMOh View Post
To me the quoted text is most relevant.

Question- I see $130k in income- what are your expenses?


I see $1 M in assets spread across the accounts

In general, the $1 M in assets would generate $40k in income (lots of assumptions in that statement, but doable).

So would $40k in investment income+SS be enough to live on?
Until my wife turns 59 1/2, the $5,000/year dividend income is off limits. The question comes down to "Do I take S.S. at 62". Then the @ $40K in dividend income plus @$24K/year in S.S. would be enough to live.

I charted out living expenses 2 different ways, a 2 bedroom apartment and house with mortgage in TN. Expenses would range from @ $3,500/mth to @ $4,400/mth. This also includes variation in Health Insuance premiums.

Much appreciate the reply, thank you.
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Old 08-04-2019, 05:11 AM   #8
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Looks a bit lean to me if you will be needing to get a full mortgage for your next home, with moving expenses, and having to pay for health insurance, while also potentially supporting a third family member, and his related expenses, with no extra income coming in other than investments....no SS, or pension.
That is correct, no pension, but possibly taking S.S. at 62 (next year).

My thought would be upon sale of house next summer, we would put aside @ $35K proceeds for moving and first year living, leaving the $100K balance of the sale for possibly down payment on new house if we decided to go that way vs renting.

And as you state, we would have to support her son until he did secure employment in his field.

The big question mark is of course health insurance.

Thank you for the reply.
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Old 08-04-2019, 05:18 AM   #9
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don't forget that the $40K + SS/yr is pre-tax
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Old 08-04-2019, 05:34 AM   #10
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don't forget that the $40K + SS/yr is pre-tax
Yes, I have thought about tax.

We would have @25K of dividend income coming out of my IRA, but with the $24K Federal Standard Deduction, only about $1K would taxable. About $6.5K comes out of a ROTH account, so no tax there and @$3.5K in dividend from Brokerage account, which is taxable with mix of qualifying and non-qualifying dividend income.

Plus the minimal amount of interest income from non-IRA CD's.

So do not think S.S., if I took it, would be taxable given not reaching the $32K threshold of income to tax 50% of S.S. income.

Both TN and SC do not tax S.S. benefits, so thats good.
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Old 08-04-2019, 05:51 AM   #11
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Plus, I am thinking that I could also pull S.S. In November of next year when I turn 62. That would be @ $2,100/mth.
That might be a mistake. Particularly with a younger wife. It would be even more so if you have been the high earner.

Check out https://opensocialsecurity.com/
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Expenses
Old 08-04-2019, 05:59 AM   #12
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Expenses

I retired at 56 with less in savings than you do but without any debt. House, cars and credit cards all paid off. I've always been told "It's not how much you make, it's how much you spend." If you can get your healthcare figured out and your debt under control you should be able to retire on a modest budget.
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Old 08-04-2019, 06:01 AM   #13
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Yes, I have thought about tax.

We would have @25K of dividend income coming out of my IRA, but with the $24K Federal Standard Deduction, only about $1K would taxable. About $6.5K comes out of a ROTH account, so no tax there and @$3.5K in dividend from Brokerage account, which is taxable with mix of qualifying and non-qualifying dividend income.

Plus the minimal amount of interest income from non-IRA CD's.

So do not think S.S., if I took it, would be taxable given not reaching the $32K threshold of income to tax 50% of S.S. income.

Both TN and SC do not tax S.S. benefits, so thats good.
Looking at it quickly, a small percentage of your SS could be taxed.
See the form below, although it is for 2018.

https://www.irs.gov/pub/irs-pdf/p915.pdf#page=16
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Old 08-04-2019, 06:10 AM   #14
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I retired at 56 with less in savings than you do but without any debt. House, cars and credit cards all paid off. I've always been told "It's not how much you make, it's how much you spend." If you can get your healthcare figured out and your debt under control you should be able to retire on a modest budget.
Good advise.
SS is a gamble when to take it and you need to do what works for you. What ever age you take it at, the break even point is early 80's for SS.
The average age of a male in 2016 was 78.6 years. It was posted here not long ago that only 41% of men will reach age 80. You just need to guess what you feel works for you.
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Old 08-04-2019, 06:23 AM   #15
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Looking at it quickly, a small percentage of your SS could be taxed.
See the form below, although it is for 2018.

https://www.irs.gov/pub/irs-pdf/p915.pdf#page=16
I kind of seeing it the same, small portion, if any would be taxable.

Thanks for reply.
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Old 08-04-2019, 09:54 AM   #16
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I am not crazy about you taking SS at 62 with such a young wife. She could have a lifespan of more than 40 years, and you are locking her into a much lower survivor benefit for life.

I'm think that one of you, maybe DW, since she is younger or you if you see something that you can tolerate, get a job down where you are moving for about a year (with health insurance) while you adjust to expenses and pad your funds. Some part time jobs have health insurance.

I also have concerns that a one bedroom is going to be too small when you have visiting guests (or if DS wonders down there a few months after you move).

I would also suggest that you two start looking for your new home while you two are still raking in the 130k.
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Old 08-04-2019, 10:00 AM   #17
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At this time, it is undetermined whether my wife's son will move with us.
All of you need to have this discussion now. You can't budget getting rental income from him, or paying expenses for him (until he gets a job), until this is determined. Does he want to continue living with you? Is he willing to leave his job? Etc.
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Old 08-04-2019, 10:37 AM   #18
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What type of job does the 24 y.o. have, in that he can think of transferring to TN, etc?
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Old 08-04-2019, 12:26 PM   #19
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I am not crazy about you taking SS at 62 with such a young wife. She could have a lifespan of more than 40 years, and you are locking her into a much lower survivor benefit for life.

I'm think that one of you, maybe DW, since she is younger or you if you see something that you can tolerate, get a job down where you are moving for about a year (with health insurance) while you adjust to expenses and pad your funds. Some part time jobs have health insurance.

I also have concerns that a one bedroom is going to be too small when you have visiting guests (or if DS wonders down there a few months after you move).

I would also suggest that you two start looking for your new home while you two are still raking in the 130k.
Yes, the thought of picking up part-time work down there, at least to defer taking S.S. at 62 in order for it to grow for bigger check and survivor benefit for wife.

Just not sure on logistics of looking for new home while still in NJ and owning our current townhome. We need the funds from sale of the town home to put down on new home. Coordinating sale and purchase of newly built home seems daunting, so the thought of sell, move to rental first and then take a year to determine exactly where we would purchase. So then, we would not have the $130K of jobs that we currently have up here in NJ.
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Old 08-04-2019, 12:28 PM   #20
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All of you need to have this discussion now. You can't budget getting rental income from him, or paying expenses for him (until he gets a job), until this is determined. Does he want to continue living with you? Is he willing to leave his job? Etc.
We have had some light discussion to this move. Its up in there air whether he wishes to come or not. If he secures a new job in the interim from now until next year, he might decide to stay here in NJ.
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