Welcome to the board, Ken.
Originally Posted by kb56
Bottom line - Job was eliminated last month and I am probably looking at FIRE – hope I can make it.
House (+) * * * * * * * * 200K
Need to last to (hopefully) 88.* Social Security kicks in at 62 somewhere around 16K.* Most calculators give me a positive outlook (comments are welcome).* Need to live - 36K/yr, but would like 48K/yr at least starting out.* Most calculators still look positive here.
Problems – have all my money in stocks, and have very little in cash.* I can currently get a line of credit from the house (150K approved as of now) for cash as needed.
Any Pitfalls with the above?
For the next five-six years (until SS kicks in) your 4% SWR would be $33,200/year. $48K/year is nearly 6% which might work out OK for a high-equity portfolio for a short time, but if it's all in telcoms and GM then you might easily be an unhappy cubicle dweller in another few years. Most of us would hesitate to recommend that you follow this course.
Another reason for caution is health insurance and living expenses. If your COBRA coverage or other healthcare doesn't work out the way you expect then your costs could quickly balloon and drive your portfolio into the ground. You may have a handle on that already, but again we'd hesitate to recommend such an aggressive withdrawal without knowing the details.
Have you tried running the numbers in all the different versions of FIRECalc? How do the success rates work out? Financial Engines or RiskGrades might give you a feel for how volatile your high-equity portfolio is and how likely it'd be to survive a few years at 6% before SS lets you cut back on your burn rate.
Your best strategy, until you hit SS, would be to put at least two years' expenses in cash to live on if your portfolio is losing money. If you have no other income (pensions, part-time salary) then maybe you'd want to bump that to three or four years' expenses.
Here's some other thoughts:
As you're rolling that 401(k) over into your IRA, read Bernstein's "Four Pillars" and make sure that your equity portfolio is diversified. Volatility is only good if your returns reward you for the extra risk. Then you might want to consider moving assets around in the IRA (no taxes to pay) to get to a more balanced allocation while you draw down your stock portfolio.
Have you read Bob Clyatt's "Work Less, Live More"?
Another option would be to cash in a portion of the IRA and draw it down via a 72(t) for the years you have left until SS, but you're so close to age 59.5 that a 72(t) might be more trouble than it's worth.
Can one of you 401(k) experts help me out? Is there a provision allowing 401(k) withdrawals after age 55? Maybe Ken wants to leave the 401(k) with the company for a while to allow that.