One final check with fine folks here

[robnplunder]

1. Means a very long retirement likely 40+years is that part of your modeling?
2. It says you are in the Bay Area..CA?? Are you planning to stay? As we know the Bay Area is unlikely to get cheap barring a massive earthquake...How much are you prepared to reduce your spending by? 20%? 40%
3. If you are already supporting your parents can you do so for 20+years there as well. What are the odds of your son needing help?

Running some other calculators including a MC sim with your numbers (basic) gives me some substantial chances of failure (50%) over a 40 yr retirement at 100K. Obviously reducing spending helps but if you have these other potentially fixed expenses it might be tough to drop to say 60K a year for multiple years

I've modeled it for 35 years, and will move out of Bay Area, CA if market runs into a prolonged downturn. I am also willing and can reduce expense up to 20%. I am assuming 10 more years of supporting my parents.

Thanks for running MC sim - much appreciate it. I've ran a few other calculators and have my own spreadsheet that I can input various scenarios. I believe I can make it work by being flexible with moving, and expense cutting as needed. There is a definite risk which I am willing to face it. But I need to think out of my box and see what others here (who have been there and done that) sees that I may not (or refuse to) see. So far, consensus seems to be I may be taking a bit too much risk and OMY is an astute thing to do.

 

[robnplunder]

Rob,

It continues to amaze me how similar our financial positions are - I'm just two years younger and my assets are likely right where yours were two years ago. As such I'm planning to work until I hit 55 and qualify early retirement.

You may want to consider running your numbers through ******** with the VPW methodology on spending. You can utilize a floor of 75K spending as you say but put a ceiling of perhaps $125K. I will bet the success percentage comes out pretty high. If not OMY fits right with my similar plan plan and would get you a very high success percentage.

Hmm. I posted my first thread a year ago - http://www.early-retirement.org/forums/f28/living-it-up-a-little-before-retiring-69207.html. In it, I said in a nutshell that I planned to retire at 55 with 2M in asset. Well, I've got to 2M 2.5 years earlier than planned thanks to saving, housing & stock market performance. That may have given me a bit more confidence. But given all the feedback so far, I will have to reevaluate my strategy.

 

[daylatedollarshort]

One of my grandparents lived to be 100. What about your own LTC needs? Is that in your plan?

I'd run the numbers in the Fido RIP with a reserve for your own LTC. (I do use lower medical costs than they do.) And see how much your maximum expenses could be with money left for LTC and living to a ripe old age for you, the wife and the folks you are supporting. I like to hope for the best and plan for the worst. I noticed the managers who were more optimistic than me at work frequently had their projects come in late and/or were rushed disasters, and many each year were fired or demoted, because they didn't allow enough pad for vacations, overhead, training, department meetings and all the Murphy's Law kinds of stuff that always cropped up. I'm sticking with conservative estimates with our ER plan since I've seen up close and personal all the disasters that happened from overly rosy estimating. My job used to be turnaround manager and taking over these disaster projects and I don't want my retirement to end in financial disaster like so many of those projects did initially.

I talk to older retirees in some of our clubs and boomerang adult kids, gray divorces, boomerang divorced adult kids with grandkids, LTC needs, parents needing financial help, serious illness, disabled grandkids, etc. - all kinds of financial adversities seem to happen for many over decades of retirement.

 

[omysteve]

In direct comparison with my situation, you seem to be in a lot better situation to RE now. I am not sure why you are compelled to post your situation and in this thread. You have my blessing to RE now .

Sorry, didn't mean to hijack your thread/situation. Have the same concerns as you do about aging/broke parents we are helping out, and 24 yo daughter who just moved back home for nth time. But we've tried to factor those elements into our "essential" monthly expenses now, and to the extent we can predict what it will be in the future.

 

[NW-Bound]

With target ER date, summer/2015, fast approaching, one final check with fine folks here:


Ages = 53 (DW & I). Total asset = 2.1M (350k in house equity), SS in 10 years at 63 = $38k

Yearly expense = $100k and room for reduction if needed, Firecalc = 100% using Bernicke spending model. Fails poorly otherwise....

Any suggestions, advices, shared experiences?

I dunno Rob. I have more in assets, both investable and real estate, and about the same in future SS. Yet, I am older (58), hence closer to SS and Medicare, do not live in expensive SF, and my original plan called for spending lower than $100K.

Yet, two years after quitting my part-time work, I have found my expenses in the last 12 months creeping into the 6 figure. Surely, my recent life-threatening health problem and then big home repair work (I own two homes) added much to the unexpected expenses, but things have a way of happening.

If it were not for my health problem, I am sure I would have 2nd thought about stopping my part-time work, which gave me earned income of around $100K/yr. As it is now, I am hopeful that my next year expenses will return back to my projection, but if it does not, I am still below what FIRECalc says is safe. Remember that I am older and have more in assets.

You really don't want to cut too close. If you really hate your job or have health problems and do not mind giving up discretionary expenses or moving, then you should not stick it out and suffer. But I do not have the feeling that your job is that bad, and that you are ready to reduce spending.


PS. What I was saying was that if things do not work out and you have to cut back or move, will you regret leaving your well-paid job? In my case, the health problem that occurred after I quit sealed the deal. I could even resume the work, but no way in hell I would now.

 

[robnplunder]

Sorry, didn't mean to hijack your thread/situation. Have the same concerns as you do about aging/broke parents we are helping out, and 24 yo daughter who just moved back home for nth time. But we've tried to factor those elements into our "essential" monthly expenses now, and to the extent we can predict what it will be in the future.

No big deal and I think you have enough to retire. But if you have doubts and can use critical feedback, you ought to start your own thread.

daylatedollarshort - I have decided to self fund my LTC. I get what you said about unexpected things which can happen. Perhaps, I have been too optimistic about things that can derail my ER plan. I sure don't want to be dollar short in RE.

NW-Bound - the big negative thing about my job is my boss. He is truly a psychopath. Otherwise, the job is enjoyable. I need to grin and bear it if I decide to work a few more years. Several years ago, I whined about my job to my cancer fighting brother (RIP). I still remember his exact words. He said, "I wish I have your problem." Perhaps, working for a psychopath is not that bad. Grin and bear, grin and bear, grin and bear ...

 

[Sunset]

.... I have decided to self fund my LTC. I get what you said about unexpected things which can happen. Perhaps, I have been too optimistic about things that can derail my ER plan. I sure don't want to be dollar short in RE....

When you say self fund your LTC, exactly where is the $300,000 avg cost of that because its not in your existing savings you have stated.
Meaning you cannot count the same 300K for LTC and retirement spending as your DW/you will need the 300K for retirement while the other is in LTC.

I think you have not tried to save enough, unless you recently started making 250k/year, your savings of 1.75MM is very low.

The market is at a peak right now, so everyone's assets look great, I think this is leading many people to over-confidence in their asset base.

You say you want to stay in the Bay area, but will move if market runs into a prolonged downturn, however, if that happens your value of your house will also probably fall by 10%-20%, the worst time to sell is when you need to sell.

Obviously I vote for you to work 2 or more years AND right now start living on your retirement amount, see if its truly possible instead of splurging before retirement.

This splurging thing suggests to me, you feel retirement is a punishment spending level, instead of an easy transition.

 

[nuke_diver]

You say you want to stay in the Bay area, but will move if market runs into a prolonged downturn, however, if that happens your value of your house will also probably fall by 10%-20%, the worst time to sell is when you need to sell.

This is certainly true and given your comments of your house equity you either still have a mortgage or you don't live in Palo Alto .

You might make it but you might find it very tight so it all depends on your comfort level. The thing we all have to consider is can we return to work if the situation changes. Seems like you think you could not so do you want to risk having to be a greeter at Walmart?

The market is at a peak right now, so everyone's assets look great, I think this is leading many people to over-confidence in their asset base.

This is also something to consider...what if there is a 30% decline the year after you retire?

While none of us know what will happen (if we did this would be a piece of cake) I would factor in as much good (long life) and bad (bad markets, higher than expected expenses) without going to unreasonable. If it still looks good then you should be fine barring the zombie apocalypse (my biggest fear ). Without going into details I can say that I have more resources, fewer expenses (no kids no parents to support) and at 55 now feel confident that I can ride out anything so will be calling it mid next year just about at 56. And I can still generate scenarios that fail, but those seem to be such outliers that a lot of folks will be in much worse shape (kind of the zombie apocalypse situation)

 

[robnplunder]

sunset, nuke_dive:

Good points, thanks. I was going to RE as early as next month if work situation is just too unbearable. That plan is now scratched, burnt, gone, bye bye. I will assess the situation again in 6 months and decide. But it looks like 1 - 2 OMYs is a prudent thing to do if I can stand my job/boss.

 

[RetireAge50]

Retire today. Get rid of all overhead requiring lots of money. Live on a beach before you get too wrinkly.


Sent from my iPhone using Early Retirement Forum

 

[daylatedollarshort]

I am not sure how much of you budget is trimmable or goes to parental support, but cutting your expenses might give you the most bang for you buck at your age. Trimming $25K a year over a fifty year potential retirement means needing $1.25M less in total retirement funding. What helped us the most was cutting costs on things we didn't miss, like raising the insurance deductibles, getting rid of the landline, not renting our cable modem and just a couple hundred different changes, some very small, but they all added up.

If the weather warms up, play tennis this weekend or go on a hike and take a picnic lunch in the Redwoods and ask yourself if you'd rather do that every day or work longer to support more expensive hobbies. There is no right or wrong answer. You have to do what works for you.

 

[Looking4Ward]

Retire today. Get rid of all overhead requiring lots of money. Live on a beach before you get too wrinkly.

I remember 10 years ago when my mother retired at 62 with just about $200K in the bank and $1200 a month in SS.

She's still doing fine.

I kept that in mind this past summer when I pulled the plug 8 years earlier than she did but with a much larger portfolio. I figured if I could spend as much as Firecalc said I could 95% of the time, I could set roughly half that amount aside for the other 5% of those times.

Go for it.

 

[Live And Learn]

the big negative thing about my job is my boss. He is truly a psychopath. Otherwise, the job is enjoyable.

I have worked for my share of psycho bosses - I've outlasted all of them . Bosses change.

 

[eytonxav]

Financial considerations aside, if you like your job, OMY probably makes sense, but if not and you are stressed out, maybe it doesn't.

 

[rodi]

Hi all -
I moved omysteve's post over to the fire and money board.

http://www.early-retirement.org/forums/f28/please-review-my-plan-split-from-another-thread-74474.html

 

[CoolChange]

I have worked for my share of psycho bosses - I've outlasted all of them . Bosses change.

+1

But, I also realize this has taken its toll on me over the years.

Currently, I am suffering OMY because of high compensation and decent executives and direct reports. At this point, similar in many ways to OP, I do not believe I would tolerate another psycho boss. (It was a fun game for me when I was younger: Who could outlast whom. Now, not so much.)

 

[MRG]

...snip....
NW-Bound - the big negative thing about my job is my boss. He is truly a psychopath. Otherwise, the job is enjoyable. I need to grin and bear it if I decide to work a few more years. Several years ago, I whined about my job to my cancer fighting brother (RIP). I still remember his exact words. He said, "I wish I have your problem." Perhaps, working for a psychopath is not that bad. Grin and bear, grin and bear, grin and bear ...

robnplunder
I think your plan of 6 months and reevaluate is great. Let your DB's words be your motivation/mantra. As best you can, realize your boss is a very sick twisted individual. I know it's really hard, but I believe you can do it. My last 2 years I developed an I don't care attitude, didn't show it, but it helped some of the stupid crap slide off. Best Wishes.


Sent from my SAMSUNG-SGH-I337 using Early Retirement Forum mobile app

 

[nuke_diver]

Good point MRG

I've generally had a don't care attitude with respect to bosses and before I was FI I was confident in my ability to find another job which work in a similar manner to being FI...that is I felt I could say what I wanted when I wanted and if that meant arguing and potentially pissing off the boss oh well. In fact getting laid off could be a perfect scenario (Would love for it to happen to me but sadly I am valued for my honesty )


That kind of attitude might make it easier to get through the daily BS. And remember you are looking at a relatively short term situation...there is a light at the end of the tunnel!

 

[clifp]

sunset, nuke_dive:

Good points, thanks. I was going to RE as early as next month if work situation is just too unbearable. That plan is now scratched, burnt, gone, bye bye. I will assess the situation again in 6 months and decide. But it looks like 1 - 2 OMYs is a prudent thing to do if I can stand my job/boss.

I think it is. I think with your assets and spending levels I think you have too many risk factors and probably not enough of a safety margin. While a $100K seem like a lot of money, even ignoring the housing cost in Silicon Valley it isn't. Plus as you know getting rehired as 50+ year old isn't particularly easy.

I know you discussed splurging a bit while still working. Which makes sense on one level because it is release from having to deal with a bad boss. On the other hand I'd say if you can live on your post retirement income while working than it will be very easy to live on it when you are actually retired. For all the reason that have been discussed on the board. So if you can dial back spending to say $90K that would save you a couple of years of work, and see if you can keep it up for 6-12 months.

 

[robnplunder]

I think it is. I think with your assets and spending levels I think you have too many risk factors and probably not enough of a safety margin. While a $100K seem like a lot of money, even ignoring the housing cost in Silicon Valley it isn't. Plus as you know getting rehired as 50+ year old isn't particularly easy.

I know you discussed splurging a bit while still working. Which makes sense on one level because it is release from having to deal with a bad boss. On the other hand I'd say if you can live on your post retirement income while working than it will be very easy to live on it when you are actually retired. For all the reason that have been discussed on the board. So if you can dial back spending to say $90K that would save you a couple of years of work, and see if you can keep it up for 6-12 months.

I can get it down to 85k but that represents a significant cut in entertainment budget, and turning a blind eye on unexpected expenses (2014 real examples - washer breaking down, water heater needing replacement, 2 deductibles on car accidents, ....). $100k/year is realistic expense for our ER.

In the last 3 - 4 years due to a lot of things that happened in my life, despite 200k+/year income, I could not save as much as I wanted to. In the next 3 - 4 years, I expect to make 250k/year and increase my total asset on average of $200k/year. OMY seems to be making more and more sense.

 

[samclem]

OMY seems to be making more and more sense.

Dang, I hate that answer, but it does seem to make sense given your numbers.
-- Not to pile on or lecture, but in addition to adding to the nestegg, using the additional time to look at the "outgo" side would probably help put your mind at ease when you come to the next decision point. Checking on Medicaid eligibility for folks/quality of available LTC facilities under Medicaid in your area, maybe looking over the monthly budget with a very sharp pencil, etc. One "takeaway" from the various withdrawal calculators--if we can flex spending so we can accommodate quite a bit of variability in our "take", it makes a big difference in portfolio survival and allows safe ER on a small stash. So, if you don't want to cut actual spending in the first years of ER, but can find places you'd be willing to cut (be honest) in case of a significant string of poor market returns, that can be nearly as useful.

 

[daylatedollarshort]

I can get it down to 85k but that represents a significant cut in entertainment budget, and turning a blind eye on unexpected expenses (2014 real examples - washer breaking down, water heater needing replacement, 2 deductibles on car accidents, ....). $100k/year is realistic expense for our ER.

In the last 3 - 4 years due to a lot of things that happened in my life, despite 200k+/year income, I could not save as much as I wanted to. In the next 3 - 4 years, I expect to make 250k/year and increase my total asset on average of $200k/year. OMY seems to be making more and more sense.

The median income in CA is around $61K, and that would include households with younger families with kids to support, workers still paying into SS, households saving for retirement, households saving or paying for college, etc. If a big chunk of your expenses are going to family support, then I guess you can't change much. But if not, I would take a hard look at your expenses.

Are you factoring in no more paying into SS, lower state and federal income taxes, and no more job and commute costs? These were pretty hefty decreases for us in annual expenses going into semi-ER.

 

[Golden sunsets]

I can get it down to 85k but that represents a significant cut in entertainment budget, and turning a blind eye on unexpected expenses (2014 real examples - washer breaking down, water heater needing replacement, 2 deductibles on car accidents, ....). $100k/year is realistic expense for our ER.

In the last 3 - 4 years due to a lot of things that happened in my life, despite 200k+/year income, I could not save as much as I wanted to. In the next 3 - 4 years, I expect to make 250k/year and increase my total asset on average of $200k/year. OMY seems to be making more and more sense.

Rob; I might have missed it but did you tell us if you have a mortgage and if so what the monthly payment adds to your annual expenses? If you do have a mortgage you might consider paying it off early as a goal prior to retirement which could significantly reduce your expenses. You might then feel more comfortable REing.

 

[rodi]

Rob; I might have missed it but did you tell us if you have a mortgage and if so what the monthly payment adds to your annual expenses? If you do have a mortgage you might consider paying it off early as a goal prior to retirement which could significantly reduce your expenses. You might then feel more comfortable REing.

I agree.

I realize this is a controversial topic... (to pay off mortgage or not). For me, I added extra principal each month. That did two things - paid down the mortgage fairly quickly AND got me used to living on less. I did not cut back on other savings like 401k, etc. Since it went out automatically (I set up my mortgage payments to take the extra principal) it was similar to the 401k - it was something that happened, and I got used to it.

My mortgage payment had been $1400/month. I started paying 2500/month... so $1100 extra per month. Amazing how quickly the CA size mortgage shrunk. At one point we had an extra stream of income (for about 11 months) - we applied that entire $1000/month to the mortgage so we were paying $3500/month.... it really got knocked down in that period.

My mortgage was small enough to lump sum it when I retired. Not having that payment as part of my spending is a huge thing... gives me a lot more flexibility in options to tighten my belt if there's a market downturn. I'm a big believer in reducing as many fixed monthly costs as possible. The mortgage is usually your biggest fixed cost. (Now, for me, it's health insurance.)

 

[omysteve]

I agree.

I realize this is a controversial topic... (to pay off mortgage or not). For me, I added extra principal each month. That did two things - paid down the mortgage fairly quickly AND got me used to living on less. I did not cut back on other savings like 401k, etc. Since it went out automatically (I set up my mortgage payments to take the extra principal) it was similar to the 401k - it was something that happened, and I got used to it.

My mortgage payment had been $1400/month. I started paying 2500/month... so $1100 extra per month. Amazing how quickly the CA size mortgage shrunk. At one point we had an extra stream of income (for about 11 months) - we applied that entire $1000/month to the mortgage so we were paying $3500/month.... it really got knocked down in that period.

My mortgage was small enough to lump sum it when I retired. Not having that payment as part of my spending is a huge thing... gives me a lot more flexibility in options to tighten my belt if there's a market downturn. I'm a big believer in reducing as many fixed monthly costs as possible. The mortgage is usually your biggest fixed cost. (Now, for me, it's health insurance.)

One consideration regarding paying off a mortgage is that when it's late in the amortization schedule (like 3 maybe 4 years left) it might not be worth selling investment assets to pay it off. That's why we haven't, but might reconsider paying it off next year when it's less than 30K lump sum balance remaining for psychological reasons (since we plan to retire by next year or sooner).

BUT paying extra principle in the earlier years of the amortization schedule, when interest vs. principle payment is higher, IMO makes complete sense to do.