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Semi-Retirement
Old 04-13-2017, 10:33 AM   #1
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Semi-Retirement

Hello, new to the forum and would like your thoughts on our plan to semi-retire now for 15 years and than be at full retirement. We have tried to be as conservative as possible in assumptions and would certainly be able to maintain semi-retirement status longer, cut spending, etc... if we needed to down the road. At the trigger-pulling point and would like opinions. The intent is to enjoy life more and keep work down to a day or two per week each until comfortable to fully retire. We are lucky to be in fields/location where this is possible and are really looking forward to this change. I appreciate all of your time and look forward to reading any thoughts you might have.

I am 37 and my wife is 36. We both came from very humble upbringing and I believe this helped us avoid the “Keeping up with the Joneses” mentality as our salaries grew.My wife and I are both making very solid salaries.I am very close to pulling the trigger and so my wife has recently gone down to a day a week…she loves her job at this pace and has no issue keeping it for a long while.I am not so much in love with my job, but aside from the occasional heavy stress I do not hate it.We have three children ages 9, 7, and 4.
Our plan is to semi-retire at the end of May (1 ½ months out) and fully retire in 15 years. As a combat veteran I know the challenges folks face upon coming home and would love to take a part time position to help in whatever way I can for my part of the semi-retirement.We will have a combined salary of $90-100k for the next 15 years until “real” retirement.

The model I have built shows the part time salary being reduced by 11% 403b, full HSA contribution, health/dental benefits, taxes, and ROTH IRA contribution…and allowing for coverage $58k in expenses. Aside from covering the expenses we would be adding $25k per year to stash (403b, match of 3%, full HSA w/ match, and ROTH IRA). For my modeling I have assumed my cost would not change over time other than growing by 2.5% inflation.I intentionally still hold a mortgage of $242k as the fixed interest rate is at 3.125%.Without any additional payments we would not have the above Home Prin & Int annual payment of $20k after 14 years…within our 15 year semi-retirement timeframe.I assume we will have $15k of annual healthcare cost after the semi-retirement benefits drop…$10k roughly in today’s dollars.


Our current asset allocation above shows 58% in Vanguard institutional and admiral total US market equities fund, 14% in a handful of high value stocks averaging 4% div, 20% in Vanguard admiral total US bond fund, 5% in Lending Club, and 2% in cash…totaling $664k. Split between liquid accounts (HSA, Lending Club, brokerage account, and cash) and non-liquid accounts (ROTHs and 401k/403b) is $148k/$516k.We have one major purchase before starting this endeavor which is at or below $35k…so we will have $113k liq and $516k non-liq or $629k.As my goal would be to enter semi-retirement in 2 months we should have another $20k or so on this value upon starting bring us back to $650k.Aside from an annual re-allocation to rough 75/25 equity over bond split I will probably be dialing down my lending club and dividend stock weighting thru tax harvesting at the end of the year and proportionally re-allocating to index split.
With the assumptions that we will get an average 6.5% return on investments, inflation will average 2.5%, and that Social Security will be roughly $24k per year from age 62 on my model shows our withdrawal rate at “real retirement” +15 years or 2032 will be 3.39%. Taking out social security is minor as the model still shows continuous growth.Given that an average rate of return and inflation is not realistic we used FireCalc to run 96 50 year (present day thru real retirement of 15 years and than 35 years to our 88th birthdays where we will tie meat to our wheel chairs and roll out into the woods to feed the wildlife) scenarios from 1871 forward.We received a 100% success rate with and without social security…At 2% real return from here on we would end a $0.
Built in conservatism is in our cost not going down over time, our not earning anything additional in the future, healthcare being high, low investment returns, etc. Additionally, as mentioned before my wife LOVES her job at a day a week and would without hesitation add a year if necessary.Additionally, although I hate to even write it as I’d rather it never happen we will most likely be getting a decent inheritance from family at some point.Outside of these numbers we have about $45k saved for kids college.We will certainly pivot to help kids down the road, but believe having some financial skin in the game in so far as self-funding for the large part their college cost is critical for their understanding the value.Outside of mortgage we have no debt.
We believe we are ready for this, but really just want to get some outside opinions. Planning for this is far easier than pulling the trigger and my wife is worried I’ll keep saying one more month, one more year.I’m sure there is slack in our expenses and feel that given we are absolutely on the same page with everything we could pivot and overcome any challenges that arise.
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Old 04-13-2017, 10:49 AM   #2
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Welcome NHguy! If you haven't found them already, we have a helpful list of things to think about regarding retirement decisions that probably would be useful to you as well.

Some Important Questions to Answer

There's a lot of information in your post and I'm sure others will weigh in with specific responses. Obviously, if you can bring in $90K/year with both of you working less than 1/2 time, that's a sweet situation. Also, lots can change over 15 years, so I think what's most important is
- are you comfortable with doing this now and living on the reduced income while continuing to save for full retirement?
- are you comfortable with the options you'd have 5 or 10 years down the road if something changes dramatically that requires one or both of you to ramp back up significantly?

If so, many of us here would encourage you to go ahead with your plan to dial back and enjoy the extra time with your kiddos.
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Old 04-13-2017, 11:14 AM   #3
Confused about dryer sheets
 
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Thank you for the response. I will check out the link you sent and appreciate your help. I am comfortable with the idea that we really won't be reducing our spending as we have budgeted our historical spend with the exception of an upcoming purchase and healthcare cost post semi-retirement. Over the past year we sold our house closer to the city and bought our current house that is in the location we actually want to live in.
Your second question is interesting. Both of our jobs are currently in great demand and I don't see that changing over the next 5, 10, 15 years. My wife could instantly up her workload at any of those intervals to offset something dramatically changing along the way...I am leaving Fortune 500 company where I have top ratings and am thought very well of from leadership. I am 100% confidant over the next five years in my ability to regain my employment at this company...probably for a raise. 10 years out could be a bit tricky given the high likelihood of leadership turnover and the fact that I would have been out of the game for so long. That said, I feel very confidant I could find something even at the 10 year point...
We are going into this knowing there is a wide variety of potential risks and have comfort in our being completely on the same page with our goals, finances, etc.. We are confidant that things will change and create roadblocks along the way and that we will be able to pivot were necessary.
Sorry for rambling, I'm really trying to fully grasp this...plan is to tell my boss next week so as to give them time to backfill role, etc. Confidant, but nervous... Even though I am only starting to post, I have benefited from you all a great deal over the years reading your posts. Thanks again for that.
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Old 04-13-2017, 11:38 AM   #4
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I'm not sure I'd be comfortable with such a long period of time as working part-time as things can easily change to make part-time go to "no time" or "no benefits" and have significant negative effects on such a long-term plan. Of course, I don't know your industry/career/employer/etc so maybe it's possible that p/t employees won't be tossed to the curb under new management or when pushed for better "numbers" etc like many companies do.

Is such an arrangement common at your company or in your type of role? My experience has been that well-compensated part-time employees tend to find their work absorbed by someone else within a couple years and their services no longer needed.

If you're both comfortable with the potential risks, however, then I don't see any reason why you shouldn't follow your plans.
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Old 04-13-2017, 11:42 AM   #5
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sir i wouldnt count on the social security portion, in my opinion from the looks of things when the soc sec issue starts up again u will be looked at as the enemy 1 %er, evil privileged person that doesn't deserve it, because u lived below ur means, that being said i ran my numbers without soc security, i worked 5 extra years, boy do i regret that move, i wish u well on ur plans and i love that ur a combat veteran
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Old 04-13-2017, 11:45 AM   #6
Confused about dryer sheets
 
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Agreed. I am in finance and that is most certainly true. My planned contribution to the financial income for semi-retirement period is small for that very reason. My wife is a physician assistant and p/t status is very typical....easy to take more or less shifts as necessary. I will be happily giving up status of top earner in the family! As mentioned, my role will most likely be low pay anyway given that I want it to be veteran's or charity based.
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Old 04-13-2017, 05:09 PM   #7
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Thanks again for your time and comments.
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Old 04-13-2017, 09:36 PM   #8
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I made a switch to part-time 60% working 3 days/week, but at my current job. Kind of a best of both situations for me at the time. Kept the same salary rate and benefits, while having 2 extra days off each week. Been a real nice change for the past approx year i have been doing this.

If you are sure you can get back into the same job and salary level in 5-10 years, that gives you a good fallback in case you need it. The big thing you have to concern with is budget and the fact your savings rate will be dropping considerably. So you have less retirement money that needs to last longer.
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Semi-Retired 7/1/16: working part-time (60%) for now [4/24/17 changed to 80%]
Retired Aug 2, 2017; age 53
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Old 04-13-2017, 11:57 PM   #9
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My question would be how would you handle the worst case scenario? If your PT income was cut 1/2 due to illness of one of you, economic downturn, etc., do you have the "fat" in your projected budget to reduce spending to handle the crisis?

Also, once weaned off the full time/career path, it is very, very hard to go back. It's easy to say "I can always go back to full time work if needed", but it may be difficult to get your head back in the game.

PT work/Semi-retirement is very seductive, IMHO. After nearly 4 years of semi, with a PT "hobby job", I can already say NO WAY to going back to mega corp, or a demeaning boss. My tolerance level for BS and ring kissing is no longer where it needs to be to return to a career type j*b.

Just a couple of thoughts. Welcome, BTW.
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Old 04-14-2017, 08:00 AM   #10
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If you are sure you can get back into the same job and salary level in 5-10 years
5 years may be short enough
10 years the OP will be 47

Take it from someone with real world experience, once you hit 50, it is very hard to find a full time that pays well. I walked away in Sept 2013. I haven't been able to find anything since. Heck, I haven't even approached what I was making in 2000 with Lucent.
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Old 04-14-2017, 08:05 AM   #11
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NHguy,

Welcome to the forum. You sound like you have things well planned out and I think you are going to be just fine.

I retired from full time work in 2013 and within two weeks I found a part time opportunity that has worked quite well for me. I stay involved in my industry but only need to work a couple of hours a day, and from my home. I have no intentions of quitting as the work is easy and I enjoy it. I also don't need the money to fund my retirement, so I know that if it went away (which it could easily do), I would still be fine.

I hope it all works out for you as you've planned.
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Old 04-15-2017, 07:19 PM   #12
Confused about dryer sheets
 
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Thank you all for posting...very appreciative of your thoughts and points. As I plan to pull the trigger this coming week, your help is very helpful.
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Old 05-18-2017, 08:08 AM   #13
Confused about dryer sheets
 
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Pulled the trigger and the boss convinced me to go on two year leave of absence instead of quitting. Certainly not planning on coming back, but it is a nice safety blanket. Nice to see the market starting out strong on my new chapter...
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Old 05-18-2017, 08:29 AM   #14
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Originally Posted by NHguy View Post
Pulled the trigger and the boss convinced me to go on two year leave of absence instead of quitting. Certainly not planning on coming back, but it is a nice safety blanket. Nice to see the market starting out strong on my new chapter...
Nice, congrats on the retirement!
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Old 05-18-2017, 06:16 PM   #15
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Congratulations! Looks like your boss is looking out for you and that is a good fall back...or maybe after an extended break they might have part time work that would be less stressful and would work well in your semiretirement plans Good luck!
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Old 05-29-2017, 01:47 PM   #16
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Thanks Evilanne. Very excited to be starting this new journey...
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