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Too old to retire early
Old 03-26-2013, 02:32 PM   #1
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Too old to retire early

Iím really looking forward to retiring, but it may be too late for me to retire early. I recently turned 60 and thinking of retiring in a little over 4 years. My youngest son is a sophomore in college and I donít see him graduating in less than three years. Oldest son still living at home but Iím hoping we resolve that fairly soon. I took an early retirement 15 months ago to take a position with a new company. I need at least 5 years with new company to achieve full vesting on 401K / retirement plan. My wife (age 57) works for the local school district and she wants to retire in two to three years.

We have a combined income of about $285K. We live somewhat below our means, but donít deny ourselves too much. My goal in retirement is to maintain our current lifestyle and I think Iíll need about $170K to $220K annually (before taxes) to do that.

Current situation:

Retirement Accounts: $2.4 Million
Non-retirement accounts: $0.3 Million
My Pension: None (I took a lump sum in lieu of pension)
DWís pension at 65: $18K / yr
My Social Security at 66: $30K / yr
DWís Social Security at 66: $5K / yr

I expect that my current employment will generate about $400K in new 401K / retirement / equity account deposits over the next 4 years. My current retirement accounts are managed by an Independent Financial Advisor in a diversified range of investment vehicles.

I have access to retiree health care from my prior employer once I quit working for good.

I think Iíll be in pretty good position to retire in 4 years, even if I withdraw at the upper end of my estimated range. I donít think Iíll be able to retire much earlier than that because of the vesting issue at my new company. I could always work an extra year if I needed to, which makes a dramatic difference due to delayed withdraws, additional deposits and additional growth.

Your thoughts / opinions are appreciated. Thanks.
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Old 03-26-2013, 02:44 PM   #2
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I think I’ll be in pretty good position to retire in 4 years, even if I withdraw at the upper end of my estimated range.
I think you may be a bit overoptimistic. Have you run your numbers through FIRECalc (link below)?

With your current savings of $2.7M, an additional $0.4M to age 64 plus 5% annual growth, that will put your total at ~ $3.7M . Using the (arguable) 4% SWR, that would allow you to withdraw $148,000 + inflation and have a 95% chance it will last 30 years. $148 + $53 for SS and pension = $201, a bit short of $220. And that doesn't include the shortfall you will need to cover until SS kicks in for you and your spouse, or until she gets her pension.
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Old 03-26-2013, 02:58 PM   #3
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Was your DW's ss a typo? She can get 50 percent of your benefit which would be 15k not 5. Not a massive difference at your projected spending level perhaps but significant
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Old 03-26-2013, 03:08 PM   #4
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Was your DW's ss a typo? She can get 50 percent of your benefit which would be 15k not 5. Not a massive difference at your projected spending level perhaps but significant
I assume it was reduced because of the pension... A WEP or similar.
My MIL had that happen - much smaller SS but larger pension compared to my FIL.
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Old 03-26-2013, 03:22 PM   #5
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IMHO, if you retire before the offical SS age for full retirement benefits you have retired early. Good luck.
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Old 03-26-2013, 03:27 PM   #6
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If you need $170-$220k a year to retire, plan on working to 70 or beyond. Sorry, just trying to keep it real.

$195k of living costs - $53k of pension and SS income would mean $142k needed from your investments and at a 4% WR would mean that you would need investments of $3.6m (and all of the above calcs ignore taxes so realistically it would be $1.1m more with taxes and you would also need another $100k or so to get you from 64 to 66). So call it $4.8m that you need at 64, but you'll only have a little over $3.5m depending on investment results.

WADR, you should be able to live very comfortable in retirement for much less than $170-$220k. I think if you stay the course on your retirement savings of $400k over the next 4 years and dial down your post retirement living expenses to $135-$150k or so you might have a good chance.

Check out Quicken Lifetime Planner (included in Quicken Deluxe and higher) which is a good, easy to use DIY retirement planner.
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Old 03-26-2013, 03:28 PM   #7
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I think you may be a bit overoptimistic. Have you run your numbers through FIRECalc (link below)?

With your current savings of $2.7M, an additional $0.4M to age 64 plus 5% annual growth, that will put your total at ~ $3.7M . Using the (arguable) 4% SWR, that would allow you to withdraw $148,000 + inflation and have a 95% chance it will last 30 years. $148 + $53 for SS and pension = $201, a bit short of $220. And that doesn't include the shortfall you will need to cover until SS kicks in for you and your spouse, or until she gets her pension.
+1 and it doesn't include taxes which will likely be substantial and eat up 15-25% of your income.
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Old 03-26-2013, 03:56 PM   #8
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Nobody knows what the next 4 years will bring. I'd suggest you run FireCalc periodically during this time and see if you can cut down on your expenses.
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Old 03-26-2013, 04:01 PM   #9
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Thanks for the feedback. Haven’t run FIRECalc yet, but I have run my own forecast on a Excel spreadsheet using a 6% growth rate. That showed me going broke when I was 97 (don’t think I’ll make it that far). And, I’m thinking that I have a lot of room to cut back on expenses once we get a little older. I do think we will continue to spend at or near our current levels for maybe 8 to 12 years into retirement, but would likely slow down the spending after that.

Rodi is correct. DW pays into TRS (Teacher Retirement System) and doesn’t pay SS, so WEP and GPO affect her SS benefit. It’s pretty confusing, but I think I’ve calculated it correctly. But, if someone has different experience with this, your input would be definitely appreciated.

My forecast spending range included taxes. I grossed up my actual forecast of what I thought I needed to get to the $170K to 220K. So, I was thinking I was in the $135K to $175K spending range after taxes.

I appreciate everyone’s feedback.
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Old 03-26-2013, 04:09 PM   #10
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Thanks for the feedback. Havenít run FIRECalc yet, but I have run my own forecast on a Excel spreadsheet using a 6% growth rate. That showed me going broke when I was 97 (donít think Iíll make it that far).
That's great but unfortunately investment growth and volatility don't follow a smooth 6% or any other percent. FIRECalc tests your withdrawal plan against actual history to see how you would have done had you retired in any year after 1871. Shows you the odds of surviving the great depression and the sad 60's. Read about how it works here: FIRECalc: Why another retirement calculator?
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Old 03-26-2013, 04:11 PM   #11
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Haven’t run FIRECalc yet, but I have run my own forecast on a Excel spreadsheet using a 6% growth rate.
Although 6% is a reasonable long term growth estimate, keep in mind the market will not cooperate and give you a consistent 6% return year after year. Some years, it may be over 30% and other years, you may lose 30% (or more). A bad year or two at the beginning of your retirement period can be very costly. On the other hand, a great year or two at the beginning of retirement helps a lot. Not trying to scare you, but something to keep in mind.
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Old 03-26-2013, 04:21 PM   #12
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Thanks for the feedback. Havenít run FIRECalc yet, but I have run my own forecast on a Excel spreadsheet using a 6% growth rate. That showed me going broke when I was 97 (donít think Iíll make it that far). And, Iím thinking that I have a lot of room to cut back on expenses once we get a little older. I do think we will continue to spend at or near our current levels for maybe 8 to 12 years into retirement, but would likely slow down the spending after that.

Rodi is correct. DW pays into TRS (Teacher Retirement System) and doesnít pay SS, so WEP and GPO affect her SS benefit. Itís pretty confusing, but I think Iíve calculated it correctly. But, if someone has different experience with this, your input would be definitely appreciated.

My forecast spending range included taxes. I grossed up my actual forecast of what I thought I needed to get to the $170K to 220K. So, I was thinking I was in the $135K to $175K spending range after taxes.

I appreciate everyoneís feedback.
If you have flexibility in your spending and if you can make your forecast between now and when you retire then it sounds like you will be in pretty good shape. Just be sure to monitor your progress between now and then.
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Old 03-26-2013, 07:28 PM   #13
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+1 and it doesn't include taxes which will likely be substantial and eat up 15-25% of your income.
Or more than 25% tax given the current "soak the rich" mentality in gov't (from local to fed levels). And looming "means testing" of SS & Medicare. Don't mean to be a downer, but you might ease down your anticipated spending target. IMHO-Better to be pleasantly surprised if things turn out better than projected.
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Old 03-26-2013, 08:02 PM   #14
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TEXTIG, I just want to ask? Will you adopt me?
If I had that much money there would be no way on earth I would go to work tomorrow
I never made anywhere near what you do. As a matter of fact I did not ever make 1/4 of what you make and yet I was able to retire 13 months ago and live a pretty good life.

I do know with my income I could live in many area's of the US but I am fine with that.

Its all in what our wants are in life. I do not want much, just have my health which is way more important that all the money in the world.

I see no reason you cannot retire anytime you please. Good job. oldtrig
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Old 03-26-2013, 08:17 PM   #15
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Reducing expenses is the key. We got rid of all our debt and it's amazing what you can live on with no debt. We have 2 houses, 4 cars (one is an old British Sports Car), a boat behind our debt free waterfront house and about the savings you have. And no worries. If things ever get tight in retirement, we sell a house or maybe both houses.

And you're still early. My retirement age, effective April 1, is 63 and I'm claiming early retirement since all of my contemporaries are still working. And they still have debt.
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Old 03-27-2013, 12:40 AM   #16
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Havenít run FIRECalc yet, but I have run my own forecast on a Excel spreadsheet using a 6% growth rate. That showed me going broke when I was 97 (donít think Iíll make it that far). And, Iím thinking that I have a lot of room to cut back on expenses once we get a little older. I do think we will continue to spend at or near our current levels for maybe 8 to 12 years into retirement, but would likely slow down the spending after that.
Forecasting with that kind of spreadsheet is really an invitation to disaster. In the real world we don't have a nice even growth rate every year as mentioned. The volatility is what kills you.

Also I would be careful about assuming what your portfolio will be 4 years from now. I remember when I was starting to look seriously at this issue back in 2006. I can assure you that those 5 year projections didn't exactly fare very well.

I would suggest doing some reading on safe withdrawal rates and why that rate is usually something well below the return you might "expect" from your portfolio over time.
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Old 03-27-2013, 07:51 AM   #17
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I want to thank everyone who has responded. It’s been an eye opener for me.

I was intrigued by 67walkon’s post. About his waterfront home with a boat and no expenses. This is actually what DW and I have in mind once we retire. Plan to buy a 38’ to 46’ trawler and do fair amount of coastal cruising along the Gulf Coast, Atlantic Coast, Bahamas and probably the Great Loop. Not quite liveaboards, but maybe 6+ months a year to start. Would still need to maintain a home somewhere. I would love to buy a new home in 67walkon’s neck of the woods as this would be perfect jumping off point for the Bahamas. But, DW wants to stay based in Texas, so you know how that will go. I envision this lifestyle until mid-seventies, at which time we could sell the boat and seriously cut back on expenses. Current house is not quite paid for, but it will be within four years. After retirement, I can purchase a home in the Clear Lake – Houston area with gulf access for roughly what my current house is worth. Will most likely be a townhome so we can just lock it up and not worry about any yard maintenance when we’re off cruising for months at a time.

Again, I want to thank everyone for their responses. I will get familiar with FIRECalc and will look at ways to get our expenses down. So unfortunately I will not be able to adopt oldtrig, as I need to get kids off the payroll rather than take on any new ones.

Thanks again.
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Old 03-27-2013, 07:59 AM   #18
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Txtig, congratulations to you for not doing what some in your situation who post here have done, namely turning a blind eye to the responses and denying your initial plan needs to be reviewed, even though asking for input. After 8 years of retirement, I'm convinced that flexibility - being agile, mobile, but not necessarily hostile - is a key element in financial success.
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Old 03-27-2013, 08:11 AM   #19
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I'm convinced that flexibility - being agile, mobile, but not necessarily hostile - is a key element in financial success.
Well, it certainly will be to survive 35 - 40 years of retirement, although I suspect the hostility may rise if uncle sam revs up the means testing
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Old 03-27-2013, 05:46 PM   #20
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Welcome to the board. To answer your question, I think you are doing well.
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