Unexpectedly retired at 48

[CatInHand]

Well, I find myself in the position of not having a job, so I may as well enjoy it. Unlike many of you, I loved my work and had no interest in discontinuing it as I got older. A particularly horrible boss and a pink slip changed all that.

After I finally detoxed from the experience I realized I had no interest in working any more so I took stock of my situation and have decided to adjust my lifestyle to my means, rather than make my means suitable to a particular lifestyle.

Fortunately I have always contributed enough to my 401k to get an employers match so when I can finally access that money I should be OK for the life I want.

My issue was what to do until then? My decision is to sell my house and go sailing with the bf, living off the proceeds from the sale.

We need to wait until he's 55 and can start taking his pension so I guess I'm kind of semi-retired until then. I've got some savings and I can do some work here and there to get by for the next three years. This time also gives us a chance to spiff up the house and the boat.

So, I can't compete in terms of net worth, but I can say that I'm thrilled not to be commuting any more.

 

[omni550]

Welcome aboard, CatInHand.

Although you didn't plan to early retire, perhaps you'll grow to enjoy it as much as the rest of us.

omni

 

[JoeWras]

Welcome, Cat. It happens. Hang in there, sounds like you have a good attitude. In retrospect, I loved my job until I ran into "that boss" a few years ago. I escaped that, but with scars. He fortunately is no longer with Megacorp so it is now behind me. Sorry to hear your boss situation went so sour.

IF you need to access your 401k, you can do something called 72t distribution. Look it up. In summary, it allows access without a penalty, but with a lot less flexibility. No hardships required. Just some actuary rules involving equal payments for a minimum of 5 years. But only do it if you have to. It is nice to know it is there if necessary.

 

[KingB]

Welcome and sorry (or congratulations) for the loss of j*b.
What is your plan for healthcare?

 

[CatInHand]

Thanks for the welcome!

I hope to avoid the 72t if possible just to have a cushion when I'm older, but it is nice to know it's there if necessary.

For healthcare right now.....well......I'm staying healthy.... Once we're on the boat and in other countries I'll use the local health care system (selectively). Happily it's working so far (I've been not employed for a year). My doc was kind enough to refill prescriptions without an appointment, at least once, so we'll just see how that goes.

I love not having a real j*b. I read the posts of people trying to hit some financial mark so they can retire and I just can't understand why they don't change their goals and retire now. I had no idea how many birds lived in my backyard until I sat on my deck watching my chickens and listening to all the bird songs. I'm almost kind of miffed that I spent so much time working and not really living.

 

[bjorn2bwild]

When life gives you limes, I say go sailing.
Of course don't forget to mind the math genie lest you end up late in life with no wishes left. I like to use the formula - more assets = more choices, balanced against an interesting life. DW and I have no other dependents, so we are free to take more chances. I have never regretted trading a little security for a little adventure.
It sounds as if you will be some what dependent on your BF for financial comfort. I would explore that thought if so.
Good luck and good attitude.

 

[Delaney]

Welcome. You have a great attitude and I think it will be great fun to plan your sailing adventure. I've heard there's a great "community" of people who live on sailboats and travel the world.

 

[CatInHand]

I've been exploring the cruisers forums as well -- quite a mix of people.

Bjorn, actually if all goes according to plan, most of the financial support will come from me. I figure the bf's supplying the boat and the knowledge to keep it running, seems only fair that I should buy the parts. I also need to plan for the possibility that the boat thing doesn't work out and we need to live on land. Keeping all these things in mind as I sort through financial scenarios.

What makes my approach different most most people's on here is that I'm trying to fit my lifestyle to my finances, not the other way around.

 

[CoolChange]

...

What makes my approach different most most people's on here is that I'm trying to fit my lifestyle to my finances, not the other way around.

Welcome aboard.

You may not be as different to those here as you think. Most of us are LBYM types which may not be exactly what you are thinking of but not as far removed as the average person. And, there are a few who drop in here occasionally who have done exactly what you describe by expatriating (some temporarily, some planning for it to be permanent).

I definitely hope you stick around and keep us updated with your new adventures in this phase of your life.

Fair winds and following seas and long may your big jib draw!

 

[Khufu]

Well, I find myself in the position of not having a job, so I may as well enjoy it. Unlike many of you, I loved my work and had no interest in discontinuing it as I got older. A particularly horrible boss and a pink slip changed all that.

After I finally detoxed from the experience I realized I had no interest in working any more so I took stock of my situation and have decided to adjust my lifestyle to my means, rather than make my means suitable to a particular lifestyle.

Fortunately I have always contributed enough to my 401k to get an employers match so when I can finally access that money I should be OK for the life I want.

My issue was what to do until then? My decision is to sell my house and go sailing with the bf, living off the proceeds from the sale.

We need to wait until he's 55 and can start taking his pension so I guess I'm kind of semi-retired until then. I've got some savings and I can do some work here and there to get by for the next three years. This time also gives us a chance to spiff up the house and the boat.

So, I can't compete in terms of net worth, but I can say that I'm thrilled not to be commuting any more.

Doesn't sound like you have enough money to retire at 48, if you only contributed up to the match on the 401k and you have the proceeds from the house. The last fifteen or so years of employment are the ones where you are earning your highest income and can save the most. Turning those high saving years into consumption years results in the need for a huge portfolio and/or pensions, etc., which it sounds like you don't have. Counting on the financial support of a boyfriend sounds shaky. What if he dies?

I would evaluate your plan carefully using software planning tools or go to a financial planner to check on the plausibility of your plan. The measure of a good retirement is not the near-term feelings of relief at not having to work, but the confidence of having enough to eat when you are 90.

 

[CatInHand]

Doesn't sound like you have enough money to retire at 48, if you only contributed up to the match on the 401k and you have the proceeds from the house. The last fifteen or so years of employment are the ones where you are earning your highest income and can save the most. Turning those high saving years into consumption years results in the need for a huge portfolio and/or pensions, etc., which it sounds like you don't have. Counting on the financial support of a boyfriend sounds shaky. What if he dies?

I would evaluate your plan carefully using software planning tools or go to a financial planner to check on the plausibility of your plan. The measure of a good retirement is not the near-term feelings of relief at not having to work, but the confidence of having enough to eat when you are 90.

Portfolio should be at about 500K when I turn 60, if it only earns 6%/year over the next 12 years.

I currently manage fine on ~$25,000/year, and I live near Seattle, so I don't expect to need more then that when living in a place with a lower cost of living.

Not depending on the BF, he's waiting for the pension so he can fund his sailing - I'm just tagging along for the ride.

I also have set up some online freelance writing work so I have plans A, B, C and D in place.

Absolute worse case scenario: I sell everything I own and spend the next 12 years backpacking in Eastern Europe. Hostels are cheap and the scenery always changes.

 

[obgyn65]

Welcome aboard.

 

[Khufu]

Portfolio should be at about 500K when I turn 60, if it only earns 6%/year over the next 12 years.

I currently manage fine on ~$25,000/year, and I live near Seattle, so I don't expect to need more then that when living in a place with a lower cost of living.

Not depending on the BF, he's waiting for the pension so he can fund his sailing - I'm just tagging along for the ride.

I also have set up some online freelance writing work so I have plans A, B, C and D in place.

Absolute worse case scenario: I sell everything I own and spend the next 12 years backpacking in Eastern Europe. Hostels are cheap and the scenery always changes.

Sounds like your portfolio is about $250,000 if twelve years of 6% returns will turn it into $500,000. Is that in the 401k and your $25,000 per year living expenses is coming out of the proceeds of the house sale? Would that be another $250k to $300k?

That's not enough. For someone retiring at age 65 a very approximate rule-of-thumb is that you need 25 times your annual expenses in savings. (Rules-of-thumb like this are not really adequate for planning purposes, but we'll have to use the heuristic here in lieu of a full financial plan.) For someone retiring at 48 the savings number would have to be more like 40 times one year's expenses. That would be one million dollars, of which you have half.

What happens at age 60? Will you be eligible for a pension then? Have you computed your Social Security benefit? What if your portfolio does not achieve 6% returns for the next 12 years? For instance, what if it loses money? Does your budget include health insurance until age 65?

 

[CatInHand]

Sounds like your portfolio is about $250,000 if twelve years of 6% returns will turn it into $500,000. Is that in the 401k and your $25,000 per year living expenses is coming out of the proceeds of the house sale? Would that be another $250k to $300k?

That's not enough. For someone retiring at age 65 a very approximate rule-of-thumb is that you need 25 times your annual expenses in savings. (Rules-of-thumb like this are not really adequate for planning purposes, but we'll have to use the heuristic here in lieu of a full financial plan.) For someone retiring at 48 the savings number would have to be more like 40 times one year's expenses. That would be one million dollars, of which you have half.

What happens at age 60? Will you be eligible for a pension then? Have you computed your Social Security benefit? What if your portfolio does not achieve 6% returns for the next 12 years? For instance, what if it loses money? Does your budget include health insurance until age 65?

Ah, but that "25X annual expenses" thing applies when wanting to maintain something roughly similar to your current lifestyle; I want less.

No pension, and SS is pretty much crap because I spent years going to school and living overseas.

Plan is to spend the next ~3 years kind of working (freelance writing) and kind of using savings. Also selling off stuff because it's time to get rid of it. When I can sell the house and net 100K (min) I will do so. At that point I switch to mainly living off house proceeds. I can still do online work if need be to have some income.

Planned for expenditures until age 60 is $1000/month. BF reckons this is twice what he spent while he was cruising during his first retirement so I think it's a pretty conservative assumption. He will also have income to cover his share of costs.

Also seems likely that there will always be some source of online income for someone who is SEO savvy and has excellent language skills, so I have this to fall back on.

Also have the option of moving to BFs boat and renting the house.

Health care is much cheaper in most other countries. Currently exploring Ecuador as a retirement choice and living on less than $1500/month seems quite doable.

I think having the portfolio lose money over the next 12 years is pretty unlikely given history. My 6% increase is conservative as it will likely be higher than that. I think we're on the uphill side of that 34 year cycle so likely to continue to increase until ~2034. Again, not as relevant since I'm not staying in the US. I can adjust my living to the finances. I will have no fixed expenses, own nothing, need nothing but a roof and food.

 

[Ready]

Your plan sounds quite adventurous and a lot of fun! I applaud your courage to pursue the life you wish and not fear the uncertainties of the finances. This forum tends to be conservative, so you will get some words of caution, but I can tell you have thought this through and are comfortable with your decisions. Enjoy and let us know how it is going!

 

[CatInHand]

Thank you. And I appreciate the cautious warnings; they give me things to think about.

Everything is uncertain. I think the best you can do is try to take the course that's closest to your heart without being completely insensitive to the cruelties of reality.

I'm confident that my portfolio will be sufficient for when I reach 60, it's the period from now until then that will be the tricky part.

 

[CatInHand]

And by the way

I know all about dryer sheets

 

[Khufu]

Ah, but that "25X annual expenses" thing applies when wanting to maintain something roughly similar to your current lifestyle; I want less.

No pension, and SS is pretty much crap because I spent years going to school and living overseas.

Plan is to spend the next ~3 years kind of working (freelance writing) and kind of using savings. Also selling off stuff because it's time to get rid of it. When I can sell the house and net 100K (min) I will do so. At that point I switch to mainly living off house proceeds. I can still do online work if need be to have some income.

Planned for expenditures until age 60 is $1000/month. BF reckons this is twice what he spent while he was cruising during his first retirement so I think it's a pretty conservative assumption. He will also have income to cover his share of costs.

Also seems likely that there will always be some source of online income for someone who is SEO savvy and has excellent language skills, so I have this to fall back on.

Also have the option of moving to BFs boat and renting the house.

Health care is much cheaper in most other countries. Currently exploring Ecuador as a retirement choice and living on less than $1500/month seems quite doable.

I think having the portfolio lose money over the next 12 years is pretty unlikely given history. My 6% increase is conservative as it will likely be higher than that. I think we're on the uphill side of that 34 year cycle so likely to continue to increase until ~2034. Again, not as relevant since I'm not staying in the US. I can adjust my living to the finances. I will have no fixed expenses, own nothing, need nothing but a roof and food.

I think you are making some rosy assumptions and fail to appreciate market risk, but if you are willing to move to wherever you can afford to live in the world, that's certainly a plus. Ecuador has the huge advantage, at least for the time being, that the currency is the USD, so that there is no currency risk to live there if your assets remain in dollars.

I wouldn't do it in your shoes, but it might work. Good luck.

 

[CatInHand]

yep, completely ignoring market risk, but it's still far enough away that I feel comfortable doing that.

Besides, isn't everyone's plan subject to market failures?

I've seen too many people die recently, still dragging themselves to the office for that last bit of money. Can't do it. I just can't.

 

[Khufu]

yep, completely ignoring market risk, but it's still far enough away that I feel comfortable doing that.

Besides, isn't everyone's plan subject to market failures?

I've seen too many people die recently, still dragging themselves to the office for that last bit of money. Can't do it. I just can't.

1. No, everyone's plan is not subject to stock market failures.

2. Data sampling error. Your workplace experience will include some disgruntled types, but you probably don't have the opportunity to encounter 85-year-olds struggling to make ends meet without enough money.

 

[CatInHand]

Well, while I was in the Peace Corps I saw people struggling not to die because they had no money....

Ooohh, Peace Corps! Plan E!


Saw a lot of people in the workplace that were disgruntled because they spent more than they received and were always miffed about it.

I'd be curious to know how many 85 year-olds with a graduate degree and math skills end up without enough money.

 

[pb4uski]

I'm not as pessimistic as Khufu about your situation, but I think it would be wise to model out your situation using Quicken Lifetime Planner. 6% isn't an outrageous return assumption IMO. SInce you seem willing to adjust your lifestyle to fit your means you should be ok.