Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Can I Retire At 51 ?
Old 06-18-2013, 04:36 AM   #1
Full time employment: Posting here.
ownyourfuture's Avatar
 
Join Date: Jun 2013
Posts: 512
Can I Retire At 51 ?

Hi,
my name is Steve.

I discovered this sight last week & I'm very impressed.
Thanks to all those responsible.


Here's my situation.
My job is taking a huge physical & mental toll on me.

More specifically, it's the hours I work. (I'd rather not be anymore specific than that)


My investing background/experience:
I started an IRA in 1986 & added to it in 87-88-90
For whatever reason, I never added anymore after 1990.

In 1994, I opened an account at small brokerage firm in a bank in my hometown. I did alright there, but by 1998 was fed up with the ridiculous commission amounts & the fact that half the time I'd call 'my guy' was out of the office, or away for one reason or another.

I transferred the account to Fidelity & have been there ever since.

On January 1st 1995, I began contributing 5.00% each to my Employee Stock Purchase Program & 401-k. In early 2000 I upped it to 10.00% each, & in 2003 upped it to 15.00% each, where it remains today.


Current Assets:

Fidelity brokerage account: $ 314,000.00 **Taxable**
Vanguard 401-k $ 177,000.00
ESPP $ 79,000.00
IRA $ 15,000.00
Checking Account $ 15,000.00

Total: $600,000.00


Current Debt: Owe 10k on my home that's worth around 130k



The 1st part of my plan covers the 3.5 year period beginning July 1st 2013, & ending January 1st 2017 when I will begin collecting a pension.



My plan: Quit job & gradually sell all of my company stock & other non-income producing investments.

Take proceeds & add as evenly as possible to my basket of 16 dividend paying stocks.

Roll my 401-k into an IRA & begin the 72(t) SEPP program.

Write 'out of the money' covered calls on my stocks for extra income.
(I've been writing calls on my holdings since September 2010 & have done very well)


My (Approximate) monthly income would be as follows:

Dividends: $ 1,518.00
Call Premiums: $ 877.00
SEPP payment $ 700.00

$3,095.00 Per Month $37,140.00 Per Year

This is not a lot of money, but I live a very simple life & I've ran monthly budgets that show I could do it.
My biggest expense will be the COBRA insurance of $581.00 per month.

It's a very good plan & covers medical, dental, & vision.
I can carry this for 18 months after I quit, which would take me to January 1st 2015.


Hopefully by that time the 'Affordable Care Act' will have 'some' of the bugs worked out & I'll be able to buy a decent plan. I'm in reasonably good health & I'm almost positive I'll improve on that if/when I quit.

**Quit smoking 3 years ago**



Now we can fast forward to January 2017. God willing, I'll be 55 & eligible to begin collecting approximately $1,800.00 per month from a pension.

Assuming the 'powers that be' haven't destroyed the world by this this time, my income would look like this:

Pension: $ 1,800.00
Dividends: $ 1,518.00
Call Premiums: $ 877.00
SEPP payment $ 700.00

$4,895.00 Per Month $58,740.00 Per Year


If I'm still around five years later in 2022, (Age 60) I'll begin collecting another smaller pension of about $280.00 per month.

**I may or may not still be participating in the 72(t) program at this time**
As I understand it, once started, it must be continued for 5 years, or until you turn 59.5 whichever is last. This could effect the following income numbers.


Pension: $ 1,800.00
Dividends: $ 1,518.00
Call Premiums: $ 877.00
SEPP payment: $ 700.00
Pension B $ 280.00

$5,175.00 Per Month $62,100.00 Per Year



Finally, In 2024 I'll turn 62 & hopefully be able to begin drawing social security.

I realize a lot can happen between now and 2024. I may not even be allowed to draw @ that time, or could be 'means tested' heavily if I can.

I'll just have to wait & see.


At this point I'd be a couple years away from being medicare eligible.
Many questions about this program also.

I'll be glad to list the the stocks in my portfolio, or go into more detail about the covered calls if the questions arise, but I don't want my 1st post to be any more drawn out than it already is

Thanks for taking the time

Steve
__________________

__________________
ownyourfuture is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-18-2013, 05:52 AM   #2
Recycles dryer sheets
 
Join Date: Nov 2011
Posts: 127
Steve, very detailed post. Some thoughts:

First of all, if your job is taking that much of a toll - you must go. Health (mental and physical) is more important!

Second, what are your expenses? That is more important to compare against income. Include taxes.

Third, small amounts in tax advantaged accounts could be a long term issue. Would need to see more details about the covered calls, but not usually a good thing to rely on in ER, and high on the risk scale. You mentioned you plan to exit from the company stock, which is a good thing. Would not the call premiums end?

Medical is an uncertain area. I do not suggest relying on the ACA at all at this point due to many uncertainties about costs, likely major changes/repeal etc. Perhaps you could grab a part time job with low stress and medical coverage until things work themselves out? That would also enable you to perhaps increase the tax sheltered accounts.

Congrats on the detailed plan so far!
__________________

__________________
Malcolm2 is offline   Reply With Quote
Old 06-18-2013, 05:56 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,685
in reviewing the situation, your plan on the surface sounds a little on the risky side, between the dividends and the call premiums it seems you are planning on almost 7% from your taxable portfolio. However, based on if you are single and you can live on what you say you can, the upcoming pension and social security and the stress your job is placing on your that has so infected you that it seems to be radiating from your posting, I think you should go for it. whatever happens down the road won't be as bad as what is happening right now to you i think
__________________
Running_Man is offline   Reply With Quote
Old 06-18-2013, 06:25 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,396
Steve,

It looks like you have things pretty well thought out but I agree with others that it is risky to rely on covered call premiums for your existence. If we slipped back into a recession what would happen to your plan? Have you run your plan through Quicken Lifetime Planner or Firecalc or Financial Engines or some other planner to see the decay of your retirement stash and how long it will last?

Given your large taxable portfolio, if you do move forward I wonder if you might be better off forgoing the SEPPs from your tax-deferred accounts and instead just withdraw $700 a month from your taxable portfolio. Your income and taxes would be much lower and you might be able to receive more generous Obamacare health insurance subsidies that would help offset your health insurance costs. Also, you would not be shackled by the SEPP rules.

How much do you need to live on? Usually, this planning is defining first what is needed to live on annually and any other special expenses (college, kid's weddings, etc) and seeing if your nestegg will last. How much do you live on now and what changes would happen as a result of retirement? For us, our costs are similar to when I worked other than higher travel and entertainment costs as a result of having more time for fun.

Finally, it sounds like maybe you are FI and in need of a different job that doesn't tear you up as much rather than all out retiring. IOW, retirement is something that you go to rather that fleeing from work. You are lucky that you have the financial resources to be able to change jobs. A close friend of mine changed jobs in his mid-50s and loves his new job so much he is still working.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 06-18-2013, 07:37 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,014
Welcome Steve! I agree with what others have said so far. You really need to understand you current and future expenses before you pull the plug. You say that you work insane hours. When you have more time on your hands you may find that spending increases, on travel, recreation, sports and entertainment. For example I am in my first year of ER and have budgeted $8000 for vacations. I expect to use all of it.
__________________
Meadbh is offline   Reply With Quote
Old 06-18-2013, 07:52 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Feb 2011
Posts: 1,629
Welcome aboard!

Your post shows you are detail-oriented & know your finances well. However past results (e.g. success with options) are not a guarantee of future outcomes. Currently you have little margin for error. At your age you have a long life expectancy (80-85yrs+/-), so hopefully 30+yrs as your cone of financial uncertainty. Over that time, health care costs are likely to rise (copays/deductibles/ACA changes, etc), SS is likely to change (e.g. proposals to raise 62 start date, decreased benefits, etc.), and investment climate could turn (remember Japan since '89??).

Is it possible to transfer to a lower-stress job in your company? Hanging on 'til 55, or taking another job for few yrs, would improve your bottom line & improve your chances of success in ER.

Good luck & keep us posted.
__________________
ERhoosier is offline   Reply With Quote
Old 06-18-2013, 09:36 AM   #7
Recycles dryer sheets
 
Join Date: Feb 2013
Location: San Jose
Posts: 172
Hi Steve, I'd agree with the others that if I were in your situation, I'd want more margin so would prefer to work until that first pension kicks in. I would use my FI situation to reduce my load if possible, or switch jobs into one that suits me better even if the pay is lower. It's only a few years so the money difference won't matter (and if you think it does, then you're probably not really ready to give up that paycheck entirely).

In my case right now it seems easy to live on 3K per month, even after adding full freight on my health insurance, but like you I have a job that takes up a lot of my time and energy so I don't get much opportunity to spend. I'm expecting that when I quit working my expenses will probably double or triple compared to now. It's another factor to add to the "uncertainty bars" around those future projections.
__________________
dunkelblau is offline   Reply With Quote
Old 06-18-2013, 09:43 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,959
What probability of success is acceptable to you? Though folks are giving you answers, presumably they are based (at least in part) on a probability of success that's acceptable to them. That may/not match your expectations.

95% is a popular prob of success goal, but not universal. There are people here who have retired with an 80% or lower prob of success, and others who were not comfortable until they reached 200% (a nest egg twice the size of the 100% theoretical prob of success).
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 06-18-2013, 09:58 AM   #9
Recycles dryer sheets
Willers's Avatar
 
Join Date: May 2013
Posts: 480
Quote:
Originally Posted by Midpack View Post
What probability of success is acceptable to you? Though folks are giving you answers, presumably they are based (at least in part) on a probability of success that's acceptable to them. That may/not match your expectations.

95% is a popular prob of success goal, but not universal. There are people here who have retired with an 80% or lower prob of success, and others who were not comfortable until they reached 200% (a nest egg twice the size of the 100% theoretical prob of success).
+1 I think you'll find that we are a pretty conservative bunch when it comes to probabilities of success. You need to determine your financial risk tolerance vs. your desire to increase your happiness.

Signed: A 200%'er trying to going through "rehab" to something more reasonable.
__________________
Willers is offline   Reply With Quote
Old 06-18-2013, 10:17 AM   #10
Thinks s/he gets paid by the post
Live And Learn's Avatar
 
Join Date: Feb 2012
Location: Tampa Bay Area
Posts: 1,688
Quote:
Originally Posted by Willers View Post
+1 I think you'll find that we are a pretty conservative bunch when it comes to probabilities of success. You need to determine your financial risk tolerance vs. your desire to increase your happiness.

Signed: A 200%'er trying to going through "rehab" to something more reasonable.
ER is likely a one-way street, so you need to really weigh the pro's and con's. It may be hard to go back and get a job at your salary if you find out you've jumped ship too soon. I'm at 104% success in FIRECalc and that thought scares me enough that I am very likely to succumb and continue working beyond my August 2013 target date.
__________________
"For the time being no discipline brings joy, but seems grievous and painful; but afterwards it yields a peaceable fruit of righteousness to those who have been trained by it." ~
Hebrews 12:11

ER'd in June 2015 at age 52. Initial WR 3%. 50/40/10 (Equity/Bond/Short Term) AA.
Live And Learn is offline   Reply With Quote
Old 06-18-2013, 10:20 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,871
Quote:
Originally Posted by Live And Learn View Post
....... It may be hard to go back and get a job at your salary if you find out you've jumped ship too soon........
But there are other options. One is "retire" on less and work at a lower paying, but tolerable job - maybe even part time. Maybe even on and off as needed.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 06-18-2013, 10:22 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,959
Quote:
Originally Posted by Willers View Post
+1 I think you'll find that we are a pretty conservative bunch when it comes to probabilities of success. You need to determine your financial risk tolerance vs. your desire to increase your happiness.

Signed: A 200%'er trying to going through "rehab" to something more reasonable.
I retired at 200%, because I know a market meltdown could easily make me a 100%'er or worse...but hopefully not in the long run.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 06-18-2013, 11:25 AM   #13
Dryer sheet wannabe
 
Join Date: Jun 2013
Posts: 24
Steve, It's very very difficult to always count on call option premiums to generate constant monthly income. It can be done over short periods of time but over a 3 year time period......that will put a lot of pressure on you and most likely you will need to take more risk. Writing calls in a down market or when a stock is dropping isn't fun either. Focus on your monthly expenses. Min income needed every month. Then how much extra do you need to enjoy living life. Also remember about the unexpected. Car breaks down, AC goes out, etc. Like all the others have said, it all comes down to your expenses. Your lucky that you have a Pension in the future! Also in your model, you are not showing dividends increasing over time.
__________________
1st Tee is offline   Reply With Quote
Old 06-18-2013, 11:44 AM   #14
Recycles dryer sheets
Willers's Avatar
 
Join Date: May 2013
Posts: 480
Quote:
Originally Posted by Midpack View Post
I retired at 200%, because I know a market meltdown could easily make me a 100%'er or worse...but hopefully not in the long run.
I agree completely and that is what keeps me in the game. Time will tell if it is necessary, but it will help me sleep better at night. If only we could predict the future...
__________________
Willers is offline   Reply With Quote
Old 06-18-2013, 01:34 PM   #15
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,811
Lots of detail, that helps.

As others have mentioned, the important thing is your expenses. If you can really live "comfortably" on $37,140, you should be able to make it.

You didn't mention Social Security amounts. Yes, many people are conservative in their plans, but I'd be comfortable assuming that I could get 75% of the currently scheduled benefits. I'll make a wild guess and say you have a PIA of $20,000 based on earnings so far. That means your reduced benefit @62 is $14,000, and 75% of that is $10,500.

I assumed your spending target would be $40,000 in constant dollars. If you can cover your COBRA premium inside the $37,000, it seems like you'll cover PPACA and later Medicare and MedSupp costs with $40,000.

I did a simple, deterministic spreadsheet that assumed your non-COLA'd pensions would lose 3% of their value every year, and that you could earn inflation plus 1.5% on your $600,000 of assets. With those assumptions, your money runs out at age 96. (Deferring SS gives slightly better results.)

I'd suggest that you set up a simple FireCalc spreadsheet and see if you get the same result.

It seems likely that you'll find a way to earn more than inflation plus 1.5% over time. Your biggest risk is near term with low current yields on bonds and the possibility that both bonds and stocks could lose a lot of market value in the first few years that you'd be retired.

I won't comment on selling calls as an investment strategy. That could be a thread of its own.
__________________
Independent is offline   Reply With Quote
Old 06-18-2013, 04:46 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,380
Steve, you clearly have an organized mind, and you laid out the situation well. You don't mention it, but I assume you are single with no dependents. The value you assign to your home suggests you live in an inexpensive area. I take it you are satisfied there?

Only other thing I might mention is something that puzzles me. You are evidently not troubled by using your call writing program to fund your expenses in retirement. Yet would you, or almost anyone else, propose funding retirement expenses by selling naked puts?

Not likely; yet this is identical to what you are proposing, in terms of exposures.

Can you retire? Very likely; see the thread currently running of people who have retired on<$500,000. Some without a pension. OTOH, there is another fresh thread about a guy who on the face of it could retire and buy his own smallish Caribbean Island, who says he can live on $15,000 p.a., who nevertheless is not quite ready. So a lot depends on your own attitudes.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 06-19-2013, 02:11 AM   #17
Dryer sheet aficionado
 
Join Date: Oct 2012
Posts: 25
Quote:
Originally Posted by haha View Post
OTOH, there is another fresh thread about a guy who on the face of it could retire and buy his own smallish Caribbean Island, who says he can live on $15,000 p.a., who nevertheless is not quite ready. So a lot depends on your own attitudes.
Where's this thread? I wanna buy my own island too...cause most mansion are $15K a nite!
__________________
joebloe is offline   Reply With Quote
Old 06-19-2013, 02:28 AM   #18
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
To the OP : have you run your numbers in FIREcalc or other retirement calculators?
__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Old 06-19-2013, 05:17 AM   #19
Full time employment: Posting here.
ownyourfuture's Avatar
 
Join Date: Jun 2013
Posts: 512
Thanks for all the replies

All of you are incredibly knowledgeable & straightforward.

I really appreciate that.

I just finished going through the 17 replies.
I copied all the questions/observations & will address them tomorrow.

Sorry, but I don't have the time today.

Thanks Again!

Steve
__________________
ownyourfuture is offline   Reply With Quote
Old 06-19-2013, 06:48 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Age 51 not too young check
Investment experience check
House paid off (close enough) check
Assets 600K primarily taxable and invested in equities check
Present value of $1,800 month pension at 55 ~$370,000
Present value of $280 pension @60 ~$30,000
Total assets ~$1,000,000
overall AA 60/40

Assuming you can get by on ~40K you should be fine.
__________________

__________________
clifp is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 02:05 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.