Can I retire now?

[welcome]

Hello Folks,
This is a great forum and I appreciate all the advise offered by the members.

I have $800k in fixed income (yield 3% annually)
I have $800k in mutual funds and dividend stocks
I have a paid off house $350k.

Net worth $1950k

No debt or mortgage. 2 kids 18 years & 14 years.
Both wife and I are 43 years old

annual house hold income $100k (wages from employer) after tax
annual additional income dividend & fixed income is $51k after tax..

We live a modest life style and was wondering if I can retire?

Annual house hold expense is $36k

 

[growing_older]

Yes, your assets easily support 36k annually. You can run FIRECalc to get better estimates. Also, with kids at that age you will need to decide what you want to do about funding college.

 

[Jaded salami]

I like the Flexible Retirement Planner to get an estimate in your situation. In addition to your kids education, is health insurance covered in your $36k estimate? If leaving your employment requires you to fund HI coverage, you will need to include it in your expense estimate.

 

[2B]

You really shouldn't include your house in determining your investable assets. You have $1.6MM to invest. You've provided very few details other than that so your age and family situation so possible pensions/SS are missing.

The "classic" FireCalc income from $1.6MM is $68,000/year which theoretically increases with inflation. This is gross and doesn't include taxes or expenses such as health insurance which you will have to pay for out-of-pocket. I'm guessing you'd need to budget close to $15,000 for health insurance for your family. Adding that to your current expenses of $36K, raises your costs to $51K. I'll then throw in $8K for taxes and say you could get by for $59K/yr. You theoretically could retire on what you have but there is effectively very little reserve for larger expenses such as home repairs or car replacement. Being 43, most people here use more conservative estimates for their SWR for long retirements.

Based on this quick analysis, you really can't retire now unless you cut your expenses, get free health care or have a plump pension coming. You are getting close so keep up what you are doing and you will probably be safely financially independent before you are 50 if you control your lifestyle.

 

[Senator]

You can make it; it depends on how lucky you feel...

I fail to see how any family of 4, not on Medicare or public assistance, can live on $36k a year. But assuming that is correct, are you covered for inflation? Income taxes? But many do, and I have had many low income people that rented from me do it.

Most of my low income renters were on some sort of public assistance and often collected a few thousand in SSI for their kids. With your assets, it is not likely you would get an EBT card, free rent, free legal assistance, free medical care, free bus fare, free cell phones, and be eligible for many other programs. Many also worked for cash doing various things. They made it on less than 36K a year in income, but the freebie package was probably worth over $50K.

You have to live somewhere; your home is not really equity that you can draw from. At a 4% withdrawal rate, ~1.5M is only $60K a year. And at 43, you should be shooting for a 3% or less withdrawal rate.

Are you sure you only spend $36K a year? That is the big question. You need to add in some money for income taxes too. Maybe that $51K in income is counting that? Is the $51K tax free?

Can you make it? The answer is yes. Will you want to live in that $36K lifestyle, and always worry about the next thing that could derail you?, is the real question.

 

[gauss]

Have you checked what you and DW have accrued under SS to date yet? You can do this at ssa.gov with their "Retirement Estimator" but be sure to enter '0' for last years earnings, so that it assumes '0' for all future years.

If you delay drawing to age 70 and have at least 10 years of earnings history then you may be surprised by the amount of your accrued benefit. If you want to be conservative, assume that you will only get 2/3 of the amount in case the current law changes in the future. Still might be the difference in being able RE now vs. later.

-gauss

 

[jerome len]

based on fixed income 800k X 3% = $24,000 and mutual finds at 800k X2%=$16,000 or a total of $40,000, I don't know how you safely come up with $51,000. Additionally, your kids are getting to the expensive age.....more food, lessons, college, etc. And, you need family health care, I don't see how you can live on $36,000 per year. I'd work a few more years if I were you......and, since the market is at a high right now and bonds couldl lose money when interest rates go up, your 1.6 million could lose value in the next few years.....I wouldn't do it but good luck with your decision.

 

[welcome]

Very much appreciated the feedback.
Yes I can live on income of 36k. However biggest challenges are the inflation and being young.. I think I will work few more years.

Thanks again for all the feedback..

 

[38Chevy454]

I agree that working a bit longer will enable additional savings to build up, plus defer withdrawals. It will also get you further into kids college or other education funding and knowledge what that will be. Since you have to have a place to live, the house is not really part of your nestegg that is able to produce income. It does have cost avoidance aspects in you do not pay rent or mortgage, but is not able to make money to support living expenses like invested assets.

Once you are confident that your expenses are set, including health care (the big unknown potentially), then determine what a safe withdrawal rate is for you. Assuming the nestegg is bigger, you can do lower rate, and corresponding lower risk.

Congrats on building up what you have at your age. I think you are close, and keep up the good work. Welcome to the forum.

 

[Walt34]

Also see this list of questions:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[EastWest Gal]

I would work a few more years.

Also, what about college for your kids? And what about healthcare expenses in ER? My son's college expenses ended up being $30k/year. Way more than med school in the 80s. Health insurance premiums alone in ER will run $10K/yr at least.

Have you tracked ALL your expenses?

I agree. You don't have enough yet. Especially with two children. Also, what if you live to be 100?



Sent from my iPhone using Early Retirement Forum

 

[pb4uski]

Run your situation through Quicken Lifetime Planner (included in Quicken Deluxe and higher if you have Quicken, otherwise well worth the minimal cost of Quicken IMO). QLP is an easy to use retirement planner that you fill in blanks with respect to you, your spouse, your kids, college costs, living expenses, SS, pensions, investment returns, etc and it does a year by year projection of whether your $1.6 million will last for your lifetime. It also has a what-if tool that let's you look at how different changes in assumptions such as lower expenses, working longer, etc affect your ability to retire.

My off-the-cuff thought is that you're probably close and may even be there depending on what your plans are for college for your kids.

 

[In-control]

I would caution using your house as part of your calculation. I do not - I look at it as free $ when we sell in a few years. It is an unknown and does not generate income. You also, esp. w/kids, need a place to live at least 1 yr after college so if you were planning on selling consider that you will still need a place to live.

Also kids and college are expensive. I have three 20 somethings and all of a sudden one may need braces and your dental plan does not cover it. Their goes $5k. Then you need to cover them for car insurance until they get settled. Owe yeah they eat more then most adults as they go thru the teen yrs. etc.... etc....

Just my experience -

 

[Fermion]

Sell your house and rent a smaller house, then you will truly have 1.95m in invested assets and can ignore all of these people who say don't include your house.

1.95m*3% = $58,500

Very easy to live on $58,500 while renting, and a small, energy efficient apartment or house rental will not require any large unforeseen expenses like roof, furnace, etc.

You will likely have SS coming at 62, which could reduce your SWR even lower than 3%.

Retire now.

 

[haha]

Hello Folks,
This is a great forum and I appreciate all the advise offered by the members.

I have $800k in fixed income (yield 3% annually)
I have $800k in mutual funds and dividend stocks
I have a paid off house $350k.

Net worth $1950k

No debt or mortgage. 2 kids 18 years & 14 years.
Both wife and I are 43 years old

annual house hold income $100k (wages from employer) after tax
annual additional income dividend & fixed income is $51k after tax..

We live a modest life style and was wondering if I can retire?

Annual house hold expense is $36k

I am single, 70+ years old, on Medicare with children grown and established, with net worth including my apartment maybe a couple hundred k less than yours and invested assets equal to yours. Nevertheless many things that I might like to have or do are too expensive for me.

Still. everyone decides his own path, and good luck to you if you make the jump. I hope your wife is easy going. I would guess that anyone who can fund a family with two children on $36,000 could go on the lecture circuit telling others about this.

Ha

 

[eytonxav]

Seems to me with your stated income and expenses, if you keep working and living on $36K per year for another ten years and save everything else, you can retire in style at 53 yo.

Also, agree with Ha that you should go on the lecture circuit

 

[In-control]

Sell your house and rent a smaller house, then you will truly have 1.95m in invested assets and can ignore all of these people who say don't include your house.

1.95m*3% = $58,500

Very easy to live on $58,500 while renting, and a small, energy efficient apartment or house rental will not require any large unforeseen expenses like roof, furnace, etc.

You will likely have SS coming at 62, which could reduce your SWR even lower than 3%.

Retire now.

That's a good recommendation. The numbers work esp. when you factor in the ever increasing cost of home maintenance/tax's/insurance. I ran the numbers for our home which we have lived in over 20 yrs, raised a family their. I compared the costs to renting, adjusting for inflation ect... and I would have had >$40K vs the house(w/o mortgage). It also assumes the price was invested with no mortgage and that that $ was in a 60/40 mix of index funds.

Is your SO ok with this thinking? Until recently mine was not and now that the kids are graduated and working, except one, we are on the same page.

 

[Totoro]

I'm confused with the sceptics here.

If OP has 1.6M in investable assets and burns through 36k per year, that's effectively 44 years worth of savings.

They'll both be 87 years old when they run out, if they just manage to have a inflation-neutral return. That assumes no SS, not selling the house, unchanged spending habits.

I do agree with 2B however: check if you really will end up at 36k after you retire, specifically with healthcare costs and taxes.

If that part checks out, good to go it seems?

 

[eytonxav]

Not skeptical, but very curious. I would like to know how to live on $36K/year with a family of 4, in a $350K house, and not eat dog food.

Also, the discipline to have a $151K after tax income and be able to limit lifestyle to $36K is amazing. How many on this forum could duplicate that feat?

 

[Totoro]

I suspect quite a few here do that feat, including myself (roughly).

Expenses excluding housing & healthcare (like OP) for me this year is +/- $15k per annum. That includes $4k from just one expensive travel trip.

Net income this year will be roughly $106k.

I am a renter though, that hacks into my actual savings rate quite a bit (eats up $19k per year).

 

[eytonxav]

I suspect quite a few here do that feat, including myself (roughly).

Expenses excluding housing & healthcare (like OP) for me this year is +/- $15k per annum. That includes $4k from just one expensive travel trip.

Net income this year will be roughly $106k.

I am a renter though, that hacks into my actual savings rate quite a bit (eats up $19k per year).

You hold yourself up as an example, but you want to cherry pick by excluding housing and healthcare. I did not see where the OP excluded housing and healthcare from his $36K expenses. Also, are you supporting a family of 4?

 

[Totoro]

You hold yourself up as an example, but you want to cherry pick by excluding housing and healthcare. I did not see where the OP excluded housing and healthcare from his $36K expenses. Also, are you supporting a family of 4?

I don't believe I'm cherry picking nor intend to. I exclude housing since OP also does that. He has a house paid off so obviously that doesn't show up in his expenses.

Likewise I'm assuming OP has healthcare via his employer (wasn't clear). If not, add 1.2k to my expenses. I live in Europe.

Regarding your last point, no I don't have a family of 4. Multiply by three my costs and you end up at 36k or 50K (with expensive travel) including healthcare. I still have alot of fat in the budget.

For another example, look at MMM. House paid for, wife and a kid. Lives on 24k per year in denver colorado. He posted his breakdown several times and lives a nice life.

Jacob (of ERE) is even lower.

Just to say it is frugal but doable without depriving yourself. Many do.

 

[eytonxav]

I don't believe I'm cherry picking nor intend to. I exclude housing since OP also does that. He has a house paid off so obviously that doesn't show up in his expenses.

I don't want to get into an argument with you, but just because someone has a $350K paid off house doesn't mean there are not expenses associated with it. Most pay taxes, utilities, maintenance, insurance, etc that can add up to quite a lot on a house like that.

Since you come from Europe, your experience may be different and perhaps thats also the case for the OP. Its tough to compare such expenses unless we are talking apples to apples, and your example looks more like a pear.

 

[Letj]

Not skeptical, but very curious. I would like to know how to live on $36K/year with a family of 4, in a $350K house, and not eat dog food.

Me too. Awaiting the answer with bated breath.

 

[Gumby]

Not skeptical, but very curious. I would like to know how to live on $36K/year with a family of 4, in a $350K house, and not eat dog food.

Around here, a $350K house would run you approximately $7K in property tax. Heating that house is probably going to run you about $2k per year if NG, maybe $4k if oil, more if electric. Aside from heating, the electric bill will run probably $1.5k per year -- more with central a/c. Homeowners insurance will be another $2-3K. Water will be $500 per year. So you're looking at $15-16K per year just to sleep indoors. If you can pay for everything else for a family of 4 -- food, clothing, transportation (including car payment, taxes, registration, insurance and repair), entertainment, school expenses, telephone, cable, home and garden repairs, etc. -- all for less than $1700 per month, then you are truly a wizard at pinching a penny. I couldn't do it.