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Confident About Your Ability to be Financially Independent or Retire Early?
Old 02-01-2012, 03:30 PM   #1
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Confident About Your Ability to be Financially Independent or Retire Early?

I have anxiety about my ability to become financially independent and/or retire early. If you were were in a similar situation, as the one described below, would you be confident about your ability to be financially independent or to retire early or would you be anxious about your ability to be financially independent or retire early.

1. You had enough money to pay for your primary residence, so you did not have a mortgage.

2. You had enough, based on a 4% safe withdrawal rate, to cover property taxes, utilities, food and some money for gas. These costs would represent about 45% of my annual living costs.

3. 55% of my other basic annual living expenses presently would not be covered. Examples of these expenses would include- maintenance to car, saving fund for car replacement, house maintenance, clothes, basic health insurance, etc.)

4. I am 41, and I will be eligible for a small state government pension at 60 that would cover about 10 to 15% of my total annual living expenses.

5. I will be eligible for social security.

If you were similarly situated, would you feel a sense of confidence that financial independence and/or early retirement was a good possibility in the short term? If so, then why is it that I am feeling a lot of anxiety about not achieving my goal of becoming financially independent and/or retire early.

Thank you for your feedback.
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Old 02-01-2012, 04:18 PM   #2
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I guess I don't get it. Pardon me if I'm being ultra-dense, but:

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55% of my other basic annual living expenses presently would not be covered. Examples of these expenses would include- maintenance to car, saving fund for car replacement, house maintenance, clothes, basic health insurance, etc.)
So how do you plan to cover these expenses for the next couple of decades?

What about health insurance?

Sounds to me like maybe you are getting close, but not quite financially ready yet.
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Old 02-01-2012, 04:26 PM   #3
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If your question is whether you can safely retire now, I'd say "not if it were me". I assume you are asking whether you can "get there" (i.e., retire early with financial independence) at some time before you reach "normal" retirement age. I think the answer to that one is "yes". In the simplest terms, it sounds like your retirement "stash" is as much as 55% low for early retirement (now).

To lessen that "blow", consider that you could spend down your stash faster than 4% if you could then transition to your pension at 60 and then SS at 62. I think you would need to really sharpen the pencil to figure if that is doable starting retirement NOW. Also, consider that a lot can happen in 19 years, so I would err on the conservative side (increase my stash/put off retirement/lower living expenses/etc.).

The good news is that you seem to have a good picture of where you are (what your retirement spending will probably be and how much stash you have.) To move up your retirement time table, do you have an option to move to another location (cheaper COL, cheaper house and add the difference to your stash)?

I'm not sure I've answered your question and I'm betting that my opinion (to wait!) is not what you want to hear. Still, at 41, you are way closer than most folks to FIRE, IMO. Feel free to lay out some specific scenarios. Many folks here (better than I with the numbers) could help evaluate with you. Good luck and don't forget, YMMV.
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Old 02-01-2012, 04:31 PM   #4
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Sounds like you are 45% of the way there at age 41. That seems well on the way, depending on how soon you want to retire. I wouldn't do it now, but in 10 years you might be about ready. Sooner if you are lucky, but you probably need to double your current portfolio, or a little better. It should do that by itself in 10 years, but hefty contibutions will speed it along. And don't let your standard of living creep up such that you're increasing your required portfolio size faster than inflation.
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Old 02-01-2012, 04:35 PM   #5
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For average people, it used to be that retiring after 20 - 25 years of employment was something only possible for those who were in the military or law enforcement.
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Old 02-01-2012, 04:38 PM   #6
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I can't provide better responses than the ones above, but have you already entered your info into FIRECalc: A different kind of retirement calculator.
  1. You can enter your current portfolio (with annual spending & years in retirement - default is 30 years for someone retiring at age 65) on the first tab.
  2. You can enter your estimated Social Security and Pension on the second tab (when it will start and COLA or not).
  3. Then enter an age you want to retire at on the third tab.
  4. Any additional input on the other tabs and then SUBMIT.
Based on the "success rate" you get, you can then adjust the age you retire at and the years in retirement (the two should be correlated, the earlier you retire, presumably the greater your years in retirement) to get an estimate of when you will be able to retire with a probability of success you're comfortable with. It's a great place to start if you haven't already...
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Old 02-01-2012, 06:01 PM   #7
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Originally Posted by justplainbll View Post
For average people, it used to be that retiring after 20 - 25 years of employment was something only possible for those who were in the military or law enforcement.
While it's true that they could retire to a pension, I doubt that financial independence was "only possible for those who were in the military or law enforcement".

After 10 years of ER, I can count the number of military ERs on one hand. You would think that if financial independence was so easy for military that there'd be more of them on discussion boards like this.
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Old 02-01-2012, 06:36 PM   #8
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It's not clear if you are asking if you have enough to retire right now, or that you are on the right track to retire in the future.

On the former, I can't offer much help. On the latter, you're way ahead of me, and we're the same age, and I've been saving 10-15% of my income for 20 years.
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Old 02-01-2012, 06:47 PM   #9
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For average people, it used to be that retiring after 20 - 25 years of employment was something only possible for those who were in the military or law enforcement.
There were plenty in the private sector that used to do this, including several of our family members. However, those pensions are disappearing fast. I had an e-mail from a friend at my old company this week asking for some advice. Our company has announced the end of their DB pension on June 1st this year. All folks eligible for retirement can retire before then if they wish. (age + service years >80, and you must be at least age 55)

They are moving to a cash balance scheme and everyone will be told what their starting balance is. Looks I made it out with my pension with a good 2 years to spare, it was something I was dreading as I approached age 55 and everyone was expecting it to happen.
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Old 02-01-2012, 07:08 PM   #10
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I think you are doing good. You don;t currently have sufficient resources to retire now, or perhaps even in the next 5 years. But if you stay on the current track it would seem that retirement in your 50s is quite possible.

At this point each additional year that you work is an additional year of savings and one less year of having to provide for your living expenses from your savings.

I suggest you look into the Lifetime Planner in Quicken. While it has its flaws, it is a very good tool for doing some basic projections and looking at what-if scenarios.
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Old 02-01-2012, 08:33 PM   #11
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I guess I realize that I could not safely retire today, but I was just wondering, if you were in my situation, if you would feel confident that FIRE was possible for me in the short term.

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Originally Posted by W2R View Post
I guess I don't get it. Pardon me if I'm being ultra-dense, but:



So how do you plan to cover these expenses for the next couple of decades?

What about health insurance?

Sounds to me like maybe you are getting close, but not quite financially ready yet.
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Old 02-01-2012, 08:35 PM   #12
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Thank you pb4uski. I will take a look at the Lifetime Planner.

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I think you are doing good. You don;t currently have sufficient resources to retire now, or perhaps even in the next 5 years. But if you stay on the current track it would seem that retirement in your 50s is quite possible.

At this point each additional year that you work is an additional year of savings and one less year of having to provide for your living expenses from your savings.

I suggest you look into the Lifetime Planner in Quicken. While it has its flaws, it is a very good tool for doing some basic projections and looking at what-if scenarios.
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Old 02-01-2012, 08:37 PM   #13
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Hi BigMoneyJim. I am asking if I am on the right track to retire in the future. It sounds like we are both working hard to get to FIRE.

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It's not clear if you are asking if you have enough to retire right now, or that you are on the right track to retire in the future.

On the former, I can't offer much help. On the latter, you're way ahead of me, and we're the same age, and I've been saving 10-15% of my income for 20 years.
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Old 02-01-2012, 08:43 PM   #14
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If the portfolio doubles by itself in 10 years, then as long as I don't touch it, I could possibly work at a lower paying/less stressful job during those years that I am waiting for the portfolio to grow. Or I could stay with the higher pay/higher stress job and get to the number I need before 10 years.

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Sounds like you are 45% of the way there at age 41. That seems well on the way, depending on how soon you want to retire. I wouldn't do it now, but in 10 years you might be about ready. Sooner if you are lucky, but you probably need to double your current portfolio, or a little better. It should do that by itself in 10 years, but hefty contibutions will speed it along. And don't let your standard of living creep up such that you're increasing your required portfolio size faster than inflation.
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Old 02-01-2012, 08:48 PM   #15
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Thanks Koolau. Moving to a cheaper COL area would involve giving up the higher paying job, so I don't know if that would work out good for me.

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If your question is whether you can safely retire now, I'd say "not if it were me". I assume you are asking whether you can "get there" (i.e., retire early with financial independence) at some time before you reach "normal" retirement age. I think the answer to that one is "yes". In the simplest terms, it sounds like your retirement "stash" is as much as 55% low for early retirement (now).

To lessen that "blow", consider that you could spend down your stash faster than 4% if you could then transition to your pension at 60 and then SS at 62. I think you would need to really sharpen the pencil to figure if that is doable starting retirement NOW. Also, consider that a lot can happen in 19 years, so I would err on the conservative side (increase my stash/put off retirement/lower living expenses/etc.).

The good news is that you seem to have a good picture of where you are (what your retirement spending will probably be and how much stash you have.) To move up your retirement time table, do you have an option to move to another location (cheaper COL, cheaper house and add the difference to your stash)?

I'm not sure I've answered your question and I'm betting that my opinion (to wait!) is not what you want to hear. Still, at 41, you are way closer than most folks to FIRE, IMO. Feel free to lay out some specific scenarios. Many folks here (better than I with the numbers) could help evaluate with you. Good luck and don't forget, YMMV.
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Old 02-02-2012, 06:34 AM   #16
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....I was just wondering, if you were in my situation, if you would feel confident that FIRE was possible for me in the short term.
All depends what you consider short term.

For me (for investment/return analysis), short term is 5-10 years while most folks (I assume) look at one year (or less) returns to make a decision.

OTOH, many folks on this forum look at ER much differently than I do, when considering what the term actually means. In my case, I considered myself as ER at the "ancient" age of 59. Why? Because in my early 20's, I looked at SS (at the time, FRA age was 65 for me, but then changed to 66) as "normal retirement age", also considered as such for the company I was currently wor*ing for, which had a pension (e.g. defined benefit) plan.

Retiring seven years earlier than originally planned means ER to me, on a personal basis; however I understand that most folks would not consider it as such.
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Old 02-02-2012, 07:25 AM   #17
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OTOH, many folks on this forum look at ER much differently than I do, when considering what the term actually means. In my case, I considered myself as ER at the "ancient" age of 59. Why? Because in my early 20's, I looked at SS (at the time, FRA age was 65 for me, but then changed to 66) as "normal retirement age", also considered as such for the company I was currently wor*ing for, which had a pension (e.g. defined benefit) plan.

Retiring seven years earlier than originally planned means ER to me, on a personal basis; however I understand that most folks would not consider it as such.
Thanks for the post. I'm with you on this one. I'm 55 and plan to retire in 4 years, wife in 2 years. I consider it ER or at least FI and able to. It took me some time to get through the thought process of who am I without my job. I used to really enjoy working with computers, but that has fallen off and I've developed other interests and priorities. Guess that probably has been happening all along as I got older, just wasn't smart enough to see it then
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Old 02-02-2012, 08:31 AM   #18
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I think your situation has too many unknowns at this stage for me too say I would feel "safe" with early retirement ( 50 ?? ) in the scenario described. Although by then you could probably close the gap greatly on the other 55% but then the health care issue looms. That is a big unknown. For me I know I have to wait until I qualify for those medical benefits that my Fed. job provides upon retirement @ 57. If I tried to go out before then I would need a crap load more $$ to feel "safe" just walking out the door even though at 50 I will probably have most of what I need in my 401k plan to cover a LBYM retirement existence. I would really have to hate my job to walk away 7 years early with the unknown of not falling under a group health plan.
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Old 02-02-2012, 09:03 AM   #19
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I have anxiety about my ability to become financially independent and/or retire early. If you were were in a similar situation, as the one described below, would you be confident about your ability to be financially independent or to retire early or would you be anxious about your ability to be financially independent or retire early.

1. You had enough money to pay for your primary residence, so you did not have a mortgage.

2. You had enough, based on a 4% safe withdrawal rate, to cover property taxes, utilities, food and some money for gas. These costs would represent about 45% of my annual living costs.

3. 55% of my other basic annual living expenses presently would not be covered. Examples of these expenses would include- maintenance to car, saving fund for car replacement, house maintenance, clothes, basic health insurance, etc.)

4. I am 41, and I will be eligible for a small state government pension at 60 that would cover about 10 to 15% of my total annual living expenses.

5. I will be eligible for social security.

If you were similarly situated, would you feel a sense of confidence that financial independence and/or early retirement was a good possibility in the short term? If so, then why is it that I am feeling a lot of anxiety about not achieving my goal of becoming financially independent and/or retire early.

Thank you for your feedback.
As someone who ERed 3 years ago at age 45, I was also beginning to plan things out earlier in my 40s. What I did was to focus my ER plan on "Can I make it to age ~60 intact?" This is because in these years I have to rely only on my non-retirement accounts, not my frozen company pension, Social Security, or unfettered access to my IRA. After I turn 60, those 3 "reinforcements" begin to give me additional sources of income to cover my expenses. Then there is Medicare which will make health insurance more affordable.

I did not want to cash out my old 401(k) and face an enormous tax bill but I did cash out my company stock which was much more lightly taxed (mostly at LTCG rates because it was NUA) and have used that to bolster my non-retirement accounts.

Looks to me that you are already taking into account your "reinforcements" in the longer term but you need to focus on how to get to that point when things get easier.

I would also suggest building into your ER budget a cushion or surplus which can be used to cover any relatively small and unforeseen expenses. For example, I just bought a new PC last month which cost about $400 but it is not a problem because my ER budget has a much bigger surplus built into it to handle things like this without busting my budget.
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Old 02-02-2012, 09:53 AM   #20
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midnighter, you need to both give yourself more credit for resourcefulness and mentally toughen up a bit. Consider: you have accumulated far more net worth than most people your age at what I suspect is not a plutocrat's earnings level. You also have plenty of time to accumulate more. You also have locked yourself into a rigid defnition of what your life will look like after retirement, when you have a very high degree of flexibility once you retire and that allows you to cope with downturns very well.

Society will continually tell you that retiring early is impossible or imprudent. get used to hearing it, toughen up, and stick to your own judgement and conclusions.
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