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Decided to RE but now I'm scared. Help!
Old 01-16-2008, 09:52 PM   #1
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Decided to RE but now I'm scared. Help!

I'm 55 and recently made a decision to RE. But now I'm scared. Here's my story. Will I be alright?

Two years ago my employer offered a "severance package" to anyone who volunteered to quit. For me, the "package" is about 42 week's pay ($70K). I thought long and hard about taking it but I let it pass. A couple of weeks ago I received the offer again. This time I bit. I'll be retiring in April. But now I'm suffering feelings of panic. The downturn in the market isn't helping.

Here's my financial picture. Will I make it?

I have $1.8M in stock/bond funds (50/50%). (I had $1.9M until recently.) No debt. I'll have a pension of $1100/mo. Health insurance is part of the retirement plan but will still cost about $300/mo (I'm single). I own my modest home. I typically spend about $18,000 per year but I'd like to spend a little more. Looks pretty good, no? Then why am I scared? I think it's because I've never been without a constant paycheck. I only know how to put money into the bank, not take it out.

To prove I'm going nuts, I'm actively preparing a resume and searching job sites on the web. But I'm not sure why. Shouldn't I have enough to make an inflation adjusted $50,000 per year for the next 35 years? What am I missing?

I have a choice to make. What would you do? I can take my pension at $1100/mo forever. Or I can choose to start with $2200/mo until age 62. Then $500/mo after that. This would generate a monthly income starting now that's about equal to social security at age 62. That way I'd have a "level" monthly income for life. Which would you choose?

Thanks for "listening" to my story!

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Old 01-16-2008, 10:07 PM   #2
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Financially, you have more than enough. Your withdrawal rate is only 1.93% to support a withdraw of $36,800 (50,000 - 13,200). Choose $1100/month or $13,200/year option over the other option since this will never break even. Your withdrawal rate will go down further when you begin to collect from social security.

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Old 01-16-2008, 10:20 PM   #3
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Relax, you will be just fine. Between the pension, SS, the 1.8M stock portfolio, cheap health insurance and most importantly the ability to live cheaply if you have to, you really have nothing to worry about.
42 y/o, married, retirement portfolio = 43 x annual expenses
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Old 01-16-2008, 10:45 PM   #4
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You have got it made in the shade, my friend.

You only "need" $18000 to live on. You "want" $50000 annual.

You are single, no kids, house paid for, no debt, cheap available health insurance.

You will have pension of $13200 annual. (I'd also say take the $1100/mo for life).

From a portfolio of $1,500,000 you can withdaw at an SWR of 2.75% to get $41250 annual. That plus pension totals $54450 annual. Miserly SWR of 2.75% should last your lifetime of say 40 years maybe 45 or 50 years with very high probable success rate. (Play around with the FIRECALC at this site).

Then in 7 to 11 years you can tap SS for additional cushion and inflation adjustment, and/or can reduce your portfolio SWR even more at that point to smooth income.

The $300,000 remainder of your portfolio consider an emergency fund for house repairs, cars, emergency medical, nursing home, round the world tours, etc. It's an emergency fund, but it would also yield some income you could draw off if you felt like it---say 4% earnings would give an additional $12000 annual, bringing total annual income to $66450.

Your portfolio allocation of 50/50 equities/bonds sounds very good as well.

I'd say the only thing you are missing is the itinerary for a retirement vacation trip to the South Seas, maybe the Caribbean, to "readjust" your outlook!!

Congratulations, my friend, and welcome to FIRE! You have done well. Now enjoy.
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
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Old 01-17-2008, 07:00 AM   #5
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Your portfolio is $1,800,000.

You have been living on $18,000.

So, you could live for 100 years on this portfolio, even if it earned no more than inflation and even if you had no pension at all.

Relax, kick back, and remember that change (any change) is just really difficult for some people! That doesn't mean it is bad.

My daughter was like that from the time she was born. Anything new or unknown was hard for her. It isn't her fault and I seriously believe that is an inborn trait in her case. She takes a while to warm up to changes in her life. I suspect you may be just like her! You could do worse.
"You can never cross the ocean until you have the courage to lose sight of the shore." - - - C. Columbus
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Old 01-17-2008, 07:05 AM   #6
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As others have said, financially you will be fine.

Spend the time between now and April working on the mental/psychological adjustments.
I would not have anyone adopt my mode of living...but I would have each one be very careful to find out and pursue his own way, and not his father's or his mother's or his neighbor's instead. Thoreau, Walden
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Old 01-17-2008, 07:10 AM   #7
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The big thing for you is getting past the withdrawal fear. I have the same thing. I think I could retire now at 43 financially but I do not want to see the nest egg I've built start to go down.

I'm a saver not a spender. Good Luck with that. I would be interested in how it works for you.
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Old 01-17-2008, 08:26 AM   #8
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km4hr, like everyone says, and as you already know, you've got it made. But I understand the shift from accumulator to spender can be really hard to make. So perhaps you could just commit to one year -- tell yourself that you'll wait a year before looking for work.

Judging by the experiences of most of the retirees on here, there's not much chance you'll be looking in a year.

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Old 01-17-2008, 08:31 AM   #9
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Km4hr, I would recommend placing your resume in a circular file and spending your free time searching for vacation spots on the web instead of j*b sites. You're probably better off financially than most people who are now enjoying ER. Congratulations, and by the way I think you'll feel much better after a few weeks of no w*rk.
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Old 01-17-2008, 08:39 AM   #10
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You are in outstanding shape. No worries what so ever. Just maintain a balanced portfolio and you will be able to ride out markets corrections with no problem.

What island are you going to visit first? 8)
Full time wuss............
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Old 01-17-2008, 08:43 AM   #11
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What everyone else says. Give your self a year at least. Think of what contributions to your family and your community you can give now that you have the time. There is so much more to life than working.
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Old 01-17-2008, 08:46 AM   #12
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Others have commented on your financial situation which looks extremely doable to me but I wanted to chime in on the emotional side. I ERd last May and had a a lot of anxiety prior to leaving Megacorp. All I can tell you is that since then, I have never been happier in my life. I do what I want to do when I want to do it and my blood pressure is way, way down. Best of luck!
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Old 01-17-2008, 09:52 AM   #13
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km4hr, You are fine financially.

Let me comment on the emotional side of it, as one other poster did. I did not have any anxiety over retiring. I had started looking at the financial details about 4 years prior (about the time the market came back in 2003) and found that I was ok... So I got a 2nd opinion from a FA (NO, please do not hijack thread on pro/con FA). I then started surfing the web and found this forum amongst others and got some more opinions and suggestions. This gave me increased confidence to move forward. So posting on this forum is a great idea.

As I got within 1 year of retirement, I started talking to people whose opinions I valued, within the company and outside the company and talked through my financial plan, as well as my 'what are you going to do' plan. The feedback I got was that I had a well thought out plan. Many of the people said I was doing things they would not, but that's because of differences in our wants and desires, not because they were 'nutty' or crazy ideas. One of my work colleagues laughed and said I planned and will probably execute my retirement just like I have done projects at work. This gave me additional confidence.

What I am suggesting is that you do you due diligence. Lay out things, do your spreadsheets, make your lists, ...etc. Then go and ask some people who you think are 'smart' what they think of your plans. Have an open mind and listen.
Hopefully when you have done some of this, you'll have the confidence level to move on with out any anxiety and enjoy your retirement.

... and btw, after 6 months of retirement, my blood pressure, cholesteral, weight are all down.
I have time to do the things I want to do to keep myself healthy. I wake up when I want to (except when the boss (DW) tells me I am supposed to be somewhere early), go to sleep when I want to, and all around do what I want to do.
Having a ball!

Best of luck to you.
Life is GREAT!
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Old 01-17-2008, 09:55 AM   #14
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So far it's unanimous! Maybe quitting was the right choice. It remains to be seen. But your support and confirmation has helped lift my confidence and reduce the anxiety. I'll be revisiting these responses in the future when I need a boost. Thanks everyone.
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Old 01-17-2008, 10:00 AM   #15
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You saved 1.8 mil. 1100 pension? No debt?

Enjoy. Enjoy, you are FINE!
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Old 01-17-2008, 10:14 AM   #16
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If you are worried about the stock market, make any coming withdrawals from the bond side of your investments until the market feels comfortable again. That will give the stocks time to dip and recover without having to withdraw anything from them.

I have 2-3 years in essentially cash for the first few years of retirement. Hopefully that will take care of this downturn. I'll try to replace that when stocks are doing "too good". A little bit of market timing that I hope will even out the ups and downs a little bit.

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Old 01-18-2008, 04:20 AM   #17
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I retired back in 1999 in slightly better financial shape then you, although no pension no health care, and younger.

Eventhough intellectually I knew I had enough, there was a nagging doubt. Certainly concerns by mom and some friends didn't help. It is prudent to be worried about big chances in your life and retirement is a huge one, but it is also a fantastic opportunity to do so at fairly young age.


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