Final Gut Check...Feedback?

[REattempt]

Ok, about to pull the FIRE...July 15! Think I have all my ducks in a row, but thought I would get a final gut check from the group.

Current Age = 46, single, 1 child, college paid for & funds not included in this analysis
Expenses 2011-2014 = $130K/year (exceeds last 3 years of expenses)
Expenses 2015 to AGE 88 = $80K/year (based on continued actual expenses.)

• Expenses reduced because certain required expenses go away in 4 years .
• Chose 88 because it was close to 15% survivability and nobody in my lineage has made it past 83. No male made it past 70.
• Health care costs included from day 1 at $3000/yr. Though I can get it cheaper through my former employer.

Assets:
Investments: $3.1MM ($2.6MM non-Qual, $500K Qual IRA/401K non-Roth)
Home: $190K
Second Home: $750K (home with value only in land...read:OLD HOUSE)

Debts:
Home: $150K
Second Home: $150K

SS/Pension:
SS: 29K/yr today's dollars starting at 67
Pension 1: $5500/yr at 65
Pension 2: $6700/yr at 65

Approach:
Bob Clyatt or OTAR type portfolio. Won't get into the details...lets assume 40/60 to 60/40 split. Expenses at .31%

Plan
2011 Pay off mortgages (-300K) & rebuild 2nd home (-250K) =

Investments = $2,550,000
Property = $1.2MM (increased value of property due to new house) + $190K = 1.39MM
Expenses Reduced to $110,000 (4.3% WR) for next 4 years (mortgages gone)

​

2015 Sell Primary home (+190K) move to 2nd home =

Investments = $2,387,000 (assuming I earn 4%/year for first 4 years)
Investments = $2,300,000 (assuming I make 0% and only spend in first 4 years)
Property = $1,200,000 (sold home)
Expenses Reduced to $60,000 (2.6% WR on $2.3MM) (mortgages gone)
​

If I DO NOT INCLUDE SS, Pensions nor the value of the second home in my assets/income, FIRECalc and ORC both say I have 100% chance to survive 42 years with 0 failures.

I think I'm good to go, but I'm still nervous.

Time for the gut check...Feedback?

 

[BigNick]

I don't think that your nervousness is about money.

 

[REattempt]

You may be right...

How do I deal with THAT?

 

[Packman]

You may be right...

How do I deal with THAT?

I assume thay you have considered the mental and emotional aspects of ER, especially at a very early age. Are you retiring from something or to something? If you know how you will spend your time, and are okay with that, go for it.

On the financial side, I would see four odd items: 1. It seems like your estimate of SS is high, assuming you pay nothing into it for the next 21 years. It probably won't make much difference to your total plan. 2. You have a lot of years to pay for health insurance and other health costs. Have you planned for the worst case? 3. Only $60,000 of expenses, while owning a million dollar home, paying health costs, etc. - seems low. 4. Have you taken taxes into consideration?

 

[chinaco]

IMO - using the information you provided, you appear to be in pretty good financial shape.


Real Estate is an asset... but also an ongoing expense. Why would you keep two houses? For that matter why own a house and property for $1.3M? Is it a farm?

 

[donheff]

Good to go. Here is to living to 90 (too lazy to look for a toast emoticon).

 

[REattempt]

Thanks!

I assume thay you have considered the mental and emotional aspects of ER, especially at a very early age. Are you retiring from something or to something? If you know how you will spend your time, and are okay with that, go for it.

On the financial side, I would see four odd items: 1. It seems like your estimate of SS is high, assuming you pay nothing into it for the next 21 years. It probably won't make much difference to your total plan. 2. You have a lot of years to pay for health insurance and other health costs. Have you planned for the worst case? 3. Only $60,000 of expenses, while owning a million dollar home, paying health costs, etc. - seems low. 4. Have you taken taxes into consideration?

Certainly retiring from something. I don't know how I will spend my time aside from learning to relax, eBay and garage sale to get rid of stuff, organize things that I have put off, do a bit of video editing. Burnt out and need some number of months to decompress, do nothing and to figure it out. Not having been here before, what mental and emotional aspect do I need to consider? How do you work through those? What problems do people encounter?

As for the odd items:
1) I put my actual numbers into the SS calculator, included 0$ for future years and it came out at $28,800. I didn't inlude it in the Firecalc/ORC plan. I did test putting it in for grins; I put in 1/2 (15K is half, assuming the Gov'ment reduces SS) and the pensions just to see what it did and it added about 10K of additional spending for all years without failure (95K).

2. This is a good point. I used 3000/yr. for all years. Since I can actually spend $85K/yr instead of the planned $60K without failure, I assumed I could add 25K/yr expenses and still be good. I can get insurance NOW for $1500/yr. What is a good number for later years?

3. It is really a 1300 SqFt., $250K home that would be paid off. The value is in the land. It would be new and I planned for expenses as they are today to maintain the home which I think would actually go down. (no painting or replacing rotted wood etc that I do today).

4. This is a good point. Yes, to a degree. I found it really hard to figure out/forecast what taxes would be. I guess I need to do a bit more work to figure out what portion of my income would be from dividends/interest and from selling securities that would be capital gains to figure out taxes.Any good rules of thumbs?

 

[REattempt]

IMO - using the information you provided, you appear to be in pretty good financial shape.


Real Estate is an asset... but also an ongoing expense. Why would you keep two houses? For that matter why own a house and property for $1.3M? Is it a farm?

One house is in a different geographic area and I have 1 child in H.S. I can't move now. Critical time in child development .

It is on a large lake near a large city. Been in the family for years. Spend my summers there on the beach as a kid. It is in my blood...not sure I can give it up. (The house is 50 years old and needs to be replaced. Replacing it will add more value than the cost of doing the build.) I figure worst case, if I run out of money or get too old to live there I can sell it. Call it my safety valve.

 

[Purron]

Greetings! You look to be in fine shape to me. Since you asked for feedback, here goes.....

Current Age = 46, single, 1 child, college paid for & funds not included in this analysis
Expenses 2011-2014 = $130K/year (exceeds last 3 years of expenses)
Expenses 2015 to AGE 88 = $80K/year (based on continued actual expenses.)

• Expenses reduced because certain required expenses go away in 4 years .
• Chose 88 because it was close to 15% survivability and nobody in my lineage has made it past 83. No male made it past 70.

Wow. Those expenses seem really high. I'm assuming the reduction from $130K to $80K is related to ending payments to an ex-spouse, but still $80K per year for one person? Or is your child still very young and will be with your for quite some time?

Health care costs included from day 1 at $3000/yr. Though I can get it cheaper through my former employer.

If you can get health care cheaper from your former employer, why not? If you're getting health insurance on your own (no subsidized group plan), $3000 a year sounds too low, particularly if you have a family plan to include your child.

SS/Pension:
SS: 29K/yr today's dollars starting at 67
Pension 1: $5500/yr at 65
Pension 2: $6700/yr at 65

The SS sound high to me - how did you arrive at $29K a year?

Plan
2011 Pay off mortgages (-300K) & rebuild 2nd home (-250K) =

Investments = $2,550,000
Property = $1.2MM (increased value of property due to new house) + $190K = 1.39MM
Expenses Reduced to $110,000 (4.3% WR) for next 4 years (mortgages gone)

​

2015 Sell Primary home (+190K) move to 2nd home =

Investments = $2,387,000 (assuming I earn 4%/year for first 4 years)
Investments = $2,300,000 (assuming I make 0% and only spend in first 4 years)
Property = $1,200,000 (sold home)
Expenses Reduced to $60,000 (2.6% WR on $2.3MM) (mortgages gone)
​

Here you show expenses reduced to $60K but above you showed $80K from 2015 to age 88.

Seems like you'll still have a pretty hefty investment in real estate. Plus depending on market conditions, these numbers could end up being substantially different.

 

[REattempt]

Greetings! You look to be in fine shape to me. Since you asked for feedback, here goes.....

Wow. Those expenses seem really high. I'm assuming the reduction from $130K to $80K is related to ending payments to an ex-spouse, but still $80K per year for one person? Or is your child still very young and will be with your for quite some time?

Yes, your assumption is accurate on why it changes. The 80K includes keeping both houses.

If you can get health care cheaper from your former employer, why not? If you're getting health insurance on your own (no subsidized group plan), $3000 a year sounds too low, particularly if you have a family plan to include your child.

I don't pay for the health care for the child, just myself. What is a good number?

The SS sound high to me - how did you arrive at $29K a year?

I manually entered my actuals into the SS calculator and 0$ for forward years and assumed FRA of 67.

Here you show expenses reduced to $60K but above you showed $80K from 2015 to age 88.

The 80K is based my budget today (if I take out the expenses that go away) but included the mortgage payments on the homes. In the plan, I will pay off the mortgages this year 2011. That will reduce my expenses by 20K...hence the 60K

Seems like you'll still have a pretty hefty investment in real estate. Plus depending on market conditions, these numbers could end up being substantially different.

True. I figure the R.E. is my buffer. Instead of trying to predict the investments I would have, I used FireCalc and ORC features that allow me to manually put in my spending and changes to investments and let it run the scenarios. All still worked out ok. I guess I look at the RE as a relief valve. I also used the value of the real estate today, what I could sell it for w/in 60 days (fire sale)

Thanks for all the help!

 

[Purron]

REattempt - it's hard for me to give you a good number on an estimate for health care insurance costs because there are so many variables and choices out there. I know it's not unusual for people to pay $1000 or more a month. Here's a tread with some good info. It's pretty old, so you may want to post a seperate question on this topic. http://www.early-retirement.org/forums/f47/faq-archive-buying-private-health-insurance-30756.html

 

[obgyn65]

Hello - have you run this application :

Merrill Edge| See Where You Stand

I think I'm good to go, but I'm still nervous.

Time for the gut check...Feedback?

 

[Midpack]

I don't think that your nervousness is about money.

+1. Some people are comfortable with a 5% WR, some can't sleep at night at any more than 2% or dividends/income only - no principal. I can't imagine asking strangers online to comment on my net worth, retirement income/spending plans. I'm the only one with skin in the game WRT my finances and successful retirement.

Tell me what you will spend each year, how long you will live, what inflation will be and what your returns will be and what if any bequest you plan on - and I can give you a good guess.

But it sounds like you're hung up on the emotional side anyway, not money. Money is the easy part in that it's quantifiable, then you make the judgement when you have "enough." The emotional side is harder, there is a lot of support here, and I found reading Work Less, Live More by Clyatt and How to Retire Happy, Wild & Free by Zelinski very helfpul for the all important non $ aspect of retirement.

 

[REattempt]

Ok, reading and Research

Midpack, THANKS FOR THE FEEDBACK.

+1. Some people are comfortable with a 5% WR, some can't sleep at night at any more than 2% or dividends/income only - no principal. I can't imagine asking strangers online to comment on my net worth, retirement income/spending plans. I'm the only one with skin in the game WRT my finances and successful retirement. I get it. It just seems to me that getting other comments from people that have already been through some period of retirement could be valueable. I know I have to decide, but if I was missing something, somebody will likely catch it.

Tell me what you will spend each year, how long you will live, what inflation will be and what your returns will be and what if any bequest you plan on - and I can give you a good guess. I looked at all my expenses and how I was looking at it again. Simplified: I will have about 2.82MM at retirement (july 15). My expenses willl be about 80K/year starting now, indexed to inflation. I think inflation will be around 2-3 percent for a year or two and then they will rise. To where, who knows. I expect my returns to be in the 4.5-5% being conservative. I plan on no bequests. Spend to the end. I'm 46, 47 in October.

But it sounds like you're hung up on the emotional side anyway, not money. Money is the easy part in that it's quantifiable, then you make the judgement when you have "enough." The emotional side is harder, there is a lot of support here, and I found reading Work Less, Live More by Clyatt and How to Retire Happy, Wild & Free by Zelinski very helfpul for the all important non $ aspect of retirement. It's been a while since you posted this and I wanted to read these before I responded. I went to the library and checked both books out. I actually had read Clyatt's book a while ago and Zelinski's "The Joy of Not Working" while visiting my brother on vacation a while ago. I re-read all three.

I also spent a bunch of time talking about all this w/my girlfried, cause she knows me better than anyone. After all the reflection, (and a bit of psychoanalysis ) I think we both concluded that my issue is not the emotional side.

Long story short, I grew up in a strict german household and a mother that worried about nothing but money. I got the disease. I have my "get-a-life" tree (didn't call it that), but I know everything that I want to accomplish and tons of ideas for stuff to do. My only fear is running out of money. I firmly believe that I'm only worried about having enough.

Funny story be told, my mother [god rest her soul] always joked that we suffered from "never enoughness." I guess that is the lesson that I am purposed to learn!

 

[chris2008]

Hi, I know the "german household" issue, too.
But while it might be super safe to wear one belt plus one suspender nobody wears 2 of each...
The book "you don't need a million to retire" by Ralph Warber helped me to think through some issues of my own ER (comeing in 2012). It might help you, too.
All the best!

 

[REattempt]

Funny....

Hi, I know the "german household" issue, too.
But while it might be super safe to wear one belt plus one suspender nobody wears 2 of each...
The book "you don't need a million to retire" by Ralph Warber helped me to think through some issues of my own ER (comeing in 2012). It might help you, too.
All the best!

ROTFL! I about fell off my chair when I read this. Actually cried laughing. That hit home...but I've never heard it before! I'll read the book, thanks for the recommendation!

 

[chris2008]

Thanks for the ROTFL!
I have checked the book again and found I got title and author wrong.
It's this one: Get a Life by Ralph Warner - Nolo

 

[Lsbcal]

Is it possible for you to do an extended leave from your job? That would help you to see how you personally deal with having no job to report to.

What do you like to do outside of work? Will it fill up your days?

Miscellaneous:
1) SS is probably too far away for you to be sure of what age you'll really get it and how it might be modified.

2) Would consider refinancing house at today's low rates versus paying it off. Depends a lot on your tax situation.

 

[ESRBob]

The 'never-enoughness' worry at the start of ER is a huge issue among some of us - (I too have the German thing in my family.) I think as long as the numbers look pretty solid (yours do) there will never be much more you can do to lay off the risk of unknown future events. The only thing I can offer is that, once you get into the new post-career mode, you'll find new ways to shave costs, if you have to, in order to be able to keep living a life that is more intentional, more free, more based around your avocation than around having to go in and work on someone else's problems for a paycheck.

I think there comes a time when you just have to jump. It may not even be clear to you, ten years on, if you 'have enough' and there will no doubt be some dark days in the markets when you'll doubt the wisdom of having left well-paid career work.

But that is not a reason to keep working, to keep delaying ER for some final layer of security. At that level there is no other security than our ability to downsize, to manage, to create a viable post-career life within the reality we find ourselves in. The payoff for living with this risk/uncertainty is the chance to fully live the life we were put here to have. Good luck with your decision -- we'll be sending some good thoughts your way on July 15!

 

[Hiredgun]

3 Million sounds like plenty to retire on. I'm hoping to check out at 45 to 46 with $3-4M.

But then I read posts like this one on Bogleheads:
Bogleheads :: View topic - Help with retiring early - How to plan 10 years out

And I start to question myself. Read the responses from Afan. I'm sure he is of a different mindset than most on this board, but it's a constant battle: worry about running out of money versus waiting too long and not having time to enjoy it.

 

[Alan]

3 Million sounds like plenty to retire on. I'm hoping to check out at 45 to 46 with $3-4M.

But then I read posts like this one on Bogleheads:
Bogleheads :: View topic - Help with retiring early - How to plan 10 years out

And I start to question myself. Read the responses from Afan. I'm sure he is of a different mindset than most on this board, but it's a constant battle: worry about running out of money versus waiting too long and not having time to enjoy it.

Interesting thread. The OP's plan there is to continue working like crazy (60 -70 hrs/week) for the next 10 years and hope to accumulate $2MM so he could consider retiring at 45 while his wife, 10 years his junior, continued working, pulling in $50k/yr. That sounds like a decent plan to me particularly since he stated from the start that it had plenty of "ifs" and "buts".

10 years is a long time and he will be much more learned when he gets to age 45 and has 10 years of married life and investing experience to draw on. I think Afan is far too conservative to think that one has to be "seriously rich" for a spouse to retire at age 45. My DW RE'ed at 48, at my suggestion, without us being rich, while I worked another 6 years to secure a pension and retiree health insurance.

Back to this thread, and July 15th is now passed so I expect REattempt has now pulled the plug and joined the class of 2011. I think he is going to do just fine.

So, did you do it??

 

[REattempt]

Update...

Soooooo...here is where I'm at.

Best laid plans of Mice and Men. So, was selling the business set to close in June. Was going to give notice on July 15, last day July 31.

It closed, but what was originally communicated as my share was larger than the actual $ at close. (I shouldn't be surprised) AND I still don't have final accounting for the numbers, so I don't know what the tax burden/tax issues are...the swing could be as much as 100K. Was also going to have health care lined up through former employer and that is taking longer than expected. As a result, I'm standing pat until I have loose ends tied up.

Finally, as Chris2008 suggested, I got the book: "Get a Life" by Ralph Warner. My issue is still primarily the money, but I don't think I got what people were saying about the issue not being the money. Work less, live more and the Zelinksi books didn't ring the bell for me. Get a life rang the bell. I guess what I am saying is that I got Warner's point where I didn't get it from the others. I don't have a plan. I've spent so much time working with this thought of the doors openning, the sun shining in and grand music playing when I retire and I may be in for a rude awakening. Over the last couple weeks, I've been leaving at 5pm, spending time with my daughter and DGF, which has been great, but the slow realization has hit me that I need to spend some time rebuilding balance in my life and putting a plan together for what I will do next. Getting my ducks in a row, so to speak.

It seems like I'm now on a path of discovery of the next phase. It seems like it will take some time to unfold, much like a flower in a new day.

Any experiences out there on how others put their plan together or how the next phase unfolded?