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Old 05-09-2008, 09:27 AM   #21
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Well, he did say he is 50 years old, so maybe if he can make it on 4% through age 62 and then start collecting social security benefits, he can manage. Then at 65, Medicare kicks in and can save him a few more bucks.

He can also work as a school crossing guard or putz around at an odd job here or there to earn that little extra to get by. Every dollar that he can earn is that much less he needs to withdraw from his stash. So if he can earn $1000 during the year (not to hard), it's the equivalent of "adding back" the withdrawal on $25,000 of assets.

Depends how bad he wants it.
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Old 05-09-2008, 09:28 AM   #22
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Originally Posted by Marcretire View Post
Thanks, everyone, for your replies. What is accelerating my desire to retire is the industry I've worked in is in a state of collapse and I'm finding age an impediment in my job search (sales). I'm in excellent health and don't foresee significant healthcare costs, although I know there's no guarantee of good health. The only other added future expense would be a new car. I'm pretty much living on a couple thousand a month pre-retirement. I'll weigh everyone's advice.
It sounds like pretty soon, your job will evaporate and the choice will be out of your hands. If that is correct, then I think that you need to start getting ready to retire. Keep saving and keep looking for ways to keep your expenses down.

It's perfectly possible to retire on less than $600K - - many, many people do that. But it really depends on your lifestyle. I think what worries people is that apparently you live on the east coast, which is not a low cost of living region. You might want to re-think that. Or, you might consider taking a lower paying part time job that is not in your collapsing industry, and add all of the income from that job to your nestegg.

If I was in your position, I would continue working until my job evaporated, take unemployment or retirement incentives if offered. Then I would load my possessions into a rental truck and move to a low cost area in the midwest (which I plan to do anyway). There, I would buy a house for about $125K. I would add any excess from the sale of my previous home to my nestegg. That nestegg addition of several hundred thousand should give you some extra income as well.

So, at that point you would have maybe $800K? Then with a 4% withdrawal rate, which is generally considered to be safe, you would have $2666/month before taxes. That should give you around the amount you need to live on after taxes. Then I might consider taking a part time, low paying (and low stress) job, pouring my pay into my nestegg. I wouldn't take a part time job if my medical insurance was pretty sure to remain low, but I gather yours could go up as health care costs spiral upwards.

You can retire, carefully and after thinking through your expenses and investments carefully.
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Old 05-09-2008, 09:33 AM   #23
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I'm sure there will be plenty on here to tell you how stupid the idea is, but I'm throwing it out there anyway. A V.A. at age 50 would pay you 4% FOR LIFE, with increases as you grow older. 4% equals $24k per year. .....I'm just sayin'.
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Old 05-09-2008, 10:47 AM   #24
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It will be tight, especially if you have no pension. If you have a big fat pension coming in the next few years and you live a simple, low cost lifestyle, it seems doable depending on how you tackle the 800-pound health insurance gorilla.
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Old 05-09-2008, 11:12 AM   #25
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I think I read the average person nearing retirement age has $50K saved up--you are way ahead of that. I'm sure you can make it work.
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Old 05-09-2008, 11:21 AM   #26
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I'm sure there will be plenty on here to tell you how stupid the idea is, but I'm throwing it out there anyway. A V.A. at age 50 would pay you 4% FOR LIFE, with increases as you grow older. 4% equals $24k per year. .....I'm just sayin'.
As long as you trust your insurer to last FOR LIFE.

Stocks decline as AIG reveals need for cash, oil surges: Financial News - Yahoo! Finance

"AIG's loss for the first quarter rekindled investors' anxiety about the strained state of the global financial system. AIG posted a loss of $7.81 billion -- its second straight quarterly loss -- and revealed plans to raise $12.5 billion in the coming months."
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Old 05-09-2008, 01:17 PM   #27
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Hi, would like very much your thoughts. I'm 50, single, no kids, no debt except $14K on mortgage. Have $600,000 in savings in the form of my 401(k). Wondering if it's feasible to retire and live off these funds.My overhead is low, just need around $2,000 month,which takes care of apartment maintenance, utilities, healthcare insurance. Thanks for your advice.
you never know where life is going to leave you or lead you. being unemcumbered neither by spouse nor kids nor debt adds lots of value to a relatively smaller nestegg. most of the people here think you need a million plus plus but speak from a perspective of being married and having kids and then grandkids. but we, the childless singles, don't have to buy so many presents. we don't care if we don't leave legacy. who knows where life will bring you tomorrow. all it takes is one little divorce to cut their nest eggs in half or a new & good partnership for you to double yours.

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There is no way. Keep working or move to the Ozarks. You think it is $2k but you have not considered all your costs.
hey, i'm considering downsizing to daytona, jacksonville, gainesville or tampa even (no offense, doc), the ozarks of florida. nothing wrong with that. in fact, i've been running numbers and i am way pleasantly stunned by the cost of living savings of downsizing to there.

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check out boglehead ..there is a guy there that retired on that amount. He grew his 600000 to 1.4 mil in 10years
haven't seen that but i've been running similar scenerios and guess what, it looks like lbym will work even after you stop working.

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Of course it all depends on your projected expenses including health care which is increasing at a rate faster than normal inflation.
that would be a huge concern of mine. but as i want to travel overseas, i'll be able to take advantage of lower cost insurance and healthcare elsewhere. so i just might wind up with, at least somewhat, deflationary health care expenses instead. afterall, i've been in the states for 51 years; time (the time that's running out) to experience the rest of the world now anyway.

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Did you factor in large ticket items like car purchases, root canals, purchase of a dog, etc?

What do you plan on doing after retirement that you didn't do pre-retirement? Will it cost more? $2K a month may not leave enough wiggle room for travel and entertainment, although you might be doing activities that don't cost much like walking in the park, reading at the library, riding your bike.
also good points. though you need to account for the dental, i've solved the dog problem. i simply play with other people's dogs whenever i get the chance. as to travel and car, i can solve that with one quick swoop: a vagabond life. sell the home, add that money to the portfolio and suddenly you've got more freedom to travel even then those with more money but also with a house to worry about. you'll use local transport so you don't need a car so there goes that huge expense too. without a house and its rec room, your entire lifestyle becomes your wiggle room.

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There, I would buy a house for about $125K. I would add any excess from the sale of my previous home to my nestegg. That nestegg addition of several hundred thousand should give you some extra income as well...
love what want2 has to say on this. in fact. a lot of that thinking is already part of my planning options as well.

edit: think i'm gonna start a thread on cost of living savings that come from downsizing but to check things out i am just now off the phone with my car insurance company. i requested quotes for three different towns in considering downsizing from fort lauderdale. here are the not insignificant savings on a six-month policy: daytona beach $261; tampa $71; gainesville $343. so by the x25 formula, moving to g-ville equals $17k that i don't need in my portfolio, just on my auto insurance savings alone. i have my health insurance company working on similar numbers and should get results to me by next tuesday. will report same on new thread.
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Old 05-09-2008, 02:03 PM   #28
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Only you know what you can REALISTICALLY live on. So given that the 2K/mth is realistic, then you $600k is what most on this forum would deem the absolute minimum to last you 30 years or so.
Questions to ask yourself.
1) how long do I think I will live? What is the family history?
2) what happens if something 'bad' happens and I need to pay for ?, ... extra medical that insurance doesn't cover, a new transmission for the car, ... katrina like catastrophe, ? Where would I get these 'emergency' funds from?
3) what happens if the market doesn't turn around and the next 3 or 4 years you don't see any appreciation (which the 4% withdrawal rate eventually relies upon to keep even/ahead of inflation), ... i.e. bad personal timing of retirement

... there are probably other questions you should consider also.

the net of what I would do if I were you would be to work as long as you can to build an emergency fund. Then you will be in a bit better position to weather some of the 'bad things' that can happen in life.
Being out of work for a while will make it even more difficult to get a (meaningful, i.e. decent paying) j*b.

Best of luck on your decision.
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Old 05-09-2008, 02:24 PM   #29
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As others have said, you might be able to do it based on your own calculations. I would definitely strongly consider working part time if your job does disappear. It'll give you an added cushion and put-off drawing down your assets.
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Old 05-10-2008, 04:28 AM   #30
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We have less saved for retirement than you do and it's working for us. Our monthly expenses are less than $1,600 and we're not in the Ozarks. We're in Hawaii, which has to be one of the more expensive areas in the nation.

However, it all depends on your lifestyle. We live simply, which is our preference. Just happier that way. Since we're already in a beautiful place and don't enjoy travel, we spend zero in that category. We have one vehicle, no mortgage, low property taxes, use very little gasoline, are watt watchers with low utility usage (although our rates are highest in the nation), and are frugal. in general. Our highest expenses are food, prescriptions, and medical insurance (pay a retiree rate, which is very reasonable).

So, I think it just depends on how you live and what you enjoy doing. If you are a big shopper, like to travel, or have expensive hobbies then you may need more savings.
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Old 05-10-2008, 08:14 AM   #31
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There is no way. Keep working or move to the Ozarks. You think it is $2k but you have not considered all your costs.
hey, i'm considering downsizing to daytona, jacksonville, gainesville or tampa even (no offense, doc), the ozarks of florida. nothing wrong with that. in fact, i've been running numbers and i am way pleasantly stunned by the cost of living savings of downsizing to there.
Our budget is $9k but we are moving to Mexico for much the same reasons. Cost of housing is $150/sq.ft. compared to $1100 where we live. Living costs are 35% lower. Where there is a will, we will find a way...

(BTW I know some retirees that pay $1k just for health coverage so that is a big deal in the US.)
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Old 05-10-2008, 08:26 AM   #32
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Our budget is $9k but we are moving to Mexico for much the same reasons. Cost of housing is $150/sq.ft. compared to $1100 where we live. Living costs are 35% lower. Where there is a will, we will find a way...

(BTW I know some retirees that pay $1k just for health coverage so that is a big deal in the US.)
Spending $9K/month sounds like work! I think when your housing cost goes down you will be surprised at how quickly the money piles up. Housing in my neighborhood in suburban New Orleans is going for about $125-$130/sq. ft.
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Old 05-10-2008, 08:30 AM   #33
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As others have said, you might be able to do it based on your own calculations. I would definitely strongly consider working part time if your job does disappear. It'll give you an added cushion and put-off drawing down your assets.

I agree with this. A part time job, say 20 hrs a week @ $8 per hour is about $7680 yr plus an earned income credit of $300. This can be a low/no stress job at a place on a bus route. Pack a lunch and enjoy the rest of your life.
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Old 05-10-2008, 02:19 PM   #34
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I'm sure there will be plenty on here to tell you how stupid the idea is, but I'm throwing it out there anyway. A V.A. at age 50 would pay you 4% FOR LIFE, with increases as you grow older. 4% equals $24k per year. .....I'm just sayin'.

Ah yes, the old annuity ploy. I'll take your word for it that you aren't shilling for the annuity industry but I'll also comment on the approach.

Annuity contracts are just that - contracts. They are only as good as the company issuing them and, even worse, they can be sold to another company without the consent of the person that bought the annuity.

It's happened twice to my level term life insurance policy and amazingly the rating of the acquiring company was always just a little bit lower.

Annuities also seriously limit the amount of inflation protection and usually have a more restrictive way to calculate it buried in the 240 pages of fine print.

As an option, what about buying preferred shares in top rated companies. The position of preferreds in a bankruptcy is above the holder of annuity contracts who would become simple creditors. Admitidly, they are below bond holds in priority. Right now Bank of America with a very high credit rating has preferreds yielding about 7%. There are numerous other companies that have excellent credit rating that will yield about there or higher. With good diversification, credit risk to any one company would be very limited. You could recover your principle at any time although the value would vary with the current interest rate. They do "mature" but usually over terms of 40 years or longer.

The advantage of preferred is that they are available in smaller amounts - typically original issue prices of $25. They are more readily sold in small lots than bonds. They usually have a slightly higher interest rate than bonds due to their less senior position in the event of bankruptcy.

If you don't want to buy 50 different preferred to get your broad diversification, you can buy a closed end mutual fund that will do it all for you. They usually sell at a discount and use a certain amount of leverage to juice their return. They also payout 8 to 12%.

There are all sorts of better alternatives than giving your money to an insurance company and hope they pay you a poorer return than you can get on your own without giving up your capital.
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Old 05-10-2008, 04:12 PM   #35
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Bank of America with a very high credit rating......

If you don't want to buy 50 different preferred to get your broad diversification, you can buy a closed end mutual fund that will do it all for you. They usually sell at a discount and use a certain amount of leverage to juice their return. They also payout 8 to 12%.
That BofA with the high credit rating, which one would that be? Also Preferred Funds are heavy invested in Financials, paying 8 to 12%, no risk there .

I actually own some of both, but IMO there's no free lunch.
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Old 05-10-2008, 04:36 PM   #36
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That BofA with the high credit rating, which one would that be? Also Preferred Funds are heavy invested in Financials, paying 8 to 12%, no risk there .

I actually own some of both, but IMO there's no free lunch.
There never is unless it's at one of those VA presentations where you walk away laughing.

BAC preferreds have a Aa2 (Moodys) and an A+ (S&P) credit rating. That's safely investment grade but they can change in a heartbeat. There are many non-finacial preferreds with equal or better ratings. It is truly possible to diversify across the whole world and almost every industry.

As far as investing in financials is concerned, what do you think an insurance company is? The problem with buying an annuity is that you've just put all of your financial eggs in one basket and the return is less than equally or better credit worthy alternatives. You can buy multiple annuities from different companies but that is still a poor level of diversification and a lower return.
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Old 05-10-2008, 05:02 PM   #37
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There never is unless it's at one of those VA presentations where you walk away laughing.

BAC preferreds have a Aa2 (Moodys) and an A+ (S&P) credit rating. That's safely investment grade but they can change in a heartbeat. There are many non-finacial preferreds with equal or better ratings. It is truly possible to diversify across the whole world and almost every industry.

As far as investing in financials is concerned, what do you think an insurance company is? The problem with buying an annuity is that you've just put all of your financial eggs in one basket and the return is less than equally or better credit worthy alternatives. You can buy multiple annuities from different companies but that is still a poor level of diversification and a lower return.
I don't want to be defending annuities or insurance companies, but the guaranteed payouts from SPIA's (realizing it really isn't guaranteed; and that SPIA's are not VA's, even though payouts can be very similar) are interesting to me. There is a lot of fine print no doubt. I'm not so sure about poorer returns, I ran some IRR calcs recently that showed an IRR of about 6% for a 53 age living to mid 80's. Compared to a 60/40 portfolio over the next 30 years, a 6% IRR might not be too bad, we do not know. When comparing risks, annuitites seem to be a reasonable investment. But again, to each their own. I don't think annuities should be trashed out of hand. I have owned VA's for almost 20 years now, they have been ok for me. The fees do not have to be huge, Fidelity has a VA for an extra 0.25% a year in fees. Each investment has it's own merits. Preferred Stocks have their pluses and minuses too.
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Old 05-10-2008, 06:16 PM   #38
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Our budget is $9k but we are moving to Mexico for much the same reasons. Cost of housing is $150/sq.ft. compared to $1100 where we live. Living costs are 35% lower. Where there is a will, we will find a way...

(BTW I know some retirees that pay $1k just for health coverage so that is a big deal in the US.)
If you are moving to Mexico, how much will the CRA's deemed disposition eat into your assets?
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Old 05-10-2008, 06:22 PM   #39
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RockOn,

Your annuity IRR was for living beyond the actuarial tables for a 53 year old man. I didn't look it up but I think a 53 year has a life expectancy of the mid 70's not the mid 80's. You're giving yourself an extra ten years of average life and then your return is at best marginal.
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Old 05-10-2008, 06:54 PM   #40
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I say that you go for it! You have definitely worked hard and seem to be at a point in your life to do something else. If you work in Pharma sales....the bottom is definitely going to be dropping.
You can always move to a lower cost of living....or rent out a room for some passive income. There are many other part time things you can do which will give you health insurance like substitute teaching. Life is too short.....go for it!
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