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Soliciting comments on ER strategy
Old 07-11-2012, 06:50 AM   #1
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Soliciting comments on ER strategy

I wanted to post this and get any comments or feedback. I work for the federal government. Im offered an early retirement package and am strongly considering it. Basic details:

Age 50
Single
Rent an apartment
Offer would be about $35,000 a year (before taxes). No COLAS until I reach age 62.
My living expenses are about $37,000 per year.
Net worth about $2.3 million
No debt (and no house, though)


I figure I can easily ER. My retirement income would cover most of my living expenses. If I withdrawal 1% per year, I should be able to cover the rest, although each year I may have to draw a little more due to inflation. I estimate my after tax retirement income will be about $26 k does that seem about right? Job is pretty stressful and Im starting to get some health problems. Im 99% sure these will improve if I ER. One thing that has me concerned is Id love to be able to live off my retirement income for my basic living expenses and tap into my nest egg only for bigger purchases but Im not quite there yet. Also, I dont really have any passions and dont know how I would answer the question What will you do?. I do live alone and the job does meet some social needs (although Im a strong introvert). I also stand to inherit a house at some point, but dont want to factor this into the equation.

If anyone has any comments or suggestions, Id appreciate it. Does my reasoning seem sound? Anything else I should consider? Thanks.
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Old 07-11-2012, 07:00 AM   #2
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Keep in mind who the members of this website are, so the answers will no doubt be slanted, But from what you describe, it sure looks like you should accept the offer. I don't see any financial issues to worry about.
Health insurance/expenses? If that is not an issue (nowithstanding Obamacare), only real question is the one you raised - what will you do with your time.
You may want to consider doing what I've done - actually write down things you will do in retirement. I broke it down into Physical (exercise), Intellectual (to keep the brain working) and DIY chores around the house. My list keeps expanding so I'm confident boredom won't be an issue at all. If you put together such a list, you may then be a lot more confident about your retirement decision.
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Old 07-11-2012, 07:09 AM   #3
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David, no social security, correct?

Your portfolio should be able to generate some income and still grow. The income will be enough to complement your pension and the portfolio should still keep even with inflation. If you have a reasonable option for healthcare you should do fine.
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Old 07-11-2012, 07:13 AM   #4
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Thanks for the replies. Yes I will get social security, but I've never factored that into the equation, in order to be conservative. That way, if something happens and I don't get it (or it is reduced) it's no problem.

And yes I can keep my health insurance.
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Old 07-11-2012, 07:15 AM   #5
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Given your net worth and the pension I don't think there is any question that you will have the financial bases covered, and at very low SWR to boot. In fact, with a little nipping and tucking you could probably do fine with just the pension since it is only $2,000 less than your current living expenses. I would run some firecalc simulations and check out the Fidelity early retirement income calculator to feel more comfortable about your financial outlook.

It sounds like the more fundamental issue is your health. To me, health needs to come first, and it sounds like leaving your stressful career will give you an opportunity to eliminate stress and relax more.

I can relate to your comments about "what will you do" with your free time in early retirement. I am also an introvert and relied heavily on my job for social stimulation. By the end it was even more important to me than the money since I had saved enough to ER. Now 9 months into ER, I am seeking out volunteer situations as well as pro bono jobs that requirement 1-2 days/week commitment to satisfy my social stimulation and purpose needs. You may also want to check out meetup.com which offers tons of activities, including some travel activities, that folks have created for others who share their affinities. It's a great way to meet like-minded people and expand your network in ER.

You may also want to make a list of things you want to accomplish in ER, with some rough time frames. In other words, become as goal oriented about filling your time with satisfying, fun activities as you were in your career about stressful work-related activities - without overdoing it, of course, because, as I said, health needs to come first ..or else what difference does any of it make?
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Old 07-11-2012, 08:06 AM   #6
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..Job is pretty stressful and Im starting to get some health problems. Im 99% sure these will improve if I ER.
Your financial situation is very similar to mine and I retired this year at 59.
If I had one regret, it would be that I wish I left a few years earlier.

Based on the stressful and health comments I would take the early retirement. Nothing more important than health.

Ernie J Zelinski's books are great , you should read them

Good luck
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Old 07-11-2012, 08:11 AM   #7
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Thanks for the replies. Yes I will get social security, but I've never factored that into the equation, in order to be conservative. That way, if something happens and I don't get it (or it is reduced) it's no problem.

And yes I can keep my health insurance.
You are golden. Don't be so hesitant to enjoy your nestegg - that is what you saved for.
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Old 07-11-2012, 08:29 AM   #8
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To be more specific on the financials:

History indicates that you can withdraw 4% of your portfolio each year, adjust it for inflation each following year, and the portfolio will last 30 years or more 95% of the time (based on each years data, starting back in 1871(IIRC?) - check the FIRECALC.com page for more). This assumes 75% of assets in equities (stocks). If you lower the stock allocation to reduce volatility, that withdraw rate (WR) would need to be adjusted down for the same success factor,

Many of us would prefer a more conservative withdraw rate, of 3%-3.5%. Assuming that $2.3M networth you mention is liquid assets that can be invested, a mild 3% would provide ~ $69,000, inflation adjusted each year. This far exceeds your current spending, even before we start pulling a pension or SS. You appear to be golden!

The only real question here is that 'current spending'. What you really need to know is 'spending in retirement'. It may or may not be significantly different. At any rate, assuming most of that $2.3M is liquid assets, you've got quite a buffer there.

I sure hope you can find a way to enjoy retirement, since you are stressed out in your current job. It would be a shame if you had the means but not the will/ability for ER. I never had that problem, I enjoy retirement immensely, can always find something to do - so sorry, I just can't relate. But I do understand it is a legitimate problem for some people.

-ERD50
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Old 07-11-2012, 09:54 AM   #9
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...

Ernie J Zelinski's books are great , you should read them

...
+1 - I found "The Joy of Not Working" very helpful in giving perspective about life apart from work. Like so many people, I relied on my work for my sense of identity. After ER, it took a while (and books like this) to realign my perspective.

Consider yourself blessed to have the options ahead of you - like most of the rest of us here you are very likely to find yourself in a much better place a year from now if you go ahead and take the plunge. Best wishes!
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Old 07-11-2012, 01:03 PM   #10
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Look at it a slightly different way. How much more can you spend per year if you continue working another year? Is that worth it to you? Doesn't sound like it matters to you. The only thing you'd really be missing are social contacts and a familiar routine. You'll find stuff to do after you retire. You can even start a different j*b if that's what it takes. You won't even have to worry about what it pays.
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Old 07-11-2012, 01:38 PM   #11
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Thanks for the replies. Yes I will get social security, but I've never factored that into the equation, in order to be conservative. That way, if something happens and I don't get it (or it is reduced) it's no problem.

And yes I can keep my health insurance.
You've won the game, why keep playing.

Sign on the dotted line and get out before they change their minds!
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Old 07-11-2012, 02:42 PM   #12
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I don’t really have any passions and don’t know how I would answer the question “What will you do?”. I do live alone and the job does meet some social needs (although I’m a strong introvert).
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Ernie J Zelinski's books are great , you should read them.
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+1 - I found "The Joy of Not Working" very helpful in giving perspective about life apart from work. Like so many people, I relied on my work for my sense of identity. After ER, it took a while (and books like this) to realign my perspective.
+3. Like others have noted, you're FI, so the money aspect is covered - congrats. But it's not as simple as the money alone.

It's important to consider 'what you will do all day', and you're wise to recognize the possibility. It may not fall into place by itself but it may not, being an introvert (like many here) could work for or against. I'd also recommend How to Retire Happy, Wild & Free by Ernie Zelinski. Not the greatest writer, but the content is helpful. If nothing else, I'd recommend competing the 'Get-a-Life-Tree' exercise. Work Less, Live More by Bob Clyatt is another good book with lots of discussion regarding the non $ aspect of retiring. Best of luck...
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Old 07-11-2012, 02:48 PM   #13
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You've won the game, why keep playing.

Sign on the dotted line and get out before they change their minds!
"Know when to fold 'em, when to walk away and when to run" ...run guy!
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Old 07-11-2012, 02:59 PM   #14
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As others have said, you are golden. It seems tough for many on this forum to consider because of our LBYM mentality but it sure looks like you can even spend more money. Take some time to figure out what it is you really want to do and then go have fun doing it.
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Old 07-11-2012, 04:19 PM   #15
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Financially you are set . You just need your social life taken care of . I would get a list of all the clubs or classes in your area . I would circle any that interested me ,try them and eventually you will find a few keepers which will lead to a new social life .
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Old 07-11-2012, 05:38 PM   #16
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Thanks for the replies. Yes I will get social security, but I've never factored that into the equation, in order to be conservative. That way, if something happens and I don't get it (or it is reduced) it's no problem.

And yes I can keep my health insurance.
Your financials are in greats shape, your reasoning is indeed sound and you are in the drivers seat. Congratulations on getting there.
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Old 07-11-2012, 05:55 PM   #17
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You just hang out here for a while after you pull the plug, David. You'll get plenty of ideas for what do in your free time if you find yourself needing any .
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Old 07-11-2012, 07:43 PM   #18
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What if you cut back to 3 or 4 days a week or got a part time job doing something you like.

You could always volunteer your time too.
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Old 07-11-2012, 08:01 PM   #19
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You just hang out here for a while after you pull the plug, David. You'll get plenty of ideas for what do in your free time if you find yourself needing any .
+1

When I retired, I had similar feelings ... "What to do with all this time.."

But came to my senses..and now cherish the feeling of just putzing around all day
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Old 07-11-2012, 08:41 PM   #20
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I retired from the fed. govt. in Jan. 2010, when I was 54 1/2. Your financial situation at age 50 is quite a bit better than mine was when I retired, and I am not having any financial issues in retirement. As others have said, your highest priorities now are to work on improving your health, and to figure out how to spend your time in retirement. In my case, I increased my amount of exercise and improved my diet after I retired, and my health has definitely improved. As for how to spend time in retirement, I had a ton of hobbies even before I retired (that I spend more time at now), plus I volunteer for several organizations in retirement, so I keep plenty busy (sometimes a little too busy!). I am sure that you will come up with a list of things you are interested in, if you give it some thought. But first, it sounds like you need to relax and de-stress a little..........best of luck to you.

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