Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Would you FIRE in this scenario?
Old 03-04-2017, 08:48 AM   #1
Dryer sheet aficionado
coltsfan53's Avatar
 
Join Date: Jul 2013
Location: Indianapolis
Posts: 27
Would you FIRE in this scenario?

I wanted to get some opinions on whether to FIRE or not from this fine community. Here is our current scenario:

Me - 44 years old, stressful sales job. I enjoy it but I could also see another mode of life being more fulfilling. Income 200k per year.
Wife - 35 years old. She has a job that she could take or leave. Makes around 50k per year.
We have no children and, barring a miracle, do not see any on the horizon.

Portfolio:
Cash: $50k
Taxable: $1MM
IRA: $655,000
401k: $303,000

Pensions: I have 2 vested at this point; will bring $24K (no COLA) at 65.

Spend:
$80-100K per year
Only debt is $315K left on mortgage ($1,800 a month for next 19 years); $235K in equity

I am a slight 4% SWR skeptic over a potential 50 year retirement; I am also more than clueless about taxes for the early retirement class.

Thanks for your input!
__________________

coltsfan53 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-04-2017, 09:10 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2009
Posts: 5,186
Quick opinion is that you don't have nearly enough in non-retirement accounts to RE. If you can withdraw from your 401k at age 55 upon separation of service from your company, it looks like you will have new access to those presently locked-up funds.
__________________

__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 03-04-2017, 09:10 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 23,350
You need to include SS and a reduction in spending once your mortgage ends, but you're right... your WR is likely to be 4%ish and is IMO too high to FIRE.

Do your expenses include income taxes and health insurance/health care?

Have you run your situation through Firecalc? If you do, exclude mortgage payments from spending, put in an off-chart spending for your annual mortgage payments on the Other Income/Spending tab and put in an offsetting pension for the same amount starting in the year your mortgage payments end. If you include your mortgage payments in your spending the program provides for mortgage payments, inflated, for the entire time horizon.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 03-04-2017, 09:29 AM   #4
Dryer sheet aficionado
coltsfan53's Avatar
 
Join Date: Jul 2013
Location: Indianapolis
Posts: 27
Excellent point on the "Off chart" allocation of the mortgage payment in FIREcalc. I have never picked up on this rather obvious need. Much appreciated.

Quote:
Originally Posted by pb4uski View Post
You need to include SS and a reduction in spending once your mortgage ends, but you're right... your WR is likely to be 4%ish and is IMO too high to FIRE.

Do your expenses include income taxes and health insurance/health care?

Have you run your situation through Firecalc? If you do, exclude mortgage payments from spending, put in an off-chart spending for your annual mortgage payments on the Other Income/Spending tab and put in an offsetting pension for the same amount starting in the year your mortgage payments end. If you include your mortgage payments in your spending the program provides for mortgage payments, inflated, for the entire time horizon.
coltsfan53 is offline   Reply With Quote
Old 03-04-2017, 11:08 AM   #5
Recycles dryer sheets
 
Join Date: Jan 2017
Posts: 59
Quote:
Originally Posted by scrabbler1 View Post
Quick opinion is that you don't have nearly enough in non-retirement accounts to RE. If you can withdraw from your 401k at age 55 upon separation of service from your company, it looks like you will have new access to those presently locked-up funds.
A Roth Conversion Ladder is a potential solution to tapping retirement accounts prior to 59.5 (or 55). Requires a 5 year planning horizon to execute without paying early withdrawal penalties. Properly executed with reasonably good projections of your expected tax situation, you may be able to greatly reduce or eliminate the taxes due on the Roth conversions.

As far as "ready to FIRE", one item I would consider to lower your WR would be to relocate (lower cost house in the same area or lower cost of living area) to kill off the the 19 years of $1800/month payments while leaving your liquid assets intact. No right or wrong answer here, just a matter of your own personal preferences. DW and I have had numerous productive conversations about what this avenue might hold for us (lower energy bills, possibly lower property taxes, lower insurance premium, lower maintenance costs, freed up capital to produce income, etc.). It doesn't have to be a "move right now" situation; for example, if you plan to move/downsize in 9 years, that would eliminate over $200k of payments from your future cash disbursements. As pb4uski noted, FIREcalc can let you run through different mortgage payment streams for your explorations.

IMHO, Healthcare cost projections are the big unknown assuming you are in the US. Right now, we are planning on paying full-freight until medicare which is a rather significant adder to the required nest egg. Hoping for some clarity on lowering these costs in the next year or two, but given the gravity of the situation, better to be overly conservative here IMHO.
DrBrisket is offline   Reply With Quote
Old 03-04-2017, 11:09 AM   #6
Thinks s/he gets paid by the post
exnavynuke's Avatar
 
Join Date: Sep 2016
Location: Acworth
Posts: 1,175
At your ages/situation (no non-investment income for decades), I'd probably max out considerations for withdrawal rates around 3.5%, and probably prefer to not plan for more than 3%. At 3%, you need about 3.3M in investments to support a $100k withdrawal rate before accounting for taxes.

SS is also likely to give you only a small boost (relative to your spending) because of retiring so early. It won't be near what your latest statement says to expect if you stop working in your mid-40's instead of your 60's as it assumes. There's a calculator you can use from SS and input your data and get revised numbers after showing zero's for future years instead of the assumed earnings.
exnavynuke is online now   Reply With Quote
Old 03-04-2017, 11:22 AM   #7
Thinks s/he gets paid by the post
nash031's Avatar
 
Join Date: Jun 2013
Location: Coronado
Posts: 1,744
OP - Go Colts! I'm from Indy myself, transplanted over the years, but still Colts and Pacers with family in Indy.

To answer your question, no, I wouldn't retire with a 4% spend and little pension income at your age. Others mentioned the SS disparity between the statement and what you'll actually get by retiring in your 40s. I generally plan for 0 SS and consider it a bonus. Might make me work an extra year, but considering our relatively early horizon for retirement, that's not so bad.

I'm planning a similar age retirement, but closer to a 3-3.5% spend with an immediate COLA pension that will make up 40-50% of our desired spend for a 50 year horizon.

In your shoes, I'd definitely aim for 3%, maybe 3.5%, and make sure you've got enough taxable assets you can access to cover the gap to when your retirement accounts open up. Explore 72t options otherwise, but that adds a level of complexity that I think is probably unnecessary when you've got substantial earning power and are still young.

Maybe consider a change of occupation? Find a(n) (a)vocation that can pay you while you let your savings grow? Certainly, you're close. I'm planning to prioritize happiness and quality of life over my paycheck here in less than three years once we hit FI. That probably means finding a job I enjoy rather than one that pays me well.

My $0.02.
__________________
"So we beat to our own drummer in the sun;
We ask for nobody's permission to run.
I just wanna live in a world like that;
Now I'm gonna live in a world like that!" - World Like That, O.A.R.
nash031 is offline   Reply With Quote
Old 03-04-2017, 11:40 AM   #8
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 669
I would say you are good to pull the FIRE trigger if that is what you really want. If you are serious, I'd suggest investing in ESPlanner or another detailed retirement calculator. I retired at 49 with 3 teenagers, the first which will be starting college in the fall. I left with considerably less money than you have, but had a 38K gov't pension to rely on.

SS is a big part of your equation and depending how long you've been making 100K+, not working may not impact SS as much as you might think. ESP will give you the number based on your entire income history to include not working from this point on.

Also, I tend to buy into the Bernicke reduction in spending as one grows older. As I look around, there is no doubt that folks are spending considerably less in the their 70s & 80s.

Finally, I will caution you that the financial part of the equation will be the easiest concern. It's the emotional part that will weigh on the mind.
__________________
Retired July 2013 at age 49.

Lazy Portfolio Investor:
AA: 55% Stocks
35% Bonds
10% Cash
NanoSour is offline   Reply With Quote
Old 03-05-2017, 01:13 AM   #9
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,639
Agree with most of what's been said so far. I suppose the single most important tool you need going forward is flexibility. If you pull the plug and hit a rough patch (financially), can you cut way back on spending for a year or two? If not, I think I'd either wait or keep some income flowing for a while. That $80K to $100K might have to drop to $50K or less for a while, so "know thyself" seems to apply here. Best of luck and keep in mind YMMV.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 03-05-2017, 01:29 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Dec 2010
Location: Midwest
Posts: 1,637
Quote:
Originally Posted by Koolau View Post
Agree with most of what's been said so far. I suppose the single most important tool you need going forward is flexibility. If you pull the plug and hit a rough patch (financially), can you cut way back on spending for a year or two? If not, I think I'd either wait or keep some income flowing for a while. That $80K to $100K might have to drop to $50K or less for a while, so "know thyself" seems to apply here. Best of luck and keep in mind YMMV.
I agree.

A thought: what other career options do you have that might be less stressful/more satisfying? If, between yourself and your wife, you cut your income by 50%, would that make working another 10 years or so more appealing? Your savings/investments look great for someone your age, but maybe you just need to let them grow a little longer.

If you project the value of your nest egg at age 59 1/2, would you be OK to FIRE then? If so, (including paid off mortgage at that time), that would remove the pressure to save so much for retirement. Without those savings, and with the benefit of (possible) tax bracket savings with reduced earnings, it might be possible to live on less income without feeling much pain.

Of course, your immediate FIRE numbers would look better if you downsize or find other ways to greatly reduce outgo. Take a long hard look at your housing/transportation expenses. Those are the usual 'big spending" culprits.
brucethebroker is offline   Reply With Quote
Old 03-05-2017, 07:41 AM   #11
Full time employment: Posting here.
 
Join Date: Jul 2013
Posts: 735
Quote:
Originally Posted by scrabbler1 View Post
Quick opinion is that you don't have nearly enough in non-retirement accounts to RE.
+1

It's really simple; given your age(s), annual spending and current balances, you just don't have enough saved.
mrfeh is offline   Reply With Quote
Old 03-05-2017, 09:20 AM   #12
Recycles dryer sheets
 
Join Date: Feb 2015
Posts: 229
Colts FAn,

I have to agree with others. You do not have anywhere close to what you would need to retire this early. Just where would the money come from to sustain your current annual rate of spending? Much of your assets are untouchable ( 401k, IRA) until later years.

Plus, the big elephant in the room is : Healthcare. You are 20 years away from Medicare....your wife 30 years. And I guarantee IF Medicare still exists when you reach 65, it will not look anything like it does today. Same for Social Security.

MAybe you could switch careers? Maybe do your homework and start your own business? Consulting? You need income. Preferably income with medical benefits included for many years to come. Just how I see it.
MrLoco is offline   Reply With Quote
Old 03-05-2017, 10:01 AM   #13
Recycles dryer sheets
 
Join Date: Aug 2015
Posts: 369
You may want to consider to move to low living cost countries until you are 65. There are countries like Costa Rica, Ecuador, Panama etc where a couple could have a very nice standard of living on about $2,000 per month. This amount will include a nice neighborhood apartment rent, food, medical, dental, transportation, food, entertainment.
VFK57 is offline   Reply With Quote
Old 03-05-2017, 11:25 AM   #14
Full time employment: Posting here.
 
Join Date: Dec 2010
Location: California
Posts: 979
Others have already commented, you can make it work but it depends on your expenses and healthcare/history.

Since you live in a low/reasonable cost of living area already, your current spend of $80-100k seem healthy with possible room to trim in lean years.

A consideration, take a sabbactical or leave of absence and test run/explore what else you might want to do.

With DW being 35 years old, you might be looking at a 60 - 65 year duration, so the SWR should be lower than the typical 4% that you may see.
Aiming_4_55 is offline   Reply With Quote
Old 03-05-2017, 02:23 PM   #15
Thinks s/he gets paid by the post
Cobra9777's Avatar
 
Join Date: Jul 2012
Location: Texas
Posts: 1,972
I just ran your numbers through FIRECalc and ******** and both tools returned a 72% success rate. ******** is a little easier with this many variables. For example, you don't have to do the workaround for the mortgage that pb4uski described. Assumptions included:

- both retire now
- 50 year retirement
- 100k initial spend adj for inflation
- 21.6k mortgage stops after 19 years
- 24k non-cola pension at 65
- no SS
- 1958k portfolio w/ default AA

When I changed the spending model in FIRECalc to Bernicke, the success rate went to 92%.

SS will improve this, but not sure what you have at this point, and it's a long way out. No kids translates into lots of flexibility to relocate and no college cost. Also $100k spend was at the top of your stated range. So, I don't see this as negatively as many who have posted.

You need to think more about health insurance, income tax, pre-59.5 IRA withdrawals, and spending flexibility. Then model your own scenarios, including one or both continuing to work for a while longer.

Congrats on what you've achieved so far. You're close.
__________________
Retired at 52 in July 2013. On to better things...
AA: 55% stock, 15% real estate, 27% bonds, 3% cash
WR: 2.7% SI: 2 pensions, some rental income, SS later
Cobra9777 is online now   Reply With Quote
Old 03-05-2017, 03:00 PM   #16
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 4,032
Most likely not. I think at your age, you need 20 more years before you get some sort of pension.
__________________

Fedup is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Do you spend more or less than you thought you would pre-FIRE? Scuba FIRE and Money 55 09-19-2016 03:20 PM
Pension Scenario-What would you do? RetireAge50 FIRE and Money 17 03-13-2014 07:24 PM
What would you do in this scenario? utrecht FIRE and Money 9 04-11-2009 09:17 PM
Would you live in a place you didn't like if it meant you could FIRE? Kathryn48 Life after FIRE 66 07-18-2008 01:58 PM
FIRE Scenario - How are ya feelin' now! chinaco FIRE and Money 57 03-09-2008 06:06 PM

» Quick Links

 
All times are GMT -6. The time now is 02:55 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×