Retiring at 55, wish I could do it now at 49

[statsman]

Hi everyone,

In recent months I have considered the possibility of an ER. With the passing of my stepfather, MIL, and FIL within the past two years, I began to realize that life is short. My mom is our only living parent, and her health at 68 is not very good.

It also doesn't help that I am starting to experience the symptoms of burn-out and apathy in the workplace after almost 26 years in the aerospace industry. Being moved from task to task, which is occurring for most of my fellow workers, doesn't promote a sense of stability and accomplishment.

I'm 49 and my wife is 55 (56 late this year). We have one child who is 15, so there is the issue of getting her through high school and college. We currently have 550K in our 401Ks/IRAs, 1000K in MM/savings to be invested, and a house worth 1200K with an outstanding mortgage balance of 395K (high cost of living in Silicon Valley, CA). We are currently adding $24K per year into our 401Ks, which includes the match.

I've run the numbers and it seems like we could retire now, but the education costs of our child and our medical costs has me concerned. I would also sacrifice a lot of my pension, limited as it is, by not working to 55 (my wife has no pension). If I leave the company now, the pension is worth 7.5K per year at 55. Leaving at 55, the pension would be worth 27K+ per year. If I am laid off on or after 53, the pension would be worth 22.5K+.

By staying to 55 (53 if laid off), we would be eligible for my company's retiree medical plan, which would cover up to $800 per month of the premiums for my wife and I. It is very difficult to walk away from that.

In browsing the forum the past several days, I noticed a lot of retirees in their late 30's and early 40's. It would seem that most would have little to no pension and/or medical plan from the company(s) they worked for.

Michael

 

[Rich_by_the_Bay]

Michael, welcome to the board. Just to verify, do you really mean "1000K" in mm/savings and a house worth "1200k" (or $1,000,000 and $1,200,000) - it would make sense from a Bay Area perspective, but just checking.

You certainly have the golden handcuffs on you, esp the medical benefit. ERs in their 30s and 40s do show up here, but they are a smalll, fortunate minority. If you FIREd would you feel obliged to stay in the Silicon Valley area?

 

[statsman]

Michael, welcome to the board. Just to verify, do you really mean "1000K" in mm/savings and a house worth "1200k" (or $1,000,000 and $1,200,000) - it would make sense from a Bay Area perspective, but just checking.

Those are the correct numbers.

If you FIREd would you feel obliged to stay in the Silicon Valley area?

If we FIREd now, we would be tied to our area while our child is in high school the next 3 years. After that, we could move.

 

[jIMOh]

You have a good handle on situation-

You appear to know how much you need because you can cover it now. Think about that number and think about things like new cars every 10 years, a new hot water heater every 10 years and similar expenses which may not be budgeted for.

In addition start looking at taxes. Think about where the money is, and how you can get access to it prior to age 59.5. Maybe it makes sense to create a taxable account for kids college and early retirement. Might mean less to 401k or less to something else (living in CA, I would not pass up 401k deduction- save on taxes now).

Think about dividends providing income during retirement, think about where you want to live. maybe take a long vacation there and see if your child would be interested in finding a college close to that location. If you have enough money to retire now, explore where you want to live with some of what you might otherwise set aside.

 

[maldini]

I'm 49 and my wife is 55 (56 late this year). We have one child who is 15, so there is the issue of getting her through high school and college. We currently have 550K in our 401Ks/IRAs, 1000K in MM/savings to be invested, and a house worth 1200K with an outstanding mortgage balance of 395K (high cost of living in Silicon Valley, CA). We are currently adding $24K per year into our 401Ks, which includes the match.

1) How was the $1M in saving acquired? Did you build it up slowly or was there a lump sum added along the way? (options, inheritance etc)?

2) With the $1M in cash, I would max out the 401k's immediately.

3) Depending on your mortgage rate, you may do better paying off the mortgage instead of letting the cash just sit in a low interest bearing account. This will improve your cash flow and perhaps get you ready for college

4) Do you have any college savings tucked away in a 529 or other like plans?

I've run the numbers and it seems like we could retire now, but the education costs of our child and our medical costs has me concerned. I would also sacrifice a lot of my pension, limited as it is, by not working to 55 (my wife has no pension). If I leave the company now, the pension is worth 7.5K per year at 55. Leaving at 55, the pension would be worth 27K+ per year. If I am laid off on or after 53, the pension would be worth 22.5K+.

Wow this is frustrating. Leaving now may be too early and yet staying just a few more years will actually have you over qualified for ER (if there is such a thing). I would go mad! At least if you are able to stomach 5 more years, you won't have any worries at all. The pension and medical benefits are going to lower your financial needs in retirement quite nicely!


Maldini

 

[FIREd]

With the limited information you provided, my first thought was that you should probably hang on to 53 and then get yourself laid off (start coming in late, miss important meetings, whatever...). It's just four more years and the added benefits could make a HUGE difference down the road.

 

[statsman]

1) How was the $1M in saving acquired? Did you build it up slowly or was there a lump sum added along the way? (options, inheritance etc)?

40% slowly acquired, 35% inheritance, 25% second home sale.

2) With the $1M in cash, I would max out the 401k's immediately.

We're currently maxed out for the maximum company contributions, but not the maximum total $ allowed. And since my wife is 55, she can add in a catch-up contribution amount. Should she?

4) Do you have any college savings tucked away in a 529 or other like plans?

A shortfall in our planning. We realize we have the cash to pay for college, but there are more effective ways to pay for the education.

Wow this is frustrating. Leaving now may be too early and yet staying just a few more years will actually have you over qualified for ER (if there is such a thing). I would go mad! At least if you are able to stomach 5 more years, you won't have any worries at all. The pension and medical benefits are going to lower your financial needs in retirement quite nicely!

That's the biggest question, being able to stomach 6 more years. And there are no guarantees. Layoffs have been occurring the past 6 months in our company, and while I have no indication that I might be next, it is a possibility.

 

[SecondCor521]

My first thought is that you could live like a king on what you have if you are willing to move anywhere in the US more than 500 miles from the coast and if you could really get $1200K for the house.

2Cor521

 

[statsman]

With the limited information you provided, my first thought was that you should probably hang on to 53 and then get yourself laid off (start coming in late, miss important meetings, whatever...). It's just four more years and the added benefits could make a HUGE difference down the road.

In an ideal world ...

I'm actually waiting to get clarification on the layoff part for the medical plan eligibility. One SPD lists 25 years of benefit eligibility service (pension years? currently 14), while another SPD lists 25 years of service (currently 25 years and 10 months). The delta is because of a merger 14 years ago. I hope to hear back early next week.

 

[TromboneAl]

You have 2.3 million and you should pull the plug now so that you don't have to post

"Retired at 55, wish I'd done it at 49"

later.

Life is too short to spend another 6 years working when you don't have to.

We escaped from the Bay Area when our daughter was 11, she got a fine education, and got in to a great college.

If you're concerned about college costs, imagine that you only have 2.1 million, and college is more than fully paid for. You can do a similar calculation for the $800/month savings in health insurance.

I know I'd jump if I were in your situation, because I was and I did, and I sure don't regret it.

 

[TickTock]

Golden handcuffs...

Your net worth is $2.35 million. You didn't mention how much you spend now (and don't, if you're not comfortable sharing it). I recommend subtracting your daughter's college education costs, the price of a new house in a lower-cost area, see how much you have left, multiply that by 4%, and compare it to what your cost of living is now minus the mortage payment and plus health insurance (maybe dart-throw $1k / month). That'll give you a good idea of where you stand.

If you do have enough to retire now, then it becomes a matter of weighing how much the extra money would mean to you later verses the dissatisfiers of working now... and that's a judgement only you and your wife can make. Good luck!

 

[Gumby]

..

 

[MichaelB]

Hi Michael. As my son would say, great name, dude.

If it guarantees access, the medical benefit is worth more than $800 per month. It also brings a great deal of peach of mind and removes one of the greatest uncertainties of ER.

It also doesn't hurt to be working when paying for college. It's amazing how colleges can burn through one's cash reserves. They're very good at that.

As for moving with children in high school, it happened to me and I did it to mine, and wouldn't suggest it. Raising high school kids is tough enough as it is.

It's nice to have these options, though.

Regards, Michael

 

[statsman]

If it guarantees access, the medical benefit is worth more than $800 per month. It also brings a great deal of peach of mind and removes one of the greatest uncertainties of ER.

It also doesn't hurt to be working when paying for college. It's amazing how colleges can burn through one's cash reserves. They're very good at that.

We've been thinking about it the past several days, and these are the two main reasons why I am likely to stay working until I turn 55. Both (retiree medical and college) are huge unknowns as far as costs are concerned.

 

[MichaelB]

We've been thinking about it the past several days, and these are the two main reasons why I am likely to stay working until I turn 55. Both (retiree medical and college) are huge unknowns as far as costs are concerned.

You can count on three things:
1) College will cost more than you plan. It's not bad planning, just that you are up against a business with a highly refined skill - separating you from your money in ways you never imagined.
2) Insurance companies will make every effort to keep you off the policies unless you are in outstanding health. Once you are out of group coverage the rules change - that is, they go away and you're on your own with few or no options.
3) Self-paid health care has the potential to bankrupt you.

Everything else about ER is a cakewalk by comparison.

Michael

BTW, just FYI, I left work with 1)no medical coverage, 2) 2 kids in college and 1 in HS, and 3)right before the markets crashed in '01.
I have found my way through this mess, but it took much more time and effort that I ever imagined, and healthcare insurance is still my greatest risk.

 

[Milton]

Hello Michael,

It sounds like you have some reasons to quit now, and other reasons to stay a few more years. Only you can decide which factors are more important.

I may well be reading more into it than I should, but your original post seems to imply that while you are not entirely fulfilled at work, you don't actually hate your job. If that is so, I would be tempted to suggest that you stay employed until 55, and look to hobbies to bring you the sense of accomplishment that you're missing. Spending time with your aging parent will continue to be difficult, but with 26 years on the job (presumably in a unionized workplace), I imagine that you have relatively generous vacation entitlement.

In browsing the forum the past several days, I noticed a lot of retirees in their late 30's and early 40's.

I am not sure that this is as common as you suggest; but even assuming that it is, I would say don't worry about other people, focus on your own needs, wants and priorities.

FIRE is not a competitive sport!

 

[texascashranger]

Hi everyone,

In recent months I have considered the possibility of an ER. With the passing of my stepfather, MIL, and FIL within the past two years, I began to realize that life is short. My mom is our only living parent, and her health at 68 is not very good.

It also doesn't help that I am starting to experience the symptoms of burn-out and apathy in the workplace after almost 26 years in the aerospace industry. Being moved from task to task, which is occurring for most of my fellow workers, doesn't promote a sense of stability and accomplishment.

I'm 49 and my wife is 55 (56 late this year). We have one child who is 15, so there is the issue of getting her through high school and college. We currently have 550K in our 401Ks/IRAs, 1000K in MM/savings to be invested, and a house worth 1200K with an outstanding mortgage balance of 395K (high cost of living in Silicon Valley, CA). We are currently adding $24K per year into our 401Ks, which includes the match.

I've run the numbers and it seems like we could retire now, but the education costs of our child and our medical costs has me concerned. I would also sacrifice a lot of my pension, limited as it is, by not working to 55 (my wife has no pension). If I leave the company now, the pension is worth 7.5K per year at 55. Leaving at 55, the pension would be worth 27K+ per year. If I am laid off on or after 53, the pension would be worth 22.5K+.

By staying to 55 (53 if laid off), we would be eligible for my company's retiree medical plan, which would cover up to $800 per month of the premiums for my wife and I. It is very difficult to walk away from that.

In browsing the forum the past several days, I noticed a lot of retirees in their late 30's and early 40's. It would seem that most would have little to no pension and/or medical plan from the company(s) they worked for.

Michael

You have done well for yourself, no doubt. You have amassed a good piece of security. I would definitely leave Silicon Valley to maximize your cost of living. For instance, I just built a 3500 sq. ft. custom home on 1 acre with $7500. golf course membership included for $480k. Beautiful Texas Hill Country in Springbranch. (between San Antonio and Austin) Canyon Lake 1 Mile, Guadalupe river and Springbranch Creek flowing the area. Famous low cost of living in TX. No state income tax. Gas $.50 gallon cheaper than CA.

 

[PaulNZ]

Hi Michael,

I would stick it out to 55, the medical benefits and extra pension would be worth there weight in gold to me. I think the reduction of stress of having those two perks and the security they give will add time to your life and also add quality as you wont feel as though you need to tighten your belt in case of any extra education/medical/inflation costs.

I would also make sure I take all my holidays and not let them build up. I would also make the workplace as enjoyable as possible maybe at the expense of something. In other words - semi retire as much as I could but still be in for the perks at the end of six years.

Cheers

 

[chinaco]

Welcome.

I think many of us working stiffs feel the same way.

I ponder the question often.

I am waiting till 55 because I can take a pension at 55 plus retirement medical. That keeps me hanging on. But I am slowing down. I no longer work long hours... I am working about 40.

 

[statsman]

Thanks to everyone for your advice and opinions. My wife and I have decided to wait until I turn 55 before we retire. Of course, plans can change, but at least I am almost certain that we will not be working longer than that. And 55 is still "early".

At this point, I figure that with every month we work it will make it that much easier to retire. We will continue to save more money each month. Even my reduced (pre-53) pension will continue to grow.

Sorry about the false alarm about FIREing. I think I am going to lurk on the forum for awhile to pick up information about investing, health insurance, and where to live after retiring (my wife likes Arizona).

 

[Ed_The_Gypsy]

statsman,

Iam with MichaelB. I recommend staying put until your kid is through high school. It is a short enough goal. Then reconsider your options.

I have heard that it is easier for retired folks to get financial aid for their kids. Can anyone comment on that? It worked for a friend up here in Canada, but I dunno about the US. If that can work, understand that you would have to retire the year before she goes off to college (literally, not later than Dec 31), because FAFSA looks at your last years' tax returns.

If you are determined to stay in the Bay Area, I suspect that you will have to work until the end. Can you be happy somewhere else? Somewhere really different?

Picture yourself in a new situation. The idea can take getting used to.]

Cheers

 

[jclarksnakes]

Michael,
...This really does depend upon YOUR personality. As you see many of us here think you are ready and many others think it is good to wait. It mostly is a matter of how much risk (taxes, inflation, health care, college expenses, global warming etc.) we can take without it keeping us up late at night worrying. It seems that you have made the right decision for YOU, at least at this time. I think the fact that you considered it shows that you are really closer to ER than you think. You have the right idea to keep ER in mind and re-evaluate your options as time goes by. One subject that was not broached was semi-retirement. I am 55 and work one night a week. I arrive at work smiling and spend the entire shift smiling and notice that the full timers do not smile nearly as much. I have no benifits in my present job but I do not need them and could have them if I wanted but with less pay. Just an idea for you to consider.
Jeff

 

[Alan]

Welcome.

I think many of us working stiffs feel the same way.

I ponder the question often.

I am waiting till 55 because I can take a pension at 55 plus retirement medical. That keeps me hanging on. But I am slowing down. I no longer work long hours... I am working about 40.

This is my situation exactly. 22 months to ER at 55.

Statsman,

I see that you have decided to hang on - good luck to you. You find a change of heart at 53 when that reduced pension dangles before you