early semi retirement

[ralphie]

Hi folks, I would like to ease into a semi-retirement in a few years @ 50. It wouldn't be retiring as much as a career change and major wage cut. I would more than likely have to do a SEPP within a couple years(52). I am wondering how many people have done this and how many reget it. I am 45, single, no debt, 325k in 401k/ret funds, 60k in cash,75k in farm land. I plan on working at least part-time until 60 maybe longer. I enjoy working would just like to be closer to family. I just don't want to be one of the horror stories... being forced to work because I ran out of money.

 

[HsiaoChu]

I'm not sure how you can survive on $390K and a small part time job unless you move to a third world county. You don't want to lose principal so at the time you retire anything that you have has to go into a stable CD or a Treasury, and if you start drawing it down for retirement purposes even at only $25K per year you'll be out of money by age 65. If you draw on the interest only you will only get about $12,000 a year out of it.

It looks like exactly the horror story you are thinking about unless you have somemagical formula that I don't know about. I'm no expert here in this, but it just doesn't look like enough right now.

 

[samclem]

You'd have to build a budget and look at both the income side and the expenses side. On the income side, don't forget to include SS. On the expenses side, all the "normal" tough to call items apply: health care costs, possibly needing long-term care, etc. FIRECalc can help you see how your savings might last.
In my opinion: You don't have enough squirreled away to support what many people would consider a "normal" lifestyle in the US, unless that new low-stress job close to the family pays well. I'm sure you could get by in some fashion (for example, you could live on that farmland and grow your own food while selling the surplus, etc, but then all you've done is found yourself another job, one that probably pays less than your present one).
Many people think we're heading into some "interesting" times, characterized by lower investment returns than we've seen for the average of the previous 50 years and also by lower pay. Hopping off the train to a lower paying job now should be something you carefully consider, as it's likely a train you'll have trouble re-boarding if you realize you've made a mistake.

 

[Rich_by_the_Bay]

Welcome to the board. Have you tried using FireCalc to get some initial estimates? It is very useful for situations like yours.

 

[ralphie]

thanks for the replies. I guess my plan is wishful thinking unless there is a good market run. I wasn't using age to ESR as much as my 401k level. I was hoping when it got to the 600k level I could take a chance and head home. I included my pension lump sum value in that. It has grown quite a bit faster than my actual 401k as of the last few years. At that point I was thinking a minimum dist. 72t(SEPP) if I really needed it. That should gross 17k. I was hoping to work for another 24k + healthcare, and get my beer money from the farm land. Also I would dabble on some other family land that could bring another 6k but I don't want to depend on a profit from that venture. That should put me at 42k per year which is half of my current pay but above average for the area. If the 401k value goes down to 500 throughout the SEPP years, I would still have20k per year at age 59.5,then a few years untill SS(approx 15k),land rent 5k. If that whole scenario played out I would be happy as a clam. Does that still sound pretty risky or maybe possible? I grew up very poor and have a real fear of ending up there again but I miss home and have been gone since I was 18. Maybe its a midlife crisis and the whole notion will pass. Thanks again

 

[REWahoo]

Ralphie, what you are proposing sounds risky to me but you can probably make it work if you are truly determined to so. Just be careful and don't shoot your eye out.

 

[ralphie]

sounds to me like I better focus on a few things for the next few years... Squirrel away every nickel I can, figure out a way to make enough money to survive plus a little more, without the SEPP, and marry a rich gal. I might not pull it off at 50 but hopefully by 55. The one thing that will help me is the fact that you can still buy a solid house back home for 50k. P.S. REWahoo, I've never shot my eye out but I did shoot myself through the heel of my boot when I was a kid

 

[REWahoo]

I did shoot myself through the heel of my boot when I was a kid

Hope it was with nothing more powerful than a Red Ryder...

 

[ralphie]

It was a 22, I started shooting gophers with it when I was 8. That episode makes me think back and I have to rephrase an earlier comment. I shouldn't have said I grew up poor... we just didn't have any money

 

[Ronstar]

I also used to hunt gophers with a 22. Also went the ESR route. I ran firecalc several times and then kept my job but reduced work hours incrementally over the last few years. My goal was and still is to meet expenses at 3 days of work per week while waiting for DW to retire. Plan is working so far.

Your plan sounds doable if can keep expenses down and get healthcare through part time employment. Spend a few years fine tuning your plan. Test it by trying to live within planned expense numbers while still employed full time. The key is to really save now while putting the plan together.

 

[brewer12345]

I am also trying to sketch out an ESR plan in more detail these days. We are much younger (37) and have two small children (4 and 6). We are planning to relocate from a high cost NJ suburb to Colorado, most likely Fort Collins. The exact timing is still up in the air, but it will be within 3 or 4 years unless the economy really goes to hell. Our plan involves swapping our mortgaged NJ home for a non-mortgaged home in CO and then generating sufficient income to cover our expenses for the forseeable future either by some kind of employment or small business/consulting ventures. The much lower cost of living vs. where we are now would make this a lot easier than it would be where we are now.

What is holding us back for the moment is a couple of things. First, the economy still being mired in a slow recovery makes me reluctant to leave a job with iron clad safety to go make a living by hook or by crook. If the economic trend improves sufficiently, I would feel a lot more comfy in taking my chances. The second thing holding us back is making sure we have enough capital to pull this off. I know we have a little ways to go in accumulating sufficient funds, but its a bit hard to tell how much is enough. We intend to not really touch our investments aside from a period of transition, but I still want to have enough in the way of after-tax funds to have a large safety net. 2/3 of our net worth is in various tax deferred retirement funds, which we do not plan on touching for an extended period of time (until we fully retire and most likely after age 59.5). The after tax bogey is pretty easy to figure out, since I know what annual expenses will be and I can use that to back into how large a safety net we want. The harder part is how large a long term retirement portfolio we need. It is going to be some 20 years before we touch that money and we will probably add small amounts of money to it from time to time in the intervening years. Scoping out how much we need to start with is tough. I guess I need to fool around with Firecalc and see what I can get out of it on the how much is enough question.

 

[lowflyer]

We began taking SEPP's from DW's rollover IRA several years ago and it worked well, but we found out that we really didn't need it, therefore we just ended up with unnecessary taxable income. Due to other situations, we were able to stop the withdrawals last year. In retrospect, I'd make darn sure you need the money before starting any SEPP's.

 

[flyfishnevada]

I agree you should do some figuring. You didn't mention what your lower wages would be. If you make 250 grand now and will be making 100 grand you might be OK. You also didn't mention your lifestyle now and you proposed lifestyle in ESR. You income and spending will determine you chances as much as your savings. I also didn't see anyone mention changing your lifestyle to accomplish your goals (some one might have, but I didn't see it). If you live in a big house, have car payments, debt, etc. downsizing and eliminating debt could make things a lot easier.

I guess all I'm saying is there are alternatives to just relying on your existing savings and future part-time income to live on. You could also reduce spending. It all depends on your personal priorities.

 

[fisherman]

If it helps DW and I ESR'd three years ago at 43. We had planned for that for 20 years and were well ahead of our projected need. We were planning to work in our business part time to keep the SWR below 3% until 55 when our pensions kick in. Without work it would be right at 4% until the pensions kick in which we were not comfortable with.

Fast forward three years and we have managed to take two trips on that was six weeks long and the other two months long. We have also been able to take several one week trips each year and to pursue my hobby of fishing more. This would not have been possible with Mega Cr*p. We do have two kids and that limits our traveling some but they do provide their own rewards in so many ways. We also fully funded their college before ESR and do not include that amount in our portfolio calculations.

We have failed in ESR in one respect. We are working more than planned as our business has continued to grow. The failure part is even though it is a part time work it is more than covering all our expenses so our withdrawal rate has been negative since we are adding to savings with it thus we do not fit the definition of ESR although we think of ourselves that way due to the free time we have now. We enjoy the business and the extra security it provides. It also provides a lot of social interaction as we have several customers that are fun to be around. We also had been running this business on the side for several years before ESR.

In summary as you said you do not want to become a statistic. I would have a very good plan first that I had documented reason to think would work. I also would not ESR if I was dependent on the part time work ( If the part time work gets you below 4% then that is good but if it takes part time work to get to 4% then I would think that was risky).

One other area to consider is Health Ins. We bought our own for about two years before leaving full time work. We also planned on 15% increases and they have been every bit of that. Make sure you have this covered and accounted for before jumping.

Keeping reading here and studying and you will likely find a way. This board was a big factor in providing the education and drive to accomplish ESR for DW and I.

 

[ralphie]

Hi fishermen (last 2 posts), its ironic that the last two posts are by fisher people. Thats precisely the reason I want to ESR. I have not been fishing in 10 years or golfing for that matter. I do get a little hunting done tho. As far as my earnings now I make around 80k. I would more than likely have to move down to the 36k range and would happily bust my butt to do it. My lifestyle now is not too "high faluting" and I am living off 40kish now. I go back home most weekends now to see family and also a lady from back there.( Basicly I miss my mommy) My heart has always been back home, even as I worked from coast to coast. I used to lead a pretty wild life and that is why I am not in better shape financially. Its a 300 mile drive one way and its getting harder to come back to the city every trip. As far as sacrifing lifestyle 36k before taxes is my threshold, I could live on less but I wouldn't. I would hit the road again. If I had to I could live on very little and I have. I am fairly mechanical,know how to raise crops and animals and have the land to do it. I also have the bare minimum to start raising a few critters as far as land and machinery.(50 cows or so). That would be my sideline. I don't want to count that in my 36k and will work for the rest... Idon't care if that means I have to work for a farmer for 26k/yr and 80 hour weeks. I need to find the additioal 10k and also leave enuff cash for retirement. That is why I asked about the SEPP. I think I can stick out 5 years in my current career but its killing me. One big thing in my favor is that in rural America you can buy a liveable home for 40k, when I make the move I wiill buy a house for cash. That lowers my expenses a bit. I just have to find a way to get back there, but I want to be mostly FI. I don't know if that clears up my situation or not but there it is. I greatly appreciate all replies, thanks for taking the time to answer a 'DREAMER"

 

[haha]

Hi fishermen (last 2 posts), its ironic that the last two posts are by fisher people. Thats precisely the reason I want to ESR. I have not been fishing in 10 years or golfing for that matter. I do get a little hunting done tho. As far as my earnings now I make around 80k. I would more than likely have to move down to the 36k range and would happily bust my butt to do it. My lifestyle now is not too "high faluting" and I am living off 40kish now. I go back home most weekends now to see family and also a lady from back there.( Basicly I miss my mommy) My heart has always been back home, even as I worked from coast to coast. I used to lead a pretty wild life and that is why I am not in better shape financially. Its a 300 mile drive one way and its getting harder to come back to the city every trip. As far as sacrifing lifestyle 36k before taxes is my threshold, I could live on less but I wouldn't. I would hit the road again. If I had to I could live on very little and I have. I am fairly mechanical,know how to raise crops and animals and have the land to do it. I also have the bare minimum to start raising a few critters as far as land and machinery.(50 cows or so). That would be my sideline. I don't want to count that in my 36k and will work for the rest... Idon't care if that means I have to work for a farmer for 26k/yr and 80 hour weeks. I need to find the additioal 10k and also leave enuff cash for retirement. That is why I asked about the SEPP. I think I can stick out 5 years in my current career but its killing me. One big thing in my favor is that in rural America you can buy a liveable home for 40k, when I make the move I wiill buy a house for cash. That lowers my expenses a bit. I just have to find a way to get back there, but I want to be mostly FI. I don't know if that clears up my situation or not but there it is. I greatly appreciate all replies, thanks for taking the time to answer a 'DREAMER"

There are some decent jobs in rural America. For while I collected milk samples from dairies for state inspection. Had to get up very early was the main downer. Sometimes becoming an AI tech can pay pretty well.

Overall, I would say you are better off to work longer @$80,000 so you don't have to hump so hard later. Doing farm labor sounds like it will get old fast for someone who has earned $80,000.

Can your girlfriend move up and play house with you in the city?

Ha