55 and ready to pull the plug

[Phase3]

Hi everyone! I have been reading here for several months. There are so many wise folks on this board. Thank you so much for all of your great advice and for the time you give here to help others. One day soon I hope to be able to pay it forward.

My story, in a nutshell. Divorced, one daughter who is a junior in high school. I have worked for my mega corp employer since the late 1980's. I had hoped to work at least until 56 or 57 or 60, but the last few years, and in particular the last year, and in particular the last few months, weeks and days have made me realize that I am done. Lots of reasons for that, no need to go into it - I'm sure many here understand.

Anyhow, I am seriously ready (although scared to death) to give my notice and ER. Actually I am considering doing some consulting after retirement but it is important to me to be able to retire and never have to have a paying gig, ever again. I have run my numbers through FireCalc and if I am doing it correctly, I have a 100% chance to go 30 years at $60,000.00 per year.

Here are my numbers, roughly rounded and categorized: non-retirement savings $270,000.00, 401-K and IRAs $1,050,000. House worth $220,000, free and clear. No debt. College 529 balance $80,000.00, daughter will go to public in-state school. Plan is to roll 401-K into Vanguard IRA and not touch any retirement money until at least 59 1/2. SS is $1700.00/month at age 62. From now until 59 1/2, I will live on savings at the draw rate of $4500.00 (max) per month.

I am not entitled to retiree health insurance because of a stretch of time in the middle of my mega corp job when I went part time. I may COBRA but if it's cost prohibitive I estimate $800.00 month for health insurance premiums and out-of-pocket. No pre-existing conditions, fortunately.

Lifestyle - I will need to learn to be much more frugal, as I have been too spendy with my six figure salary - eating out too often, not shopping around for the best deals on things, etc. I am actually looking forward to tightening up (which is good because I will have to!) I do like to travel and hope to be able to take one good trip per year (i.e. $2 -$3K trip) and then several lower cost long weekend trips. Lots of places in MI to go that I adore.

I'm not comfortable sharing my finances with anyone in my life - I'd rather lay it all out here and get opinions from perfect strangers! (Ironic!) I would greatly appreciate your honest thoughts as to whether this is doable given my numbers and situation. It's hard to be rational when you are both desperate to get out of the mega corp and also scared to death to take the leap.

Thanks in advance for any help or insight you can provide!

 

[Meadbh]

Welcome Phase3!

Your numbers all looked very favorable until I realized you never mentioned what your current spending is. Yes, you said you would live on $4500 per month in ER.....that's just a tad more than what I am spending myself. But I had taken it for a trial run before ER and knew it was feasible. If you are spending $4500 per month now, great! But if you are spending $6500, or $10,000 per month, better get practicing on a budget!

I think the best way to do this is to have a specific checking account for personal spending and to feed it each month with the amount you plan to spend, no more!

 

[Phase3]

Thanks for your input Mead!

Yes - spending is my achilles heel but I have worked up a budget that I think will work and I have been going through it line by line, making sure! And my plan is to write myself a check for $4500.00 out of a Vanguard money market into my personal checking account once a month (payday!)

I do spend more than $4500.00 a month now but not a lot more - much of my pay now goes into retirement, college savings, gas for the car for my long commute, lunches while at work, etc. I'm cutting out my cleaning lady - going to clean my own house. I want to cook more and will have the time to shop and cook and freeze stuff, which will be different from just grabbing high priced prepared foods after a long day of work, etc. Also, I'm not planning to give notice for several months and will be "practicing" and fine-tuning in the meantime.

I really appreciate your comments, thank you for taking the time to read and to respond!

 

[daylatedollarshort]

I do spend more than $4500.00 a month now but not a lot more - much of my pay now goes into retirement, college savings, gas for the car for my long commute, lunches while at work, etc. I'm cutting out my cleaning lady - going to clean my own house. I want to cook more and will have the time to shop and cook and freeze stuff, which will be different from just grabbing high priced prepared foods after a long day of work, etc. Also, I'm not planning to give notice for several months and will be "practicing" and fine-tuning in the meantime.

I really appreciate your comments, thank you for taking the time to read and to respond!

The median household income in the U.S. is ~50K, so with a paid for house, paid for college, no more need to save for retirement, etc. $4,500 a month is certainly enough to live a nice life on.

We reduced out budget by a huge percent when we had more time just through simple things like cooking from scratch, switching cable providers, getting rid of the land line, paying less in taxes, time for more DIY projects and making our own cleaning supplies. We found the greatest savings just from adopting sustainable living ideas.

We laugh when we go to the store and get excited over 79 cent a pound boneless chicken on special when we used to run projects with budgets in the millions for a living. But we are happier having our days free to just do simple things like price shop, walk the dog and sit outside and read in the lawn chair.

Good luck living on your practice budget. I think it sounds like a great plan.

 

[Throwdownmyaceinthehole]

"one daughter who is a junior in high school"
Our numbers are similar to yours and we FIRE'd last month at 58. Your biggest cost to be concerned with is your daughter - we spent a lot more on the kiddos getting them launched - helping them with cars, clothes, house, bounced check fees, babies, bail money... you get the picture! Those were a few very expensive years - but we are past that now and still have our savings and sanity. But you may want to consider setting aside a large chunk of change for that.

 

[Midpack]

Welcome aboard.

I have run my numbers through FireCalc and if I am doing it correctly, I have a 100% chance to go 30 years at $60,000.00 per year.

Many people plan on age 95, so that would be 40 years for a 55 yo. But it's your choice and you may have other ideas after age 85. But I plugged the following into FIRECALC

• portfolio=$1,320K
• years=40
• SS=$20.4K begin 2020
• and left everything else at default (investment AA/returns, inflation, etc.)

and solved for spending (near the bottom last tab).

Given a success rate, determine spending level for a set portfolio, or portfolio for a set spending level

Search for settings that will get a success rate of as close to 100 % as possible (usually within 1%) by changing... Spending Level

Looking for a spending level that will result in 100% success rate . . . . . . . . . . . . . . . [done]
A spending level of $59,477 provided a success rate of 100.0% (101 total cycles, of which 0 failed). This spending level is 4.51% of your starting portfolio. (Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)

So if past history repeats, it appears the $ may work out for you.

If at all possible, I'd recommend you reduce your spending before retiring to be certain you can reduce expenses, or at least figure out exactly how you'd go about it (exactly what expenses you would reduce). If you find you aren't happy/can't live at $4500/mo, then what?

And don't forget to plan on unusual expenses (new roof, new cars, home maint/repairs/replacements) and provide for health care along with all the normal expenses.

Best of luck...

 

[David1961]

If at all possible, I'd recommend you reduce your spending before retiring to make sure you can reduced expenses, or at least figure out exactly how you'd go about it. If you find you can't live at $4500/mo, then what?

+1

 

[ERhoosier]

+1 on reducing spending for a while before actual ER. Some adapt easily & others have a very hard time cutting back. Look at it as a dress rehearsal for you... and family.

 

[omni550]

Welcome aboard, Phase3!

Are you expecting anything in the way of a pension from your megacorp employer?

omni

 

[heeyy_joe]

You have enough in post tax account to control your level of taxable income for several years. You are ship shape for a good retirement, write a budget and stick to it.

 

[Richard8655]

Phase3,
Your retirement savings and planned SS are almost exactly the same as mine. I just ER'ed effective this Friday (3/29/13). I've also reached my limit in my professional office life and decided to call it quits while I can still enjoy life.

I've been running FireCalc over and over to death for the last 6 months, confirming in my mind I'm not crazy and that this is the right thing to do. And I'm not crazy. Neither are you, and 60k/year should be just fine. I too am frugal, and that's the secret of this success.

I'd recommend Obamacare (Affordable Care Act) as your affordable medical coverage solution coming up in 2014. It'll provide a nice subsidy in making sure your premiums are reasonable for your income bracket. Try to hold out until then.

Rest assured, you're in good shape. Enjoy your well-deserved retirement.

 

[Scarab]

You indicated you're basically at the end of your rope with your job. This is where a lot of us are, me included. I've contemplated a similar scenario, but I'm trying to hold off a bit longer now.

While you could probably pull the plug with your numbers, you might also consider the financial impact of working another 1, 2 or more years. Here's what I considered:

1.) The company matching funds deposited into the 401k. It would be extremely hard to duplicate that high of a return on my own, it's probably 50% or better depending on your plan.

2.) Your healthcare costs should be closer to $400 a month while working versus out on your own.

3.) Work another 1, 2 or 3 years on your current income level, while executing on your reduced budget, save more money.

I'm also weighing the stress, wear and tear on my body, mind and soul. At some point, I'm going to reach that break point, and it sounds like you're there already. Definitely work on the cost reduction plan first, see how it goes for say 6 months and see if you're comfortable at the new spend level.

 

[Richard8655]

The above post makes a good point about stress, wear, and tear on the body. If the job impacts health and well-being, and if finances allow, by all means go now.

What good are all these years of scrimping, saving, and dreaming when you're dead of a heart attack just as you're about to retire? We Americans are known to work ourslves to death without knowing when to stop and smell the roses.

 

[obgyn65]

I don't have much to add to what other forum participants have written already. Welcome to the forum, phase3. Interesting username by the way.

 

[Midpack]

Wow, OP hasn't been back in 3-4 days? Patience...

 

[Live And Learn]

Wow, OP hasn't been back in 3-4 days? Patience...

or killing himself at work with 20 hr days

 

[Phase3]

Hi everyone! So sorry I haven't been here for a few days. Yes, working like a dog - not 20 hour days but enough life sucked out of me that I don't have much energy at the end of the day. I have been reading throughout the week and your thoughts and tips have been very helpful.

My comments/responses, in no particular order: I redid my budget a bunch of times and came to the conclusion that I really need $5000.00 (net) per month to maintain a standard of living that is minimally acceptable to me after all of these years of hard work and sacrifice. I took another look at my figures and various pots of money and with the help of FireCalc was able to get the number up to $5,000.00. First I checked the SS website and found out that my benefit number is $22,000.00 per year. I had last checked in 2011 so this was a happy surprise. Also between now and my projected last day (four months away) I should be able to salt away $10,000.00 more in my 401-K and $20,000.00 in savings.

I completely agree that I need to learn to live under the new budget starting NOW and am doing so. In fact to save as outlined above it is necessary. The extra $500.00 (from $4500.00 to $5000.00) is making all the difference - just enough wiggle room that I don't feel panicked. Also, I can always supplement with some consulting, but again it's important to me that any extra money is gravy and not a crucial part of the budget.

My daughter - yes she is expensive but fortunately (knock on wood) she is a good student, has a good job, and doesn't cause me any trouble! When she goes to college in 2014 I will some money in my budget - it will be a lot cheaper to live when it's just me! - and I can use the difference to bail her out of jail or whatever else comes up!

New roof, new cars - just bought a new car and hope it lasts 10 years. It should - it's a very reliable brand. I have a line item in my budget for home maintenance - $300.00/month. My home was built in 2006 and hasn't cost me much and shouldn't for the next few years. Still, allocating $3600.00 per year. Also decided to take out a HELOC and will be shopping for that soon. I want that just in case some huge unexpected expense comes along. A safety net I hope to never use.

Health care - planning on doing COBRA for the balance of 2013 and then switching to an appropriate policy under Obamacare in early 2014. Budget for health insurance and health care and dental expenses is $700.00/month. In checking e-healthinsurance it looks like I can get a high deductible plan for $300.00 to $350.00 month, which leaves enough for out-of-pocket expenses.

Pension - most unfortunately, no. I have a 401-K and a "pension" but the latter is really just another defined benefit plan. With the "pension", when I leave I can buy an annuity, cash out or roll over into an IRA. In other words, same options as 401-K. I plan to roll both over into an IRA and not touch the IRA until 59 1/2 (or later if I am able to wait.) I gave the total accumulated in both accounts in my first post.

Stay longer on the job? I would love to, if I could. But, I can't. I am grateful that I have managed to have this career and position as long as I have, but a number of changes in the last two years have made life at work unbearable. And, more miserable changes are coming soon. If I had no self esteem and didn't mind being treated as no more than a cog in a wheel, I could stay. After a long and very successful professional career I simply cannot do that to myself.

I think that's everything - really appreciate the support and am looking forward to participating here as I go through the process. Lots to learn about managing my portfolio but honestly I think that will be fun. Thank you all again, very much!

 

[jollystomper]

Phase 3, welcome! I am in similar situation as you in terms of age and a kid in high school (senior); only difference is that I am married. Just a couple of things to consider, in addition to the other good advice here:
- From a spending perspective, try to actually live on your planned retirement income for a month or two. My DW and I are wrapping up a month of doing that and it is an eye-opener.
- Do your health care projections include health insurance for your daughter? To me $800/month seems low for 2 people, but I may be wrong.

 

[Live And Learn]

Glad to see you back. I wouldn't count on a high deductible plan in 2014. I suspect those will be phased out as Obamacare phases in. However i think your budget is still pretty good if you can keep reportable income below 60k. You may want to see if you would still qualify for a subsidy when there is only one of you on the policy. Here's a website you can use:
National Health Care Calculator

 

[pb4uski]

FWIW over our first year of ER we dialed down our spending some from what it was when the money was pouring in regularly. I dialed down the number of TV channels we had, ditched the land line for Ooma, changed to pay-as-you-go cellphones, etc. I viewed it as a new "game" to find the best deals for what we needed. Worked out fine, and Mr. Market has been gracious.

 

[Phase3]

Greetings everyone!

Update - upon further reflection realized that while I have reached the point where I could retire, I haven't reached the point where I want to retire. Yes, I would love to leave the job today, but I didn't work this hard and this long to live on a shoestring. My job has been intolerable for a while now but it is high-paying and I can save quite a bit if I just hang in for a while longer.

Game plan - know that I could leave at any time as I have an adequate safety net. Goal though is to shoot for the retirement I have worked all of these years to have - estimated retirement year depending on savings rate, performance of investments etc. to reach that goal is 2016 (age 58.) Not bad. If it happens that I can't make it that far, every week I work and save will add a few more dollars to my monthly retirement income.

Thanks all for your valuable input and I will continue to read and participate here. I am psychologically ready to retire. My wallet needs to get on the same page!

 

[Midpack]

Update - upon further reflection realized that while I have reached the point where I could retire, I haven't reached the point where I want to retire. Yes, I would love to leave the job today, but I didn't work this hard and this long to live on a shoestring. My job has been intolerable for a while now but it is high-paying and I can save quite a bit if I just hang in for a while longer.

You've probably thought of this, but I was in a similar situation years ago. It depends on the job, but there's always plenty of work to do so it's was to let the days fly by without stepping back to take stock of your situation. I got fed up despite high pay and top performance ratings, but I took stock of what I liked to do, what I didn't like and what long and short term goals I wanted to accomplish before I left.

I ended up recharged by some of the new goals/challenges I gave myself.

And I delegated some of my former work among Dept Mgrs - though I'm NOT advocating simply dumping undesirable tasks to others AT ALL - I have no respect for managers who do that. When I looked at some of the tasks in terms of developing/broadening others, there were some changes I could make that we're win-win. My successor benefitted, and so did others.

I could go on and on, but taking a broader view of your job and making some manageable changes can make it more interesting for you, and maybe others. And improve your/their output and/or development.

A few years later it really for old for me again, and I knew it was time to go. Fortunately I was well past FI, as it appears you'll be too. FWIW. Best of luck...no reply necessary.

 

[Phase3]

Thanks Midpack. I really appreciate your suggestions and support. I have been working hard at a new attitude - I recognize that I am near the end of my career and I have attained the level where I can delegate/reconfigure etc. The job isn't what it used to be but of course that's the nature of life - change - and I am working hard at embracing the new paradigm and making it doable for the next few years. There is a new younger person above me who is making life miserable for many as he would prefer, I think, to have a bunch of malleable youngsters working for him but instead has a range of folks in their late 30's to early sixties. There are about 9 of us who are 54 and up who really aren't taking too well to the new order and the new person, who is not only new to the job but new to the company.

I think we all feel that he would like for as many of us to retire as possible, so the style is micro-management until one by one we scream uncle. I was about ready to scream/pull the plug but I'll be damned if I am going to do it until I am ready to have the retirement I have worked toward for so long. I am close but not there yet!

So - one day at a time, try to stay flexible and do what I need to do to make it palatable and to also feel that I am contributing meaningfully - important to me.

Thanks so much.