Can I retire on $3.1MM? Anybody here done it?

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bulbar

Recycles dryer sheets
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May 6, 2014
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My mega energy company says I could get severance and retire early at 53. If I did that, I would have $3.1MM total. I'd get $23k/yr SS at 62 in today's dollars and my wife would get $9k/year SS when I'm 67. We have twins who go to college next year and assuming that will be $200k over 4 years. We spend $140k/yr right now and my retiree medical would add another $8k/yr on top of that. I ran ***** and I think it only had a 70% sucess assuming we could get it back to $140k spending.

The thing is that, if I stay, it takes me 1.5 years here to get to the same $3.1MM I could get right now with the severance. So I'm thinking maybe leave now and have that time for myself?

What do you think?
 
If it were me, I'd take the severance in a heartbeat, find out what income you could have at 100% success rate and figure out how to live on that amount, whatever it is.

Between lower taxes, no job/commute costs, kids getting off the payroll before too long, maybe downsizing, more free time for price shopping, cooking and DIY around the house we were able to slash a quite a bit our annual run rate and become FI. Plus we work part-time at hobby jobs for extras or more savings. For us it was well worth it. The higher your expenses now the more opportunities you probably have to cut back and still live a pleasant middle or upper middle class life. We had a lot of waste and overspending in our previous budgets, so the extra free time was worth cutting out a lot of stuff we don't really miss. But it depends on your priorities. Many posters here would rather work longer and not have to cut spending at all.

My husband and I have gotten more into areas like zero-waste living, self sufficiency and urban homesteading as a hobbies, which also save money, too, so that has really been helping to lower our retirement withdrawal rate.
 
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What withdrawal rate are you using? Is your planned spending going to remain 140k? Drop your sending to 100k and at a 4% WR, 2.5mm should put you near 100%. That leaves plenty to pay for college and a cash cushion. I'm retiring in six months at 52 with about half of your nest egg.



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At your current spending, you may be in trouble. I would leave now with the severance and cut spending down to about $100K, maybe $110K. That shouldn't be difficult, that is still a massive amount to spend every year.
 
Agree with the consensus, lower your spending by $20-30K/year and you should be good shape. Use the SS as inflation offset.
 
Good comments. The other catch is that I have a short window to decide. They are looking for another job for me. When they find it, severance is off the table.

On spending, we actually spent $150k in 2014. A lot I know. But don't know if we could get down to even $110k with family of 4 and mortgage. I really don't want to retire to a life of pinching pennies (yeah I know $110k is not pinching pennies but you know what I mean).

I have my finacial planner guy running cases at $130k spending and a 5.5% return to see what it looks like, with taxes modeled etc.
 
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bulbar said:
Good comments. The other catch is that I have a short window to decide. They are looking for another job for me. When they find it, severance is off the table.

On spending, we actually spent $150k in 2014. A lot I know. But don't know if we could get down to even $110k with family of 4 and mortgage. I really don't want to retire to a life of pinching pennies (yeah I know $110k is not pinching pennies but you know what I mean).
Click to expand...

Does that $150K include taxes? Our taxes dropped and our kids qualify now for financial aid for college and we get tax credits for both ACA and college now. You generally have to have after tax money to spend down or lower spending or some combination of the two for that to work. The ACA max AGI for subsidies for a family of 4 is $95.4K for this year.
 
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You and the family survived this far reacting to changes along the way. We have gone back and forth with how much of a cushion to build for the unexpected and worried way too much about it. I finally decided 2 years (March 2017) is it. We go with what we have, which will allow us to spend more than we do today, understanding that things will change and we may have to cut back from 18 yr old scotch to 12 year old.


You have a pile of cash that at 3% draw will allow for $90K, 4% will allow for $120K. You could do a couple years of 4% and then cut to 3.5 and then to 3 if necessary. What would you do if you lost your job tomorrow? you would survive. If necessary you could pick up a job while kids are in college to help cover that, lots of things you could do if you are drawing too much from the $3M.
 
The $150k includes property taxes, school taxes, etc. But not Fed taxes. We actually got a small refund on Fed taxes.
 
We looked at the CES tables and figured we had a lot of areas of opportunities to cut back and still live a pleasant middle class life or better and not have to ever work again:

Consumer Expenditure Survey

Does the $150K include saving for retirement or job / commute costs? Life insurance or disability insurance? Once you are FI and no longer working you can cut those expenses out of the budget, and the kids' costs will likely not be forever. Even if they live at home post college they should be able to work at least part-time and cover their own spending money, cell phone bills and car expenses.
 
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No, the $150k does not include saving for retirement so can't cut there. It does include life and disability tho, but those costs I think would actually go up if I retire because I'll have to go get my own policies instead of the cheap ones the company has.
 
No one should have to endure the indignity of living on less than $150,000 a year. Keep working.
 
I am 55 with the same nest egg, no severance. Big difference is college is nearly paid for and no mortgage. So ask yourself how long will you need to spend that much? I did a 3 year look back and a 2-3 year projection ahead, since college costs and mortgage are disappearing Including all expenses except income tax, we could get by on $3600/month most months, including everything except new health insurance costs, and income tax which was an unknown at the time.

I think you could do it, but you probably need to do some belt tightening, at least until the twins are out of college and the house is paid off.

One more thing. Social security. I think with SS you should try to take it at 67 or 70 unless health is an issue. Your spousal SS should be her own or 1/2 of yours, whichever is greater, so you might get some SS dollars from that. Also, the social security estimates are based on 35 years of work, so if you retire now, you will get less than you expect because of no W2 income for after age 53.

Can you do some consulting work with your experience to make it less tight?
 
How much money/time left on your mortgage? Once that's paid off that could get you down closer to $100K than $150K. Do your kids go to private school? If so, that expense will stop when they graduate. Other than a large mortgage and private school, I can't see any other way you're spending so much money. Maybe showing a detailed budget would help us see where you could cut.
 
$3600 a month total? That's less than $48k per year. Wow. Yeah, I know we could tighten but just dont know if we could get to the $100k level to be comfortable. Didn't know that about SS being based on 35 years of work. I just got the estimate from the SS site. Need ot look at that I guess. I've got about 31 years. Don't understand your point about spouse's SS being the greater hers or 1/2 of mine. Never heard that before. I might be able to consult a bit.
 
Trying to scale it down relative to my assets and expenses I think you might be able to do it. However you really don't indicate the desire or ability to adjust your spending level much. This could prove critical in the future.
 
Good point. If I want it bad enuf, we should be able to cut enuf.
 
bulbar said:
No, the $150k does not include saving for retirement so can't cut there. It does include life and disability tho, but those costs I think would actually go up if I retire because I'll have to go get my own policies instead of the cheap ones the company has.
Click to expand...


How are you going to get disability:confused: It usually is based on earned income... which for you would be zero if you retired...
 
Yes retire now.

No but would if I had $3 million.

I think you should fire advisors and make your own plan.
 
If your wife is a widower will she need more than $3.1M? In other words, not sure you really need a life insurance policy.

I personally wouldn't do it unless the retirement calculators say 100% success. I sense that you are reluctant to cut spending so I'd keep working or take the severance and look for alternatives (new job/consulting...)
 
Some folks are conservative here. So am I.

At one glance, you would think $3.1M is surely plenty and should be enough to support 4.8% withdrawal rate of $150K/yr.

If I remove $200K for college, and take out 10% for other big ticket purchase (2 cars, roof, other stuff), I will have just $2.6M, then suddenly my WR is now 5.7%.

I have similar asset than yours + 750K home equity. I plan to spend $110K/yr. I am still nervous. DW and I are still working this year. We are 58/53. So, I would not want to spend more than $110K in our case. YMMV.
 
bulbar said:
I have my finacial planner guy running cases at $130k spending and a 5.5% return to see what it looks like, with taxes modeled etc.
Click to expand...

How much is that financial "planner" charging you?

I'm surprised no one else commented on this giant red flag:

bulbar said:
The $150k includes property taxes, school taxes, etc. But not Fed taxes. We actually got a small refund on Fed taxes.
Click to expand...

If you received a "small refund" on taxes, that doesn't mean you don't get a free ride on taxes with a $150k budget in ER, because you won't have taxes magically withheld from your income by someone else! You still have to pay them. So you will need to withdraw quite a bit more from your portfolio and SS to end up with $150k cash to spend each year on whatever you want. Maybe $175k-$180k?
 
bulbar said:
My mega energy company says I could get severance and retire early at 53. If I did that, I would have $3.1MM total. I'd get $23k/yr SS at 62 in today's dollars and my wife would get $9k/year SS when I'm 67. We have twins who go to college next year and assuming that will be $200k over 4 years. We spend $140k/yr right now and my retiree medical would add another $8k/yr on top of that. I ran ***** and I think it only had a 70% sucess assuming we could get it back to $140k spending.

The thing is that, if I stay, it takes me 1.5 years here to get to the same $3.1MM I could get right now with the severance. So I'm thinking maybe leave now and have that time for myself?

What do you think?
Click to expand...

I say the twins pay for college. Thats the deal breaker to retire at 53.
 
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