It’s Gonna be a Long Three Years….

[TexasRider]

Greeting from Texas.
I’ve been lurking the site for some time but finally registered because I think I can see the finish (starting) line. The date I have in my head in July 2020.
I am 51 YO with the same Mega Corp for 25 years. Stay-at-home DW is 50. I am very loyal to company and grateful for the opportunities that it has given to me & my family but it has definitely taken a turn in the last 2 years. New leadership direction is forcing a lot of good people to take cuts and/or let go. I've taken my cut and I think I'm somewhat stable (for now). Unfortunately I am in the middle of much of it and it’s hard on the soul. It’d be understandable if it was logical plan, but I don’t feel connected to the strategy so it’s hard to support and keep my team calm about it. It seems reckless.

Son is freshman at college (fully funded in separate college accounts) and Daughter starts next year (fully funded).

Nest egg is $3.6m which I see a clear path to exceed $5m by July 2020. Egg is combination of pre & post-tax & stock options. Definitely in prime earning/savings years so each additional year makes a big difference. Between Stock options, Deferred Comp, 401(k) and ESPP we can add $500k per year to the nest.
Pre-Tax [401(k), Deferred Comp] - $1.4m
After-Tax investments - $1.8m
Options - $423k current estimated executed value. Next few years we will vest about $200k net per year in Stock Shares and Stock Options so it’s enticing to stay each additional year (I guess they do that on purpose, huh?)

Owe under $200k on $800k home. Could pay it off but rate is so low so doesn’t make sense.
Trying to get a handle on post retirement expense estimates – Using $275k as placeholder til we break it down better.
Concerned about health care – (Join the club, right?).
Trying to understand strategy of accessing income sources; when to exercise options, tax strategy, etc..?
Big Concern is this – Maintaining focus for the 3 years in the midst of corporate chaos. I know I have to work my strategy and let it be so I don’t obsess for 3 years – that’s not a recipe for a healthy 3 years of my life.

Thanks to everyone who contributes on this forum; it is a wealth of information & support.

 

[2017ish]

... The date I have in my head in July 2020.
I am 51 YO ....

Son is freshman at college (fully funded in separate college accounts) and Daughter starts next year (fully funded).

Nest egg is $3.6m which I see a clear path to exceed $5m by July 2020. Egg is combination of pre & post-tax & stock options. ...

Trying to get a handle on post retirement expense estimates – Using $275k as placeholder til we break it down better.
...
Big Concern is this – Maintaining focus for the 3 years in the midst of corporate chaos. I know I have to work my strategy and let it be so I don’t obsess for 3 years – that’s not a recipe for a healthy 3 years of my life.

...

Welcome aboard! We are nearing the end of DW's slightly more than 2.5 year notice period. It really went by fast and without much notice until recently (she just realized that she has only half a pregnancy to go, which really put it into perspective for her as an OBG)

Start tracking your expenses and chop out those attributable to kids and house loan (you can payoff at any time, so this is fair). Also, adjust your tax expenses to what you'd be paying as you draw down. Right off the top, you get rid of social contributions, most or all medicare contributions, and all retirement savings contributions. It is surprising to see what those adjustments do to present spending when you are in high income level.

You may find that you don't need all three years. Ignore your present income in figuring out what you need in retirement. Go with your non-kid, non-work, non-mortgage baseline expenses, then add on your anticipated travel and what-not spending....

If 275 is what you'll need in retirement (and you have no pension), you are looking at closer to 7 million egg than 5 million. (Assuming 4% drawdown each year)

E.T.A.--You might want to take a look at this thread and the prior ones that the poster mentioned. Another Texan who ended up exiting 12/31/16 with 8 mill at about your age. http://www.early-retirement.org/for...ing-job-hoping-to-retire-in-2016-a-84051.html

 

[exnavynuke]

Yeah, I noted the same thing 2017ish saw. For a 4% WR to produce $275k you'll need ~$6.875M. That's pre-tax money however, so the actual amount would be higher if your $275k spending is your after-tax spending. However, at 53/54, you're likely looking at 40+ years in retirement so many people would advise using a 3-3.5% withdrawal rate instead. For a 3.5% withdrawal rate to supply $275k/year you're looking at closer to $8M required.

Of course, your expenses will likely drop some over time (pay off house, start collecting SS, etc). I'd highly recommend you run Firecalc and/or some other retirement planning calculators to evaluate the feasibility of your current plan.

FIRECalc: A different kind of retirement calculator

 

[2017ish]

... However, at 53/54, you're likely looking at 40+ years in retirement so many people would advise using a 3-3.5% withdrawal rate instead. For a 3.5% withdrawal rate to supply $275k/year you're looking at closer to $8M required.

...

Second this point. We are 57/56, with DW living to 105 for planning purposes. IF I were doing a textbook SWR with static spending adjusted for inflation, I'd be going with 3%. (And, for cutting the work-cord, I wanted 30 times a nice, comfortable spend rate; we'll spend more than that at outset with a fixed percentage spending plan, but more than 50% of our spending is going to be fat/discretionary/travel expenditures that can be cut when times are tougher--which OP should have as well, I bet.)

 

[ivinsfan]

275 is a big placeholder, especially if you lose your job and all those stock options and things that come with it.

I suggest for your peace of mind, you involve your DW since she isn't working outside of the home and set a budget you both can live with. In truth, if your DW hasn't worked outside of the home in a long time, it's probably easier to pare expenses then for her to get a job. But you will have an empty nest, so who knows, maybe she could grab a job.

You are free to spend your money wherever you like, but really, you are not ready for 2020 at this spending level.

 

[euro]

Agree with others, the key here is in getting a firm grip on spending requirements. I suggest going back over the past two or three years and reconstructing your ACTUAL spending with as accurate figures as possible. Then, figure out if all of that will likely still hit in retirement - that will give you a better grasp than just a "placeholder". Any option of moving to a lower-cost area?
Does your mega provide retiree health coverage for long-timers like yourself? Luckily, mine did/does and that made pulling the plug much easier for me (although even if they exist, I'm well aware such perks could end at any time )

 

[DrRoy]

For a 4% WR to produce $275k you'll need ~$6.875M. That's pre-tax money however, so the actual amount would be higher if your $275k spending is your after-tax spending. However, at 53/54, you're likely looking at 40+ years in retirement so many people would advise using a 3-3.5% withdrawal rate instead. For a 3.5% withdrawal rate to supply $275k/year you're looking at closer to $8M required.

See the thread "Planning for a more expensive retirement". I firmly believe that due to likely lower future returns, a max 3% WR is prudent. That puts your spending at $180K on $6M or $9.2M for $275K.

 

[lhamo]

I'm going to go against the grain a bit here and say congratulations -- you have a big enough nestegg that you almost certainly would be just fine financially if you were let go tomorrow. No, it isn't going to kick off 275k/year, but I question whether you really NEED that for the rest of your life. Kids will launch soon -- you could definitely consider downsizing that house and the higher expenses that go with it. Would be interesting to see where else your budget goes. How much on grocery spending, for example? I've seen many budgets go from over $1000/month to nearly half that just with different choices about WHERE and HOW to shop, not necessarily buying different food. Costco can be your friend if you know what the best deals are.

Consider carefully the toll the work stress is taking on you mentally, physically and relationallly and PLEASE don't stay in a job that is making you miserable one more day than you really have to. I'm not joking when I say it might kill you -- my dad died of a massive heart attack at 52 and never got to enjoy his planned retirement (he had been planning to retire at 55...)

 

[2017ish]

I'm going to go against the grain a bit here and say congratulations -- you have a big enough nestegg that you almost certainly would be just fine financially if you were let go tomorrow. No, it isn't going to kick off 275k/year, but I question whether you really NEED that for the rest of your life. ...

I agree with this--they have great nest egg and he may not really need three years once expenses are closely examined. BUT, everyone is different on spending and 275 is nowhere near the numbers a couple of folks have m/l documented as what they needed on Boglehead threads recently.

(heck, I wasn't comfortable with DW giving notice until we were beyond OP's present level--and, of course, our spending plans are reasonable. )

 

[braumeister]

It was a big relief to find that this was a financial thread. When I saw the title I was afraid it was a political junkie who couldn't wait for the next presidential campaign season to start.

 

[2017ish]

It was a big relief to find that this was a financial thread. When I saw the title I was afraid it was a political junkie who couldn't wait for the next presidential campaign season to start.

Or, even worse, a takeoff from the sex in retirement thread.

 

[TexasRider]

I agree with this--they have great nest egg and he may not really need three years once expenses are closely examined. BUT, everyone is different on spending and 275 is nowhere near the numbers a couple of folks have m/l documented as what they needed on Boglehead threads recently.

(heck, I wasn't comfortable with DW giving notice until we were beyond OP's present level--and, of course, our spending plans are reasonable. )

Yeah - Need a better handle on what the real spending levels will be. Maybe $275k is not necessary. I think since we are just starting this process, everything is based on what we do now instead of what our new life will be. Thanks all.

 

[TexasRider]

I'd highly recommend you run Firecalc and/or some other retirement planning calculators to evaluate the feasibility of your current plan.

FIRECalc: A different kind of retirement calculator

I’ve been playing with FireCalc for a few months now but maybe I’m not using it correctly.

I enter Portfolio of $3,365k (options coming due end of March so didn’t include yet)
SS of $36k for me and half that for DW @ 67
Retirement year of 2020 with $300k add to portfolio each year until that.
Mix Portfolio – (I am heavy in equity)

I’m getting 100% certainty with a 4% spend
97.4% with a $250k constant spend
92.3% with $275k spend

I try not to be too rosy when I load up FireCalc but maybe I am?

 

[TexasRider]

I'm going to go against the grain a bit here and say congratulations -- you have a big enough nestegg that you almost certainly would be just fine financially if you were let go tomorrow. No, it isn't going to kick off 275k/year, but I question whether you really NEED that for the rest of your life. Kids will launch soon -- you could definitely consider downsizing that house and the higher expenses that go with it. Would be interesting to see where else your budget goes. How much on grocery spending, for example? I've seen many budgets go from over $1000/month to nearly half that just with different choices about WHERE and HOW to shop, not necessarily buying different food. Costco can be your friend if you know what the best deals are.

Consider carefully the toll the work stress is taking on you mentally, physically and relationallly and PLEASE don't stay in a job that is making you miserable one more day than you really have to.

Thanks so much, all of you, for the encouraging words.
I realize we can adjust to anything if need be and of course, life is too short to endure a miserable situation.
We are anxious to enter the next phase which is underscored every time we hear of someone we know passing at an early age.
We've done our duty to raising two terrific young adults and sending them on their way with no student loans – now it’s time for us to enjoy life without work stress hanging over my head all the time.

 

[ivinsfan]

You will be under 55 when you plan to pull the plug..several posters have already suggested you use 3% instead of the 4 you are entering into FireCalc.

That's the "rosy" part.

 

[exnavynuke]

I’ve been playing with FireCalc for a few months now but maybe I’m not using it correctly.

I enter Portfolio of $3,365k (options coming due end of March so didn’t include yet)
SS of $36k for me and half that for DW @ 67
Retirement year of 2020 with $300k add to portfolio each year until that.
Mix Portfolio – (I am heavy in equity)

I’m getting 100% certainty with a 4% spend
97.4% with a $250k constant spend
92.3% with $275k spend

I try not to be too rosy when I load up FireCalc but maybe I am?

I put in spending of 275,000, your $3,365,000, 40 year retirement, retire in 3 years (2020), adding $300k per year until then, SS of 36,000 starting in 2033 and 18k starting in 2034 and 75% equity investment and come up with a 58.5% success rate under constant spending power model. At 30 year retirement it only goes up to 70.7%.

 

[TexasRider]

I put in spending of 275,000, your $3,365,000, 40 year retirement, retire in 3 years (2020), adding $300k per year until then, SS of 36,000 starting in 2033 and 18k starting in 2034 and 75% equity investment and come up with a 58.5% success rate under constant spending power model. At 30 year retirement it only goes up to 70.7%.

Seems like the difference between Portfolio Total Market & Mixed Portfolio.
I need to understand it better.
Thanks - I'll play with it.

 

[Nodak]

Welcome aboard

 

[Aerides]

Have you looked directly at actual expenses these past 3 years? $275 per year is higher than most any estimate I've seen on these forums. And Texas isn't generally thought of as a crazy COL state.

If you were in the $150 range most of us would be saying "why not now?"

 

[Badbreath]

TexasRider
In the same boat. 56 and want to retire 2020 will have less money then you but $2 to $2.5M but will work for us. This week Megacorp handed me a RSU package and said we want to keep you here for at least 3 years. The up side is I do get a pension and I can stay with the megacorp heath insurance till 65 (Medicare time). Also kid is almost done with collage and mortgage done this year.

We will see what happens in 2020

 

[TexasRider]

Have you looked directly at actual expenses these past 3 years? $275 per year is higher than most any estimate I've seen on these forums. And Texas isn't generally thought of as a crazy COL state.

Yes -I'm realizing that DW's early spending estimates are based too much on pre-RE spending. She insists its over $300k. We need to build it from the ground up instead of whittling it down from current level. I'm guessing it should be around $175-200k. I'm sure I'm not the only one here that tries to be overy conservative with estimates.

Also need to consider down sizing in interim of our final RE move. Texas is crazy affordable but this big house eats energy and maintenance dollars each month. We'll have 7,500 sq ft for the two of us and the dogs. Dilemma is when to do it.
Ultimately we'd like to move back to Mid-Atlantic area but daughter is starting up college here in Texas later this year - we will stay here for next 5 years. Does it make sense to downsize for that period of time factoring in all costs?? That's the topic of many happy hours with DW and me.

 

[TexasRider]

TexasRider
In the same boat. 56 and want to retire 2020 will have less money then you but $2 to $2.5M but will work for us. This week Megacorp handed me a RSU package and said we want to keep you here for at least 3 years. The up side is I do get a pension and I can stay with the megacorp heath insurance till 65 (Medicare time). Also kid is almost done with collage and mortgage done this year.

We will see what happens in 2020

Stock grants are a fantastic incentive. I will ultimately leave some on the table when I leave but they have accelerated our savings a great deal. No pension or health reimbursement (unless I stay til 2022-which I can't stomach). Sounds like you're in a great place.

Good to have another in Class of 2020. See you at the graduation ceremony!!

 

[audreyh1]

Yeah - Need a better handle on what the real spending levels will be. Maybe $275k is not necessary. I think since we are just starting this process, everything is based on what we do now instead of what our new life will be. Thanks all.

Does that $275K include taxes?

Getting a handle on your real and needed spending is everything when planning to retire.

 

[TexasRider]

Does that $275K include taxes?

Getting a handle on your real and needed spending is everything when planning to retire.

Thanks. We are quickly realizing that determining a solid spending estimate is the whole ball game. Taxes are a big part of it.

 

[timemoveson]

Expenses are key

Texas, congratulations on your success and positioning going into the home stretch.

You are absolutely right about expenses. Getting a real track on these made all the difference to our confidence levels about projections. I am the same general ballpark as you and "4%" or 3% of any percent only works as your base case if it resembles the level of pre-tax income your asset base is capable or producing.

Two years of hard-core but incredibly simple tracking in MINT made the challenge go away. A year in we knew exactly what we were dealing with for actual expenses and the 2nd year has allowed us to affect it in smart, easy ways and see the long term trends very clearly. We need substantially less than we thought on a yearly cashflow basis.