REtiring early at 57 and scared

[Buckeye]

Hello all, my name is Jon and I am brand new here and am VERY glad to see there is this active forum to help me get along. I have been working since 1983, constantly and in many different occupations. Starting at 16 years old as the cleanup kid in the local supermarket meat department, then 5 years in the US Army followed by 2 years full time college as my only non working break. I am sooooo ready to retire and I think I am financially prepared but it's that fear of the unknown that is there. I am assuming this is a common thing. I'm hoping that I can get some advice and anecdotal evidence that I CAN do this. I guess a major fear is the task of paying for health insurance before I am eligible for Medicare. I have looked into options but have not been able to get a really solid idea of how much it will cost. I will be spending a lot of time reading the existing posts, but please let me know; what were the main issues you have had in early retirement and how did you overcome them?

You are a veteran so you should be eligible for healthcare from the VA. You will pay nominal co-pays for care and for prescriptions. I retired early and the VA was my only source of healthcare from the age of 52 to the age of 65. Actually, I self-paid for some chiro visits in the community so I did get some healthcare outside the VA. Dig out that DD214!

I'm healthy and I've never had anything major addressed by the VA but I feel I received (and continue to receive) excellent healthcare from my modern VA facility in Central Florida. You can sign-up online or go to your nearest facility. Check out VA.gov. Going on Medicare this year was a bit of a shock because I haven't paid a medical insurance premium for the last 13 years! An additional benefit is the VADIP (VA Dental Insurance Program) dental insurance. I pay $48 per month for the top tier dental plan from Delta Dental which has a $3,000 payout limit and no deductible. You might have a waiting period for things like crowns and implants so don't wait to sign up if you think you might use it.

PM me if you want any additional information about my experience with the VA. I figure I saved well over $100,000 in medical insurance premiums because of my VA medical benefit.

 

[Buckeye]

Basement, Welcome. Yes, you can do it. Thanks for your service BTW. I retired last year at 57. I see you mention your spouse. I was going to tell you to go to the VA for medical but that won't help your wife. Also, it has been a long time but if you haven't done it, put in a VA disability claim. I'm sure something is wrong with you, and it may be traced/related to your military service. Good luck to you sir. I stay busy officiating sports.

Considering using a VSO (Veterans Service Officer) to assist you in filing a disability claim. Search VSO and/or VA accredited representative on VA.gov. I used a very experienced VSO from the San Francisco office of the DAV. He came to an outplacement meeting I attended when I was preparing to separate. The new PACT Act might be of value to you also and you can read up on it at VA.gov. The VA.gov website is full of information.

 

[Wile E. Coyote]

Not all veterans are eligible. It depends on dates of service.

 

[SecondAttempt]

Last Friday should have been my last day of working. Things at w*rk have led to me extending my employment somewhat, weeks not years. It's all good. I'm 58. I have been planning early retirement since I was about 25 and my original target was 45 years old but my plan included a little supplemental income from part time work.

As life played out I probably could have made my target date but various opportunities presented themselves. I worked for two startups which was a huge risk. One failed but it led to me being hired from the rubble by the second and that led to a pretty good financial windfall and great experience in business leadership that led to future opportunities.

I left the second startup to get a PhD. That was a few years without significant income. I was teaching part time but nothing like what I was used to. I found that my personal behavior changed a LOT. My spending dropped dramatically. I did not feel like I was depriving myself. We still went out to our favorite restaurants about the same amount and still went on the same kinds of vacations. But the random unplanned expenses disappeared without me consciously trying.

So, as I approach retirement I am feeling some fear as you describe. All the calculators say I am fine and my resources are similar to yours. I have a plan that I have followed for decades. I have the advantage of having taken financial risks in my life that I both benefited from and had to recover from. I know myself enough to know how my behavior changes based on the resources immediately available to me.

My situation is based on actual experiences and yet there is a bit of fear present so I don't think that is something you should dwell on. A solid plan you have confidence in will help you overcome your fear.

 

[Midpack]

Work until you are not scared.

Best advice so far on this thread. YOU have to be confident in YOUR plan unless you can easily resume your line of work. What some random strangers here suggest isn’t a substitute for doing the math yourself until you’re confident. You need to know exactly what you’ll spend, including bridging healthcare costs until Medicare. There’s some good advice here, but there are some ill-informed replies as well. The 4% rule was based on a 65 yo with 30 year life expectancy, and a recent retiree can’t know if their plan will be successful after one year.

 

[2017ish]

We retired in 2017 at 57/56. DW gave me a lot of grief over the several years of telling her to work "4 more years," as I applied more conservative metrics and more retirement calculators .

In the end, we were looking at 2% withdrawal of the initial portfolio to fund our expected "at home" expenses. (No pensions, excluded social security, ignored value of house and acreage, and ignored likely/possible inheritance.).

Why so conservative? DW is from a very long lived family and checks all the boxes for personal longevity.

We retired to travel, so our expenses are more than twice our adjusted working expenditures. We withdraw a constant percentage (4.25) based on the most recent year end portfolio value. Thus, when our portfolio dips, we must spend less the following year.

Our healthcare expenditures, including insurance, have not been significant (to us)--but that varies widely by location and each individual's situation.

As others have said, investigate your expenses and determine as much as you can just what insurance will run. The latter is important given your indication as to expected spending level.

 

[InTheBasement]

I don't mind talking about portfolio values but I also like to talk in terms of what percentage my annual spend is, in terms of my total portfolio. The reason for this is that portfolio values and annual spends differ widely from person to person. At the point I began living off my portfolio, I had about $750K, with an annual spend of $18K. This represented 2.4% of the portfolio. I was lucky enough to have retired at the beginning of a long bull market. Over the next few years, I increased my annual withdrawals. I am now withdrawing $27,600 a year, which is ~2.25% of my current portfolio value of $1.23M. With Social Security coming into play in the future, I should be able to increase my annual spend quite significantly in the future, if I want or need to.

18K annual spend! Can you share how you were able to pull that off? That's an extremely low number, especially for where you live. I am in New York and I have no mortgage. My wife and I live a rather unimpressive and simple life and even at that our annual spend is near 50K. My property tax alone eats up 10K.

 

[InTheBasement]

You are a veteran so you should be eligible for healthcare from the VA. You will pay nominal co-pays for care and for prescriptions. I retired early and the VA was my only source of healthcare from the age of 52 to the age of 65. Actually, I self-paid for some chiro visits in the community so I did get some healthcare outside the VA. Dig out that DD214!

I'm healthy and I've never had anything major addressed by the VA but I feel I received (and continue to receive) excellent healthcare from my modern VA facility in Central Florida. You can sign-up online or go to your nearest facility. Check out VA.gov. Going on Medicare this year was a bit of a shock because I haven't paid a medical insurance premium for the last 13 years! An additional benefit is the VADIP (VA Dental Insurance Program) dental insurance. I pay $48 per month for the top tier dental plan from Delta Dental which has a $3,000 payout limit and no deductible. You might have a waiting period for things like crowns and implants so don't wait to sign up if you think you might use it.

PM me if you want any additional information about my experience with the VA. I figure I saved well over $100,000 in medical insurance premiums because of my VA medical benefit.

Yes, I am a veteran but I was not deployed into combat, and I did not retire from the Army. I was only in for five years so I am not eligible for VA health benefits. I am lucky enough to qualify for some benefits such as property tax reduction and such. Welcomed of course, but not overly significant.

 

[InTheBasement]

Best advice so far on this thread. YOU have to be confident in YOUR plan unless you can easily resume your line of work. What some random strangers here suggest isn’t a substitute for doing the math yourself until you’re confident. You need to know exactly what you’ll spend, including bridging healthcare costs until Medicare. There’s some good advice here, but there are some ill-informed replies as well. The 4% rule was based on a 65 yo with 30 year life expectancy, and a recent retiree can’t know if their plan will be successful after one year.

I have done a tremendous amount of calculating over the past 3 years. I am rather confident that my finances will suffice. My statement of "being scared" is sort of financial, but more importantly focused on the fact that I have been living my current lifestyle for so long that I don't even know what steps to take to transition. Fear of the unknown I guess you could call it. Since I was 16 I have been working and I have never even been laid off, so I don't know what things I really need to do to ensure I am taking care of all of my requirements.

 

[InTheBasement]

4% of $1.5M is $60K, so that sounds doable. Does the 60K include Federal and State taxes? Are you going to withdraw it all from a 401K at age 57, or are you going pull some from after tax investments or cashing in some CD. FYI in order to get $60K from a 401K, you’ll actually need to withdraw $75K because 401K withdrawals have a mandatory 20% federal tax withholding. You will likely have 1/2 of that refunded when you file your taxes the following year, but it’s a big hit the first year.

Approximately half is in 401K. The rest is spread between Roth IRA, traditional IRA, a couple of small teachers retirement funds (not pension), and a bridge account consisting of a high interest savings account and a mutual fund. So I believe I have enough in the bridge to last until I am 62 at which point I will begin collecting SS

 

[InTheBasement]

Welcome. You will get lots of advice and education here, most of it good.

Is this $1.5M investable cash, income taxes already paid? That is best case. Worst case is if it is all in tax-sheltered accounts like tIRAs, 401Ks, etc, in which case federal and possibly state taxes might leave you with around 2/3 investable. Worst/worst case would be that it is taxable and the number also includes the net value of your house. Again, this reduces the investable portion of the $1.5M because you have to live (and pay) somewhere.

About half is in 401K, the rest is split between Roth IRA, traditional IRA a couple small teachers retirement funds (not pension), and a bridge account consisting of a high interest savings account and a mutual fund. The savings account and mutual fund are enough to last me from 57 until 62 quite easily. So if I rely mostly on the savings account there should be no income taxes other than on the interest, which should not be killer since high interest is 4.7% and it's not providing tremendous income. It does not include the value of my house.

 

[InTheBasement]

Agree, but IMO, it "probably" will make a difference". Retiring at 57 is pretty young to retire with just 1.5m these days, especially if it's in tax deferred accounts, even with a smaller 60k WR. Why? Because STUFF happens and a ~30 year retirement is a long time for STUFF to happen.

Hopefully the OP is debt free too and his SS payments will be on the higher side when he starts collecting..

We are completely debt free. SS, even at 62 will satisfy about half of our annual financial requirements.

 

[donheff]

Welcome to the forum.

As you can see, there are lots of folks here that will provide good, detailed advice. The major challenge in my mind is wrapping your head around expenses. That varies tremendously from person to person. Many of us tracked expenses in excruciating detail for years or dug out the checking and credit card records and tallied up everything for two or three years. From that data we identified mandatory expenses that would not go away, discretionary that could be cut back in an emergency and a cushion to account for things we didn't anticipate. Periodic expenses like car purchases, roofs, painting, major appliance replacement and the like need to be averaged in. And taxes are expenses that need to be included and will likely change over time as income sources change. Calculating expenses is pretty straight forward.

The income side is a whole different matter. Evaluating how your portfolio should be structured and how much you should be comfortable withdrawing from it, working out when and how "guaranteed" income sources like social security will fit in, and related "income" analysis is what eventually solves the "work until you are not scared" equation. This is also the area that a lot of people here can help you address.

Take your time and good luck.

Edit: I posted this and then saw your response about the calculations you have done over the past few years. If you have the financial issues fairly locked down, jump in the pool. You can always dry yourself off and go back to work if you find yourself at loose ends.

 

[InTheBasement]

Stuff, yes.
My new Mustang ? cost almost $50K.
How do you pay for that with a $60k annual budget unless at least $6k of it goes into a New Car Replacement fund?

LOL. Well, we are rather simple life type people and auto replacement would certainly not be a 50K car. At the moment I drive a 14 year old Toyota RAV 4 that I hope to get another 6 years out of. We tend to buy cars that are the top of the low end. We just got the wife a Kona, but the top of that line. So That car should last for a good 15 years at least. We anticipate that we will only need one car in retirement since we are that type of couple that does everything together.

 

[Surewhitey]

I have done a tremendous amount of calculating over the past 3 years. I am rather confident that my finances will suffice. My statement of "being scared" is sort of financial, but more importantly focused on the fact that I have been living my current lifestyle for so long that I don't even know what steps to take to transition. Fear of the unknown I guess you could call it. Since I was 16 I have been working and I have never even been laid off, so I don't know what things I really need to do to ensure I am taking care of all of my requirements.

We did a mini reset back in 2011-15 by moving to another country and lived on <$20k and came back with a new perspective of what we really need & what makes us happy. Our lifestyle has gone from $44k to $70k from 2015-now. Can we cut back a little, sure. We didn't know what to expect & we too had never been without employment...I don't recall being intimidated, maybe nervous. After 3 years, we knew more of what we could "handle". We talk about doing something similar when traveling to new places and I'd personally love to do it again. We found it easy to return to work after the itch was scratched, but the infection comes back eventually.

Maybe consider a reset to start & find out what is really important to you and DW?

We are back to ownership of our house and 2 DGK's, so very different than the time we had there. Change with the times is something to consider too.

 

[LateToFIRE]

OP, Sounds like financially you'll be fine as you've not even counted SS or value of your home into the equation - note there's a lot of debate around here on how to think about home equity. There's also a huge amount of debate around when to take social security, so don't be surprised if some folks jump on you about taking it at age 62. My opinion - there is no right answer, each situation has its nuances.

At any rate, as I mentioned earlier, I fully understand the fear factor, especially when RE happens abruptly. I am sure you're wondering if there's something you have not considered in your calc's - healthcare, taxes, SS, etc. I've only been able to slay that fear demon with lots and lots of reading - a lot of it right here on this forum - and running spreadsheets & calculators. The experience base here is incredible.

For me the revelations where I had a lack of knowledge would include:

1) I had to get my arms around our spending budget. Was blessed with a relatively strong income, so paid little attention to budgeting. So, I downloaded a couple years of checking account and credit card data, figured out what we spent and on what, and made some adjustments for certain things that would change in ret. Most importantly, I separated required vs discretionary expenses, so I could have some idea what we could give up if things went south.

2) I was very confused about what our tax picture would look like in ret. We have a good mix of taxable vs t-IRA funds, and multiple taxable liquidity events to consider over next 2-3 years. We finally broke down and retained an accountant - sometimes you just gotta pay for expert advice. Also, one of the biggest questions was whether or not Roth conversions would make sense. Thank you forum for humoring my many questions on that topic.

3) There is a certain amount of pent up BTD (Blow That Dough). Wanted to be able to do some of the things (ex. travel) we had not been able to enjoy fully while I was working - so needed to get comfortable spending an elevated amount early in ret while we're still reasonably able-bodied - we've seen how quickly physical capabilities can deteriorate without warning.

4) The healthcare stuff was a concern as not yet Medicare age - fortunately figured out would qualify for employer's retiree medical plan, so don't have to worry about figuring out ACA.

Once I felt I had my arms around these issues/questions, I felt a lot better. There is still that sense of letting go of the lifeboat and having to swim on your own. But, we both know that a j*b is not really a very good lifeboat. It just feels that way.

Anyhow, you seem to have a pretty good handle on your financial situation. I think it will just take some time to adjust. And if it just doesn't feel right, you could probably go back to work, maybe part-time, albeit perhaps not at your previous level of income. I find that reminding myself that I have options helps.

 

[tmitchell]

I left my job at 54 about 2 years ago, so a bit younger than you. I had similar fears and also worked from a very early age.

On the money side of the equation, this has been the easiest part. Last year was the first full year I lived entirely off my portfolio. I thought it would be more anxiety producing than it has been, but as many have said as long as you feel comfortable with the plan you should be good. My only "unexpected" expenses so far have been more travel than I anticipated, along with some experimenting around new hobbies.

Which brings me to my second point: the "retiring to" something is a real question IMO. A lot of folks here made the leap without any trouble and immediately loved their new lives of freedom. It's been harder for me. If you've been a productive member of society for your whole life and lean into that identity, switching to retirement could be a major adjustment. It took me well over a year just to settle in, and I'm still trying to figure out how to best take advantage of all the time that lies ahead. Personally I have not found hobbies to be enough of a challenge. I'd think long and hard about what you plan to "do" and how your particular temperament is going to be in the face of your new life.

On the healthcare side, the ACA has been quite excellent. I experimented with one plan the first year and switched to Kaiser this year, which has been manageable so far. But I have no pressing health concerns at this stage. You might want to run some calculators around expected income. I have a 60/40 portfolio and WR is under 4%, so "income" is quite low which affords significant subsidies.

Anyway, congrats on the milestone and good luck!

 

[RetiredHappy]

I retired at 53 and to have peace of mind that we would do OK in retirement, I turned my entire IRA into 2 term deferred income annuities which would start distribution when I turned 60. We did set aside a large sum of money to fund us for the following 7 years. We are continuing to withdraw all dividends + selling positions in our taxable in the meantime. When I turn 65 in 3+ years' time, we should settle nicely into our expenses being paid for by 2 SS, annuities, taxable account dividends and RMD (husband's).

 

[Dtail]

I left my job at 54 about 2 years ago, so a bit younger than you. I had similar fears and also worked from a very early age.

On the money side of the equation, this has been the easiest part. Last year was the first full year I lived entirely off my portfolio. I thought it would be more anxiety producing than it has been, but as many have said as long as you feel comfortable with the plan you should be good. My only "unexpected" expenses so far have been more travel than I anticipated, along with some experimenting around new hobbies.

Which brings me to my second point: the "retiring to" something is a real question IMO. A lot of folks here made the leap without any trouble and immediately loved their new lives of freedom. It's been harder for me. If you've been a productive member of society for your whole life and lean into that identity, switching to retirement could be a major adjustment. It took me well over a year just to settle in, and I'm still trying to figure out how to best take advantage of all the time that lies ahead. Personally I have not found hobbies to be enough of a challenge. I'd think long and hard about what you plan to "do" and how your particular temperament is going to be in the face of your new life.

On the healthcare side, the ACA has been quite excellent. I experimented with one plan the first year and switched to Kaiser this year, which has been manageable so far. But I have no pressing health concerns at this stage. You might want to run some calculators around expected income. I have a 60/40 portfolio and WR is under 4%, so "income" is quite low which affords significant subsidies.

Anyway, congrats on the milestone and good luck!

Yes your key comment is if one leans into that identity. I had a rewarding challenging lucrative career with some obsessive hours. However, when I retired, I did not miss it one bit and am not in contact with any former folks from work.
However, I do have an obsessive hobby teaching and playing Pickleball 6x weekly for around 35 hours.

 

[Al18]

About half is in 401K, the rest is split between Roth IRA, traditional IRA a couple small teachers retirement funds (not pension), and a bridge account consisting of a high interest savings account and a mutual fund. The savings account and mutual fund are enough to last me from 57 until 62 quite easily. So if I rely mostly on the savings account there should be no income taxes other than on the interest, which should not be killer since high interest is 4.7% and it's not providing tremendous income. It does not include the value of my house.

Sounds like you’re in excellent shape. I would further investigate requirements for subsidized health insurance under the ACA. I don’t know the particulars, but I believe you need to show some taxable income and believe you are required to file a tax return.

 

[tmitchell]

Yes your key comment is if one leans into that identity. I had a rewarding challenging lucrative career with some obsessive hours. However, when I retired, I did not miss it one bit and am not in contact with any former folks from work.
However, I do have an obsessive hobby teaching and playing Pickleball 6x weekly for around 35 hours.

That sounds like a great way to stay healthy & connected with others!

 

[mystang52]

This is Page 3, so I'm late to this thread. To the OP: I never give specific financial advice, here, but I pose 3 things to consider: 1) Are you comfortable dealing with a substantial rare expense item, such as new roof, unexpected immediate need for a replacement car, etc.? 2) If you take SS at age 62, and you die prematurely thereafter, is that permanently reduced death benefit for your wife a concern? 3) For the first year of ER, keep your lifestyle simple. Then you can better assess how much more you can loosen the purse strings for future years.

 

[Dtail]

That sounds like a great way to stay healthy & connected with others!

Yes indeed, but I do admit that I don't have a current plan B if I were not able to play all of a sudden.

 

[Al18]

Regarding when to take SS, you may want to run your numbers thru https://opensocialsecurity.com to determine how to maximize your benefit. For many married couples, it’s usually a better choice for the lower earner to claim at age 62 and the higher earner to claim at full retirement age or 70.

 

[InTheBasement]

This is Page 3, so I'm late to this thread. To the OP: I never give specific financial advice, here, but I pose 3 things to consider: 1) Are you comfortable dealing with a substantial rare expense item, such as new roof, unexpected immediate need for a replacement car, etc.? 2) If you take SS at age 62, and you die prematurely thereafter, is that permanently reduced death benefit for your wife a concern? 3) For the first year of ER, keep your lifestyle simple. Then you can better assess how much more you can loosen the purse strings for future years.

The SS discussion is an interesting one and one that seems to be debated all the time. I look at it this way. I could get by without SS, but having it would make life quite easy. So taking it at 62 would improve my quality of life in the early stages of retirement. I would rather have that income in the earlier days than to have more when I am older and less able to enjoy it. I don't see any financial issues with my wife if I were to pass early. Realistically, life would likely become less expensive without me around I intend to keep life simple for the first year. We are just like that by our nature. We are already rather simple and don't do any travel or anything extravagant. We have found that there is always something great to do locally. Just within a 50 mile radius of my house are well over 100 county, state, and national parks that we are planning to visit/explore. My hobbies, and hers are already basically paid for. She plays bass, and I play guitar. I already have all the grilling/smoking gear that I need, and her idea of a great day is waking up and spending the day reading. It's funny, the more I write, the more it feels like I am in a good position to do this.