46 And Planning to Retire in Late 2016 - Am I Ready?

[OrcasIslandBound]

If it helps to have a different perspective from another person who will retire September 1st, I'll give you my perspective: age 58, DW age at retirement : 59. Investments 1.7 mil. Houses (2) about 1 mil. Debt: 215k. Pension, non cola 6k per year. SS DW 17K @62. My SS 33k at 67. Planned expenses 85-90k per year for everything, aca, taxes and all.

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[I was misinformed]

+1 to the advice to be conservative in your assumptions. Have you actually lived on the $45k? Perhaps use what your actual spending has averaged over the past 3-4 yrs?
I am sure someone will mention it, but you may also want to play around a bit with Firecalc (Firecalc.org) and see how various assumptions about spending and returns will influence things.

I have a rather different situation (single, retired at 58.5 yo) but I would join others here urging a little caution. In the 18 months since I retired I have had a continuous stream of discoveries and issues that have challenged my assumptions about my finances. Nothing really serious at all, but everything has seemed to break against me - i) my regular day to day spending has turned out to be a little higher than I expected, ii) I've had modest (but not really expected given a very conservative AA) investment losses, iii) condo fees and RE tax have gone up a surprising amount, iv) big dental bills, v) a splurge vacation I had planned ultimately developed into something more expensive than I had initially imagined, vi) I have suddenly developed lots of problems with my appliances, plumbing and other aspects of my condo which have/will lead to some significant expenses, vii) I am continuing some modest professional activity but this hasn't brought in even the modest amount of remuneration I hoped for, and may end up costing me more than I make. I am now very glad that I had built in large financial buffers in my plans before retiring.

 

[OrcasIslandBound]

misinformed, your situation is kind of the one that I worry about the most. Cost overruns, unexpected expenses, and being right to the line going into retirement with not enough margin to handle what appears to be happening in your case. What would you do different, had you not retired yet?

I'm about the same age as you and at this point can't possibly imagine working another day beyond Sept 1st. So, my DW and I have decided that if things go into these cost overruns, we're going to have to find a way to make money from the real estate or other source. Just not interested in continuing on with Megacorp.

 

[Moneygrubber]

misinformed, your situation is kind of the one that I worry about the most. Cost overruns, unexpected expenses, and being right to the line going into retirement with not enough margin to handle what appears to be happening in your case. What would you do different, had you not retired yet?

I'm about the same age as you and at this point can't possibly imagine working another day beyond Sept 1st. So, my DW and I have decided that if things go into these cost overruns, we're going to have to find a way to make money from the real estate or other source. Just not interested in continuing on with Megacorp.

The biggest and most painful exercise, but ultimately very valuable was checking my expenses last year to the dime. I tracked every expenditure on a spreadsheet and using quicken. It was a GIANT pita... But it really helped nail down my budget. I have more than I need and plan on leaving megacorp in April at 55, I was going to go at 50 but glad I waited, you really need that cushion to feel comfortable and not worry as much in the long haul.


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[OrcasIslandBound]

Thanks Moneygrubber, I too have tracked my expenses for last year. They were bigger than we can handle in retirement. Of course, it didn't help that we re-roofed our house, painted the exterior, installed a camera monitoring sys, went to a wedding in Alaska, took a 4 week vacation, etc. Won't be able to do all those activities going forward.

Also, it didn't help that the DS (age 18 at the time) managed to get 4 tickets in his car which is on our insurance (and registered in my name). Ins costs were already high. He needs to be on his own ins. Yes, we have a bit more work cut our for us. Too many expenses....

 

[petershk]

I think your cutting too close. Think about it. The main reason to fire is stress reduction and life enjoyment. When you cut close if something goes wrong and you have no income that creates huge stress and cuts enjoyment a lot . The margin of financial safety and matching investment style to personality are great at combating that.

I'd try this.

Keep it simple. That your income generating assets... Pick a simple safe withdrawal rate (I'd say no more than 3%) and start acting as if you're fired today.

So... Subtract that number from your paycheck and put everything else in savings. Pretend like you can't find freelance work... Add additional costs (health especially), subtract a few others (maybe gas, work food, work clothes). And see how that goes for the next 6-12 months.

I'm kinda doing that. Its obviously only partly representative, but it puts the lifestyle reduction part to the test. Turns out I suck at that part .

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[I was misinformed]

misinformed, your situation is kind of the one that I worry about the most. Cost overruns, unexpected expenses, and being right to the line going into retirement with not enough margin to handle what appears to be happening in your case. What would you do different, had you not retired yet?

Fortunately my finances have enough margin that, even had I known that
these modest setbacks were coming, I don't think my ER date would have changed (much).

What might be relevant for other folks in my experiences is that the conjunction of all these circumstances really caught me by surprise, despite my being a pretty cautious guy. The only good discovery for me has been that I have handled all this without any angst at all.

All the years I lurked at E-R.org I really should have been at financial-fraidy-cat.org. Hence the large margins in my plans. E-R.org broadened my horizons and I admire folks here who can make their plans with a calmly rational view of their finances and related life and death risks we all face.

 

[pb4uski]

....All the years I lurked ... I really should have been at financial-fraidy-cat.org. ....

This webpage is not available

 

[Moneygrubber]

Thanks Moneygrubber, I too have tracked my expenses for last year. They were bigger than we can handle in retirement. Of course, it didn't help that we re-roofed our house, painted the exterior, installed a camera monitoring sys, went to a wedding in Alaska, took a 4 week vacation, etc. Won't be able to do all those activities going forward.

Also, it didn't help that the DS (age 18 at the time) managed to get 4 tickets in his car which is on our insurance (and registered in my name). Ins costs were already high. He needs to be on his own ins. Yes, we have a bit more work cut our for us. Too many expenses....

Sounds like I need a new line item for my budget for "shxx happens"


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[Al18]

I think you are 90% towards retirement, but need additional money to ride out the stock market swings with confidence. Some other things to consider:
1. Most on this forum do their retirement planning to age 99. This means you'll need to plan for 53 years of retirement - a 2% withdrawal rate.
2. It appears you make about $100K per year - so each full year of work is equivalent to 3.5 years of part-time work.
3. Social Security is based on 35 years of work. 0 is averaged in for every year less than 35. Have you estimated your SS income using one of SS calculators?
4. If you retire now, how will you afford the extra travel/vacations. I expect your spending to go up $10K-$20K per year on travel/vacations. Instead consider taking an extra vacation per year while you're still employed full-time.

 

[Nomad4hire]

Thanks for the reply. I'm am almost completely invested in stock mutual funds (index funds). I also plan to do some part-time web-based work - which should bring in around $30K/yr. (my wife will be bringing in part of that 30K). Based on that, and knowing I can take some money out of my Roth - I think I'm okay. Definitely - the stock market downturn does have me thinking about the aspects of dealing with that while in retirement, too. And - yes - kids (and those possible expenses you listed) are a concern - but one I believe we can manage.

We are in very similar circumstances...to include assumptions, but I am nearly 10 years older. We started looking at ER in 2013, and assumed an annual spend of $36,000. Many on this forum cautioned us, and rightfully so. We have learned since then, that the key for us is living at the level we intend to live in ER. I am still working, DW still part time, and we are saving everything beyond our expenses. We have been able to live within our annual goal. Looking back, I am glad I waited to ER. That said I am in a OMY cycle because we are still not 100 percent comfortable. All of our runs in Firecalc and others give us 100 percent. So, we are focused on this maybe being the year we drop to part time and consulting.

You and your family are in great shape based on the numbers and assumptions you provided. My two cents are to consider all thoughts provided here as my experience has been -- there are wise and honest folks here with the best of intent, unlike my former financial advisor!
-- Nomad

 

[FreeBear]

Sorry, I'm late to the party. Lots of previous comments on your projected budget and estimated future income estimates. From your replies, you seem confident in your projected budget. Are you as confident in projected work income? In other words, do you have experience with this or is it an entirely new to you?

If your comfortable with your budget and future income, I agree that you should be able to pull the expected $20K shortfall from you $ 1M ish savings for over 30 yrs. with some cushion. If you expect your kids to fend for themselves after college and you and DW are not "required" to leave an estate, I think you stand an even better chance. Most importantly, both of you still plan to work part time, taking a huge stress of the egg nest.

Keep in mind though that we're not as conservative as many (most?) here. We're running a SWR of 4.5 - 4.8% for the next 4 year, when SS at 62 will bring our SWR to 4%.

I am surprised though, that you appear to be at a 100% stock allocation and are considering switching to partial retirement/part time work so soon? Although hold about a year in cash, have you considered at least 20% bond holdings? Maybe as high as 40-50% bonds? With recent stock dip, it's not the most inviting time to sell, but perhaps you can put the incoming 100K expected this year into bonds or sit it in a 1% savings account (Ally or others).

Finally, what will both of you do with all your time, assuming you'll be switching to part-time work? Seriously, it's important to consider the non-financial aspects too, especially since you'll also soon be empty nesters.

Good luck!
FB (ER'd 1 year!)