50, hoping to go from semi-retired to full retirement

[tony1852]

Hi all!

Turning 50 in a few months. Semi-retired at 47 in 2020. Leaving job was planned in 2020, but covid actually helped as company termed wife and I so got some additional perks wouldn't have gotten otherwise. Planned to work another 3-5 years part time then fully retire (through 2023-2025). For some reason, I'm apprehensive, so maybe some advice from others that have done or are like minded may give me the umphf I need to call it quits after 2023.

Here's the setup:

$620k in qualified accounts
$450k in 401k/IRA
$150k in Roth
$20k in HSA
$1MM in non-qualified accounts
$80k cash/CDs
$70k I-bonds
$850k brokerage

No debt. Paid off mortgage in 2019. 1 child leaving by end of year (college completed and paid for), 1 child already out with 11 year old left at home. Wife turns 42 this year. Small house, so this is probably where we'll stay as family is here.

A family member is diligently paying back a loan at $675/mo through 2027, and child support from wife's previous covers youngest's 529 contributions.

Monthly budget of $4583 ($55k annually) which we've tracked for several years. Lots of fluff in it as 529 college contributions ($425/mo) disappear in 8 years and 2nd largest percentage is consumed by travel & entertainment ($733/mo). We've been on the ACA exchange since 2021, so we know how that works for us. Budget includes new car fund every 7-10 years and yearly house repairs. Only thing I haven't considered is LT health care, which I'm not sure how to navigate, so any thoughts on that much appreciated!

No debt. Paid off mortgage in 2019. 1 child leaving by end of year (college completed and paid for), 1 child already out (no college) with 11 year old left at home. Wife turns 42 this year. Small house, so this is probably where we'll stay as family is here.

Using FIREcalc looks good. With $1.6MM on a $55k budget and 60 years (getting wife to 102), we've got 1 fail/92 for a 98.9% success rate. That's without SS. $55k/$1.6MM = 3.34% withdrawal rate

The SS calculator says if I stop working today, I'll get $3020 monthly at FRA in today's dollars(?). Since that's 17 years away, I'm assuming it's going to be much more in future dollars. When I put 75% of this into FIREcalc (assuming that the fund runs out in 2035 as predicted and then benefits get slashed), along with 1/2 this value for my wife both starting at appropriate FRA, then it goes to 100% success, with an average ending value of over $18MM.

Using my own cracker jack spreadsheet, assuming 4% inflation long term and making 5.6% on combined portfolio, I come up with about $8MM excess when my wife turns 100.

Anyone see any big holes in our plan? And if not, then why am I so anxious lol?? Thanks!

 

[pacergal]

If my math is correct, you. have over 3 million saved. Plus
SS I the future.
If your budget truly is 55,000/year, I don't think you have anything to worry about.

 

[38Chevy454]

Welcome to the forum. From your numbers it does seem you are good shape. Come on in to the retirement pool, the water is great. Only risk is if some projected income sources should stop, but sounds like small risk of that happening.

 

[Mark1]

Hi all!
......
Here's the setup:

$620k in qualified accounts
$450k in 401k/IRA
$150k in Roth
$20k in HSA
$1MM in non-qualified accounts
$80k cash/CDs
$70k I-bonds
$850k brokerage


Using FIREcalc looks good. With $1.6MM on a $55k budget and 60 years (getting wife to 102), we've got 1 fail/92 for a 98.9% success rate. That's without SS. $55k/$1.6MM = 3.34% withdrawal rate

Oh, I get it now. 1.6MM, not 3MM

 

[Al18]

Note the SS calculator assumes you continue to work until age 62. Your SS benefit is based on your highest 35 years of income.

 

[FREE866]

Quit tomorrow. End of discussion.

 

[Love This Community]

Good callout Mark1. It’s easy to mistake the total assets to $3M and say OP is more than ready vs. $1.6M

 

[RetiredHappy]

Note the SS calculator assumes you continue to work until age 62. Your SS benefit is based on your highest 35 years of income.

+1. It is likely that you don't get $3K of SS at FRA as SS assumes that you will continue to work until 62. You can download the detailed calculator and specify that you are going to get $0 earnings from this point out and it will give you an accurate number.

My gut check is that to retire at 50/42 for the 2 of you at $1.6M in savings is dicey. But then we spend 4 times of your $55K per year in retirement. Retirement without hobbies, i.e. spending money for leisure, can be a little boring.

 

[tony1852]

Thanks all for the comments.

I did use the SS calculator and tell it that I made $0 earnings from today, so at least I think I got that correct. Although it didn't make that much of a difference. My last year's SS earnings (2021) were only about $26,000. Assuming that I continue to make that, there's only a few years of low earnings that get replaced. Statement shows $3092, while putting in the $0 moving forward only dropped it to $3020.

We're pretty simple people. My hobbies are martial arts, lifting weights, playing guitar, and D&D. My wife does some of the same and is a voracious reader (over 100 books last year). Luckily our entertainment isn't expensive. Until we semi-retired, we really had no time for travel or spending money on non-essentials, or to pursue our hobbies at all lol. I don't see us ever spending huge amounts beyond what we are today for fun. Now, if in 10 years we end up with 2x what we have now, our attitude might change. Even travel is tough with our 11 year old, so for the next 7-8 years that will almost guaranteed be what we did the last 2 years and nothing more.

I think the $55k/year budget is reasonable and we have $1.6MM in current liquid assets as someone correctly pointed out, not $3MM. Sorry if how I wrote it made it look confusing. Does that change any of the above analysis?

 

[Surewhitey]

You are uncannily identical to our scenario. I'm just waiting for DW to buy into leaving work. She actually enjoys it for the most part. So I just started a small biz to boost the booty a bit more.

We spend $51-57k on everything, including travel. DD has 2 kiddos now so we are grounded somewhat, but still maximize 6-7 weeks of travel, annually.

You having kids still on the payroll is the early question, but wouldn't scare me personally. ACA is one of my questions, but I think it is a perfect plan for HC. We have plenty of bridge bucks to get us to 65 while engineering our income $.

We took a few years off 2012-15 and it was great... Maybe why I want to return to something like it.

Your numbers work imo...

 

[intent]

I don't see any big holes. One item though that my wife and I ran into (we're a little older, but our numbers are very similar to yours) was that she has had a somewhat difficult time adjusting to significantly reduced income (I'm still doing some part-time consulting work). Basically, she just sort of has a general fear and this manifests in not wanting to spend any money on fun. We've talked about it and she's improving, but I think it mainly comes from her lack of deep involvement in the planning - I ran the calculators, did the reading, built the spreadsheets, etc, etc. She trusted, and trusts me, but without having done the involved work of figuring it all out I think she feels more unsure than I do.

This hasn't been a deal breaker and neither of us is planning to head back to work FT. I'm just bringing it up as something of which to be aware and to make sure you both discuss everything fully. I think in my excitement for both of us to quit working FT I might have rushed her a little and might not have taken enough time to deep dive the numbers with her. It's on both of us a little. She wasn't as interested in deep diving as I was and so was probably a bit too lax pre-retirement in her desire to discuss the topic at length, and I was too willing to accept this and should probably have setup a third-party review with an FA who maybe could have provided for her an imprimatur of authority, and with it more confidence in our plan.

Although, if I'm being honest, I would have been fearful to do that because selecting the wrong FA could have led to a situation where they say we're not anywhere near wealthy enough to retire

One part of our planning that has helped the situation, though not totally alleviated her feelings, is my willingness to continue earning at least some income. While right now I'm still consulting in my field, I always believed, and expressed to DW, that I would be perfectly happy to take a menial, no stress, job of some sort (I tend to be drawn to delivery/courier work) to supplement our assets if need be. This has helped us both feel less anxiety about the possibility of unexpected/unplanned for expenses. Of course, you might not want to do this, so that's something to consider. And even though our plan always involved me doing some PT consulting work for 2-3 years, she's discovered that she has some feelings of guilt seeing me have to take meetings and such. Again, not a dealbreaker, but something we've been working through.

I suppose all of that is a lot of words to say, do your best to make sure you're both emotionally, as well as financially ready.

 

[SJhawkins]

This thread hits so close to home its a little nuts. I have to wonder if we are more the "norm" for today's world!

I give the OP some serious credit to pull this off. I'm a few years older with basically the same storyboard but yet to pull the trigger.

Thanks for posting this OP, will be keeping and eye on this one!

 

[Tiny]

Thanks all for the comments.

I did use the SS calculator and tell it that I made $0 earnings from today, so at least I think I got that correct. Although it didn't make that much of a difference. My last year's SS earnings (2021) were only about $26,000. Assuming that I continue to make that, there's only a few years of low earnings that get replaced. Statement shows $3092, while putting in the $0 moving forward only dropped it to $3020.

We're pretty simple people. My hobbies are martial arts, lifting weights, playing guitar, and D&D. My wife does some of the same and is a voracious reader (over 100 books last year). Luckily our entertainment isn't expensive. Until we semi-retired, we really had no time for travel or spending money on non-essentials, or to pursue our hobbies at all lol. I don't see us ever spending huge amounts beyond what we are today for fun. Now, if in 10 years we end up with 2x what we have now, our attitude might change. Even travel is tough with our 11 year old, so for the next 7-8 years that will almost guaranteed be what we did the last 2 years and nothing more.

I think the $55k/year budget is reasonable and we have $1.6MM in current liquid assets as someone correctly pointed out, not $3MM. Sorry if how I wrote it made it look confusing. Does that change any of the above analysis?

You guys will do really well and finances won’t be a problem for you. Look into GoCurryCracker for tax advice and what to spend first. Nice work and enjoy retirement. Welcome to the forum

 

[tony1852]

It's nice to see that there are some people in very similar situations. Even though I'm not a big crowd follower, it does give some more confidence that others have evaluated this situation personally and have or are close to pulling the trigger as well.

The ACA has worked out well for us our previous work provided group insurance for the past 2 years (2021 and 2022). This year, my wife is on a silver plan, which due to our MAGI is in theory better than anything we could have ever had. I think she has less than $1000 as an out-of-pocket maximum. I took a bronze plan, so I could stash some money in an HSA. Total for us both monthly is $70. I estimate this might go up in a few years if they don't renew some of the pandemic benefits, but I still think we'll be at $150-$200 per month.

When we went semi-retired/PT, I thought I could do a menial job. However, the thought of making not much per hour now so goes against my value of time philosophy that I would be miserable. Not that I wouldn't do it, it would just be such a let down after a few years of such freedom and flexibility. I'm doing some very limited consulting right now, and my wife also works as an independent contractor. In fact, her biggest client is our former company that is paying her more per hour than if she worked there FT. No benefits, but doesn't have to go to office either, so the flexibility is huge.

We're still going to be PT/semi-retired through end of this year. I'll see how the general economy is doing then. My biggest initial fear was sequence of risk returns. A big dump in the market during first year or two, which was last year, scarred the poop out of me. At peak we had more like $1.735MM, but hit a low of $1.48MM last year. Less than the market dropped due to some conservative investments, but still a huge paper loss. I'm hoping an average recession rather than an extended crash is in the cards. I tracked investments from 2000 to 2013 with essentially 0 returns as the market was at a peak in 1999-2000 (just when I was really starting to invest), then got smacked by the dot com bust and as things were recovering the great recession. With inflation as it is now, flatlining portfolio returns for just a few years early would be no bueno.

Worst case, we'll just keep doing our PT stuff for a few years if we have to get out the other side of the potential recession. Although the calculators SHOULD have spun this scenario and say I should be just fine.

Again, thanks all!