Can I quit at age 60?

[BigMike]

Hi Everyone,

I've already introduced myself.......but would now like some advice and guidance.

I just turned 58 last month and my wife will be 57 this August. We have pretty much decided to call it quits at the end of 2008. I guess you could consider that retiring early, but there are many on this board that have retired sooner. Anyway, here are our particulars:

Total Current Investments: $1,100,000 allocated as follows:

12.5% Large Cap US (Vanguard S/P500)
12.5% Small Cap US (T.Rowe Price Small Cap)
12.5% Large Cap Foreign (Vanguard)
6.5% Emerging Markets (Vanguard EM)
6.0% Foreign Small Cap (MFS Small Cap-401K)

40% Vanguard Total Bond Fund
10% I-Bonds

We have no pensions, no debt besides our home mortage and no company provided health insurance after retirement (besides COBRA coverage). We are in pretty good health, but do take a number of maintenance drugs for high blood pressure and other issues.... none of them life threatening.

We would like to pay off our home at retirement. Current mortgage balance is about $100k. Home is valued at about $200k....we live in the Dallas area.

Current living expenses $42,000 (after tax)

We would like to do a lot of traveling after we hang it up..... We have already been to Great Britain, France, Italy, Greece, Belize, Guatamala, Mexico, US and British Virgin Islands, but there is still much of the world to discover (i.e., Asia, South America and Africa). I'm estimating an annual travel budget of between $10-20k. We would probably wear out the travel bug by the time we hit our mid 70's....

We would appreciate any comments relative to our current portfolio and our retirement plans.

My wife is telling me she is done at the end of 2008 come hell or high water! I'd like to quit now, just sick and tired of my current profession (legal).

Mike

 

[Cut-Throat]

You did not mention Social Security. Without it, It looks like you have $1 Mil and need $42K after Tax. Is all the $1Mil in tax sheltered accounts like 401K?

Looks a little tight without Social Security. With S.S. you should be OK.

 

[BigMike]

Hi Cut-Throat......

First, let me say that I have enjoyed your posts very much over the past few years........

Yes, my wife and I would be eligible for SS. The estimates I receive from the gov'mt say I'd get about $16K at 62 and my wife would get $14k. I'm trying to figure a way to quit at 60 and bridge the couple/few years till we can draw it....

Our porfolio is approximately 80% in tax shelter accounts and 20% in already taxed accounts. Another question I have had is how to withdraw funds to pay off the mortgage and to live on. Hate to exhaust all our already taxed funds to do this since it wouldn't give us much flexiblity to avoid paying taxes on SS income later.

Mike

 

[Rich_by_the_Bay]

Hi, BigMike - welcome.

Do your expenses of 42K include your mortgage payment? If so, by how much will that drop once the mtg is paid off?

You probably already aware of it, but Firecalc can give you a great numeric snapshot. I'd work it through various scenarios and I think you will get your answer.

 

[BigMike]

Hi Rich,

The $42k annual living expense figure does not include my interest and principal on the the mortgage (I have already anticipated paying off the mortgage), but it does include estimated taxes and insurance.

 

[macdaddy]

Mike - I don't know how much it matters, but what state do you live in? (taxes)  You seem right on the line of whether you'll be able to meet 42k a year or not so maybe it does matter a little bit.

 

[brewer12345]

mike, I plugged your data into firecalc and assumed you would dump in $10k a year aditional saving until retirement and pull $10k a year over your 42k for travel. FIRECalc says you would be 100% safe, assuming you croaked at about age 90. I would run the numbers yourself, but it looks do-able to me.

Question: does your budget include healthcare? Do you have some other provision for it?

 

[Rich_by_the_Bay]

The $42k annual living expense figure does not include my interest and principal on the the mortgage (I have already anticipated paying off the mortgage), but it does include estimated taxes and insurance.

I think you are there, assuming you watch your step with investments and that health insurance is figured in somehow. Congratulations.

 

[jdw_fire]

mike, I plugged your data into firecalc and assumed you would dump in $10k a year aditional saving until retirement and pull $10k a year over your 42k for travel.  FIRECalc says you would be 100% safe, assuming you croaked at about age 90.  I would run the numbers yourself, but it looks do-able to me.

Question: does your budget include healthcare?  Do you have some other provision for it?

I also plugged your numbers (including SS and paying off your mortgage) into FIRECalc except that I said you retire now (w/ 30 yr life span) and asked for a "95% safe" withdraw.  I got a W/D of $64,316 (when I used Bernicke "Reality Retirement Plan" I got a W/D of $101,284).  If your expenses are correct it looks like you can go now!

 

[Hydroman]

You look good to ER now. Just pray that the market doesnt tank in the next year or two. It is riding pretty high right now.

JDW:
Where can I find the Bernicke "Reality Retirement Plan" model on the web? I would like to test some scenarios. Thanks.

 

[jdw_fire]

You look good to ER now. Just pray that the market doesnt tank in the next year or two. It is riding pretty high right now.

JDW:
Where can I find the Bernicke "Reality Retirement Plan" model on the web?  I would like to test some scenarios. Thanks.

FIRECalc takes into consideration earlier times when the market tanked so the hope should be that the market doesn't tank worse than it has in the past.  As for the Bernicke "Reality Retirement Plan" model, Dory has programmed it into the new version of FIRECalc and that is how I made my calculation.