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40 year old & dreaming a 55 ER
Old 11-13-2015, 11:21 AM   #1
Dryer sheet wannabe
Join Date: Nov 2015
Posts: 19
40 year old & dreaming a 55 ER

First thanks to all who tirelessly provide their advice to guys like me that dream ER. One day I would LOVE to "payback" and do the same with all the wisdom I intend to soak-up from this forum.

My situation:
2 Working professionals- both 40 year old with 2 kids (9,7)
400K in 401K/403B & Roth's
Earnings 190K before tax
Recently became elegible for Deferred comp (457B) and plan to contribute 18K in it per year to support 55 to 59 1/2 age - because of the no withdrawl penalty feature of 457B. Will also stash another 24K per year in 401K/Roth. Altogether save ~42K/Year for next 15 years.
Own a rental house (plus our current house) - both houses will be fully paid by age 55.

Would like to retire at age 55. In retirement:
Expect 15K /Yr rental income after taxes and insurance
Pension from my employer (not wive's) 20K/Yr
Will do a 457B withdrawl from age 55 to 59 1/2 and then live off the dividends from Roth Accts after turning 59 1/2.
Frugal lifestyle and can easily cover about 60K in post retirement exp which includes paying for Healthcare through MN HIE exchange (age 55 to 65).

My numbers tell me the following:
400000K (current) plus 42K/year addition for 15 yrs = 2.5M when we are 55 @ 8% return. Mostly, ETF, low cost vanguard Index funds (passive investing), Dividend Aristrocrats
@ 55; Passive income= 35K
@ 55; Total Exp (including healthcare via exchange)=60K
These numbers don't include SSN and if I use a 4% withdrawl rule- it seems like we could be flushed with cash and a 1% withdrawl will just be fine.

Any issues, concerns, challenges with these assumptions?
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Old 11-13-2015, 11:35 AM   #2
Full time employment: Posting here.
Join Date: Apr 2015
Posts: 903
The 8% return (real) seems mighty optimistic. Also, are you budgeting for taxes?

Ran your numbers and even at 4% real return, you're still on track to accumulate ~1.6M by 55. With 60K annual expenses plus your pension, ER by 55 seems easily doable to me. However, you have young kids. What about college expenses, etc?
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Old 11-13-2015, 11:52 AM   #3
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Join Date: Jul 2010
Posts: 6,889
Welcome, MN_1021! Looks like you and your family are off to a great start in terms of saving for retirement. You don't mention college savings for the kiddos - is that part of your plan also? I would definitely suggest running your numbers through FIREcalc and/or some other calculators and try different assumptions - and I would agree that 8% is an aggressive assumption.

If you haven't seen them yet, there are two excellent resources here that might be useful in your planning:


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Old 11-13-2015, 11:57 AM   #4
Dryer sheet wannabe
Join Date: Nov 2015
Posts: 19
Good point about taxes. I should have mentioned that most probably we'll be in 15% bracket and 60K/year spending includes taxes as well as Healthcare. Upper Midwest is cheap living and we are fairly frugal individuals (1 car, don't eat out much etc)

As for the 8% ROI; I feel that is doable in our case since I am a CPA and work in investments area. In all realty; we do not intend to touch any Roth's, 401K/403B (~2M in 15 years) till age 60 and only plan to withdrawl from Deffered comp (457B) portion of ~.5M stash after 15 year. The theory is that passive incomes (Rent & pension) of 35K should support more than 50% of 60K need and then Deffered comp withdrawls will supplement the other 25K need.
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