44 and ready to retire

[wasatchskiier]

Good afternoon,

I realize everyone is different, but is there a general rule of thumb that can assist me on letting me know if I am financially able to retire?

I little about me... I'm 44 years old, I've done well (financially) over the last 20 years; divorced; one child (college, etc. is taken care of); healthy. I have about $2.1 MM in stocks, cash, etc. Own my own home and car and am debt free. I don't need much to live on (maybe $75k a year) and my only real luxury in life is my ski habit (although I live in the southeast). I also stand to inherit quite a bit probably 15 to 20 years from now... but I would like that to go to my son.

I hope it isn't inappropriate to give that kind of detail, but I thought it was necessary... I'm looking for some encouragement that I can stop working and start enjoying life more.

Thank you in advance!

 

[REWahoo]

This should be helpful: Some Important Questions to Answer Before Asking - Can I Retire?

 

[wasatchskiier]

Thank you! The Fire Calculator is very helpful! nm

*

 

[HawkeyeNFO]

Withdrawing 4% of $2.1M is $84k per year. So in theory you could quit today and be OK, but the 4% guideline is designed for people older than 44. Some people have no problem taking more risk than that, but I think the majority on this site would take a more conservative approach, and would tell you that you're close, but should probably have some more money first.

Try this and see what it tells you: https://firecalc.com/

 

[HI Bill]

Since you're young, and on the apparently edge (of achieving 100% success rate in FIRECALC), I'd consider keeping increasing the portfolio for about the next 2 to 4 years. Work on tracking expenses. Figure out how much health insurance will cost you. Figure out what it is you want to do in retirement, and if your ~$80K is enough for that.

I could have easily lived off of $75-80K, but I married and wanted to double the travel budget. Then my wife said she wanted a house (I had planned for a condo). So I kept it up, and now, and now the budget in RE is $110-120K. I would not want to FIRE and not have enough $ to be able to afford to do the stuff that gives me sastifaction!

 

[ut2sua]

OP, Health insurance could cost quite a bit. If your $75k budget includes HI and taxes, then you look good to FIRE

 

[WyomingLife]

Good afternoon,

I don't need much to live on (maybe $75k a year) and my only real luxury in life is my ski habit (although I live in the southeast). I also stand to inherit quite a bit probably 15 to 20 years from now... but I would like that to go to my son.

Welcome.

I may be reading between the lines, but it doesn't sound like you, by your own admission, have a good idea of how much you are spending. Another poster mentioned health care costs, too.

A starting point is collecting the data to ascertain how much you are currently spending. From that, you can estimate future needs. You would also want to estimate health insurance, social security (and the impact of early retirement on the same) and the like. And many here would suggest not taking into account the potential for a future inheritance (although I recognize you want that to go to your son).

There are lots of wonderful, free tools that one can use to capture financial data, such as how much you are spending. Until you have those data, financial planning is pretty much guessing and hoping.

 

[Aerides]

Without knowing your expenses, the answer is "probably". But if that $75 per year is really $125, or $150, then...eh....

A good place to start is looking at your actual outgoings over say the past 3 years. All in what did you spend? Add about $1k per month as a health insurance placeholder until you have a firmer idea on post-RE income and shop around for plans.

 

[scrabbler1]

I retired 11 years ago at age 45, so I can relate partly to your situation.


One thing I did when running the numbers was to split my ER plan into 2 parts. The first part was getting from my age of retirement to age ~60, the more difficult part. After that, my "reinforcements" begin coming to my aid, greatly improving my overall financial picture. Those include my rollover IRA, my frozen company pension, and Social Security. Before age ~60, I have to get by using only my taxable account, something I am now 11 years into doing with only 4 years left.


You do need to get a good handle on your expenses, especially health insurance. The ACA came into existence with its exchanges back in 2014, and that has been a great help toward keeping my HI under control, with or without premium subsidies (it's a lot better with them, though!).

 

[Cobra9777]

$75K / $2.1M = 3.5% WR, which should be fine, although perhaps a bit risky for a 44 year old. But presumably SS is coming, so the WR would drop sharply at that point. I think a lot of people here have pre-SS WRs that are higher than 4%... but I think most are probably in their mid-50s and early 60s.

Anyway, just plug your numbers into FireCalc. FireCalc is much better than any "rule of thumb" at quantifying your financial readiness for retirement.

If the job sucks, and you are truly "ready to retire," I think you've got workable numbers. But as others have already posted, you really need to have a very solid understanding of your expenses in retirement, especially health insurance.

 

[pb4uski]

Good afternoon,

I realize everyone is different, but is there a general rule of thumb that can assist me on letting me know if I am financially able to retire?

I little about me... I'm 44 years old, I've done well (financially) over the last 20 years; divorced; one child (college, etc. is taken care of); healthy. I have about $2.1 MM in stocks, cash, etc. Own my own home and car and am debt free. I don't need much to live on (maybe $75k a year) and my only real luxury in life is my ski habit (although I live in the southeast). I also stand to inherit quite a bit probably 15 to 20 years from now... but I would like that to go to my son.

I hope it isn't inappropriate to give that kind of detail, but I thought it was necessary... I'm looking for some encouragement that I can stop working and start enjoying life more.

Thank you in advance!

You probably have enough if your $75k spending guesstimate is right... but an important consideration is whether you have penalty-free access to that $2.1m. If it is in tax-deferred accounts like 401k or tIRAs then you might be able to withdraw that much under a 72(t)/SEPP plan.

 

[GreenEggs]

Good afternoon,

I realize everyone is different, but is there a general rule of thumb that can assist me on letting me know if I am financially able to retire?

I little about me... I'm 44 years old, I've done well (financially) over the last 20 years; divorced; one child (college, etc. is taken care of); healthy. I have about $2.1 MM in stocks, cash, etc. Own my own home and car and am debt free. I don't need much to live on (maybe $75k a year) and my only real luxury in life is my ski habit (although I live in the southeast). I also stand to inherit quite a bit probably 15 to 20 years from now... but I would like that to go to my son.

I hope it isn't inappropriate to give that kind of detail, but I thought it was necessary... I'm looking for some encouragement that I can stop working and start enjoying life more.

Thank you in advance!

You've got plenty to retire. Move to a ski town & enjoy life before you're old and gimpy. (Keep tabs on your parents in case they do something to screw up your inheritance. )

Seriously, go be a ski bum. Get a summer hobby too. Maybe river rafting or motorcycle traveling. (One of my favorite forums is https://advrider.com/ )

 

[wanderingwheelz]

You do need to get a good handle on your expenses, especially health insurance. The ACA came into existence with its exchanges back in 2014, and that has been a great help toward keeping my HI under control, with or without premium subsidies (it's a lot better with them, though!).

Huh? Obamacare caused the cost of similar/same insurance to rise sharply. Because we are high earning self employed people, my wife and I pay A LOT more because of it.

What you said is true that it is a drastically more affordable program if you receive taxpayer assistance. Just like your food is less expensive if you receive food stamps. But who wants to retire on welfare?

 

[Dtail]

Huh? Obamacare caused the cost of similar/same insurance to rise sharply. Because we are high earning self employed people, my wife and I pay A LOT more because of it.

What you said is true that it is a drastically more affordable program if you receive taxpayer assistance. Just like your food is less expensive if you receive food stamps. But who wants to retire on welfare?

That is why it depends on which county/state that the OP lives in and how much the investment assets is accessible through a Taxable account. Thus one could have a MAGI of 25k but live on 75k, so would not call it truly welfare status.

Yes the ACA has been a godsend for a bunch of folks on this site including me.

 

[pj.mask]

Also depends if you could even get insurance with a preexisting condition (at any price). But on average people without health issues say insurance is too expensive and those needing insurance are appreciative of the new protections. The obvious solution is to eliminate Obamacare and never get sick.

OP you need more confidence on your spending and details (includes health insurance - at what price, etc) but the answer is many single people live great lives at $75k

Are you the type of person who will make due with your available budget or be upset that you want the extra $$?

 

[street]

You've got plenty to retire. Move to a ski town & enjoy life before you're old and gimpy. (Keep tabs on your parents in case they do something to screw up your inheritance. )

Seriously, go be a ski bum. Get a summer hobby too. Maybe river rafting or motorcycle traveling. (One of my favorite forums is https://advrider.com/ )

This exactly.
This would be great life, spend all the time you can doing the things you love. Get side gig PT for a little extra and start a new exciting life. You have enough just need to adjust and be responsible and go live life in a new area.

 

[scrabbler1]

Huh? Obamacare caused the cost of similar/same insurance to rise sharply. Because we are high earning self employed people, my wife and I pay A LOT more because of it.

What you said is true that it is a drastically more affordable program if you receive taxpayer assistance. Just like your food is less expensive if you receive food stamps. But who wants to retire on welfare?

As I wrote earlier, even without any subsidies, the cost of my HI dropped a lot when the exchanges came on line in 2014. Without any subsidies, and despite several years of big rate increases since 2014, this year's premium is about the same as what I was paying in 2011 before I dropped the policy in favor of the cheap, bare-bones, hospital-only policy.

I agree with Dail that it depends a lot on where someone lives. But what I read in this forum was that people who weren't paying a lot already were the ones who saw large percentage increases. For example, someone who was paying $200 a month may have had a 50% increase to pay $300 a month (no subsidy). Mine went from $700 a month (before I switched to the hospital-only policy, and not counting any rate increases in 2012-2013) to $400 a month (no subsidy) and I was glad to see the decrease while the other person is annoyed at the increase even though I am still paying $100 more than the other person.

 

[wanderingwheelz]

That is why it depends on which county/state that the OP lives in and how much the investment assets is accessible through a Taxable account. Thus one could have a MAGI of 25k but live on 75k, so would not call it truly welfare status.

Yes the ACA has been a godsend for a bunch of folks on this site including me.

I’m new to the discussions regarding FIRE lifestyle so the notion of receiving/trying to qualify for government assistance hasn’t been front of mind, as you might imagine.

We have accumulated about $2MM in a taxable brokerage account and have a home that’s paid for and no other debt. Roughly the same amount in tax deferred IRA and 401k accounts. Ages 48/45 with one college senior child who will very likely be on her own by the time I turn 52 and we both retire (@ 4 more years).

Are you saying that as long as we keep our taxable dividends, interest as well as capital gains in our brokerage account (or a business or home sale) below 4* the poverty level in our state of residence we will receive a health care subsidy? What about withdrawal of funds that are principal amount? Those are not considered part of MAGI, correct? ex. Sold $10,000 of an index fund that is 30% capital appreciation and 70% that is the original investment. $3,000 is counted against the figure that affects 4 times the poverty line, correct?

Thanks.

 

[scrabbler1]

Are you saying that as long as we keep our taxable dividends, interest as well as capital gains in our brokerage account (or a business or home sale) below 4* the poverty level in our state of residence we will receive a health care subsidy? What about withdrawal of funds that are principal amount? Those are not considered part of MAGI, correct? ex. Sold $10,000 of an index fund that is 30% capital appreciation and 70% that is the original investment. $3,000 is counted against the figure that affects 4 times the poverty line, correct?

Thanks.

Principal amount doesn't count towards MAGI. In your example, only $3k counts toward MAGI. Be aware that MAGI includes tax-exempt muni bond interest. MAGI includes cap gain distributions from mutual funds, even if they end up getting taxed at 0%. Those can be huge in actively managed funds, whereas index funds tend to generate far less of those.

 

[wanderingwheelz]

Thanks. I’m using total stock market stock funds for both domestic and international in the taxable brokerage account largely due to their inherent tax efficiency (No cap gains distributions). We do own a sizable mini bond fund too, in order to keep our asset allocation at 60/40 since we know what it felt like to get wiped out with 100/0 back during THR. Thankfully we were young and didn’t need to sell. If/when our earned income drops I’ll sell the mini fund down first, even if I replace it with a total bond fund (Taxable interest).

 

[pb4uski]

Huh? Obamacare caused the cost of similar/same insurance to rise sharply. Because we are high earning self employed people, my wife and I pay A LOT more because of it.

What you said is true that it is a drastically more affordable program if you receive taxpayer assistance. Just like your food is less expensive if you receive food stamps. But who wants to retire on welfare?

Where you claim that Obamacare caused the cost of insurance to rise sharply, you are dead wrong. It depends a lot on where you lived. I was payng $629/month for two in 2013 for HDHI. A similar bronze plan in 2014, the first year of Obamacare, was $682/month for two. The 8.4% increase from 2013 to 2014 was in line with annual premium increases... the premium increase from 2012 to 2013 was 13%.

You can get a good idea of what the cost of health insurance would be in your zip code by visiting healthsherpa.com

 

[pb4uski]

This link explains what is included and excluded in Obamacare MAGI. Note that there are different MAGIs for different purposes in the tax code and they are all fairly similar but have nuances of differences so you need to be sure that you are using the right definition.

http://laborcenter.berkeley.edu/pdf/2019/magi.pdf

 

[Hopeful]

Whatever one's thoughts or opinions are on Obamacare and cost, I would not be planning a long early retirement period based on subsidies. I can see subsidies for millionaires going the way of the dodo bird. Politicians would have little trouble garnering public support for nixing subsidies for millionaires.

Unless there was a very short period between one's retirement and going on Medicare, I would not feel comfortable without planning for the full cost of a ACA plan without subsidies in my retirement plan. I would also plan for the cost to rise at a higher rate than standard inflation. But perhaps I am more conservative that others.

 

[Dtail]

I’m new to the discussions regarding FIRE lifestyle so the notion of receiving/trying to qualify for government assistance hasn’t been front of mind, as you might imagine.

We have accumulated about $2MM in a taxable brokerage account and have a home that’s paid for and no other debt. Roughly the same amount in tax deferred IRA and 401k accounts. Ages 48/45 with one college senior child who will very likely be on her own by the time I turn 52 and we both retire (@ 4 more years).

Are you saying that as long as we keep our taxable dividends, interest as well as capital gains in our brokerage account (or a business or home sale) below 4* the poverty level in our state of residence we will receive a health care subsidy? What about withdrawal of funds that are principal amount? Those are not considered part of MAGI, correct? ex. Sold $10,000 of an index fund that is 30% capital appreciation and 70% that is the original investment. $3,000 is counted against the figure that affects 4 times the poverty line, correct?

Thanks.

Just responding to your 4* question, as your other questions have been responded to already.
Yes, you need to keep your ACA MAGI below 4x the FPL in order to receive the tax subsidies.
Since you have a large taxable account, this should be doable.
Of course, we don't really know how long the ACA or ACA type subsidies will last, as you have many years to Medicare.
Nevertheless, you can plan for the full payment, but plan your MAGI to take advantage of the subsidy while you can year by year.

 

[GreenEggs]

Go ski !!

You can worry over this stuff later.