46 - married - two teens - doing the math to see when I can retire

[WanderlustNC]

Hello from NC. I am going to be 46 in a few months and have been saving for early retirement for over 20 years. I am blessed to work for a very employee focused company that puts a lot of effort in helping build wealth instead of liabilities.

After 20+ years in the market, I am looking forward to moving to the next chapter in my life which is more service based mixed in with my love of travel. A few years down the road we may live in Costa Rica or Panama'. I speak spanish and am familiar with the area.

I would like to retire in a 2026 - 2027 timeframe. If I need longer to build wealth, so be it. But I am tired and would love to move on by then. As it gets closer, the fear of no monthly paycheck and losing cheap health insurance is creeping in. That's why I am here, to learn more, plan more, and set realistic goals.

My wife has a small business and works for herself. Her income is small so I ignore it for planning purposes.

I have two teens that will start college in 2025 and 2027 respectively. I have $30K each in their college funds. I understand there will be a future need for funds here.

Nest egg: is split between 401K and private company stock.
401K in a 2035 TRowe Price date fund: $2M
Private stock: $1.7M (averages 15+% ROI)
Future investment savings: $120K per year until retirement

Expenses: Current minimum expenses is $5K a month. I am assuming $10K a month for planning purposes. This needs to be further refined. Healthcare is the obvious unknown that I am researching now. College is another area that needs attention and will depend on schools chosen and living at home or away.

SSA says about $20K per year if I retire in the next few years and start the draw at 62.

FireCalc has been helpful. Obviously tons of variables so depending on the settings, I range from being able to retire today to being broke in my 70's. Inflation is the nemesis once I cut the cord. I have also run simulations in various other programs and appear to be on track but will continue to track and plan.

I look forward to learning more and incorporating input from those who have gone down this path before me. Thank you in advance for helping me find blind spots!

[Out-to-Lunch]

Welcome to E-R.org!

[qwerty3656]

Congratulations, you are doing great, especially if you pull the trigger on Costa Rica/Panama. I'm no expert, but my reactions (take with grain of salt):
- I would be leery of keeping all that money in company stock. If bad things happen, you lose your investment and job at the same time.
- you obviously need more college money. I was lucky in that I did pre-paid tuition and all my kids went to in-state public colleges.
- You should educate yourself on the "take SS at 62 vs 70" arguments. It is not as obvious as it seems
- As I've looked closer at retirement, I am surprised at the emphasis I'm placing on controlling taxable income (Roth conversions, RMDs, ACA subsidies, taxes on SS). Having a good chunk of cash you can tap w/o taxes helps to navigate.
- I don't know alot about target date funds - I would want to know more about their investment philosophy (maybe too much bond exposure, maybe too tied to overpriced indexes?)

[WanderlustNC]

Quote:

Originally Posted by qwerty3656 Congratulations, you are doing great, especially if you pull the trigger on Costa Rica/Panama. I'm no expert, but my reactions (take with grain of salt): - I would be leery of keeping all that money in company stock. If bad things happen, you lose your investment and job at the same time. - you obviously need more college money. I was lucky in that I did pre-paid tuition and all my kids went to in-state public colleges. - You should educate yourself on the "take SS at 62 vs 70" arguments. It is not as obvious as it seems - As I've looked closer at retirement, I am surprised at the emphasis I'm placing on controlling taxable income (Roth conversions, RMDs, ACA subsidies, taxes on SS). Having a good chunk of cash you can tap w/o taxes helps to navigate. - I don't know alot about target date funds - I would want to know more about their investment philosophy (maybe too much bond exposure, maybe too tied to overpriced indexes?)

Thank you for your input!

I cannot divest company stock without quitting. Its a solid investment as the returns are exceptional. Obviously there is risk there as you pointed out and could come into play should the market tank a year or two before I planned to leave. I would have to decide to ride out the dip or jump and ride a downturn at the beginning of retirement. The good news is this is all after tax money so that $1.7M should just be capital gains.
Ideally that $1.7M is $3M in 5 years. TBD....

I ran the numbers on SS at 62 vs 67 vs 70. I think break even is 78 for me. My thought was that $100K in the market another 5 years would yield a higher return. I need to truth with more math.

I will have access to the company stock immediately after retirement. I plan to have at least two years of planned income in cash. If another 2008 happens, I am living off of cash instead of selling stocks at a discount.

Once I have received all company stock, I plan to do 401K conversions to IRA via the 5 year ladder to allow access to those funds without the 10% penalty.

I think the 2035 fund is 80/20 stocks/bonds currently. The fees are extremely low too due to our negotiations with TRowe.

[target2019]

Well, there's always another calculator that can show a different what-if future. Still, you are in a great spot right now financially. It could be that markets continue to reward you, but every so often a recession comes along. And then markets may even shift entirely away from your employer, putting stock into a less favorable position for a long time.

You're well over 90% stock, with maximum risk. You don't think of it that way, but if you plug your holdings into Morningstar or similar research site you can find measures of risk.

62 - 51 means 11 years of waiting for SS, but 14 years of waiting for Medicare. Right now 20K SS looks like a drop in the bucket, 20% of a 100K yearly spend. 2041 (age 65), many would advise that you adjust that amount down to $15K in today's dollars.

That period with two going to college will be fun. Does Firecalc include that hit?

BTW, I use Flexible Retirement Planner. I'm retired (not early), so take my advice with a grain of salt.

[WanderlustNC]

Quote:

Originally Posted by target2019 Well, there's always another calculator that can show a different what-if future. Still, you are in a great spot right now financially. It could be that markets continue to reward you, but every so often a recession comes along. And then markets may even shift entirely away from your employer, putting stock into a less favorable position for a long time. You're well over 90% stock, with maximum risk. You don't think of it that way, but if you plug your holdings into Morningstar or similar research site you can find measures of risk. 62 - 51 means 11 years of waiting for SS, but 14 years of waiting for Medicare. Right now 20K SS looks like a drop in the bucket, 20% of a 100K yearly spend. 2041 (age 65), many would advise that you adjust that amount down to $15K in today's dollars. That period with two going to college will be fun. Does Firecalc include that hit? BTW, I use Flexible Retirement Planner. I'm retired (not early), so take my advice with a grain of salt.

Thanks for the feedback!

Yes, I am absolutely 90%+ stock currently. A recession that crushes company stock would require me to either leave before the loss or ride it out for a few year. That's something I am keeping my eye on as I progress towards my goal dates but having a job during that situation is probably the answer.

Good point on devaluing SS.

I have baked college into other models. I will add to Firecalc too. The other models yielded positive results and it wasnt much of an issue. I am a big fan of not overpaying for education. I went to a community college for my first two years and spent $2K total including books. Masters Degree was paid for by my university.

I am going to look into Flexible Retirement Planner. Thanks for the tip!

[WanderlustNC]

Quote:

Originally Posted by Out-to-Lunch Welcome to E-R.org!

Thank you!

[finnski1]

Welcome Wanderlust. You appear to be in great shape. Just keep on doing what you are doing. The private company stock is a little tricky but you appear to have a good handle on that as well.

[Dtail]

Welcome to our wonderful forum.
I played around in Firecalc with your numbers. I added disbursing 300k for college in 2025 and used a 45 year retirement until 95 y.o.
You are in very good shape with a 100% success rate and a maximum yearly spend of ~150k.

[rodi]

Looking at your current savings - 3.7M
and your desire for 10k/month (120k/year).

That's a 3.2% WR. Which is pretty darn good. And that's not including future SS.

Once you've got your kids college funded I'd say you're in pretty good shape.

The only thing I'd tweak is that firecalc and some of the other studies seem to prefer an asset allocation between 20-80 and 80-20... 90% stock might be a more risk if there's a black swan event.

[WanderlustNC]

Quote:

Originally Posted by finnski1 Welcome Wanderlust. You appear to be in great shape. Just keep on doing what you are doing. The private company stock is a little tricky but you appear to have a good handle on that as well.

Thank you. Yes, the company stock is a fantastic vehicle with plenty of speed but with zero steering....

[WanderlustNC]

Quote:

Originally Posted by Dtail Welcome to our wonderful forum. I played around in Firecalc with your numbers. I added disbursing 300k for college in 2025 and used a 45 year retirement until 95 y.o. You are in very good shape with a 100% success rate and a maximum yearly spend of ~150k.

Thank you for that! I have spent a fair amount of time on Firecalc and depending on selections, I ranged from 100% to You Have Died From Dysentery.

Obviously its just a tool but glad others are getting similar predictions.

[WanderlustNC]

Quote:

Originally Posted by rodi Looking at your current savings - 3.7M and your desire for 10k/month (120k/year). That's a 3.2% WR. Which is pretty darn good. And that's not including future SS. Once you've got your kids college funded I'd say you're in pretty good shape. The only thing I'd tweak is that firecalc and some of the other studies seem to prefer an asset allocation between 20-80 and 80-20... 90% stock might be a more risk if there's a black swan event.

Yes, my plan is to be able to fund my current lifestyle at 4% or below and once the kids are mostly on their own, I can take a pay cut on down years and/or use cash reserves to avoid selling equities low.

During retirement, Firecalc seemed to prefer a 70/30 stock/bond mix. I have more research to do on that front.

Thank you for the comments!

[Dtail]

Quote:

Originally Posted by WanderlustNC Thank you for that! I have spent a fair amount of time on Firecalc and depending on selections, I ranged from 100% to You Have Died From Dysentery. Obviously its just a tool but glad others are getting similar predictions.

Another good retirement tool to use is Fidelity. It uses a Monte Carlo simulator and is generally a little more conservative than Firecalc. It lets you put in expenses by category and uses a 2.5% inflation rate except for medical at 4.9%.
The Monte Carlo results are good to use as another indicator in conjunction with Firecalc's historical sequencing model.

[Bigdawg]

Quote:

Originally Posted by WanderlustNC Thank you for that! I have spent a fair amount of time on Firecalc and depending on selections, I ranged from 100% to You Have Died From Dysentery. Obviously its just a tool but glad others are getting similar predictions.

Loving the sense of humor. Welcome and good luck. You seem to be doing quite well. I will echo the call to dial back equities just a tab. Dysentery treatments are expensive, so I've heard.

[WanderlustNC]

Quote:

Originally Posted by Dtail Another good retirement tool to use is Fidelity. It uses a Monte Carlo simulator and is generally a little more conservative than Firecalc. It lets you put in expenses by category and uses a 2.5% inflation rate except for medical at 4.9%. The Monte Carlo results are good to use as another indicator in conjunction with Firecalc's historical sequencing model.

Fidelity has a few tools there. Thanks for the tip!

[WanderlustNC]

Quote:

Originally Posted by Bigdawg Loving the sense of humor. Welcome and good luck. You seem to be doing quite well. I will echo the call to dial back equities just a tab. Dysentery treatments are expensive, so I've heard.

Go long on dysentery treatment companies and its a wash.