59 yr old ready to say "bye bye" at 62 or sooner!

[Mack18]

Hello Everyone!
My name is Mack and here are some of my particulars:
Age: 59 (60 in March)
Retirement portfolio = $982k in 401k (20% in Roth 401k)
Pension= $2.3k month (no cola)
Home = $380k (no mortgage)
Status = single
Income = $150k
Expenses = No major expenses or debts
Savings = $100k (brokerage and savings accounts)

Researching the possibly of retirement between now and 62. My main concern is the cost of funding my health care coverage for 3 to 5 years. Additionally, I would like to move into a new home. I would use proceeds from sale of current home plus possibly $25-50k from savings to cover purchase. After retirement, I plan to work sporadically and at my leisure doing consulting jobs.

Thoughts?

 

[Blue Poles]

Expenses = No major expenses or debts

Sure, but you have expenses. How much do you spend right now, and how certain are you that it includes everything?

You'll need to have a good understanding of how much you spend now, and how much you want to spend in the future before anyone can give you an answer.

 

[The Cosmic Avenger]

Sure, but you have expenses. How much do you spend right now, and how certain are you that it includes everything?

You'll need to have a good understanding of how much you spend now, and how much you want to spend in the future before anyone can give you an answer.

Right. I prefer to know my essential ("need") expenses (basic groceries, property tax, utilities, etc.), and my preferred ("want") expenses, such as hobbies, entertainment, travel, what we actually spend on groceries now, etc. If you know the difference, you can have a range of what is "enough" to retire, which gives you flexibility.

 

[Lewis Clark]

Here are some questions for you to think about.

https://www.early-retirement.org/fo...-answer-before-asking-can-i-retire-69999.html

 

[mystang52]

Unless you intend to sell your house and rent, the value of the house is meaningless. For RE, all that matters is net income vs expenses. Having that age 62 as a target will be a great motivator for you. Use the 2+ year window, now, to finalize the plans and make sure you're on target.

 

[MBAustin]

Welcome, Mack! As others have stated, understanding your actual expenses (and allowing for those unplanned major ones such as vehicle replacement, roof replacement, etc.) is step one. As one of them will be health insurance/expenses, you can shop for ACA plans (healthcare.gov to start) using your projected income. My guess is that you will find some very affordable options, as have many others here on the forums.

Once you have an idea of expenses, you can use FIRECalc (link at the bottom of each page here) to project your success at staying retired. Lots of friendly folks here will be happy to answer your questions, also!

 

[pb4uski]

... Thoughts?

You should play with FIRECalc. Based on $1,080k of savings, if you have a 60/40 AA portfolio, FIRECalc suggests that you could safely withdraw $39,814 annually from your portfolio over the next 40 years. In addition to that you have $27,600 from your pension whenever that starts (fixed, not COLAed?) and any social security.

So it all depends on what you spend. If in retirement you can live on $50k a year or less then you're probably in good shape. If you need $100k a year, then you may not have enough. And lots of in-betweens.

For ACA, start out looking at healthsherpa.com

 

[pacergal]

Welcome to the forum.
Your Budget/spending number is important.
+1 on running firecalc and answering the "can I retire" questions.

 

[Out-to-Lunch]

Welcome aboard!

 

[Time2]

After taxes you have of spendable income $124,000. Spending 4% of your portfolio plus your $28,000 pension is $68,000. Sooo... 124,000 - 68,000 = $56,000.
Have you been saving $56,000 the last couple of years? Cause if not, you will suddenly be forced to live on a lot less.

 

[pb4uski]

^^^ Right idea but we don't know how much of that $150k of income that he is saving.

 

[MarieIG]

Hi Mack,

Welcome to the ER forum.

You have made some impressive steps in your savings and debt reduction, but as noted above, you may want to nail down your budget, expenses, and the timing/ financing of your next home purchase a bit more.

Some Important Questions to Answer Before Asking - Can I Retire?

FIRECalc

 

[Mack18]

Sure, but you have expenses. How much do you spend right now, and how certain are you that it includes everything?

You'll need to have a good understanding of how much you spend now, and how much you want to spend in the future before anyone can give you an answer.

Expenses are $6k per month leaning on the high side including property tax, auto & home insurance, food, utilities, and misc.

 

[Mack18]

Unless you intend to sell your house and rent, the value of the house is meaningless. For RE, all that matters is net income vs expenses. Having that age 62 as a target will be a great motivator for you. Use the 2+ year window, now, to finalize the plans and make sure you're on target.

I agree about the house. I included as a future asset should one day I need to tap into the equity to cover long term care.

 

[Mack18]

Welcome, Mack! As others have stated, understanding your actual expenses (and allowing for those unplanned major ones such as vehicle replacement, roof replacement, etc.) is step one. As one of them will be health insurance/expenses, you can shop for ACA plans (healthcare.gov to start) using your projected income. My guess is that you will find some very affordable options, as have many others here on the forums.

Once you have an idea of expenses, you can use FIRECalc (link at the bottom of each page here) to project your success at staying retired. Lots of friendly folks here will be happy to answer your questions, also!

Thanks MBAustin. I've used FireCalc and the projections were pretty good for me to retire at 62. I recently purchased New Retirement planning software and was able to put in future purchases and expenses such as new car, medical care, and long term care. Projections were not too great using their pessimistic assumptions, but were in the 90's using the average assumption.

 

[Mack18]

You should play with FIRECalc. Based on $1,080k of savings, if you have a 60/40 AA portfolio, FIRECalc suggests that you could safely withdraw $39,814 annually from your portfolio over the next 40 years. In addition to that you have $27,600 from your pension whenever that starts (fixed, not COLAed?) and any social security.

So it all depends on what you spend. If in retirement you can live on $50k a year or less then you're probably in good shape. If you need $100k a year, then you may not have enough. And lots of in-betweens.

For ACA, start out looking at healthsherpa.com

Thanks PB4uski!

 

[Andre1969]

What about Social Security? Unless I glossed over it in reading, I didn't see anything about SS.

 

[Morgan22]

Expenses are $6k per month leaning on the high side including property tax, auto & home insurance, food, utilities, and misc.

What about ACA Health Insurance and Fed/State Income Taxes you'll be paying for after your retirement?

(I'm always surprised when people who want to retire do not add these expenses into their total expenses. But I kind of get it since it's just automatically taken out of your paycheck for most folks.)

You'll need to estimate those additional expenses and add them into your current estimate of $6k.

Depending on the sources of your retirement income, and the state you live in, this could add another couple thousand per month to your expenses.

Let me add, I am pro early retirement, but just putting this info out there to make sure you have all your bases covered before you decide to leave.

 

[Closet_Gamer]

+1 on all the advice re expense budgeting analysis and discipline.

Another +1 on breaking those expenses into essential and discretionary. This is a big part of what go us over the line ... we have many paths to cut discretionary expenses if things get ugly.

 

[Mack18]

What about Social Security? Unless I glossed over it in reading, I didn't see anything about SS.

You're right, not sure if I included it. SS projection @62 = 2167 @ FRA = 3077. However, I just learned that SS can reduce your payout if you also have the added benefit of a pension. I'm still trying to figure out how much of a reduction they can take. Doesn't seem fair that I'm penalized just because I'm blessed to find a job that also pays a pension.

 

[Lewis Clark]

The windfall elimination provision (WEP) may reduce your social security benefits if you receive a pension from a government entity or another organization that didn't withhold Social Security taxes from your paychecks.

https://www.ssa.gov/pubs/EN-05-10045.pdf

 

[Alan]

The windfall elimination provision (WEP) may reduce your social security benefits if you receive a pension from a government entity or another organization that didn't withhold Social Security taxes from your paychecks.

https://www.ssa.gov/pubs/EN-05-10045.pdf

Exactly, the OP first needs to determine if he paid into SS via FICA taxes before worrying about WEP. The max WEP currently is about $550/mo that it can reduce your SS. You can calculate your WEP here:

https://www.ssa.gov/benefits/retirement/planner/anyPiaWepjs04.html

Full explanation on how it works:
https://www.ssa.gov/policy/docs/pro...E WEP WORKS: Social,)) at full retirement age.

 

[Out-to-Lunch]

You're right, not sure if I included it. SS projection @62 = 2167 @ FRA = 3077. However, I just learned that SS can reduce your payout if you also have the added benefit of a pension. I'm still trying to figure out how much of a reduction they can take. Doesn't seem fair that I'm penalized just because I'm blessed to find a job that also pays a pension.

Is your pension from a job where you didn't pay into SS?
https://www.ssa.gov/policy/docs/program-explainers/windfall-elimination-provision.html

 

[Budatx]

Social Security's Windfall Elimination Provision

Because of my local government pension, I am also affected by the WEP. Here's a link that explains it all. Luckily, despite my pension, I was able to accumulate 30 years of "Substantial Earnings," so my SS will not be reduced.

https://www.ssa.gov/pubs/EN-05-10045.pdf

 

[pb4uski]

.... However, I just learned that SS can reduce your payout if you also have the added benefit of a pension. I'm still trying to figure out how much of a reduction they can take. Doesn't seem fair that I'm penalized just because I'm blessed to find a job that also pays a pension.

There is no reduction or penalty just because you have a pension. I have a pension but no reduction.

If you have a government job where you didn't have to pay into social security then there often is a penalty.

So it all depends on what sort of a job you had and the kind of pension you have.