Can I retire early?

[Grover]

Will be able to retire from the fire dept next Oct with 70% of my salary at the age of 50. This should equate to aprox $3500 a month with my wife gettinga 50% reduction upon my death. I'll have to pickup health care costs but will be able to get it at a reasonable rate either on my own or thru my wifes work.

I will also be getting at seperation aprox $800 a month extra for 5 yrs on a couple extra savings plans I saved for. Each yr I stick around the FD till I max out at age 54 I'll get an extra 2 1/2% for 80% retirement plus of course my final avg salary would go up.

I am part owner in a well established small business where I will still work 2 days a week and bring in 25K aprox a yr.

My wife is an accountant for a University and will still be working for atleast another 8 yrs (cuttent salary aprox 35K) till our kids are out of college. The job pays for 80% of thier tuition and my daughter has a scholarship where the 1st 3 yrs are free anyway, my son should get the same thing in 4 yrs when he gets out of HS.

My wife has a pention (previous job) that should start when shes 55 in 8 yrs of a meager $500+ a month and she has aprox 90K now in a 401k.

Our house is pd for (aprox $200K value)  but owe aprox 10k on cars I own. I have value in my business worth aprox 70-100k. We will have aprox 30K cash on hand if I retire next yr.

Its kinda scary to take the plunge of retirement not knowing how long the money will last to live comfortable.


Thanks for your help in advance.

 

[Nords]

Welcome to the board, Grover. I bet you're really happy that your kids aren't watching Sesame Street any more!

Let's see if I have the numbers right, assuming you retire Oct 2005:

2005: $3500/month + $800/month (five years) + $25K/year + $35K/year = $111,600/year.
2010: Lose $800/month, annual income drops to $102K/year
2013: Lose $35K/year, gain $500/month, annual income now $73K/year.

You can carry this out further assuming that at some point you and spouse are eligible for Social Security (which may or may not be a good assumption).

You don't give enough info on your annual expenses and I'm not really sure how much of your wife's salary is going to college costs. (Is annual tuition $35K/80% = $43.750?) Usually people here track their expenses for a year or two and take a look at large one-time expenses like kid's weddings, a new roof, replacement appliances, fantasy vacations, and no more college tuition. Another issue may be healthcare expenses when your wife leaves her job-- could your healthcare be provided by your small business?

Once you have good expense numbers you can start plugging FIRECalc with the data and figure out if your AFTER-TAX cash flow is sufficient. Your cash streams seem to be fixed (not raised with inflation) so inflation is going to be a big concern as you get older.

How old you get is another issue, and one that needs to be evaluated with your spouse's health in mind as well. For example one of you may live to your 70s but it's much more likely that one of you will live to (HER) 90s. That affects portfolio survivability over nearly five decades. It's also a factor in the decision whether to take SS as soon as possible or to let it rise to its full amount to maximize spouse's survivor benefits.

Finally, as you've noticed, you have a couple lifestyle decisions-- whether to hang around the fire department for a max pension instead of the $800/month, how much/how long that $800/month will be if you retire at 54 instead of 50, whether you want to keep working two days/week at the business, how long your wife wants to keep working, and at what risk that business puts your retirement savings & pensions.

I'm pretty sure that the membership will have other questions & advice...

 

[FlowGirl]

You don't give enough info on your annual expenses and I'm not really sure how much of your wife's salary is going to college costs. (Is annual tuition $35K/80% = $43.750?)

I assume he meant that they are receiving an 80% tuition discount because his wife works for the University. Many colleges offer this deal. I had one friend who went to work fulltime at Georgetown University working a menial admin job. The job barely paid for living expenses, but after a year he was eligible for free tuition so continued to work there while taking classes in their evening law program. Ended up with a fully paid for law degree from a top university with no debt. Smart move, and many schools extend the same deal to immediate family members.

 

[Grover]

College will cost us about $2k total if that for each kid if my wife is still working there and she will. Paying for college isn't an issue unless something drasticly changes.

iirc my SS will not be reduced at all when that kicks in. I think some of the guys before me that opted out have their pention reduced by 1/2 of what SS pays. I have never paid any SS or MedCare in at the FD but do on the wages at my business and my wifes work. Sweet deal.

Annual expenses are taxes of aprox $1200 and fire Ins of $500. Is that what you are after?

Well the extra $800 a month for 5 yrs will be of course more when I'm 54. I'm guessing $1k by then for 5 yrs.

 

[bosco]

College will cost us about $2k total if that for each kid if my wife is still working there and she will. Paying for college isn't an issue unless something drasticly changes.

iirc my SS will not be reduced at all when that kicks in. I think some of the guys before me that opted out have their pention reduced by 1/2 of what SS pays. I have never paid any SS or MedCare in at the FD but do on the wages at my business and my wifes work. Sweet deal.

be sure that the Windfall elimination provision of SS does not apply to you. It surprises a lot of people that earn pension from a job that does not contribute to SS, but also qualify for SS. They find out that their SS is severly reduced, but nothing is said about it in the benefit statement that is mailed to them annually.

 

[Mr._johngalt]

In the movie 'The Edge' (one of my favs), Anthony Hopkins is lost in the wilderness with Alec Baldwin. Hopkins character says,
"I'd like to start my life over when I get back." And, "I never knew anyone who actually did start their life over." ER is lind of like starting your life over..........at least it was for me.

JG

 

[dex]

2005: $3500/month + $800/month (five years) + $25K/year + $35K/year = $111,600/year.
2010: Lose $800/month, annual income drops to $102K/year
2013: Lose $35K/year, gain $500/month, annual income now $73K/year.

Nords - am I missing something to get to your total?
2005 = 35 x 12= 42; 8 x 12 = 9.6
42 + 9.6 + 25 = 76.6

With the wife still working I do not think there isn't any financial problem.

I really regret my corporate working life when I see pension plans like this.
Yes I did get to travel and didn't have to do any phyical work but, corporate accounting/finance life was/is not rewarding in any intrinsic way.

Grover's pension is equal to about $700K assuming 6%
His other savings is equal to 160K asuming 6% for a total

so net worth
860 est investment/pension basis
190 Home net of car loan
90 401k
1140 Est Net worth

I'm estimating my net worth at 1,600 when I retire at 51.

I think I would trade the $500K in for the enjoyment and reward you received in your work.

My father worked with his hands and instilled in his children the idea of going to college and getting a professional job - 3 out of 4 did. The immigrant experence is one of the things that made this country great - each generation trying to do better. On the flip side it may not be what makes us happy. Who knew!

 

[REWahoo]

In the movie 'The Edge' (one of my favs), Anthony Hopkins is lost in the wilderness with Alec Baldwin.

Alec Baldwin? Is he Canadian? Or just a Canadian wannabee?

Cut-Throat posted (and included some great photos) on another thread about flying into an Alaskan fishing spot with the same plane/pilot as the ill-fated "Grizzly Man". I flew into a Canadian fishing spot (Fortress Lake) in the same plane/pilot used in 'The Edge'. Our pilot flew many of the scenes prior to the crash, which was done with the usual Holywood magic.

REW

 

[Mr._johngalt]

Alec Baldwin?  Is he Canadian?  Or just a Canadian wannabee?

Cut-Throat posted (and included some great photos) on another thread about flying into an Alaskan fishing spot with the same plane/pilot as the ill-fated "Grizzly Man".  I flew into a Canadian fishing spot (Fortress Lake) in the same plane/pilot used in 'The Edge'.  Our pilot flew many of the scenes prior to the crash, which was done with the usual Holywood magic.

REW

I don't know about Alec Baldwin being Canadian, but he is way out in
left wing la-la land.

'The Edge' is an excellent movie. I've watched it 10 times. And BTW,
speaking of Canada, I have never done a fly-in, but one of my friends did once. When they got off the plane way back in the wilderness, the first thing he saw was a water skiier. Not enough research?

JG

 

[bosco]

I don't know about Alec Baldwin being Canadian, but he is way out in
left wing la-la land.


JG

Not that I care what Mr. Baldwin's political views are, but if memory serves me, JG has stated that George W. and Rush Limbaugh are too far to the left.

Make your own decision who's in la-la land....

 

[Mr._johngalt]

Not that I care what Mr. Baldwin's political views are, but if memory serves me, JG has stated that George W. and Rush Limbaugh are too far to the left.

Make your own decision who's in la-la land....

Yeah, I used a little hyperbole (you can look it up) ; but not much

Actually I think I said they were both to the left of me politically, but that includes about the entire population so they are not in a very
exclusive club.

JG

 

[Nords]

Nords -  am I missing something to get to your total?
2005 = 35 x 12= 42; 8 x 12 = 9.6
42 + 9.6 + 25 = 76.6

The spouse's $35K/year job brings the $76.6K to $111.6K.

College will cost us about $2k total if that for each kid if my wife is still working there and she will. Paying for college isn't an issue unless something drasticly changes.

Annual expenses are taxes of aprox $1200 and fire Ins of $500. Is that what you are after?

You guys scored a great deal with your spouse's job & college costs. "Not an issue" indeed!

I'm not asking for the details, but I'm suggesting that you need to know exactly how much money you spend per year on everything. Not just the healthcare premiums, insurance premiums, groceries, utility bills, and other purchases that bring you up to say, $40K/year spending, but also the occasional expenses of replacement vehicles, a new roof, replacement appliances, a kid's wedding, a fantasy vacation, whatever. (No mortgage to deal with, and college costs seem to be essentially zero!) You have a good handle on your income & your savings and now you just need to know how much you'll have left over each year when you finish paying the bills. Then you can play with FIRECalc scenarios to your heart's content...

 

[Patrick]

Each yr I stick around the FD till I max out at age 54 I'll get an extra 2 1/2% for 80% retirement plus of course my final avg salary would go up.

Do you get a COLA on your salary each year?  It might be a consideration.

My wife has a pention (previous job) that should start when shes 55 in 8 yrs of a meager $500+ a month and she has aprox 90K now in a 401k.

Are you planning on putting more into the 401K over the next 8 years?

 

[Grover]

Do you get a COLA on your salary each year?  It might be a consideration.

Are you planning on putting more into the 401K over the next 8 years?

They give a COLA about every 5-8 yrs from what I heard. They don't have to give them if they don't want to. Thats something I'd like to see get changed.

Well its my wifes 401K and iirc she is putting in 150 a month. I look at that and tell her to put more into it because she may need it after I die when our pention is reduced 50% to her. I can take options to give her 75-100% at a cut of 200 a month for each % raise. Since she will have 2 pentions and SS she should be able to survive the rest of her life on the 50% of mine.