Can I retire on $3.1MM? Anybody here done it?

[ER1970]

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Originally Posted by Live And Learn As others have said, you can't retire with 3.1mm and 145k in expenses with alot of confidence. I definitely hear you on not wanting to have to watch your pennies in retirement. Do you have an itemization of the 135k in spending ? If you give that a look you may find ways to save that aren't painful. If not, then keep working. I know severance feels like 'free money' and its TOUGH turning it down, but unless you know that you can find another job at a comparable salary I'd let the company find me another role, do it with pride, spend the next few years looking at spending and creating a "budget" (spending plan), wait until I had 100% in FIRECALC and a comfortable shortfall age in FIDO's Retirement Income Planner, and retire when those stars align so you can sleep at night after you leave the workforce.

+1 - this is the most practical and strategic advice I've heard so far regarding your situation.

Speaking of cutting costs, will your kids consider going to Texas state colleges? UT is an excellent university, and the tuition and living costs are much lower than, say Columbia or UCLA. Something to also plan ahead if you seriously consider retiring now.

[2B]

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Originally Posted by ER1970 Speaking of cutting costs, will your kids consider going to Texas state colleges? UT is an excellent university, and the tuition and living costs are much lower than, say Columbia or UCLA. Something to also plan ahead if you seriously consider retiring now.

Getting into the two premier Texas universities (UT and TAMU) can be difficult if you aren't in the top end of your class. It's a real disservice to some of the top high school grads of the state who are passed over by less qualified candidates only because these went to smaller high schools.

A way around it is to do the first year in a junior college. The dropout rate is pretty high and a high JC gpa is usually a ticket into the top schools on their sophomore year. Texas Tech, UH and other schools are also good public universities. Oklahoma and Louisiana have programs offering top Texas HS graduates in state tuition and scholarships to go to their top schools.

[RunningBum]

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Originally Posted by Amethyst Hmm, I wasn't a member back when the board began, but...wasn't it started partly for the benefit of younger "dot-com millionaires" who wanted to know if their fortunes would last a lifetime? Amethyst

Not sure about that as I wasn't around then either, but I always figured it was that and other common issues such as health insurance, tax issues, Roth conversions, bridging until you can access SS/pensions/retirement accounts, what to do with yourself, etc. All issues that don't really matter whether you have a 6 figure annual budget or low 5 figures.

[REWahoo]

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Originally Posted by Amethyst Hmm, I wasn't a member back when the board began, but...wasn't it started partly for the benefit of younger "dot-com millionaires" who wanted to know if their fortunes would last a lifetime?

Not really.

Dory 36, who created FIRECalc and started this forum, was an IT guy working for an oil company in Saudi at the time.

In case you haven't seen it: http://www.early-retirement.org/foru...org-53657.html

[bulbar]

Both twins got into A&M automatically, both in top 10%. Son will prob get a National Merit Finalist which will cut his costs a lot.

People tell me our costs will go down a lot when they leave for school so that will help. But how much? We spend $13k on groceries a year. That has to drop.

But my medical insurance I think will go up. We pay about $1200 a year in premiums under my company. Retiree medical would be $10k per year. That's a huge increase. I've never looked at ACA, maybe that's a better route.

I'm going to get with the wife and see where we would be if we cut at least the easy stuff and took into account the kids leaving for 9 months a year.

[Texas Proud]

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Originally Posted by ER1970 +1 - this is the most practical and strategic advice I've heard so far regarding your situation. Speaking of cutting costs, will your kids consider going to Texas state colleges? UT is an excellent university, and the tuition and living costs are much lower than, say Columbia or UCLA. Something to also plan ahead if you seriously consider retiring now.

+1 on this.... we also live in Houston and my son is in the top 3% of his class.... I have told him he can go to any university in Texas that is Texas supported..... if he wants to go someplace else he has to come up with the extra money somehow...

There is nothing wrong with 'local' universities... and the cost is much lower....


Opps... I see that you had responded... but left my post anyhow...

[ER1970]

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Originally Posted by bulbar Both twins got into A&M automatically, both in top 10%. Son will prob get a National Merit Finalist which will cut his costs a lot. People tell me our costs will go down a lot when they leave for school so that will help. But how much? We spend $13k on groceries a year. That has to drop. But my medical insurance I think will go up. We pay about $1200 a year in premiums under my company. Retiree medical would be $10k per year. That's a huge increase. I've never looked at ACA, maybe that's a better route. I'm going to get with the wife and see where we would be if we cut at least the easy stuff and took into account the kids leaving for 9 months a year.

How much is your mortgage payment/m? Any chance to downsize into a smaller/less expensive house, or pay off mortgage before you retire? Any car loans? Houston is not a super expensive COLA from what I've heard, yet your budget is quite high...

[bulbar]

Mortage is about $10k per year, only owe about $75k. No other debt or loans. Only paid $55/ft for the house, we live far out west where it's still somewhat affordable.

[2B]

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Originally Posted by bulbar Both twins got into A&M automatically, both in top 10%. Son will prob get a National Merit Finalist which will cut his costs a lot.

Congratulation to your twins and to you and your wife. That doesn't happen without some parental help.

I found my out of pocket costs for the kids went down every time one of them left for school. The older two were very active in sports and band. The money drain there was amazing and I didn't really notice it until it stopped.

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Originally Posted by bulbar I'm going to get with the wife and see where we would be if we cut at least the easy stuff and took into account the kids leaving for 9 months a year.

Quicken or Mint would have been good for you to have started about 10 years ago. It's hard to beat recording your expenses in almost real time.

The next best way is to try to break out the big items. Housing (mortgage, property tax, insurance, utilities, maintenance, lawn crew, maid service, pool service, etc.) is your biggest line item in all probability. That's where your biggest savings can be found at your income level. Cars can also be a drain if you "deserve" high end luxury cars. Nice vehicles are pricey but I'm amazed what some of my "broke" coworkers drive. Work expenses should be looked at. You won't be wearing as many suits if you wear suits. Hardly anyone does in the Houston energy business unless you are very high up or working in financial services in some way. You can only look at your expenses with the records readily available.

Try to avoid what my wife always did when I tried to talk about cutting expenses. She always said she'd start cutting back at the grocery store. After the kids left, grocery savings have very little impact on most people spending more than $50k/yr in my opinion. The exception would be if you waste a lot of high end meats. Of course, dining out could be a real budget killer. When you retire, it's a good time to take up gourmet cooking if it appeals to you and your wife.

[2B]

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Originally Posted by Texas Proud +1 on this.... we also live in Houston and my son is in the top 3% of his class.... I have told him he can go to any university in Texas that is Texas supported..... if he wants to go someplace else he has to come up with the extra money somehow... There is nothing wrong with 'local' universities... and the cost is much lower.... Opps... I see that you had responded... but left my post anyhow...

I told my kids they had to go to TAMU, UT, another public Texas university or have a good story. The two oldest went to TAMU in the College of Engineering. They youngest went to Texas State.

The desired degree is probably the best way to decide. All schools don't necessarily have equivalent "quality" degree programs in all majors.

[MooreBonds]

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Originally Posted by bulbar Our avg yearly spend from 2008-2013 was $135k. Defintely areas we can cut back, but $30k per year I dont know. But then we've never really tried to. It's not like we're living over our heads, but we don't have a budget either. We spend what I make and we should be on a budget and putting money into savings beyond 20% or so I put into 401k.

Regarding taxes, you really need to do a quick and dirty sample tax return. Many early retirees are surprised with how much their taxes go down, living off of just capital gains and qualified dividends. (note: you need to also make your portfolio tax-efficient - there's a big tax difference between getting capital gains/qualified dividends taxed at 15% versus interest and short-term capital gains taxed at 28%+!)

But there can also be a boogeyman waiting in the wings when you start withdrawing from your 401k/IRAs, since that will be taxed at the higher 28%+. Same with your state tax return - each state taxes capital gains/dividends/401k/IRA distributions differently.

You very well could chop your income tax bill in half with just a few hours worth of work one-time in sitting down and putting your highest-taxed items in your deferred accounts, and lowest tax-cash flow in your taxable accounts.

Just keep in mind that taxes can and do change, and they might one day raise the rates on qualified dividends and capital gains...

[bulbar]

We've been using Quicken since 1998, so we have every expense catagorized. That's how I know our average is near $135k. Never bought a new car and always pay cash and usually buy them out of state and ship them down and save maybe $4k-$5k. Never wear a suit. No dry cleaning bill. Maybe I'll post my expenses here but that will probably just open me up to ridicule.

[aja8888]

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Originally Posted by bulbar We've been using Quicken since 1998, so we have every expense catagorized. That's how I know our average is near $135k. Never bought a new car and always pay cash and usually buy them out of state and ship them down and save maybe $4k-$5k. Never wear a suit. No dry cleaning bill. Maybe I'll post my expenses here but that will probably just open me up to ridicule.

A lot of folks posted expenses here when going through this analysis. It would help you get another opinion or have some tough questions asked. It's not considered ridicule as many of us have gone through this exercise.

[ER1970]

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Originally Posted by bulbar Mortage is about $10k per year, only owe about $75k. No other debt or loans. Only paid $55/ft for the house, we live far out west where it's still somewhat affordable.

Then I'm really puzzled where your $135k/yr goes and $150k/yr budget comes from even counting in kids college. Just a back of envelope calculation:

$10k mortgage
$13k grocery
$10k retiree health insurance
$5k property taxes (I assume)
$5k car/house insurance
$50k in kids college

Any other big expenses? I'd say $120k for the next 4 yrs all in including taxes(4%+/- SWR), then $80k after that. A more realistic and sustainable approach.

[ER1970]

Also suggest you pay off the $75k mortgage before you pull the plug.

[FIREd]

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Originally Posted by bulbar We've been using Quicken since 1998, so we have every expense catagorized. That's how I know our average is near $135k. Never bought a new car and always pay cash and usually buy them out of state and ship them down and save maybe $4k-$5k. Never wear a suit. No dry cleaning bill. Maybe I'll post my expenses here but that will probably just open me up to ridicule.

Probably. Save yourself some grief. Surely you know better than anybody else where you get value for your money and where you don't.

[Texconsin]

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Originally Posted by ER1970 Also suggest you pay off the $75k mortgage before you pull the plug.

I hope to spend every red cent before they pull MY plug!

[bulbar]

We spent about $150k in 2013. $10k of that was a used car, so make it $140k. If we can cut certain categories back to where they were in 2009, that would lower the $140k to $110k. Vacations, hobbies, money to the church, Xmas and gifts, groceries, house insurance (why did my home insurance go from $2k in 2012 to $4k in 2013?)

[pb4uski]

If you were retired, you would have the time to chase down the answer to that question and shop your insurance around. One of the first things that I did when we retired is that I went through our regular expenses and made sure it was worth keeping and explored alternatives.

[wingfooted]

Personally I would take the big severance package and just see how it goes in retirement. As you mention you would have to work another 5 years to make the same amount. 53 is relatively young and you still have time for a second act with big oil if you start to run short financially or just get bored. It is god awful out there in the oil patch right now but I don't feel the current low price scenario can last longer than a year. Depletion wins every time. Then everyone will be looking for consultants and you would be making more money than you do now but on your own terms.


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