Close but no cigar

[madsquopper]

We could probably retire right now (well, after June 2008) if we sold our house and moved to a cheaper area, but we both want to stay in the Washington, DC metro area which has a HUGE impact on cost of living.

The basics:

I'm 53, spouse is 50. Next year she's retiring after 30 years teaching high school and will get a pension of approximately 65K (inflation indexed). We'll probably stay in her health plan for now even though it's a tad on the expensive side. After she quits she wants to do part time consulting work in statistical analysis. My job is pleasant enough (hard to complain at better than 100K, not a lot of stress, rarely more than 40 hrs/wk, and the company 401K contribution is around 13%); it's mostly the idea of "having" to be there that's the worst part and I may cut back to 32 hours/week next year.

Current retirement savings:

Me: about $1.2 million, about 75% in retirement accounts. Pretty much a 75/25 stock/bond mix of most of the "major" asset classes.

Her: Besides the pension, about 200K in retirement accounts.

House: about 600K equity, but of course to use that you need to sell and buy something else.

No debts other than the 170K mortgage at 5 3/8 fixed rate.

Right now I figure I'll work full/part time another 3-5 years; I'd like to get my savings up to near $2 million or so. Even after I quit I'll probably stay in the company's "on-call" pool and work on interesting projects from time to time.

Mostly, life is good, but I'd like more free time to pursue my many interests

Larry

 

[DangerMouse]

Any reason why you want to keep going beyond the financial reward? What is your motivation to keep working?

 

[madsquopper]

Any reason why you want to keep going beyond the financial reward? What is your motivation to keep working?

Simple. I'm not at the point where a SWR of 4% would be enough. The stress of trying to live within a lower budget than I'd like would be way greater than working a bit longer.

Larry

 

[macdaddy]

You're already at $121,000 per year at a 4% SWR. How much do you need?

 

[TromboneAl]

You'll probably regret having waited more than you would regret trying to squeak by on $121,000 per year.

 

[Mwsinron]

Well at least you know that you need more than 121k a year to meet your needs. Good luck with that!

 

[madsquopper]

Well, yeah, maybe you guys are right. After spelling it all out here, I'm closer than I thought. Once my spouse retires next year, I may follow suit, and at least go to just part time for a while to build up our cushion a bit more. I think what ups my retirement budget estimate a lot is that my spouse wants to do a lot of traveling after working like a dog for 30 years as a teacher, and that ain't cheap.

Larry

 

[DangerMouse]

I guess you need to weigh up how important having a budget requiring in excess of $121k is versus having to get out of bed and go to work every day.

BTW now I am curious as to why your budget is so high. I can understand the desire to travel, however have you overestimated what it will cost you as there are a lot on htis board who travel full time for a lot less. The problem is when you start to go first class you can miss out on a lot of local experiences. Anywhere in particular you are planning to travel. I would love to hear about your plans.

 

[madsquopper]

BTW now I am curious as to why your budget is so high.

Probably a variety of factors:

First, I didn't do a detailed budget. More of an approximation based on what we currently actually live on (i.e., salaries minus all the deductions that you won't be having in retirement like 401 contributions and SS/Medicare taxes) and then adjusted for no mortgage but increased health insurance premiums. The 121K is probably an upper limit and maybe too high. I'm also estimating taxes as 25% which again may be a bit high.

Then, I'm basing things on a 50/50 split between my spouse and I. Hard to explain our relationship, but we each like to be 50/50 even though during our working years I've made more and if we retired tomorrow she'd be contributing more.

Also I'm not counting Social security at all, which is probably too pessimistic. Once that kicks in, it's something like 24K a year for me and I expect close to that for her

In the end the 120K estimate came from 60K each for two people, but 15 K was budgeted for taxes. Thus "take home" is 45K per person to cover everything else. And the DC area is an expensive place to live, in general.

We are definitely not "high end" travelers, or anything else, really, but do have a lot of "lower cost" activities that do add up over time.

So have I made any big errors or omissions in my assumptions?

Larry

 

[BUM]

Hi Larry,

I retired in Jan '05 and I thought that 4% stuff would be very stressful...not! If you and DW want to continue working part time, fine your mortgage and other 1040 deductions can offset some income so you may be around the 15% bracket, or less, assuming you have after tax savings and don't need to use TradIRA or Roth funds for a few years.

I was amazed how much of my spending was work related, and I too way overestimated my budget. Keep those estimates conservative but not obstacle to retirement. From where I sit...Cigar!

 

[DangerMouse]

Larry

I am not yet retired, so I can't really comment on your assumptions. However if it was me I would be calculating based on your actual holdings today was your 4% SWR would be and working out exactly what you could afford with those figures. I think you do have to remove all yoru work related expenses, your taxes may be high - I am not sure. There are many others on this site who have worked through the exercise and come out pleasantly surprised.

I guess I am not a big fan of anyone working any longer than they should because in my case my father was always going to retire at 60 and travel. Unfortunately he got pancreatic cancer at 57 and was dead at 58 with none of his travel dreams fulfilled. Never leave anything too late unless there is some compelling reason why.