Convincing myself it's okay to RE

[Old Crow]

Hello, long time listener first time caller.
I just turned 57 last week, married, wife is 64. Kids are grown and gone.
I'm a Mechanical Engineer, DW is/was Medical Technologist that's retiring next week.
We have no debt, house has been paid for for about a decade, no car loans. I maintain the house and vehicles myself (lifelong DIY'er). I keep a detailed spreadsheet of our spending and our largest expenses are the weekly trip to the grocery store followed by property taxes, $400 and $190 per month respectively.
We have about $1,400,000 saved (for retirement?) split 75/25 between qualified accounts and after tax savings with the qualified accounts generally invested in targeted retirement year funds (2020 for example). The after tax money is in CD's, MM's and a low interest checking account. Returns on our qualified accounts haven't been stellar this year and we're actually only up a couple of percent YTD.
Like many others here my wife and I have lived well below our means and enjoy the security provided by our savings. We don't seek more things hoping they will make us happy.
We're planning on waiting until DW is 66 (FRA) to begin drawing her SS ($1,500 per month). I have 10 years until my FRA and am planning to delay SS for me until then ($2,800 per month). I'll begin collecting a $480 per month pension in 3 years.
I've checked out the plans available on the ACA website in our area and it looks like healthcare will cost us about $600 per month for the top of the line plan if we stay below the income requirements for a married couple in order to qualify for credits.
Overall, if I were to retire January 1, 2019 we would require $3,000 per month drawn from our qualified accounts over the next 24 or so months in order to continue living as we have been. This amount includes paying for healthcare through the exchange. DW's first SS check will arrive October 2020, then my modest pension the following November. Combined, these will reduce the withdrawals from our qualified accounts by almost $23k per year.
So, after a lifetime of living below our means and saving for the future we're struggling with the idea of walking away from the financial security that steady employment has given us for so long. As stated earlier, DW is retiring but she's been working part time for about a decade, so the struggle is whether or not I should follow her shortly after and begin living off of passive income. BTW, I don't hate my job but am tired of dealing with corporate weasels and am looking forward to spending my remaining time as I see fit (hobbies, remodeling, & grand kids). I also have a couple of P/T job opportunities in my field but I'd rather do something other than engineering (maybe work for a micro brewery).
I'm looking for advice from those who've gone before me in similar circumstances.
Does it make financial sense to RE?
Thanks

[Mdlerth]

Welcome, OC! My parents used to use Old Crow for whiskey sours. Maybe not top shelf sippin' likker, but in a mixed drink it was fine.

The answer to your specific question is "No, it does NOT make financial sense to retire." It never does, but retirement planning isn't about maximizing your finances. It's about optimizing several competing aspects of life.

I'll let other, smarter folks advise on your financial readiness, e.g., "What does FIRECalc say?" or "You appear to be okay with an anticipated 2.5% WR." But I'll offer a few other comments in other areas where your optimizing seems to be on target.

First, congratulations on the "Kids are grown and gone." DW and I are still dealing with a boomerang. He's low maintenance, but he needs to stop incubating and hatch already.

Second, I second the notion of doing something entirely different after a lifetime of engineering. I doubly second the idea that it be beer-related!

Third, I know whereof you speak regarding trepidation about turning off the steady paycheck. The reliability of that deposit in my account - on time, never bouncing - has been extraordinary. (The magnitude of each deposit, not so much.)

Finally, I am one with you in feeling not so much hatred for the j*b as much as simply tired of it. They say "the opposite of love isn't hate, it's apathy." I think "they" are right.

Consider that retirement, like ice cream, comes in several flavors. Among others, there are "Earliest Possible", "Comfortable Glide Path", "Waiting for The Last Element to Fall into Place" and "Three Bad Days and I'm Gone". I'd suggest figuring out which flavor you're hungering for will determine whether you should hang around a bit longer or punch out now.

[Midpack]

Whether or not you're financially ready depends on spending, portfolio and how long. What your spending will be isn't entirely clear, but if it's $3000/mo with a $1.4M portfolio, that's a conservative WR and you should be fine financially. Add other sources of income like Soc Sec etc. and you're more than fine.

That said, I can't imagine living on $3000/mo even for routine expenses. Though we live on about $4,000/mo without healthcare or taxes, we find from actual experience there are another $1000/mo in unexpected or less than annual expenses like replacing cars, home maintenance (roof, painting, remodeling, HVAC and other system replacements, furniture), consumer electronics (PC's, tablets, phones, TVs, laundry & kitchen appliances). Having to come to the financial aid of friends & family. Long term health care. Have you budgeted for those items too? For us and most I believe, there are some big tickets expenses that may only occur every 3-20 years but they do add up. Fortunately I budgeted for as many of those longer cycle big ticket items as I could think of, in our spending tracking we call those non-annual expenses "accrual" expenses (misuse of the term).

As for mentally/emotionally ready, only you can answer that. It is worth really thinking through what you'll do with all that time, but it sounds like you may have that covered. It's also worth thinking about your how your social life may change - do you have plenty of friends and support outside of work? Presumably most of your friends are your age, and they will still be at work while you're off. Are you ready to hang out with friends who are quite a bit older than you between now and age 65-70? I was aware of it, but it was a tougher adjustment than I recognized when I retired at age 57.

I retired at 57, and now that I am 64 I'd say I should have continued to work a little longer to build up even more $ even though we had plenty when I retired. That said, the last 7 years have flown by, so boredom hasn't been an issue at all. Best of luck with your decision.

[Rianne]

IMHO, the key to your post is "my wife and I have lived well below our means and enjoy the security provided by our savings. We don't seek more things hoping they will make us happy." You must live in a low property tax area. From recent articles I've read, the ACA is getting stronger. Many HIC are entering or re entering the market as they've figured out ways to make a profit. We rely on the ACA for the next 5 years to be affordable. You want to keep your MAGi below the line for the highest subsidies. In our state, that means the difference in paying $25K per year for HI premiums vs $96.00 per year (seriously!). Here's where your after tax savings will help. Do you need the top of the line plan? We went for the lowest Bronze plan with an HSA. In 2018, it proved to be the smartest move for us.


Congratulations on your ER plans! Healthcare seems to be the biggest issue in deciding to go for it.

[travelover]

I well remember that shaky feeling of walking away from a paycheck that I knew I'd never see again. What made it easier for me was the hostility toward older engineers and imminent layoffs. So, I stepped off the plane and hoped the parachute would open. It did and 11 years later, I've never regretted it. Every day I become more aware of how finite life is and am grateful for the extra years I've had of retirement that can't be had for any price once they've been spent at work.

[LiveBelowMeans]

Old Crow,

As a fellow engineer, I'm sure you have studied this from every angle, and you have a decent factor of safety built into your numbers . Engineers are naturally conservative, hence your concerns. Having an older wife, I think you should retire sooner as you want to be able to enjoy your retirement while you are both healthy. You never know how many GOOD years you have left. JMHO

[MBAustin]

Welcome Old Crow!

You've received some good perspectives already. If you haven't found them already, we have a helpful list of things to think about as you're making your timing decision:

Some Important Questions to Answer

As you probably know if you've been reading here awhile, there is no one right answer about when to pull the paycheck plug, only an answer that's good for you and your family all things considered. Good luck in making your decision and keep us posted!

[cnocmmz]

Quote:

Originally Posted by Old Crow Hello, long time listener first time caller. I just turned 57 last week, married, wife is 64. Kids are grown and gone. I'm a Mechanical Engineer, DW is/was Medical Technologist that's retiring next week. We have no debt, house has been paid for for about a decade, no car loans. I maintain the house and vehicles myself (lifelong DIY'er). I keep a detailed spreadsheet of our spending and our largest expenses are the weekly trip to the grocery store followed by property taxes, $400 and $190 per month respectively. We have about $1,400,000 saved (for retirement?) split 75/25 between qualified accounts and after tax savings with the qualified accounts generally invested in targeted retirement year funds (2020 for example). The after tax money is in CD's, MM's and a low interest checking account. Returns on our qualified accounts haven't been stellar this year and we're actually only up a couple of percent YTD. Like many others here my wife and I have lived well below our means and enjoy the security provided by our savings. We don't seek more things hoping they will make us happy. We're planning on waiting until DW is 66 (FRA) to begin drawing her SS ($1,500 per month). I have 10 years until my FRA and am planning to delay SS for me until then ($2,800 per month). I'll begin collecting a $480 per month pension in 3 years. I've checked out the plans available on the ACA website in our area and it looks like healthcare will cost us about $600 per month for the top of the line plan if we stay below the income requirements for a married couple in order to qualify for credits. Overall, if I were to retire January 1, 2019 we would require $3,000 per month drawn from our qualified accounts over the next 24 or so months in order to continue living as we have been. This amount includes paying for healthcare through the exchange. DW's first SS check will arrive October 2020, then my modest pension the following November. Combined, these will reduce the withdrawals from our qualified accounts by almost $23k per year. So, after a lifetime of living below our means and saving for the future we're struggling with the idea of walking away from the financial security that steady employment has given us for so long. As stated earlier, DW is retiring but she's been working part time for about a decade, so the struggle is whether or not I should follow her shortly after and begin living off of passive income. BTW, I don't hate my job but am tired of dealing with corporate weasels and am looking forward to spending my remaining time as I see fit (hobbies, remodeling, & grand kids). I also have a couple of P/T job opportunities in my field but I'd rather do something other than engineering (maybe work for a micro brewery). I'm looking for advice from those who've gone before me in similar circumstances. Does it make financial sense to RE? Thanks

OC Welcome
It seems your situation is very similar to ours wrt age. I am 58 and DW is 64. Although not as much saved as you both (Congrats Btw)), we have about -1MM between investments and Cash; (80/20) however, we will have strong guaranteed pensions (Net 83K) not counting my SS at either 62 0r 67. So, be are hoping to bail out next year or early 2020 for sure. Health care is pretty much paid for (Ret Military), just got to figure out what to do with our selves.....lol
Best of luck to you both :-)

[Old Crow]

Old Crow comes from the name Bud Anderson gave his WWII P-51 Mustang in the ETO (look at avatar).
I guess DW and I are little different, the $3,000 we need per month in retirement was padded by 10% as a fudge factor for those expenses that aren't recurring or predictable. My BIL and SIL live on Cape Cod, both ER, and they need $4,000 per month mostly due to higher property taxes and cost of living compared to northeastern PA.
Home maintenance, up to and including HVAC repair/replacement is done by me with the help of a few friends in the trades. So I'm not too concerned about those expenses and I do have $100 per month baked into my monthly budget for property maintenance. Our vehicles are in good condition and I maintain those as well. The only time they're at a garage is for PA's mandatory annual safety inspection.
I am an engineer, so I don't require much social interaction and have a relatively small circle of friends. By friends, I mean people that would lend me money, not Face Book "friends".
The gist of the issue is withdrawing money from a lifelong deposit account. For about two years all of the cash needed to live will be drawn from these accounts through the ups and downs of the market. Once DW's SS and my small pension come on-line we would only require about a 1% WR starting in 2022. Having said that, we would probably continue at the same WR and plan some trips, possibly to Europe.
Thanks for the comments, please continue to offer advice.

[Floridatennisplayer]

Hey OC. You have the exact same intrepid thoughts that everyone else has. Me too! It’s nice to read so many threads like yours as we are all in the same boat....or ......about to get into the same boat.

I am in the same situation but at age 63.5. I’m telling everyone they can kiss my .ss in March at age 64. I’ll pay my own way for a year which will only make a small dent in our savings, but coming from a lifetime of only putting money in, the thought of taking money out ...yeah, that’s a different mindset my wife and I have to learn.

I would suggest going to Fidelity’s website and filling out their RIP retirement tool. Like you we have no debt but I grossly underestimated what my annual expenses were until I filled out their complete expense analysis. Very eye opening.

[pb4uski]

Regarding the emotional distress of taking money out or not having a "paycheck" anymore.... my solution was to put in an automatic monthly transfer of $x from our retireement portfolio to the local bank account that we use to pay bills and live on. I think of this as my retirement "paycheck" and while I know it is a withdrawal, it is less painful in that it happens automatically and I don't have to initiate it.

However, we saved that money for our retirement and I am loathe to hoard it so it doesn't bother me a bit.

[flintnational]

Welcome to the forum. As life long savers, yes it was hard to leave a j*b, FIRE and start drawing from our savings. I think many of us struggle with this issue. It is counter to how we have lived our lives. However, the uneasy feeling does go away. We are into year five and no longer struggle with this issue. We have gotten quite good at the spendthrift, devil may care lifestyle.

[Dtail]

Welcome to our wonderful forum.
Even though I accepted a package, I couldn't find additional work and stumbled unto retirement.
Life can be short. Try to think about all the wonderful things you wish to do, but haven't had the time to do so.

[WyomingLife]

Dear OC:

Most welcome! From a household perspective, we're similar in age, both personal and spouse. As the offspring of parents of the Great Depression and WWII*, which you also seem to be, I think we're a kindred spirit. I haven't yet pulled the plug because of HC complications.

You didn't post a budget, but $3,000/month would be supported by a SWR of 4% assuming just north of $1M in the market. I think 4% is more than acceptable in your situation and given your disposition. I conservatively took your $1.4M, multiplied by 75% (not counting the 25% in cash and cash-like liquid assets, which again is also a ludicrously conservative take on my part of your financial situation), divided by 25, then again by 12, and came up with $3,500 a month, above your $3,000 threshold.

I'm pretty sure that, if the Earth-ending meteor were to hit, you'd be in the cohort of survivors, given your frugal life. And if that meteor were to hit, I'd just hope that you'd accept me and DW (and progeny) into your compound/bunker.**

* A shout-out here to Jack C. Taylor, decorated WWII combat pilot who flew from the deck of the USS Enterprise, who went on to found/build the rental/fleet/vehicle company that, to this day, bears the name of that ship. https://en.wikipedia.org/wiki/Jack_C._Taylor

**Typed in the shadow of the Yellowstone supervolcano, so said matters are non-trivial over geologic time, and thus to my retirement planning.

[Old Crow]

Good morning fellow cheapskates (my best friend from HS calls me that but he's so buried in debt he can never retire and will have to work until he dies).
I appreciate all of the sage advice provided since my post yesterday morning. DW and I had a meeting with CFP yesterday afternoon to discuss our state of the union regarding ER. I previously emailed a spreadsheet I put together with various ER scenarios and the impact to our qualified accounts if I stopped working at the end of Q1CY19.
He liked (mostly agreed) my analysis and ran about a dozen different scenarios through his Monte Carlo simulator (which isn't available for client use) and in each case our finances in retirement passed muster. BTW, the FIRE Calc here also returned similar results to his.
So, drum roll please, DW and I are going to jump into ER on March 31, 2019. Driving to work today I felt like the weight of the world had been lifted off my back. I have a long commute so now I have to be super extra careful with the goal line in sight.

WyomingLife:
Yes, both sets of our parents grew up in The Great Depression and both fathers were WWII vets. DW's father sailed a 100' harbor tug across the Pacific from Okinawa to the US mainland at 10 MPH! My father trained in B-17's but didn't see combat in Europe and was being redeployed to the PTO for the invasion of Japan when the war ended.
And yes, you and DW are welcome in compound after meteor (SHTF). I agree with financial assessment and we only need to stress the accounts to that level for two years.

Thanks again for the advice and perspective.

[Rianne]

Congratulations! It's good to know FIREcalc gives similar results to CFP calculator. You can go to work dreaming about all the things to do after March 2019. Honestly, we enjoy staying home, volunteer, breakfast or dinner out every so often. Our monthly expenses $58K-$62K, but we have very high property taxes (Illinois). Our savings/investments very similar to yours. Vacations are low cost. You can hang out on the forum, it's free!

[Mdlerth]

Quote:

Originally Posted by Rianne Congratulations! It's good to know FIREcalc gives similar results to CFP calculator. You can go to work dreaming about all the things to do after March 2019. Honestly, we enjoy staying home, volunteer, breakfast or dinner out every so often. Our monthly expenses $58K-$62K, but we have very high property taxes (Illinois). Our savings/investments very similar to yours. Vacations are low cost. You can hang out on the forum, it's free!

Holy frijoles! 58K-62K per month? I'd heard taxes are high in Illinois, but that's stratospheric!

[Rianne]

Quote:

Originally Posted by Mdlerth Holy frijoles! 58K-62K per month? I'd heard taxes are high in Illinois, but that's stratospheric!

YIKES, did I just write that? I meant a year. I'd be in the billionaires club and sailing on my yacht. Not there yet.

[TwoByFour]

Quote:

Originally Posted by Old Crow So, after a lifetime of living below our means and saving for the future we're struggling with the idea of walking away from the financial security that steady employment has given us for so long. I'm looking for advice from those who've gone before me in similar circumstances. Does it make financial sense to RE? Thanks

Your question about leaving the security of a job is what many of us went through. I know I did. Age discrimination is very much alive in my former career (software) and I knew once I quit, getting another job at my salary would be hard. But I ran the numbers and it kept telling me things were going to be OK, so I did it and am happy I did.

As far as the finances - I recommend a budget to see where you spend money. Some people use a percentage of working income rather than a budget, with the percentage anywhere from 50% to 120% of pre-retirement income. Be sure to include taxes. Take that annual amount and put it into a RIP (retirement income planner) tool, program in the years you will start SS, and see what it says. Some people go for a 90% confidence. 100% is of course better.

[bloom2708]

Read the post wrong. Was thinking 75 stocks/25 bonds. Ignore. Doh!