Hello

[Sullivan]

Hello all. Long time lurker. Great forum with lots of valuable advice. I would like to “stress test” my progress toward retirement. I live in a low cost city and have the opportunity to retire next month with health insurance and pension. The agency I work for normally offers early out retirement each year so I am not married to the idea of leaving just yet. I am 49 years old and married.

-No debt except for house. Monthly payment is $1400 at 3.375%.

Assets ($2.2M) are as follows:

-Taxable stock accounts/mutual funds. $278,000
-Cash $175,000
-Roth IRAs $380,000
-401ks/Deductible IRAs $1,400,000

Yearly spending is $90,000 at most and can be adjusted downward if needed. My pension would be $21,000 after deduction for health insurance and survivor annuity. My wife would be working part time three more years earning $28,000 per year. From age 57-62, my pension would increase by $14500 per year for a total of $35,500. At age 62, pension would decrease back to normal rate. Eligible for social security at age 62 and so is my wife.

FIRE calculations give this 100% success rate but it still makes me nervous . Any advice would be much appreciated. Thanks!

 

[MBAustin]

Welcome Sullivan! If you haven't found them already, we have a helpful list of things to think about before you make the leap:

Some Important Questions to Answer

Glad to have you with us!

One concern is that retiree health insurance can be yanked under a lot of circumstances (it's a benefit, not a promise, in many cases - in my case the cost went from $300 to $1200/month and the coverage went down over the course of several years). How confident are you that you'll have it for the 16 years you'll need it, and would you be able to cover ACA cost in your budget if not?

 

[Sullivan]

Welcome Sullivan! If you haven't found them already, we have a helpful list of things to think about before you make the leap:

Some Important Questions to Answer

Glad to have you with us!

One concern is that retiree health insurance can be yanked under a lot of circumstances (it's a benefit, not a promise, in many cases - in my case the cost went from $300 to $1200/month and the coverage went down over the course of several years). How confident are you that you'll have it for the 16 years you'll need it, and would you be able to cover ACA cost in your budget if not?

Thanks! Very confident that the health insurance will be for life. It is federal retirement.

 

[pacergal]

Welcome!
If you have all of the questions in the above post answered to your satisfaction, it looks like you are OK.
There are many threads about the nervous first few months of retirement. Research those and feel free to come back and ask any questions. I have found the members on the forum to be happy to help and very knowledgeable.

 

[SnowballCamper]

If you retire before age 59, you'll likely have some hoops to get through to get the IRA money. So if you're thinking several years before age 59 it might be a good idea to sock more away in the taxable accounts, but I wouldn't give up any matching funds at all.

 

[perez99]

One thing to consider is how to fund the years before you have penalty access to IRA's (I think its at ~ 59 1/2 years). Ignoring investment performance and cost of living increases, seem you need access to an additional $178.5K.

Sorry for the hard to read table format below... don really know how to import a table to a post...

Age (Start of year)	Pension Him	PT work - Her	Total Income	Needed	To be funded from investments
49	21,000	28,000	49,000	90,000	41,000
50	21,000	28,000	49,000	90,000	41,000
51	21,000	28,000	49,000	90,000	41,000
52	21,000	0	21,000	90,000	69,000
53	21,000	0	21,000	90,000	69,000
54	21,000	0	21,000	90,000	69,000
55	21,000	0	21,000	90,000	69,000
56	21,000	0	21,000	90,000	69,000
57	35,500	0	35,500	90,000	54,500
58	35,500	0	35,500	90,000	54,500
59	35,500	0	35,500	90,000	54,500
Total	274,500	84,000	358,500	990,000	631,500

Total Need to fund from investments: 631,500
Cash 175,000
Taxable 278,000
Total Non IRA funds 453,000
Gap (178,500)

 

[Koolau]

I agree with MBAustin that health care prior to MC is the key thing to worry about with Early Retirement. Short of a rogue asteroid or nuclear war, HC is the biggie. YMMV

 

[pb4uski]

One thing to consider is how to fund the years before you have penalty access to IRA's (I think its at ~ 59 1/2 years). Ignoring investment performance and cost of living increases, seem you need access to an additional $178.5K.

Sorry for the hard to read table format below... don really know how to import a table to a post...

Age (Start of year)	Pension Him	PT work - Her	Total Income	Needed	To be funded from investments
49	21,000	28,000	49,000	90,000	41,000
50	21,000	28,000	49,000	90,000	41,000
51	21,000	28,000	49,000	90,000	41,000
52	21,000	0	21,000	90,000	69,000
53	21,000	0	21,000	90,000	69,000
54	21,000	0	21,000	90,000	69,000
55	21,000	0	21,000	90,000	69,000
56	21,000	0	21,000	90,000	69,000
57	35,500	0	35,500	90,000	54,500
58	35,500	0	35,500	90,000	54,500
59	35,500	0	35,500	90,000	54,500
Total	274,500	84,000	358,500	990,000	631,500

Total Need to fund from investments: 631,500
Cash 175,000
Taxable 278,000
Total Non IRA funds 453,000
Gap (178,500)

Nailed it... OP has plenty to retire but not penalty free access.

I would consider a 72t... $41k a year would fund the gap in the first few years and preserve cash and taxable account funds for financial flexibility. I dunno, maybe even do more than $41k... looks like the max is $58k.

Also consider Roth conversions to reduce the tax torpedo once SS is online and RMDs begin.

 

[38Chevy454]

Welcome to the forum, great that you have the federal govt health care so quite low risk of it being removed. I agree with pb4uski that setting up a 72t is probably a good idea. Use some of those pretax funds so you have some after tax funds flexibility. Otherwise it seems you are good shape, just need to bridge the funding until SS kicks in.

 

[detroitbabu]

OP,

What is your mortgage balance? I personally would be more comfortable if I had no mortgage before I entertain the thought of retiring. It would reduce your expenses to ~$73K from $90K.

I would work for 3 to 5 more years and reevaluate if the job is not stressful and killing you.

 

[Koolau]

OP,

What is your mortgage balance? I personally would be more comfortable if I had no mortgage before I entertain the thought of retiring. It would reduce your expenses to ~$73K from $90K.

I would work for 3 to 5 more years and reevaluate if the job is not stressful and killing you.

3 to 5 years is a long time unless one is enjoying the ride. YMMV

 

[detroitbabu]

3 to 5 years is a long time unless one is enjoying the ride. YMMV

Hence the statement " if the job is not too stressful". Also, I said this is what I would do.

 

[Surewhitey]

Probably fine if you use your cash, taxable and Roth funds for your bridge. Learn how to live on closer to $70k though... We are under $60k for years now and travel quite a bit.

Figure out a comfortable expense plan over the next 6 - 12 months... Think about reducing the bigger costs like going to 1 car when she retires... Big one.

 

[Koolau]

Hence the statement " if the job is not too stressful". Also, I said this is what I would do.

Yep. Caught that. There's stress (really bad.) Then there's "not enjoying the ride" (less bad, but enough in my case to bail out - in one day.) YMMV

 

[detroitbabu]

3 to 5 years is a long time unless one is enjoying the ride. YMMV

Hence the statement " if the job is not too stressful". Also, I said this is what I would do.

 

[Dtail]

Sounds like you around a 3%WR not including SS for both. From a financial perspective, you should be good to go.
Being on the earlier side of ER, even for this forum, do you have plans of stuff to do in retirement?

 

[pb4uski]

OP,

What is your mortgage balance? I personally would be more comfortable if I had no mortgage before I entertain the thought of retiring. It would reduce your expenses to ~$73K from $90K.

I would work for 3 to 5 more years and reevaluate if the job is not stressful and killing you.

-1 If I had plenty to retire but penalty-free access was an issue, the last thing that I would do is to pay off a mortgage... I would preserve taxable account money for flexibility rather than use it to pay off the mortgage.

 

[tulak]

-1 If I had plenty to retire but penalty-free access was an issue, the last thing that I would do is to pay off a mortgage... I would preserve taxable account money for flexibility rather than use it to pay off the mortgage.

Especially at 3.375%.

 

[detroitbabu]

-1 If I had plenty to retire but penalty-free access was an issue, the last thing that I would do is to pay off a mortgage... I would preserve taxable account money for flexibility rather than use it to pay off the mortgage.

1. I did not say he should use taxable money to pay off the mortgage. I simply asked what the mortgage balance was.

2. If the mortgage balance was low enough that I could cash flow and pay off the mortgage I would work extra couple of years before retiring.

I am not telling the OP what to do. I am simply saying that is what *I* would do.

 

[pb4uski]

You're picking nits. You implicitly suggested that the OP pay off the mortgage before retiring and work an additional 3-5 years... and no one has jumped on your bandwagon for either suggestion.

OP,

What is your mortgage balance? I personally would be more comfortable if I had no mortgage before I entertain the thought of retiring. It would reduce your expenses to ~$73K from $90K.

I would work for 3 to 5 more years and reevaluate if the job is not stressful and killing you.

 

[detroitbabu]

You're picking nits. You implicitly suggested that the OP pay off the mortgage before retiring and work an additional 3-5 years... and no one has jumped on your bandwagon for either suggestion.

Fantastic! You are a mind reader and know what I meant to say better than me.
I also did not know that getting to a consensus and agreeing with the majority is the way to have a "correct" opinion around here, especially when I said this is what I would do.

My last post.

 

[Figaro]

You are fine financially assuming the mortgage balance is something like $150k or less just based on the payment amount. You could do Roth conversions between now and 59.5 to get access those yearly contribution penalty free five years from now. Given your built up resources in taxable and cash no issue. You also could pay off mortgage with cash if you're a conservative investor to reduce your "expenses". Lots of options available to you, good job accumulating. Maybe strategically reallocate and tax gain/loss harvest to take advantage of lower tax brackets thru 2026.

We are at market lows right now so your invested portion in deferred will continue to grow. Folks worry about rmds but if you are on Medicare it could increase your premiums later on as well. So best to "manage" your income now with conversions.

You've got enough. But you will have a problem with the tax efficiency when you're in your 70s if you don't address the big deferred balance soon. It's really work optional for your family. Have fun and enjoy the fruits from the seeds you showed early career!

 

[Sullivan]

OP,

What is your mortgage balance? I personally would be more comfortable if I had no mortgage before I entertain the thought of retiring. It would reduce your expenses to ~$73K from $90K.

I would work for 3 to 5 more years and reevaluate if the job is not stressful and killing you.

166k

 

[Sullivan]

Sounds like you around a 3%WR not including SS for both. From a financial perspective, you should be good to go.
Being on the earlier side of ER, even for this forum, do you have plans of stuff to do in retirement?

Thanks for all your comments as this thread has been helpful. Much appreciated to all.

This is kinda what I am struggling with, the emotional aspect. I just turned 49. From FireCalc and the comments here, it appears I have enough to be okay.

Early retirement has been my goal for at least 20 years. Now that the opportunity is here, I am struggling with the emotional aspect. I guess I am uneasy at the thought of telling people that I am retired at age 49. It's pretty rare Also, would be a big change going from an "accumulation phase" to a "spend down phase". I think I would struggle with that, at least initially.

The job is relatively easy since I am able to telework 4-5 days per week. Prior to Covid, I had to go to the office every day. If that were still the case, it would be a no brainer though.

I may stay OMY. I feel like I have been "institutionalized" like Brooks in Shawshank Redemption

 

[yakers]

Early retirement has been my goal for at least 20 years. Now that the opportunity is here, I am struggling with the emotional aspect. I guess I am uneasy at the thought of telling people that I am retired at age 49. :

You don't have to tell them, many many posts about how and when to share retirement status

I had some medical issues which turned out OK after treatment but all I told people is that after a night in the cardiac ward I wasn't waiting any longer (although I could have). Or you are a financial manager (your own) many other approaches.

I realy liked my job, stayed 2 years after the earliest I could retire, but retirement is better

many volunteer opportunities

the key is financial independence