Hello - Recovered Workaholic, Single, 56, in the Deep South - Wants Out!

[Lstansbury]

Hello,
Just coming out of lurkdom to hopefully get smart enough to retire ASAP!

I'd like to retire today, but of course, may have to wait until I'm 58 if I can stand it and if they'll let me keep working at Mega Health Corp.

Assets -
1) One Defined benefit plan - starts paying $18K per year at age 60. COLA is at the whim of the state budget coffers, so not counting on it. No upside to waiting longer to take it.

2) Another DBP -- pays $4,400 at age 60, but goes up to about $6,000/year at 65.

3) Other Assets - $48,000 in Roth IRA,
$275K in 401K,
$27K in after tax savings

4) Equities are about 15%, Bonds about 5%, the rest I just converted to cash to grab some gains before the next bottom.

5) Equity in rental property, $50K, mortgage still around $81K. Rental property only nets me about $1200 per year since I plow most of the rents back into mortage and deferred maintenance (i.e., new air conditioner, new roof).

Monthly expenses down to $3,600 per month or about $40K per year. I'm pretty darn frugal. It's a big bare boned, but I'm hoping I could find small, happy job somewhere to help ease the time out.

Healthcare is biggest question when I retire. I'm in a state that requires income of $15K per year to qualify for subsidy in Obamacare. Without subsidy, it's a $6k per year hit to me. So if I qualify for subsidy, I'm in much better financial shape retiring early. Not sure if the 15K income requirement per year could be distributions from 401(k), instead of job. If so, I could "retire" from my 401K whenever I decide to pull the trigger, and that distribution from 401K might qualify me for the subsidy until Medicare time. Which would make health care costs doable until 65.

My spouse is deceased, one adult child who is mostly on her own, although I do help out with a student loan and a gift now and then.

If you were me -- would you retire soon? I'm sick, sick, sick of corporate politics, job requires 60 hours a week just to keep head above water, and have been working now 35 years. is there a glimmer of hope? ?? Maybe even just to quit and do some kind of hobby income in something that I enjoy? Any strength, hope or experience shared is mucho appreciated!

Thanks for any comments, responses!

 

[Palimpsest]

I think your strength is your DBPs, so play to that. Try and work one more year and have the same talk with yourself next year. If you can wait until your DBPs kick in you would have a lot more cushion.

 

[jclarksnakes]

What about Social Security?

 

[Lstansbury]

Hi! thanks for the reminder re: social security, I've checked my regular benefits, and will start them at 62, but I'm also a widow and those benefits start at 60...

 

[WM]

Are you happy with the rental? How long until it's paid off and what do you expect to net from it at that point?

 

[Lstansbury]

Are you happy with the rental? How long until it's paid off and what do you expect to net from it at that point?

Rental worked out well, so far. I've only been doing it now 7 months, but have received all monthly payments, and did well on my taxes thanks to depreciation. But since I build a sinking fund for maintenance each month, and pay a manager, I probably only net about
$1200 per year. The tax break is helping to make it a good decision for now. So far, so good.

 

[Ready]

Hello Lstansbury and welcome to the forum. It looks like nobody has attempted to give you an answer to your question "would you retire soon?". You state your expenses are about $40K per year. Your pensions will not start until age 60, and then will only cover about half your expenses. We know you have social security benefits, but you don't state how much. Nor did you tell us what your current income is and how much you are contributing from your income each year toward your retirement savings. Without those pieces of information it's difficult to give much guidance.

Working 60 hours per week is enough to burn anyone out. is there any chance of getting that schedule down to a more reasonable level?

 

[Dash man]

Would you be able to manage if your rental went vacant for several months or you had a problem tenant? To me, your rental with mortgage is a dangerous liability if you don't have sufficient resources to back it up. I say this as an experienced landlord and have seen many different problems over the years. Overall it's been a great investment, but we do it mortgage free so cash flow is not much of an issue. We went years without much problem, then in the past two years we were hit with a new picture window, a need to replace the A/C and heating units, appliances were replaced and most recently $900 in plumbing expenses. That was in one unit. Our other unit had termites, mold from previously improperly installed flooring, a sink hole in front of the home that required remediation and the subsequent vacancy because that tenant had simply had enough. We still cleared $6,500 last year between the two, but only because of no mortgages on the properties. We also chose to sell the sinkhole property since we found a willing buyer even with the problems disclosed.

As you can see from my experience it can get expensive quickly if things go south. You may want to consider unloading your rental property because of the risk unless you keep a substantial cushion to support it.

 

[travelover]

....... it can get expensive quickly if things go south............

I believe that the OP stated that they were from deep south.

 

[Accidental Retiree]

Hello,
Just coming out of lurkdom to hopefully get smart enough to retire ASAP!

I'd like to retire today, but of course, may have to wait until I'm 58 if I can stand it and if they'll let me keep working at Mega Health Corp.

Assets -
1) One Defined benefit plan - starts paying $18K per year at age 60. COLA is at the whim of the state budget coffers, so not counting on it. No upside to waiting longer to take it.

2) Another DBP -- pays $4,400 at age 60, but goes up to about $6,000/year at 65.

3) Other Assets - $48,000 in Roth IRA,
$275K in 401K,
$27K in after tax savings

4) Equities are about 15%, Bonds about 5%, the rest I just converted to cash to grab some gains before the next bottom.

5) Equity in rental property, $50K, mortgage still around $81K. Rental property only nets me about $1200 per year since I plow most of the rents back into mortage and deferred maintenance (i.e., new air conditioner, new roof).

Monthly expenses down to $3,600 per month or about $40K per year. I'm pretty darn frugal. It's a big bare boned, but I'm hoping I could find small, happy job somewhere to help ease the time out.

Healthcare is biggest question when I retire. I'm in a state that requires income of $15K per year to qualify for subsidy in Obamacare. Without subsidy, it's a $6k per year hit to me. So if I qualify for subsidy, I'm in much better financial shape retiring early. Not sure if the 15K income requirement per year could be distributions from 401(k), instead of job. If so, I could "retire" from my 401K whenever I decide to pull the trigger, and that distribution from 401K might qualify me for the subsidy until Medicare time. Which would make health care costs doable until 65.

Yes, you can take withdrawals from your 401(k) to reach your income requirement. It will be taxable income, and you will need to show that income source when you apply for insurance on the exchange.

 

[Hermit]

Hi Lstansbury. Welcome to the forum.

Like you, I am a widower so I will let you know what I did for SS.

I am collecting SS on DW's account until I reach 70. At 63, when I retired, her SS provided about 66% of what mine would have provided. By waiting until 70 to begin collecting on my account, I will receive almost double what I would have received on my account at 63 while still collecting on DWs account through those years. In addition, COLA additions will be much greater.

To help you plan, you can get what is called a Benefit Matrix from SSA on your account and on your spouse's account. It shows what you will collect on the account if you retire in each month from when you can begin to collect on that account until you reach 70. It helped me understand exactly how much income I would have from SS in any situation. It was quite accurate. I made an appointment at SSA and the matrix for each was printed for me. I don't know if you can get it on line or over the phone.

 

[karluk]

I'd like to retire today, but of course, may have to wait until I'm 58 if I can stand it and if they'll let me keep working at Mega Health Corp.
...[snip]...
If you were me -- would you retire soon? I'm sick, sick, sick of corporate politics, job requires 60 hours a week just to keep head above water, and have been working now 35 years. is there a glimmer of hope? ?? Maybe even just to quit and do some kind of hobby income in something that I enjoy? Any strength, hope or experience shared is mucho appreciated!

Thanks for any comments, responses!

May I ask how you are planning on financing the two (or more) years between retiring no later than age 58 and receiving your pensions at age 60? Unless I'm missing something, you would have no alternative but to withdraw around $40,000 per year from your savings. That's over a 10% withdrawal rate, which is not a SWR in anyone's book.

If that's your plan, then I would say that retirment for you before age 60 is unrealistically risky. If you wait until age 60 and/or successfully find a lower stress part time job to pay the bills, then you may possibly be able to swing it financially. It depends on how much of your income gap you expect SS to cover.

I would also like to comment on your decision to move most of your money into cash. Do you have any long term plan for your investment portfolio that doesn't require the stock market to conveniently crash in the near future, so you can reinvest at a better price? That may work out for you, but I wouldn't count on it. Most people who try to time the market end up regretting it.

 

[Lstansbury]

Hello Lstansbury and welcome to the forum. It looks like nobody has attempted to give you an answer to your question "would you retire soon?". You state your expenses are about $40K per year. Your pensions will not start until age 60, and then will only cover about half your expenses. We know you have social security benefits, but you don't state how much. Nor did you tell us what your current income is and how much you are contributing from your income each year toward your retirement savings. Without those pieces of information it's difficult to give much guidance.

Working 60 hours per week is enough to burn anyone out. is there any chance of getting that schedule down to a more reasonable level?

Thank you for the response! Social security benefits will start at 62 at $1,300 or so per month. They are reduced because one of my pensions is a Government pension, therefore GPension Offset wacks it a bit.
Current income is upper 80's, I throw $23,000 max into 401K, $6,500 max into Roth IRA (and my employers throw a little into the mix, maybe $2k per year.) After tax savings is about $12K per year. And then's there's healthcare and taxes. so I'm living on $40K per year now.

 

[Lstansbury]

Would you be able to manage if your rental went vacant for several months or you had a problem tenant? To me, your rental with mortgage is a dangerous liability if you don't have sufficient resources to back it up. I say this as an experienced landlord and have seen many different problems over the years. Overall it's been a great investment, but we do it mortgage free so cash flow is not much of an issue. We went years without much problem, then in the past two years we were hit with a new picture window, a need to replace the A/C and heating units, appliances were replaced and most recently $900 in plumbing expenses. That was in one unit. Our other unit had termites, mold from previously improperly installed flooring, a sink hole in front of the home that required remediation and the subsequent vacancy because that tenant had simply had enough. We still cleared $6,500 last year between the two, but only because of no mortgages on the properties. We also chose to sell the sinkhole property since we found a willing buyer even with the problems disclosed.

Yep. I agree with you! The mortgage rate is very low - only 3.5% and I got a $6,500 first time home buyer credit when I bought it. And all of that went into upgrades. But I do feel like it is a scary liability sitting out there! I have 27K in regular savings, plus another $3k in townhome sinkhole savings, and I'm loading $300 every month from the rental income into add'l townhome sinkhole savings. The air conditioner coil was replaced 2 years ago, but I know I may have other just as big issues. Good news is that it's a townhome and I only own the land right below the building.

This is why I'm so risk averse in the stock market -- I have risk in the rental market! The option to unload the rental is definitely in the front of my mind.

 

[Lstansbury]

Hi Lstansbury. Welcome to the forum.

Like you, I am a widower so I will let you know what I did for SS.

I am collecting SS on DW's account until I reach 70. At 63, when I retired, her SS provided about 66% of what mine would have provided. By waiting until 70 to begin collecting on my account, I will receive almost double what I would have received on my account at 63 while still collecting on DWs account through those years. In addition, COLA additions will be much greater.

To help you plan, you can get what is called a Benefit Matrix from SSA on your account and on your spouse's account. It shows what you will collect on the account if you retire in each month from when you can begin to collect on that account until you reach 70. It helped me understand exactly how much income I would have from SS in any situation. It was quite accurate. I made an appointment at SSA and the matrix for each was printed for me. I don't know if you can get it on line or over the phone.

Thank you Hermit, that's great information. My news isn't as good. I should only collect around $100 per month if I start collecting benefits at age 60. The reasons is that I have a small government pension -- and you have to offset your potential SS survivor's benefits by Two-Thirds! (I got reminded of this yesterday). So $900 of my monthly dollars will cut into the 71% of SS I would have received otherwise. If you have heard anything else re: GPO offset to widower's benefits, please let me know, I would love some better news. Thanks for the info on the matrix, I will go back to SS and maybe the can give me one. They weren't doing that the last time I checked on this a few years ago.

 

[Ready]

Thanks for the update info. You are making a very nice income and maxing out your tax deferred contributions. If it were me, I would try to hang in there until I could begin collecting social security just to be safe, but I understand you are working some very long hours and looking for a change.

If you can find a way to hang in there but reduce your hours and try to work two more years, I think you would be a lot more comfortable. Others may have a different opinion though. Ultimately it's what you are comfortable with that matters!

 

[seraphim]

Short answer: no. Not until your DBs kick in.

Are there penalties for withdrawing from your 401k prior to age 59.5? If so, those penalties are killers. You haven't enough non-retirement funds to last until you're 59.5/60.

Get rid of the rental property. For the minimal income there's a ton of risk, and a renter going deadbeat or lack of a renter for a period of time ... The prospect's exceptionally risky. If you owned the property outright, might be different.

With SS, DBs and a reasonable WD rate:

$33k (DBs +$9k WD) - $5 (effective taxes) / 12 = $2333 + $1300 (SS) = $3633 net monthly. At age 62.

Just an estimate - if I remembered figures from your post properly. I'm assuming SS is not taxed. I'm not sure about that. Used a %15 effective tax rate.

What do you estimate your expenses to be? Are the DBs COLAd?

From 60 to 62, your net income would be about $2333 a month. Prior to 60? See above.

Maybe at age 60, depending on your expenses.

Never forget the possibility of LT health care that can wipe out a 401k.

Just my opinion.

 

[Lstansbury]

Thank you Seraphim, I appreciate your analysis...